E LOAN INC (Form: 10-K, Filing Date: 04/01/2002)

Transcription

SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
Annual report pursuant to section 13 and 15(d)
Filing Date: 2002-04-01 | Period of Report: 2001-12-31
SEC Accession No. 0001082337-02-000001
(HTML Version on secdatabase.com)
FILER
E LOAN INC
CIK:1082337| IRS No.: 770460084 | State of Incorp.:DE | Fiscal Year End: 1231
Type: 10-K | Act: 34 | File No.: 000-25621 | Film No.: 02597432
SIC: 6162 Mortgage bankers & loan correspondents
Mailing Address
Business Address
5875 ARNOLD RD., SUITE 100 5875 ARNOLD RD., SUITE 100
DUBLIN CA 94568
DUBLIN CA 94568
9252412402
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO _____________
Commission file number
000-25621
E-LOAN, INC.
(Exact name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation or Organization)
77-0460084
(I.R.S. Employer Identification Number)
5875 Arnold Road, Suite 100
Dublin, California 94568
(Address of Principal Executive Offices including Zip Code)
(925) 241-2400
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.001 PAR VALUE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting common stock held by non-affiliates of the registrant as of March 15, 2002 is approximately $81,000,000. The
total number of shares of common stock outstanding as of March 15, 2002 was 54,041,623.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's Proxy Statement for its Annual Meeting of Stockholders to be held on May 14, 2002 are incorporated by reference
hereof.
E-LOAN, INC.
2001 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Part I.
Page
Item 1.
Description of Business
1
Item 2.
Properties
26
Item 3.
Legal Proceedings
26
Item 4.
Submission of Matters to a Vote of Security Holders
26
Item 5.
Market for Registrant's Common Stock and Related Stockholder Matters
26
Item 6.
Selected Financial Data
27
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
29
Item 7a.
Quantitative and Qualitative Disclosures About Market Risks
33
Item 8.
Financial Statements and Supplementary Data
34
Part II.
Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
55
Item 10.
Directors and Executive Officers
55
Item 11.
Executive Compensation
55
Item 12.
Security Ownership of Directors, Officers and Certain Beneficial Owners
55
Item 13.
Certain Relationships and Related Transactions
55
Exhibits, Financial Statement Schedules and Reports on Form 8-K
55
Item 9.
Part III.
Part IV.
Item 14.
Signatures
58
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL BACKGROUND
E-LOAN, Inc. was incorporated on August 26, 1996 and began marketing its services in June 1997. Our purpose is to make the entire loan process not only more affordable but actually
enjoyable. We are a leading online provider of loans directly to consumers, offering borrowers a variety of purchase and refinance mortgage loans, auto loans, and home equity loans and
lines of credit to suit their financial needs. We also offer access to credit cards, unsecured personal loans and education loans supplied by third-party providers.
We originate loans through our website and by telephone, fund the loan using warehouse and other lines of credit, and then promptly sell closed loans into the secondary capital markets.
Our principal sources of income are gains from the sale of mortgage, home equity, and auto loans which are derived based on a mark-up to the secondary market investor price, and interest
income earned on loans during the brief period that they are held pending sale. All loans are underwritten pursuant to standards we establish to conform to the underwriting criteria of the
ultimate purchasers of the loans. In this way, we minimize our credit risk with our loan products.
Product diversification. We offer diversified loan products - mortgage, home equity, and auto - in order to reach more potential customers regardless of the interest rate market. We are able to
shift resources such as marketing and operations expenses among our products to take advantage of seasonal and cyclical lending opportunities as the mix of business changes in response to
interest rate and economic conditions. This product diversification strategy helps reduce volatility and provide more stability through a range of economic cycles. When interest rates are low,
consumers refinance higher interest rate home and auto loans to lower their overall borrowing costs. When interest rates are higher, consumers still have the need to borrow and are concerned
about finding the best loan - perhaps a home equity line of credit - to meet their needs for such uses as home improvement or paying for college education.
Low Cost Producer Strategy. Our business model starts with a focus on being a low cost producer of loans. Low cost producer refers to the expense required to originate and sell a loan. This
low cost position enables us to offer consumers great rates with fast service. Highly satisfied customers will help drive overall consumer adoption and our overall share of the lending market.
Increased market share will drive economies of scale that further help lower our costs to originate and sell loans.
Business model. Our business model seeks to transform the traditional loan process by focusing on all three parts of the loan transaction: point of sale, transaction fulfillment, and sale of the
loan to the capital markets. At the point of sale, we have reengineered the lending process to lower the cost to consumers, improve their control over the process, and expand the number
of loan options compared with what consumers typically find in the offline world. We provide a clear means to compare and contrast loan products by making their true cost as transparent
as possible. With strong capital market relationships, we underwrite and fund our loans as compared to a broker who serves as an intermediary. Control over loan fulfillment allows us to
streamline processes and help eliminate inefficiencies, saving borrowers time and money. Finally, when selling loans we sell to the highest bidder in the capital markets. This allows us to
offer borrowers the lowest rates available from a broad range of loan purchasers in the capital markets. The ability to innovate in all three parts of the loan transaction allows us to take full
advantage of the enormous opportunities in online consumer lending.
INDUSTRY BACKGROUND
Shortcomings of the Traditional Consumer Debt Market
Consumers seeking financing for homes, cars or other purchases often encounter obstacles in obtaining multiple rate quotes, unbiased advice, thorough comparisons of loan products and
timely credit decisions. For consumers, obtaining a home loan often represents an especially difficult transaction. While not as complex or difficult, obtaining an auto loan can be an especially
aggravating and potentially costly transaction.
Traditional Mortgage and Home Equity Lending.
While increased competition in the mortgage industry over the past decade has resulted in tremendous innovation in the mortgage loan choices available to
consumers, the level of complexity associated with these loans has also increased. In addition, the underwriting and lending processes remain paper-based
and time-intensive, with little visibility into the process for consumers. As a result, we believe that the traditional mortgage lending process causes many
consumers to feel:
• uncertain that their single source lenders and brokers are providing unbiased advice and are recommending the most suitable loan products;
• skeptical that rates initially quoted will ultimately be available;
• intimidated by the number and variety of loan products available;
• pressured to commit to a particular product before they have researched and compared products to their satisfaction;
• frustrated with the amount and types of fees they are required to pay; and
• overwhelmed by the substantial time and effort that it takes to get a mortgage loan.
Many borrowers receive little ongoing assistance in managing their debt after the loan is closed. Many direct lenders who also engage in mortgage servicing are not committed to
proactive monitoring of their customers' loans because they risk losing servicing fees if customers refinance with other lenders. Multi-lender brokers have an incentive to pursue refinancing
opportunities, but typically lack the technological capability to proactively monitor the market changes of thousands of loan products in real time.
Traditional Auto Financing.
In the auto lending arena, consumers (prior to the increase in the popularity of the Internet) have relied largely upon local auto dealerships to provide
financing. This is due in part to the difficulty in obtaining loan information from a variety of national lenders for comparison. Because direct lenders only
offer their own products, it may be time-consuming and frustrating for a borrower to search for the lowest rate by comparing loans among several local
lenders in the consumer's area. Traditionally, dealers have bundled financing with the sale of the car, and as a result, dealers can manipulate the terms of the
financing package to compensate for any price concessions the buyer may negotiate for the vehicle. The elements of the loan, such as payment, term, and
interest rate may not be easily understood and transparent to the buyer, because the dealer has little incentive to make it so.
Market opportunity
The consumer debt market is substantial and highly fragmented among many lenders. The evolution of Internet usage and the lending industry's adoption of electronic solutions to traditionally
paper based processes provide for a significant growth opportunity within this market.
Consumer Debt Market.
According to industry sources, the 2001 U.S. consumer debt market for our focus products totaled approximately $2.8 trillion in originations, which is
comprised of approximately $2.0 trillion in mortgage loans (approximately $1.1 trillion of which were refinance transactions), approximately $422.0 billion
in home equity loans and approximately $400.0 billion in auto loans. The average mortgage market totaled a significant $1.5 trillion in annual loan
originations over the past four years (1998-2001), and 2001 was a record year for mortgage refinance loan activity.
Research from Tower Group [August 2001] projects steady growth for online mortgage lending over the next four years. In 2000, online mortgage loan sales reached approximately $13.0
billion, or 1.3 percent of total U.S. mortgage loans originated for that year, and in 2001, online mortgage loan sales reached approximately $45.0 billion. Tower Group forecasts that total
online mortgage sales will grow to $180.0 billion in 2005, accounting for more than 12 percent of total U.S. mortgages.
Internet Market Evolution. The last several years have seen a tremendous change in consumer adoption of the Internet with early usage centered on finding information; people have moved to
conducting simple transactions such as buying books online, and then to using the Internet to buy airline tickets and make stock trades. Research conducted by the Pew Internet and American
Life Project confirms the perception that consumers first go online for email, games and information searches. Then they tend to look at research on products and finance, and after some
experience of online life they make a purchase online, which involves more trust and faith in an online business to keep their critical personal and financial information secure. Jupiter Media
Metrix, an online research and consulting firm, predicts that as these Internet users become more comfortable with the Internet, they will continue to make more ambitious purchases. Jupiter
estimates that online shoppers now number 67 million and estimates that this will grow to 132 million over the next four years. The number of affluent online shoppers, defined as those with
household incomes over $75,000, is projected to grow from 26 million today to 44 million over the same time period. We believe this evolution will significantly contribute to consumer
adoption of online lending over the coming years.
Loan products are ideally suited to fulfillment over the Internet because they are often complex, requiring extensive consumer research to find the right product and provider, and do not require
the consumer, provider and product to be in physical proximity. Loans - as opposed to other products marketed online, such as computers - have the potential to evolve into a completely
electronic product. The Internet gives consumers informational links and graphical interfaces for comparing competing loan products, as well as transaction capabilities to complete their loan.
PRODUCTS AND SERVICES
The E-Loan Solution
We make the loan process more affordable by using the technology of the Internet to find the right loan for the consumer, to streamline every aspect of the loan application and approval
process, and to pass cost savings on to consumers. We eliminate unnecessary, commissioned financing intermediaries such as mortgage brokers and auto dealer finance salespeople. We
eliminate most traditional lender fees such as administration, commitment, processing, underwriting, wire transfer, or document preparation, which can exceed $1,500 for a mortgage. Our
website is designed to offer prospective borrowers easy access to rate quotes, information about loan fulfillment and a variety of interactive tools and services to help them understand their
options and make the best choices for their personal situations. At our website, borrowers can:
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quickly search a database of loan products from a variety of capital market sources;
compare two or more loans along many characteristics;
use a calculator to determine the size of the loan for which they will qualify;
apply for loans online;
receive a credit decision in a very short time;
obtain a mortgage loan pre-approval letter;
set up rate watch and monitoring accounts so that they can receive automatic notification;
receive overnight documentary drafts to take to auto dealers; and
track their loan applications online through our unique E-Track service that monitors every stage of their loan application in real time.
Given the range of consumer debt products and the difficulties consumers face in accessing and evaluating a variety of loan options, we believe we have a substantial opportunity to market
debt products online in a convenient, cost-effective way and to build a leading national brand name in consumer lending.
E-LOAN Innovations
We continuously look for ways to break down barriers and eliminate redundant steps to make the loan process significantly faster, easier and far less expensive for both consumers and
ourselves. Our loan process starts electronically with the customer and stays that way. From the start to the end of the process, the loan information is not re-entered by anyone at E-LOAN
or by anyone at the secondary market loan purchaser. Where technology and automation make sense, we use it. Where a person can make a distinct difference, such as consulting with a
customer, our team members provide professional advice.
Some of the important innovations that we have introduced to date include E-Track, analytical loan recommendations, ongoing mortgage monitoring, our proprietary underwriting system,
online disclosures, and flash funding.
E-Track.
We have developed a proprietary online tracking system, E-Track, in order to make the loan application process more open and convenient for consumers.
We establish an E-Track account for each customer at the time an application is completed online. Each E-Track account is personalized and passwordprotected and contains important information, such as documentation requirements and deadlines, that pertain to the loan. All of this information is updated
in real time as the loan application is processed. In addition to the E-Track system, our customer service representatives provide as much personal contact and
information as the consumer desires.
Analytical Loan Recommendations. We provide borrowers with recommendations regarding available loan products. We formulate our recommendations by using powerful comparative
and analytical tools designed to assist the borrower in determining the most suitable product available through E-LOAN. These recommendations are based solely on borrower-provided
information and criteria.
Ongoing Mortgage Monitoring.
We enable customers to obtain information in order to make refinance decisions by continuously comparing their existing loan to new products available
through E-LOAN and alerting them to opportunities to save money over the life of their loan. Our monitoring algorithm takes into account the borrower's
investment objectives, prospective hold period, risk profile and marginal tax rates. This capability promotes long-term relationships with our customers.
Proprietary Underwriting System. A mortgage and home equity loan application is immediately passed through an automated series of credit filters, and then, if credit qualified, immediately
passed through our proprietary underwriting engine. Within approximately two minutes of customer submission -- and without any human effort or underwriting charges except for the cost
of a credit report -- the loan is automatically underwritten and an email response is sent to the customer. At the same time, the output of our underwriting engine is passed on in an easy to
read electronic format to a loan consultant for immediate follow up with the customer.
Online Disclosures. The disclosures that are required by various federal and state laws and regulations are accepted in electronic form by a majority of our mortgage and home equity
customers, enabling fast and easily navigable access using our proprietary E-Track system. In addition, we now post federally required decline letters electronically, eliminating shipping and
handling costs.
Flash Funding. For a majority of our mortgage loan sales, we use our flash funding process. Using this process, all of the information we have on the loan is
sent across an electronic bridge to the loan purchaser, where it is automatically loaded into their servicing system, eliminating almost all of the manual effort
required on their end. A handful of the key customer signed documents are mailed to the loan purchaser; the remainder of the loan file is immediately sent to
storage. We receive the loan purchaser's electronic acknowledgment and payment for the loan in days, not weeks, enabling us to better manage interest rate
spreads, hedge costs, and working capital.
Business Development
The following are key areas of focus to further develop our business:
Expanding Capital Markets Development and Consumer Debt Offerings. We believe that our ability to satisfy customers' specific borrowing requirements by offering a comprehensive
selection of consumer debt products available online nationwide is one of our greatest competitive advantages. We intend to continue to seek ways to increase the breath of our capital market
sources in order to expand the number and variety of product choices available for consumers while also improving our pricing flexibility.
Automating the Lending Process Comprehensively. We intend to further streamline and automate our processes in order to eliminate the inefficiencies and unnecessary steps that separate
the origination and underwriting processes from the capital markets. By continually incorporating and upgrading automated underwriting techniques and technologies, we believe we will
efficiently match borrowers with the loan best tailored to their needs, resulting in faster approval, lower pricing and reduced documentation. We are also positioned to take advantage of the
trend to adopt automated property valuation modeling versus traditional appraisals as well as electronic signatures versus the traditional paper based process.
Achieving Direct Response Marketing Excellence.
Our ability to effectively target prospective customers with timely and compelling offers will enable us to realize our market share growth potential. We will
continue to invest in the analytical tools and specialized personnel to allow us to achieve substantial growth in our customer base .
Increase Relocation Mortgage Clients. Relocation mortgage loans are loans that are part of a Company's employee relocation program. The relocation mortgage market is ideally suited to
our centralized online lending model with telephone support from loan professionals. Unlike the total mortgage market, this segment is primarily consolidated among three primary providers,
Wells Fargo Bank, Cendent Mortgage, and Washington Mutual. Relocation loans are an attractive business as they represent consistent volume with fewer sales obstacles than a typical
purchase mortgage transaction because of the inherent corporate endorsement. We currently have five Fortune 500 relocation clients, and believe that we have a significant opportunity to
grow this segment of our business.
Helping Consumers Monitor and Manage Their Debt. Many borrowers receive little ongoing assistance in managing their debt after a loan is closed. Many direct lenders who also engage in
mortgage servicing are not committed to proactive monitoring of their customers' loans because they risk losing servicing fees if customers refinance with other lenders. Multi-lender brokers
have an incentive to pursue refinancing opportunities, but may lack the technological capability to proactively monitor the market changes of thousands of loan products in real time.
We recognize that consumers can lower their overall cost of capital by managing their loans as a portfolio, much as they manage their assets. We intend to provide tools and services to help
our consumers create and manage these debt portfolios through personalized accounts within our online environment. We believe that our role in providing these tools and services will help
us form and maintain strong, ongoing relationships with borrowers that will prompt them to use us to fulfill their future borrowing needs.
Our debt management services currently include loan monitoring and rate alerts that provide customers with assistance in mortgage loan origination and refinancing decisions. We intend to
further develop tools that help our customers identify optimal financing opportunities available through E-LOAN for all of their debt types in order to lower their overall cost of capital.
Mortgage and Home Equity Loan Operations
Overview. As a direct-to-consumer lender we originate, underwrite, fund and promptly sell a variety of mortgage and home equity loans in the secondary capital markets, including long term
and intermediate term mortgages, adjustable and fixed rate mortgages, no closing cost loans, and home equity loans and lines of credit. Originations are funded through our own warehouse
lines of credit. Our loan originations are principally prime credit quality loans secured by single-family residences. All loans are underwritten pursuant to standards we establish to conform
to the underwriting criteria of the ultimate purchasers of the loans. In this way, we minimize credit risk with our loan products. We engage in hedging activities to minimize interest rate risk
during the brief time between rate-lock with our customer and sale of the loan.
Obtaining a Loan. The loan origination process begins when the customer completes a loan application online through our website or by telephone. Once the application is submitted, our
proprietary underwriting system immediately analyzes the borrower's information and renders a credit decision. Generally, within minutes of submitting an application (or hours for weekend
applications), customers receive a phone call from a loan professional welcoming them to E-LOAN, providing a credit decision, answering questions, verifying information in the application
and telling them what to expect from the process. Customers then receive their required disclosures electronically or in the mail, based on the customer's preference.
An E-Track account is created shortly after a loan application is received and keeps the customer abreast of all pertinent information throughout the loan process. Customers are invited to
visit their E-Track account frequently to review key steps in the loan process and receive updated information regarding their loan product, closing costs, and interest rate lock. They can also
view loan disclosures and the progress of their loan approval.
Although the E-Track account is available 24 hours a day, seven days a week, a dedicated loan consultant also maintains telephone and/or email contact with borrowers throughout the loan
process to communicate major events and answer questions. One-on-one personal service begins as soon as the online application has been received, and continues through approval and
funding.
Most approved customers are invited to request an interest rate lock for their selected loan at time of application during the initial phone contact. Lock requests can be made by phone or
online through their E-Track accounts. Once the requested rate has been confirmed, customers are notified and provided with all relevant product and execution conditions.
As additional loan documentation is received, data provided by the customer at the time of initial origination is validated. Where needed, appraisals, credit reports, and title and survey
documents are ordered and reviewed by the loan consultant, who is supported by a loan processor.
Final loan approval is secured once all critical data elements have been validated and have been confirmed to satisfy the guidelines of the lending program sought by the borrower. If a
borrower's loan does not satisfy loan program guidelines, the designated loan consultant will research additional loan programs for the customer. If a product cannot be secured for the
customer, the customer will receive a letter stating the reasons that a loan could not be obtained.
After loans have been approved and all relevant conditions have been met, we prepare loan documents to be signed by the borrower. The assigned loan consultant will work with the borrower
to obtain the necessary signatures for funding and schedule the closing of the loan. Often a mobile notary service is used to provide an added level of convenience for the borrower. Once the
borrower has signed all documentation, the loan file is reviewed to identify any missing requirements. If complete, the loan is then funded and recorded as closed.
A quality control review of funded loans is performed prior to forwarding the loan documentation to the final mortgage loan purchaser or its designated custodian. An accounting audit is also
performed to reconcile settlement information provided by escrow/attorney settlement agents with our internal information. Loan documentation relating to closed loans is then shipped to the
mortgage loan purchaser or its designated custodian, and documentation is maintained to satisfy regulatory and company record retention requirements.
We also solicit customer feedback regarding the loan process to measure overall customer loyalty and to utilize in developing future product and service enhancements that are responsive to
customer concerns.
Loan Underwriting. Our guidelines for underwriting conventional conforming loans comply with the underwriting criteria employed by Fannie Mae and/or Freddie Mac. Our underwriting
guidelines and property standards for all other conventional non-conforming loans are based on the underwriting standards employed by the secondary mortgage loan purchasers.
We consider the following general underwriting criteria in determining whether to approve a loan application:
• employment and income;
• credit history;
• property value and characteristics; and
• available assets.
Automated Underwriting. Automated underwriting (AU) contributes significantly to our goal of increasing the efficiency of multi-source lending by providing customers faster, more costefficient credit reviews and decisions. AU may further offer efficiency enhancements through reduced costs in property appraisals. In addition, we believe customers also value the less
onerous and time-consuming nature of AU relative to more traditional underwriting processes.
We have created our own proprietary underwriting engine that enables us to instantly underwrite loans at time of application at minimal cost. We are also approved as an originator under
Fannie Mae's Desktop Originator and Desktop Underwriter system (DU), and Freddie Mac's Loan Prospector (LP). These systems help automate the lending process for all conforming loans.
We will continue to seek to enhance our AU capabilities and incorporate as many techniques and technologies as are warranted by our business needs and the needs of our major business
partners.
Automated Appraisal. The use of automated property valuation models (AVMs) to replace the traditional physical appraisal process is starting to gain acceptance by our capital market
sources. This trend is particularly evident with our home equity products where approximately 80% of loans are completed using AVMs versus physical appraisals. Our customers benefit
through reduced costs (the cost of a typical appraisal normally exceeds $300) and time savings. Freddie Mac and Fannie Mae are both conducting pilot programs with no-appraisal loan
products that use AVMs. Acceptance of AVMs is necessary for a true electronic loan offering.
Interest Rate Hedging
. We attempt to minimize the interest rate risk associated with the time lag between when loans are rate-locked with the customer and when they are
committed for sale or exchanged in the secondary market, through our hedging activities. Individual mortgage loan risks are aggregated by note rate,
mortgage loan type and stage in the pipeline, and are then matched, based on duration, with the appropriate hedging instrument, thus mitigating basis risk
until closing and delivery. We currently hedge our mortgage pipeline through mandatory forward sale of Fannie Mae mortgage-backed securities and nonmandatory forward sales agreements with the ultimate investor. We determine which alternative provides the best execution in the secondary market.
We believe that we have implemented a cost-effective hedging program to provide a level of protection against changes in the market value of rate-lock commitments. However, an effective
strategy is complex and no hedging strategy can completely insulate us against such changes.
Warehouse credit facilities. We use warehouse credit facilities to fund our loans prior to their sale to capital market loan purchasers, typically within 30 days. We currently draw on warehouse
credit facilities established with Greenwich Capital Financial Products, Inc. and GMAC Bank. We have committed and uncommitted funds available through these facilities aggregating
approximately $350 million as of March 31, 2002. The interest rate charged on these borrowings range from LIBOR plus 0.75% to 2.0% depending on the loan type. The net of this expense
and the interest income that we earn during the time loans are held for sale currently produces a positive interest spread.
Our agreements with our warehouse lenders require us to comply with various operating and financial covenants. These covenants restrict our ability to:
• sell any of our material assets or merge or consolidate with another company;
• issue additional shares of common stock without their consent;
• pay dividends on our outstanding shares of common stock; and
• amend our Certificate of Incorporation or Bylaws.
These covenants also require us to:
• maintain a minimum cash and cash equivalents, and tangible net worth;
• limit the amount of debt we incur relative to our net worth;
• ensure that our current assets are equal to or greater than our current liabilities; and
• maintain two warehouse facilities at all times with minimum credit limits.
Loan Production. We originate conventional mortgage loans (conforming and jumbo loans) and home equity loans and lines of credit. Approximately 78% of the conventional loans originated
are conforming loans, which are eligible for sale in programs sponsored by Fannie Mae or Freddie Mac. The remainder of the conventional loans are non-conforming loans. These include
loans with an original balance in excess of $300,700 that otherwise meet all other Fannie Mae or Freddie Mac guidelines (jumbo loans), and other loans that do not meet those guidelines.
Auto Operations
Overview. We are one of the leading online providers of auto loans for new or used vehicles. We can also refinance an auto loan for customers who have made at least three payments on an
existing automobile installment loan. We primarily fund auto loans using a line of credit and then sell them to auto loan purchasers in a manner similar to that which we employ for mortgage
and home equity loan sales. The loan underwriting criteria are similar to those of our mortgage and home equity loans, and are also based upon the guidelines established by the ultimate loan
purchaser, thereby reducing our credit risk. We minimize our interest rate risk as the auto loan purchasers provide an interest rate commitment that covers our time to process and sell them
the loan.
Obtaining a Loan. The process of obtaining a car loan involves fewer steps than a mortgage or home equity loan and occurs at a much faster pace. The process begins when a customer
searches for a rate, then completes a short, online application at our website or by telephone. The application goes through an automated underwriting process that takes only minutes to
complete.
If approved, a customer receives an email notification generally within two hours after submitting the application. At the time of approval, a documentary draft and two sets of sample loan
documents are created (one for a used car and one for a new car), and are mailed or delivered overnight to the customer. The customer then takes the documentary draft and documents to any
franchised auto dealership and negotiates the purchase price for a vehicle of their choice, with the same leverage in the transaction that a cash purchaser brings to a dealer.
When the customer selects a vehicle, and the purchase price is finalized, the customer signs the draft and presents it to the dealer as payment. The dealer is required to obtain a copy of the
customer's driver's license as proof of identity and to forward this to us, along with any other documents required by the secondary market loan purchaser. In addition, the dealer ensures
that the title is filed properly, with E-LOAN or the loan purchaser listed as the lien-holder, and that the purchase agreement is faxed to us. The dealer deposits the draft with its bank. Upon
notification that the draft has been presented for payment, we verify that all of the documentation has been received and is in order before honoring the draft. When the documents have been
verified, the bank is notified to honor the draft and a copy of the final loan contract is delivered to the customer.
Using our propriety E-Track system, we are electronically providing auto customers in test markets with their actual loan documents online immediately after they are approved. Customers
are able to receive their final loan documents in minutes, instead of days, with a lower cost and better, faster borrower experience. In addition, the dealer is able to receive payment through
an electronic transmission (ACH) versus the draft process. This is a significant advance in our goal to create an electronic loan. We anticipate rolling out this new process broadly over the
coming year.
Line of credit facilities
. We use a line of credit facility established with Bank One, NA to fund our loans prior to their sale to auto loan purchasers, typically within 10 days. We
have $10 million in committed funds available through this facility as of April 1, 2002 at LIBOR plus 2.5% which expires on July 31, 2002. This agreement
also requires us to comply with various operating and financial covenants. Bank One has indicated that they are exiting this component of their lending
business, and therefore will not be renewing our line of credit after the expiration on July 31, 2002. We are in active discussions with multiple lending
providers, and believe that we will be successful in securing an alternative source prior to expiration of our current facility.
Customer Service
We devote significant resources to providing personalized, timely customer service and support to minimize the potential uncertainty, anxiety and inconvenience of the loan process. By
combining high-tech communications with highly personalized attention, we provide a level of customer service that often exceeds that experienced in the traditional loan application process.
In order to help prospective customers understand the lending process, our website provides a rich assortment of educational content, advisory tools and ancillary services. Prospective
customers may call us toll-free with questions seven days a week or email us and receive prompt replies.
Once a mortgage or home equity application is submitted online, we assign the customer a loan professional that becomes the customer's primary point of contact, ensuring prompt and
personalized attention. Similarly an auto loan consultant is available to assist the borrower in the loan process. The loan professional maintains regular email and phone communication with
the borrower to answer questions, address any problems and generally facilitate closing the loan by coordinating with our underwriting and processing staff. After closing, we survey all
borrowers to assess the quality of their experience both on the website and in terms of customer service and an award is presented to employees achieving the highest customer satisfaction
standards. Customers who withdraw their applications are also surveyed to determine improvements that can minimize future withdrawals.
Every mortgage or home equity loan application also triggers the opening of a password-protected E-Track account. Using E-Track, customers can track the process of their loan applications
online, at any time. Each event that occurs throughout the various stages of the loan process generates an automated email alert to the borrower. The information is also logged in E-Track so
the borrower has a continuously updated record of all loan application developments. Borrowers can also view required disclosures electronically through E-Track.
TECHNOLOGY
Our technology systems use a combination of our own proprietary technologies, open source, and commercially available, licensed technologies from industry leading providers, including
Sun Microsystems, Cisco Systems and Oracle. Our systems were designed around industry standard architecture to reduce downtime in the event of outages or catastrophic occurrences.
These systems provide availability 24 hours a day, seven days a week, and have capacity for peak activity levels without requiring additional hardware or support.
User Interface. Our website is designed for fast downloads and compatibility with the most basic browsers. Pages are built with minimal graphics and do not require client-side plug-ins or
Java to view.
Loan Application and Tracking. When a customer applies for a loan online, the application data is stored in a database server. As additional information, including credit reports, appraisal
details and financial documentation, is obtained throughout the loan process and added to the borrower's file, e-mails are automatically sent to the borrower (and realtor, if applicable) to
inform them of the current status of the loan application. At the same time, the borrower's E-Track account is updated.
Security. In order to safeguard borrowers' sensitive financial data, our systems provide secure online transaction capability. Customer information sent via the website is encrypted using a
Secure Socket Layer ("SSL"). The network is protected with industry leading firewall software. The website itself is locked down, with only two people authorized to change the content on
the production servers. E-Track is password-protected so that only the borrower may access the account. The servers containing borrower data are accessible only to authorized users within
E-LOAN.
Server Hosting and Back-Up
. Our website system hardware is hosted at the Verio NTT facilities located in San Jose, California, providing redundant communication lines and multiple
emergency power back-up. We have implemented load balancing systems and our own redundant servers to provide for fault tolerance. Scheduled
maintenance takes place without taking the website offline.
CUSTOMERS
We are a direct-to-consumer lender. Our customer's loan characteristics vary by product type. Our capital market loan purchaser's generally look at three areas to assess loan risk:
• Credit reputation: credit score and history
• Collateral: loan amount relative to the home or auto value
• Capacity to pay: income, debt, cash reserves
A credit score summarizes credit reputation. Credit scores generally range from the mid 300s to the mid 800s, with scores above 700 representing good to excellent credit. The median credit
score for our mortgage, home equity, and auto loans in 2001 were 750 , 733 and 684, respectively. Capital market loan purchasers look favorably upon loans with loan to value ratios ("LTV"s)
below 80% and often pay a premium for those loans. The LTV of our mortgage and home equity loans in 2001 were 69% and 76%, respectively.
As all loans are underwritten pursuant to standards we establish to conform to the underwriting criteria of the ultimate purchasers of the loans, we minimize our credit risk with our loan
products. We do warrant that we will perform the loan origination process - gather required documentation and perform the necessary steps - consistent with those underwriting guidelines.
If we make an error in our process, we agree to correct the mistake or repurchase the loan if required. Since our inception, we have rarely repurchased loans and in all cases the loans were
subsequently sold without a material discount in price.
GEOGRAPHIC INFORMATION
All of our revenue is generated from transactions originating in the United States. All of our fixed assets are located in the United States, principally at our headquarters in Dublin, California
and at our auto operations site in Jacksonville, Florida.
MARKETING
Our brand and direct response marketing strategy is to attract home and auto loan applicants to our website by promoting the E-LOAN brand as a byword for trust, choice, open and honest
competitive pricing and service for consumer loans. We rely on a variety of methods to promote our brand. By providing superior customer service, we promote referrals from satisfied
borrowers. Offline marketing focuses on direct response vehicles (primarily direct mail and email campaigns) that target the demographic and geographic segments with the highest propensity
to utilize an online loan provider. We plan to invest in new database and analysis systems and expand our staff of experienced direct marketers with the goal of achieving excellence in this
area. Online marketing efforts are centered on partnerships with leading online companies and select use of banner advertising. We also intend to take advantage of both short and long term
cross-selling opportunities across our product lines.
Mortgage and Home Equity Loan Marketing. We have an exclusive partnership to provide mortgage and home equity loans with Charles Schwab & Co., Inc. Strategic partnerships with such
online websites as United Mileage Plus program and Bankrate.com drive applications through mortgage loan centers on those websites. We have also partnered with RE/MAX Realty, the
nation's second-largest real estate agency. We also engage in marketing activities at realtor and relocation trade shows and other events in the real estate industry in order to encourage realtors
and relocation consultants to promote our website to homebuyers. A minority of our mortgage and home equity applications are derived from our online marketing partnerships.
Auto Loan Marketing. Strategic partnerships with leading automotive sites, including Microsoft's CarPoint, Autobytel.com, and Bankrate.com, drive applications from Internet savvy auto
buyers through auto loan centers on those websites. The majority of our auto applications are derived from online marketing partnerships.
COMPETITION
Primary Competition
Our primary sources of competition remain the traditional offline lenders in the loan market and to a lesser extent online providers of consumer loans. The largest competitors by product are:
mortgage brokers for mortgage loans, the consumer's bank for home equity loans, and auto dealers for auto loans.
Mortgage Loan Competition.
Our largest competition for mortgage loans is mortgage brokers. Mortgage brokers continue to originate the majority of all mortgage loans. The popularity of
using brokers is indicative of consumers desire to obtain a competitive price from among multiple lenders. While the common perception is that a broker
performs extensive research to ensure the customer achieves the right loan at the right price, the reality is often that consumers are guided into loans that
provide the greatest commission to the broker. Brokers are also middlemen in the transaction and as a result they cannot control the fulfillment process, and
overall customer experience, in contrast to a direct-to-consumer lender. The brokers' key competitive advantage is their existing relationship with real estate
agents who refer customers to them.
We offer the choice advantages of a broker through our lower cost capital markets access to multiple loan purchasers, with the transaction fulfillment advantages of a direct-to-consumer
lender such as rapid credit decisions and streamlined processes. We believe real estate agents will gain confidence in our solution over time and want their customers to realize the benefits of
lower rates and fast service.
Home Equity Loan Competition
. There is an under-developed competitive market for home equity loans as compared to mortgage loans. Because of this, consumers tend to apply for home
equity loans with their primary bank because of its familiarity.
Auto Loan Competition.
Our largest competition for auto loans is the auto dealership's finance salesperson. By separating the auto financing from the purchasing transactions, we
effectively remove dealer control over financing terms and permit consumers to receive rates that are based upon their credit background and not their
negotiating skills. We can typically offer our customers a lower loan rate than auto dealerships offer.
Online Competition
Online Direct Lender Competition.
Traditional single source lenders such as Washington Mutual, Countrywide Home Loans, Citibank and Bank of America have created websites which offer mortgage and home equity loans
directly online as an alternative to the traditional process. These sources, however, normally do not offer the consumer a selection of loan products from multiple capital market loan
purchasers or comparisons of products, and they may be reluctant to reduce fees due to the risk of cannibalizing their existing offline distribution channels. In addition, these lenders often
hold loans for servicing income and therefore may face a potential conflict of interest in promoting refinance opportunities for their customers. If they refinance an existing customer into a
lower interest rate loan, they may lose money.
The online lenders with the most comparative business models and product offerings are; Quicken Loans, E-Trade Mortgage, and Ditech.com for mortgage and home equity loans, and
Peoplefirst.com for auto loans.
Loan Marketplace Websites. A number of consumer loan websites act much like traditional loan brokers, offering multi-lender distribution channels for banks and other financing sources.
Among these providers are Lending Tree and Providian's GetSmart. These websites are a marketplace that operate on an advertising model but do not actually make loans; they simply provide
a conduit between borrower and lender. They do not offer complete transaction fulfillment for customers, and therefore, add additional steps and fees to the lending process. Our control over
the fulfillment process allows us to remove the redundant or unnecessary steps and related costs involved in getting a loan, and to pass savings onto the consumer. Our capital markets access
to multiple loan purchasers further enables us to provide consumers with highly competitive rates.
We believe that a significant market opportunity exists for an online direct-to-consumer lender that combines a broad selection of loan products from different capital market sources with
complete transaction fulfillment. Our model offers a compelling value proposition based on saving borrowers money, time and effort.
LICENSING AND REGULATION OF MORTGAGE AND AUTO LOAN BUSINESS
We are licensed as a mortgage banker and/or mortgage broker, or are otherwise authorized to originate mortgage loans in all states and the District of Columbia. We have obtained available
licenses in every state that requires such licensing for our online operations and originate auto loans in most, but not all, states. In a few states where licensing would provide rate relief for
certain loans, but is not available for our particular online lending operations, we limit our product offerings to comply with state law.
The mortgage and auto loan businesses are highly regulated. In order to offer our mortgage and auto loan services, we must comply with federal and state laws and regulations relating to
licensing, advertising, loan disclosures and servicing, rate and fee limits, use of credit reports, notification of action taken on loan applications, privacy, discrimination, unfair and deceptive
business practices, payment or receipt of kickbacks, referral fees or unearned fees in connection with the provision of real estate settlement services, and other requirements.
Current laws, and those enacted or interpreted to deal with Internet transactions and other aspects of our business, may be revised or interpreted in ways that adversely affect our business. We
believe we are in substantial compliance with the laws applicable to our business, and have taken prudent steps to mitigate risks associated with offering loan services through the Internet.
CUSTOMER PRIVACY
We believe that the privacy of customer information is important to uphold both online and offline. We disclose our information handling practices in a detailed privacy policy, which is
prominently accessed from every page of our website. Our policy is based on industry best practices, fair information practices and privacy law.
The recently enacted Gramm-Leach-Bliley Act ("GLBA"), among other things:
• Restricts financial institutions from disclosing nonpublic personal information about a consumer, subject to certain exceptions;
• Requires financial institutions to disclose its privacy policies and practices with respect to information sharing;
• Does not preempt any state law that provides greater protection than provided for in the GLBA; and
• Requires that financial institutions provide a means for consumers to opt out of information sharing with third parties.
We engage the services of an independent firm, which reviews our online and offline privacy practices regularly and provides us with a certificate of compliance that can be viewed by
accessing our privacy policy. We believe independent third party verification of our privacy practices is an essential means of validation for our customers.
EMPLOYEES
As of December 31, 2001, we employed 436 full-time employees, of whom 227 were in mortgage loan operations, 46 were in home equity loan operations, 70 were in auto loan operations,
40 were in administration, 17 were in marketing and business development, and 36 were in engineering. As we continue to grow and introduce more products, we expect to hire more
personnel, particularly in the area of loan operations. None of our employees are represented by a labor union or are the subject of a collective bargaining agreement. We believe that
relations with our employees are good.
ITEM 2. PROPERTIES
E-LOAN is headquartered in Dublin, California, where it leases approximately 68,000 square feet of space primarily in a single building where its mortgage and home equity loan operations
and a portion of its auto loan operations take place. E-LOAN also holds a lease on approximately 24,000 square feet of office space in Jacksonville, Florida where most of the auto loan
fulfillment activity takes place. The lease for E-LOAN's office space in Dublin expires in November 2004. The lease for E-LOAN's office space in Jacksonville expires in May 2005.
ITEM 3. LEGAL PROCEEDINGS
Between August 10, 2001 and September 25, 2001, a number of substantially identical class action complaints alleging violations of the federal securities laws were filed in the United States
District Court for the Southern District of New York naming as defendants, in the aggregate, E-LOAN, Inc., certain of our officers and directors, and certain underwriters (The Goldman Sachs
Group, Inc., FleetBoston Robertson Stephens, Inc., Merrill Lynch Pierce Fenner & Smith, Inc., Credit Suisse First Boston Corp., J.P. Morgan Chase & Co.), some of which were involved in
the our initial public offering. The complaints have since been consolidated into a single action. The complaints allege, among other things, that the underwriters of our initial public offering
violated the securities laws by failing to disclose certain alleged compensation arrangements (such as
undisclosed commissions or stock stabilization practices) in the offering's registration statement and that E-LOAN and certain of our officers and directors violated Section 11 of the
Securities Act of 1933 Section 10(b) of the Securities Exchange Act of 1934. The plaintiffs seek monetary damages. Similar complaints have been filed against over 300 other issuers that
have had initial public offerings since 1998 and all such actions have been included in a single coordinated proceeding. We intend to defend these actions vigorously. However, due to the
inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of the litigation. Any unfavorable outcome of this litigation could have an adverse impact on our
business, financial condition, liquidity and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 2001.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
E-LOAN's (the "Company") common stock has been quoted on the Nasdaq National Market under the symbol "EELN" since its initial public offering on June 28, 1999. Prior to this time,
there was no public market for the Company's common stock. The following table shows the high and low sale prices per share of the Company's common stock as reported on the Nasdaq
National Market for the periods indicated:
High
Fiscal 2000:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Fiscal 2001:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Low
$ 16.75
9.34
4.63
4.88
$ 7.00
3.25
3.13
0.38
3.34
1.88
1.59
1.99
0.50
0.95
0.66
0.96
On March 15, 2002, the last reported sale price of the Company's common stock on the Nasdaq National Market was $1.50 per share. The Company had approximately 307 holders of record
of our common stock on that date.
The Company has never declared or paid any cash dividends on its capital stock. The Company currently expects to retain future earnings, if any, for use in the operation and expansion of its
business and does not anticipate paying any cash dividends in the foreseeable future. The covenants under the Company's warehouse lines of credit prohibit the Company from paying cash
dividends without the consent of Greenwich Capital Financial Products, Inc. or if in so doing, it caused the Company to breach its tangible net worth covenant with GMAC Bank.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
The selected financial data below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is qualified by reference
to the Financial Statements and Notes thereto appearing elsewhere in this document. The balance sheet data as of December 31, 2000 and 2001 and the income statement data for each of the
three years in the period ended December 31, 2001 are derived from, and are qualified by reference to, the audited financial statements of the Company included elsewhere in this document.
Years Ended December 31,
----------------------------------------------------1997
1998
1999
2000
2001
---------
---------
---------
---------
---------
(Dollars in thousands, except per share data)
INCOME STATEMENT DATA:
Revenues........................... $
1,043
$
6,832
$
22,097
$
35,879
$
67,950
Operating expenses:
Operations......................
1,319
8,257
22,779
31,747
42,946
Sales and marketing.............
Technology......................
470
102
5,704
1,346
30,286
3,595
28,506
6,207
16,785
6,325
General and administrative......
524
1,619
6,859
6,840
5,784
Non-cash marketing costs........
Amortization of unearned
--
--
6,490
5,970
compensation....................
--
1,251
9,392
5,164
Amortization of goodwill and
intangible assets ..............
Total operating expenses......
Loss from operations........
Other income, net..................
Net loss........................... $
--
-23,116
11,589
39,733
28,144
--------2,415
--------18,177
--
--------98,224
--------128,915
--------111,118
---------
---------
---------
---------
---------
(1,372)
(2)
(11,345)
173
(76,127)
3,152
(93,036)
1,276
(43,168)
3,638
---------
---------
---------
---------
---------
(1,374) $ (11,172) $ (72,975) $ (91,760) $ (39,530)
========= ========= ========= ========= =========
Net loss per share:
Basic and diluted........... $
(0.12) $
(0.98) $
(2.75) $
(1.91) $
(0.73)
========= ========= ========= ========= =========
BALANCE SHEET DATA (AT
END OF PERIOD):
Cash and cash equivalents.......... $
Loans held-for-sale................
Goodwill and intangible assets.....
4,218
---
Total assets.......................
Warehouse and other lines payable..
Long term obligations..............
Mandatorily redeemable
4,680
---
55,523
41,046
1,289
convertible preferred stock.....
Total stockholders' equity
(deficit).......................
5,049
21,393
(966)
$
9,141
42,154
--
(11,184)
$
37,748
35,140
67,878
152,967
33,115
2,525
-103,007
$
28,459
22,745
28,144
99,743
17,678
1,088
-67,486
$
32,538
162,246
-210,626
158,148
5,000
-39,768
size="1">
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the financial statements and the related notes thereto included
elsewhere in this document. This discussion contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. The Company's actual results could
differ materially from the results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below,
as well as those discussed below under Factors Affecting Future Operating Results. The Company disclaims any obligation to update information contained in any forward-looking statement.
OVERVIEW
The Company is a leading online lender whose revenues are derived primarily from the commissions and fees earned from mortgage, home equity and auto loans that it underwrites, funds
and sells on the secondary market.
MORTGAGE REVENUES
The Company's mortgage revenues are derived from the origination and sale of self-funded loans and, to a lesser extent, from the brokering of loans. Brokered loans are funded through
lending partners and the Company never takes title to the mortgage. Brokerage revenues are comprised of the mark-up to the lending partner's loan price and processing fees. These revenues
are recognized at the time a loan is closed. In October 1998, the Company began funding its mortgage loans using warehouse lines of credit. Self-funded loans are funded through the
Company's own warehouse lines of credit and sold to mortgage loan purchasers typically within thirty days. Self-funded loan revenues consist of proceeds in excess of the carrying value of
the loan, origination fees less certain direct origination costs and other processing fees. These revenues are recognized at the time the loan is sold. The Company earns additional revenue from
its self-funded loans as compared to brokered loans because the sale of loans includes a service release premium. Self-funded loans generated 96% of annual mortgage revenues in 2001.
INTEREST INCOME ON MORTGAGE AND HOME EQUITY LOANS
The Company generates revenues from interest income on self-funded mortgage and home equity loans. The revenues realized are based on the loan amount multiplied by the contractual
interest rate from the time of funding by the Company through time of sale. These revenues are recognized as earned during the period from funding to sale.
HOME EQUITY REVENUES
In the fourth quarter of 2000, the Company began self-funding home equity loans and selling them to home equity loan purchasers. The Company's home equity revenues are derived from the
origination and sale of self-funded loans. Self-funded loans are funded through the Company's own warehouse lines of credit and sold to home equity loan purchasers typically within thirty
days. Self-funded loan revenues consist of proceeds in excess of the carrying value of the loan, origination fees less certain direct origination costs and other processing fees. These revenues
are recognized at the time the loan is sold.
AUTO REVENUES
The Company's auto revenues are derived from the origination and sale of self-funded loans and from the brokering of auto loans. Auto brokerage revenues are primarily comprised of the
mark-up to the lending partner's loan price or a set origination fee. These revenues are recognized at the time a loan is closed. Self-funded loans are funded through an auto line of credit
and sold to auto loan purchasers typically within ten business days. In April 2001, the Company began funding its auto loans prior to sale with borrowings against an auto line of credit.
Self-funded loan revenues consist of the mark-up to the lending partner's loan price or a set origination fee. These revenues are recognized at the time a loan is sold.
CREDIT CARD AND OTHER
Credit card and other revenues are derived from the fees paid by various partners in exchange for consumer loan referrals. The current loan programs offered include credit card and education
loans.
QUARTERLY RESULTS
The following table sets forth the unaudited results of operations for the Company on a quarterly basis and expressed as a percentage of total revenues (dollars in thousands):
Three Months Ended
--------------------------------------------------------------------------------------
Revenues.......................... $
March 31,
June 30,
Sept. 30,
Dec 31,
March 31,
June 30,
Sept. 30,
Dec 31,
2000
---------
2000
---------
2000
---------
2000
---------
2001
---------
2001
---------
2001
---------
2001
---------
7,113
$
8,483
$
8,966
$
11,317
$
16,367
$
15,207
$
16,862
$
19,515
Operating expenses:
Operations..................
6,836
7,170
8,442
9,299
11,488
10,693
10,181
10,583
Sales and marketing.........
Technology..................
9,134
1,122
7,596
1,707
6,295
1,650
5,481
1,728
4,831
1,783
3,978
1,680
3,616
1,461
4,360
1,402
General and administrative..
Amortization of non-cash
1,789
1,953
1,548
1,550
1,488
1,276
1,380
1,641
519
2,985
2,986
2,985
2,985
2,918
1,723
1,283
257
1,020
marketing costs.........
compensation............
-3,468
-1,045
-2,841
Amortization of goodwill
and intangible assets...
9,933
---------
9,933
---------
9,933
---------
9,934
---------
9,933
---------
9,933
---------
8,278
---------
----------
Total operating expenses....
32,282
---------
31,796
---------
32,576
---------
32,261
---------
32,765
---------
31,565
---------
25,961
---------
20,827
---------
Loss from operations..............
Other income, net.................
(25,169)
(23,313)
(23,610)
(20,944)
(16,398)
(16,358)
(9,099)
(1,312)
388
201
486
201
84
238
88
3,228
--------- --------- --------- --------- --------- --------- --------- --------Net income (loss)................. $ (24,781) $ (23,112) $ (23,124) $ (20,743) $ (16,314) $ (16,120) $ (9,011) $
1,916
=========
=========
=========
=========
=========
=========
=========
=========
100%
100%
100%
100%
100%
100%
100%
100%
96%
85%
94%
82%
70%
70%
60%
54%
128%
16%
25%
90%
20%
23%
70%
18%
17%
48%
15%
14%
30%
11%
9%
26%
11%
8%
21%
9%
8%
22%
7%
8%
6%
33%
26%
18%
20%
49%
34%
19%
11%
2%
7%
6%
15%
140%
--------454%
---------
117%
--------375%
---------
111%
--------363%
---------
88%
--------285%
---------
61%
--------201%
---------
65%
--------207%
---------
50%
--------154%
---------
---------107%
---------
Loss from operations..............
Other income, net.................
-354%
5%
---------
-275%
2%
---------
-263%
5%
---------
-185%
2%
---------
-101%
1%
---------
-107%
2%
---------
-54%
1%
---------
-7%
17%
---------
Net income (loss).................
-348%
=========
-272%
=========
-258%
=========
-183%
=========
-100%
=========
-105%
=========
-53%
=========
10%
=========
AS A PERCENTAGE OF REVENUES:
Revenues..........................
Operating expenses:
Operations..................
Sales and marketing.........
Technology..................
General and administrative..
Amortization of non-cash
marketing costs.........
compensation............
Amortization of goodwill
and intangible assets...
Total operating expenses....
--
--
--
size="1">
REVENUES
The following table provides the components of revenue shown as a percentage of total revenues:
Mortgage...........................
Interest income on mortgage
and home equity loans...........
Home equity........................
Auto...............................
Credit card and other..............
Total revenues.....................
March 31,
2000
--------44%
June 30,
2000
--------50%
Sep. 30,
2000
--------48%
Dec. 31,
2000
--------43%
March 31,
2001
--------44%
June 30,
2001
--------58%
Sep. 30,
2001
--------61%
Dec. 31,
2001
--------64%
10%
-44%
2%
--------100%
=========
13%
-35%
2%
--------100%
=========
17%
-33%
2%
--------100%
=========
18%
2%
35%
2%
--------100%
=========
19%
4%
32%
1%
--------100%
=========
20%
6%
14%
2%
--------100%
=========
18%
10%
10%
1%
--------100%
=========
18%
9%
8%
1%
--------100%
=========
size="1">
Revenues increased from the first quarter to the fourth quarter of 2000 from $7.1 million to $11.3 million and increased from the first quarter to the fourth quarter of 2001 from $16.4 million
to $19.5 million. A significant portion of these increases resulted from growth in the dollar volume of mortgage and home equity loans closed and sold. Home equity operations commenced
in the fourth quarter of 2000, whereas mortgage revenues benefited from an increase in refinance loans due to falling interest rates in 2001. Refinance mortgage accounted for 89% of closed
loan volume in the fourth quarter of 2001 as compared to 52% in the fourth quarter of 2000. Revenues also increased due to an increase in interest income earned on mortgage and home
equity loans. Auto revenues increased from the first quarter to the fourth quarter of 2000 from $3.1 million to $3.9 million and decreased from the first quarter to the fourth quarter of 2001
from $5.3 million to $1.5 million. The decline in 2001 is largely attributed to strong competition from the auto manufacturers in the form of widely available incentive financing rates, such
as 0% interest rate specials.
The following table summarizes dollar volume of loans closed and sold and the revenue in both dollars and average basis points ("BPS") (dollars in thousands except BPS):
March 31,
June 30,
Sep. 30,
Dec. 31,
March 31,
June 30,
Sep. 30,
Dec. 31,
2000
---------
2000
---------
2000
---------
2000
---------
2001
---------
2001
---------
2001
---------
2001
---------
Mortgage
$ Volume
Revenue
$ 265,413
$
3,139
$ 315,607
$
4,190
$ 293,241
$
4,209
$ 344,785
$
4,862
$ 555,434
$
7,215
$ 697,246
$
8,772
$ 702,324
$ 10,243
$ 764,714
$ 12,769
118
133
144
141
130
126
146
167
BPS
Home Equity
$ Volume
$
--
$
--
$
--
$
13,605
$
32,208
$
62,351
$
87,439
$
65,049
Revenue
BPS
$
---
$
---
$
---
$
192
141
$
622
193
$
970
156
$
1,681
192
$
1,705
262
Auto
$ Volume
$ 176,828
$ 174,043
$ 188,097
$ 320,955
$ 303,449
$ 130,951
$ 117,295
$ 111,338
Revenue
BPS
$
$
$
$
$
$
$
$
3,145
178
2,962
170
2,999
159
3,913
122
5,281
174
2,095
160
1,720
147
1,498
135
size="1">
The following table illustrates the percentages of the Company's mortgage closed loan volume from purchase and refinance loans as compared to the total market (according to Mortgage
Bankers Association of America) through 2001:
1999
E-LOAN
Purchase
Refinance
63%
37%
66%
34%
Q1 01
61%
39%
1999
Total Market
Purchase
Refinance
2000
Q2 01
17%
83%
2000
15%
85%
Q1 01
81%
19%
Q3 01
22%
78%
Q2 01
45%
55%
Q4 01
11%
89%
Q3 01
50%
50%
2001
55%
45%
16%
84%
Q4 01
2001
30%
70%
45%
55%
OPERATING EXPENSES
Total Operating Expenses.
Total operating expenses remained relatively flat in 2000, remaining at $32.3 million in the first quarter of 2000 and $32.3 million in the fourth quarter of
2000, and decreased sequentially in 2001 from $32.8 million in the first quarter of 2001 to $20.8 million in the fourth quarter of 2001. The quarterly
decreases in 2001 are primarily due to the completion of amortization of the marketing services receivable in the second quarter of 2001, as well as the
completion of amortization of goodwill in the third quarter of 2001.
Operations.
Operations expense is comprised of both fixed and variable expenses, including employee compensation and expenses associated with the production and
sale of loans and interest expense paid by the Company under the warehouse and line of credit facilities it uses to fund mortgage, home equity and auto loans
held for sale.
The following table provides detail of the Company's operations expenses classified by the following revenue-related categories (dollars in thousands):
Mortgage .......................... $
March 31,
June 30,
Sep. 30,
Dec. 31,
March 31,
June 30,
Sep. 30,
2000
2000
2000
2000
2001
2001
2001
2001
---------
---------
---------
---------
---------
---------
---------
---------
4,094
$
4,020
$
4,130
$
3,898
$
5,076
$
5,190
$
4,907
Dec. 31,
$
5,767
Interest expense on mortgage and
home equity loans............
729
1,076
1,540
2,090
2,881
2,481
2,110
1,988
Home equity........................
--
--
--
226
385
771
984
953
Auto...............................
2,013
2,028
2,696
3,022
3,114
2,204
2,135
--
46
76
63
32
47
45
--------Total operations................... $
6,836
--------$
=========
7,170
--------$
=========
8,442
--------$
=========
9,299
--------$
=========
11,488
--------$
=========
10,693
1,832
43
--------$
=========
10,181
--------$
=========
10,583
=========
size="1">
Operations expense increased from the first quarter to the fourth quarter of 2000 from $6.8 million to $9.3 million, and decreased from the first quarter to the
fourth quarter of 2001 from $11.5 million to $10.6 million. Operations expense decreased as a percentage of revenues from 96% for the first quarter of 2000
to 54% for the fourth quarter of 2001. The decrease in operations expense as a percentage of revenue is due to increased volumes of revenue, as well as the
increased leverage of fixed costs from technology and process improvements. The Company expects operations expenses to trend lower as a percentage of
revenue going forward as it further streamlines and automates the loan process and leverages its fixed costs over a growing loan volume.
Direct Margin.
Direct margin is defined as revenue minus operations expense, which includes variable and fixed expenses.
The following table provides detail of the Company's direct margin classified by the following revenue-related categories (dollars in thousands):
Mortgage........................... $
March 31,
June 30,
Sep. 30,
Dec. 31,
March 31,
June 30,
Sep. 30,
2000
2000
2000
2000
2001
2001
2001
2001
---------
---------
---------
---------
---------
---------
---------
---------
(955) $
170
$
79
$
964
$
2,139
$
3,582
$
5,336
Dec. 31,
$
7,002
Interest margin....................
(48)
47
22
(8)
146
527
871
Home equity........................
--
--
--
(34)
237
199
697
752
Auto...............................
1,132
934
303
(109)
(415)
(334)
148
162
--------Total direct margin................ $
277
=========
120
--------$
1,313
=========
891
205
--------$
524
=========
2,167
190
--------$
2,018
=========
315
--------$
4,879
=========
192
--------$
4,514
=========
1,454
58
--------$
6,681
=========
--------$
8,932
=========
size="1">
Direct margin increased from the first quarter to the fourth quarter of 2000 from $0.3 million to $2.0 million, and increased from the first quarter to the
fourth quarter of 2001 from $4.9 million to $8.9 million. The growth in direct margin is due largely to the contribution from mortgage volume coupled with
technology and process improvements. Additionally, the increase in direct margin is due to the positive spread of interest income over interest expense, as well
as the addition of home equity operations, which commenced in the fourth quarter of 2000. Auto direct margin turned negative in the second quarter of 2001
as loan volume declined due to the industry's broad use of low interest rate financing incentives. We expect auto direct margin to turn positive again in 2002
as use of these incentives returns to normal levels.
Sales and Marketing.
Sales and marketing expense is primarily comprised of expenses (excluding non-cash marketing costs) related to advertising, promotion and distribution
partnerships and employee compensation and other expenses related to marketing personnel. Sales and marketing decreased sequentially from the first
quarter to the fourth quarter of 2000 from $9.1 million to $5.5 million and decreased from $4.8 million in the first quarter of 2001 to $4.4 million in the
fourth quarter of 2001. Sales and marketing expense decreased as a percentage of revenues from 128% for the first quarter of 2000 to 48% for the fourth
quarter of 2000, and decreased as a percentage of revenues from 30% in the first quarter of 2001 to 22% in the fourth quarter of 2001. Sales and marketing
expense decreased in 2000 and 2001 as a percentage of revenue due to increased leverage from new and existing advertising and partner relationships. Sales
and marketing expenses are expected to continue at approximately 25% of total revenues in upcoming quarters, representing an increase in absolute dollars as
revenues grow.
Technology.
Technology expense includes employee compensation, the introduction of new technologies and the support of the Company's existing technological
infrastructure. Technology increased from the first quarter to the fourth quarter of 2000, from $1.1 million to $1.7 million, and decreased from the first
quarter to the fourth quarter of 2001, from $1.8 million to $1.4 million. Technology expense as a percentage of revenues remained relatively constant in
2000, and decreased from 11% in the first quarter of 2001 to 7% in the fourth quarter of 2001. The Company expects technology expense to moderately
increase in absolute dollars in the upcoming quarters.
General and Administrative.
General and administrative expense is primarily comprised of employee compensation and professional services. General and administrative expense
decreased from the first quarter to the fourth quarter of 2000 from $1.8 million to $1.6 million and increased from the first quarter to the fourth quarter of
2001 from $1.5 million to $1.6 million. General and administrative expense decreased as a percentage of revenues from 25% for the first quarter of 2000 to
14% for the fourth quarter of 2000, and further decreased as a percentage of revenues in 2001 from 9% in the first quarter of 2001 to 8% in the fourth quarter
of 2001. General and administrative expenses are expected to stay relatively constant in the upcoming quarters.
Amortization of Non-Cash Marketing Costs.
On June 15, 2000, the Company issued two warrants to purchase up to 13.1 million shares of common stock to Charles Schwab & Co., Inc. pursuant to the
marketing services agreement. The first warrant for 6,500,000 shares has a three-year term and is exercisable at $3.75 per share. The second warrant for
6,600,000 shares had a three and a quarter year term and was exercisable at $15.00 per share. The fair value of the warrants, as determined at the date of grant
using the Black-Scholes option pricing model was $12.5 million and was recorded as a contra-equity account called marketing services receivable. On July
12, 2001, the second warrant to purchase 6,600,000 shares of common stock was surrendered to the Company in exchange for a new warrant to purchase
1,389,000 shares of common stock at an exercise price of $5.00 per share until July 25, 2003. The fair value of this warrant was determined to be equivalent
to the fair value of the warrant surrendered and therefore did not require an adjustment to the marketing services receivable. The marketing services
receivable was amortized on a straight-line basis over a one-year term and concluded amortization on June 30, 2001.
Amortization of Unearned Compensation.
Certain stock options granted in the years ended December 31, 1998 and 1999 were considered to be compensatory. Additionally, an issuance of Series D
preferred stock to Harold "Pete" Bonnikson, Senior Vice President of Mortgage Operations, in 1999 was considered to be compensatory. Unearned
compensation associated with stock options for the years ended December 31, 1998 and 1999 amounted to $5.7 million and $44.3 million, respectively.
Management accelerated the vesting of compensatory options in the fourth quarter of 2001 resulting in the full amortization of unearned compensation as of
December 31, 2001.
Amortization of Goodwill.
Amortization of goodwill, which resulted from the acquisition of Electronic Vehicle Remarketing, Inc. ("CarFinance.com") in September of 1999, was $9.9
million per quarter from the first quarter of 2000 through the second quarter of 2001, and decreased to $8.3 million in the third quarter of 2001. As of
December 31, 2001, goodwill was fully amortized.
Other Income, Net.
Other income, net, decreased from the first quarter to the fourth quarter of 2000 from $0.4 million to $0.2 million, and increased from the first quarter to the
fourth quarter of 2001 from $0.1 million to $3.2 million. In the fourth quarter of 2001, the Company sold its entire interest in E-LOAN Japan, which resulted
in a one-time $3.2 million gain.
COMPARISON OF YEARS ENDED DECEMBER 31, 2000 AND 2001
The following table sets forth the results of operations for the Company and these results expressed as a percentage of total revenues (dollars in thousands):
-----------------------2000
2001
----------- ----------Revenues .............................................. $
35,879 $
67,950
Operating expenses:
Operations.........................................
Sales and marketing................................
Technology.........................................
General and administrative.........................
Amortization of non-cash marketing costs...........
Amortization of unearned compensation..............
Amortization of goodwill and intangible assets.....
Total operating expenses....................
Loss from operations...................................
Other income, net......................................
Net loss...............................................
31,747
42,946
28,506
16,785
6,207
6,325
6,840
5,784
6,490
5,970
9,392
5,164
39,733
28,144
----------- ----------128,915
111,118
----------- ----------(93,036)
(43,168)
1,276
3,638
----------- ----------$
(91,760) $
(39,530)
=========== ===========
Revenues ..............................................
100%
100%
Operating expenses:
Operations.........................................
Technology.........................................
88%
79%
17%
19%
63%
25%
9%
9%
Other income, net......................................
Net loss...............................................
18%
26%
111%
----------359%
-----------259%
4%
-----------256%
===========
9%
8%
41%
----------164%
-----------64%
5%
-----------58%
===========
REVENUES
Revenues for the year ended December 31, 2001 increased $32.1 million from $35.9 million for the twelve months ended December 31, 2000 to $68.0 million
for the twelve months ended December 31, 2001. This increase resulted primarily from the growth in the number of mortgage and home equity loans closed.
Interest income on self-funded mortgage and home equity loans also increased due to the increased funding volumes. These increases were partially off-set by
a decline in the number of auto loans closed and its related revenue.
OPERATING EXPENSES
Total operating expenses decreased $17.8 million from $128.9 million for the twelve months ended December 31, 2000 to $111.1 million for the twelve
months ended December 31, 2001. The decrease is primarily due to a reduction of $11.6 million in the amortization of goodwill, $11.7 million in sales and
marketing expenses and $4.2 million in amortization of unearned compensation. These amounts are partially off-set by an increase of $11.2 million in
operations expense.
Operations.
Operations expense increased $11.2 million from $31.7 million for the twelve months ended December 31, 2000 to $42.9 million for the twelve months
ended December 31, 2001. Operations expense as a percentage of revenues decreased from 88% in 2000 to 63% in 2001. Operations headcount increased by
77 to 343 as of December 31, 2001 from 266 as of December 31, 2000. This increase is primarily due to the expansion of the Company's mortgage and home
equity operations to accommodate increasing volumes, partially off-set by a decrease in headcount for auto operations.
Sales and marketing expenses decreased $11.7 million from $28.5 million for the twelve months ended December 31, 2000 to $16.8 million for the twelve
months ended December 31, 2001. Sales and marketing expenses as a percentage of revenues decreased from 79% in 2000 to 25% in 2001. The decreases are
the result of reduced spending in the Company's national advertising campaign and improved leverage from new and existing advertising and partner
relationships resulting in more cost-effective customer acquisitions. Sales and marketing headcount decreased by 2 to 17 as of December 31, 2001 from 19 as
of December 31, 2000.
Technology.
Technology expenses increased $0.1 million from $6.2 million for the twelve months ended December 31, 2000 to $6.3 million for the twelve months ended
December 31, 2001. Technology expenses as a percentage of revenues decreased from 17% in 2000 to 9% in 2001. Technology headcount increased by 6 to
36 as of December 31, 2001 from 30 as of December 31, 2000.
General and administrative expenses decreased $1.0 million from $6.8 million for the twelve months ended December 31, 2000 to $5.8 million for the twelve
months ended December 31, 2001. General and administrative expenses as a percentage of revenues decreased from 19% in 2000 to 9% in 2001. General and
administrative headcount remained constant at 40 as of December 31, 2000 and 2001.
Amortization of Non-Cash Marketing Costs.
The marketing services receivable was amortized on a straight-line basis over a one-year term and concluded amortization on June 30, 2001. Amortization of
non-cash marketing costs decreased $0.5 million from $6.5 million for the twelve months ended December 31, 2000 to $6.0 million for the twelve months
ended December 31, 2001.
Amortization of unearned compensation decreased $4.2 million from $9.4 million for the twelve months ended December 31, 2000 to $5.2 million for the
twelve months ended December 31, 2001. Management accelerated the vesting of compensatory options in the fourth quarter of 2001 resulting in the full
amortization of unearned compensation as of December 31, 2001.
Amortization of goodwill decreased $11.6 million from $39.7 million for the twelve months ended December 31, 2000 to $28.1 million for the twelve
months ended December 31, 2001. Amortization of goodwill concluded at September 2001.
Other Income, net.
Other income, net, increased $3.2 million from $1.3 million for the twelve months ended December 31, 2000 to $3.6 million for the twelve months ended
December 31, 2001. The increase is primarily due to the sale of shares in E-LOAN Japan, which resulted in a gain of $3.2 million. This gain was partially
off-set by a decrease of approximately $1.0 million in interest on short-term investments.
COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 2000
The following table sets forth the results of operations for E-LOAN and these results expressed as a percentage of total revenues (dollars in thousands):
-----------------------1999
2000
----------- ----------Revenues .............................................. $
22,097 $
35,879
Operating expenses:
Operations.........................................
Technology.........................................
Other income, net......................................
Net loss...............................................
22,779
31,747
30,286
28,506
3,595
6,207
6,859
6,840
-6,490
23,116
9,392
11,589
39,733
----------- ----------98,224
128,915
----------- ----------(76,127)
(93,036)
3,152
1,276
----------- ----------$
(72,975) $
(91,760)
=========== ===========
Revenues ..............................................
Operating expenses:
Operations.........................................
Technology.........................................
Other income, net......................................
Net loss...............................................
100%
100%
103%
137%
16%
31%
-105%
52%
----------445%
-----------345%
14%
-----------330%
===========
88%
79%
17%
19%
18%
26%
111%
----------359%
-----------259%
4%
-----------256%
===========
REVENUES
Revenues for the year ended December 31, 2000 increased $13.8 million from $22.1 million for the twelve months ended December 31, 1999 to $35.9 million
for the twelve months ended December 31, 2000. This increase resulted primarily from the growth in the number of mortgage loans closed and the growth in
auto loans closed as a result of the acquisition of CarFinance.com in September 1999. Included in the total revenue for the year ended December 31, 2000 is
$0.2 million in home equity revenue from the sale of home equity loans, which E-LOAN began originating and selling internally in November of 2000.
OPERATING EXPENSES
Total operating expenses increased $30.7 million from $98.2 million for the twelve months ended December 31, 1999 to $128.9 million for the twelve
months ended December 31, 2000. The increase is primarily due to an expansion of the auto loan portion of the business (which was acquired from Bank of
America in September of 1999), an increase of $28.1 million in the amortization of goodwill in connection with this acquisition and $6.5 million in non-cash
marketing costs related to the issuance of warrants to purchase E-LOAN common stock. These amounts are partially off-set by a decrease of $13.7 million in
the amortization of unearned compensation expense.
Operations.
Operations expense increased $8.9 million from $22.8 million for the twelve months ended December 31, 1999 to $31.7 million for the twelve months ended
December 31, 2000. Operations expense as a percentage of revenues decreased from 103% in 1999 to 88% in 2000. Operations headcount increased by 33 to
266 as of December 31, 2000 from 233 as of December 31, 1999. This increase is primarily due to the expansion of the Company's auto operations which
resulted from the acquisition of CarFinance.com in September 1999.
Sales and marketing expenses decreased $1.8 million from $30.3 million for the twelve months ended December 31, 1999 to $28.5 million for the twelve
months ended December 31, 2000. Sales and marketing expenses as a percentage of revenues decreased from 137% in 1999 to 79% in 2000. The decreases
are the result of reduced spending in the Company's national advertising campaign and improved leverage from new and existing partner relationships
resulting in more cost-effective customer acquisitions. Sales and marketing headcount increased by 2 to 19 as of December 31, 2000 from 17 as of December
31, 1999.
Technology.
Technology expenses increased $2.6 million from $3.6 million for the twelve months ended December 31, 1999 to $6.2 million for the twelve months ended
December 31, 2000. Technology expenses as a percentage of revenues increased from 16% in 1999 to 17% in 2000. This increase is primarily due to an
increase in recruiting, compensation and benefits related to the hiring and retention of technology staff. Technology headcount decreased by 1 to 30 as of
December 31, 2000 from 31 as of December 31, 1999.
General and administrative expenses remained constant for both the twelve months ended December 31, 1999 and 2000. General and administrative expenses
as a percentage of revenues decreased from 31% in 1999 to 19% in 2000. General and administrative headcount decreased by 1 to 40 as of December 31,
2000 from 41 as of December 31, 1999.
Non-Cash Marketing Costs.
Amortization of non-cash marketing costs was $6.5 million for the twelve months ended December 31, 2000.
Amortization of unearned compensation decreased from $23.1 million for the twelve months ended December 31, 1999 to $9.4 million for the twelve months
ended December 31, 2000.
Amortization of goodwill increased from $11.6 million for the twelve months ended December 31, 1999 to $39.7 million for the twelve months ended
December 31, 2000.
Other Income, net.
Other income, net, decreased from $3.2 million for the twelve months ended December 31, 1999 to $1.3 million for the twelve months ended December 31,
2000. The decrease is primarily due to the inclusion of a one-time, non-cash gain in the amount of $2.9 million from the settlement of a strategic alliance
agreement in the fourth quarter of 1999. This amount was partially off-set by a one-time expense of $400,000 related to the settlement of a trademark dispute,
which was also included in the 1999 amounts.
CRITICAL ACCOUNTING POLICIES
The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S., which require the Company to
make estimates and assumptions (see Note 1 to the consolidated financial statements). The Company believes that of its significant accounting policies (see
Note 2 to the consolidated financial statements), the following may involve a higher degree of judgment and complexity.
Loans held-for-sale.
Loans held-for-sale are recorded at the lower of cost or aggregate market value. Cost generally consists of loan principal balance adjusted for net deferred
fees and costs. No valuation adjustment was required at December 31, 2000 or 2001.
Capitalized Software
. In 1999, the Company adopted SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, which requires that the
Company expense computer software costs as they are incurred in the preliminary project stage. Once the capitalization criteria of the SOP have been met,
external direct costs of materials and services consumed in developing or obtaining internal-use computer software and payroll and payroll related costs for
employees who are directly associated with and who devote time to the internal-use computer software are capitalized. Capitalized costs are generally
amortized over one to three years on a straight-line basis. As of December 31, 2001, the Company had capitalized approximately $2.7 million in internally
developed software costs of which $1.0 million had been amortized.
Derivative Instruments
. On June 15, 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives will be recorded each period in current
earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge
transaction. The Company adopted SFAS No. 133 on January 1, 2001. Adoption of this pronouncement resulted in a transition adjustment of a $0.2 million
gain, which was recorded as a component of mortgage revenue. For the twelve months ended December 31, 2001, the Company recorded $0.8 million as a
component of mortgage revenue related to recording changes in fair value of SFAS No. 133 derivatives for which the Company did not elect SFAS No. 133
hedge accounting and underlying hedged loans which did qualify for hedge accounting in accordance with SFAS No. 133. This Statement was recently
amended under SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities and SFAS No. 138, Accounting for Certain Derivative
Instruments and Certain Hedging Activities. The Statements require entities that use derivative instruments to measure these instruments at fair value and
record them as assets and liabilities on the balance sheet. Entities must reflect gains or losses associated with changes in the fair value of these derivatives,
either in earnings or as a separate component of comprehensive income, depending on the nature of the underlying contract or transaction. These
amendments do not change the Company's current method of accounting for these Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's sources of cash flow include cash from the sale of mortgage, home equity and auto loans, borrowings under warehouse lines of credit and
other credit facilities, brokerage fees, interest income, credit card referrals and the sale of debt and equity securities in both private and public transactions.
The Company's uses of cash include the funding of mortgage, home equity and auto loans, repayment of amounts borrowed under warehouse lines of credit,
operating expenses, payment of interest, and capital expenditures primarily comprised of furniture, fixtures, computer equipment, software and leasehold
improvements.
Net cash used in operating activities was $26.6 million and $142.0 million for the twelve months ended December 31, 2000 and 2001, respectively. Net cash
used in operating activities during the twelve months ended December 31, 2000 was primarily due to the net loss less amortization of unearned compensation,
goodwill and non-cash marketing costs, partially off-set by cash provided by a decrease in loans held-for-sale. Net cash used in operating activities during the
twelve months ended December 31, 2001, was primarily due to the increase in loans held-for-sale plus the net loss less amortization of unearned compensation,
goodwill and non-cash marketing costs.
Net cash used in investing activities was $6.2 million for the twelve months ended December 31, 2000 and net cash provided by investing activities was $2.7
million for the twelve months ended December 31, 2001. Net cash used in investing activities during 2000 was primarily for the purchase of software, furniture,
equipment and leasehold improvements. Net cash provided by investing activities during 2001 was primarily due to the sale of the Company's investment in
E-LOAN Japan, partially offset by the purchase of software, furniture, equipment and leasehold improvements.
Net cash provided by financing activities was $23.5 million and $143.4 million for the twelve months ended December 31, 2000 and 2001, respectively. Net
cash provided by financing activities in these periods was primarily from proceeds from borrowings under the Company's warehouse lines of credit and other
credit facilities, net proceeds from notes payable, as well as proceeds from the private placement in the twelve months ended December 31, 2000.
The Company has a warehouse line of credit for borrowings of up to $50 million for the interim financing of mortgage loans with GMAC Bank. The interest
rate charged on borrowings against these funds is variable based on LIBOR plus various percentage rates. Borrowings are collateralized by the related mortgage
loans held-for-sale. The committed line of credit expires on March 31, 2003. Upon expiration, management believes it will either renew its existing line or
obtain sufficient additional lines. This line of credit agreement generally requires the Company to comply with various financial and non-financial covenants.
In particular, the Company must maintain a minimum unrestricted cash balance of $12.5 million (excluding Documentary Drafts) in addition to the requirement
that the Company maintain at least one other warehouse facility of no less than $100 million. Failure to comply with these, or any other covenants, could result
in the obligation to repay all amounts then outstanding. The Company was in compliance with all debt covenants for this agreement during the year ended and
at December 31, 2001.
The Company has an agreement to finance up to $300 million of mortgage loan inventory pending sale of these loans to the ultimate mortgage loan investors
with Greenwich Capital. Of this amount, $150 million is available in committed funds. This loan inventory financing is secured by the related mortgage loans.
The interest rate charged on borrowings against these funds is based on LIBOR plus various percentage points. The line requires the restriction of $2.5 million
in cash as additional collateral. The line expires March 21, 2003. Upon expiration, management believes it will either renew its existing line or obtain sufficient
additional lines. This agreement includes various financial and non-financial covenants. In particular, the Company must maintain a minimum cash and cash
equivalents balance of the higher of $15 million (including Restricted Cash, excluding Documentary Drafts) or the highest amount required by any other lender
or agreement. Additionally, the Company is required to maintain at least one other warehouse facility of no less than $50 million. Failure to comply with
these, or any other covenants, could result in the obligation to repay all amounts then outstanding. The Company was in compliance with all covenants for this
agreement during the year ended and at December 31, 2001.
In addition, the Company has an uncommitted mortgage loan purchase and sale agreement with Greenwich Capital. Under the terms of this agreement,
mortgage loans which are subject to a "take-out" commitment between the Company and an investor, but have not yet been purchased, may be sold to
Greenwich Capital with the accompanying trade assignment. This allows the Company to accelerate turnover and provide additional liquidity to fund additional
mortgage loans. Revenue derived from sales under this agreement are included as a receivable on the Company's balance sheet.
On April 1, 2001, the Company entered into an agreement for a $25 million line of credit with Bank One, NA for the interim financing of auto loans. The
interest rate charged on this line is based on LIBOR plus 2.5%. This line includes various financial and non-financial covenants. At December 31, 2001, the
Company was not in compliance with a debt to tangible net worth covenant ratio and subsequently obtained a waiver from the lender. This committed line
was reduced to $10 million on April 1, 2002 and expires on July 31, 2002. Bank One has indicated that they are exiting this component of their lending
business, and therefore will not be renewing our line of credit after the expiration on July 31, 2002. The Company is in active discussions with multiple lending
providers, and believes that it will be successful in securing an alternative source prior to expiration of the current facility.
On April 2, 2001, the Company entered into a loan agreement with Christian A. Larsen, the Company's Chairman of the Board and Chief Executive Officer,
that provided the Company with the ability to draw funds up to an aggregate of $7.5 million upon demand. The borrowings had an interest rate of the lower of
12% or the maximum legal rate allowed. Additionally, as provided for in the loan agreement, the $7.5 million commitment was reduced to $2.5 million as part
of the issuance of a convertible note to The Charles Schwab Corporation. This facility expired on January 5, 2002.
On July 12, 2001 the Company issued a $5.0 million convertible note to The Charles Schwab Corporation, which is convertible into shares of its common
stock at a conversion price of $1.06 per share and which matures on January 19, 2003. The convertible note bears interest at a rate of 8% per annum and is
payable quarterly. On March 14, 2002, the Company elected to redeem the note prior to its maturity date. Under the terms of the note, the Company seeks to
redeem the note on April 15, 2002 by payment of $5,250,000 (105% of the unpaid principal as of the date of redemption). The Charles Schwab Corporation
has the option before April 15, 2002 to convert the amount due under the note into 4,716,981 shares of common stock of the Company, in lieu of repayment.
The Company believes that its existing cash and cash equivalents as of December 31, 2001 will be sufficient to fund its operating activities, capital expenditures
and other obligations for the next twelve months. However, if during that period or thereafter the Company is not successful in generating sufficient cash flow
from operations, or in raising additional funds when required in sufficient amounts and on terms acceptable to the Company, it could have a material adverse
effect on the Company's business, results of operations and financial condition. If additional funds are raised through the issuance of equity securities, the
percentage ownership of its then-current stockholders would be reduced.
FACTORS AFFECTING FUTURE OPERATING RESULTS
The following important factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this
report or presented elsewhere by management from time to time.
We Have a History of Losses, We Have Only Recently Achieved Profitability, and We May Not Maintain Profitability
We incurred net losses of $91.8 million and $39.5 million for the years ended December 31, 2000 and 2001, respectively. As of December 31, 2001, our accumulated deficit was $216.9
million. We have achieved profitability in the fourth quarter of 2001. Because we expect our operating costs will increase to accommodate expected growth in loan applications, we will
need to generate significant revenues to maintain profitability. We may not sustain or increase profitability on a quarterly or annual basis in the future. If revenues grow more slowly than we
anticipate, or if operating expenses exceed our expectations or cannot be adjusted accordingly, our business, results of operations and financial condition will be adversely affected.
We have a Limited Operating History and Consequently Face Significant Risks and Challenges in Building Our Business
We were incorporated in August 1996, initiated our online mortgage operations in June 1997 and acquired our auto operations in September 1999. We cannot assure you that we will be able
to operate successfully if a downturn in the mortgage or auto business occurs. As a result of our limited operating history, our recent growth and our reporting responsibilities as a public
company, we may need to expand operational, financial and administrative systems and control procedures to enable us to further train and manage our employees and coordinate the efforts
of our underwriting, accounting, finance, marketing, and operations departments.
Our Quarterly Financial Results Are Vulnerable to Significant Fluctuations and Seasonality, Which Could Adversely Affect Our Stock Price
Our revenues and operating results may vary significantly from quarter to quarter due to a number of factors. Certain months or quarters have historically experienced a greater volume of
purchase money mortgage and auto loan applications and funded loans. As a result, we believe that quarter- to-quarter comparisons of our operating results are not a good indication of
our future performance. It is possible that in some future periods our operating results may be below the expectations of public market analysts and investors. In this event, the price of our
common stock may fall.
Interest Rate Fluctuations Could Significantly Reduce Customers' Incentive to Refinance Existing Mortgage Loans
A significant percentage of our mortgage customers use our services to refinance existing mortgages and they are motivated to do so primarily when interest rates fall below the rates of their
existing mortgages. In the event interest rates significantly increase, consumers' incentive to refinance will be greatly reduced and the number of loans that we originate could significantly
decline. We significantly benefited from the spread between long term and short term interest rates during 2001. Based on historical trends, we would not expect the same level of benefit
from interest rate spreads in a normal market.
Our Ability to Engage in Profitable Secondary Sales of Loans May Also Be Adversely Affected by Increases in Interest Rates
The mortgage loan purchase commitments we obtain are contingent upon our delivery of the relevant loans to the purchasers within specified periods. To the extent that we are unable to
deliver the loans within the specified periods and interest rates increase during those periods, we may experience no gain or even a loss on the sale of these loans. In addition, any increase in
interest rates will increase the cost of maintaining our warehouse and repurchase lines of credit on which we depend to fund the loans we originate. We have implemented a hedging program
to manage the risk of loss due to fluctuations in interest rates, but our hedging efforts may not be successful, and no hedging strategy can completely eliminate interest rate risk. A sharp
decrease in interest rates over a short period may cause customers who have interest rates on mortgages committed through us to either delay closing their loans or refinance with another
lender. If this occurs in significant numbers, it may have an adverse effect on our business or quarterly results of operations.
Our Hedging Strategy May Not Succeed in Reducing Our Exposure to Losses Caused by Fluctuations in Interest Rates
We attempt to manage our interest rate risk exposure through hedging transactions using a combination of forward sales of mortgage-backed securities and forward whole-loan sales to fix the
sales price of loans we expect to fund. An effective hedging strategy is complex, and we have limited experience administering a hedging program. A successful hedging program depends in
part on our ability to properly estimate the number of loans that will actually close and is subject to fluctuations in the prices of mortgage-backed securities, which do not necessarily move
in tandem with the prices of loans we originate and close. To the extent that we implement a hedging strategy but are unable to effectively match our purchases and sales of mortgage-backed
securities with the sale of the closed loans we have originated, our gains on sales of mortgage loans will be reduced, or we will experience a net loss on those sales.
Uncertainty With Respect to the Time It Takes to Close Mortgage Loans Can Lead to Unpredictable Revenue and Profitability
The time between the date an application for a mortgage loan is received from a customer on our website and the date the loan closes can be lengthy and unpredictable. The loan application
and approval process is often delayed due to factors over which we have little or no control, including the timing of the customer's decision to commit to an available interest rate, the close
of escrow date for purchase loans, the timeliness of appraisals and the adequacy of the customer's own disclosure documentation. Purchase mortgage loans generally take longer to close than
refinance loans as they are tied to the close of the property sale escrow date. This uncertain timetable can have a direct impact on our revenue and profitability for any given period. We may
expend substantial funds and management resources supporting the loan completion process and never generate revenue from closed loans. Therefore, our results of operations for a particular
period may be adversely affected if the mortgage loans applied for during that period do not close in a timely manner or at all.
We Have Recently Experienced Significant Growth in Our Business, and If We Are Unable to Manage this Growth, Our Business Will Be Adversely Affected
Over the past two years we have experienced significant growth, which has placed a strain on our resources and will continue to do so in the future. Our failure to manage this growth
effectively could adversely affect our business. We may not be successful in managing or expanding our operations or maintaining adequate management, financial and operating systems
and controls. Our headcount has grown substantially. At December 31, 2000 and 2001, we had 355 and 436 full-time employees, respectively.
If Online Lending and Our Service Offerings Do Not Achieve Widespread Consumer Acceptance, Our Business Will Be Adversely Affected
Our success will depend in large part on widespread consumer acceptance of obtaining mortgage and auto loans online. The development of an online market for mortgage and auto loans has
only recently begun, is rapidly evolving and likely will be characterized by an increasing number of market entrants. Our future growth, if any, will depend on the following critical factors:
• the growth of the Internet as a commerce medium generally, and as a market for consumer financial products and services specifically;
• our ability to successfully and cost-effectively market our services to a sufficiently large number of customers; and
• our ability to overcome a perception among many real estate market participants that obtaining mortgages online is risky for consumers.
We cannot assure you that the market for our services will develop, that our services will be adopted or that consumers will significantly increase their use of the Internet for obtaining
mortgage or auto loans. If the online market for mortgage and auto loans fails to develop, or develops more slowly than expected, or if our services do not achieve widespread market
acceptance, our business, results of operations and financial condition would be adversely affected.
The Loss of One or More of Our Significant Distribution Partners Would Adversely Affect Our Business
We rely on Internet distribution partners to direct a significant number of prospective customers to our website. If we lose any of our significant distribution partners, we will likely fail to
meet our growth objectives, both in terms of additional borrowers and increased brand awareness. In the aggregate, approximately 30% and 60% of our mortgage and auto loan applications,
respectively, were derived from the websites of our distribution partners during the year ended December 31, 2001. Our agreements with our distribution partners are typically short-term,
from one to four years in length, and most can be terminated for any reason upon 30 to 60 days prior written notice. We cannot assure you that any or all of these agreements will not be
terminated or will be renewed or extended past their current expiration dates. If any of these agreements were to be terminated or were to lapse without extension, we could lose a considerable
number of loan applications and our business would be adversely affected.
The Termination of One or More of Our Mortgage Funding Sources Would Adversely Affect Our Business
We depend on GMAC Bank, formerly GE Capital Mortgage Services, Inc. ("GE Capital"), to finance our self-funded mortgage loan activities through the warehouse credit facility they
provide. We also depend on Greenwich Capital Financial Products, Inc. to finance portions of our mortgage loan inventory pending ultimate sale to mortgage loan purchasers. If either of these
warehouse credit facilities becomes unavailable, our business would be adversely affected. Under our agreements with each of these lenders, we make extensive representations, warranties
and various operating and financial covenants. A material breach of these representations, warranties or covenants on either or both lines could result in the termination of our agreements
and an obligation to repay all amounts outstanding at the time of termination. In the past, we have had to obtain waivers from Greenwich Capital and GE Capital as a result of our failure
to comply with covenants regarding the issuance of capital stock, excess asset purchases and the breach of financial ratios. Our agreements with Greenwich Capital and GMAC Bank expire
in March 2003. Upon expiration of these agreements management intends to renew or extend the warehouse credit facilities. However, we cannot assure you that these agreements will be
renewed or extended past their current expiration dates, and additional sources of funding for our mortgage loans may not be available on favorable terms or at all.
Our Inability to Secure a Replacement Auto Line of Credit Would Adversely Affect Our Business
We have a line of credit from Bank One, NA, to finance the funding of our auto loans, and it is our sole facility for auto loan fundings. As part of an April 1, 2002 renewal, the line of
credit commitment was reduced from $25 million to $10 million and extended until July 31, 2002. Bank One has indicated that they are exiting this component of their lending business, and
therefore will not be renewing our line of credit after the expiration on July 31, 2002. We are in active discussions with multiple lending providers, and believe that we will be successful in
securing an alternative source prior to expiration of our current facility. However, we cannot assure you that we will be successful and our inability to secure a replacement would adversely
affect our auto lending business.
We Are Primarily Dependent on One Lending Source for All of Our Home Equity Business
Currently, the majority of our home equity loans are funded through Wells Fargo Bank pursuant to a Home Equity Loan/Line Purchase Agreement. If Wells Fargo Bank is unable or unwilling
to purchase our home equity loans, we may experience delays in our ability to accept or process home equity loan applications until we are able to secure new sources of loan purchasers.
Sufficient additional sources of loan purchasers for our home equity loans may not be available on favorable terms or at all.
We Are Primarily Dependent on Three Auto Loan Purchasers for the Majority of Our Auto Loan Business
Currently, the majority of our auto loans are sold to three auto loan purchasers. If any of them are unable or unwilling to purchase our auto loans, we may experience delays in our ability to
accept or process auto loan applications until we are able to secure new auto loan purchasers. Sufficient additional purchasers for our auto loans may not be available on favorable terms or at
all.
We Depend on the Timely and Competent Services of Various Companies Involved in the Mortgage Process; If These Companies Fail to Timely and Competently Deliver These
Services, Our Business and Reputation Will be Directly and Adversely Affected
We rely on other companies to perform services related to the loan underwriting process, including appraisals, credit reporting and title searches. Any interruptions or delays in the provision
of these services may cause delays in the processing and closing of loans for our customers. If we are unsuccessful in managing the timely delivery of these services we will likely experience
increased customer dissatisfaction and our business and reputation could be adversely affected.
The Loss of Our Relationship with Any of Our Significant Providers of Automated Underwriting Would Have an Adverse Effect on Our Business
We depend on automated underwriting and other services offered by government sponsored and other mortgage investors, including Fannie Mae and Freddie Mac ("Agencies"), to help
ensure that our mortgage services can be offered efficiently and on a timely basis. We currently have an agreement with the Agencies that authorizes our use of their automated underwriting
services and enables us to sell qualified first mortgages to these Agencies. We cannot assure you that we will remain in good standing with the Agencies or that the Agencies will not terminate
our relationship. We expect to continue to process a significant portion of our conforming mortgage loans using the Agencies' systems until we are able to obtain automated underwriting
services from other providers. Our agreement with the Agencies can be terminated by either party. The termination of our agreements with the Agencies would adversely affect our business
by reducing our ability to streamline the mortgage origination process.
We May Incur Losses on Loans if We Breach Representations or Warranties to Mortgage or Auto Loan Purchasers
In connection with the sale of mortgage and auto loans, we make customary representations and warranties to loan purchasers relating to, among other things, compliance with laws and
origination practices. In the event we breach any of these representations and warranties, we may be required to repurchase or substitute these loans and bear any subsequent losses on the
repurchased loans. We may also be required to indemnify mortgage and auto loan purchasers for these losses and claims with respect to loans for which there was a breach of representations
and warranties. In addition, many of our agreements with mortgage and auto loan purchasers prohibit our solicitation of borrowers with respect to the refinancing of loans we originate and
sell. The loan purchasers under our mortgage loan purchase agreements may construe our continuing mortgage monitoring service as violating these non-solicitation provisions, in which case
they may elect to terminate their agreements with us or may seek recovery from us for damages sustained by them. Many of our agreements with mortgage and auto loan purchasers prohibit
us from refinancing mortgage and auto loans for specified time periods, unless we pay penalties to the loan purchasers or obtain their consent. Many of these agreements also require us to
return any premiums paid by a mortgage or auto loan purchaser if the loans purchased are prepaid in full during periods of up to twelve months following the date the loan is purchased.
The Consumer Lending Industry is Intensely Competitive, and if We Fail to Successfully Compete in this Industry, Our Market Share and Business Will be Adversely Affected
The market for the origination of consumer loans is rapidly evolving, both online and through traditional channels, and competition for borrowers is intense and is expected to increase
significantly in the future. We face competition from offline banks, mortgage bankers, brokers and auto dealers, which as a group provide the majority of mortgage loans, home equity loans
and lines of credit, and auto loans, respectively. In addition, we compete directly with companies offering mortgage and auto loans over the Internet. Principal among these competitors are
E*Trade Mortgage Corporation, Quicken Loans, LendingTree, Ditech.com, and Peoplefirst.com. Traditional lenders, including Countrywide, Wells Fargo Bank and Bank of America, also
provide access to their loan offerings over the Internet. Increased competition, particularly online competition, could result in price reductions, reduced margins or loss of market share, any
of which could adversely affect our business. Further, we cannot assure you that our competitors and potential competitors will not develop services and products that are equal or superior to
those of ours or that achieve greater market acceptance than our products and services.
To compete successfully, we must respond promptly and effectively to the challenges of technological change, evolving standards and our competitors' innovations by continuing to enhance
and expand our services, as well as our sales and marketing channels. Auto manufacturer's subsidy of rates of interest and finance charge could adversely affect our ability to offer competitive
interest rates for our auto loans, and the number of loans that we originate could significantly decline. We may not be able to compete successfully in our market environment and our failure
to do so could have an adverse effect on our business, results of operations and financial condition.
If We Fail to Comply with the Numerous Laws and Regulations that Govern Our Industry, Our Business Could be Adversely Affected
Our business must comply with all applicable state and federal laws, and with extensive and complex rules and regulations and licensing and examination requirements of various federal,
state and local government authorities. These rules impose obligations and restrictions on our mortgage and auto loan brokering and lending activities. In particular, these rules limit the
broker fees, interest rates, finance charges and other fees we may assess, require extensive disclosure to our customers, prohibit discrimination and impose on us multiple qualification and
licensing obligations. We may not always have been and may not always be in compliance with these requirements. Failure to comply with these requirements may result in, among other
things, revocation of required licenses or registrations, loss of approved status with the agencies or with institutions that purchase our loans, voiding of loan contracts or security interests,
indemnification liability or the obligation to repurchase loans sold to loan purchasers, rescission of mortgage loans, class action lawsuits, administrative enforcement actions and civil and
criminal liability.
Any Acquisitions that We Undertake Could be Difficult to Integrate and Could Disrupt Our Business, Dilute Stockholder Value and Adversely Affect Our Operating Results
In September 1999, we acquired Electronic Vehicle Remarketing, Inc., and we may acquire or make investments in other complementary businesses, technologies, services or products in the
future. These acquisitions and investments could disrupt our ongoing business, distract our management and employees and increase our expenses. In the past, we have had discussions with
companies regarding our acquiring, or investing in, their businesses, products, services, or technologies, and we expect to have additional discussions in the future. If we acquire a company,
we could have difficulty in assimilating that company's personnel, operations, technology, and software. In addition, the key personnel of the acquired company may decide not to work for
us. We could also have difficulty in integrating the acquired products, services or technologies into our operations, and we may incur indebtedness or issue equity securities to pay for any
future acquisitions. The issuance of equity securities could be dilutive to our existing stockholders.
The Loss of Any of Our Executive Officers or Key Personnel Would Likely Have an Adverse Effect on Our Business
Our future success depends to a significant extent on the continued services of our senior management and other key personnel, particularly co-founder Chris Larsen, Chief Executive Officer
and Chairman of the Board of Directors, as well as Joseph Kennedy, President and Chief Operating Officer. The loss of the services of Mr. Larsen, Mr. Kennedy or other key employees,
would also likely have an adverse effect on our business, results of operations and financial condition. We have not entered into employment agreements with any of our executives, except
Mr. Kennedy, and we do not maintain "key person" life insurance for any of our personnel.
We May Not be Able to Recruit and Retain the Personnel We Need to Succeed
Competition for personnel throughout our industry is intense. We may be unable to retain our key employees or attract, assimilate or retain other highly qualified employees in the future. Our
future success depends on our continuing to attract, retain and motivate highly skilled employees, particularly with respect to our loan processing functions. We have in the past experienced,
and we expect to continue to experience in the future, difficulty in hiring and retaining employees with appropriate qualifications. If we do not succeed in attracting new personnel or retaining
and motivating our current personnel, our business will be adversely affected.
Our Business Will be Impaired if Consumers Do Not Continue to Use the Internet
Our business will be adversely affected if Internet usage does not continue to grow, particularly by home and auto buyers. A number of factors may inhibit Internet usage by consumers,
including inadequate network infrastructure, security concerns, inconsistent quality of service, and lack of availability of cost-effective, high-speed service. If Internet usage grows, the
Internet infrastructure may not be able to support the demands placed on it by this growth and its performance and reliability may decline. In addition, many websites have experienced service
interruptions as a result of outages and other delays occurring throughout the Internet infrastructure. If these outages or delays frequently occur in the future, Internet usage, as well as the
usage of our website, could grow more slowly or decline.
Our Business Will Suffer if We Are Unable to Expand and Promote Our Brand Recognition
Establishing and maintaining our brand is critical to attracting and expanding our customer base, solidifying our business relationships and successfully implementing our business strategy.
We cannot ensure that our brand will be positively accepted by the market or that our reputation will be strong. Promotion and enhancement of our brand will also depend, in part, on our
success in providing a high-quality customer experience. We cannot ensure that we will be successful in achieving this goal. If visitors to our website do not perceive our existing services to
be of high quality or if we alter or modify our brand image, introduce new services or enter into new business ventures that are not favorably received, the value of our brand could be diluted,
thereby decreasing the attractiveness of our service to potential customers.
Our Business Will Suffer if We Are Unable to Adapt to the Rapid Technological Change that Characterizes Our Industry
Our future success will depend on our ability to adapt to rapidly changing technologies by continually improving the performance features and reliability of our services. We rely on third
party software products and services, including software related to automated underwriting functions, to enable us to realize processing efficiencies that are central to our operations. If we
are unable to integrate this software in a fully functional manner, we may experience difficulties that could delay or prevent the successful development, introduction or marketing of new
products and services. In addition, enhancements of our products and services must meet the requirements of our current and prospective customers and must achieve significant market
acceptance. We could also incur substantial costs if we need to modify our services or infrastructure to adapt to these changes.
Any Outages, Delays or Other Difficulties Experienced by the Internet Service Providers, Online Service Providers or Other Website Operators on Which Our Users Depend
Could Adversely Affect Our Business
Our website has in the past and may in the future experience slower response times or decreased traffic for a variety of reasons. In addition, our users depend on Internet service providers,
online service providers and other website operators for access to our websites. Many Internet users have experienced significant outages in the past, and could experience outages, delays
and other difficulties due to system failures unrelated to our systems. Additionally, the Internet infrastructure may not be able to support continued growth in its use. Any of these problems
could adversely affect our business.
Our Business Will be Adversely Affected if We Are Unable to Safeguard the Security and Privacy of Our Customers' Financial Data
Internet usage could decline if any well-publicized compromise of security occurred. We may incur significant costs to protect against the threat of security breaches or to alleviate problems
caused by any breaches that occur. We also retain on our premises personal financial documents that we receive from prospective borrowers in connection with their loan applications. These
documents are highly sensitive and if a third party were to misappropriate our customers' personal information, customers could possibly bring legal claims against us. We cannot assure you
that our privacy policy will be deemed sufficient by our prospective customers or compliant with any federal or state laws governing privacy which may be adopted in the future.
Our Business Will be Adversely Affected if We Are Unable to Protect Our Intellectual Property Rights from Third Party Challenges or if We Are Involved in Litigation
Trademarks and other proprietary rights are important to our success and our competitive position. Although we seek to protect our trademarks and other proprietary rights through a variety
of means, we cannot assure you that the actions we have taken are adequate to protect these rights. We may also license content from third parties in the future, and it is possible that we could
face infringement actions based upon the content licensed from these third parties. Trademark or propriety rights claims against us, regardless of their merit, could result in costly litigation
and the diversion of our financial resources and technical and management personnel. Further, if any of these claims are proved valid, through litigation or otherwise, we may be required to
change our trademarks and pay financial damages, which could adversely affect our business.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate movements significantly impact our volume of closed loans and represent the primary component of market risk to us. In a higher interest rate environment, consumer demand for
mortgage loans, particularly refinancing of existing mortgages, declines. Interest rate movements affect the interest income earned on loans held for sale, interest expense on the warehouse
lines payable, the value of mortgage loans held for sale and ultimately the gain on sale of mortgage loans.
We attempt to minimize the interest rate risk associated with the time lag between when loans are rate-locked and when they are committed for sale or exchanged in the secondary market,
through our hedging activities. Individual mortgage loan risks are aggregated by note rate, mortgage loan type and stage in the pipeline, and are then matched, based on duration, with the
appropriate hedging instrument, thus mitigating basis risk until closing and delivery. We currently hedge our mortgage pipeline through mandatory forward sales of Fannie Mae mortgagebacked securities and non-mandatory forward sale agreements with the ultimate investor. We determine which alternative provides the best execution in the secondary market. In addition,
we do not believe our net interest income would be materially affected as a result of concurrent changes in long-term and short-term interest rates due to the short duration of time loans are
held on the balance sheet prior to being sold to capital market loan purchasers (on average under thirty days).
We believe that we have implemented a cost-effective hedging program to provide a high level of protection against changes in the market value of rate-lock commitments. However, an
effective strategy is complex and no hedging strategy can completely insulate the Company against such changes.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Accountants, Financial Statements and Notes to Financial Statements begin on page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information regarding directors and executive officers appearing under the heading "Proposal 1: Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance"
of our proxy statement relating to our 2002 Annual Meeting of Stockholders to be held on May 14, 2002 (the "2002 Proxy Statement") is incorporated into this item by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing under the headings "Compensation of Directors," "Compensation Committee Report of the Board of Directors," "Executive Compensation" and "Performance
Graph" of our 2002 Proxy Statement is incorporated into this item by reference (except to the extent allowed by Item 402(a)(8) of Regulation S-K).
ITEM 12. SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN BENEFICIAL OWNERS
The information appearing under the heading "Security Ownership of Directors, Officers and Certain Beneficial Owners" of our 2002 Proxy Statement is incorporated into this item by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the heading "Certain Relationships and Related Transactions" of our 2002 Proxy Statement is incorporated into this item by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. The following financial statements of E-LOAN, Inc. and its subsidiaries are found in this Annual Report on Form 10-K for the fiscal year ended December 31, 2001:
FINANCIAL STATEMENTS
Page
Report of Independent Accountants
F-2
Balance Sheets
F-3
Statements of Operations
F-4
Statements of Stockholders' Equity (Deficit)
F-5
Statements of Cash Flows
F-6
Notes to the Financial Statements
F-7
2. Financial Statement Schedules.
All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(b) Reports on Form 8-K. E-LOAN filed one report on Form 8-K during the fourth quarter of 2001 as follows:
Current Report on Form 8-K filed October 10, 2001 for the purpose of reporting under Item 5 thereof the results of E-LOAN's third quarter financial results.
(c)Exhibits.
Exhibit
Number
Exhibit Title
3.1
Restated Certificate of Incorporation of E-LOAN dated July 2, 1999 (8)
3.2
Corrected Certificate of Amendment of Restated Certificate of Incorporation of E-LOAN, Inc.
dated February 15, 2001 (10)
3.3
Amended and Restated Bylaws of E-LOAN, Inc. dated March 16, 2001 (10)
4.1
Promissory Note made by The Charles Schwab Corporation in favor of E-LOAN, Inc., dated as of
March 31, 2001, in the amount of $2,000,000 (12)
4.2
Promissory Note made by Christian A. Larsen in favor of E-LOAN, Inc., dated as of March 31,
2001, in the amount of $3,000,000 (12)
4.3
Stock Purchase Warrant dated as of July 12, 2001 granting Charles Schwab & Co., Inc. the right to
purchase 1,389,000 shares of E-LOAN's common stock (12)
4.4
8% Convertible Note made by The Charles Schwab Corporation in favor of E-LOAN, Inc., dated as
of July 12, 2001, in the amount of $5,000,000 (12)
10.1
Form of Underwriting Agreement, undated (1)
10.2
Specimen of Common Stock Certificate, undated (1)
10.3
Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation dated March 23, 1999 (1)
10.4
Form of Indemnification Agreement between the Registrant and each of its directors and officers
dated March 19, 1999 (1)
10.5
1997 Stock Plan, undated (1)
10.6
1997 Stock Plan dated April 27, 1999 (1)
10.7
1997 Stock Plan dated August 30, 1999 (4)
10.8
1999 Employee Stock Purchase Plan, undated (1)
10.9
1999 Employee Stock Purchase Plan dated October 25, 1999 (4)
10.10
Restated Investor Rights Agreement among E-LOAN and certain investors dated September 4,
1998 (1)
10.11
Warrant Agreement to Purchase Shares of the Series C Preferred Stock of E-LOAN, Inc. with
Comdisco, Inc. dated March 4, 1998 (1)
10.12
Employment Agreement with Joseph Kennedy dated March 26, 1999 (1)
10.13
Marketing Agreement with DLJdirect, Inc. dated September 4, 1998 (1)*
10.14
Co-Marketing Agreement with E*Trade Group, Inc. dated March 26, 1998 (1)*
10.15
Marketing Agreement with MarketWatch.com dated February 8, 1999 (1)*
10.16
Marketing Agreement with Prism Mortgage Company dated May 1, 1998 (1)
10.17
Warehousing Credit and Security Agreement with Bank United dated February 3, 1999 (1)
10.18
Broker Agreement with Citicorp Mortgage, Inc. dated September 23, 1997 (1)
10.19
Underwriting Review Agreement with CMAC Service Company dated September 3, 1998 (1)
10.20
Warehouse Credit Agreement with Cooper River Funding Inc. and GE Capital Mortgage Services,
Inc. dated June 24, 1998 (1)
10.21
Warehouse Credit Agreement with Cooper River Funding Inc. and GE Capital Mortgage Services,
Inc. dated June 24, 1998 and Amended and Restated Note to Cooper River Funding Inc. dated
April 26, 1999 (1)
10.22
Loan Purchase Agreement with Countrywide Home Loans, Inc. dated September 25, 1998 (1)
10.23
Conventional Loan Purchase Agreement with Crestar Mortgage Corporation dated July 1, 1998 (1)
10.24
GMAC Mortgage Corporation Seller's Agreement for Residential Mortgage Loans with GMAC
Mortgage Corporation dated July 1, 1998 (1)
10.25
Mortgage Loan Purchase and Sale Agreement with Greenwich Capital Financial Products, Inc.,
undated (1)
10.26
License, Staffing, Purchase and Sale Agreement with NetB@nk dated June 1, 1998 (1)
10.27
Mortgage Loan Processing Agreement with NetB@nk dated June 1, 1998 (1)
10.28
Wholesale Mortgage Purchase Agreement with PHH Mortgage Services Corporation dated June 1,
1998 (1)
10.29
Underwriting Services Agreement with PMI Mortgage Services Co. dated June 12, 1998 (1)
10.30
Mortgage Purchase Agreement with Resource Bancshares Mortgage Group, Inc. dated May 1, 1998
(1)
10.31
Mortgage Selling and Servicing Contract with Federal National Mortgage Association dated
February 12, 1999 (1)
10.32
Multi-Tenant Office Triple Net Lease with Creekside South Trust, as amended, dated August 19,
1998 (1)
10.33
Lease Agreement between JTC and Palo Alto Funding Group, Inc. dated June 20, 1996 (1)
10.34
Mortgage Loan Origination Agreement between Chase Home Mortgage Corporation and Palo Alto
Funding Group dated November 30, 1992 (1)
10.35
Correspondent Agreement with Citicorp Mortgage, Inc. dated June 15, 1998 (1)
10.36
Conventional Wholesale Mortgage Purchase Agreement with Colonial Mortgage Company dated
September 1, 1998 (1)
10.37
Lender Associate Agreement with GreenPoint Mortgage Corp. dated November 9, 1998 (1)
10.38
Correspondent Broker Agreement with New America Financial, Inc., undated (1)
10.39
Correspondent Mortgage Services Agreement with PHH Mortgage Services Corporation dated May
20, 1998 (1)
10.40
Correspondent Purchase Agreement with Prism Mortgage Company dated March 22, 1998 (1)
10.41
Wholesale Lending Agreement with Union Federal Savings Bank of Indianapolis dated March 6,
1998 (1)
10.42
Master Lease Agreement with Comdisco, Inc. dated March 4, 1998 (1)
10.43
Loan and Security Agreement with Silicon Valley Bank dated December 8, 1998 (1)
10.44
Internet Data Center Services Agreement with Exodus Communications, Inc. dated November 10,
1997 (1)
10.45
Marketing Agreement with PHH Mortgage Services Corporation dated January 19, 1998 (1)
10.46
Second Amendment to Lease with Creekside South Trust dated March 25, 1999 (1)
10.47
Joint Venture Agreement with Softbank Corp. dated March 31, 1999 (1)*
10.48
Stock Purchase Agreement with Forum Holdings, Inc. dated May 20, 1999 (1)
10.49
Master Loan and Security Agreement with Greenwich Capital Financial Products, Inc. dated May
20, 1999 (1)
10.50
Stock Purchase Warrant issued to Greenwich Capital Financial Products, Inc. dated May 20, 1999
(1)
10.51
Marketing, Promotion, Licensing, Computer Services and Related Services Agreement with FCC
National Bank dated May 3, 1999 (2)*
10.52
Agreement and Plan of Reorganization with Banc of America Auto Finance Corp., Robert Ferber
and Non-Bank Stockholders dated August 23, 1999 (3)
10.53
Registration Rights Agreement with Banc of America Auto Finance Corp., Robert Ferber and NonBank Stockholders dated September 17, 1999 (3)
10.54
Restated Investor Rights Agreement dated August 20, 1999 (4)*
10.55
Second Amended and Restated Note to Cooper River Funding Inc. dated July 28, 1999 (4)
10.56
Strategic Alliance Agreement with Greenpoint Mortgage Funding, Inc. dated September 29, 1999
(4)
10.57
Strategic Alliance Agreement between Bank of America, N.A., Banc of America Auto Finance
Corp., and Electronic Vehicle Remarketing, Inc. dated August 23, 1999 (4)*
10.58
Referral Agreement between AutoConnect L.L.C. and Electronic Vehicle Remarketing, Inc. dated
September 1998 and Addendum to Referral Agreement dated July 22, 1999 (4)*
10.59
Listing and Advertising Agreement between EVRI/CarFinance.com and Intelligent Life
Corporation dated August 4, 1999 (4)*
10.60
Referral Agreement between Kelley Blue Book and Electronic Vehicle Remarketing, Inc. dated
June 1, 1998 and Amendment to Referral Agreement dated 1999 (4)*
10.61
Content Partner/Distribution Agreement with Infoseek Corporation, undated (5)*
10.62
Securities Purchase Agreement with Certain Purchasers dated April 25, 2000 (6)
10.63
Marketing Agreement with Charles Schwab & Co., Inc. dated April 25, 2000 (6)*
10.64
Marketing Agreement with RE/MAX International, Inc. dated January 24, 2000 (7)*
10.65
Auto Loan Purchase and Sale Agreement with AmeriCredit Financial Services dated June 5, 2000
(8)*
10.66
Auto Loan Purchase and Sale Agreement with Bank of America dated May 16, 2000 (8)*
10.67
Co-Branded Web Services Referral Agreement with eBay Inc. dated April 21, 2000 (8)*
10.68
Systems and Marketing Agreement with H&R Block Mortgage Corporation dated March 21, 2000
(8)*
10.69
Auto Loan Purchase and Sale Agreement with TranSouth Financial Corporation dated May 4, 2000
(8)*
10.70
Auto Loan Purchase and Sale Agreement with Wells Fargo Bank, N.A. - Auto Finance Group dated
May 1, 2000 (8)*
10.71
Financial Services Agreement with WFS Financial Inc. dated April 24, 2000 (8)*
10.72
Fourth Modification Agreement with Cooper River Funding, Inc. and GE Capital Mortgage
Services, Inc. dated March 17, 2000 (9)
10.73
Amendment Number One to the Master Loan and Security Agreement with Greenwich Capital
Financial Products, Inc. dated April 10, 2000 (9)
10.74
Fifth Modification Agreement with Cooper River Funding, Inc. and GE Capital Mortgage Services,
Inc. dated April 26, 2000 (9)
10.75
Amendment to Warehouse and Mortgage Loan Purchase and Sale Agreement with Greenwich
Capital Financial Products, Inc. dated September 30, 1999 (9)
10.76
Whole Loan Custodial Agreement with Greenwich Capital Financial Products, Inc. dated June 29,
2000 (9)
10.77
Sixth Modification Agreement with Cooper River Funding, Inc. and GE Capital Mortgage
Services, Inc. dated September 30, 2000 (9)
10.78
Correspondent Purchase and Sale Agreement with Washington Mutual Bank dated October 13,
2000 (9)
10.79
Standard Sublease with Pagoo, Inc. dated October 20, 2000 (9)
10.80
Addendum to Sublease with Pagoo, Inc. dated October 18, 2000 (9)
10.81
Covenant Waiver with Greenwich Capital Financial Products, Inc. dated November 14, 2000 (9)
10.82
Landlord Consent to Sublease from Creekside South Trust dated November 17, 2000 (9)
10.83
Seventh Modification Agreement with Cooper River Funding, Inc. and GE Capital Mortgage
Services, Inc. dated November 30, 2000 (9)
10.84
Website Linking Agreement with Providian Bancorp Services dated November 30, 2000 (9)*
10.85
Second Addendum to Sublease with Pagoo, Inc. dated December 15, 2000 (9)
10.86
Home Equity Loan/Line Purchase Agreement with Wells Fargo Bank West, N.A. and Wells Fargo
Bank, N.A. dated November 1, 2000 (9)*
10.87
Whole Loan Sale Agreement with Principal Residential Mortgage, Inc. dated February 24, 1999
(10)
10.88
Third Modification Agreement with Cooper River Funding Inc. and GE Capital Mortgage Services,
Inc. dated July 28, 1999 (10)*
10.89
United Mileage Plus Participation Agreement with Mileage Plus, Inc. dated March 1, 2001 (10)*
10.90
Amendment Number Two to the Master Loan and Security Agreement with Greenwich Capital
Financial Products Inc. dated February 22, 2001 (10)
10.91
Securitization Commitment from Greenwich Financial Products Inc. dated February 22, 2001 (10)
10.92
Stock Purchase Warrant issued to Greenwich Financial Products Inc. dated February 23, 2001 (10)
10.93
Revolving Credit Note to Bank One, NA dated April 2, 2001 (10)
10.94
Loan Agreement with Bank One, NA dated April 2, 2001 (10)
10.95
Security Agreement with Bank One, NA dated April 2, 2001 (10)
10.96
Dispute Resolution Agreement with Bank One, NA dated April 2, 2001 (10)
10.97
Warehouse Security Agreement with GE Capital Mortgage Services, Inc. and Cooper River
Funding Inc. dated June 24, 1998 (10)
10.98
Amendment to Auto Loan Purchase and Sale Agreement with AmeriCredit Financial Services, Inc.
dated January 1, 2001 (11)*
10.99
Third Amendment to Marketing Agreement with Charles Schwab and Co., Inc. dated January 1,
2001 (11)*
10.100
Systems and Marketing Agreement with H&R Block Mortgage Corporation dated January 1, 2001
(11)*
10.101
Eighth Modification Agreement with Cooper River Funding Inc. and GE Capital Mortgage
Services, Inc. dated January 2, 2001 (11)
10.102
Third Amendment to Underwriting Services Agreement with PMI Mortgage Services Co. dated
January 10, 2001 (11)
10.103
Amendment to Auto Loan Purchase and Sale Agreement with TranSouth Financial Corporation
dated January 10, 2001 (11)*
10.104
Amendment to June 22, 2000 Engagement Letter with PricewaterhouseCoopers LLP dated
February 12, 2001 (11)
10.105
Engagement Letter with PricewaterhouseCoopers LLP dated February 12, 2001 (11)
10.106
Ninth Modification Agreement with Cooper River Funding Inc. and GE Capital Mortgage Services,
Inc. dated February 14, 2001 (11)
10.107
Seller Contract with Greenpoint Mortgage Funding, Inc. dated February 21, 2001 (11)
10.108
Amendment to Auto Loan Purchase and Sale Agreement with TranSouth Financial Corporation
dated February 27, 2001 (11)*
10.109
First Amendment to Auto Loan Purchase and Sale Agreement with Wells Fargo Bank, N.A. - Auto
Finance Group dated January 23, 2001 (11)*
10.110
Third Amended and Restated Note to Cooper River Funding Inc. dated March 1, 2001 (11)
10.111
Tenth Modification Agreement with Cooper River Funding Inc. and GE Capital Mortgage Services,
Inc. dated March 1, 2001 (11)
10.112
Shareholders Agreement with Softbank Finance Corporation, InsWeb Corporation, and Marsh &
McLennan Risk Capital Holdings, Ltd. dated March 28, 2001 (11)
10.113
Amendment to Underwriting Services Agreement with PMI Mortgage Services Co. dated July 31,
1998 (11)
10.114
Second Amendment to Underwriting Services Agreement with PMI Mortgage Services Co. dated
May 3, 1999 (11)
10.115
First Amendment to Lease with Creekside South Trust dated September 11,1998 (11)
10.116
Loan Agreement between E-LOAN, Inc. and Christian A. Larsen dated as of April 2, 2001 (12)
10.117
Security Agreement between E-LOAN, Inc. and Christian A. Larsen dated as of March 30, 2001
(12)
10.118
Security Agreement between E-LOAN, Inc. and The Charles Schwab Corporation dated as of
March 31, 2001 (12)
10.119
Intercreditor Agreement between E-LOAN, Inc., The Charles Schwab Corporation and Christian A.
Larsen, and acknowledged and agreed to by E-LOAN, Inc. as of March 31, 2001 (12)
10.120
Second Amendment to Auto Loan Purchase and Sale Agreement with Wells Fargo Bank, N.A. Auto Finance Group dated March 15, 2001 (12)+
10.121
Tri-Party Enhanced AOT Agreement with Wells Fargo Home Mortgage, Inc. and Federal Home
Loan Mortgage Corporation dated May 22, 2001 (12)+
10.122
Originator Master Commitment for Enhanced AOT with Federal Home Loan Mortgage
Corporation dated June 11, 2001 (12)+
10.123
Master Agreement with Federal Home Loan Mortgage Corporation dated June 18, 2001 (12)+
10.124
Eleventh Modification Agreement with Cooper River Funding Inc. and GE Capital Mortgage
Services, Inc. dated June 29, 2001 (12)
10.125
Note Purchase Agreement between E-LOAN, Inc. and The Charles Schwab Corporation dated as of
July 12, 2001 (12)
10.126
Amended and Restated Loan Agreement between E-LOAN, Inc. and Christian A. Larsen dated as
of July 12, 2001 (12)
10.127
Registration Rights Agreement between E-LOAN, Inc. and The Charles Schwab Corporation dated
as of July 12, 2001 (12)
10.128
Amended and Restated Security Agreement between E-LOAN, Inc. and Christian A. Larsen dated
as of July 12, 2001 (12)+
10.129
Security Agreement between E-LOAN, Inc. and The Charles Schwab Corporation dated as of July
12, 2001 (12)+
10.130
Amended and Restated Security Agreement between E-LOAN, Inc. and Bank One, N.A., dated as
of July 12, 2001 (12)+
10.131
Amended and Restated Intercreditor Agreement between E-LOAN, Inc., The Charles Schwab
Corporation and Christian A. Larsen, and acknowledged and agreed to by E-LOAN, Inc. as of July
12, 2001 (12)+
10.132
Subordination and Intercreditor Agreement between Bank One, N.A., The Charles Schwab
Corporation and Christian A. Larsen, and acknowledged and agreed to by E-LOAN, Inc. as of July
12, 2001 (12)
10.133
Fourth Amendment to Marketing Agreement with Charles Schwab & Co., Inc. dated as of July 1,
2001 (13)+
10.134
Systems and Marketing Agreement with H&R Block Mortgage Corporation dated as of July 1,
2001 (13)+
10.135
Auto Loan Purchase and Sale Agreement with Compass Bank dated as of July 3, 2001 (13)+
10.136
First Modification of Loan Agreement and Other Loan Documents with Bank One, NA dated as of
July 20, 2001 (13)+
10.137
Auto Loan Purchase and Sale Agreement with Patelco Credit Union dated as of August 3, 2001
(13)+
10.138
Correspondent Loan Purchase Agreement with CitiMortgage, Inc. dated as of August 7, 2001 (13)
10.139
Auto Loans Alliance Program Agreement with Household Automotive Credit Corporation and
Household Bank, f.s.b. dated as of August 15, 2001 (13)+
10.140
Letter Agreement with GMAC Mortgage Corporation dated as of August 6, 2001 (13)
10.141
Warehouse Credit Agreement with GMAC Bank dated as of November 1, 2001 (13)
10.142
First Modification Agreement with GMAC Bank dated as of November 1, 2001 (13)
10.143
Warehouse Security Agreement with GMAC Bank dated as of November 1, 2001 (13)
10.144
Note in favor of GMAC Bank dated as of November 1, 2001 (13)
10.145
Originator Master Commitment for Enhanced AOT Offering with Federal Home Loan Mortgage
Corporation dated August 21, 2001+
10.146
Mortgage Loan Purchase and Sale Agreement with E*TRADE Bank dated October 19, 2001+
10.147
Amendment to Auto Loan Purchase and Sale Agreement with AmeriCredit Financial Services, Inc.
dated October 17, 2001+
10.148
Master Commitment with GMAC Residential Funding dated October 23, 2001+
10.149
First Amendment to Master Commitment with GMAC Residential Funding dated November 1,
2001+
10.150
Second Amendment to Master Commitment with GMAC Residential Funding dated November 9,
2001+
10.151
Amendment Number Four to Master Loan and Security Agreement with Greenwich Capital
Financial Products, Inc. dated November 14, 2001
10.152
Third Amendment to Auto Loan Purchase and Sale Agreement with Wells Fargo Bank - Auto
Finance Group dated November 16, 2001+
10.153
Second Modification Agreement with GMAC Bank dated December 17, 2001
10.154
Amended and Restated Note with GMAC Bank dated December 17, 2001
10.155
Flow Purchase and Sale Agreement (Refinance Loans) with E*TRADE Bank dated December 18,
2001+
10.156
Amendment Number Five to Master Loan and Security Agreement with Greenwich Capital
Financial Products, Inc. dated January 1, 2002
10.157
Amendment Number Six to Master Loan and Security Agreement with Greenwich Capital
Financial Products, Inc. dated February 1, 2002
10.158
Promissory Note with Greenwich Capital Financial Products, Inc. dated March 21, 2002
10.159
Master Loan and Security Agreement with Greenwich Capital Financial Products, Inc. dated March
21, 2002
10.160
Amendment Number One to Custodial Agreement with Bankers Trust Company of California,
N.A. and Greenwich Capital Financial Products, Inc. dated March 21, 2002
10.161
Second Modification and Extension of Loan Agreement and Other Loan Documents with Bank
One, NA dated April 1, 2002
10.162
Fourth Modification Agreement with GMAC Bank dated March 28, 2002
23.1
Consent of PricewaterhouseCoopers LLP, Independent Accountants
____________
(1) Filed with Registration Statement on Form S-1 (No. 333-74945) filed on March 24, 1999, as amended, which Registration Statement became effective June 28, 1999. (2) Filed with
Quarterly Report on Form 10-Q (FQE 06/30/99) on August 16, 1999, as amended.
(3) Filed with Current Report on Form 8-K on May 11, 2000.
(4) Filed with Quarterly Report on Form 10-Q (FQE 09/30/99) on November 15, 1999, as amended.
(5) Filed with Annual Report on Form 10-K (FYE 12/31/99) on March 30, 2000, as amended.
(6) Filed with Current Report on Form 8-K on May 11, 2000.
(7) Filed with Quarterly Report on Form 10-Q (FQE 03/31/00) on May 12, 2000.
(8) Filed with Quarterly Report on Form 10-Q (FQE 06/30/00) on August 14, 2000.
(9) Filed with Annual Report on Form 10-K (FYE 12/31/00) on April 2, 2001.
(10) Filed with Annual Report on Form 10-K/A (FYE 12/31/00) on April 23, 2001.
(11) Filed with Quarterly Report on Form 10-Q (FQE 03/31/01) on May 14, 2001.
(12) Filed with Quarterly Report on Form 10-Q (FQE 06/30/01) on August 14, 2001.
(13) Filed with Quarterly Report on Form 10-Q (FQE 09/30/01) on November 14, 2001.
* Confidential Treatment Granted
+ Confidential Treatment Requested
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
E-LOAN, Inc. a Delaware corporation
By: /s/ CHRISTIAN A. LARSEN
Christian A. Larsen, CEO
Dated: April 1, 2002
Pursuant to the requirements of the Securities and Exchange Act of 1934, this amended report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints Christian A. Larsen and Matthew Roberts, and each of them, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting to said attorneys-in-fact, or his substitute or substitutes, the power and authority to perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each of said attorneys- in-fact, or
his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature
/s/ CHRISTIAN A. LARSEN
Title
Date
Chief Executive Officer and Chairman of the Board of
Directors
April 1, 2002
President, Chief Operating Officer and Director
April 1, 2002
Chief Financial Officer and Secretary (Principal
Financial and Accounting Officer)
April 1, 2002
Director
April 1, 2002
Christian A. Larsen
/s/ JOSEPH J. KENNEDY
Joseph J. Kennedy
/s/ MATTHEW ROBERTS
Matthew Roberts
/s/ ROBERT C. KAGLE
Robert C. Kagle
/s/ WADE RANDLETT
Director
April 1, 2002
Director
April 1, 2002
Director
April 1, 2002
Wade Randlett
/s/ DANIEL O. LEEMON
Daniel O. Leemon
/s/ CLAUS H. LUND
Claus H. Lund
E-LOAN, INC.
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Page
Report of Independent Accountants
F-2
Balance Sheets
F-3
Statements of Operations
F-4
Statements of Stockholders' Equity (Deficit)
F-5
Statements of Cash Flows
F-6
F-7
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of E-LOAN, Inc.:
In our opinion, the accompanying balance sheets and the related statements of operations, of stockholders' equity (deficit) and of cash flows present fairly, in all material respects, the financial
position of E-LOAN, Inc. (the "Company") at December 31, 2000 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December
31, 2001, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted
in the United States of America which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made
by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
/s/ PRICEWATERHOUSECOOPERS LLP
San Francisco, California
April 1, 2002
E-LOAN, INC.
BALANCE SHEETS
DECEMBER 31, 2000 AND 2001
($ IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000
2001
---------
---------
ASSETS
Current assets:
Cash and cash equivalents (includes $0 and $4,500 of restricted cash). $
28,459
$
32,538
Loans held-for-sale...................................................
22,745
162,246
Accounts receivable, prepaids and other current assets................
10,360
--------61,564
8,025
8,435
--------203,219
6,215
2,010
28,144
---------
1,192
----------
Total current assets............................................
Fixed assets, net.........................................................
Deposits and other assets.................................................
Goodwill and intangible assets............................................
Total assets................................................... $
99,743 $ 210,626
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Warehouse and other lines payable..................................... $
Accounts payable, accrued expenses and other current liabilities......
Capital lease obligation, current portion.............................
Notes payable, current portion........................................
Total current liabilities......................................
Capital lease obligations, long term......................................
Notes payable, long term..................................................
Total liabilities..............................................
17,678
11,928
$ 158,148
7,535
396
1,167
175
--
--------31,169
213
--------165,858
--
875
--------32,257
---------
5,000
--------170,858
---------
Commitments and contingencies (Note 15):
Stockholders' equity:
Preferred stock, 5,000,000 $0.001 par value shares authorized at
December 31, 2000 and December 31, 2001; 0 shares issued and
outstanding at December 31, 2000 and December 31, 2001..............
Common stock, 150,000,000 $0.001 par value shares authorized at
December 31, 2000 and December 31, 2001; 53,449,236 and
54,010,151 shares issued and outstanding at December 31, 2000
and December 31, 2001...............................................
Marketing services receivable.............................................
Unearned compensation.....................................................
Additional paid-in capital................................................
Accumulated deficit.......................................................
--
--
53
54
(5,970)
-(8,625)
-259,362
256,578
(177,334) (216,864)
--------- --------Total stockholders' equity.....................................
67,486
39,768
--------- --------Total liabilities and stockholders' equity..................... $ 99,743 $ 210,626
========= =========
size="1">
The accompanying notes are an integral part of these financial statements.
E-LOAN, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
($ IN THOUSANDS, EXCEPT SHARE AMOUNTS)
1999
2000
2001
----------- ----------- ----------Revenues (Note 12)..................................... $
22,097 $
35,879 $
67,950
Operating expenses:
Operations.........................................
22,779
31,747
42,946
30,286
28,506
16,785
Technology.........................................
3,595
6,859
6,207
6,840
6,325
5,784
-23,116
6,490
9,392
5,970
5,164
11,589
39,733
28,144
----------98,224
----------128,915
----------111,118
-----------
-----------
-----------
(76,127)
3,152
(93,036)
1,276
(43,168)
3,638
-----------
-----------
-----------
Other income, net......................................
Net loss............................................... $
(72,975) $
(91,760) $
(39,530)
=========== =========== ===========
Net loss attributable to common stockholders........... $
(74,017) $
(91,760) $
(39,530)
=========== =========== ===========
Net loss per share: (Note 2)
Basic and diluted.................................. $
Weighted-average shares - basic and diluted........
(2.75) $
(1.91) $
(0.73)
=========== =========== ===========
26,900,863
===========
48,071,654
===========
53,797,271
===========
size="1">
E-LOAN, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
($ IN THOUSANDS, EXCEPT SHARE AMOUNTS)
MarketTotal
Series A
Series B
Addiing
StockPreferred Stock
Preferred Stock
Common Stock
Unearned
tional
Services Accumholders'
-------------------- -------------------- ----------------------- CompensaPaid-in
Receivulated
Equity
Shares
Amount
Shares
Amount
Shares
Amount
tion
Capital
able
Deficit
(Deficit)
--------- --------- --------- --------- ------------ --------- --------- --------- ------- --------- --------Balance at December 31, 1998........... 428,635 $
91
430,207 $
411
12,524,010 $
13 $ (4,477) $
5,377 $
-$ (12,599) $ (11,184)
Common stock issued for cash upon
exercise of stock options...........
----687,763
1
-207
--208
Accretion for preferred stock Series C.
-------(260)
--(260)
Accretion for preferred stock Series D.
-------(782)
--(782)
Charitable contribution................
----75,000
--900
--900
Issuance of warrant in relation to
warehouse line......................
-------290
--290
Issuance of stock options for
consulting services rendered.......
-------198
--198
Proceeds from Initial Public Offering
and private placement, net of
issuance costs of $2,281............
----4,980,061
5
-62,552
--62,557
Conversion of preferred stock.......... (428,635)
(91) (430,207)
(411) 20,493,921
20
-23,767
--23,285
Issuance of common stock in
connection with acquisition.........
----2,879,997
3
-80,274
--80,277
Obtained warrant and non-cash gain
from settlement of dispute..........
-------(3,081)
--(3,081)
Issuance of common stock through ESPP..
--
--
--
--
Unearned compensation..................
Net loss...............................
---
---
---
---
---------
--------- ---------
38,491
--
---
458
--
(16,718)
--
--
39,834
--
---
-(72,975)
23,116
(72,975)
---------
---------
-------
---------
---------
(21,195)
209,734
--
(85,574)
103,007
--
616
--
--
617
--
--
30
--
--
30
10
--
---
39,100
600
---
---
39,110
600
12,460
(3,178)
(5,970)
--
---
6,490
9,392
----------
--------
(91,760)
---------
(91,760)
---------
259,362
(5,970)
(177,334)
67,486
---
--------- ------------
---------
Balance at December 31, 1999...........
--
--
--
--
41,679,243
42
--
--
--
--
915,287
1
Exercise of warrants issued for
capital lease.......................
--
--
--
--
43,148
---
---
---
---
10,666,664
144,894
---
---
---
---
--
458
Proceeds from Private Placement, net
of issuance costs of $889...........
Marketing Services Receivable, net of
of amortization.....................
Net loss...............................
Balance at December 31, 2000...........
-----------
----------- ----------
---
---
----------- ------------
--
--
----------
53,449,236
53
-12,570
---------(8,625)
--
--
--
--
272,104
--
--
--
--
288,811
Issuance of warrants in relation to
warehouse line.......................
--
--
--
--
--
--
of amortization.....................
---
---
---
---
---
---
-8,625
Net loss...............................
--
--
--
--
--
--
--
-1
--
87
--
--
87
--
290
--
--
291
--
300
--
--
300
---
5,970
5,164
Marketing Services Receivable, net of
-(3,461)
--
5,970
---
(39,530)
(39,530)
--------- --------- --------- --------- ------------ --------- --------- --------- ------- --------- --------Balance at December 31, 2001...........
-$
--$
-54,010,151 $
54 $
-$ 256,578 $
-$(216,864) $ 39,768
=========
========= =========
========= ============
=========
=========
size="1">
E-LOAN, INC.
STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
1999
----------Cash flows from operating activities:
Net loss.................................................... $
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization of unearned compensation.....................
Charitable contribution of common stock...................
Non-cash gain on settlement of dispute....................
Amortization of goodwill and intangible assets............
Non-cash marketing costs..................................
Gain on sale of equity investment...........................
Depreciation and amortization of fixed assets.............
Changes in operating assets and liabilities:
Accounts receivable, prepaids, deposits
and other assets......................................
Loans held-for-sale.....................................
Accounts payable, accrued expenses and
other payables........................................
Net cash used in operating activities.................
Cash flows from investing activities:
Acquisition of furniture, equipment and software............
Disposal of furniture, equipment and software...............
Net cash received in connection with acquisition
of CarFinance.com.........................................
Proceeds from sale of equity investment.....................
Net cash (used in) provided by investing activities...
(72,975) $
2000
----------(91,760) $
2001
----------(39,530)
23,116
900
(2,891)
11,589
--1,188
9,392
--39,733
6,490
-2,351
5,164
--28,144
5,970
(3,237)
3,853
(5,973)
7,014
(4,222)
12,395
1,576
(139,500)
10,227
----------(27,805)
-----------
(973)
----------(26,594)
-----------
(4,394)
----------(141,954)
-----------
(2,874)
--
(6,187)
--
(2,233)
190
813
-----------(2,061)
------------(6,187)
-4,708
----------2,665
=========
=======
=========
=========
----------Cash flows from financing activities:
Proceeds from issuance of common stock, net.................
-----------
63,223
-----------
40,357
373
Payments on obligations under capital leases, net...........
(236)
(262)
(414)
Proceeds from notes payable.................................
Repayments of notes payable.................................
7,859
(5,291)
-(1,167)
10,000
(7,060)
Proceeds from warehouse and other lines payable.............
1,095,860
960,684
3,124,921
Repayments of warehouse and other lines payable.............
Proceeds from issuance of preferred stock, net..............
(1,103,791)
849
(976,120)
--
(2,984,452)
--
-----------
-----------
-----------
58,473
-----------
23,492
-----------
143,368
-----------
Net cash provided by financing activities.............
Net increase (decrease) in cash................................
28,607
(9,289)
4,079
Cash and cash equivalents, beginning of period.................
9,141
-----------
37,748
-----------
28,459
-----------
Cash and cash equivalents, end of period....................... $
37,748 $
28,459 $
32,538
=========== =========== ===========
Supplemental cash flow information:
Cash paid for interest...................................... $
5,335 $
5,994 $
10,037
=========== =========== ===========
Noncash investing and financing activities:
Furniture, equipment and software under capital leases...... $
Acquisition of CarFinance.com for common stock..............
-80,277
-----------
$
$
136
------------
$
97
------------
80,277 $
136 $
97
=========== =========== ===========
size="1">
E-LOAN, Inc.
1. The Company
E-LOAN, Inc. (the "Company") was incorporated on August 26, 1996 and began marketing its services in June 1997. The Company is a provider of first and second mortgage loans, home
equity loans and lines of credit, auto loans, education loans and credit card referrals. The Company operates as a single operating segment.
The Company completed its initial public offering of 4,020,000 shares of its common stock on June 28, 1999, raising $52.3 million, net of underwriting discount. Concurrently, the Company
sold 960,061 shares of its common stock for $12.5 million, net of underwriting discount, in a private placement to Forum Holdings, Inc., an investment subsidiary of Group Arnault. The net
proceeds of $62.5 million were received on July 2, 1999. Simultaneous to the closing of the initial public offering, all the convertible preferred stock and mandatorily redeemable convertible
preferred stock were automatically converted into an aggregate of 20,493,921 shares of common stock. On April 25, 2000, the Company entered into a Securities Purchase Agreement with
six institutional investors to sell an aggregate of 10,666,664 shares of common stock at a purchase price of $3.75 per share in a private placement. The aggregate gross proceeds of $40.0
million were received on June 15, 2000.
On September 17, 1999, the Company acquired Electronic Vehicle Remarketing, Inc. ("CarFinance.com"), a leading provider of online auto loans. Under the terms of the agreement, the
Company issued 2,879,997 shares of common stock to five investors. As a result of the acquisition, the Company recorded $78.0 million in goodwill and $1.4 million of acquired intangible
assets, which was amortized on a straight-line basis over a two-year period. This acquisition was accounted for as a purchase transaction.
The following is a proforma summary of the unaudited consolidated statement of operations of the Company for the year ended December 31, 1999, assuming the above acquisition had taken
place as of January 1, 1999 (in thousands, except per share amounts):
1999
----------(unaudited)
Revenues............................... $
26,037
Net loss............................... $
(101,821)
Net loss per share:
Basic and diluted.................. $
Weighted average number of shares......
(2.56)
===========
39,765,030
===========
Reclassification
Certain amounts in the financial statements have been reclassified to conform to the 2001 presentation.
2. Summary of Significant Accounting Policies
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers all highly liquid monetary instruments with an original maturity of three months or less from the date of purchase and documentary drafts, to be cash equivalents.
Both cash equivalents and short term investments are considered available-for-sale securities and are carried at amortized cost, which approximates fair value. As more fully described in Note
8, the Company must maintain a minimum cash and cash equivalents balance of the higher of $20 million (including Restricted Cash, excluding Documentary Drafts) or the highest amount
required by any other lender or agreement. The following summarizes cash and cash equivalents at December 31, 2000 and 2001 (dollars in thousands):
December 31,
-----------------------2000
2001
----------- ----------Cash..................................... $
12,290 $
9,911
Commercial paper.........................
8,524
15,501
Documentary drafts.......................
7,645
2,626
Restricted cash............................
-4,500
----------- ----------$
28,459 $
32,538
=========== ===========
Documentary Drafts
The Company originates auto loans directly to consumers through the use of a documentary draft process. This process requires the borrower and the auto dealer to provide a series of
supporting documents in order to complete the loan. Examples of required supporting documentation include copies of the borrower's driver's license, bill of sale, proof of insurance, and
application for title registration.
Documentary drafts consist of cash allocated to satisfy documentary drafts presented by borrowers before the required supporting documents are received by the Company to complete the
loan. If the required documentation is not provided as agreed to by the borrower and auto dealer, then the allocation of cash is reversed and the cash balance is restored. The Company's
documentary draft process allows for at least two business days to process the required supporting documentation prior to determining whether to reverse or honor the original presentment
by the auto dealer. All documentary drafts are pledged as collateral for borrowings under the auto line of credit at December 31, 2001 (see Note 8). Of the $2.6 million included in cash and
cash equivalents at December 31, 2001, $2.0 million converted to loans in January 2002.
Loans held-for-sale
Mortgage loans held-for-sale consists of residential property mortgages having maturities up to 30 years as well as second mortgages on residential properties. Pursuant to the mortgage
terms, the borrowers have pledged the underlying real estate as collateral for the loans. It is the Company's practice to sell these loans to mortgage loan purchasers shortly after they are
funded. Mortgage loans held-for-sale are recorded at the lower of cost or aggregate market value. Cost generally consists of loan principal balance adjusted for net deferred fees and costs. No
valuation adjustment was required at December 31, 2000 or 2001.
Auto loans held-for-sale consists of automobile loans having maturities up to 72 months. Pursuant to the loan terms, the borrowers have pledged the value of the automobile as collateral for
the loan. It is the Company's practice to sell these loans to auto loan purchasers shortly after they are funded. Auto loans held-for-sale are recorded at the lower of cost or aggregate market
value. No valuation adjustment was required at December 31, 2000 or 2001.
Fixed assets
Fixed assets, including assets under capital leases, are recorded at cost and depreciated using the straight-line method over their useful lives, which is generally three years for computers and
software and five years for furniture and fixtures. Assets under capital leases are depreciated over the shorter of the useful life of the asset or the term of the lease. Leasehold improvements
are amortized over the remaining life of the lease. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or
otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations in the period realized.
In 1999, the Company adopted SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use, which requires that the Company expense computer
software costs as they are incurred in the preliminary project stage. Once the capitalization criteria of the SOP have been met, external direct costs of materials and services consumed in
developing or obtaining internal-use computer software and payroll and payroll related costs for employees who are directly associated with and who devote time to the internal-use computer
software are capitalized. Capitalized costs are generally amortized over one to three years on a straight-line basis. As of December 31, 2001, the Company had capitalized approximately $2.7
million in internally developed software costs of which $1.0 million had been amortized.
Goodwill and intangible assets
The Company recorded $78.0 million in goodwill and $1.4 million of acquired intangible assets resulting from the acquisition of Carfinance.com on September 17, 1999, which was amortized
on a straight-line basis over a two-year period. Amortization of goodwill and acquired intangible assets for the years ended December 31, 2000 and 2001 was $39.7 million and $28.1 million,
respectively. As of December 31, 2001, goodwill and intangible assets have been fully amortized.
Impairment of long-lived assets
The Company evaluates the recoverability of long-lived assets in accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting for the Impairment of LongLived Assets and for Long-Lived Assets to be Disposed Of . SFAS No. 121 requires recognition of impairment of long-lived assets in the event the net book value of such assets exceeds the
future undiscounted cash flows attributable to such assets. There was no impairment charge in the Company's financial statements for the years ended December 31, 2000 and 2001.
Equity investments
The Company accounts for investments in entities where its ownership interest is between 20% and 50% under the equity method. These investments are recorded in deposits and other assets
and the Company's proportionate share of income or loss is included in other income, net.
Revenue
Mortgage Revenues
The Company's mortgage revenues are derived from the origination and sale of self-funded loans and, to a lesser extent, from the brokering of loans. Brokered
loans are funded through lending partners and the Company never takes title to the mortgage. Brokerage revenues are comprised of the mark-up to the lending
partner's loan price and processing fees. These revenues are recognized at the time a loan is closed. In October 1998, the Company began funding its mortgage
loans using warehouse lines of credit. Self-funded loans are funded through the Company's own warehouse lines of credit and sold to mortgage loan purchasers
typically within thirty days. Self-funded loan revenues consist of proceeds in excess of the carrying value of the loan, origination fees less certain direct
origination costs and other processing fees. These revenues are recognized at the time the loan is sold. The Company earns additional revenue from its selffunded loans as compared to brokered loans because the sale of loans includes a service release premium. Self-funded loans generated 96% of annual mortgage
revenues in 2001.
Interest Income on Mortgage and Home Equity Loans
The Company generates revenues from interest income on self-funded mortgage and home equity loans. The revenues realized are based on the loan amount
multiplied by the contractual interest rate from the time of funding by the Company through time of sale. These revenues are recognized as earned during the
period from funding to sale.
Home Equity Revenues
In the fourth quarter of 2000, the Company began self-funding home equity loans and selling them to home equity loan purchasers. Home equity revenues are
derived from the origination and sale of self-funded loans. Self-funded loans are funded through the Company's warehouse lines of credit and sold to home
equity loan purchasers typically within thirty days. Self-funded loan revenues consist of proceeds in excess of the carrying value of the loan, origination fees
less certain direct origination costs and other processing fees. These revenues are recognized at the time the loan is sold.
Auto Revenues
Auto revenues are derived from the origination and sale of self-funded loans and from the brokering of auto loans. Auto brokerage revenues are primarily
comprised of the mark-up to the lending partner's loan price or a set origination fee. These revenues are recognized at the time a loan is closed. In April 2001,
the Company began funding its auto loans prior to sale with borrowings against an auto line of credit. Self-funded loans are funded through the Company's
auto line of credit and sold to auto loan purchasers typically within ten business days. Self-funded loan revenues also consist of the mark-up to the lending
partner's loan price or a set origination fee. These revenues are recognized at the time the loan is sold.
Credit Card and Other
Credit card and other revenues are derived from the fees paid by various partners in exchange for consumer loan referrals. The current loan programs offered include credit card and education
loans.
Advertising and marketing costs
Advertising and marketing costs related to various media content advertising such as television, radio and print are charged to operating expenses as incurred.
These costs include the cost of production as well as the cost of any air time.
Marketing services receivable
The marketing services receivable relates to the issuance of two warrants issued in connection with a strategic marketing agreement (see Note 10). The fair
value of these warrants was recorded as a contra equity account called marketing services receivable and was amortized on a straight-line basis over oneyear. As of December 31, 2001, the marketing services receivable is fully amortized. In association with this marketing agreement, there are a series of cash
payments to be made over the course of the agreement, which are not included in the marketing services receivable. Amounts payable under this agreement
are disclosed in the future minimum payments table under marketing agreements disclosed in Note 15.
Income taxes
The Company accounts for income taxes using the liability method in accordance with SFAS No. 109, Accounting for Income Taxes. Under this method,
deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized. The provision for income tax expense represents taxes payable for the current period, plus the net change in
deferred tax assets and liabilities.
Stock-based compensation
The Company accounts for stock-based employee compensation arrangements in accordance with the provisions of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations, and complies with the disclosure requirements of SFAS No. 123,
Accounting for Stock-Based Compensation. Under APB No. 25, compensation expense is based on the excess of the estimated fair value of the Company's
stock over the exercise price, if any, on the date of grant. The Company accounts for stock issued to non-employees in accordance with the provisions of
SFAS No. 123 and the Emerging Issues Task Force Consensus in Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Non-Employees for
Acquiring, or in Conjunction with Selling, Goods or Services.
Net loss per share
The Company computes net loss per share in accordance with SFAS No. 128, Earnings per Share. Under the provisions of SFAS No. 128 basic net loss per
share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of common shares outstanding
during the period. Diluted net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average
number of common and potential dilutive shares outstanding during the period, to the extent such potential dilutive shares are dilutive. Potential dilutive shares
are composed of incremental common shares issuable upon the exercise of stock options and warrants, and the conversion of debt into common stock.
The following table sets forth the computation of basic and diluted net loss per share for the periods indicated (dollars in thousands, except per share amounts):
------------------------------------1999
2000
2001
----------- ----------- ----------Numerator:
Net loss.............................. $
Accretion of Series C and D
mandatorily redeemable convertible
preferred stock to redemption value.
(72,975) $
(1,042)
-----------
Net loss available to common
stockholders.................... $
Denominator:
Weighted average common shares
basic and diluted...................
Net loss per share:
Basic and diluted..................... $
(91,760) $
------------
(39,530)
------------
(74,017) $
(91,760) $
(39,530)
=========== =========== ===========
26,900,863
-----------
48,071,654
-----------
53,797,271
-----------
(2.75) $
(1.91) $
(0.73)
=========== =========== ===========
Comprehensive income
The Company adopted SFAS No. 130, Reporting Comprehensive Income, during 1998. The Company classifies items of "other comprehensive income" by
their nature in the financial statements and displays the accumulated balance of other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the balance sheet. To date, the Company has not had any transactions that are required to be reported in other
comprehensive income.
Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS N. 141, Business Combinations and SFAS 142, Goodwill and Other Intangible
Assets. SFAS No. 141, among other things, eliminates the use of the pooling of interests method of accounting for business combinations. Under the provisions
of SFAS No. 142, goodwill will no longer be amortized, but will be subject to a periodic test for impairment based upon fair values. SFAS No. 141 is effective
for all business combinations initiated after June 30, 2001. SFAS No. 142 is effective beginning January 1, 2002. The adoption of these statements is not
expected to have a material effect on the Company's financial statements.
Derivative instruments
On June 15, 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives will be recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. The Company
adopted SFAS No. 133 on January 1, 2001. Adoption of this pronouncement resulted in a transition adjustment of a $0.2 million gain, which was recorded
as a component of mortgage revenue. For the twelve months ended December 31, 2001, the Company recorded $0.8 million as a component of mortgage
revenue related to recording changes in fair value of SFAS No. 133 derivatives for which the Company did not elect SFAS No. 133 hedge accounting and
underlying hedged loans which did qualify for hedge accounting in accordance with SFAS No. 133. This Statement was recently amended under SFAS No.
137, Accounting for Derivative Instruments and Hedging Activities and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities. The Statements require entities that use derivative instruments to measure these instruments at fair value and record them as assets and liabilities
on the balance sheet. Entities must reflect gains or losses associated with changes in the fair value of these derivatives, either in earnings or as a separate
component of comprehensive income, depending on the nature of the underlying contract or transaction. These amendments do not change the Company's
current method of accounting for these Statements.
3. Loans Held-for-Sale
The inventory of mortgage loans consists primarily of first and second trust deed mortgages on residential properties located throughout the United States. As
of December 31, 2000 and 2001, the Company had net mortgage loans held-for-sale of $18.6 million and $159.7 million, all of which are on accrual basis. All
mortgage loans held-for-sale are pledged as collateral for borrowings at December 31, 2000 and 2001 (see Note 8).
The inventory of auto loans consists primarily of loans against new and used automobiles located throughout the United States. As of December 31, 2000 and
2001, the Company had loans held-for-sale of $4.1 and $2.5 million, all of which are on accrual basis. All of the auto loans held-for-sale at December 31, 2001
were pledged as collateral for borrowings at December 31, 2001 (see Note 8).
4. Accounts receivable, prepaids and other current assets
Accounts Receivable, Prepaids and Other Current Assets as of December 31, 2000 and 2001, was $10.4 million and $8.4 million, respectively. This balance
consists primarily of the receivable due to the Company from sales of mortgage loans on its sale agreement with Greenwich Capital Financial Products, Inc.
("Greenwich Capital") in the amounts of $6.6 million and $3.1 million at December 31, 2000 and 2001, respectively (see Note 8).
5. Significant Customers and Concentrations of Credit Risk
Cash and cash equivalents totaling $19.9 million and $12.5 million at December 31, 2000 and 2001, respectively, is held by federally insured financial
institutions and exceeds existing federal deposit insurance coverage limits at each institution. Commercial paper totaling $8.5 million and $15.5 million at
December 31, 2000 and 2001, respectively, is held with high credit quality financial institutions and has original maturities of three months or less.
Approximately 20% and 43% of all mortgage loans sold during the years ended December 31, 2000 and 2001, respectively, were sold to one mortgage loan
purchaser and approximately 87% and 40% of all auto loans sold during the years ended December 31, 2000 and 2001 were sold to one auto loan purchaser.
All brokered auto loans in 2000 and 2001 were brokered to one lender. All home equity loans in 2000 and 2001 were sold to one purchaser.
6. Fixed Assets
Fixed assets are recorded at cost and consist of the following (dollars in thousands):
Computer equipment and software.....................
Furniture and fixtures..............................
Equipment and software under capital leases.........
Leasehold improvements..............................
Accumulated depreciation and amortization...........
December 31,
-----------------------2000
2001
----------- ----------$
7,765 $
9,394
1,556
1,619
997
1,200
1,600
1,748
----------- ----------11,918
13,961
(3,893)
(7,746)
----------- ----------$
8,025 $
6,215
=========== ===========
Depreciation and amortization expense for the years ended December 31, 2000 and 2001 was $2.4 million and $3.9 million respectively.
As of December 31, 2000 and 2001, respectively, the accumulated amortization for equipment and software under capital leases was $0.7 million and $0.9
million. All equipment and software under capital lease serves as collateral for the related lease obligations (see Note 15).
7. Income Taxes
No provision for income taxes was recorded for the years ended December 31, 1999, 2000 and 2001 due to the net losses incurred. The provision for income
taxes was at rates other than the U.S. Federal statutory rate for the following reasons:
U.S. Federal statutory rate..............
State taxes..............................
Unearned compensation....................
Goodwill.................................
Change in valuation allowance............
Warrants.................................
Other....................................
------------------------------------1999
2000
2001
----------- ----------- -----------34.0%
-34.0%
-34.0%
-4.4%
-6.2%
-7.2%
12.2%
4.1%
5.4%
6.1%
17.3%
29.3%
20.2%
17.2%
1.8%
0.2%
2.8%
6.2%
-0.3%
-1.2%
-1.5%
----------- ----------- ----------0.0%
0.0%
0.0%
=========== =========== ===========
There was no benefit for income taxes for the years ended December 31, 1999, 2000 and 2001 due to the Company's inability to recognize the benefit of net
operating losses. At December 31, 2001 the Company had net operating loss carryforwards of approximately $89.2 million for federal purposes and $63.7
million for state tax purposes. The federal carryforwards expire in the years 2013 through 2021. For federal and state tax purposes, a portion of the Company's
net operating loss may be subject to certain limitations on annual utilization in case of changes in ownership, as defined by federal and state tax laws.
The primary components of temporary differences, which give rise to deferred taxes are as follows (dollars in thousands):
------------------------------------1999
2000
2001
----------- ----------- ----------Deferred tax assets:
Net operating loss carryforwards.... $
Other...............................
16,660 $
34,102 $
34,897
1,258
600
498
----------- ----------- ----------Total deferred tax assets....
17,918
34,702
35,395
Valuation allowance....................
(17,918)
(34,702)
(35,395)
----------- ----------- ----------$
-$
-$
-=========== =========== ===========
Management evaluates the recoverability of the deferred tax assets and the level of the valuation allowance. Due to the uncertainty surrounding the realization
of the favorable tax attributes in future tax returns, the Company has recorded a valuation allowance against its net deferred tax assets at December 31, 1999,
2000 and 2001. At such time as it is determined that it is more likely than not that the deferred tax asset will be realizable, the valuation allowance will be
reduced.
8. Warehouse and Other Lines Payable
As of December 31, 2001, the Company had a warehouse line of credit for borrowings of up to $70 million for the interim financing of mortgage loans
with GMAC Bank. The interest rate charged on borrowings against these funds is variable based on LIBOR plus various percentage rates. Borrowings are
collateralized by the related mortgage loans held-for-sale. At December 31, 2000 and 2001 approximately $17.2 million and $47.8 million was outstanding
under this line, respectively. This line of credit agreement generally requires the Company to comply with various financial and non-financial covenants. In
particular, the Company must maintain a minimum unrestricted cash balance of $15 million (excluding Documentary Drafts). The Company was in compliance
with these covenants during the year ended and at December 31, 2001. The committed line of credit was renewed on March 28, 2002 and will expire on March
31, 2003. Upon expiration, management believes it will either renew its existing line or obtain sufficient additional lines.
As of December 31, 2001, the Company had an agreement to finance up to $300 million of mortgage loan inventory pending sale of these loans to the ultimate
mortgage loan investors with Greenwich Capital. Of this amount, $100 million is available in committed funds. This loan inventory financing is secured by
the related mortgage loans. The interest rate charged on borrowings against these funds is based on LIBOR plus various percentage points. At December 31,
2000 and 2001 there was $0 and $104.9 million outstanding under this financial commitment. This agreement includes various financial and non-financial
covenants. In particular, the Company must maintain a minimum cash and cash equivalents balance of $20 million (including Restricted cash, excluding
Documentary drafts) and the highest amount required by any other lender or agreement. The Company was in compliance with these covenants during the year
ended and at December 31, 2001. The line was renewed on March 21, 2002 and will expire on March 21, 2003. Upon expiration, management believes it will
either renew its existing line or obtain sufficient additional lines.
In addition, the Company has an uncommitted mortgage loan purchase and sale agreement with Greenwich Capital. Under the terms of this agreement,
mortgage loans which are subject to a "take-out" commitment between the Company and an investor, but have not yet been purchased, may be sold to
Greenwich Capital with the accompanying trade assignment. This allows the Company to accelerate turnover and provide additional liquidity to fund additional
mortgage loans. Revenue derived from sales under this agreement are included as a receivable on the balance sheet (see Note 4).
On April 1, 2001, the Company entered into an agreement for a $25 million line of credit for the interim financing of auto loans. The interest rate charged
on this line is based on LIBOR plus 2.5%. This committed line was reduced to $10 million on April 1, 2002 and expires on July 31, 2002. Upon expiration,
management believes it will obtain sufficient additional lines. At December 31, 2001, approximately $5.5 million was outstanding under this line. This line
includes various financial and non-financial covenants. At December 31, 2001, the Company was not in compliance with a debt to tangible net worth covenant
ratio and subsequently obtained a waiver from the lender.
9. Notes Payable
In December 1998, the Company entered into a credit facility in the principal amount of $3.0 million for equipment financing, which had an interest rate of
prime plus 0.50%. At December 31, 2000 and 2001, $2.0 million and $0 was outstanding under this credit facility. This credit facility was repaid and closed
in April 2001.
On April 2, 2001, the Company entered into a loan agreement with Christian A. Larsen, the Company's Chairman of the Board and Chief Executive Officer,
that provided the Company with the ability to draw funds up to an aggregate of $7.5 million upon demand, expiring January 5, 2002. The borrowings
had an interest rate of the lower of 12% or the maximum legal rate allowed. Additionally, under the terms of the loan agreement with Mr. Larsen, if the
Company at any time prior to January 5, 2002 secured any new equity or any subordinated debt with repayment terms later than January 5, 2002, then the loan
commitment under the loan agreement would be reduced, dollar-for-dollar, by the amount of such equity or subordinated debt. Thus, upon the sale of a $5
million convertible note to Charles Schwab Co., Inc., the loan commitment under the loan agreement was reduced to $2.5 million. At December 31, 2001, no
amounts were outstanding under the loan agreement. The line expired on January 5, 2002.
On July 12, 2001 the Company sold a $5 million convertible note to Charles Schwab Co., Inc., which is convertible into shares of its common stock at a
conversion price of $1.06 per share and which matures on January 19, 2003. The convertible note bears interest at a rate of 8% per annum and is payable
quarterly. On March 14, 2002, the Company elected to redeem the note prior to its maturity date. Under the terms of the note, the Company seeks to redeem
the note on April 15, 2002 by payment of $5,250,000 (105% of the unpaid principal as of the date of redemption). The Charles Schwab Corporation has the
option before April 15, 2002 to convert the amount due under the note into 4,716,981 shares of common stock of the Company, in lieu of repayment.
10. Stockholders' Equity
Common and preferred stock
As of December 31, 2001, the Company was authorized to issue 150,000,000 shares of common stock and 5,000,000 shares of preferred stock. As of December
31, 2001 the 5,000,000 shares of preferred stock are undesignated. On June 28, 1999, the Company completed its initial public offering, upon which all
outstanding convertible preferred shares automatically converted into 20,493,921 shares of common stock.
Warrants
In March 1998, the Company issued a warrant to purchase up to 15,000 shares of Series C convertible preferred stock at an exercise price of $2.00 per share
to Comdisco, Inc. in connection with a capital lease. In February 2000, this warrant was net exercised for 43,148 shares of common stock.
In connection with two separate strategic alliance agreements, the Company issued a warrant to purchase 200,000 shares of Series C convertible preferred
stock at an exercise price of $2.40 per share in March 1998 and a warrant to purchase 53,996 shares of Series D convertible preferred stock at an exercise price
of $9.26 per share in September 1998. In January 1999, the warrant to purchase 200,000 shares of Series C convertible preferred stock was exercised. These
shares converted into 600,000 shares of common stock upon the Company's initial public offering on June 28, 1999. In October 1999, the warrant to purchase
53,996 shares of Series D convertible preferred stock was returned as part of a negotiated settlement.
In May 1999, the Company issued a warrant to purchase 75,000 shares of common stock at an exercise price of $13.33 per share to Greenwich Capital in
connection with a warehouse agreement. In May 2000, this warrant expired.
In connection with a strategic marketing agreement signed in July 2000, the Company issued two warrants to purchase a total of 13,100,000 shares of common
stock to Charles Schwab & Co., Inc. The first warrant to purchase 6,500,000 shares of common stock has a three year term and is exercisable at $3.75 per
share. The second warrant to purchase 6,600,000 shares of common stock had a three and a quarter year term and was exercisable at $15.00 per share. The
fair value of the warrants, as determined at the date of grant using the Black-Scholes option pricing model was $12.5 million and was recorded as a contraequity account called marketing services receivable. On July 12, 2001, the second warrant to purchase 6,600,000 shares of common stock was surrendered
to the Company in exchange for a new warrant to purchase 1,389,000 shares of common stock at an exercise price of $5.00 per share until July 25, 2003.
The fair value of this warrant was determined to be equivalent to the fair value of the warrant surrendered and therefore did not require an adjustment to the
marketing services receivable. The marketing services receivable was amortized on a straight-line basis over a one-year term. At December 31, 2001 both of
these warrants remained outstanding.
In February 2001, the Company issued a warrant to purchase 300,000 shares of common stock to Greenwich Capital in connection with a warehouse agreement
at an exercise price of $1.55 per share until February 23, 2006. At December 31, 2001 this warrant remained outstanding.
11. Employee Benefit Plans
401(k) Savings Plan
The Company has a savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code (the "401(k) Plan"). Under
the 401(k) Plan, participating employees may defer a percentage (not to exceed 20%) of their eligible pretax earnings up to the Internal Revenue Service's
annual contribution limit. All employees of the Company age 21 years or older are eligible to participate in the 401(k) Plan. The Company did not match
employee contributions during the years ended December 31, 2000 or 2001.
Stock Option and Employee Stock Purchase Plans
As of December 31, 2001, the Company had reserved up to 14,237,969 shares of common stock issuable upon exercise of options issued to certain employees,
directors, and consultants pursuant to the Company's 1997 Stock Option Plan. Such options were exercisable at prices established at the date of grant, and have
a term of ten years. Initial optionee grants have a vested interest in 25% of the option shares upon the optionee's completion of one year of service measured
from the grant date. The balance will vest in equal successive monthly installments of 1/48 upon the optionee's completion of each of the next 36 months
of service. If an option holder ceases to be employed by the Company, vested options held at the date of termination may be exercised within three months.
Options under the plan may be either Incentive Stock Options, as defined under Section 422 of the Internal Revenue Code, or Nonstatutory Options. During
the years ended December 31, 1999, 2000 and 2001, 4,961,910, 6,458,404 and 3,612,500 options had been granted and 1,657,334 options were still available
for grant under the Company's stock option plan at December 31, 2001.
Options granted during the years ended December 31, 1998 and 1999 resulted in unearned compensation of $5.7 million and $38.2 million, respectively. The
amounts recorded represented the difference between the exercise price and the deemed fair value of the Company's common stock for shares subject to the
options granted. The amortization of unearned compensation was charged to operations on an accelerated basis over the four-year vesting period of the options.
For the years ended December 31, 1999, 2000 and 2001, the amortization of unearned compensation related to stock options was $21.6 million, $9.4 million
and $5.2 million, respectively. Management accelerated the vesting of compensatory options in the fourth quarter of 2001 resulting in the full amortization of
unearned compensation as of December 31, 2001.
In February 1999, the Company sold 40,000 shares of Series D mandatorily redeemable convertible preferred stock at a price of $9.26 per share for aggregate
proceeds of $0.4 million to Harold "Pete" Bonnikson, Senior Vice President of Mortgage Operations, in connection with his employment by the Company.
This price was below the deemed fair market value of the common stock and resulted in a compensation charge in the amount of $1.5 million which was equal
to the difference between the deemed fair market value of the Series D mandatorily redeemable convertible preferred stock and the price paid for these shares.
In March 1999, the Company adopted the 1999 Employee Stock Purchase Plan (the "Purchase Plan") under which 1,500,000 shares of common stock were
reserved for issuance. The Purchase Plan provides for an annual automatic increase in the number of shares of common stock reserved under the Purchase Plan
by an amount equal to the lesser of 1,500,000 shares, 2% of the then outstanding shares, or a lesser amount determined by the Company's Board of Directors.
Since the initial registration of 1,500,000 shares under the Purchase Plan, an additional 1,068,984 shares have been added to the 1999 Purchase Plan by the
automatic increase mechanism. As of December 31, 2001, a total of 2,568,984 shares were authorized for issuance under the Purchase Plan. Employees who
participate in the Purchase Plan may have up to 15% of their earnings withheld and used to purchase shares of common stock on specified dates as determined
by the Board. The price of common stock purchased under the Purchase Plan is equal to 85% of the lower of the fair market value of the common stock, at the
commencement date or the ending date of each 24-month offering period. Each offering period includes four six-month purchase periods. No compensation
expense is recorded in connection with this plan.
Sales under the Purchase Plan for the years ended December 31, 2000 and 2001 were 144,894 and 288,811 shares of common stock at an average price of
$4.14 and $1.01, respectively. As of December 31, 2001, 2,096,788 shares of the Company's common stock remained reserved and available for issuance
under this plan.
The following information concerning the Company's stock option plan and employee stock purchase plan was provided in accordance with SFAS No. 123,
Accounting for Stock-Based Compensation. As permitted by SFAS No. 123, the Company accounted for such plans in accordance with APB No. 25 and related
interpretations. The fair value of each stock option was estimated on the date of grant using the minimum value and fair value option-pricing models with the
following weighted average assumptions.
----------------------------------------1999
2000
2001
-----------
-----------
-----------
Stock option plan:
Expected stock price volatility.......
80.00 % (1)
Risk-free interest rate...............
6.54 %
Expected life of options (years)......
5
80.00 %
105.00 %
5.88 %
4.48 %
5
5
Stock purchase plan:
Expected stock price volatility.......
80.00 %
80.00 %
105.00 %
Risk-free interest rate...............
6.54 %
6.34 %
3.19 %
Expected life of options (years)......
2
2
2
size="1">
(1) Prior to the Company's initial public offering on June 28, 1999, the fair value of each option grant was determined using the minimum value method using
a zero volatility. Subsequent to the offering, the fair value was determined using the Black-Scholes option pricing model.
As a result of the above assumptions, the weighted average fair value of options granted during the years ending December 31, 1999, 2000 and 2001 was
$5.20, $3.33, and $1.08, respectively. The weighted average fair value of stock purchased during the three years ending December 31, 1999, 2000 and 2001
was $8.42, $6.05, and $2.95, respectively.
The following pro forma net loss information has been prepared as if the Company had followed the provisions of SFAS No. 123 (in thousands, except per
share amounts):
----------------------------------------1999
2000
2001
-----------
-----------
-----------
Net loss:
As reported........................... $
(72,975)
$
(91,760) $
(39,530)
Pro forma............................. $
(75,483)
$
(99,535) $
(44,903)
As reported........................... $
(2.75)
$
(1.91) $
(0.73)
Pro forma............................. $
(2.80)
$
(2.07) $
(0.83)
Net loss per share:
size="1">
A summary of the status of the Company's stock option plan and changes during those periods is presented below:
----------------------------------------------------------------------------------------------1999
2000
2001
------------------------------- ------------------------------- ------------------------------Number of
Exercise Price
Number of
Exercise Price
Number of
Shares
Per Share
Shares
Per Share
Shares
-----------
------------------ -----------
Exercise Price
Per Share
------------------ -----------
------------------
Outstanding at
beginning of year.....
3,746,118
$
0.05 -
$
1.33
7,375,614
$
0.05 -
$ 46.00
9,476,295
$
0.05 -
$ 46.00
Granted.................
4,961,910
$
2.00 -
$ 46.00
6,458,404
$
0.38 -
$ 16.75
3,612,500
$
0.59 -
$
3.00
Exercised...............
(687,763) $
0.05 -
$
2.00
(915,287) $
0.05 -
$ 10.00
(272,104) $
0.05 -
$
2.00
Terminated/forfeited....
(644,651) $
0.05 -
$ 46.00
(3,442,436) $
0.05 -
$ 46.00
(2,243,732) $
0.05 -
$ 32.94
-----------
-------
------- -----------
-------
------- -----------
-------
-------
Outstanding,
at end of year........
7,375,614
$
===========
0.05 =======
$ 46.00
9,476,295
$
======= ===========
0.05 -
$ 46.00
=======
10,572,959
$
======= ===========
0.05 =======
$ 46.00
=======
Options exercisable
at end of year........
932,779
$
===========
0.05 =======
$ 23.38
2,067,531
$
======= ===========
0.05 -
$ 46.00
=======
4,409,447
======= ===========
size="1">
The following table summarizes information about stock options outstanding at December 31, 2000:
Options Outstanding
Options Exercisable
-------------------------------------- -------------------------Weighted
Weighted
Average
Range of
Number
Exercises Prices
Exercise
Outstanding
Price
------------------ -------------
Average
Weighted
Remaining
Contractual
Life
Average
Number
Exercise
Exercisable
Price
----------- ----------- -------------
-----------
$
0.05 - $
2.00
5,252,429
$
1.36
8.64
1,629,449
$
1.39
$
2.06 - $ 19.13
3,915,535
$
7.12
9.29
344,868
$
14.22
$ 20.44 - $ 26.25
284,331
$
22.27
8.80
85,553
$
22.20
$ 32.63 - $ 46.00
24,000
$
35.11
8.68
7,661
$
35.35
-------------
-------------
9,476,295
2,067,531
=============
=============
size="1">
The following table summarizes information about stock options outstanding at December 31, 2001:
Options Outstanding
Options Exercisable
-------------------------------------- -------------------------Weighted
Weighted
Average
Range of
Number
Exercises Prices
Exercise
Outstanding
Price
------------------ -------------
Average
Weighted
Remaining
Contractual
Life
Average
Number
Exercise
Exercisable
Price
----------- ----------- -------------
-----------
$
0.05 - $
1.25
3,081,941
$
0.99
8.71
908,366
$
0.76
$
1.26 - $
2.00
4,319,290
$
1.66
8.32
2,251,677
$
1.86
$
2.06 - $ 14.00
2,720,992
$
5.42
8.48
1,007,310
$
6.07
$ 14.38 - $ 46.00
450,736
$
20.89
7.85
242,094
$
21.04
------------10,572,959
=============
------------4,409,447
=============
size="1">
12. Revenues and Other Income, Net
$
0.05 =======
$ 46.00
=======
The following table provides the components of revenues (in thousands):
------------------------------1999
2000
2001
--------- --------- --------Revenues:
Mortgage.................................. $
Interest income on mortgage and home
equity loans............................
Home equity...............................
Auto......................................
Credit card and other.....................
13,569
$
16,400
$
38,999
5,049
5,448
12,456
-192
4,978
2,887
13,019
10,594
592
820
923
--------- --------- --------Total revenues...................... $ 22,097 $ 35,879 $ 67,950
========= ========= =========
The following table provides the components of other income, net (in thousands):
------------------------------1999
2000
2001
--------- --------- --------Interest on short-term investments.......... $
1,104 $
1,707 $
745
Interest expense on non-warehouse
facility borrowings.......................
(311)
(314)
(359)
Equity investment gain/(loss)................
(132)
(117)
3,252
Non-cash gain on settlement of dispute.......
2,891
--Settlement of trademark dispute..............
(400)
----------- --------- --------$
3,152 $
1,276 $
3,638
========= ========= =========
In October 1999, the Company negotiated a settlement regarding one of the Company's strategic alliance agreements. Pursuant to the agreement, the Company
obtained a warrant to purchase 53,996 shares of the Company's Series D convertible preferred stock. The Company recorded the warrant at fair value on the
date the settlement was reached, and accordingly, the Company recognized a one-time non-cash gain of $2.9 million.
In March 2000, the Company reached an agreement to settle a previously existing trademark dispute regarding the use of the Company's name. Accordingly,
the Company accrued a one-time expense of $0.4 million at December 31, 1999.
In December 2001, the Company sold its entire equity investment in Finance All, the parent company of E-LOAN Japan, for $4.7 million. The Company
recorded a one-time gain on sale of equity investment in the amount of $3.3 million, in connection with this sale. The book value of the investment at the time
of sale was $1.4 million.
13. Operating Expenses
The following table provides the components of operating expenses (in thousands):
Compensation and benefits....................
Processing costs.............................
Advertising and marketing....................
Professional services........................
Occupancy costs..............................
Computer and internet........................
General and administrative...................
Interest expense on warehouse borrowings.....
Amortization of unearned compensation........
Amortization of goodwill and intangible
------------------------------1999
2000
2001
--------- --------- --------$ 17,423 $ 22,119 $ 29,927
2,495
5,171
5,160
26,937
25,323
14,063
4,356
6,075
3,203
2,715
3,978
3,453
704
843
1,103
3,470
4,356
5,253
5,419
5,435
9,678
23,116
9,392
5,164
assets....................................
Non-cash marketing costs.....................
11,589
39,733
28,144
-6,490
5,970
--------- --------- --------Total operating expenses............ $ 98,224 $ 128,915 $ 111,118
========= ========= =========
The following table provides detail of the operations component of total operating expenses classified by the following revenue-related categories (in
thousands):
------------------------------1999
2000
2001
--------- --------- --------Mortgage .......................... $ 16,239 $ 16,142 $ 20,940
Interest expense on mortgage and
home equity loans............
5,419
5,435
9,460
Home equity........................
-226
3,094
Auto...............................
1,121
9,759
9,285
-185
167
--------- --------- --------Total operations................... $ 22,779 $ 31,747 $ 42,946
========= ========= =========
14. Fair Value of Financial Instruments
The fair value of a financial instrument is the amount for which the instrument could be exchanged in a current transaction between willing parties, other than
in a forced liquidation sale. Fair value estimates are subjective in nature and involve uncertainties and therefore, cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
The carrying value of the Company's other financial instruments, including cash and cash equivalents, accounts receivable and all other financial assets and
liabilities approximate their fair value because of the short-term maturity of those instruments or because they carry interest rates which approximate market.
15. Commitments and Contingencies
Leases
The Company leases office space under two operating leases, which provide for renewal in November 2004 and May 2005, respectively. Rent expense under
operating leases amounted to $1.1 million, $1.3 million and $0.8 million for the years ended December 31, 1999, 2000 and 2001, respectively.
The Company's lease obligations under capital and operating leases are as follows (in thousands):
Under the terms of the office leases, the Company maintains stand-by letters of credit in favor of the lessors, in the amounts of $0.6 million and $0.5 million,
respectively.
Years Ending December 31,
2002...................................................
2003...................................................
2004...................................................
2005...................................................
2006 and thereafter....................................
Total minimum lease payments............................
Less amount representing interest.......................
Present value of minimum lease payments.................
Less current portion of capital lease obligations.......
Long-term portion.......................................
Capital
Operating
--------- --------$
179 $
1,598
-1,637
-1,557
-178
----------- --------179 $
4,970
=========
(4)
--------175
(175)
--------$
-=========
Legal
In the normal course of business, the Company is at times subject to pending and threatened legal actions and proceedings. After reviewing pending and
threatened actions and proceedings with counsel, management believes that the outcome of such actions or proceedings is not expected to have a material
adverse effect on the financial position or results of operation or liquidity of the Company.
Between August 10, 2001 and September 25, 2001, a number of substantially identical class action complaints alleging violations of the federal securities
laws were filed in the United States District Court for the Southern District of New York naming as defendants, in the aggregate, E-LOAN, Inc., certain of
its officers and directors, and certain underwriters (The Goldman Sachs Group, Inc., FleetBoston Robertson Stephens, Inc., Merrill Lynch Pierce Fenner &
Smith, Inc., Credit Suisse First Boston Corp., J.P. Morgan Chase & Co.), some of which were involved in the company's initial public offering. The complaints
have since been consolidated into a single action. The complaints allege, among other things, that the underwriters of our initial public offering violated the
securities laws by failing to disclose certain alleged compensation arrangements (such as undisclosed commissions or stock stabilization practices) in the
offering's registration statement and that the Company and certain of its officers and directors violated Section 11 of the Securities Act of 1933 Section 10(b)
of the Securities Exchange Act of 1934. The plaintiffs in the class action seek monetary damages. The Company intends to defend these actions vigorously.
However, due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of the litigation. Any unfavorable outcome of this
litigation could have an adverse impact on our business, financial condition and results of operations.
Mortgage bankers' blanket bond
As of December 31, 2001, the Company carried a mortgage bankers' blanket bond and errors and omissions insurance coverage for $5.0 million. The premiums
for the bond and insurance coverage are paid through September 2002.
Marketing agreements
The Company has entered into several marketing agreements with third parties. Under these agreements the third parties will display the Company's logo and
loan information on their internet websites and provide related marketing services. The Company pays for these services in minimum monthly and quarterly
installments plus, in some cases, a per view charge for each time the information is displayed. Future minimum payments under these agreements are as
follows (in thousands):
Years Ending December 31,
2002........................................
2003........................................
2004........................................
2005........................................
Amount
--------$
1,135
58
----------$
1,193
=========
One of these marketing agreements is with a stockholder of the Company, Charles Schwab & Co, Inc. The Company has incurred approximately $0.1 million
and $1.0 million in marketing expenses under this agreement during the years ended December 31, 2000 and December 31, 2001, respectively.
Loan commitments and hedging activities
Upon receiving a lock commitment from a borrower ("rate lock"), the Company simultaneously enters into either a mandatory sell forward agreement with
certain institutional investors or a non-mandatory forward sale agreement with the ultimate investor. At December 31, 2001, the Company was a party to
commitments to fund loans at interest rates previously agreed (locked) by both the Company and the borrower for specified periods of time. Rate locks with
the borrowers are on a best effort basis, borrowers are not obligated to enter into the loan agreement. A rate lock, which does not result in a funded loan, is
referred to as fallout. As the Company is exposed to movements in interest rates after entering into rate locks, the Company must estimate fallout if interest
rate risk is to be economically hedged with a mandatory sell forward agreement. At December 31, 2001, the Company had provided locks to originate loans
amounting to approximately $154.4 million (the "locked pipeline").
The Company originates mortgage loans and sells them primarily through whole loan sales. The market values of mortgage loans are sensitive to changes in
market interest rates. If interest rates rise between the time the Company enters into a rate lock with the borrower, the subsequent funding of the loan and the
time the mortgage loans are committed for sale, there may be a decline in the market value of the mortgage loans. To protect against such possible declines,
the Company has adopted an economic hedging strategy.
The Company retains the services of Tuttle Risk Management Services, Inc. ("TRMS") , an unaffiliated advisory firm specializing in mortgage loan pipeline
management to assist the Company in minimizing the interest rate risk associated with the time lag between when loans are rate-locked and when they
are committed for sale or exchanged in the secondary market. Individual mortgage loan risks are aggregated by note rate, mortgage loan type and stage in
the pipeline, and are then matched, based on duration, with the appropriate hedging instrument, thus mitigating basis risk until closing and delivery. The
Company currently hedges its mortgage pipeline through mandatory forward sales of Fannie Mae mortgage-backed securities and non- mandatory forward sale
agreements with the ultimate investor. The Company determines which alternative provides the best execution in the secondary market. As a managed account
of TRMS, the Company is able to take advantage of TRMS' reporting services, including pipeline, mark-to-market, commitment and position reporting.
The Company believes that it has implemented a cost-effective economic hedging program to provide a high level of protection against changes in the market
value of rate-lock commitments. However, an effective strategy is complex and no hedging strategy can completely insulate the Company against such
changes.
At December 31, 2001, the Company had entered into mandatory sell forward commitments amounting to approximately $78.0 million. The Company adjusts
the amount of mandatory sell forward commitments held to offset changes in the locked pipeline and changes in the market. During the twelve months ended
December 31, 2001, the Company did not designate mandatory sell forward commitments as FAS 133 hedges. At December 31, 2001, the Company had
entered into $107.9 million of commitments with third party investors to deliver loans related to funded loans held for sale.
At December 31, 2001, the Company had entered into non-mandatory forward loan sale agreements amounting to approximately $91.2 million. These forward
loan sale agreements do not subject the Company to mandatory delivery and there is no penalty if the Company does not deliver into the commitment. The
Company is exposed to the risk that these counterparties may be unable to meet the terms of these sale agreements. The investors are well-established U.S.
financial institutions; the Company does not require collateral to support these commitments, and there has been no failure on the part of the counterparties to
meet the terms of these agreements to date. The Company designates all non-mandatory forward sale agreements as fair value FAS 133 hedges for underlying
loans at funding. The Company designates as a fair value FAS 133 hedge at commitment date loans held for sale, where the Company intends to deliver
the underlying loan into the commitment ("delivery commitment"). The Company did not have a material gain or loss representing the amount of hedge
ineffectiveness related to non-mandatory forward sale agreements or delivery commitments during the year ended December 31, 2001.
16. Risks and Uncertainties
The Company has a limited operating history and its prospects are subject to the risks, expenses and uncertainties frequently encountered by companies in
the new and rapidly evolving markets for internet products and services. These risks include the failure to develop and extend the Company's online service
brands, the rejection of the Company's services by consumers, vendors and/or advertisers, the inability of the Company to maintain and increase the levels of
traffic on its online services, as well as other risks and uncertainties.
Additionally, in the normal course of business, companies in the mortgage banking and auto finance industries encounter certain economic and regulatory
risks. Economic risks include interest rate risk, credit risk and market risk. The Company is subject to interest rate risk to the extent that in a rising interest
rate environment, the Company will generally experience a decrease in loan production, which may negatively impact the Company's operations. Credit risk
is the risk of default, primarily in the Company's loan portfolio that result from borrowers' inability or unwillingness to make contractually required payments.
Market risk reflects changes in the value of loans held-for-sale and in commitments to originate loans. Regulatory risks include administrative enforcement
actions and/or civil or criminal liability resulting from the Company's failure to comply with the laws and regulations applicable to the Company's business.
The Company depends on two warehouse credit facilities to finance the mortgage loan inventory pending ultimate sale to mortgage loan investors. The
Company also has a line of credit to finance the auto loan inventory pending ultimate sale to auto investors. All of these facilities have operating and
financial covenants including the requirement that the Company maintain two mortgage warehouse facilities (with minimum borrowing capacity limits) and
the maintenance of certain financial ratios. In particular, the Company must maintain a minimum cash and cash equivalents balance of $15 million (including
Restricted cash, excluding Documentary drafts) and the highest amount required by any other lender or agreement. Failure to comply with these covenants on
either or both lines could result in the obligation to repay all amounts outstanding at the time of termination. In the past, the Company has obtained waivers
from these lenders due to failure to comply with certain covenants.
The Company sells loans to loan purchasers on a servicing released basis without recourse. As such, the risk of loss or default by the borrower has been
assumed by these purchasers. However, the Company is usually required by these purchasers to make certain representations relating to credit information, loan
documentation and collateral. To the extent that the Company does not comply with such representations, or there are early payment defaults, the Company
may be required to repurchase the loans and indemnify these purchasers for any losses from borrower defaults. For the years ended December 31, 2000 and
2001, the Company had not repurchased any loans.
The Company achieved profitability in the fourth quarter of 2001. Because the Company expects its operating costs will increase to accommodate expected
growth in loan applications, it will need to generate significant revenues to maintain profitability. The Company may not sustain or increase profitability on
a quarterly or annual basis in the future. If revenues grow more slowly than anticipated, or if operating expenses exceed expectations or cannot be adjusted
accordingly, the business, results of operations and financial condition will be adversely affected. Management believes that its cash and cash equivalents held
at December 31, 2001 will be sufficient to fund its operating activities and capital expenditures, and meet all other obligations including its minimum cash and
cash equivalent covenants through at least December 31, 2002.
17. Subsequent Events
In January 2002, the Company's Board of Directors authorized an increase of 2,160,406 shares to the number of shares authorized for issuance under the
Company's 1997 Stock Plan, in accordance with the annual automatic increase provision contained in the Plan. As of April 1, 2002, the total shares authorized
for issuance under the 1997 Stock Plan was 16,398,375 shares.
On March 14, 2002, the Company elected to redeem its 8% convertible note dated July 12, 2001 with The Charles Schwab Corporation prior to its maturity
date of January 19, 2003. Under the terms of the note, the Company seeks to redeem the note on April 15, 2002 by payment of $5,250,000 (105% of the unpaid
principal as of the date of redemption). The Charles Schwab Corporation has the option before April 15, 2002 to convert the amount due under the note into
4,716,981 shares of common stock of the Company, in lieu of repayment.
On March 21, 2002, the Company renewed its existing warehouse line of credit agreement with Greenwich Capital for borrowings of up to $300 million for
the interim financing of mortgage loans. Of this amount, $150 million is available in committed funds which represents an increase over the $100 million prior
to renewal. The minimum cash and cash equivalents balance was reduced from $20 million prior to renewal to the higher of $15 million (including Restricted
Cash, excluding Documentary Drafts) or the highest amount required by any other lender or agreement. The restriction of $4.5 million in cash as additional
collateral was also reduced to $2.5 million as part of the renewal. Other than these changes, the terms of the renewal are substantially similar to those existing
prior to renewal. This renewal extended the agreement until March 21, 2003.
On March 28, 2002, the Company renewed its existing warehouse line of credit agreement with GMAC Bank. The renewed line provides for borrowings of up
to up to $50 million for the interim financing of mortgage loans with GMAC Bank, a reduction from the $70 million available prior to renewal. The minimum
unrestricted cash balance was reduced to $12.5 million from $15 million (excluding Documentary Drafts). Other than these changes, the terms of the renewal
are substantially similar to those existing prior to renewal. This renewal extended the agreement until March 31, 2003.
On April 1, 2002, the Company renewed its existing line of credit agreement with Bank One, NA for the interim financing of auto loans. The line of credit
commitment was reduced to $10 million and extended until July 31, 2002. Bank One has indicated that they are exiting this component of their lending
business, and therefore will not be renewing the Company's line of credit after the expiration on July 31, 2002. The Company is in active discussions with
multiple lending providers, and believe that we will be successful in securing an alternative source prior to expiration of the current facility.
[ ** ] Confidential treatment requested
Exhibit 10.145
ORIGINATOR MASTER COMMITMENT
FOR ENHANCED AOT
MASTER COMMITMENT [ ** ]
E-Loan, Inc.
Seller/Servicer [ ** ]
This is a Master Commitment ("Master Commitment") #[ ** ], dated August 21, 2001, by and between the Federal
Home Loan Mortgage Corporation ("Freddie Mac") and E-Loan ("Originator"), Seller/Servicer #[ ** ]. This Master
Commitment establishes the terms and conditions under which Mortgages originated by Originator will be eligible for
purchase by Freddie Mac from Wells Fargo Home Mortgage, Inc. ("Direct Seller") under the Enhanced AOT Uttering.
The sale and servicing of Mortgages under this Master Commitment shall be governed by the terms and requirements
of the applicable Purchase Documents, as that term is defined in the Freddie Mac Sellers' and Servicers' Guide (the
"Guide").
The provisions of Master Agreement #[ ** ] shall apply to and be incorporated into this Master Commitment.
I. General Terms
II. Enhanced AOT Offering. The Tri-Party Enhanced AOT Agreement, in the form attached hereto as Exhibit A,
has been entered into by Originator, Direct Seller (as defined in the Enhanced AOT Agreement), and Freddie
Mac and dated May 22, 2001 and is incorporated herein and made a part hereto.
Originator has entered into this Master Commitment to originate Mortgages eligible for purchase by Freddie
Mac. Under the Enhanced AOT Offering, Originator will sell such Mortgages ("Originator Mortgages") to
Direct Seller with servicing released at a price to be negotiated between Originator and Direct Seller. Direct
Seller will sell such Mortgages to Freddie Mac under a Master Commitment negotiated between Direct Seller
and Freddie Mac ("Direct Seller AOT MC"). Under the Direct Seller AOT MC, Direct Seller will sell the
Mortgages to Freddie Mac using the Required Spread negotiated between Freddie Mac and Originator and
stated below.
III. Defined Terms
. All capitalized terms not otherwise defined herein have the meanings set forth in the Guide unless clearly
indicated otherwise. This Master Commitment and all supplements and amendments shall be considered
Purchase Documents.
IV. Eligible Mortgage Products
. Originator may originate for sale by Direct Seller to Freddie Mac through this Enhanced AOT Offering, the
following mortgage products (the "Mortgages"):
15-year fixed rate Mortgages;
20-year fixed rate Mortgages;
and 30-year fixes rate Mortgages.
V. Master Commitment Amount
. The dollar amount of this Master Commitment shall be $500 million ("Master Commitment Amount").
VI. Delivery
. Mortgages shall not be delivered by Originator to Freddie Mac under this Master Commitment. In order for
Mortgages to be delivered to Freddie Mac, Originator must sell the Mortgages to Direct Seller for delivery
under the Direct Seller MC. Mortgages originated by Originator and delivered under the Direct Seller MC will
be applied toward the Master Commitment Amount.
VII. Minimum Servicing Spread
. The Minimum Servicing Spread for Mortgages sold pursuant to the terms of this Master Commitment shall
be [ ** ]basis points (.[ ** ] percent).
VIII. Required Delivery Date
. The sale of Mortgages to Freddie Mae through Direct Seller under the terms of this Master Commitment is
optional and all deliveries shall be made by November 30, 2001.
IX. Purchase Tolerance/Pair-off
. Purchase by Freddie Mac of at least 90 percent of the Master Commitment Amount, will constitute
fulfillment by Seller of the purchase requirements under this Master Commitment. In addition, Freddie Mac
shall purchase Mortgages otherwise eligible for purchase with an aggregate unpaid principal balance not to
exceed 100 percent of the Master Commitment Amount. Such purchase tolerances shall apply notwithstanding
the purchase tolerances set forth in Section 11.5 of the Guide.
X. Required Spreads
. The Required Spreads for Mortgages sold by Direct Seller to Freddie Mac under the Guarantor Program or
Multilender Program are:
15-year Fixed-rate Mortgages [ ** ]basis points
(.[ ** ] percent)]
20-year Fixed-rate Mortgages [ ** ] basis points
(.[ ** ] percent)]
30-year Fixed-rate Mortgages [ ** ]basis points
(.[ ** ] percent)]
These Required Spreads reflect Seller's participation in Freddie Mac's Gold Remittance Cycle.
Originator agrees to provide Direct Seller with the Required Spreads stated above when selling Mortgages to
Direct Seller for delivery to Freddie Mac under the Enhanced AOT Offering.
XI. Special Mortgage Provisions
XII. Accuracy of Information. Originator represents and warrants that all loan and servicing data provided to
Direct Seller relating to the Mortgages purchased by Freddie Mae pursuant to the Enhanced AOT Offering is
true, correct and complete in all respects.
XIII. Retention of Mortgage Files
. Originator represents and warrants that it shall retain a copy of the origination Mortgage file for 12 months or
whatever timeframe required by applicable law or regulation, whichever is greater.
XIV. Validation of Information
. On a periodic basis, Freddie Mac will provide reports describing the Mortgages that have been sold to
Freddie Mac by the Direct Seller that were originated under this Enhanced AOT Offering. Originator should
review that report and notify Freddie Mac within 30 of receipt of any errors or discrepancies on the report. If
Originator does not notify Freddie Mac of any errors or discrepancies, Freddie Mac will deem such Mortgages
to be Originator Mortgages under the Tri-Party Enhanced AOT Agreement.
XV. Additional Special Provisions for this Master Commitment
[Reserved for any special instructions the Originator needs to provide Seller
or any additional terms]
XVI. Concluding Provisions
The terms, provisions, and any waiver(s) of Guide requirements set forth in this Master Commitment are
expressly conditional upon compliance by Originator with the warranties and representations under this
Master Commitment, the Guide, and the Purchase Documents. In the event of a breach by Originator of any
such warranty or representation, Freddie Mac may immediately revoke this Master Commitment in whole or
in part for future deliveries.
XVII. Signature and Return
In order to accept and confirm this Master Commitment, duplicate originals of this Master Commitment must
be executed by Originator and one executed original returned by September 11, 2001, to:
Federal. Home Loan Mortgage Corporation
Attention: Ruth Kuizon - Contract Specialist
21700 Oxnard Street, Suite 1900
Woodland Hills, CA 91367
IN WITNESS WHEREOF, the duly authorized officers of Originator and Freddie Mac have executed this
Master Commitment as of the date first written above.
FEDERAL HOME LOAN MORTGAGE CORPORATION
By:
Patti Shumate
Director of Sales
E-LOAN, INC.
By:
Name:
Title:
Date:
rdk/122569d-EAOT.doc/LJSE-4ZK0Z6
EXHIBIT A
[RESERVED FOR FORM OF TRI-PARTY ENHANCED AOT AGREEMENT]
TRI-PARTY ENHANCED AOT AGREEMENT
This Agreement is made by and among E-Loan, Inc., S/S# [ ** ] ("Originator"), Wells Fargo Home Mortgage,
Inc., S/S# [ ** ] ("Direct Seller"), and the Federal Home Loan Mortgage Corporation, ("Freddie Mac") this
22nd day of May, 2001 (the "Agreement").
RECITALS
(A) Originator and Freddie Mac desire to enter into a special Master Commitment (the "Originator MC")
which contains certain terms and conditions pursuant to which Originator may originate Mortgages eligible
for purchase by Freddie Mac ("Originator Mortgages");
(B) Originator and Direct Seller desire to enter into the Wells Fargo Funding Loan Purchase Agreement
pursuant to which Direct Seller will purchase the Originator Mortgages from Originator and sell much
Mortgages to Freddie Mac;
(C) Direct Seller and Freddie Mac desire to enter into a special Master Commitment (the "Direct Seller MC")
which contains certain terms and conditions pursuant to which Direct Seller shall sell the Originator
Mortgages to Freddie Mac;
(D) Originator desires to assign certain of its rights under the Originator MC to Direct Seller so that Direct
Seller may incorporate the Required Spreads and other terms as necessary, into the Direct Seller MC and use
the combined terms and conditions from both the Originator MC and the Direct Seller MC to sell the
Originator Mortgages to Freddie Mac; and
(E) Originator, Direct Seller and Freddie Mac are all willing to participate in Freddie Mac's Enhanced AOT
offering subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, mutual promises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto, the parties
agree as follows:
1. The Recitals are true and correct.
2. Originator hereby assigns certain of its rights under the Originator MC to Direct Seller so that Direct Seller
may incorporate the Required Spreads (and other terms necessary) from the Originator MC into the Direct
Seller MC and sell the Originator Mortgages to Freddie Mac under the Direct Seller MC and Direct Seller's
Seller/Servicer number. Notwithstanding the immediately preceding sentence, Originator expressly reserves
the right to agree to amendments to Originator's Purchase Documents, from time to time. Originator and
Direct Seller also agree that this Agreement shall be incorporated into and become part of the Originator MC,
or related Originator's Master Agreement and Direct Seller's MC.
3. Direct Seller hereby accepts such assignment from Originator and agrees that Direct Seller shall sell all
Originator Mortgages it purchases from Originator to Freddie Mac under the Direct Seller MC, as
supplemented by the Required Spreads (and other terms as necessary incorporated from the Originator MC.
4. Direct Seller acknowledges and agrees that Originator has served the right to agree to amendments to
Originator's Purchase Documents, from time to time.
5. Freddie Mac hereby gives its consent to the assignment by Originator to Direct Seller; provided that, (i)
originator and Direct Seller comply with all of the requirements of this Agreement and the applicable
Purchase Documents, and (ii) Originator and Direct Seller acknowledge and agree that Freddie Mac reserves
the right to revoke its consent to the assignment at any time and in its sole discretion.
6. Originator and direct Seller agree that Originator shall notify Direct Seller of any amendment to
Originator's purchase Documents prior to its execution of any amendment to Originator's Purchase
Documents. Direct Seller acknowledges and agrees that, (i) Freddie Mac has not duty or obligation to notify
Direct Seller of any amendment to Originator's Purchase Documents, (ii) Originator shall be Direct Seller's
agent for purposes of receiving notice of any such amendment to Originator's Purchase Documents, (iii)
Direct Seller shall be deemed to have notice of and be bound by any amendment to the Originator's Purchase
Documents, and (iv) all Originator Mortgages delivered and sold by Direct Seller on or after the effective date
of any such amendment shall comply with the Originator's Purchase Documents, as amended. With respect to
any such amendment to the Originator's Purchase Documents, Originator represents and warrants that it has
notified and, if required under the Wells Fargo Funding Loan Purchase Agreement, received approval of the
terms and conditions of the amendment from Direct Seller.
7. Without changing the Originator's duty to notify direct Seller as set forth in the immediately preceding
paragraph 6, Originator agrees that Freddie Mac may, as a courtesy to Direct Seller, but not as a duty or
obligation, electronically transmit via the internet to Direct Seller's email address set forth below an unsigned
copy of any such amendment to the Special Master Commitment(s) or Originator's other Purchase Documents.
Freddie Mac shall not be responsible for the failure of any telecommunications company or cable company to
properly, accurately and promptly transmit any such email.
8. Direct Seller represents, warrants and covenants that (i) as of the Delivery Date and through and including
the Settlement Date, Direct Seller shall be the sole owner of the Originator Mortgages delivered to Freddie
Mac and (ii) all such Mortgages are free and clear of any and all security interests, claims and encumbrances
of any other party including, but not limited to, the Originator.
9. Direct Seller agrees that it shall, (i) as of the Settlement Date, convey and transfer to Freddie Mac all of
Direct Seller's right, title and interest in the Originator Mortgages delivered to Freddie Mac, and (ii) on and
after the Settlement Date, service the Originator Mortgages.
10. Originator acknowledges and agrees that Originator has received from Direct Seller the reasonably
equivalent value of and the fair consideration for the Originator Mortgages and Originator has no right, title or
interest in the Originator Mortgages or the servicing rights to such Mortgages.
11. Originator represents and warrants to Direct Seller and their successor and/or assigns that all Originator
Mortgages comply with all of Freddie Mac's requirements in Originator's Purchase Documents including, but
not limited to, requirements regarding loan documentation, legal enforceability, first lien priority status, the
Borrower's income and credit qualifications, the Borrower's source and amount of downpayment, the value
and acceptability of the collateral and overall Mortgage eligibility. originator represents and warrants to Direct
Seller that, with respect to each mortgage sold to Direct Seller under the Wells Fargo Funding Loan Purchase
Agreement, the Originator has provided Direct Seller with all data, information and detail necessary to process
the delivery of the mortgage to Freddie Mac. such data, information and detail shall include, but not be limited
to, those items described in Chapter 17 of the Freddie Mac Single-Family Seller/Servicer Guide.
12. Originator and Direct Seller acknowledge and agree that Freddie Mac's purchase of the Originator
Mortgages from Direct Seller shall be in complete reliance upon Originator's representations and warranties in
the immediately preceding paragraph 11. Originator agrees that Freddie Mac, as the assignee of Direct Seller,
shall have the right to pursue its remedies under Originator's Purchase Documents directly against Originator.
Furthermore, Originator agrees that Freddie Mac (i) is the intended beneficiary of Originator's representations
and warranties under the Originator's Purchase Documents and this Agreement and (ii) shall not be required to
first pursue any remedies for misrepresentation or breach of warranty against Direct Seller before pursuing its
rights and remedies against Originator. Originator also agrees that Freddie Mac's rights as an intended
beneficiary of Originator's representation and warranties shall vest on the Settlement Date.
13. In the event Freddie Mac determines that any representation by Originator is untrue or that any of
Originator's warranties have been breached, Freddie Mac will pursue its remedies under the Purchase
Documents directly against Originator. Originator and Freddie Mac acknowledge and agree that Freddie Mac
will not hold Direct Seller responsible for any misrepresentation or breach of warranty by Originator with
respect to any Originator Mortgage regarding loan documentation, legal enforceability, first lien priority
status, the Borrower's income and credit qualifications, the Borrower's source and amount of downpayment,
the value and acceptability of the collateral or overall Mortgage eligibility. to accommodate Freddie Mac
quality control reviews, Originator agrees to retain copies of the origination file of each Originator Mortgage
for a period of 12 months after the Originator Mortgage's origination date, or the amount of time required by
law or regulation, whichever is greater.
14. Originator, Direct Seller and Freddie Mac agree that as of the Settlement Date:
(i) Originator shall be solely responsible for all representations, warranties, covenants and requirements under
the Originator's Purchase Documents with respect to loan documentation, legal enforceability, first lien
priority status, the Borrower's income and credit qualifications, the Borrower's source and amount of
downpayment, the value and acceptability of the collateral and the overall eligibility of each Originator
Mortgage. Notwithstanding any provisions of the Originator Purchase Documents to the contrary, Originator
shall remain solely responsible for all such representations, warranties covenants and requirements with
Freddie Mac specifically and expressly releases Originator in writing;
(ii) Direct Seller shall be fully responsible for, (A) all representations, warranties, covenants and requirements
regarding the delivery of Mortgage loan documents and loan data, Note endorsements, and mortgage file
contents under the Direct Seller's Purchase Documents and (B) the representation, warranties and covenants
made hereunder, and
(iii) Direct Seller shall be fully responsible for, (A) all servicing representations, warranties, covenants and
requirements regarding the Direct Seller's Purchase Documents and (B) the representation, warranties and
covenants made hereunder.
15. In the event of a transfer of servicing of any Originator Mortgages, (i) Originator shall continue to be fully
and solely responsible for all representations, warranties, covenants and requirements under the Originator's
Purchase Documents with respect to the loan documentation, legal enforceability, first lien priority status, the
Borrower's income and credit qualifications, the Borrower's source and amount of downpayment, the value
and acceptability of the collateral and the overall eligibility of each Originator Mortgage until Freddie Mac
specifically and expressly releases Originator in writing, notwithstanding any provision of the Guide, Form
960, Form 981 or other Originator Purchase Documents to the contrary; and (ii) the servicing transferor shall
be released from the servicing representations, warranties covenants and requirements in accordance with
Freddie Mac's Guide requirements.
16. Notwithstanding anything contained in this Agreement or the Originator Purchase Documents to the
contrary, the Servicer of the Originator Mortgages will always be solely responsible for providing Freddie
Mac's Quality Control Department with mortgage loan files in accordance with the Guide requirements.
17. The parties hereto agree that capitalized terms used in this Agreement and not otherwise defined herein
shall have the meanings ascribed to them in the Freddie Mac Single-Family Seller/Servicer Guide, as amended
and supplemented by Freddie Mac Sellers' and Servicers' Bulletins published prior to the date of the Master
Agreement. References to chapters or sections of the Guide shall be deemed to be references to such chapters
or sections as Enhanced by Freddie Mac Sellers' and Servicers' Bulletins.
18. In the event that (i) Originator and Direct Seller fail to comply with the provisions of this Attachment, or
(ii) there is a breach of warranty or a representation made under this Agreement or other applicable Purchase
Documents is determined to be same, Freddie Mac may, at its option and in its sole discretion, exercise any of
its remedies at law or under the applicable Purchase Document, including, but not limited to, the right to
terminate a parties Master Agreement and any Master Commitments issued thereunder upon written notice to
the affected party.
19. This Agreement will terminate upon the earlier of (i) 90 days from written notice to the parties by Freddie
Mac, or (ii) the termination dates contained in the Originator's Master Agreement incorporating this
Agreement.
20. Notices shall be sent, faxed or electronically transmitted as follows:
(a) To Originator:
Mr. Steve Majerus
Vice President
E-Loan, Inc.
5875 Arnold Road
Dublin, CA 94568
(b) To Direct Seller:
Ms. Mary Blue
Senior Vice President
Wells Fargo Home Mortgage, Inc.
100 South 5th Street
Minneapolis, MN 55402
(c) To Freddie Mac:
Mr. Brian Swan
Director of Customer Services
Freddie Mac
333 West Wacker, Suite 2500
Chicago, IL 60606
21. Originator and Direct Seller agree that the terms of this Agreement are hereby deemed to be "confidential
information" as described in Section 2.16 of the Guide and further agree to comply with the confidentiality
requirements set forth therein.
22. Originator and Direct Seller hereby indemnify and hold Freddie Mac harmless from and against any
damages, liabilities, judgments, claims, counterclaims or defenses to which Freddie Mac may become subject,
which arise out of or occur in connection to this Agreement.
IN WITNESS WHEREOF, Originator, Direct Seller and Freddie Mac have caused this agreement to be
executed by their duly authorized representatives as of the date first set forth above.
FEDERAL HOME LOAN MORTGAGE CORPORATION
By:
Brian L. Swan
Director of Customer Services
E-LOANS, INC.
By:
Type Name: V. P. Secondary Marketing
Title: V.P. Secondary Marketing
Date: 5/23/01
WELLS FARGO HOME MORTGAGE, INC.
By:
Type Name: Mary Blue
Title: Senior Vice President
Date: June 15, 2001
s:\mktg\wells fargo\2001\enhanced aot\e-loans\tri- party.doc
ORIGINATOR MASTER COMMITMENT FOR
ENHANCED AOT OFFERING
MASTER COMMITMENT NUMBER [ ** ]
E-Loan, Inc.
Dated: August 21, 2001
MASTER COMMITMENT #[ ** ]
SECTION I. GENERAL TERMS
SECTION II. SPECIAL MORTGAGE PROVISIONS
SECTION III. ADDITIONAL SPECIAL PROVISIONS FOR THIS MASTER COMMITMENT
SECTION IV. CONCLUDING PROVISIONS
SECTION V. SIGNATURE AND RETURN
EXHIBIT A - TRI-PARTY ENHANCED AOT AGREEMENT
Exhibit 10.146
This Mortgage Loan Purchase and Sale Agreement, dated as of October 1, 2001 is executed between E*TRADE Bank,
a federally chartered savings batik with offices at 671 North Glebe Road, Arlington, Virginia 22203 as Purchaser (the
"Purchaser"), and E-LOAN, Inc. as seller and servicer (the "Seller").
WHEREAS, the Purchaser desires to purchase from the Seller and the Seller desires to sell to the Purchaser, from tune
to time, certain Mortgage Loans as specified in the related Mortgage Loan Schedule attached hereto as Exhibit A,
pursuant to the terms of a related letter agreement by and between the Seller and the Purchaser and attached hereto (the
"Purchase Price and Terms letter");
WHEREAS, each of the Mortgage Loans is secured by a mortgage, deed of trust or other security instrument creating
a first or second lien on a residential dwelling located in the jurisdiction indicated on the related Mortgage Loan
Schedule; and
WHEREAS, the Purchaser arid the Seller wish to prescribe the representations and warranties of the Seller with
respect to itself and the Mortgage Lows; NOW, THEREFORE, in consideration of the premises and mutual
agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Purchaser and the Seller agree as follows:
I.
DEFINITIONS
1. Defined Terms.
Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires,
shall have the following meaning specified in this Article:
Agreement: This Mortgage Loan Purchase and Sale Agreement including all exhibits hereto, amendments
hereof and supplements hereto.
Appraised Value: The value set forth in an appraisal made in connection with the origination of the related
Mortgage Loan as the value of the Mortgaged Property.
Assignment: Art assignment of the Mortgage, notice of transfer or equivalent instrument, in recordable form,
sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect of
record the sale or transfer of the Mortgage Loan.
Business Day: Any day other than: (i) a Saturday or Sunday. or (ii) a legal holiday in the Commonwealth of
Virginia or (iii) a day on which banks in the Commonwealth of Virginia are authorized or obligated by law or
executive order to be closed.
Closing Date: The date or dates, set forth in the Purchase Price and Terms letter, on which, from time to time,
the Purchaser shall purchase and the Seller shall sell the Mortgage Loans listed on the related Mortgage Loan
Schedule.
Code: The Internal Revenue Code of 1986, as amended.
Combined LTV: With respect to any Mortgage Loan that creates a second priority lien, the combined LTV of
the first and second Mortgage Loans.
Convertible Mortgage Loan : Any individual adjustable rate Mortgage Loan purchased pursuant to this
Agreement which contains a provision whereby the Mortgagor is permitted to convert the Mortgage Loan to a
fixed rate Mortgage Loan in accordance with the terms of the related Mortgage Note.
Credit Score: The credit score for each Mortgage Loan shall be the minimum of two credit bureau scores
obtained at origination or such other tune by the Seller. If two credit bureau scores are obtained, the Credit
Score will be the lower score. If three credit bureau scores are obtained, the Credit Score will be the middle of
the three. When there is more than one applicant, the lowest of the applicants Credit Scores will be used.
There is only one (1) score for any loan regardless of the number of borrowers and/or applicants. The
minimum Credit Score for all Mortgage Loans will be in accordance with the Underwriting Guidelines (as
defined below).
Cut off Date: The first day of the month in which the related Closing Date occurs, or such other date as shall
be specified in the Purchase Price and Terms Letter.
Due Date: The day of the month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any
days of grace.
FDIC: The Federal Deposit Insurance Corporation, or any successor thereto.
FHLMC: The Federal Rome Loan Mortgage Corporation, or any successor thereto.
FHLMC Guides: The FHLMC Seller/Servicers' Guide and all amendments or additions thereto
Fidelity Bond: A fidelity bond to be maintained by the Seller.
FIRREA: The Financial Institutions Reform, Recovery, and Enforcement Act of 1989,
FNMA: The Federal National Mortgage Association, or any successor thereto.
FNMA Guides: The FNMA Seller/Servicers' Guide and all amendments or additions thereto.
GAAP: Generally accepted accounting procedures, consistently applied.
Gross Margin: With respect to each adjustable rate Mortgage Loan, the fixed percentage amount Set forth in
the related Mortgage Note to be added to the applicable Index to determine the Mortgage Interest Rate.
HUD: The United States Department of Housing aid Urban Development or any successor.
Index: A rate per annum set forth on the applicable Mortgage Loan Schedule.
Insurance Proceeds: With respect to each Mortgage Loan, proceeds of insurance policies insuring the
Mortgage Loan or the related Mortgaged Property.
Interest Rate Adjustment Date: With respect to each adjustable rate Mortgage Loan, the date, specified in the
related Mortgage Note and the related Mortgage Loan Schedule, on which the Mortgage Interest Rate is
adjusted.
Lender Paid Mortgage Insurance Policy Program: Any Mortgage Loan underwritten with an LTV greater than
80.01% and less than 95% in which the owner of such Mortgage Loan is responsible for the premiums
associated with the mortgage insurance policy.
Loan-to-Value Ratio or LTV: With respect to any Mortgage Loan, the ratio of the original outstanding
principal amount of the Mortgage Loan, to (i) the Appraised Value of the Mortgaged Property at origination
with respect to a Refinanced Mortgage Loan, and (ii) the lesser of the Appraised Value of the Mortgaged
Property at origination or the purchase price of the Mortgaged Property with respect to all other Mortgage
Loans. The Loan-to-Value Ratio as of any date other than the date of origination shall be the then outstanding
principal balance of the Mortgage Loan divided by (i) the Appraised Value of the Mortgaged property at
origination with respect to a Refinanced Mortgage Loan, and (ii) the lesser of the Appraised Value of the
Mortgaged Property at origination or the purchase price of the Mortgaged Property, with respect to all other
Mortgage Loans.
Maximum Mortgage Interest Rate: The maximum annual rate at which interest accrues on any adjustable rate
Mortgage Loan in accordance with the provisions of the related Mortgage Note.
Minimum Mortgage Interest Rate: The minimum annual rate at which interest accrues on any adjustable rate
Mortgage Loan in accordance with the provisions of the related Mortgage Note.
Monthly Payment: The scheduled monthly payment of principal and interest on a Mortgage Loan which is
payable by a Mortgagor under the related Mortgage Note.
Mortgage: The mortgage, deed of trust or other instrument securing a Mortgage Note which creates a first or
second lien on an unsubordinated estate in fee simple in real property securing the Mortgage Note; except that
with respect to real property located in jurisdictions in which the use of leasehold estates for residential
properties is a widely accepted practice, the mortgage, deed of trust or other instrument securing the Mortgage
Note may secure and create a first or second lien upon a leasehold estate of the Mortgagor.
Mortgage File: The mortgage documents pertaining to a particular Mortgage Loan which are specified in
Exhibit B hereto and any additional documents required to be added to the Mortgage File pursuant to this
Agreement.
Mortgage Interest Rate: The annual rate at which interest accrues on any Mortgage Loan in accordance with
the provisions of the related Mortgage Note, which shall be adjusted from time to tine with respect to
adjustable rate Mortgage Loans.
Mortgage Interest Rate Cap: With respect to an adjustable rate Mortgage Loan, the limit on each Mortgage
Interest Rate adjustment as set forth in the related Mortgage Note.
Mortgage Loan: An individual Mortgage Loan which is the subject of this Agreement, each Mortgage Loan
originally sold and subject to this Agreement being identified on the applicable Mortgage Loan Schedule,
which Mortgage Loan includes without limitation the Mortgage File, the Monthly Payments, Insurance
Proceeds, and all other rights, benefits, proceeds and obligations arising from or in connection with such
Mortgage Loan.
Mortgage Loan Documents: The documents listed in Exhibit B.
Mortgage Loan Schedule: The schedule of Mortgage Loans annexed hereto as Exhibit A for the related pool
of Mortgage Loans. such schedule setting forth the following information, and/or such other information as
the parties may mutually agree upon in writing, with respect to each Mortgage Loan in the related Mortgage
Loan pool:
(1) the Seller's Mortgage Loan identifying number;
(2) the Mortgagor's name;
(3) the street address of the Mortgaged Property including the state and zip code;
(4) a code indicating whether the Mortgaged Property is owner occupied (i.e., primary residence, second
residence, investor property);
(5) the type of residential property constituting the Mortgaged Property;
(6) the original months to maturity or the remaining months to maturity from the applicable Cut-off Date, in
any case based on the original amortization schedule and, if different, the maturity expressed in the same
manner but based on the actual amortization schedule;
(7) the Loan-to-Value Ratio at origination and at the applicable Cut-off Date;
(8) the Mortgage Interest Rate at origination;
(9) the Mortgage Interest Rate as of the applicable Cut-off Date;
(10) the stated maturity date;
(11) the amount of the Monthly Payment as of the applicable Cut-off Date;
(12) the original principal amount of the Mortgage Loan.;
(13) the principal balance of the Mortgage Loan as of the close of business on the applicable Cut-off Date,
after deduction of payments of principal due on or before such Cut-off Date, whether or not collected;
(14) a code indicating the purpose of the Mortgage Loan (i.e., purchase, rate and term refinance, equity take
out refinance);
(15) a code indicating the documentation style (i.e,, full, alternative or reduced);
(16) the number of times during the twelve (12) month period preceding the applicable Closing Date that any
Monthly Payment has been received thirty, (30) or more days after its Due Date;
(17) the date on which the first payment is due;
(18) with respect to adjustable rate Mortgage Loans, the initial Interest Rate Adjustment Date;
(19) with respect to adjustable rate Mortgage Loans, the next interest Rate Adjustment Date;
(20) with respect to adjustable rate Mortgage Loans, the Gross Margin;
(21) with respect to adjustable rate Mortgage Loans, the Maximum Mortgage Interest Rate under the terns of
the Mortgage Note;
(22) with respect to adjustable rate Mortgage Loans, the Minimum Mortgage Interest Rate under the terms of
the Mortgage Note;
(23) with respect to adjustable rate Mortgage Loans, a code indicating the type of Index;
(24) a code indicating whether the Mortgage Loan is a Convertible Mortgage Loan;
(25) a code indicating whether or not the Mortgage Loan is the subject of Primary Mortgage Insurance or
Lender Paid Mortgage Insurance Policy;
(26) a code indicating the issuer of any related Primary Mortgage Insurance Policy;
(27) a code indicating the Credit Score of the Mortgagor;
(28) the Primary Mortgage Insurance certificate number, if applicable;
(29) the primary Mortgage Insurance and Lender Paid Mortgage Insurance coverage percentage, if applicable;
(30) a code indicating whether or not the Mortgage Loan is the subject of a Prepayment Penalty as well as the
terms of the prepayment penalty;
(31) A code indicating whether the Mortgage Loan is a first or second lien on the Mortgaged Property;
(32) The purchase price of the specific Mortgage Loan; and
(33) The periodic rate cap with respect to such Mortgage Loan.
With respect to the aggregate Mortgage Loans in the pool, the related Mortgage Loan Schedule shall set forth
the following information, as of the applicable Cut-off late:
(1) the number of Mortgage Loans;
(2) the current aggregate outstanding principal balance of the Mortgage Loans;
(3) the weighted average Mortgage Interest Rate of the Mortgage Loans; and
(4) the weighted average maturity of the Mortgage Loans.
Mortgage Note: The note or other evidence of the indebtedness of a Mortgagor secured by a M Mortgage,
Mortgaged Property: The underlying real property securing repayment of a Mortgage Note, consisting of a
single parcel of real estate considered to be real estate under the laws of the State in which such real property
is located, which may include condominium units and planned unit developments, improved by a residential
dwelling; except that with respect to real property located in jurisdictions in which the use of leasehold estates
for residential properties is a widely accepted practice, a leasehold estate of the Mortgagor, the term of which
is equal to or longer than the term of the Mortgage.
Mortgagor: The obligor on a Mortgage Note.
OCC: Office of the Comptroller of the Currency, its successors and assigns.
Person: Any individual, corporation, partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision thereof.
Prepayment Penalty: With respect to each Mortgage Loan, the penalty if the Mortgagor prepays such
Mortgage Loan as provided in the related Mortgage Note or Mortgage.
Primary Mortgage Insurance Policy: Each primary policy of mortgage insurance represented to be in effect
pursuant to Section 3.02(ee).
Prime Rate: The prime rate announced to be in effect from time to time as published as the average rate in the
Wall Street Journal (Northeast Edition).
Purchase Price: The price paid on the applicable Closing Date by the Purchaser to the Seller in exchange for
the Mortgage Loans purchased on such Closing Date as calculated in Section 2.02 of this Agreement.
Purchase Price and Terms Letter: As defined in the Recitals of this Agreement.
Purchase Price Premium: the excess of the Purchase Price over par, as applicable.
Purchaser: E*Trade Bank, its successors in interest and assigns.
Qualified Appraiser: An appraiser who had no interest, direct or indirect in the Mortgaged Property or in any
loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of
the Mortgage Loan, and such appraiser and the appraisal made by such appraiser both satisfy the requirements
set forth in the FNMA or FHLMC Guides and in Title XI of FIRREA and the regulations promulgated
thereunder, all as in effect on the date the Mortgage Loan was originated.
Qualified Insurer: An insurance company duly qualified as such under the laws of the states in which the
Mortgaged Properties are located, duly authorized and licensed in such states to transact the applicable
insurance business and to write the insurance provided, approved as an insurer by FNMA and FHLMC and
whose claims paying ability is rated in the two highest rating categories by the Standard & Poor's Ratings
Services, Moody's Investors Service, Inc. and Fitch Investors Service, Inc. with respect to primary mortgage
insurance and in the two highest rating categories for general policyholder rating and financial performance
index rating by Best's with respect to hazard and flood insurance.
Rating Agencies: Standard & Poor's Ratings Services, a Division of McGraw Hill Companies, Inc. or, in the
event that ownership of the Mortgage Loans is evidenced by mortgage backed securities, the nationally
recognized - rating agencies issuing ratings with respect to such securities, if any.
Reconstitution: As defined in Section 5.16.
Reconstitution Agreement: As defined in Section 5.14.
Refinanced Mortgage Loan: A Mortgage Loan (including an Equity Take Out Refinanced Mortgage Loan)
which was made to a Mortgagor who owned the Mortgaged Property prior to the origination of such Mortgage
Loan and the proceeds of which were used in whole or part to satisfy an existing mortgage.
REMIC: A "real estate mortgage investment conduit," as such term is defined in the Code.
Repurchase Price: With respect to any Mortgage Loan, a price equal to (i) the unpaid principal balance
("UPB'') of the Mortgage Loan on the date of repurchase, plus (ii) interest on such outstanding principal
balance at the Mortgage Interest Rate from The last date through which interest has been paid and distributed
to the Purchaser through the last day of the month of repurchase, plus (iii) the Purchase Price premium, if any,
multiplied by the UPB on the date of repurchase, plus (iv) third party expenses incurred in connection with the
transfer of the Mortgage Loan being repurchased
SAIF: The Savings Association Insurance Fund, or any successor thereto.
Seller; the Seller stated on the cover page of this Agreement, or any successor thereto pursuant to the terms
hereof.
Stated Principal Balance: As to each Mortgage Loan as of any date of determination, (i) the principal balance
of such Mortgage Loan at the applicable Cut-off Date after giving effect to payments of principal due on or
before such date, whether or not received, minus (ii) all amounts previously distributed to the Purchaser with
respect to the Mortgage Loan representing payments or recoveries of principal or advances in lieu thereof.
Underwriting Guidelines: The underwriting guidelines of the Seller as approved by Purchaser, in effect at the
time of origination of the related Mortgage Loans, a copy of which is attached as Exhibit C hereto. Any
amendments to the 'Underwriting Guidelines shall be attached to the applicable Purchase Price and Terms
Letter.
II.
PURCHASE OF MORTGAGE LOANS; RECORD TITLE AND POSSESSION OF
MORTGAGE FILES;
BOOKS AND RECORDS; DELIVERY OF MORTGAGE LOAN DOCUMENTS
1. Agreement to Purchase.
The Seller agrees to sell and the Purchaser agrees to purchase from time to tune the Mortgage Loans
having an aggregate principal balance on the applicable Cut-off bate in an amount as set forth in the
related Purchase Price and Terns Letter, or in such other amount as agreed by the Purchaser and the
Seller as evidenced by the actual aggregate principal balance of the Mortgage Loans accepted by the
Purchaser on the applicable Closing Date. The Seller shall deliver the related Mortgage Loan
Schedule for the Mortgage Loans to be purchased on the applicable Closing Date to the Purchaser at
least four (4) Business Days prior to such Closing Date.
2. Purchase Price.
The Purchase Price for each Mortgage Loan shall be the percentage of par as stated in the related
Purchase Price arid Terms Letter (subject to adjustment as provided therein), multiplied by the
aggregate principal balance, as of the applicable Cut-off Date, of the Mortgage Loans listed on the
related Mortgage Loan Schedule, after application of scheduled payments of principal due on or
before the applicable Cut-off Date, whether or not collected. The initial principal amount of the
Mortgage Loans shall be the aggregate principal balance of the Mortgage Loans, so computed as of
the applicable Cut-off Date. If so provided in the related Purchase Price and Terms Letter, portions of
the Mortgage Loans shall be priced separately.
In addition to the Purchase Price as described above, the Purchaser shall pay. to the Seller; at closing,
accrued interest on the current principal amount of the Mortgage Loans as of the applicable Cut-off
Date at the weighted average Mortgage Interest Rate of the Mortgage Loans. The Purchase Price plus
accrued interest as set forth in the preceding paragraph shall be paid to Purchaser on the applicable
Closing Date by wire transfer of immediately available funds to an account specified in writing by the
Purchaser,
The Purchaser shall be entitled to (1) all scheduled principal due after the applicable Cut-off Date, (2)
all other recoveries of principal collected on or after such Cut-off Date (provided, however, that all
scheduled payments of principal due on or before such Cut-off Date and collected by the Seller or any
successor servicer after such Cut-off Date shall belong to the Seller), and (3) all payments of interest
on the Mortgage Loans (minus that portion of any such payment which is allocable to the period prior
to the applicable Cut-off Date). The outstanding principal balance of each Mortgage Loan as of the
applicable Cut-off Date is determined after application of payments of principal due on or before such
Cut-off Date whether or not collected, together with any unscheduled principal prepayments collected
prior to such Cut-off Date; provided, however, that payments of scheduled principal and interest
prepaid for a Due Date beyond the applicable Cut-off Date shall not be applied to the principal
balance as of such Cutoff Date, Such prepaid amounts shall be the property of the purchaser, and shall
be paid by the Seller to the Purchaser on the Closing Date as an adjustment to the Purchase Price.
3. Record Title and Possession of Mortgage Files
As of the applicable Closing Date, the Seller sells, transfers, sets over and conveys the Mortgage
Loans to the Purchaser, without recourse, and the Seller hereby acknowledges that the Purchaser shall
have subject to the terms of this Agreement, all the right, title and interest of the Seller in and to the
Mortgage Loans. The delivery of the Mortgage Files shall be made to the Purchaser or its designee on
the applicable Closing Date at the expense of the Seller. From the applicable Closing Date, the
ownership of each related Mortgage Loan, including the Mortgage Note, the
Mortgage, the contents of the related Mortgage File and all rights, benefits, proceeds and obligations
arising therefrom or in connection therewith, shall be vested in the Purchaser- All rights arising out of
the Mortgage Loans including, but not limited to, all funds received on or in connection with the
Mortgage Loans and all records or documents with respect to the Mortgage Loans prepared by or
which come into the possession of the Seller shall be received and held by the Seller in trust for the
benefit of the Purchaser as the owner of the Mortgage Loans.
4. Books and Records.
The sale of each Mortgage Loan has been reflected on the Seller's balance sheet and other financial
statements as a sale of assets by the Seller.
5. Transfer of Mortgage Loans.
The Purchaser may sell and transfer one or more of the Mortgage Loans, provided, however, that (i)
the transferee will not be deemed to be a Purchaser hereunder unless a copy of an Assignment,
Assumption and Recognition of this Agreement, mutually agreeable to the parties, executed by the
transferee shall have been delivered to the Seller. The Purchaser also shall provide Seller with
advance written notice of the transfer.
6. Examination of Mortgage Files; Delivery of Mortgage Loan Documents.
Prior to or following each Closing Date (as mutually agreed upon by the parties and specified in the
applicable Purchase Price and Terms Letter), the Seller shall, at the Purchaser's option, (a) deliver to
the Purchaser or its designee in escrow, for examination with respect to each Mortgage Loan to be
purchased, the related Mortgage File, including a copy of the Assignment of Mortgage, pertaining to
each Mortgage Loan, or (b) make the related Mortgage File available to the Purchaser, or its designee,
for examination at the Seller's offices or such other location as shall otherwise be agreed upon by the
Purchaser and the Seller. Such examination may be made by the Purchaser or its designee upon
reasonable notice to the Seller and during normal business hours at a time acceptable to the Purchaser
for purposes of ensuring that the Mortgage Loans have been underwritten in accordance with the
Underwriting Guidelines and to ensure conformity with the terms of the related purchase Price and
Terns Letter. If the Purchaser males such examination prior to the related Closing Date and
determines, in its sole discretion, that any Mortgage Loan does not so conform to the Underwriting
Guidelines or the terms of the related Purchase Price and Terns Letter, such Mortgage Loans shall be
deleted from the related Mortgage Loan Schedule, and may, at the Purchaser's option, be replaced by
a substitute Mortgage Loan which meets the requirements set forth in Section 3.03. If the Purchaser
makes such examination after the related Closing Date and determines, in its sole discretion, that any
Mortgage Loan does not so conform to the Underwriting Guidelines or the terms of the related
Purchase Price and Terms Letter, Seller shall repurchase such Mortgage Loan(s), at the Repurchase,
Price, promptly upon Purchaser's written notice. The Purchaser may, at its option and without notice
to the Seller, purchase some or all of the Mortgage Loans without conducting any partial or complete
examination. The fact that the Purchaser or its designee has conducted or has failed to conduct any
partial or complete examination of the Mortgage Files shall not affect the Purchaser's (or any of its
successor's) rights to demand repurchase, substitution or other relief as provided herein.
No later than four (4) Business Days prior to each Closing Date, and notwithstanding the preceding
paragraph, the related Mortgage Loan Documents enumerated as items (1), (2), (3), (4), (S), (6), (7),
and (8) in Exhibit B hereto shall be delivered by the Seller to the Purchaser (or its designee pursuant
to a bailee letter agreement). if the Seller cannot deliver the original recorded Mortgage Loan
Documents or the original policy of title insurance, including riders and endorsements thereto, on the
applicable Closing Date, the Seller shall, promptly upon receipt thereof and in any case not later than
90 days from such Closing Date, deliver such original documents, including original recorded
documents, to the Purchaser or its designee (unless the Seller is delayed in making such delivery by
reason of the fact that such documents shall not have been returned by the appropriate recording
office). If delivery is not completed within 90 days solely due to delays in making such delivery by
reason of the fact that such documents shall not have been returned by the appropriate recording
office, the Seller shall deliver such documents to the Purchaser, or its designee, within such time
period as specified in an Officer's Certificate stating the date by which Seller expects to receive any
missing documents sent for recording from the applicable recording office. In the event that
documents have not been received by the date specified in the Officer's Certificate, a subsequent
Officer's Certificate shall be delivered by such date specified in the prior Officer's Certificate, stating
a revised date for receipt of documentation. The procedure shall be repeated until the documents have
been received and delivered. The Seller shall continue to use its best efforts to effect delivery within
180 days of the applicable Closing Date; provided however, that if delivery is not completed within
180 days of such Closing Date, at the Purchaser's option, the Seller will repurchase such Mortgage
Loan in accordance with Section 3.03, or the Purchaser, in its sole discretion, will extend in writing
the time period for Seller to effect delivery; and further provided that at the expiration of such
extension, if the documents have not been received, Seller will repurchase such Mortgage Loan in
accordance with Section 3.03.
The Seller shall pay all initial recording fees for the Assignments of Mortgage and any other fees in
connection with the transfer of all original documents to the Purchaser or its designee. The Seller shall
prepare, in recordable form, all Assignments of Mortgage necessary to assign the Mortgage Loans to
Purchaser, or its designee. The Seller shall be responsible for recording the Assignments of Mortgage
in accordance with and at the direction of the Purchaser.
To the extent not delivered on the applicable Closing Date, the Seller shall provide a copy of the title
insurance policy to the Purchaser or its designee within ninety (90) days of the applicable Closing
Date.
7. Closing.
The closing for the purchase and sale of the Mortgage Loans shall take place on the applicable
Closing Date. The closing shall be either: by telephone, confirmed by letter or wire as the parties shall
agree, or conducted in person, at such place as the parties shall agree.
The closing for the Mortgage Loans to be purchased on each Closing Date shall be subject to each of
the following conditions:
a. at least two (2) Business Days prior to the applicable Closing Date, the Seller shall deliver to
the Purchaser a magnetic diskette, or transmit by modern., a listing on a loan level basis of the
information contained in the related Mortgage Loan Schedule;
b. all of the representations and warranties of the Seller under this Agreement shall be true and
correct as of the applicable Closing Date and no event shall have occurred which, with notice
or the passage of time, would constitute a material default under this Agreement;
c. the Purchaser shall have received, or the Purchaser's attorneys shall have received in escrow,
all closing documents, in such forms as are agreed upon and acceptable to the Purchaser
(including, but not limited to, completed original copies of all exhibits hereto, including but
not limited to those set forth in clause (e) below), duly executed by all signatories other than
the Purchaser as required pursuant to the terms hereof,
d. the Seller shall have delivered and released to the Purchaser (or its designee) on or prior to
the applicable Closing Late all documents required pursuant to the terms of this Agreement;
and
e. the Seller shall have complied with all other terms and conditions of this Agreement and the
related Purchase Price and Terms Letter.
Subject to the foregoing conditions, the Purchaser shall pay to the Seller on the applicable Closing Date the
Purchase Price for the related pool of Mortgage Loans, plus accrued interest pursuant to Section 2_02 of this
Agreement, by wire transfer of immediately available funds to the account designated by the Seller.
VIII.
REPRESENTATIONS AND WARRANTIES OF THE SELLER; REPURCHASE;
REVIEW OF MORTGAGE LOANS
1. Representations and Warranties of the Seller.
The Seller represents. warrants and covenants to the Purchaser that as of each Closing Date or as of
such date specifically provided herein:
a. The Seller is duly organized, validly existing and in good standing under the laws of the state
of its formation end has all licenses necessary to carry out its business as now being
conducted, and is licensed and qualified to transact business in and is in good standing under
the laws of each state in which any Mortgaged Property is located or is otherwise exempt
under applicable law from such licensing or qualification or is otherwise not required tinder
applicable law to effect such licensing or qualification and no demand for such licensing or
qualification has been made upon such Seller by any such state, and in any event such Seller
is in compliance with the laws of any such state to the extent necessary to ensure the
enforceability of each Mortgage Loan and the servicing of the Mortgage Loans in accordance
with the terms of this Agreement;
b. The Seller has the full power and authority and legal right to hold, transfer and convey each
Mortgage Loan, to sell each Mortgage Loan and to execute, deliver and perform, and to enter
into and consummate all transactions contemplated by this Agreement and to conduct its
business as presently conducted. has duly authorized the execution, delivery and performance
of this Agreement and any agreements contemplated hereby, has duly executed and delivered
this Agreement, and any agreements contemplated hereby, and this Agreement and each
Assignment of Mortgage to the Purchaser and any agreement contemplated hereby,
constitutes a legal, valid and binding obligation of the Seller, enforceable against it in
accordance with its terms, and all requisite corporate action has been taken by the Seller to
make this Agreement and all agreements contemplated hereby valid and binding upon the
Seller in accordance with their terms;
c. None of the execution and delivery of this Agreement, the origination of the Mortgage Loans
by the Seller, the sale of the Mortgage loans to the Purchaser, the consummation of the
transactions contemplated hereby, or the fulfillment of or compliance with the terms and
conditions of this Agreement will conflict with any of the terms, conditions or provisions of
the Seller's charter or by laws or materially conflict with or result in a material breach of any
of the terms, conditions or provisions of any legal restriction or any agreement or instrument
to which the Seller is now a party or by which it is bound, or constitute a default or result in
an acceleration under any of the foregoing, or result in the material violation of any law, rule,
regulation, order, judgment or decree to which the Seller or its property is subject;
d. There is no litigation, suit, proceeding or investigation pending or, to the Seller's knowledge,
threatened, or any order or decree outstanding, with respect to the Seller which is reasonably
likely to have a material adverse effect on the sale of the Mortgage Loans, the execution,
delivery, performance or enforceability of this Agreement, or which is reasonably likely to
have a material adverse effect on the financial condition of the Seller;
e. No consent, approval, authorization or order of any court or governmental agency or body is
required for the execution, delivery and performance by the Seller of or compliance by the
Seller with this Agreement, except for consents, approvals, authorizations and orders which
have been obtained;
f. The consummation of the transactions contemplated by this Agreement is in the ordinary
course of business of the Seller, and the transfer, assignment and conveyance of the Mortgage
Notes and the Mortgages by the Seller pursuant to this Agreement are not subject to bulk
transferor any similar statutory provisions in effect in any applicable jurisdiction;
g. The Seller will treat the sale of the Mortgage Loans to the Purchaser as a sale for reporting
and accounting purposes and, to the extent appropriate, for federal income tax purposes;
h. Seller is an approved seller/servicer of residential fixed and adjustable rate mortgage loans for
FNMA/FHLMC and HUD. The Seller is duly qualified, licensed, registered and otherwise
authorized under all applicable federal, state and local laws, and regulations, if applicable,
meets the minimum capital requirements set forth by the OCC, and is in good standing to sell
mortgage loans to FNMA/FHLMC and no event has occurred which would make Seller
unable to comply with eligibility requirements or which would require notification to either
FNMA or FHLMC;
i. The Seller does not believe, nor does it have any cause or reason to believe, that it cannot
perform each and every covenant contained in this Agreement. The Seller is solvent and the
sale of the Mortgage Loans will not cause the Seller to become insolvent. The sale of the
Mortgage Loans is not undertaken with the intent to hinder, delay or defraud any of the
Seller's creditors;
j. No statement, tape, diskette, form, report or other document prepared by, or on behalf of,
Seller pursuant to this Agreement or in connection with the transactions contemplated hereby,
contains or will contain any statement that is or will be inaccurate or misleading in any
material respect, on the applicable Closing Date;
k. The Seller has delivered to the Purchaser financial statements as to its last two complete fiscal
years. All such financial statements fairly present the pertinent results of operations and
changes in financial position for each of such periods and the financial position at the end of
each such period of the Seller and its subsidiaries and have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the periods
involved, except as set forth in the notes thereto. There has been no change in the business,
operations, financial condition, properties or assets of the Seller since the date of the Seller's
financial statements that would lave a material adverse effect on its ability to perform its
obligations under this Agreement;
l. Except as disclosed in this Agreement, the Seller has not dealt with any broker, investment
banker, agent or other person that may be entitled to any commission or compensation in
connection with the sale of the Mortgage Loans. Seller will pay any commission or
compensation to any broker, investment banker, agent or other person that may be entitled
thereto in connection with the sale of the Mortgage Loans.
13. Representations and Warranties as to Individual Mortgage Loans.
The Seller hereby represents and warrants to the Purchaser, as to each Mortgage Loan, as of the
related Closing Date, or such other date as specified, as follows;
a. The information set forth in the related Mortgage Loan Schedule and the related magnetic
tape(s) or diskette(s) is complete, true and correct;
b. All payments due prior to the applicable Cut-off Date for such Mortgage Loan have been
made as of the related Closing Date, the Mortgage Loan is not delinquent in payment mote
than 30 days and has not been dishonored; the Seller has not advanced funds, or induced,
solicited or .knowingly received any advance of funds from a party other than the owner of
the Mortgaged Property subject to the Mortgage, directly or indirectly, for the payment of any
amount required by the Mortgage Loan; there has been no more than one delinquency during
the preceding twelve month period and such delinquency did not last more than 30 days.;
c. There are no defaults in complying with the terms of the Mortgage, and all taxes,
governmental assessments, insurance. premiums, water, sewer and municipal charges,
leasehold payments or round rents which previously became due and owing have been paid,
or escrow funds have been established in an amount sufficient to pay for every such escrowed
item which remains unpaid and which has been assessed but is not yet due and payable;
d. The terms of the Mortgage Note and the Mortgage have not been impaired, waived, altered or
modified in any respect, except by written instruments which have been recorded to the
extent any such recordation is required by law, or, necessary to protect the interest of the
Purchaser. No instrument of waiver, alteration or modification has been executed, and no
Mortgagor has been released, in whole or in part, from the teens thereof except in connection
with an assumption agreement and which assumption agreement is part of the Mortgage File
and the terms of which are reflected in the related Mortgage Loan Schedule; the substance of
any such waiver, alteration or modification has been approved by the issuer of any related
Primary Mortgage Insurance Policy and title insurance policy, to the extent required by the
related policies;
e. The Mortgage Note and the Mortgage are not subject to any right of rescission, set off,
counterclaim or defense, including, without limitation, the defense of usury, nor will the
operation of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any
right thereunder, render the Mortgage Note Or Mortgage unenforceable, in whole or in part,
or subject to any right of rescission, set off, counterclaim or defense, including the defense of
usury, and no such right of rescission, set off, counterclaim or defense has been asserted with
respect thereto, and the Mortgagor was not a debtor in any state or federal bankruptcy or
insolvency proceeding at the time the Mortgage Loan was originated;
f. All buildings or other customarily insured improvements upon the Mortgaged Property, are
insured by an insurer acceptable under the FNMA or FHLMC Guides, against loss by fire,
hazards of extended coverage and such other hazards as are provided for in the FNMA or
FHLMC Guides and by FNMA or FHLMC. All such standard hazard policies are in full force
and effect and on the date of origination contained a standard mortgagee clause naming the
Seller and its successors in interest and assigns as loss payee and such clause is still in effect
and all premiums due thereon have been paid. If required by the flood Disaster Protection Act
of 1973, as amended, the Mortgage Loan is covered by a flood insurance policy meeting the
requirements of the current guidelines of the Federal Insurance Administration which policy
conforms to FNMA and FHLMC requirements. Such policy was issued by an insurer
acceptable under FNMA or FHLMC guidelines. The Mortgage obligates the Mortgagor
g.
h.
i.
j.
thereunder to maintain all such insurance at the Mortgagor's cost and expense, and on the
Mortgagor's failure to do so, authorizes the holder of the Mortgage to maintain such insurance
at the Mortgagor's cost and expense and to seek reimbursement therefor from the Mortgagor;
Any and all requirements of any federal, state or local law including, without limitation,
usury, truth lending, real estate settlement procedures, consumer credit protection, equal
credit opportunity or disclosure laws applicable to the Mortgage Loan have been complied
with, the consummation of the transactions contemplated hereby will not involve the
violation of any such laws or regulations, and the Seller shall maintain in its possession,
available for the Purchaser's inspection, and shall deliver to the Purchaser upon demand,
evidence of compliance with all such requirements;
The Mortgage has not been satisfied, canceled or subordinated, in whole or in part, or
rescinded, and the Mortgaged Property has not been released from the lien of the Mortgage,
in whole or in part nor has any instrument been executed that would effect any such release,
cancellation, subordination or rescission. The Seller has not waived the performance by the
Mortgagor of any action, if the Mortgagor's failure to perform such action would cause the
Mortgage Loan to be in default, nor has the Seller waived any default resulting from any
action or inaction by the Mortgagor;
The Mortgage is a valid, subsisting, enforceable and perfected first or second lien on the
Mortgaged Property, as specified in the applicable Purchase Price and Terms Letter and
Mortgage Loan Schedule, including all buildings on the Mortgaged Property and all
installations and mechanical, electrical, plumbing, heating and air conditioning systems
affixed to such buildings, and all additions, alterations and replacements made at any time
with respect to the foregoing securing the Mortgage Note's original principal balance. The
Mortgage and the Mortgage Note do not contain any evidence of any security interest or other
interest or right thereto. Such lien is free and clear of all adverse claims, liens and
encumbrances having priority over the lien of the Mortgage subject only to (1) the lien of
non-delinquent current real property taxes and assessments not yet due and payable, (2)
covenants, conditions and restrictions, rights of way, easements and other matters of the
public record as of the date of recording which are acceptable to mortgage lending institutions
generally and either (A) which are referred to or otherwise considered in the appraisal made
for the originator of the Mortgage Loan, or (B) which do riot adversely affect the appraised
value of the Mortgaged Property as set forth in such appraisal, (3) other matters to which like
properties are commonly subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property, and (4) if the Mortgage is a second lien
pursuant to the applicable Purchase Price and Terns Letter and Mortgage Loan Schedule, the
first lien on the Mortgaged Property. Any security agreement, chattel mortgage or equivalent
document related to and delivered in connection with the Mortgage Loan establishes and
creates a valid, subsisting, enforceable and perfected first or second lien and first or second
priority security interest, as specified in the applicable Purchase Price and Terms Letter and
Mortgage Loan Schedule, on the property described therein, and the Seller has the full right
to sell and assign the same to the Purchaser;
The Mortgage Note and the related Mortgage are original and genuine and each is the legal,
valid and binding obligation of the maker thereof, enforceable in all respects in accordance
with its terms subject to bankruptcy, insolvency and other laws of general application
affecting the rights of creditors and the Seller has taken all action necessary to transfer such
rights of enforceability to the Purchaser. All parties to the Mortgage Note and the Mortgage
had the legal capacity to enter into the Mortgage Loan and to execute and deliver the
Mortgage Note and the Mortgage. The Mortgage Note and the Mortgage have been duly and
properly executed by such parties. No fraud, error, omission, misrepresentation, negligence or
similar occurrence with respect to a Mortgage Loan has taken place on the part of any Person,
including, without limitation, the Seller, the Mortgagor, or any other party involved in the
origination of the Mortgage Loan. The proceeds of the Mortgage Loan have been fully
disbursed and 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 disbursements
of any escrow funds therefor have been complied with, or a repair escrow has been
established as permitted in the applicable Underwriting Guidelines. All costs, fees and
expenses incurred in making or closing the Mortgage Loan and the recording of the Mortgage
were paid or are in the process of being paid, and the Mortgagor is not entitled to any refund
of any amounts paid or due under the Mortgage Note or Mortgage;
k. The Seller is the sole owner of record and holder of the Mortgage Loan and the indebtedness
evidenced by the Mortgage Note, except for the Assignments of Mortgage which have been
sent for recording, and upon recordation the Seller will be the owner of record of the
Mortgage and the indebtedness evidenced by the Mortgage Note, and upon the sale of the
Mortgage Loan to the Purchaser, the Seller will retain the Mortgage File or any part thereof
with respect thereto not delivered to the purchaser or the Purchaser's designee in trust only for
the purpose of servicing and supervising the servicing of the Mortgage Loan. Immediately
prior to the transfer and assignment to the Purchaser, the Mortgage Loan, including the
Mortgage Note and the Mortgage, were not subject to an assignment or pledge, and the Seller
had good and marketable title to and was the sole owner thereof and had full right to transfer
and sell the Mortgage Loan to the Purchaser free and clear of any encumbrance, equity, lien,
pledge, charge, claim or security interest and has the full right and authority subject to no
interest or participation of, or agreement with, any other patty, to sell and assign the Mortgage
Loan pursuant to this Agreement and following the sale of the Mortgage Loan, the Purchaser
will own such Mortgage Loan free and clear of any encumbrance, equity, participation
interest, lien, pledge, charge, claim or security interest. The Seller intends to relinquish all
rights to possess, control and monitor the Mortgage Loan, except for the purposes of
servicing the Mortgage Loan as set forth in this Agreement. After the applicable Closing
Date, the Seller will have no right to modify or alter the terms of the sale of the Mortgage
Loan and the Seller will have no obligation or right to repurchase the Mortgage Loan or
substitute another Mortgage Loan, except as provided in this Agreement, or as otherwise
agreed to by the Seller and the purchaser;
l. The Mortgage Loan with respect to a first priority lien Mortgage is covered by an ALTA
lender's title insurance policy or other generally acceptable form of policy or insurance
acceptable to FNMA or FHLMC, issued by a title insurer acceptable to FNMA or FHLMC
and qualified to do business in the jurisdiction where the Mortgaged Property is located,
insuring (subject to the exceptions contained in (j) (1), (2) and (3) above) the Seller, its
successors and assigns, as to the first priority lien of the Mortgage in the original principal
amount of the Mortgage Loan and in the case of adjustable rate Mortgage Loans, against any
loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of
the Mortgage providing for adjustment to the Mortgage Interest Rate and Monthly Payment.
Such lender's title insurance policy affirmatively insures ingress and egress and against
encroachment by or upon the Mortgaged Property or any interest therein and contains any
customary, environmental indemnity. Where required by state law or regulation, the
Mortgagor has been given the opportunity to choose the carrier of the required mortgage title
insurance. The Seller, its successors and assigns, are the sole insureds of such lender's title
insurance policy, such title insurance policy has been duly and validly endorsed to the
purchaser or the assignment to the Purchaser of the Seller's interest therein does not require
the consent of or notification to the insurer and such lender's title insurance policy is in full
force and effect and will be in full force and effect upon the consummation of the transactions
contemplated by this Agreement. No claims have been made under such lender's title
insurance policy, and no prior holder of the related Mortgage, including the Seller, has done,
by act or omission, anything which would impair the coverage of such lender's title insurance
policy.
The Mortgage Loan with respect to a second priority lien Mortgage is covered by an ALTA
lender's title insurance policy as described in the paragraph above, if such coverage is
required pursuant to the Underwriting Guidelines;
m. There is no default, breach, violation or event of acceleration existing under the Mortgage or
the related Mortgage Note, and no event which, with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a default, breach, violation or
event permitting acceleration; and neither the Seller nor any prior mortgagee has waived any
default, breach, violation or event permitting acceleration;
n. There are no mechanics', or similar liens or claims which have been filed for work, labor or
material (and no rights are outstanding that under law could give rise to such liens) affecting
the related Mortgaged Property which are or may be liens prior to or equal to the lien of the
related Mortgage;
o. Ali improvements subject to the Mortgage which were considered in determining the
Appraised Value of the Mortgaged Property lie wholly within the boundaries and building
restriction lines of the Mortgaged Property (and wholly within the project with respect to a
condominium unit) and no improvements on adjoining properties encroach upon the
Mortgaged Property except those which are insured against by the title insurance policy
referred to in clause (m) above and all improvements on the property comply with all
applicable zoning and subdivision laws and ordinances; the Mortgaged Property is lawfully
occupied under applicable law;
p. The Mortgage Loan was originated by or for the Seller. The Mortgage Loan complies with all
the terms, conditions and requirements of the Underwriting Guidelines in effect at the time of
origination of such Mortgage Loan. The Mortgage Notes and Mortgages are on forms
acceptable to FNMA or FHLMC. The Seller is currently selling loans to FNMA and/or
FHLMC which are the same document forms as the Mortgage Notes and Mortgages
(inclusive of any riders); the Mortgage Interest Rate is as set forth in the related Mortgage
Loan Schedule (including in the case of adjustable rate Mortgage Loans, the interest rate and
payment limitations set forth in the related Mortgage Loan Schedule), and Monthly Payments
under the Mortgage Note are due and payable on the first day of each month. The Mortgage
contains the usual and enforceable provisions of the originator at the time of origination for
the acceleration of the payment of the unpaid principal amount of the Mortgage Loan if the
related Mortgaged property is sold without the prior consent of the mortgagee thereunder.
The Seller used no selection procedures that identified the Mortgage Loans as being less
desirable or valuable than other comparable mortgage loans in the Seller's portfolio at the
related Cut-off Date;
q. The Mortgaged Property is not subject to any material damage by waste, fire, earthquake,
windstorm, flood or other casualty and is in good repair. At origination of the Mortgage Loan
there was, and there currently is, no proceeding Pending .for the. total or partial
condemnation of the Mortgaged Property. There have not been any condemnation
proceedings with respect to the Mortgaged Property and, to the best of Seller's knowledge,
there are no such proceedings scheduled to commence at a future date;
r. The related Mortgage contains customary and enforceable provisions such as to render the
rights and remedies of the holder thereof adequate for the realization against the Mortgaged
Property of the benefits of the security provided thereby, including, (1) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (2) otherwise by 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
s.
t.
u.
v.
w.
x.
y.
z.
Loan will be able to deliver good and merchantable title to the Mortgaged Property. There is
no homestead or other exemption available to the Mortgagor which would interfere with the
right to sell the Mortgaged Property at a trustee's sale or the right to foreclose the Mortgage;
If the Mortgage constitutes a deed of trust, a trustee, authorized and duly qualified if required
under applicable law to act as such, has been properly designated and currently so serves and
is named in the Mortgage, and no fees or expenses are or will become payable by the
Purchaser to the trustee under the deed of trust, except in connection with a trustee's sale or
attempted sale after default by the Mortgagor;
The Mortgage File contains an appraisal of the related Mortgaged Property, signed prior to
the final approval of the mortgage loan application by a Qualified Appraiser, approved by the
Seller, who had no interest, direct or indirect, in the Mortgaged Property, or in any loan made
on the security thereof, and whose compensation is not affected by the approval or
disapproval of the Mortgage Loan, and the appraisal and appraiser both satisfy the
requirements of FNMA or FHLMC and Title XI of FIRREA and the regulations promulgated
thereunder, all as in effect on the date the Mortgage Loan was originated. The appraisal is in a
form acceptable to FNMA or FHLMC and was made by a Qualified Appraiser;
All parties which have had any interest in the Mortgage, whether as mortgagee, assignee,
pledgee or otherwise, are (or, during the period in which they held and disposed of such
interest, were) (A) in compliance with any and all applicable licensing requirements of the
laws of the state wherein the Mortgaged Property is located, and (B) (I) organized under the
laws of such state, or (2) qualified to do business in such state, or (3) federal savings and loan
associations or national banks or a Federal Home Loan Bank or savings bank having principal
offices in such state, or (4) not doing business in such state;
The related Mortgage Note is not and has not been secured by any collateral except the lien of
the corresponding Mortgage and the security interest of any applicable security agreement or
chattel mortgage referred to above and such collateral does not serve as security for any other
obligation;
The Mortgagor has received all disclosure materials required by applicable law with respect
to the making of the Mortgage Loan and has executed a statement acknowledging such
receipt;
Except as otherwise permitted in the Underwriting Guidelines, the Mortgage Loan does net
contain "graduated payment" or "buydown" features;
The Mortgagor is not in bankruptcy and, to the best of the Seller's knowledge, the Mortgagor
is not insolvent; there exist no circumstances or conditions with respect to the Mortgage, the
Mortgaged Property, the Mortgagor, the Mortgagor's credit standing or otherwise that could
reasonably be expected to cause investors to regard the Mortgage Loan as an unacceptable
investment, cause the Mortgage Loan to become delinquent, or materially adversely affect the
value or marketability of the Mortgage Loan;
The Mortgage Loans are either fixed or adjustable rate mortgage loans. The Mortgage Loans
have an original term to maturity of not more than thirty (30) years, with interest payable in
arrears on the first day of each month. Each Mortgage Note is payable in equal monthly
installments of principal and interest, which installments of interest, with respect to adjustable
rate Mortgage Loans, are subject to change due to the adjustments to the Mortgage Interest
Rate on each Interest Rate Adjustment Date, with interest calculated and payable in an-ears,
sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original
term of not more than thirty years from commencement of amortization. The Mortgage
Interest Rate is adjusted, with respect to adjustable rate Mortgage Loans, on each Interest
Rate Adjustment Date to equal the Index plus the Gross Margin (rounded up or down to the
nearest ..125%), subject to the Mortgage Interest Rate Cap, the Maximum Mortgage Interest
Rate and the Minimum Mortgage Interest Rate. The weighted average Mortgage Interest Rate
is as set forth on the description of pool characteristics for the Mortgage Loans in the
aa.
ab.
ac.
ad.
ae.
af.
Purchase Price and Terms Letter. No Mortgage Loan contains terns or provisions which
would result in negative amortization;
Each Mortgage Note, each Mortgage, each Assignment of Mortgage and any other documents
required pursuant to this Agreement to be delivered to the Purchaser or its designee, or its
assignee for each Mortgage Loan, have been, on or before the applicable Closing Date,
delivered to the Purchaser or its designee, or its assignee;
The origination, collection and servicing practices used by the Seller, with respect to each
Mortgage Note and Mortgage have been legal and in accordance with applicable laws and
regulations and those mortgage servicing practices (including collection procedures) of
prudent mortgage banking and mortgage lending institutions which service mortgage loans of
the same type. With respect to escrow deposits and payments that the Seller is entitled to
collect, all such payments are in the possession of, or under the control of, the Seller, and
there exist no deficiencies in connection therewith for which customary arrangements for
repayment thereof have not been made. All escrow payments have been collected in full
compliance with state and federal law and the provisions of the related Mortgage Note and
Mortgage. As to any Mortgage Loan that is the subject of an escrow, escrow of funds is not
prohibited by applicable law and has been established in an amount sufficient to pay for every
escrowed item that remains unpaid and has been assessed but is not yet due and payable. No
escrow deposits or other charges or payments due under the Mortgage Note have been
capitalized under any Mortgage or the related Mortgage Note. All Mortgage Interest Rate
adjustments have been made in strict compliance with state and federal law and the terms of
the related Mortgage Note. Any interest required to be paid pursuant to state, federal and
local law has been properly paid and credited;
None of the Mortgage Loans had a Loan-To-Value Ratio or a Combined Loan-To- Value
Ratio greater than that set forth in the Underwriting Guidelines;
Except for Mortgage Loans underwritten in accordance with the Lender Paid Mortgage
Insurance Policy Program, if a Mortgage Loan has an LTV greater than 80%, the excess of
the principal balance of the Mortgage Loan over 75% of the Appraised Value is and will be
insured as to payment defaults by a Primary Mortgage Insurance Policy issued by a Qualified
Insurer. All provisions of such Primary Mortgage Insurance Policy have been and are being
complied with, such policy is in full force and effect, and all premiums due thereunder have
been paid. No action, inaction, or event has occurred and no state of facts exists that has, or
will result in the exclusion from, denial of, or defense to coverage under any Primary
Mortgage Insurance Policy (including, without limitation, any exclusions, denials or defenses
which would limit or reduce the availability of the timely payment of the full amount of the
loss otherwise due thereunder to the insured) whether arising out of actions, representations,
errors, omissions, negligence, or fraud of the Seller, or for any other reason under such
coverage. Any Mortgage Loan subject to a Primary Mortgage Insurance Policy obligates the
Mortgagor thereunder to maintain the Primary Mortgage; Insurance Policy and to pay all
premiums and charges in connection therewith. The Mortgage Interest Rate for the Mortgage
Loan as set forth on the related Mortgage Loan Schedule is net of any such Primary Mortgage
Insurance premium.
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;
Except with respect to Mortgage Loans secured by an interest in a leasehold estate, the
Mortgaged Property is located in the state identified in the related Mortgage Loan Schedule
and consists of a single parcel of real property with a detached single family residence erected
thereon, or a townhouse, or a two to four family dwelling, or an individual condominium unit
in a condominium project, or an individual unit in a planned unit development or a de
minimis planned unit development; provided, however, that any condominium unit or
planned unit development shall conform with requirements acceptable to FNMA or FHLMC,
or the Underwriting Guidelines, regarding such dwellings, or is located in a condominium or
planned unit development project which has received project approval from FNMA or
FHLMC. No residence or dwelling is a single parcel of real property with a cooperative
housing corporation, a mobile home or a manufactured dwelling thereon. As of the date of
origination, no portion of the Mortgaged Property was used for commercial purposes, and
since the date of origination,, to the best of the Seller's knowledge, no portion of the
Mortgaged Property is used for commercial purposes;
ag. As of the date of origination of the Mortgage Loan, the Mortgaged Property was lawfully
occupied under applicable law, and all inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of the Mortgaged Property and, with
respect to the use and occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained from the
appropriate authorities;
ah. There is no pending action or proceeding directly involving the Mortgaged Property in which
compliance with any environmental law, rule or regulation is an issue; to the best of Seller's
knowledge, there is no violation of any environmental law, rule or regulation with respect to
the Mortgaged Property; and nothing further remains to be done to satisfy in full, all
requirements of each such law, rule or regulation constituting a prerequisite to use and
enjoyment of said property;
ai. 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;
aj. Except as otherwise permitted in the Underwriting Guidelines with respect to "One-Time
Close" products, no Mortgage Loan was made in connection with the construction or
rehabilitation of a Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged
Property;
ak. The 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. The documents,
instruments and agreements submitted for loan underwriting were not falsified and contain no
untrue statement of material fact or omit to state a material fact required to be stated therein
or necessary to make the information and statements therein not misleading. Principal
payments on the Mortgage Loan commenced no more than sixty days after funds were
disbursed in connection with the Mortgage Loan;
al. Except as otherwise disclosed on the Mortgage Loan Schedule, none of the Mortgaged
Properties is subject to a ground lease. With respect to any ground lease to which a
Mortgaged Property may be subject such ground lease satisfies the requirements of the
FNMA or FHLMC Guides.;
am. The Mortgage Loan is a "qualified mortgage" within the meaning of Section $60G(a)(3) of
the Code (without regard to Treasury Regulations 1.$60G 2(f) or any similar rule that
provides that a defective obligation is a qualified mortgage for a temporary period);
an. With respect to adjustable rate Mortgage Loans, the Mortgage Loan is not a Convertible
Mortgage Loan unless otherwise indicated on and in conformity with the related Mortgage
Loan Schedule.
41. Repurchase; Substitution.
It is understood and agreed that the representations, warranties and covenants set forth in Sections
2.05, 3.01 and 3.02 shall survive the sale of. the Mortgage Loans and delivery of the Mortgage Loan
Documents to the Purchaser, or its designee, and shall inure to the benefit of the Purchaser,
notwithstanding any restrictive or qualified endorsement on any Mortgage Note or Assignment or the
examination, or lack of examination, of any Mortgage File. Upon discovery by either the Seller or the
Purchaser of a breach of any of the foregoing representations mid warranties and/or covenants that
materially and adversely affects the value of the Mortgage Loans or the interest of the Purchaser in
any Mortgage Loan, the party discovering such breach shall give prompt written notice to the other.
The Seller shall have a period of thirty (30) days from the earlier of its discovery or its receipt of
notice of any such breach within which to correct or cure such breach- The Seller hereby covenants
and agrees that if any such breach is not corrected or cured within such thirty (30) day period, the
Seller shall, at the Purchaser's option and not later than sixty (60) days of its discovery or its receipt of
notice of such breach, repurchase such Mortgage Loan at the Repurchase Price or, with the
Purchaser's prior consent, substitute a Mortgage Loan as provided below. In the event that any such
breach shall involve any representation or warranty set forth in Section 3.01, and such breach is not
cured within thirty (30) days of the earlier of either discovery by or notice to the Seller of such breach,
all Mortgage Loans shall, at the option of the Purchaser, be repurchased by the Seller at the
Repurchase Price. Any such repurchase shall be accomplished by wire transfer into an account
designated in writing by the Purchaser.
Any substitute Mortgage Loan shall (a) have a principal balance at the time of substitution not in
excess of the principal balance of the removed Mortgage Loan, (b) have a Mortgage Interest Rate not
less than, and not more than one percentage point greater than, the Mortgage Interest Rate of the
removed Mortgage Loan, (c) have a remaining term to stated maturity not later than, and not more
than one year less than, the remaining term to stated maturity of the removed Mortgage Loan, (d) be,
in the reasonable determination of the Purchaser, of the same type, quality and character (including
location of the Mortgaged Property) as the removed Mortgage Loan as if the breach had not occurred,
(e) have a Loan-to-Value Ratio, or Combined Loan-to-Value Ratio, at origination no greater than that
of the removed Mortgage Loan and (f) be, in the reasonable determination of the Purchaser, in
material compliance with the representations and warranties contained in Section 3.02 as of the date
of substitution.
The Seller shall amend the applicable Mortgage Loan Schedule to reflect the withdrawal of the
removed Mortgage Loan from this Agreement and the substitution of such substitute Mortgage Loan
therefor. Upon such amendment, the Purchaser shall review the Mortgage File delivered to it relating
to the substitute Mortgage Loan. In the event of such a substitution, accrued interest on the substitute
Mortgage Loan for the month in which the substitution occurs and any principal prepayments made
thereon during such month shall be the property of the Purchaser and accrued interest for such month
on the Mortgage Loan for which the substitution is made and any principal prepayments made thereon
during such month shall be the property of the Seller. The principal payment on a substitute Mortgage
Loan due on the Due Date in the month of substitution shall be the property of the Seller; and the
principal payment on the Mortgage Loan for which the substitution is made due on such date shall be
the property of the Purchaser.
It is understood and agreed that the obligations of the Seller set forth in Section 2.05 and this Section
3.03 respectively, to cure, repurchase or substitute for a defective Mortgage Loan, and to indemnify
Purchaser pursuant to Section 4.01, constitute the sole remedies of the Purchaser respecting a breach
of the aforementioned representations, warranties and covenants. If the Seller fails to cure, repurchase
or substitute for a defective Mortgage Loan in accordance with this Section 3.03, or to indemnify
Purchaser pursuant to Section 4.01, that failure shall be an event of default and the Purchaser shall he
entitled to pursue all remedies available to it under law and in equity. No provision of this paragraph
shall affect the rights of the Purchaser to terminate this Agreement for cause, as set forth in Section
5.15.
42. Repurchase of Convertible Mortgage Loans.
In the event the Mortgagor under any Convertible Mortgage Loan elects to convert said Mortgage
Note to a fixed interest rate Mortgage Note, as provided in said Mortgage Note, then the Seller shall,
prior to the effective date of said conversion, repurchase such Convertible Mortgage Loan from the
Purchaser promptly.
43. Repurchase of Mortgage Loans With Early Payment Defaults.
If the related Mortgagor is thirty (30) days or more delinquent with respect to the Mortgage Loan's
Monthly Payment before the expiration of the three (3) month period immediately following the
applicable Closing Date, the Seller shall, upon the Purchaser's notice, promptly repurchase such
Mortgage Loan from the Purchaser in at the Repurchase Price.
44. Purchase Price Protection.
With respect to any Mortgage Loan that prepays in full during the three (3) month period from and after the
related Closing Date, the Seller shall reimburse the Purchaser the amount (if any) of the Purchase Price
Premium paid by the Purchaser to the Seller, within thirty (30) days of such payoff.
II.
THE SELLER
1. Indemnification.
The Seller agrees to indemnify the Purchaser and its affiliates and hold them harmless against any and
all claims, losses, damages, penalties, fines, forfeitures, legal fees and related costs, judgments, arid
any other costs, fees and expenses that the Purchaser or any of its affiliates may sustain in any way
related to the breach of a representation, warranty or covenant set forth in Sections 2.05, 3.01 or 3.02
of this Agreement. The Seller shall immediately notify the Purchaser ii' a claim is made by a third
party with respect to this Agreement or the Mortgage Loans, assume (with the consent of the
Purchaser) the defense of any such claim and pay all expenses in connection therewith, including
counsel fees, and promptly pay, discharge and satisfy any judgment or decree which may be entered
against it or the Purchaser in respect of such claim. The Seller shall follow any written instructions
received from the Purchaser in connection with such claim, The provisions of this Section 4_01 shall
survive termination of this Agreement.
2. Merger or Consolidation of the Seller.
The Seller will keep in full effect its existence, rights and franchises as a corporation under the laws
of tile state of its incorporation except as permitted herein, and will obtain and preserve its
qualification to do business as a foreign corporation in each jurisdiction in which such qualification is
or shall be necessary to protect the validity and enforceability of this Agreement, or any of the
Mortgage Loans and to perform its duties under this Agreement.
Any Person into which the Seller may be merged or consolidated, or any corporation resulting from
any merger, conversion or consolidation to which the Seller shall be a party, or any Person succeeding
to the business of the Seller whether or not related to loan servicing, shall be the successor of the
Seller hereunder without the execution or filing of any paper or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided, however, that the
successor or surviving Person shall be an institution (i) having a GAAP net worth of not less than
$25,000,000, (ii) the deposits of which are insured by the FDIC, SAIF and/or BIF, or which is a
HUD-approved mortgagee whose primary business is in origination and servicing of first and second
lien mortgage loans, and (iii) who is a FNMA or FHLMC approved seller/servicer in good standing.
3. Limitation on Liability of the Seller and Others.
Neither the Seller nor any of the officers, employees or agents of the Seller shall be under any liability to the
Purchaser for any action taken or for refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment made in good faith; provided, however, that this provision shall not
protect the Seller or any such person against any breach of warranties or representations made herein, or
failure to perform its obligations in strict compliance with any standard of care set forth in this Agreement, or
any liability which would otherwise be imposed by reason of negligence, bad faith or willful misconduct, or
any breach of the terms and conditions of this Agreement.
IV.
MISCELLANEOUS PROVISIONS
1. Amendment.
This Agreement may be amended from time to time by the Seller and the Purchaser by written
agreement signed by the Seller and the Purchaser.
2. Recordation of Agreement.
To the extent permitted by applicable law, this Agreement is subject to recordation in all appropriate
public offices for real property records in all the counties or other comparable jurisdictions in which
any or all 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 Seller at the Seller's expense on
direction of the Purchaser accompanied by an opinion of counsel to the effect that such recordation
materially and beneficially affects the interest of the Purchaser or is necessary for the administration
or servicing of the Mortgage Loans.
3. Governing Law.
This Agreement shall be governed by and construed in accordance with internal laws of the
Commonwealth of Virginia without regard to conflict of laws principles. The parties hereby agree to
submit to the exclusive jurisdiction of the courts of the Commonwealth of Virginia and/or the United
States Federal Court for the District encompassing Virginia. The parties further agree not to raise any
objection to venue of a court located in the Commonwealth of Virginia.
4. Notices.
Any demands, notices or other communications; permitted or required hereunder shall be in writing
and shall be deemed conclusively to have been given if personally delivered at or mailed by registered
mail, postage prepaid, and return receipt requested or certified mail, return receipt requested, or
transmitted by telex, telegraph or telecopier and confirmed by a similar mailed writing, as follows:
(i) if to the Seller:
(ii) if to the Purchaser:
E*TRADE Bank
671 North Glebe Road
Arlington, VA 22203
Attention: Vice President, Operations
or such other address as may hereafter be furnished to the other party by like notice. Any such
demand, notice or communication hereunder shall be deemed to have been received on the date
delivered to or received at the premises of the addressee (as evidenced, in the case of registered or
certified mail, by the date noted on the return receipt).
5. Severability of Provisions.
Any part, provision, representation or warranty of this Agreement which is prohibited or which is held
to be void or unenforceable shall be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof. Any part, provision, representation or warranty
of this Agreement which is prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall be ineffective, as to such jurisdiction, to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the
parties hereto waive any provision of lava which prohibits or renders void or unenforceable any
provision hereof. If the invalidity of any part, provision, representation or warranty of this Agreement
shall deprive any party of the economic benefit intended to be conferred by this Agreement, the
parties shall negotiate, in good faith, to develop a structure the economic effect of which is nearly as
possible the same as the economic effect of this Agreement without regard to such invalidity.
6. Exhibits.
The exhibits to this Agreement are hereby incorporated and made a part hereof and are an integral
part of this Agreement.
7. General Interpretive Principles.
For purposes of this Agreement, except as otherwise expressly provided or unless the context
otherwise requires;
(i) the terms defined in this Agreement have the meanings assigned to them in thus Agreement and
include the plural as well as the singular, and the use of any gender herein shall be deemed to include
the other gender;
(ii) accounting terms not otherwise defined herein have the meanings assigned to them in accordance
with generally accepted accounting principles;
(iii) references herein to "Articles," "Sections," "Subsections," "Paragraphs," and other subdivisions
without reference to a document are to designated Articles, Sections, Subsections, Paragraphs and
other subdivisions of this Agreement;
(iv) a reference to a Subsection without further reference to a Section is a reference to such
Subsection as contained in the same Section in which the reference appears, and this rule shall also
apply to Paragraphs and other subdivisions;
(v) the words "herein," "hereof," "hereunder," and other words of similar import refer to this
Agreement as a whole and not to any particular provision;
(vi) the term "include" or "including" shall mean without limitation by reason of enumeration; and
(vii) headings of the Articles and Sections in this Agreement are for reference purposes only and shall
not be deemed to have any substantive effect.
8. Reproduction of Documents.
This Agreement and all documents relating thereto, including, without limitation, (i) consents,
waivers and modifications which may hereafter be executed, (ii) documents received by any party at
the closing, and (iii) financial statements, certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm, micro- card, miniature
photographic or other similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative proceeding, whether or
not the original is in existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further reproduction of such
reproduction shall likewise be admissible in evidence
9. Recordation of Assignments of Mortgage.
To the extent permitted by applicable law, each of the Assignments of Mortgage is subject to
recordation in all appropriate public offices for real property records in all the counties or other
comparable jurisdictions in which any or all of the Mortgaged Properties are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be effected by the Seller at the
Seller's expense in the event recordation is either necessary under applicable law or requested by the
Purchaser, at its sole option.
10. Assignment
The Purchaser shall have the right, without the consent of the Seller hereof, to assign, in whole or in
part, its interest under this Agreement with respect to some or all of the Mortgage Loans, and
designate any person to exercise any rights of- the Purchaser hereunder, and the assignee or designee
shall accede to the rights and obligations hereunder of the Purchaser with respect to such Mortgage
Loans; provided that subsequent to any such assignment the Purchaser shall retain its rights to
indemnification and repurchase hereunder. All references to the Purchaser in this Agreement shall be
deemed to include its assignee or designee.
11. No Partnership.
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 Purchaser.
12. Counterparts; Successors and Assigns.
This Agreement 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 agreement. Seller shall not assign this
Agreement without the prior written consent of the purchaser, which consent shall not be
unreasonably withheld. Subject to the foregoing, this Agreement shall inure to the benefit of and be
binding upon the Seller and the Purchaser and their respective successors and assigns.
13. Entire Agreement.
This Agreement sets forth the entire understanding between the parties hereto and shall be binding
upon all successors of both parties.
14. No Solicitation.
From and after each Closing Date, the Seller agrees that it will not take any action or permit or cause
any action to be taken by the Seller, any of its agents or affiliates, or by any independent contractors
on the Seller's behalf, to personally, by telephone or mail, solicit the borrower or obligor under any
Mortgage Loan to refinance the Mortgage Loan, in whole or in part, without the prior written consent
of the Purchaser. It is understood and agreed that all tights and benefits relating to the solicitation of
any Mortgagors to refinance any Mortgage Loans and the attendant rights, title and interest in and to
the list of such Mortgagors and data relating to their Mortgages (including insurance renewal dates)
shall be transferred to the Purchaser pursuant hereto on the applicable Closing Date and the Seller
shall take no action to undermine these rights and benefits. Notwithstanding the foregoing, it is
understood and agreed that promotions undertaken by or on behalf of the Seller or any affiliate of the
Seller which are directed to the general public at large, or segments thereof, provided that no segment
shall consist primarily of the Mortgage Loans, including, without limitation, mass mailing,
newspaper, radio and television advertisements shall not constitute solicitation under this Section
5.14. The Seller shall use its best efforts to prevent the sale of the name of any Mortgagor to any
Person who is not an affiliate of the Seller.
15. Termination.
This Agreement may be terminated by either party upon thirty (30) days prior written notice.
16. Cooperation of Seller with a Reconstitution.
The Seller and the Purchaser agree that with respect to some or all of the Mortgage Loans, on or after the Closing
Date, on one or more dates at the Purchaser's sole option, the Purchaser may effect a sale of some or all of the
Mortgage Loans then subject to this Agreement, without recourse, to:
(a) one or more third party purchasers in ore or more in whole loan transfers (each, a "Whole Loan Transfer"); or
(b) one or more trusts or other entities to be formed as part of one or more pass-through transfers (each, a "PassThrough Transfer").
With respect to each Whole Loan Transfer and each Pass-Through Transfer entered into by the Purchaser, the Seller
agrees (1) to cooperate fully with the Purchaser, any prospective purchaser, any master servicer or trustee and/or any
issuer or other participant in such whole loan transfer or pass-through transfer with respect to all reasonable requests
for due diligence; and (2) to restate in an assignment or similar agreement requested by the Purchaser the
representations and warranties set forth in Section 3.01 of this Agreement as of the Reconstitution Date; provided that
with respect to those representations and warranties that relate to delinquency or condition of the Mortgaged Property,
the Seller shall represent and warrant as to the actual status thereof as of the Reconstitution Date. The Seller shall
provide to the Purchaser and/or any other participants in such Reconstitution: (i) any and all information and
appropriate verification of information which may be reasonably available to the Seller, whether through letters of its
auditors, opinions of counsel or otherwise, as the Purchaser or any such other participant shall reasonably request; and
(ii) such additional representations, warranties, covenants, opinions of counsel, letters from auditors, and certificates of
public officials or officers of the Seller as are reasonably agreed upon by the Seller and the Purchaser or any such
other participant. The Seller shall indemnify the Purchaser and Reconstitution Parties for the accuracy and
completeness of all such information provided by or on behalf of the Seller. The Purchaser shall be responsible for the
costs relating to the delivery of such information.
In the event the Seller has agreed to and does hold record title to the Mortgages prior to the Reconstitution Date, the
Seller shall prepare an assignment of mortgage in blank to the prospective purchaser, issuer or trustee, as applicable,
from the Seller, acceptable to the prospective purchaser, issuer or trustee; as applicable, for each Mortgage Loan that is
part of the whole loan or pass-through transfer and shall pay all preparation and initial recording costs associated
therewith. In connection with the whole loan or pass-through transfer, and at the expense of Purchaser, the Seller shall
execute each assignment of mortgage, track such assignments of mortgage to ensure they have been recorded and
deliver them as required by the prospective purchaser or trustee, as applicable, upon the Seller's receipt thereof.
Additionally, at the expense of Purchaser, the Seller shall prepare and execute, at the direction of the Purchaser, any
note endorsement in connection with any and all seller/servicer agreements.
All Mortgage Loans not sold or transferred pursuant to a whole loan or pass- through transfer shall remain subject to
this Agreement and, if this Agreement shall remain in effect with respect to the related Mortgage Loans, shall continue
to be serviced in accordance with the terms of this Agreement and with respect thereto this Agreement shall remain in
full force and effect.
[SIGNATURES COMMENCE ON THE FOLLOWING PAGE]
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their names to be signed hereto by their
respective officers thereunto duly authorized as of rile day and year first above written.
E*TRADE BANK, Purchaser
By: /s/ Matthew Geary
Matthew Geary
Director
E-LOAN, INC., Seller
By: /s/ Steven M. Majerus
Steven M. Majerus
V.P. Secondary Marketing
EXHIBIT A
MORTGAGE LOAN SCHEDULE
E-LOAN Jumbo Mixed Bulk 30 year & 15 year Loans
Loan# Int:Rate LoanAmt LTV CLTV FICO Purpose Prod Type Occupancy IMPOUNDS State 1st Payment Due ZipCd Origin PROP UNITS Doc Type MI Coverage DTI
Property Ty
Loan level detailed determined at time of commitment.
EXHIBIT B
CONTENTS OF MORTGAGE FILE
With respect to each Mortgage Loan, the Mortgage File shall include each of the following items:
1. The original Mortgage Note endorsed "Pay to the order of , without recourse." and signed in the name of the Seller
by an authorized officer, with all intervening endorsements showing, a complete chain of title from the. originator to
the Seller, and all riders thereto. If the Mortgage Loan was acquired by the Seller in a merger, the endorsement must
be by "[Seller], successor by merger to the [name of predecessor]". 1f the Mortgage Loan was acquired or originated
by the Seller while doing business tinder another name, the endorsement must be by "[Seller] formerly known as
[previous name]".
2. The original Mortgage (including all riders thereto) with evidence of recording thereon, or a copy thereof certified
by the public recording office in which such mortgage has been recorded or, if the original Mortgage has not been
returned from the applicable public recording office, a true certified copy, certified by the Seller, of the original
Mortgage together with a certificate of the Seller certifying that the original Mortgage has been delivered for recording
in the appropriate public recording office of the jurisdiction in which the Mortgaged Property is located.
3. The original or certified to be true copy or if in electronic form on the related Mortgage Loan Schedule, the
certificate number of the related policy, certified by the Seller, of the Primary Mortgage Insurance Or Lender Paid
Mortgage Insurance Policy, if required.
4. The original Assignment prepared in blank, or in accordance with Purchaser's instructions, which assignment shall,
but for any blanks requested by Purchaser, be in form and substance acceptable for recording, or a copy certified by
Seller as a true and correct copy of the original Assignment which has been sent for recordation- If the Mortgage Loan
was acquired or originated by the Seller while doing business under another name, the Assignment must be by
"[Seller] formerly known as [previous name]".
S. The original policy of title insurance, including riders and endorsements thereto, or if the policy has not yet been
issued, a written commitment or interim binder or preliminary report of title issued by the title insurance or escrow
company.
6. Originals of all recorded intervening Assignments, or copies thereof, certified by the public recording office in
which such Assignments have been recorded showing a complete chain of title .from the originator to the Seller, with
evidence of recording thereon, or a copy thereof certified by the public recording office in which such Assignment has
been recorded or, if the original Assignment has not been returned from the applicable public recording office, a true
certified copy, certified by the Seller of the original Assignment together with a certificate of the Seller certifying that
the original Assignment has been delivered for recording in the appropriate public recording office of the jurisdiction
in which the Mortgaged Property is located.
7. Originals, or copies thereof certified by the public recording office in which such documents have been recorded, of
each assumption, extension, modification, written assurance or substitution agreements, if applicable, or if the original
of such document has not been returned from the applicable public recording office, a true certified copy, certified by
the Seller, of such original document together with certificate of Seller certifying the original of such document has
been delivered for recording in the appropriate recording office of the jurisdiction in which the Mortgage Property is
located.
8. If the Mortgage Note or Mortgage or any other material document or instrument relating to the Mortgage Loan has
been signed by a person on behalf of the Mortgagor, the original power of attorney or other instrument that authorized
and empowered such person to sign bearing evidence that such instrument his been recorded, if so required in the
appropriate jurisdiction where the Mortgaged Property is located (or, in lieu thereof, a duplicate or conformed copy of
such instrument, together with a certificate of receipt from the recording office, certifying that such copy represents a
true and complete copy of the original and that such original has been or is currently submitted to be recorded in the
appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located), or if the
original power of attorney or other such instrument has been delivered for recording in the appropriate public
recording office of the jurisdiction in which the Mortgaged Property is located.
9. Mortgage Loan closing statement (Form HUD-1) and any other truth-in- lending or real estate settlement procedure
forms required by law
10. Residential loan application.
11. Uniform underwriter and transmittal summary (FNMA Form 1008) or reasonable equivalent.
12. Credit report on the mortgagor.
13. Business credit report, if applicable.
14. Residential appraisal report and attachments thereto.
15. The original of any guarantee executed in connection with the Mortgage Note.
16. Verification of employment and income except for Mortgage Loans originated under a Limited Documentation
Program, a)1 in accordance with Seller's underwriting guidelines.
17. Verification of acceptable evidence of source and amount of down payment, in accordance with Seller's
underwriting guidelines.
18. Photograph of the Mortgaged Property (may be part of appraisal).
19. Survey of the Mortgaged Property, if any.
20. Sales contract, if applicable.
21. If available, termite report, structural engineer's report, water potability and septic certification.
22. Any original security agreement, chattel mortgage or equivalent executed in connection with the Mortgage.
23. With respect to each adjustable rate Mortgage Loan, a statement to the effect that the Mortgagor bass received all
disclosure materials required by applicable law with respect to the making of adjustable rate Mortgage Loans.
EXHIBIT C
UNDERWRITING GUIDELINES AS OF INITIAL CLOSING DATE
[ ** ]
MORTGAGE LOAN PURCHASE and SALE AGREEMENT
Between
E*TRADE BANK, as Purchaser
And
E-LOAN, as Seller
Dated as of October 1, 2001
ARTICLE I DEFINITIONS *
Section 1.01 Defined Terms. *
ARTICLE II PURCHASE OF MORTGAGE LOANS; RECORD TITLE AND POSSESSION OF MORTGAGE
FILES; BOOKS AND RECORDS; DELIVERY OF MORTGAGE LOAN DOCUMENTS *
Section 2.01 Agreement to Purchase. *
Section 2.02 Purchase Price. *
Section 2.03 Record Title and Possession of Mortgage Files *
Section 2.04 Books and Records. *
Section 2.05 Transfer of Mortgage Loans. *
Section 2.06 Examination of Mortgage Files; Delivery of Mortgage Loan Documents. *
Section 2.07 Closing. *
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER; REPURCHASE; REVIEW OF
MORTGAGE LOANS *
Section 3.01 Representations and Warranties of the Seller. *
Section 3.02 Representations and Warranties as to Individual Mortgage Loans. *
Section 3.03 Repurchase; Substitution. *
Section 3.04 Repurchase of Convertible Mortgage Loans. *
Section 3.05 Repurchase of Mortgage Loans With Early Payment Defaults. *
Section 3.06 Purchase Price Protection. *
ARTICLE IV THE SELLER *
Section 4.01 Indemnification. *
Section 4.02 Merger or Consolidation of the Seller. *
Section 4.03 Limitation on Liability of the Seller and Others. *
ARTICLE V MISCELLANEOUS PROVISIONS *
Section 5.01 Amendment. *
Section 5.02 Recordation of Agreement. *
Section 5.03 Governing Law. *
Section 5.04 Notices. *
Section 5.05 Severability of Provisions. *
Section 5.06 Exhibits. *
Section 5.07 General Interpretive Principles. *
Section 5.08 Reproduction of Documents. *
Section 5.09 Recordation of Assignments of Mortgage. *
Section 5.10 Assignment *
Section 5.11 No Partnership. *
Section 5.12 Counterparts; Successors and Assigns. *
Section 5.13 Entire Agreement. *
Section 5.14 No Solicitation. *
Section 5.15 Termination. *
Section 5.16 Cooperation of Seller with a Reconstitution. *
EXHIBIT A MORTGAGE LOAN SCHEDULE *
EXHIBIT B CONTENTS OF MORTGAGE FILE *
EXHIBIT C UNDERWRITING GUIDELINES AS OF INITIAL CLOSING DATE *
Exhibit 10.147
AMENDMENT TO AUTO LOAN PURCHASE AND SALE AGREEMENT
THIS SECOND AMENDMENT ("Amendment") to the AUTO LOAN PURCHASE AND SALE AGREEMENT
("Agreement") dated and effective June 5, 2000, by and between E- LOAN, Inc. ("E-LOAN") and AmeriCredit
Financial Services, Inc. ("AmeriCredit") is entered into and effective this 17th day of October, 2001.
FOR GOOD AND VALUABLE CONSIDERATION the receipt and sufficiency of which is expressly acknowledged
by the parties hereto, E-LOAN and AmeriCredit agree as fellows:
1. With respect to the loan documentation and verification requirements set out in Exhibit D, E-Loan is no longer
required to obtain verbal verification of proof of insurance for any AmeriCredit booked loan. A current insurance card
is required.
2. With respect to the loan documentation and verification requirements set out in Exhibit D, AmeriCredit requires that
three references be provided for loans approved by AmeriCredit at all Verification Levels.
3. With respect to the loan documentation and verification requirements set out in Exhibit D, E-Loan will request a
copy of the borrower's and coborrower's driver's license, but the driver's license will not be mandatory for funding.
4. With respect to the loan documentation and verification requirements set out in Exhibit D, AmeriCredit will no
longer require dealer and customer signatures on the lien perfection documents. A title application or front and back of
the executed title is acceptable. Borrower and lienholder information must be verified.
5. Effective March 12, 2001, the effective rate range is [ ** ]% depending upon AmeriCredit custom score and state
regulations. Effective April 26, 2001, the effective rate range is [ ** ]% depending upon AmeriCredit custom score
and state regulations.
6. The fifth sentence of Paragraph 1.5 of the Agreement is amended to read as follows:
"Until the Transfer Date, E-LOAN shall own the application and all documentation relating to a prospective Loan to
be sold. E-Loan acknowledges and agrees that Correspondent may utilize proprietary information of E-Loan with
respect to applications that are declined or approved and not funded, solely for internal credit decisioning model
development purposes; provided, however, that Correspondent shall comply in all respects with all applicable federal
and state privacy requirements, including without limitation the requirements of the Gramm-Leach-Bliley Act, relating
to consumer or customer information."
7. Section 7.2 of the Agreement is deleted and replaced with the following:
7.2 Customer Privacy and Confidentiality of Information.
(a) Each party and their respective affiliates, directors, officers, employees, authorized representatives, agents and
advisors (including without limitation, attorneys, accountants, consultants, bankers and financial advisors) shall keep
confidential all information concerning the other party's proprietary business procedures, products, services,
operations, marketing materials, fees, policies or plans and all Nonpublic Personal Information of the other party that
is received or obtained during the negotiation or performance of the Agreement, whether such information is oral or
written, and whether or not labeled as confidential by such party (collectively "Confidential Information"). "Nonpublic
Personal Information" shall include all personally identifiable financial information and any list, description or other
grouping of consumers, and publicly available information pertaining to them, that is derived using any personally
identifiable financial information that is not publicly available, and shall further include all "nonpublic personal
information" as defined by federal regulations implementing the Gramm-Leach-Bliley Act, as amended from time to
time. "Personally identifiable financial information" means any information a consumer provides to a party in order to
obtain a financial product or service, any information a party otherwise obtains about a consumer in connection with
providing a financial product or service to that consumer, and any information about a consumer resulting from any
transaction involving a financial product or service between a party and a consumer. Personally identifiable
information may include, without limitation, a consumer's first and last name, physical address, zip code, email
address, phone number, social security number, birth date, and any other information that itself identifies or when tied
to the above information, may identify a consumer.
(b) Each party shall take reasonable steps, at least substantially equivalent to the steps it takes to protect its own
proprietary information, during the term of this Agreement and for a period of three years following termination of this
Agreement, to prevent the use, duplication or disclosure of Confidential Information, other than, by or to its employees
or agents who are directly involved in negotiating or performing this Agreement and who are apprised of their
obligations under this Section and directed by the receiving party to treat such information confidentially, or except as
required by law or by a supervising regulatory agency of a receiving party (with information as to the amount of, and
manner of calculating the Purchase Price redacted where permitted). Neither party shall disclose, share, rent, sell or
transfer to any third party any Confidential Information.
(c) Each party's Privacy Notices and Privacy Policies are consistent with the Federal Trade Commission's procedures,
rules and regulations, as applicable and as amended from time to time, and comply with acceptable trade practices.
(d) Upon the request of the disclosing party, the other party shall promptly return all Confidential Information received
in connection with the transaction, and shall promptly destroy such materials containing such information (and any
copies, extracts, and summaries thereof) and shall further provide the other party with written confirmation of such
return or destruction upon request; provided, however, Correspondent shall have no duty to destroy or return any data
gathered pursuant to Paragraph 1.5 of the Agreement, as amended, in the event a party discovers that Confidential
Information been used in an unauthorized manner or disclosed in violation of this Section, the party discovering the
unauthorized use or disclosure shall immediately notify the other party of such event, and the disclosing party shall
indemnify and hold the other party harmless from all claims, damage, liability, costs and expenses (including court
casts and reasonable attorneys' fees) arising or resulting from the unauthorized use or disclosure. In addition, the nondisclosing party shall be entitled to all other remedies available at law or equity, including injunctive relief.
8. Section 1.5 and Exhibit E of the Agreement provide for payment of an Origination or Referral Pee ("fee") to ELOAN by AmeriCredit per booked loan in an amount based on loan closure rate (see schedule below).
Closure Rate
Referral Fee
[ ** ]
[ ** ]
[ ** ]
[ ** ]
[ ** ]
[ ** ]
[ ** ]
[ ** ]
[ ** ]
[ ** ]
Beginning July 1, 2001, AmeriCredit agrees to pay E-LOAN a flat fee of $[ ** ]per booked loan with no additional
origination or referral fee payment. This fee schedule will continue on a monthly basis until the parties mutually spree
that these flat fee payments shall cease and a new mutually agreed upon pricing schedule shall take effect.
9. Beginning September 1, 2001, for the loans AmeriCredit purchases, AmeriCredit will take responsibility for
certificate of title follow up and lien perfection except for those loans where the certificate of title has been issued
reflecting an incorrect lienholder or the title requires a correction that must be facilitated by E-LOAN. The parties will
mutually agree on the rights and responsibilities of all title follow up pursuant to a Title Follow Up Transition Plan, of
which the terms and conditions are incorporated herein.
The Agreement is hereby modified and amended to incorporate the terms and conditions set forth herein, which shall
supersede and prevail over any conflicting terms of the Agreement. Except for the changes above, all of the terms and
conditions of the Agreement remain in full force and effect.
AMERICREDIT FINANCIAL SERVICES,
INC.
By:
Authorized Signature
Name:
Title:
E-LOAN, INC.
By:
Name:
Title:
Exhibit 10.148
October 23, 2001
Mr. Steve Majerus
Vice President, Secondary Marketing
E-Loan, Inc.
5875 Arnold Road
SS# [ ** ] / CCID# [ ** ]
Dear Steve:
GMAC-Residential Funding ("GMAC-RFC") is pleased to offer E-Loan, Inc. a Master Commitment under which
GMAC-RFC will commit to purchase certain residential mortgage loans to be delivered in accordance with the
provisions of this Master Commitment and subject to the terms and conditions set forth in the Client Contract between
E-Loan, Inc. and GMAC-RFC dated as of October 22, 2001, and the GMAC-RFC Client Guide as the same may be
supplemented, amended or modified from time to time.
The terms and conditions of this Master Commitment are as follows:
Commitment Amount:
$120,000,000
October 23, 2001 to October 23, 2002
Term:
Product, Program and
Underwriting Variances:
All delivery commitments taken under this Master Commitment
must be ordered on or before October 23, 2002.
The following Product, Program and Underwriting Variances will
apply throughout the term of this Master Commitment.
HOME EQUITY PROGRAM GOAL LINE (line of credit)
:
E-Loan, Inc. will sell to GMAC-RFC a minimum of [ ** ]of Goal
Line products (line of credit) that meet the eligibility requirements
set forth in the Client Guide.
HOME EQUITY PROGRAM GOAL LOAN (closed-end fixedrate loan)
:
E-Loan, Inc. will sell to GMAC-RFC a minimum of [ ** ]of Goal
Loan products (closed-end, fixed-rate loan) that meet the eligibility
requirements set forth in the Client Guide.
125 LOAN PROGRAM
:
E-Loan will sell to GMAC-RFC a minimum of [ ** ]of 125 Loan
products that meet the eligibility requirements set forth in the
Client Guide.
CREDIT GAP and ALTERNET LOAN PROGRAM
:
E-Loan, Inc. will sell to GMAC-RFC a minimum of [ ** ]of a
combination of Credit Gap and AlterNet loan products that meet
the guidelines set forth in the Client Guide.
ASSETWISE USAGE and PERFORMANCE AGREEMENT
:
E-Loan, Inc. agrees to deliver 80 percent of this Master
Commitment to GMAC-RFC utilizing Assetwise, GMAC-RFC's
proprietary Decision Engine.
To significantly enhance and streamline E-Loan, Inc.'s
underwriting approval process, it is highly recommended that ELoan submit its loan deliveries to GMAC-RFC via Assetwise. An
Assetwise Usage and Performance Goal of 80% should be targeted
for optimum results, with actual performance evaluated by GMACRFC periodically. Assetwise Usage will be determined by the
Assetwise Certificate, also known as the Assetwise Findings
Report. If Assetwise Usage does not meet the recommended level,
additional training and guidance will be provided to help E-Loan,
Inc. reach the 80% goal.
Pair-off Fee:
Failure by E-Loan, Inc, to deliver to GMAC-RFC the minimum
loan volume requirements as stated in the "Product, Program, and
Underwriting Variances" section, in fundable form, by October 23,
2002 will result in a pair-off fee due and payable to GMAC-RFC
by E-Loan, Inc. within 10 days of written notification from
GMAC-RFC. Such pair-off fee shall be equal to [ ** ] basis points
on the dollar amounts that fall short of the minimum delivery
requirements in the product categories as stated above.
Future Amendments:
GMAC-RFC and E-Loan, Inc, agree to notify each other as
necessary when issues arise that are not addressed in this Master
Commitment. Any amendments to this commitment letter must be
mutually agreed upon in writing and incorporated into this Master
Commitment.
Termination:
GMAC-RFC may at any time in the exercise of its sole discretion
terminate E- Loan, Inc.'s right to sell loans to GMAC-RFC under
this Master Commitment with 30 days` written notice by GMAC
RFC to E-Loan, Inc. GMAC-RFC may from time to time in the
exercise of its sole discretion modify or supplement any of the
program criteria or requirements effective immediately upon notice
by GMAC-RFC to E-Loan, Inc.
Confidentiality:
GMAC-RFC and E-Loan, Inc. each agree that the specific terms
and provisions of this Commitment is confidential except as
required by law or as may be reasonably necessary to be disclosed
in connection with the sale or securitization of loans sold to
GMAC-RFC by E-Loan, Inc.
Commitment Offer
Expiration Date:
This agreement may be canceled at GMAC-RFC's option if an
executed copy is not received on or before October 26, 2001.
We look forward to our continued relationship with E-Loan, Inc. If the terms of this commitment letter are agreeable
with you, please so indicate by executing both of the enclosed copies, return one original to GMAC-RFC on or before
the date indicated above, and retain the other original for your records.
Sincerely,
Lori Zaloumis
Sales Director
AGREED AND ACCEPTED BY:
E-LOAN, INC.
SIGNATURE:
NAME:
TITLE:
DATE:
Exhibit 10.149
GMAC
Residential Funding
November 1, 2001
Mr. Steve Majerus
Vice President, Secondary Marketing
E-Loan, Inc.
5875 Arnold Road
SS# [ ** ] / CCID# [ ** ]
Dear Steve:
This letter shall serve as the first amendment (the "Commitment Amendment") to the GMAC-Residential Funding
("GMAC-RFC") Master Commitment dated as of October 23, 2001 by and between GMAC-RFC and E-Loan, Inc. All
other terms and conditions of the GMAC-RFC Master Commitment not amended in the Commitment Amendment shall
remain in full force and effect.
The terms and conditions of this Commitment Amendment are as follows:
PRODUCT, PROGRAM and UNDERWRITING VARIANCES
:
HOME SOLUTION PROGRAM
:
(Home Solution)
E-Loan, Inc. may deliver Home Solution first mortgage loans, which
meet the terms of the attached Exhibit A, which is incorporated into
this Commitment. Program criteria for the Home Solution program
are described on the attached Exhibit A. Except to the extent
otherwise expressly provided on the attached Exhibit A, all loans
must comply with the loan eligibility and all other loan requirements
contained in the Client Guide.
FANNIE MAE DESKTOP UNDERWRITER AUTOMATED
UNDERWRITING
:
(Jumbo A, Expanded Criteria)
GMAC-RFC agrees to purchase loans that have been
underwritten by Fannie Mae Desktop Underwriter with
the limitations and requirements set forth in the attached
Exhibit B. GMAC-RFC further agrees that, with respect
to loans sold under the Master Commitment, the credit
underwriting requirements described in Exhibit B
supersede any conflicting requirements in Part Four (4) of
the Client Guide.
FREDDIE MAC LOAN
UNDERWRITING
PROSPECTOR
AUTOMATED
:
(Jumbo A, Expanded Criteria)
GMAC-RFC agrees to purchase loans that have been
underwritten by Freddie Mac Loan Prospector with the
limitations and requirements set forth in the attached
Exhibit C. GMAC-RFC further agrees that, with respect
to loans sold under the Master Commitment, the credit
underwriting requirements described in the attached
Exhibit C supersede any conflicting requirements in Part
Four (4) of the Client Guide.
Future Amendments:
GMAC-RFC and E-Loan, Inc. agree to notify each other when issues
arise that are not addressed in this Commitment Amendment. Any
amendments to this Commitment Amendment must be mutually
agreed upon in writing.
Termination:
terminate E-Loan, Inc. right to sell loans to GMAC-RFC under this
Commitment Amendment with 30 days written notice by GMACRFC to E-Loan, Inc. GMAC-RFC may from time to time in the
exercise of its sole discretion modify or supplement any of the
program criteria or requirements effective immediately upon notice
by GMAC-RFC to E-Loan, Inc.
Confidentiality:
GMAC-RFC and E-Loan, Inc. each agree that the specific tetras and
provisions of this Commitment is confidential except as required by
law or as may be reasonably necessary to be disclosed in connection
with the sale or seeuritization of loans sold to GMAC-RFC by ELoan, Inc.
Commitment Offer Expiration Date:
executed copy is not received on or before November 7, 2001.
We look forward to our continued relationship with E-Loan, Inc. If the terms of this commitment amendment
letter are agreeable with you, please so indicate by executing both of the closed copies, return one original to
GMAC-RFC on or before the date indicated above, and retain the other original for your records.
Sincerely,
Lori Zaloumis
Sales Director
E-LOAN, INC.
SIGNATURE:
NAME:
TITLE:
DATE:
[ ** ]
Exhibit 10.150
GMAC
Residential Funding
November 9, 2001
Mr. Steve Majerus
Vice President, Secondary Marketing E-Loan, Inc.
5875 Arnold Road Dublin, California 94569
SS# [ ** ]ID# [ ** ]
Dear Steve:
This letter shall serve as the second amendment (the "Commitment Amendment") to the GMAC-Residential Funding
("GMAC-RFC") Master Commitment dated as of October 23, 2001 by and between GMAC-RFC and E-Loan, Inc. All
other terms and conditions of the GMAC-RFC Master Commitment not amended in the Commitment Amendment
shall remain in full force and effect.
The terms and conditions of this commitment Amendment are as follows:
PRODUCT, PROGRAM and UNDERWRITING VARIANCES:
LOAN PROSPECTOR (LP) AND DESKTOP UNDERWRITER (DU) REDUCED DOCUMENTATION
PROGRAM:
(Goal Line and Goal Loan Only)
GMAC-RFC will purchase Home Equity products (Goal Line Home Equity Line of Credit and/or Goal Loan Closedend Second Mortgages only) which were originated simultaneously with a first mortgage and meet the eligibility
requirements described in the GMAC-RFC Client Guide and as set forth in the attached Exhibit D.
STATED INCOME TO 90% CLTV:
(Goal Line and Goal Loan)
GMAC-RFC will purchase Home Equity products (Goal Line Home Equity Lines of Credit and/or Goal Loan Closedend Second Mortgages only) which were originated simultaneously with a first mortgage (purchase and rate/term
transactions only) and meet the eligibility requirements described in the GMACRFC Client Guide and as set forth in
the attached Exhibit E.
HIGH RISE CONDOMINIUM PROGRAM:
(Goal Line and Goal Loan)
GMAC-RFC will purchase up to [ ** ]% of total volume delivered in Home Equity Products (Goal line Home Equity
Line of Credit and /or Goal Loan Closed End Second Mortgages only) that meet the eligibility requirements set forth
in the Client Guide and in the attached Exhibit F.
Future Amendments:
GMAC-RFC and E-Loan, Inc. agree to notify each other as
necessary when issues arise that are not addressed in this
Commitment Amendment. Any amendments to this commitment
letter must be mutually agreed upon in writing and incorporated
into this Commitment Amendment.
Termination:
terminate ELoan, Inc.'s right to sell loans to GMAC-RFC under
this Commitment Amendment with 30 days written notice by
GMAC-RFC to E-Loan, Inc. GMAC-RFC may from time to time
in the exercise of its sole discretion modify or supplement any of
the program criteria or requirements effective immediately upon
notice by GMAC-RFC to E-Loan, Inc.
Confidentiality:
GMAC-RFC and E-Loan, Inc. each agree that the specific terms
and provisions of this Commitment Amendment are confidential
except as required by law or as may be reasonably necessary to be
disclosed in connection with the sale or securitization of loans
sold to GMAC-RFC by E-Loan, Inc.
Commitment Offer
Expiration Date:
executed copy is not received on or before November 16, 2001.
We look forward to our continued relationship with E-Loan, Inc. If the terms of this Commitment Amendment are
agreeable with you, please so indicate by executing both of the enclosed copies, return one original to GMAC- RFC on
or before the date indicated above, and retain the other original for your records.
Sincerely,
Lori Zaloumis
Sales Director
E-LOAN, INC.
SIGNATURE:
NAME:
TITLE:
DATE:
EXHIBIT D
Commitment Amendment Dated 11/09/01
E-Loan, Inc.
Loan Prospector (LP) and Desktop Underwriter (DU) Reduced Documentation Program
(Goal Line and Goal Loan Only)
[ ** ]
EXHIBIT E
E-Loan, Inc.
[ ** ]
EXHIBIT F
E-Loan, Inc.
High Rise Condominium Program (Goal Line and Goal Loan)
[ ** ]
Exhibit 10.151
AMENDMENT NUMBER FOUR
to the
MASTER LOAN AND SECURITY AGREEMENT
This AMENDMENT NUMBER FOUR (this "Amendment") is made this 14th day of November, 2001, between ELOAN, INC. ("Borrower") and GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. ("Lender") to the
MASTER LOAN AND SECURITY AGREEMENT, dated as of May 10, 1999, between Lender and Borrower, as
otherwise amended (the "Loan Agreement").
RECITALS
WHEREAS, Borrower has requested that Lender agree to amend the Loan Agreement to increase the maximum
amount of advances that may be made on an uncommitted basis, and the Lender has agreed to make such amendments,
subject to the terms and conditions of this Amendment.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and of the mutual covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. (a) Increase of Maximum Uncommitted Amount. Effective as of October 1, 2001, the defined term
"Maximum Uncommitted Amount" is deleted in its entirety and replaced with the following:
"Maximum Uncommitted Amount shall mean $150 million."
(b) Applicable Collateral Percentage. Effective as of October 1, 2001, the defined term "Applicable Collateral
Percentage" is hereby amended by adding the following to the end thereof:
"; provided, however, if at any time the aggregate outstanding principal amount of Advances exceeds $200 million, the
"98%" contained in clauses (a)(1) and (b)(1) shall automatically be changed to "95%" with respect to any and all
Mortgage Loans pledged to the Lender in connection with the Advance that results in the aggregate outstanding
principal amount of Advances exceeding $200 million and each pledge of Mortgage Loans made during the period of
time in which the aggregate outstanding principal amount of Advances exceeds $200 million."
(c) Applicable Margin. Effective as of October 1, 2001, the defined term "Applicable Margin" is hereby amended by
adding the following to the end thereof:
per annum rate for Tranche A Advances shall be automatically increased from 0.95% to 1.50%" and the per annum
rate for Tranche B Advances shall be automatically increased from 1.50% to 2.00% with respect to the Advance that
results in the aggregate outstanding principal amount of Advances exceeding $200 million and each subsequent
Advance made during the period of time in which the aggregate outstanding principal amount of Advances exceeds
$200 million."
SECTION 2. Fees and Expenses. Borrower agrees to pay to Lender all fees and out of pocket expenses incurred by
Lender in connection with this Amendment (including all reasonable fees and out of pocket costs and expenses of the
Lender's legal counsel incurred in connection with this Amendment), in accordance with Section 11.03 of the Loan
Agreement
SECTION 3. Defined Terms. Any terms capitalized but not otherwise donned herein shall have the respective
meanings set forth in the Loan Agreement.
SECTION 4. Representations. In order to induce the Lender to execute and deliver this Amendment, the Borrower
hereby represents to the Lender that as of the date hereof, after giving effect to this Amendment, the Borrower is in
full compliance with all of the terms and conditions of the Loan Agreement.
SECTION 5. Limited Effect. Except as expressly amended and modified by this Amendment, the Loan Agreement
shall continue in full force and effect in accordance with its terms. Reference to this Amendment need not be made in
the Loan Agreement or any other instrument or document executed in connection therewith, or in any certificate, letter
or communication issued or made pursuant to, or with respect to, the Loan Agreement, any reference in any of such
items to the Loan Agreement being sufficient to refer to the Loan Agreement as amended hereby.
SECTION 6. GOVERNING LAW. THIS AMENDMENT 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 1N ACCORDANCE WITH SUCH LAWS WITHOUT
REGARD TO CONFLICT OF LAWS DOCTRINE APPLIED 1N SUCH STATE.
SECTION 7. Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate
counterparts, each of which shall be an original and all of which taken together shall constitute one and the same
instrument.
[SIGNATURE PAGE FOLLOWS]
1N WITNESS WHEREOF, each of the Borrower sad the Lender have caused this Amendment to be executed and
delivered by its duly authorized officer as of the day and year first above written.
E-LOAN, INC.,
Borrower
By:
Name:
Title:
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.,
Lender
By:
Name:
Title:
Exhibit 10.152
Third Amendment to Auto Loan Purchase and Sale Agreement
This THIRD AMENDMENT ("Amendment") to the Auto Loan Purchase and Sale Agreement dated and effective
May 1, 2000 by and between E-LOAN, Inc. ("E-LOAN") and Wells Fargo Bank, N.A. - Auto Finance Group ("Wells
Fargo" or "Correspondent"), as amended by the First Amendment to Auto Loan Purchase and Sale Agreement dated
March 15, 2001 (collectively, the Agreement") is entered into and effective on this 16th day of November, 2001.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which is expressly acknowledged
by the parties hereto, E-LOAN and Wells Fargo agree as follows:
1. The Exhibit E of the SECOND AMENDMENT is hereby deleted and replaced with Exhibit E attached to this
Amendment.
2. The Agreement is hereby modified and amended to incorporate the terms and conditions set froth herein, which
shall supersede and prevail over any conflicting terms of the Agreement. Except for the changes set forth above, all of
the terms and conditions of the Agreement shall remain in full force and effect.
E-LOAN, INC.
WELLS FARGO BANK, N.A. AUTO FINANCE GROUP
By:
Name: Cynthia Kuo
Title: Senior Vice President
By:
Name:
Title:
By:
Name:
Title:
Exhibit E: Purchase Price
Purchase Price:
With respect to each Loan made, Correspondent shall pay E-LOAN, via ACH in the account specified in Section 1.6,
the Principal Balance of each Loan. Correspondent will use its best effort to pay within 48 hours of receipt of the
Required Documents for such Loan. Calculation and payment of Additional Compensation shall be as shown below.
Additional Compensation:
1. Origination Fees:
As additional compensation for E-LOAN's performance of Services hereunder, Wells Fargo will pay E-LOAN a fee
("Origination Fee") for each loan purchased under this Agreement calculated in accordance with the attached Core
Pricing Model. on or before the tenth (10th) day of each month, Wells Fargo shall pay E-LOAN the aggregate
Origination Fees for all Loans funded in the prior calendar month pursuant to this Agreement. Notwithstanding the
foregoing, E-LOAN shall refund the Origination Fee to Wells Fargo for each Loan that is prepared within [ ** ] days
from the date such Loan is funded.
Origination Fees will be discounted based on the aggregate dollar volume of funded loans within each calendar month
according to the following schedule. The discount is applied to the Spread and the model calculates the new
Origination Fee based on the discounted Spread.
[ ** ]
2. Definitions:
Contract Rate
- The Annual Percentage Rate charged to the borrower by E-LOAN.
Spread
- Difference between the Contract Rate and Buy Rate.
[ ** ]
Exhibit 10.153
SECOND MODIFICATION AGREEMENT
THIS SECOND MODIFICATION AGREEMENT (the "Agreement") is made as of the 17th day of December, 2001,
by and among E-LOAN, INC. (the "Borrower"), and GMAC Bank, a federal saving bank (the "Lender").
BACKGROUND
The Borrower and the Lender entered into a Warehouse Credit Agreement, dated as of November 1, 2001, as amended
(as so amended, the "Warehouse Credit Agreement") pursuant to which the Lender agreed to make advances (the
"Advances") to the Borrower in accordance with the provisions of the Warehouse Credit Agreement. All capitalized
terms used herein and not otherwise defined shall have the meanings set forth in the Warehouse Credit Agreement.
The Advances are evidenced by the Borrower's Note, dated as of November 1, 2001 (the "Note") in the stated
principal amount of $50,000,000 and secured by, among other things, a Warehouse Security Agreement dated as of
November 1, 2001, as amended (as so amended, the "Warehouse Security Agreement") between the Borrower and the
Lender granting the Lender a security interest in certain of the Borrower's assets.
The Borrower has requested that the Lender make certain modifications to the terms of the Warehouse Credit
Agreement, and the Lender has agreed to such modification, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:
1. Warehouse Credit Agreement. The Warehouse Credit Agreement is hereby amended as follows:
(a) The definition of "Commitment" contained in Section 1.01 of the Warehouse Credit Agreement is amended to read
in full as follows:
""Commitment" shall mean the obligation of the Lender to make Advances in an aggregate principal amount
outstanding at any time not to exceed $50,000,000, or such other amount as Lender, in its sole discretion, may
determine from time to time, provided that during the period of December 17, 2001 through February 17, 2002,
Commitment shall be increased to $70,000,000."
(b) Section 3.01(d) is hereby added to the Warehouse Credit Agreement and shall read in full as follows:
"(d) The Borrower shall pay the Lender a commitment fee (the "Commitment Fee") in an amount equal to .25% per
annum of the Commitment increase in effect from December 17, 2001 through February 17, 2002. The Commitment
Fee shall be due and payable monthly in advance on the Effective Date and on the fifth Business Day in each calendar
month thereafter with respect to the Commitment Fee accruing during such calendar month."
2. Note. The Note shall be amended and restated to provide that the principal amount thereof is Seventy Million
United States dollars ($70,000,000).
3. References to Credit Documents. Upon the effectiveness of this Agreement:
(a) Each reference in the Warehouse Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words
of like import, and each reference in the Restated Note and the Warehouse Security Agreement to the Warehouse
Credit Agreement, shall mean and be a reference to the Warehouse Credit Agreement as amended hereby;
(b) Each reference in the Warehouse Credit Agreement and the Warehouse Security Agreement to the Note shall mean
and be a reference to the Restated Note; and
(c) Each reference in the Warehouse Credit Agreement and the Note to the Warehouse Security Agreement shall mean
and be a reference to the Warehouse Security Agreement as amended hereby.
4. Ratification of Documents.
(a) Except as specifically amended herein or amended and restated in the Restated Note, the Warehouse Credit
Agreement, the Note and the Warehouse Security Agreement shall remain unaltered and in full force and effect and
are hereby ratified and confirmed.
(b) The execution, delivery and effectiveness of this Agreement and the Restated Note shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of the leader under the Warehouse Credit
Agreement, the Note or the Warehouse Security Agreement nor constitute a waiver of any default or Event of Default
under the Warehouse Credit Agreement, the Note or the Warehouse Security Agreement.
5. Representations and Warranties. The Borrower hereby certifies that (i) the representations and warranties which it
made in the Warehouse Credit Agreement and the Warehouse Security Agreement are true and correct as of the date
hereof and (ii) no Event of Default and no event which could become an Event of Default with the passage of time or
the giving of notice, or both, under the Note, the Warehouse Credit Agreement or the Warehouse Security Agreement
exists on the date hereof.
6. Miscellaneous.
(a) This Agreement shall be governed by and construed according to the laws of the State of Delaware without regard
to the principles of conflicts of laws and shall be binding upon and shall inure to the benefit of the parties hereto, their
successors and assigns.
(b) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(c) This Agreement is intended to take effect as a document under seal.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
E-LOAN, INC.
By:
President
GMAC Bank
By:
Exhibit 10.154
AMENDED AND RESTATED NOTE
U S $70,000,000
Amended and Restated as of December 17, 2001
FOR VALUE RECEIVED, E-LOAN, INC., a corporation organized and existing under the laws of Delaware (the
"Borrower"), hereby promises to pay to the order of GMAC Bank, a federal savings bank (the "Lender"), in lawful
money of the United States of America in immediately available funds on the Expiry Date (as defined in the
Warehouse Credit Agreement) the principal sum of SEVENTY MILLION United States dollars ($70,000,000), or, if
less, the aggregate unpaid principal amount of all Advances (as defined in the Warehouse Credit Agreement) made by
the Lender to the Borrower pursuant to the Warehouse Credit Agreement.
The Borrower promises also to pay interest on the unpaid principal amount of each Advance from the date such
Advance is made until paid in full, at the interest rates, and at the times, as specified in the Warehouse Credit
Agreement.
This Amended and Restated Note ("Amended and Restated Note"), amends, restates and supersedes all prior notes,
including that certain Note dated November 1, 2001 in the amount of $50,000,000 ("Original Note"). However, this
Amended and Restated Note shall in no way extinguish the Borrower's unconditional obligation to repay all
Indebtedness as defined in the Warehouse Credit Agreement dated as of November 1, 2001 as amended (as so
amended, the "Warehouse Credit Agreement"). This Note is secured by the Warehouse Security Agreement dated as
of November 1, 2001 as amended.
This Note is subject to mandatory prepayment as provided in Section 4.02 of the Warehouse Credit Agreement and, in
case an Event of Default (as defined in the Warehouse Credit Agreement) shall occur and be continuing, the principal
of and accrued interest on this Note may be declared to be due and payable in the manner and with the effect provided
in the Warehouse Credit Agreement.
The Borrower hereby waives diligence, presentment, protest, demand or notice of every kind in connection with this
Note.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF DELAWARE WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
E-LOAN, INC.
By:
Name:
Title:
Exhibit 10.155
FLOW PURCHASE AND SALE AGREEMENT
(Refinance Loans)
This FLOW PURCHASE AND SALE AGREEMENT (the "Agreement"), dated as of December 18, 2001, is made by
and between E*TRADE Bank, a federally chartered savings bank with offices located at Ballston Tower, 671 North
Glebe Road, Arlington, Virginia 22203 (the "Purchaser") and E-LOAN, Inc., a Delaware corporation with offices
located at 5875 Arnold Road, Dublin, California 94568 (the "Seller").
WHEREAS, Seller is engaged in the business of, among other things, originating loans secured by new and/or used
motor vehicles.
WHEREAS, Seller desires to sell and Purchaser desires to purchase from time to time on a servicing released basis
certain of such loans under the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, Purchaser and Seller agree as follows:
ARTICLE I
Definitions
1.01 Defined Terms. Whenever used in this Agreement, the following words and phrases, unless the context otherwise
requires, shall have the following meanings:
"Additional Compensation": shall have the meaning set forth in Exhibit E of the Agreement.
"Confirmation": The written confirmation of Purchaser's acceptance of all or any portion of the Loans included in the
applicable Offer, substantially in the form of Exhibit G hereto and delivered in accordance with the terms of Article II
hereof.
"Event of Default": shall have the meaning set forth in Section 6.02.
"Financed Vehicle": such new or used automobile, van or light-duty truck securing a Loan.
"Loan": a loan secured by a Financed Vehicle, including all accrued interest and finance charges, and accrued fees
thereon, servicing rights and rights under all endorsements, appraisals and/or guarantees, and the related Records.
"Loan File": the documents listed in Exhibit B hereto with respect to each Loan.
"Offer": Seller's written offer to sell one or more Loans under the terms of this Agreement.
"Obligor": the borrower or co-borrower on a Loan, and any other Person who owes payments under such Loan.
"Pass-Through Transfer": the sale or transfer of some or all of the Loans by the Purchaser to a trust to be formed as part
of a publicly issued or privately placed asset-backed securities transaction.
"Person": includes any individual, partnership, corporation (including a business trust), limited liability company, joint
stock company, trust, unincorporated association, joint venture, or other entity or government or any agency or political
subdivision thereof, whether acting in an individual, fiduciary or other capacity.
"Purchase Criteria": shall have the meaning set forth in Section 2.01(a) of this Agreement.
"Purchase Price": the sum of: (i) the aggregate unpaid principal balance ("UPB") of the Loans as of the Transfer Date
and (ii) 100% of the accrued but unpaid interest on the Loans as of the Transfer Date.
"Purchaser": E*TRADE Bank, its successors and assigns.
"Records": the records and documents specifically related to the Loans, including but not limited to, all original notes,
credit agreements, instruments, correspondence with the Obligor, existing policies or certificates of insurance, if any,
and all pending insurance claims and the proceeds thereof relating to any Loan.
"Repurchase Price" shall have the meaning set forth in Section 5.07 of the Agreement.
"Schedule of Loans": all information and data identifying characteristics of the Loans, in a format acceptable to
Purchaser, as set forth in Exhibit A hereto.
"Seller": E-LOAN, Inc.
"Seller's Funding Source(s)": (1) Bank One, NA, pursuant to that certain Loan Agreement, effective as of April 2, 2001
between Bank One, NA, as Lender, and E-LOAN, Inc., as Borrower, (2) Christian Larsen ("Larsen"), pursuant to that
certain Amended and Restated Loan Agreement effective as of July 12, 2001 between Larsen, as Lender, and E-LOAN,
Inc., as Borrower, and (3) The Charles Schwab Corporation ("Schwab"), pursuant to that certain 8% Convertible Note
effective as of July 12, 2001 between Schwab, as Lender, and E-LOAN, Inc., as Borrower, and such other funding
sources as Purchaser may approve in its reasonable discretion
"Transfer Date": The closing date for the sale of the Loans that are the subject of a Confirmation, which date shall be
two (2) business days following the date an Offer is presented to Purchaser.
"Whole Loan Transfer": any sale or transfer of all or part of the Loans by the Purchaser to a third party.
ARTICLE II
Purchase and Sale
1. Purchase and Sale of Loans
.
On the applicable Transfer Date and in accordance with the terms and conditions of this Agreement, Purchaser agrees
to purchase and Seller agrees sell, from time to time, all of Seller's right, title and interest in and to the Loans listed in
the Confirmation applicable to such Loans.
(a) Offer. From time to time, Seller shall submit in writing, for Purchaser's review and approval, an Offer to sell one
or more Loans under the terms of this Agreement. Each Offer shall be in a format acceptable to Purchaser substantially
in the form attached hereto as Exhibit F, and shall be accompanied by the Schedule of Loans, the Loan Files and such
other information as mutually agreed by the parties. In determining whether to submit an Offer to Purchaser, Seller shall
apply Purchaser's underwriting and other criteria for purchase of Loans subject to this Agreement as set forth on Exhibit
C ("Purchase Criteria") to the Loan application, and shall only submit Offers that Seller reasonably believes satisfy the
Purchase Criteria. It is understood and agreed by the parties that Seller is not obligated to offer to sell any Loans to
Purchaser and Purchaser is not obligated to buy any Loans from Seller, except as set forth in a Confirmation and subject
to the terms of this Agreement.
(b) Acceptance. Purchaser shall, in its sole discretion, accept or reject all or any portion of the Loans included in the
Offer, and shall inform Seller of its decision. If Purchaser accepts all or any portion of the Offer, Purchaser shall
electronically transmit to Seller a Confirmation substantially in the form attached hereto as Exhibit G. The Confirmation
shall identify (i) the Loans to be purchased pursuant to the Confirmation, (ii) the Transfer Date, and (iii) the Purchase
Price.
Transmission of a Confirmation shall constitute acceptance of Seller's Offer in respect of the Loans specified in the
Confirmation. Subject to the provisions of Section 6.02 hereof, on the Transfer Date specified in the Confirmation,
Seller shall be obligated to sell and deliver, and Purchaser shall be obligated to purchase the Loans that are specified in
such Confirmation.
As between Purchaser and Seller, absent manifest error, a Loan shall conclusively be deemed to have been purchased
by Purchaser if (i) Purchaser has received a complete Loan File in respect of such Loan and (ii) such Loan is specified
in any Confirmation maintained in the Purchaser's records and transmitted to Seller in accordance with this Section
2.01(b).
To the extent that any Loans which are included in a Seller's Offer are not included in the corresponding Confirmation,
Purchaser shall identify on a Loan Exception Report substantially in the form of Exhibit H any Loans that it is willing
to purchase subject to the satisfaction of any conditions specified by Purchaser, and the conditions that need to be
satisfied in order to enable Purchaser to purchase such Loans. In such event, Purchaser shall not be required to purchase
any of such Loans, but upon satisfaction of the conditions specified by Purchaser, Seller may include such Loans in a
subsequent Offer.
Seller agrees that it will not offer for sale to any person other than Purchaser any Loan for which a Confirmation or an
Offer has been issued hereunder and is outstanding.
(c) Purchase Requirement. Notwithstanding the foregoing and subject to the provisions of Section 6.01, if a Loan
or Loans subject to an Offer meet the Purchase Criteria in effect at the time the Loan was approved, in Purchaser's
reasonable determination, Purchaser shall issue a Confirmation to purchase such Loan or Loans; provided, however,
that Purchaser shall not be required to issue a Confirmation with respect to any Loan included in an Offer, where such
Loan was approved more than sixty (60) days prior to the date of an Offer; and further provided that Purchaser shall not
be required to issue a Confirmation if there is a pending Event of Default by Seller.
(d) Funding and Delivery of Loans. (i) On each Transfer Date, Seller shall immediately deliver to Purchaser the Loan
Files relating to the Loans subject to the Confirmation.
2.02 Payment of Purchase Price and Additional Compensation.
(a) Purchase Price. On or before the applicable Transfer Date, Purchaser shall pay to Seller, or such party designated in
writing by Seller, the Purchase Price for the Loans, in immediately available funds, via wire transfer into the following
collection account: Bank One, NA/E-LOAN, Inc. Collection Account, Account #[ ** ], Bank One, NA, Columbus, Ohio,
ABA [ ** ], Attention: Kelly Maloney, or such other account as Seller and Bank One, NA shall designate in writing to
Purchaser (the "Collection Account"). Upon or before submitting an Offer to Purchaser, Seller shall deliver, or shall
have delivered to Purchaser written wire transfer instructions for the payment of the Purchase Price. Upon receipt by
Seller or Seller's designee of the portion of the Purchase Price representing the principal balance of the Loans, the Loans,
and all rights, benefits, payments, proceeds and obligations to Seller arising from or in connection with the Loans,
together with any lien or security interest in the vehicle serving as collateral for the Loans, shall vest in Purchaser. Any
payments received by Seller from Obligors with respect to any Loan sold to Purchaser, shall be forwarded to Purchaser
within two (2) business days of receipt. Until the Transfer Date, Seller shall own and control the application and all
documentation relating to the Loans to be sold. All Loans sold under this Agreement shall be sold without recourse, on
a servicing released basis.
(b) Additional Compensation. On or before the tenth (10th) day of each month, Purchaser shall pay to Seller, or such
lender designated in writing by Seller, the Additional Compensation relating to all Loans sold in the previous calendar
month. The Additional Compensation is described on Exhibit E and shall be paid in immediately available funds, via
wire transfer into the Collection Account.
ARTICLE III
Representations, Warranties and Covenants
3.01 Representations, Warranties and Covenants of Purchaser. Purchaser represents, warrants and covenants to Seller,
as of the Transfer Date or such other date as expressly stated herein, as follows:
(a) Good Standing and Power of Purchaser. Purchaser is a federally chartered savings bank, duly organized, validly
existing and in good standing under the laws of the United States, with full corporate power to own its properties and to
carry on its business as currently conducted.
(b) Authorization. The execution and delivery of this Agreement have been duly authorized by all necessary corporate
action on the part of Purchaser and, assuming due execution by Seller, this Agreement is a valid and binding obligation
of Purchaser, enforceable against the Purchaser in accordance with its terms subject only to (i) the effect of applicable
bankruptcy, insolvency, reorganization, conservatorship, receivership, fraudulent conveyance, moratorium or other
similar laws and (ii) limitations imposed by laws, regulations and judicial decisions relating to or affecting the rights of
creditors generally, or by general principles of equity (regardless of whether enforcement is considered in proceedings
at law or in equity).
(c) Effective Agreement. The execution, delivery and performance of this Agreement by Purchaser and the
consummation of the transactions contemplated hereby, will not conflict with, result in the breach of, constitute a
violation or default, result in the acceleration of payment or other obligations, or create a lien, charge or encumbrance,
under Purchaser's charter or by-laws, any judgment, decree or order, any law, rule or regulation of any government or
agency thereof, or any contract, agreement or instrument to which Purchaser is subject.
(d) No Broker. No broker or finder, or other party or agent performing similar functions, has been retained by Purchaser
or is entitled to be paid based upon any agreements, arrangements or understandings made by Purchaser in connection
with the transaction contemplated herein.
(e) Regulatory Approvals. Purchaser has prepared and submitted for filing any and all applications, filings, and
registrations with and notifications to, all federal, state and local regulatory authorities required for Purchaser to perform
its obligations under this Agreement. Purchaser has received no notice or other communication from any regulatory
authority indicating that such authority would oppose, challenge or not approve the transaction contemplated by this
Agreement.
(f) Consents. Any required consents, approvals and/or authorizations of any federal, state or local governmental
authority or agency or any other party, which if not delivered would have a material adverse effect on the ability of
Purchaser to execute and deliver or to perform this Agreement, or to consummate the transaction contemplated by this
Agreement, have been delivered.
a. Third-Party Claims
. There is no dispute, action, suit, proceeding or investigation of any nature pending or to the best of
Purchaser's knowledge threatened against or affecting Purchaser that, individually or in the aggregate,
(i) challenges the validity, legality or enforceability of this Agreement, or (ii) has or is likely to have a
material adverse effect upon Purchaser's ability to perform its obligations under this Agreement.
(h) Compliance with Laws. Purchaser is in compliance with all statutes and regulations applicable to this Agreement
and its obligations under this Agreement, including without limitation any applicable licensing and/or regulatory agency
notification requirements.
3.02 Representations, Warranties and Covenants of Seller. Seller represents, warrants and covenants to Purchaser, as of
each Transfer Date or such other date as expressly stated herein, as follows:
(a) Good Standing and Power of Seller. Seller is a corporation, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its formation, with full corporate power to own its properties and to carry on its
business as currently conducted.
(b) Authorization. The execution and delivery of this Agreement have been duly authorized by all necessary corporate
action on the part of Seller, and, assuming due execution by Purchaser, this Agreement is a valid and binding obligation
of Seller, enforceable against Seller in accordance with its terms subject only to (i) the effect of applicable bankruptcy,
insolvency, reorganization, conservatorship, receivership, fraudulent conveyance, moratorium or other similar laws
and (ii) limitations imposed by laws, regulations and judicial decisions relating to or affecting the rights of creditors
generally, or by general principles of equity (regardless of whether enforcement is considered in proceedings at law or
in equity).
(c) Effective Agreement. The execution, delivery and performance of this Agreement by Seller and the consummation
of the transactions contemplated hereby will not conflict with, result in the breach of, constitute a violation or default,
result in the acceleration of payment or other obligations, or create a lien, charge or encumbrance, under any of the
provisions of Seller's articles of incorporation or by-laws, any judgment, decree or order, any law, rule or regulation of
any government or agency thereof, or any contract, agreement or instrument to which Seller is subject.
a. No Broker
. No broker or finder, or other party or agent performing similar functions, has been retained by Seller
or is entitled to be paid based upon any agreements, arrangements or understandings made by Seller
in connection with the transaction contemplated herein.
b. Regulatory Approvals
. Seller has prepared and submitted for filing any and all applications, filings, and registrations with
and notifications to, all federal, state and local regulatory authorities required for Seller to perform
its obligations under this Agreement. Seller has received no notice or other communication from
any regulatory authority indicating that such authority would oppose, challenge or not approve the
transaction contemplated by this Agreement. Seller is duly licensed to engage in the business of making
the Loans under the laws of each jurisdiction in which each Loan has been made.
c. Consents
. Any required consents, approvals and/or authorizations of any federal, state or local governmental
authority or agency or any other party, which if not delivered would have a material adverse effect
on the ability of Seller to execute and deliver or to perform this Agreement, or to consummate the
transaction contemplated by this Agreement, have been delivered, including without limitation, the
consent of Seller's Funding Sources.
d. Third-Party Claims
. There is no dispute, action, suit, proceeding or investigation of any nature pending or to the best
of Seller's knowledge threatened against or affecting Seller that, individually or in the aggregate, (i)
challenges the validity, legality or enforceability of this Agreement, (ii) has or is likely to have a
material adverse effect upon Seller's ability to perform its obligations under this Agreement, (iii) has or
is likely to have a material adverse effect on the Loans individually or taken as a whole, or (iv) has or
is likely to have a material adverse effect on Seller's business as it is being conducted with respect to
the Loans.
e. Compliance with Laws
. Seller is in compliance with all statutes and regulations applicable to this Agreement and its
obligations under this Agreement, and to the Loans, including without limitation any applicable
licensing and/or regulatory agency notification requirements. Seller has not received notice from any
agency or department of federal, state or local government asserting a violation of any law, regulation,
ordinance, rule or order (whether executive, judicial, legislative or administrative) that would have a
material adverse effect on the Seller's ability to perform its obligations under this Agreement or the
Loans individually or taken as a whole.
f. Deliveries
. All schedules, statements, certificates, agreements, and other documents delivered by Seller pursuant
to the terms of this Agreement are true, correct and complete in all material respects and accurately
represent the information contained therein in all material respects.
g. Bulk Sale
. The sale contemplated hereby is not subject to "bulk sale" or similar requirements in any jurisdiction
and is in the ordinary course of Seller's business.
h. Location, Name and State of Incorporation
. Seller's (i) chief executive office is located at 5875 Arnold Road, Suite 100, Dublin, California 94568
(ii) state of incorporation is the State of Delaware and (iii) exact legal name is as set forth in the first
paragraph of this Agreement. Except for the name "Palo Alto Funding Group, Inc.," which was the
name of Seller's predecessor company that was dissolved in December of 1997, Seller has had no other
names (including trade names or similar appellations) in the past five years other than the name set
forth in the first paragraph of this Agreement.
i. Liens on Seller Assets
. Exhibit I hereto describes all existing liens or encumbrances on the assets of Seller as of the initial
Transfer Date. As of each Transfer Date, Seller is in compliance with its obligations under Section
5.10.
3.03 Representations and Warranties Regarding Loans. Seller hereby represents and warrants to Purchaser, with respect
to the Loans purchased by Purchaser, as of each Transfer Date or such other date as expressly stated herein, as follows:
(a) Origination of Loans. Each Loan was originated in the United States and is evidenced by a promissory note and
security agreement between Seller and the related Obligor and shall have been fully and properly executed by the parties
thereto.
(b) Valid First Lien. The certificate of title application or registration relating to each Financed Vehicle shall list Seller,
Purchaser or its designated nominee, as the parties shall mutually agree, as the first and only lienholder. Each Loan
has created a valid, subsisting and enforceable first priority security interest securing Obligor's obligations under the
Loan, in favor of Seller in the related Financed Vehicle, which security interest is assignable without the consent of the
Obligor, and shall be so assigned, by the Seller to the Purchaser.
(c) Monthly Payments. Each Loan provides for monthly payments that fully amortize the amount financed thereunder
by maturity and provides for a finance charge at its annual percentage rate ("APR"), calculated based on the simple
interest method.
(d) Customary Provisions; Prepayment. Each Loan contains customary and enforceable provisions, such that the rights
and remedies of the holder thereof are adequate for realization against the collateral of the benefits of the security.
The terms of each Loan provide, in the event of prepayment, for full payment of the outstanding principal balance and
accrued but unpaid interest.
(e) Schedule of Loans. The information set forth in the Schedule of Loans is true and correct in all material respects.
(f) Compliance with Law. Each Loan and each sale of the related Financed Vehicle: (i) complied at the time of
origination and sale, and at all times during Seller's ownership of such Loan; and (ii) complies as of the applicable
Transfer Date, with all requirements of applicable federal, state and local laws, and regulations thereunder, including
without limitation usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, applicable state adaptations
of the Uniform Consumer Credit Code and other consumer credit, equal credit opportunity and disclosure laws.
(g) Binding Obligation. Each Loan constitutes the legal, valid and binding payment obligation in writing of the related
Obligor, enforceable by the holder thereof in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting the enforcement of creditors' rights
in general and by general principles of equity, regardless of whether such enforceability shall be considered in a
proceeding in equity or at law.
(h) No Bankrupt Obligors. None of the Loans is due from any Obligor who is the subject of a bankruptcy, repossession,
insolvency or reorganization proceeding or is bankrupt or is insolvent.
(i) No Government Obligors. None of the Loans is due from the United States or any state, or from any agency,
department or instrumentality of the United States or any state or local government.
(j) Loans in Force. No Loan has been satisfied, subordinated or rescinded, nor has any Financed Vehicle been released
in whole or in part from the lien granted by the related Loan. Seller has not received notice that any Loan will be paid
in full (whether by virtue of a demand statement or otherwise).
(k) No Amendments. No Loan has been amended or modified and no provision of a Loan has been waived in such a
manner that the total number of scheduled payments has been increased, the time period for payments to be made has
been extended, the number of days between any payments has been extended, the related amount financed has been
increased, or the amount owed under such Loan has been reduced, except as is consistent with the Purchase Criteria and
disclosed to Purchaser in writing prior to the applicable Transfer Date. Seller is not required to perform any additional
service for, or perform or incur any additional obligation to, such Obligor in order for Seller to enforce such Loan. The
obligation of the original Obligor of such Loan has not been assigned to and has not been released to or assumed by
another Person unless the release or assumption was properly documented and disclosed to Purchaser in writing prior
to the applicable Transfer Date.
(l) No Defenses. Seller knows of no facts that would give rise to any right of rescission, setoff, counterclaim or defense,
including but not limited to the defense of usury, nor has the same been asserted or threatened, with respect to any Loan.
(m) No Liens. No liens or claims have been filed, including liens for work, labor or materials relating to a Financed
Vehicle, that are liens prior to, or equal with, the security interest in such Financed Vehicle granted by the related Loan,
which liens have not been released or satisfied. Seller has received no notice of any claims for taxes, labor, materials,
fines, confiscation, or replevin relating to the Loan or Financed Vehicle. Seller has received no notice of any unsatisfied
claim against the Obligor based on the operation or use of such Financed Vehicle. All taxes due for the purchase, use
and ownership of the Financed Vehicle have been paid. All taxes due on the transfer of such Loan to Seller have been
paid.
(n) No Default; No Repossession. All payments required under each Loan have been made up to the date the Loan
is sold. There is no default, breach, violation or event of acceleration existing under the terms of any Loan nor has
any event occurred which, upon the giving of notice or the lapse of time, or both, would constitute a default, breach,
violation or event of acceleration under the Loan; Seller has not waived any of the foregoing; and no Financed Vehicle
has been repossessed during the life of the Loan.
(o) Insurance. Each Financed Vehicle is insured against loss under a policy issued by an insurer qualified to do business
in the jurisdiction where the vehicle is located, in a form such that it may be endorsed to Purchaser as loss payee, in
amounts adequately protecting Purchaser's security interest in the Financed Vehicle relating to such Loan (the "Required
Obligor Insurance"). To the best of Seller's knowledge, there are no facts or circumstances that could provide a basis
for revocation of, or a defense to any claims made under, any insurance policy covering a vehicle. Seller has received
no notice of (1) cancellation of any such Required Obligor Insurance or (2) of any delinquent insurance premiums with
respect to any such Required Obligor Insurance.
(p) Good Title. It is the intention of the Seller that the transfer and assignment of each Loan herein contemplated
constitutes a sale of such Loan from the Seller to the Purchaser and that the beneficial interest in and title to such Loan
not be part of the debtor's estate in the event of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. No Loan has been sold, transferred or assigned by the Seller to any Person and, except for any pledge
which has been terminated or released in respect of such Loan on or prior the Transfer Date, no Loan has been pledged
by the Seller to any Person. No provision of a Loan shall have been waived, except for a waiver that would not cause
representation 3.03(k) above to be untrue; on the Transfer Date, Seller has good and marketable title to each Loan free
and clear of all liens and rights of others and has the full right to transfer and sell such Loan; and immediately upon
payment of the Purchase Price by Purchaser, the Purchaser shall have good and marketable title to each Loan, free and
clear of all liens and rights of others.
(q) Lawful Assignment. No Loan shall have been originated in, or shall be subject to the laws of, any jurisdiction under
which the sale, transfer and assignment of such Loan under this Agreement or pursuant to a transfer of the related
certificate of title shall be unlawful, void or voidable. The terms of the Loan do not require the Obligor to consent to the
transfer, sale or assignment of the Loan or prohibit its transfer, sale or assignment.
(r) Intentionally left blank.
(s) Chattel Paper. Each Loan constitutes "chattel paper" as defined in the Uniform Commercial Code.
(t) Intentionally left blank.
(u) Loan for Refinance of Vehicle. The proceeds of the Loan have been used for the Obligor's refinance of the Financed
Vehicle.
(v) Intentionally left blank.
(w) Possession of Financed Vehicle. Obligor is in possession of the Financed Vehicle related to the Loan, and to the best
of Seller's knowledge there is no arrangement for the regular use of such Financed Vehicle by a Person other than the
Obligor, such Financed Vehicle has not been materially damaged and not repaired, and is in good operating condition,
ordinary wear and tear excepted.
(x) Jurisdiction of Origination. Each Loan was originated by Seller, and made to an Obligor in one of the jurisdictions
listed in Exhibit D.
(y) Purchase Criteria. Each Loan was originated in accordance with, and satisfies the requirements of the Purchase
Criteria set forth in Exhibit C hereto.
(z) Loan Payments. The Seller has not advanced funds, or induced, solicited or knowingly received any advance of
funds from a party other than the Obligor, directly or indirectly, for the payment of any amount required under the Loan.
(aa) No Adverse Selection. The Seller has used no adverse selection procedures in selecting the Loans offered to the
Purchaser.
(bb) Fraud. No error, omission, misrepresentation, negligence, fraud or similar occurrence with respect to a Loan has
taken place on the part of Seller or on the part of any person including without limitation the Obligor or any other party
involved in the origination of the Loan or in the application of any insurance in relation to such Loan.
(cc) Legal Capacity. To the best of Seller's knowledge, all parties to the Loan had legal capacity to enter into the Loan
and to execute and deliver the Loan, and the Loan has been duly and properly executed by such parties.
(dd) Loan Proceeds Disbursed. The proceeds of the Loan have been fully disbursed and there is no requirement for
future advances thereunder.
(ee) Additional Collateral. The Loan is not and has not been secured by any collateral except the lien against the related
Financed Vehicle.
(ff) Perfection of Security Interest. If the related Financed Vehicle is located in a jurisdiction in which notation of a
security interest on the title document is required or permitted to perfect such security interest, the title document shows,
if a new or replacement title document with respect to such Financed Vehicle is being applied for, such title document
will be issued and delivered to Purchaser within 180 days (subject to any extensions of time as set forth in Section 5.07)
and will show, the Seller, Purchaser or its nominee as the first and only lienholder against the Financed Vehicle.
(gg) Contents of Loan File. As of the Transfer Date, all Records and other documents required hereby, and mutually
agreed to by the parties, to be in the Loan File are contained therein.
The representations and warranties of the Seller shall survive closing and termination of this Agreement and shall inure
to the benefit of the Purchaser, its successors and assigns, notwithstanding any restricted endorsement or assignment.
With respect to the representations and warranties regarding the Loans contained in this Section 3.03 that are made
to the best of the Seller's knowledge, if it is discovered that any such representation or warranty is found to be
inaccurate when made, in a manner that materially and adversely affects any Loan, the Purchaser shall be entitled to
all the remedies to which it would otherwise be entitled to under this Agreement absent such knowledge qualification,
including, without limitation, the repurchase requirements contained herein.
ARTICLE IV
Closing and Post Closing
4.01 Conditions of Closing. The obligation of Purchaser to consummate the transactions contemplated hereby is subject
to the satisfaction of the following conditions precedent on or before each Transfer Date or such other date as provided
below, any of which may be waived in writing by Purchaser:
(a) Seller shall have performed and observed in all material respects its obligations and covenants as set forth in this
Agreement;
(b) The representations and warranties of Seller set forth in Sections 3.02 and 3.03 of this Agreement shall be true and
correct in all material respects as of the Transfer Date (or such other date as specified in Sections 3.02 or 3.03 as if made
on the Transfer Date);
(c) With respect to the initial Transfer Date, Seller has delivered to Purchaser a fully executed copy, in a form
satisfactory to Purchaser, of (1) the Agreement for Deposit of Purchase Price and Release of Liens of Bank One, NA on
Chattel Paper and Instruments, among Seller, Purchaser and Bank One, NA, (2) the Agreement for Release of Liens on
Chattel Paper and Instruments, among Seller, Purchaser and The Charles Schwab Corporation, and (3) the Agreement
for Release of Liens on Chattel Paper and Instruments, among Seller, Purchaser and Christian Larsen.
(d) With respect to each Transfer Date, to the extent Seller shall have granted liens in favor of any Person which require
a release agreement pursuant to Section 5.10, Seller shall have delivered to Purchaser a release agreement satisfying the
requirements of such Section 5.10.
2. Limited Power of Attorney
. Seller hereby appoints Purchaser, its agents, employees, successors and assigns, as its attorney in
fact, with the full power of substitution, for the limited purpose of (1) endorsing Seller's name on any
checks, drafts, money orders or other forms of payment payable to Seller that may come into
Purchaser's possession with respect to any Loan purchased by Purchaser under this Agreement, and
(2) executing any form or document necessary to effectuate the assignment of a Loan in accordance
with this Agreement, or to create, perfect, assign or release a first priority security interest in a vehicle
securing a Loan in favor of Purchaser. Seller hereby irrevocably authorizes Purchaser at any time and
from time to time to file in any Uniform Commercial Code jurisdiction any initial financing
statements or amendments thereto that cover the Loans purchased pursuant to this Agreement, and
that contain any other information required by Part 5 of Article 9 of the Uniform Commercial Code or
such jurisdiction for the sufficiency or filing office acceptance of any financing statement or
amendment. Seller agrees to furnish all such information to Purchaser promptly upon request
therefore as will enable Purchaser to make such filings.
ARTICLE V
Additional Covenants
5.01 Confidentiality and Privacy Obligations of the Parties.
(a) From and after the date hereof, Seller and Purchaser (including, for purposes of this Section 5.01, Seller's
and Purchaser's respective directors, officers, employees, subsidiaries, affiliates, agents and advisors) shall treat all
information received from the other party during the negotiation or performance of the Agreement concerning the
business, assets, operations and financial condition of such other party, (the "Confidential Information") as confidential,
unless and to the extent that such party can demonstrate that such information was already known to it or in the
public domain; and neither party shall use any Confidential Information for any purposes except in furtherance of the
transaction contemplated by this Agreement.
(b) Neither party shall be deemed to have violated the covenants set forth in this Section 5.01 if such party shall be
required to disclose any Confidential Information in compliance with any legal process, order or decree, whether issued
by any court or government agency of competent jurisdiction or pursuant to any applicable regulatory requirement or
otherwise, in which event such party shall use its reasonable best efforts first to give the other prompt written notice,
unless notice is prohibited by law (in which case such notice shall be provided as early as may be legally permissible),
of any such request so that the other party may, in its discretion and at its expense, seek a protective order or other
appropriate remedy.
(c) Any exchange of Confidential Information shall be solely for the purpose of negotiating or performing this
Agreement, and shall be provided only to those authorized individuals of a party who are directly involved in
negotiating or performing the Agreement and who are directed by the receiving party to treat such information
confidentially in accordance with the requirements of this Section 5.01.
(d) Upon the request of the disclosing party, the other party shall promptly return all Confidential Information received
in connection with the transaction, and shall promptly destroy such materials containing such information (and any
copies, extracts, and summaries thereof) and shall further provide the other party with written confirmation of such
return or destruction upon request.
(e) The Seller acknowledges that in the course of performing this Agreement, the Seller will receive certain non-public
personal information about Purchaser's customers that falls within the provisions of the Right to Financial Privacy Act
of 1978, as amended, the Gramm-Leach-Bliley Act of 1999 and the regulations promulgated thereunder by the Office of
Thrift Supervision (12 CFR 573), and other applicable law. The Seller agrees to maintain the confidentiality of all such
information in accordance with applicable law. The Seller further agrees not to disclose or use any such information
except to perform its obligations under this Agreement or is otherwise permitted by such Federal regulation or any
similar state statutes or regulations relating to the privacy of non-public personal information by which the Seller and/
or the Purchaser may be bound.
This Section 5.01 shall survive termination or expiration of this Agreement. The covenants of the parties contained in
this Section 5.01 shall survive closing and termination of this Agreement, except as, and to the extent termination hereof
may be necessary, in order to comply with legal, accounting or regulatory requirements.
5.02 Cooperation of Parties.
a. From the date hereof until the Transfer Date, Purchaser and Seller each shall (i) execute and deliver
such instruments and take such other actions as the other party hereto may reasonably request in order
to carry out and implement this Agreement; and (ii) promptly notify the other party upon becoming
aware of any order, decree or complaint seeking to restrain or enjoin the execution of this Agreement
or the performance of the transactions contemplated hereunder.
(b) After the Transfer Date, the parties agree to (i) promptly cooperate with each other with respect to the processing
of pending payments and transactions which originated prior to the Transfer Date and (ii) promptly execute and deliver
such instruments and take such other actions as the other party hereto may reasonably request in order to carry out and
implement this Agreement.
(c) Seller and Purchaser shall each comply with the notice requirements of any applicable law. Each party shall assist
the other in complying with notice requirements that relate to both parties, or that require information in the possession
or control of the other party. Such compliance and assistance by each party shall include, without limitation, sending its
own notices to Obligors of the transfer of servicing from Seller to Purchaser, at such party's own expense, and providing
each other with any information that either party has or has access to that the other party reasonably requires to complete
its notices. If requested in writing by Purchaser, Purchaser shall have the right to approve any such notices to be sent
by Seller, and, if requested in writing by Seller, Seller shall have the right to approve any such notices to be sent by
Purchaser, prior to the date mailed. Purchaser and Seller may elect to send a joint notice which each shall have the
opportunity to review and approve.
5.03 Subsequent Sale of the Loans. Seller acknowledges and agrees that Purchaser may in the future sell, transfer
or otherwise assign the Loans in whole or in part, to a third party for the purpose of securitization or otherwise.
Notwithstanding anything to the contrary contained in this Agreement, Seller agrees to take all reasonable steps, at
Purchaser's expense, to assist the Purchaser, if the Purchaser so requests, in securitizing the Loans and selling undivided
interests in such Loans in a public offering or private placement or selling participating interests in such Loans. Seller
shall cooperate with the Purchaser in connection with any Whole Loan Transfer or Pass-Through Transfer contemplated
by the Purchaser pursuant to this Section 5.03. In connection therewith, Seller agrees to:
(a) execute all agreements required to be executed in connection with such Whole Loan Transfer or Pass-Through
(and any other documents incidental thereto, including officer's certificates) as the Purchaser shall reasonably request,
which agreements shall contain provisions substantially similar to those set forth herein and customarily included in
secondary market securitized transactions with respect to like assets, including a reconstitution agreement restating
the representations and warranties contained in Section 3.01 as of the reconstitution date and the representations and
warranties contained in Section 3.02 as of the related Closing Date;
(b) cooperate with respect to all reasonable requests regarding due diligence;
(c) deliver, at the expense of the Purchaser and subject to any applicable privacy and/or confidentiality requirements
under federal or state law or regulation, including without limitation, any U.S. Securities and Exchange Commission
rules, for inclusion in any prospectus, private placement memorandum or other offering material or disclosure document
such written information regarding the Seller, its financial condition, delinquency, foreclosure and loss experience as
shall be reasonably requested by the Purchaser and to indemnify and hold harmless the Purchaser and any affiliate
of the Purchaser for liabilities, losses and expenses arising in connection with any material misstatement contained in
such written information or any omission of a material fact the inclusion of which was necessary to make such written
information not misleading;
(d) deliver, at the expense of the Purchaser, such statements and audit letters of reputable certified public accountants
pertaining to the written information provided by the Seller referred to in clause (c) above as may be requested by the
Purchaser; and
(e) deliver, at the expense of the Purchaser, such opinions of counsel as are customarily delivered by originators in
connection with Whole Loan Transfers or Pass-Through Transfers.
5.04 Expenses; Taxes. Each of the parties hereto shall bear its own legal, accounting and other costs in connection with
the transaction contemplated by this Agreement. Each party shall pay their own applicable federal, state and local taxes
incurred in their performance under this Agreement.
5.05 Non Solicitation. With respect to each Loan sold to Purchaser under this Agreement, Seller agrees that Seller
will not directly solicit the respective Obligors to apply for, or offer to such Obligors, any auto-secured loan product
to refinance the Loan. For the purposes of this Section 5.05, the phrase "directly solicit" shall not include general
advertising directed to the general public at large, mass mailings based on commercially acquired mailing lists,
newspaper, radio and television advertisements and information brochures which indicate services the Seller offers,
including refinances.
5.06 Indemnification. Seller shall indemnify, hold harmless and defend Purchaser, its affiliates and any of their officers,
directors, employees, shareholders, agents and representatives from and against any claims, losses, liabilities, demands,
obligations and settlement amounts, including, without limitation, reasonable attorneys' fees and expenses, which any
of them may receive, suffer or incur in connection with (i) the inaccuracy of any representation or warranty of Seller
contained or referred to herein, (ii) the breach of any agreement or covenant of (x) Seller set forth or referred to herein or
(y) any third party set forth in any agreement referenced in Section 4.01(d) or delivered pursuant to Section 5.10 or (iii)
Seller's ownership of the Loans prior to the applicable Transfer Date, including any third-party litigation, proceeding,
claim or other similar matter in connection with the Loans relating to Seller's action or inaction prior to the applicable
Transfer Date.
Purchaser agrees to provide Seller with prompt written notice of any such claim, demand or action, including copies
thereof and any correspondence and other documentation relating thereto. Seller shall have the right to take over the
defense of any such claims, demands, actions, suits, or proceedings through counsel selected by Seller and reasonably
acceptable to Purchaser, to compromise and/or settle the same and to prosecute any available appeals or reviews of any
adverse judgment or ruling that may be entered therein; provided, however, that Seller shall not enter into any settlement
without Purchaser's prior written consent, and, provided, further, that if Seller elects not to assume such defense, or
counsel for Purchaser reasonably advises Purchaser that there are issues which raise conflicts of interest between Seller
and Purchaser, Purchaser may retain counsel reasonably satisfactory to it after consultation with Seller and Seller shall
pay the reasonable fees and expenses of such counsel in accordance with the terms of this Agreement. Purchaser and
Seller shall cooperate with respect to the investigation, defense and resolution of all such matters.
5.07 Repurchase upon Breach. Notwithstanding any provision of this Agreement to the contrary, if Purchaser provides
written notice to Seller that (i) any of the Seller representations and warranties in Section 3.02 or 3.03 hereof relating
to the Loans have been found to be inaccurate or untrue, or (ii) the Seller has breached any agreement or covenant
of Seller set forth or referred to herein, and in either case, such inaccuracy or breach materially and adversely affects
any Loan, and such inaccuracy or breach is not cured within thirty (30) days following delivery of Purchaser's written
notice to Seller, then Seller, at Purchaser's option, will be obligated upon the expiration of such 30-day period either
to repurchase the Loan or reimburse Purchaser for monetary damages incurred as a result of the inaccuracy or breach;
provided, however, that should Seller, as a result of any delay in the recording office of the applicable jurisdiction,
be unable to deliver to Purchaser the original certificate of title with respect to a Loan within the 180 day period set
forth in the representation contained in 3.03 (ff) hereof, Seller shall be entitled to sixty (60) additional days to effect
such delivery. The Repurchase Price shall be equal to (i) the UPB of the Loan at the time of repurchase; plus (ii)
accrued but unpaid interest on the UPB at the Loan interest rate from the last date through which interest has been
paid and distributed to the Purchaser through the date of repurchase; plus (iii) any Additional Compensation paid to the
Seller in connection with the repurchased Loan; plus Purchaser's reasonable expenses incurred in connection with the
repurchase. Such repurchase or reimbursement, together with the indemnification provided in Section 5.06 hereof, shall
be Purchaser's sole remedies with respect to a breach of Seller's representations and warranties in Section 3.03 hereof.
5.08 Assignments. Seller shall assign at Seller's expense, Seller's interest in each Loan, effective as of the Transfer Date,
in order to evidence the transfer of Seller's interest in the Loans to Purchaser in such manner as may be reasonable and
appropriate, and as mutually agreed by the parties. Seller further agrees, from time to time following the applicable
Transfer Date, to execute any individual assignments necessary to effect assignment of each Loan to Purchaser.
5.09 Maintenance of Perfection; Annual Lien Search. Seller agrees that (a) it will not, without providing Purchaser with
30 days' prior written notice, (i) change its jurisdiction of incorporation or (ii) change its corporate name; and (b) upon
Purchaser's request made no more than once per calendar year, it will provide Purchaser with UCC lien search results
in the name of Seller in Seller's jurisdiction of organization.
5.10 Additional Lien Releases. Seller agrees that it shall not grant or incur (whether in connection with the sale of any
loan to another loan purchaser or otherwise) any lien in favor of any Person (other than the Persons described in Section
4.01(d)) that is (i) on Seller's interest in any chattel paper, documents or instruments representing direct loans arising
from the finance of sales of motor vehicles, or any proceeds thereof, and (ii) the subject of any financing statement filed
under the UCC; provided that Seller may grant such liens upon obtaining and delivering to Purchaser an agreement of
such Person, in form satisfactory to Purchaser, which excludes or releases from the liens acquired by such Person any
Loans purchased by Purchaser pursuant to this Agreement.
ARTICLE VI
Termination
6.01 Termination by Mutual Agreement. It is understood and agreed by the parties that Seller is not obligated to offer
to sell any Loans to Purchaser and Purchaser is not obligated to buy any Loans from Seller, except as set forth in
a Confirmation and subject to the terms of this Agreement. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned by mutual consent and upon the written agreement of the parties hereto, or
by either party without cause upon thirty (30) days prior written notice to the other party, provided that there is no
then-pending Event of Default by either party. No later than seven (7) business days of Seller's receipt of a notice of
termination by Purchaser, or Seller's issuance of a notice of termination to Purchaser, Seller shall provide Purchaser with
a list of Loans for which applications are pending ("Loan(s) in Process"). The parties' respective rights and obligations
under Article II of this Agreement, solely with respect to such Loan(s) in Process, shall continue for a period of
forty-five (45) days following the Seller's issuance of the Loans in Process list; provided, however, that in the event
the termination notice is issued by Seller, such continuation following the termination date shall be at Purchaser's
sole discretion. Further, notice of termination by either party shall not relieve either of the parties of its respective
obligations, or deprive either party of its respective rights under this Agreement with respect Loans that were the subject
of a Confirmation as of receipt of such termination notice.
6.02 Termination for Cause. This Agreement may be terminated by either party upon the following Events of Default:
(a) in the event of a material breach by the other party of this Agreement, which shall not have been remedied to the
reasonable satisfaction of the non-breaching party within thirty (30) days after written notice of the material breach or
failure to satisfy is delivered to the party in default; provided, however, that the non-breaching party shall retain its
ability to bring a claim for damages and/or equitable relief against the party in default and to seek all available
remedies from the party in default in accordance with this Agreement in connection with such breach or failure
notwithstanding any termination of the Agreement pursuant to this Section 6.02(a); and further provided, that notice of
termination by Purchaser under this Section 6.02(a) shall relieve Purchaser of any obligation under Section 2.01(b) of
this Agreement to purchase Loans that are the subject of a Confirmation as of the date of such notice, and/or under
Section 6.01 of this Agreement with respect to Loans in Process.
(b) in the event of (i) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect
of Seller or any substantial part of its property in an involuntary case under any applicable federal or state bankruptcy,
insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidation, assignee, custodian,
trustee, sequestrator or similar official for Seller or for any substantial part of its property, or ordering the winding-up
or liquidation of Seller's affairs; or (ii) the commencement by Seller of a voluntary case under any applicable federal
or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by Seller to the entry of
an order for relief in an involuntary case under any such law, or the consent by Seller to the appointment of or taking
possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for Seller or for any
substantial part of its property, or the making by Seller of any general assignment for the benefit of creditors, or the
failure by Seller generally to pay its debts as such debts become due, or the taking of action by Seller in furtherance of
any of the foregoing (both Sections 6.02(b)(i) and (b)(ii) being referred to as an "Insolvency Event").
6.03 Notice of Termination. Except with respect to any Insolvency Event, in which case termination shall be automatic
without the requirement of any notice, to exercise the right to terminate as provided in this Article VI, the exercising
party must advise the other party in writing, which notice shall be effective immediately upon being received by the
other party.
6.04 Effect of Termination. The termination of this Agreement pursuant to Section 6.01 or 6.02 shall not release either
party hereto from any liability or obligation to the other party hereto arising from a breach of any provision of this
Agreement occurring prior to termination.
ARTICLE VII
Miscellaneous Provisions
7.01 Survival of Covenants, Representations and Warranties. Except to the extent otherwise provided herein, the
representations, warranties, covenants and agreements in this Agreement or in any instrument, document, agreement or
schedule delivered pursuant to this Agreement shall survive closing and/or termination of this Agreement.
7.02 Waiver. Each party hereto, by written instrument signed by duly authorized officers of such party, may extend the
time for the performance of any of the obligations or other acts of the other party hereto and may waive, but only as
affects the party signing such instruments:
(a) any inaccuracies in the representations or warranties of the other party contained or referred to in this Agreement or
in any document delivered pursuant hereto;
(b) compliance with any of the covenants or agreements of the other party contained in this Agreement;
(c) the performance (including performance to the satisfaction of a party or its counsel) by the other party of such of its
obligations set out herein; and
(d) satisfaction of any condition to the obligations of the waiving party pursuant to this Agreement;
provided
, that in each case, no waiver shall be deemed to be or construed as a further or continuing waiver of such terms,
conditions or obligations or of any other term, condition or obligation.
7.03 Notices. Any notice or other communication required or permitted pursuant to this Agreement shall be effective
only if it is in writing and delivered personally, by facsimile transmission, by overnight courier or by registered or
certified return-receipt mail, postage prepaid addressed as follows:
If to Seller: E-LOAN
5875 Arnold Road
Attention: Stephen Herz, Vice President
Telephone: (925) 560-2811
Fax: (925) 803-3507
With a copy to Edward A. Giedgowd, General Counsel, at the same address, fax: (925) 803-3503
If to Purchaser: E*TRADE Bank
671 North Glebe Road
Arlington, Virginia 22203
Attention: Rob Snow, Vice President
E*TRADE Global Asset Management
Telephone: (703) 236-8181
Fax: (703) 247-2778
With a copy to John A. Buchman, General Counsel
or to such other person or address as any such party may designate by notice to the other party and shall be deemed to
have been given as of the date received.
7.04 Assignment; Parties in Interest; Amendment. This Agreement may not be assigned by the Seller without the prior
written consent of the Purchaser. Subject to the foregoing, this Agreement is binding upon and is solely for the benefit
of the parties hereto and their respective successors and permitted assigns. No person who is not a signatory hereto
shall have any rights or benefits under this Agreement, either as a third party beneficiary or otherwise. This Agreement
cannot be amended or modified, except by a written agreement executed by the parties hereto
7.05 Entire Agreement. This Agreement supersedes any and all oral or written agreements and understandings
heretofore made relating to the subject matter hereof and contains the entire agreement of the parties relating to the
subject matter hereof. Exhibits and attachments to this Agreement are incorporated into this Agreement by reference
and made a part hereof.
7.06 Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the
Commonwealth of Virginia, without regard to the provisions thereof regarding choice of law.
7.07 Severability. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall,
as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of
the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to
be unenforceable, the provision shall be interpreted to be only so broad as is enforceable.
7.08 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
7.09 Definitions; Sections and Headings. The sections and headings used in this Agreement are inserted for convenience
of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement.
7.10 Waiver of Jury Trial. EACH PARTY HERETO WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by the respective officers
thereunto duly authorized, all as of the date first above written.
E*TRADE BANK
, Purchaser
By:
____________________
Its:
____________________
E-LOAN
, Inc. Seller
By: ______________________
Its: _______________________
EXHIBIT A
SCHEDULE OF LOANS
For each Loan, the schedule will include the following (except as otherwise specified herein):
Field
Account #
Obligor Name
Obligor SSN
Last Known Address
Contract Date
Next Payment Date
Maturity Date
First Payment Date
Term
Original Principal Balance
Current Principal Balance (if different from Original Principal Balance)
APR
New/Used
Year/Make/Model
LTV (as of origination date)
Co-obligor Name
Co-obligor SSN
Co-obligor Address
FICO Score
Debt-to-Income Ratio
EXHIBIT B
CONTENTS OF THE LOAN FILE
1. The original signed note and security agreement evidencing the Loan, together with any agreements modifying such
Loan, including, without limitation, any extension agreements.
2. A copy of the application for the certificate of title relating to each Financed Vehicle, showing Seller, Purchaser or
its nominee as the sole lienholder or legal owner, and subject to Section 5.07 of this Agreement, within 180 days of the
applicable Transfer Date, the original certificate of title.
3. A true and complete copy of the credit application of the applicable Obligor.
4. A true and complete copy of the duly executed odometer statement with respect to the Financed Vehicle related to
such Loan (if such Financed Vehicle is a used Vehicle), which statement may be included in the bill of sale.
5. A true and complete copy of the duly executed notice to co-signer delivered to the co-signer, if any, related to such
Loan, which notice may be set forth in the note and security agreement.
6. A true and complete copy of all other agreements, documents and instruments evidencing, securing or guarantying
such Loan.
EXHIBIT C
PURCHASE CRITERIA
[ ** ]
EXHIBIT D
LIST OF STATES
All States and the District of Columbia in the United States, except for the States of Alaska, Hawaii and Illinois.
EXHIBIT E
ADDITIONAL COMPENSATION
[ ** ]
EXHIBIT F
FORM OF OFFER
Offer to Sell Loans - E*Trade
Offer Date: ____________
E-LOAN, Inc. hereby offers the following Loans for sale to E*TRADE
Bank, in accordance with Section 2.01 of the Flow Purchase and Sale
Agreement dated ___________ between E-LOAN, Inc. and E*TRADE
Bank.
Customer Name
Loan Amount
Loan Number
Loan Date
EXHIBIT G
FORM OF CONFIRMATION
Confirmation to Purchase Loans
Confirmation Date: __________
E*TRADE Bank hereby agrees to purchase on _______, 200_, the following
Loans from E-LOAN, Inc. in accordance with Section 2.01 of the Flow Purchase
and Sale Agreement dated ___________ between E-LOAN, Inc. and E*TRADE
Bank.
Customer Name
Loan Amount
Loan Number
Loan Date
EXHIBIT H
FORM OF LOAN EXCEPTION REPORT
Loan Exception Report
Dated _____________
The following Loans were included in an Offer to Sell Loans dated __________
delivered to E*TRADE Bank by E-LOAN, Inc., and have not been accepted for
purchase by E*TRADE Bank for the Reasons for Exception set forth below.
Upon satisfaction of the conditions set forth below in respect of any Loan, such
Loan may be included in a subsequent Offer to Sell Loans, in accordance with
Section 2.01 of the Flow Purchase and Sale Agreement dated ___________
between E-LOAN, Inc. and E*TRADE Bank.
Customer Name Loan Amount
Loan Number
Contract Date
Reason for
Exception
EXHIBIT I
LIENS AND ENCUMBRANCES
See attached copies of UCC searches for
California, Delaware, Florida and Ohio.
Exhibit 10.156
AMENDMENT NUMBER FIVE
to the
This AMENDMENT NUMBER FIVE (this "Amendment") is made this 1st day of January, 2002, between E-LOAN,
INC. ("Borrower") and GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. ("Lender") to the MASTER
LOAN AND SECURITY AGREEMENT, dated as of May 10, 1999 between Lender and Borrower, as otherwise
amended (the "Loan Agreement").
RECITALS
WHEREAS, Borrower has requested that lender agree to amend the Loan Agreement to increase the maximum
amount of advances that may be made on an uncommitted basis (i.e., in the sole and absolute discretion of the Lender),
and the Lender has agreed to make such amendments, subject to the terms and conditions of this Amendment.
acknowledged, and of the mutual covenants herein contained, the parties hereto hereby agree ac follows:
SECTION 1. (a) Increase of Maximum Uncommitted Amount. Effective as of January 1, 2002, the defined term
"Maximum Uncommitted Amount" is deleted in its entirety and replaced with the following:
"Maximum Uncommitted Amount shall mean $200 Million."
(b) Applicable Collateral Percentage. Effective as of January 1, 2002, the defined term "Applicable Collateral
Percentage" is hereby amended by adding the following to the end thereof:
"98%" contained in clauses (a)(1) and (b)(1) shall automatically be changed to 95% with respect to any and all
Mortgage Loans Pledged to the Lender in connection with the Advents that results in the aggregate outstanding
principal amount of Advances exceeding $200 million and each pledge of Mortgage Loans made during the period of
time in which the aggregate outstanding principal amount of Advances exceeds $200 million (and such change shall
remain effective with inspect to the relevant Mortgage Loans even after the aggregate outstanding principal amount of
Advances is $200 million or less)."
(c) Applicable Margin. Effective as of January 1, 2002, the defined term "Applicable Margin" is hereby amended by
adding the following to the end thereof:
per annum rate for Tranche A Advances shall de automatically increased from 0.75% to 1.50%x" and the per annum
rats for Tranche B Advances shall be automatically increased from 1.25% to 2.00%, with respect to the Advance that
results in the aggregate outstanding principal amount of Advances exceeding $200 million and each subsequent
Advance made during the period of time in which the aggregate outstanding principal amount of Advances exceeds
$200 million (and such increase shall remain effective with respect to the relevant Mortgage Loans even after the
aggregate outstanding principal amount of Advances is $200 million or less)."
SECTION 2. Fees and Expenses. Borrower agrees to pay to Lender all fees and out of pocket expenses incurred by
Lender is connection with this Amendment (including all reasonable fees and out of pocket costs and expenses of the
Lender's legal counsel incurred in connection with this Amendment), in accordance with Section 11.03 of the Loan
Agreement.
SECTION 3. Defined Terms. Any terms capitalized but not otherwise defined herein shall have the respective
meanings set forth in the Loan Agreement.
SECTION 4. Representations. In order to induce the Lender to execute and deliver this Amendment, the Borrower
hereby represents to the Lender that as of the date hereof, after giving effect to this Amendment, the Borrower is in fall
compliance with all of the terms and conditions of the Loan Agreement.
SECTION 5. Limited Effect. Except as expressly amended and modified by this Amendment, the Loan Agreement
shall continue in full force and affect ion accordance with its terms . Reference to this Amendment need not be made
in the Loan Agreement or any other instrument or document executed in connection therewith, or in any certificate,
letter or communication issued or made pursuant to, or with respect to, the loan Agreement, any reference in any of
such items to the Loan Agreement being sufficient to refer to the Loan Agreement as amended hereby.
SECTION 6. GOVERNING LAW. THIS AMENDMENT STALL BE CONSTRUED 1N 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
REGARD TO CONFLICT OF LAWS DOCTRINE APPLIED IN SUCH STATE.
SECTION 7. Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate
counterparts, each of which shall be an original and all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, each of the Borrower and the Lender have caused this Amendment to he executed and
delivered by its duly authorized officer as of the day and year first above written.
E-LOAN, INC.,
Borrower
By:
Name:
Title:
Lender
By:
Name:
Title:
Exhibit 10.157
AMENDMENT NUMBER SIX
to the
Master Loan and Security Agreement
Dated as of May 10, 1999
by and between
E-LOAN, INC.
and
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC.
This AMENDMENT NUMBER SIX is made this 1st day of February, 2002, by and between E-LOAN, INC., having
an address at 5875 Arnold Road, Dublin, California 94568 (the "Borrower") and GREENWICH CAPITAL
FINANCIAL PRODUCTS, INC., having an address at 600 Steamboat Road, Greenwich, Connecticut 06830 (the
"Lender"), to the Master Loan and Security Agreement, dated as of May 10, 1999, by and between the Borrower and
the Lender, as amended (the "Agreement"). Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Agreement.
RECITALS
WHEREAS, the Borrower has requested that the Lender agree to amend the Agreement to extend the Termination
Date thereunder for an additional period of thirty days;
WHEREAS, in order to induce Lender to enter into this Amendment Number Six, the Borrower has agreed to pay the
Lender a commitment fee equal to $41,666.67; and
WHEREAS, the Borrower and the Lender have agreed to amend the Agreement as set forth herein.
acknowledged, and for the mutual covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. Effective as of February 1, 2002, Section 1 of the Agreement is hereby amended by deleting the
definition of Termination Date and replacing it with the following:
"Termination Date" shall mean March 21, 2002, or such earlier date on which this Loan Agreement shall terminate in
accordance with the provisions hereof or by operation of law, as same may be extended pursuant to Section 2.09.
SECTION 2. Commitment Fee. In order to induce the Lender to enter into this Amendment Number Six with the
Borrower, the Borrower hereby agrees to pay to the Lender a commitment fee equal to $41,666.67 to be paid to the
Lender upon execution of this Amendment Number Six. Such commitment fee shall be paid in dollars, in immediately
available funds, in accordance with the Lender's instructions. This Amendment Number Six shall be effective upon
Lender's receipt of such commitment fee.
SECTION 3. Defined Terms. Any terms capitalized but not otherwise defined herein should have the respective
meanings set forth in the Agreement.
SECTION 4. Limited Effect. Except as amended hereby, the Agreement shall continue in full force and effect in
accordance with its terms. Reference to this Amendment need not be made in the Agreement or any other instrument
or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant
to, or with respect to, the Agreement, any reference in any of such items to the Agreement being sufficient to refer to
the Agreement as amended hereby.
SECTION 5. Representations. In order to induce the Lender to execute and deliver this Amendment Number Six, the
Borrower hereby represents to the Lender that as of the date hereof, the Borrower is in full compliance with all of the
terms and conditions of the Agreement and no Default or Event of Default has occurred and is continuing under the
Agreement.
SECTION 6. Governing Law. This Amendment Number Six 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 regard to conflict of laws doctrine applied in such state (other than Section 5-1401 of the New
York General Obligations Law).
SECTION 7. Counterparts. This Amendment Number Six may be executed by each of the parties hereto on any
number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one
and the same instrument.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
1N WITNESS WHEREOF, the Borrower and the Lender have caused this Amendment Number Six to be executed
and delivered by their duly authorized officers as of the day and year first above written.
E-LOAN, INC.
(Borrower)
By:
Name:
Title:
(Lender)
By:
Name: Anthony Palmisano
Title: Vice President
Exhibit 10.158
PROMISSORY NOTE
$300,000,000
March 21, 2002
New York, New York
FOR VALUE RECEIVED, &LOAN, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the
order of GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. (the "Lender"), at the principal office of the
Lender at 600 Steamboat Road, Greenwich, Connecticut 06830, in lawful money of the United States, and in
immediately available funds, the principal sum of THREE HUNDRED MILLION DOLLARS ($300,000,000) (or
such lesser amount as shall equal the aggregate unpaid principal amount of the Advances made by the Lender to the
Borrower under the Loan Agreement), on the dates and in the principal amounts provided in the
Loan Agreement, and to pay interest on the unpaid principal amount of each such Advance, at such office, in like
money and funds, for the period commencing on the date of such Advance until such Advance shall be paid in full, at
the rates per annum and on the dates provided in the Loan Agreement.
The date, amount and interest rate of each Advance made by the Lender to the Borrower, and each payment made on
account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Note,
endorsed by the Lender on the schedule attached hereto or any continuation thereof; provided, that the failure of the
Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower to make a
payment when due of any amount owing under the Loan Agreement or hereunder in respect of the Advances made by
the Lender.
This Note is the Note referred to in the Master Loan and Security Agreement dated as of March 21, 2002 (as amended,
supplemented or otherwise modified and in effect from time to time, the "Loan Agreement") between the Borrower,
and the Lender, and evidences Advances made by the Lender thereunder. Terms used but not defined in this Note have
the respective meanings assigned to them in the Loan Agreement.
The Borrower agrees to pay all the Lender's costs of collection and enforcement (including reasonable attorneys' fees
and disbursements of Lender's counsel) in respect of this Note when incurred, including, without limitation, reasonable
attorneys' fees through appellate proceedings.
Notwithstanding the pledge of the Collateral, the Borrower hereby acknowledges, admits and agrees that the
Borrower's obligations under this Note are recourse obligations of the Borrower to which the Borrower pledges its full
faith and credit.
The Borrower, and any indorsers or guarantors hereof, (a) severally waive diligence, presentment, protest and demand
and also notice of protest, demand, dishonor and nonpayments of this Note, (b) expressly agree that this Note, or any
payment hereunder, may be extended from time to time, and consent to the acceptance of further Collateral, the release
of any Collateral for this Note, the release of any party primarily or secondarily liable hereon, and (c) expressly agree
that it will not be necessary for the Lender, in order to enforce payment of this Note, to first institute or exhaust the
Lender's remedies against the Borrower or any other party liable hereon or against any Collateral for this Note. No
extension of time for the payment of this Note, or any installment hereof, made by agreement by the Lender with any
person now or hereafter liable for the payment of this Note, shall affect the liability under this Note of the Borrower,
even if the Borrower is not a party to such agreement; provided, however, that the Lender and the Borrower, by
written agreement between them, may affect the liability of the Borrower.
Any reference herein to the Lender shall be deemed to include and apply to every subsequent holder of this Note.
Reference is made to the Loan Agreement for provisions concerning optional and mandatory prepayments, Collateral,
acceleration and other material terms affecting this Note.
Any enforcement action relating to this Note may be brought by motion for summary judgment in lieu of a complaint
pursuant to Section 3213 of the New York Civil Practice Law and Rules. The Borrower hereby submits to New York
jurisdiction with respect to any action brought with respect to this Note and waives any right with respect to the
doctrine of forum non conveniens with respect to such transactions.
This Note shall be governed by and construed under the laws of the State of New York (without reference to
choice of law doctrine but with reference to Section 5-1401 of the New York General Obligations Law, which by
its terms applies to this Note) whose laws the Borrower expressly elects to apply to this Note. The Borrower
agrees that any action or proceeding brought to enforce or arising out of this Note may be commenced in the
Supreme Court of the State of New York, Borough of Manhattan, or in the District Court of the United States
for the Southern District of New York.
E-LOAN, INC.
By:
Name:
Title:
Exhibit 10.159
______________________________
Dated as of March 21, 2002
______________________________
E-LOAN, INC.
as Borrower
and
as Lender
MASTER LOAN AND SECURITY AGREEMENT, dated as of March 21, 2002, between E-LOAN, INC., a
Delaware corporation (the "Borrower") and GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., a Delaware
corporation (the "Lender").
RECITALS
The Borrower wishes to obtain financing from time to time to provide interim funding for the origination and
acquisition of certain Mortgage Loans (as defined herein), which Mortgage Loans are to be sold or contributed by the
Borrower to the Lender pursuant to a mortgage loan purchase agreement between the Borrower and the Lender, to one
or more trusts or other entities to be sponsored by the Borrower or an Affiliate (as defined herein) thereof, or to thirdparties, which Mortgage Loans shall secure Advances (as defined herein) to be made by the Lender hereunder.
The Lender has agreed, subject to the terms and conditions of this Loan Agreement (as defined herein), to provide
such financing to the Borrower, with a portion of the proceeds of the sale of all mortgage-backed securities issued by
any such trust or other entity, together with a portion of the proceeds of any permitted whole loan sales, together with
other funds of the Borrower, if necessary, being used to repay any Advances made hereunder as more particularly
described herein.
Accordingly, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions and Accounting Matters.
1. Certain Defined Terms
. As used herein, the following temps shall have the following meanings (all terms defined in
this Section 1.01 or in other provisions of this Loan Agreement in the singular to have the
same meanings when used in the plural and vice versa):
"Accepted Servicing Practices" shall mean, with respect to any Mortgage Loan, accepted and
prudent mortgage servicing practices of prudent mortgage lending institutions which service
mortgage loans of the same type as such Mortgage Loans in the jurisdiction where the related
Mortgaged Property is located and in a manner at least equal in quality to the servicing the
Borrower or the Borrower's designee provides to mortgage loans which they own in their own
portfolio (as applicable).
"Advance" shall mean any Committed Advance or Uncommitted Advance, as applicable, and
collectively "Advances" shall mean the sum of all Committed Advances and Uncommitted
Advances.
"Affiliate" means, with respect to any Person, any other Person which, directly or indirectly,
controls, is controlled by, or is under common control with, such Person, for purposes of this
definition, "control" (together with the correlative meanings of "controlled by" and "under
common control with") means possession, directly or indirectly, of the power (a) to vote 10%
or more of the securities (on a fully diluted basis) having ordinary voting power for the
directors or managing general partners (or their equivalent) of such Person, or (b) to direct or
cause the direction of the management or policies of such Person, whether through the
ownership of voting securities, by contract, or otherwise
"Agency" means Fannie Mae, Freddie Mac or GNMA, as applicable.
"ALTA" means the American Land Title Association.
"Applicable Collateral Percentage" shall mean with respect to each Advance:
(a) in the case of "A" credit Dry Loans (other than High LTV Loans) and HELOCs:
(1) which are 0 to 29 days past due with respect to scheduled principal and interest payments,
98%, and (2) which are 30 days or more past due with respect to scheduled principal and
interest payments, 0%;
(b) in the case of "B" or "C" credit Dry Loans and High LTV Loans:
(1) which are 0 to 29 days past due with respect to scheduled principal and interest payments,
96%, and (2) which are 30 days or more past due with respect to scheduled principal and
interest payments, 0%; and
(c) in the case of Wet Loans:
(1) for which all Required Documents have not been delivered for 0 to 10 days, 98%, and (2)
for which all Required Documents have not been delivered within 10 days, 0%.
"Applicable Marlin" shall mean with respect to Advances that are Tranche A Advances and
Tranche B Advances respectively, and which are secured by the Mortgage Loans, the
applicable rate per annum set forth below for each day that such Advances shall be so
secured:
Tranche A Advances 0.75%
Tranche B Advances 1.25%
Tranche C Advances 1.50%
"Appraised Value" shall mean the value set forth in an appraisal made in connection with the
origination of the related Mortgage Loan as the value of the Mortgaged Property.
"Assignment of Mortgage" shall mean, with respect to any Mortgage, an assignment of the
Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the
laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the
assignment and pledge of the Mortgage.
"Bankruptcy Code" shall mean the United States Bankruptcy Code of 1978, as amended from
time to time.
"Best's" means Best's Key Rating Guide, as the same shall be amended from time to time.
"Borrower" shall have the meaning provided in the heading hereof.
"Borrowing Base" shall mean the aggregate Collateral Value of all Eligible Mortgage Loans
that have been, and remain, pledged to the Lender hereunder.
"Borrowing Base Certificate" shall mean the certificate prepared by the Lender in such form
as shall be mutually agreed to between the Borrower and the Lender.
"Borrowing Base Deficiency" shall have the meaning provided in Section 2.06 hereof.
"Business Day" shall mean any day other than (i) a Saturday or Sunday, (ii) a day on which
the New York Stock Exchange, the Federal Reserve Bank of New York, the Custodian or
banking and savings and loan institutions in the State of New York or the City of New York
or the city or state in which the Custodian's offices are located are closed, or (iii) a day on
which trading in securities on the New York Stock Exchange or any other major securities
exchange in the United States is not conducted.
"Capital Lease Obligations" shall mean, for any Person, all obligations of such Person to pay
rent or other amounts under a lease of (or other agreement conveying the right to use)
Property to the extent such obligations are required to be classified and accounted for as a
capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Loan
Agreement, the amount of such obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"Cash Equivalents" shall mean (a) securities with maturities of 90 days or less from the date
of acquisition issued or filly guaranteed or insured by the United States Government or any
agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of 90
days or less from the date of acquisition and overnight bank deposits of any commercial bank
having capital and surplus in excess of $500,000,000, (c) repurchase obligations of any
commercial bank satisfying the requirements of clause (b) of this definition, having a term of
not more than seven days with respect to securities issued or filly guaranteed or insured by
the United States Government, (d) commercial paper of a domestic issuer rated at least A-1 or
the equivalent thereof by Standard and Poor's Ratings Group ("S&P") or P-1 or the equivalent
thereof by Moody's Investors Service, Inc. ("Moody's") and in either case maturing within 90
days after the day of acquisition, (e) securities with maturities of 90 days or less from the date
of acquisition issued or filly guaranteed by any state, commonwealth or territory of the
United States, by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which state,
commonwealth, territory, political subdivision, taxing authority or foreign government (as the
case may be) are rated at least A by S&P or A by Moody's, (f) securities with maturities of 90
days or less from the date of acquisition backed by standby letters of credit issued by any
commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of
money market mutual or similar funds which invest exclusively in assets satisfying the
requirements of clauses (a) through (f) of this definition.
"Change of Control" means the acquisition by any Person, or two or more Persons acting in
concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of 1934) of outstanding shares of
voting stock of the Borrower at any time if after giving effect to such acquisition (i) such
Person or Persons owns twenty percent (20%) or more of such outstanding voting stock or
(ii) the existing shareholders of the Borrower do not own more than fifty (50%) of such
outstanding shares of voting stock.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
"Collateral" shall have the meaning assigned to such term in Section 4.01(b) hereof.
"Collateral Value" shall mean with respect to each Mortgage Loan, the Applicable Collateral
Percentage times the lesser of (x) the outstanding principal balance of such Mortgage Loan,
and (y) the Market Value thereof, provided, that, the Collateral Value shall be deemed to be
zero with respect to each Mortgage Loan:
(1) in respect of which there is a material breach of a representation and warranty set forth on
Schedule 1 (assuming each representation and warranty is made as of the date Collateral
Value is determined) or there is a Material Exception which was not otherwise waived by
Lender;
(2) which the Lender determines, in its reasonable discretion, is not eligible for sale in the
secondary market or for securitization without unreasonable credit enhancement;
(3) which has been released from the possession of the Custodian under Section 5(a) of the
Custodial Agreement to the Borrower or its bailee for a period in excess of eighteen (18)
calendar days (or if such 18th day is not a Business Day, the preceding Business Day);
(4) which has been released from the possession of the Custodian (i) under Section 5(b) of the
Custodial Agreement under any Transmittal Letter in excess of the time period stated in such
Transmittal Letter for release, or (ii) under Section 5(c) of the Custodial Agreement under an
Attorney Bailee Letter, from and after the date such Attorney's Bailee Letter is terminated or
ceases to be in full force and effect;
(5) which has been subject to this Loan Agreement for greater than 45 days;
(6) in respect of which (a) the related Mortgaged Property is the subject of a foreclosure
proceeding or (b) the related Mortgage Note has been extinguished under relevant state law in
connection with a judgment of foreclosure or foreclosure sale or otherwise;
(7) if (a) the related Mortgage Note or the related Mortgage is not genuine or is not the legal,
valid, binding and enforceable obligation of the maker thereof, subject to no right of
rescission, set-off, counterclaim or defense, or (b) such Mortgage is not a valid, subsisting,
enforceable and perfected first lien on the Mortgaged Property;
(8) in respect of which the related Mortgagor is the subject of a bankruptcy proceeding;
(9) if the Mortgagor does not make the first payment due on the related Mortgage Loan
within thirty (30) days of the due date therefor;
(10) that is a HELOC, High LTV Loan, Second Lien Mortgage Loan or "B" or "C" credit
Mortgage Loan that is not covered by a Takeout Commitment; or
(11) that was originated more than 30 days prior to the date such Mortgage Loan was first
subject to the terms of this Loan Agreement.
"Collection Account" shall mean the segregated account established at the direction of the
Borrower, and maintained in the name of the Lender and subject to a security interest in favor
of the Lender into which all Collections received by the Servicer or a Subservicer shall be
remitted by such Servicer or Subservicer. The Borrower shall have the right to direct that
withdrawals from such account be made until such time as the Lender, in its sole discretion,
provides notice to the Collection Bank terminating such right of the Borrower.
"Collection Account Agreement" shall mean an agreement between the Borrower, the
Collection Bank, and the Lender, substantially in the form of Exhibit G hereto, as the same
may be amended, supplemented or otherwise modified from time to time, in which the
Borrower and Collection Bank acknowledge the Lender's lien on the Collection Account
(which lien is hereby consented to by the Borrower), and the Borrower hereby grants to the
Lender the right to assume at any time during the occurrence of an Event of Default
hereunder exclusive dominion and control over the distribution of all movies in the account,
which control may be exercised by the Borrower prior to such assumption of control by the
Lender.
"Collection Bank" shall be mutually determined by the Lender and the Borrower.
"Collections" shall mean, collectively, all collections and proceeds on or in respect of the
Mortgage Loans excluding collections required to be paid to the Servicer or a mortgagor on
the Mortgage Loans.
"Commitment Fee" shall have the meaning assigned to such term in Section 3.04 hereof.
"Committed Advance" shall have the meaning assigned to such term in Section 2.01(a)
hereof.
"Contractual Obligation" shall mean as to any Person, any material provision of any
agreement, instrument or other undertaking to which such Person is a party or by which it or
any of its property is bound or any material provision of any security issued by such Person.
"Cooperative Corporation" shall mean with respect to any Cooperative Loan, the cooperative
apartment corporation that holds legal title to the related Cooperative Project and grants
occupancy rights to units therein to stockholders through Proprietary Leases or similar
arrangements.
"Cooperative Loan" shall mean a Mortgage Loan that is secured by a first lien on and a
perfected security interest in Cooperative Shares and the related Proprietary Lease granting
exclusive rights to occupy the related Cooperative Unit in the building owned by the related
Cooperative Corporation.
"Cooperative Project" shall mean with respect to any Cooperative Loan, all real property and
improvements thereto and rights therein and thereto owned by a Cooperative Corporation
including without limitation the land, separate dwelling units and all common elements.
"Cooperative Shares" shall mean with respect to any Cooperative Loan, the shares of stock
issued by a Cooperative Corporation and allocated to a Cooperative Unit and represented by a
stock certificate.
"Cooperative Unit" shall mean with respect to any Cooperative Loan, a specific unit in a
Cooperative Project.
"Custodial Agreement" shall mean the Custodial Agreement, dated as of the date hereof,
among the Borrower, the Custodian and the Lender, substantially in the form of Exhibit B
hereto, as the same shall be modified and supplemented and in effect from time to time.
"Custodian" shall mean Bankers Trust Company of California, N.A., its successors and
permitted assigns.
"Custodian Loan Transmission" shall have the meaning assigned thereto in the Custodial
Agreement.
"Default" shall mean an Event of Default or an event that with notice or lapse of time or both
would become an Event of Default.
"Disbursement Account" shall have the meaning assigned to such term in the Custodial
Agreement.
"Dollars" and "$" shall mean lawful money of the United States of America.
"Dry Loan" shall mean a first or second lien Mortgage Loan which is underwritten in
accordance with the Underwriting Guidelines which Mortgage File contains all required
Mortgage Loan Documents.
"Due Date" means the day of the month on which the Monthly Payment is due on a Mortgage
Loan, exclusive of any days of grace.
"Due Diligence Review" shall mean the performance by the Lender of any or all of the
reviews permitted under Section 11.16 hereof with respect to any or all of the Mortgage
Loans or the Borrower or related parties, as desired by the Lender from time to time.
"Effective Date" shall mean the date upon which the conditions precedent set forth in
Section 5.01 shall have been satisfied.
"Eligible Mortgage Loan" shall mean a Mortgage Loan secured by a first or second mortgage
lien (as reflected on the Mortgage Loan Data Transmission) on a residential property and as
to which (i) the representations and warranties in Section 6.12 and 6.23 and Schedule 1
hereof are correct, (ii) was originated or acquired by the Borrower in accordance with the
applicable Underwriting Guidelines and (iii) such other customary criteria for eligibility
determined by the Lender shall have been satisfied.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that is a member of any
group of organizations (i) described in Section 414(b) or (c) of the Code of which the
Borrower is a member and (ii) solely for purposes of potential liability under
Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under
Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or
(o) of the Code of which the Borrower is a member.
"Escrow Payments" means with respect to any Mortgage Loan, the amounts constituting
ground rents, taxes, assessments, water rates, sewer rents, municipal charges, mortgage
insurance premiums, fire and hazard insurance premiums, condominium charges, and any
other payments required to be escrowed by the Mortgagor with the Mortgagee pursuant to the
Mortgage or any other document.
"Event of Default" shall have the meaning provided in Section 8 hereof.
"Exception Report" shall mean the exception report prepared by the Custodian pursuant to the
Custodial Agreement.
"Fannie Mae" means Fannie Mae, formerly the Federal National Mortgage Association, or
any successor thereto.
"First Lien" shall mean with respect to each Mortgaged Property, the lien of the mortgage,
deed of trust or other instrument securing a mortgage note which creates a first lien on the
Mortgaged Property.
"First Lien Mortgage Loan" shall mean an Eligible Mortgage Loan secured by a first priority
lien on the related Mortgaged Property, subject to Permitted Exceptions.
"Freddie Mac" means Freddie Mac, formerly the Federal Home Loan Mortgage Corporation,
or any successor thereto.
"Funding Date" shall mean the date on which an Advance is made hereunder.
"GAAP" shall mean generally accepted accounting principles as in effect from time to time in
the United States of America.
"GNMA" means the Government National Mortgage Association, or any successor thereto.
"Governmental Authority" shall mean any nation or government, any state or other political
subdivision thereof, any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any court or arbitrator having
jurisdiction over the Borrower, any of its Subsidiaries or any of its properties.
"Gross Margin" means with respect to each adjustable rate Mortgage Loan, the fixed
percentage amount set forth in the related Mortgage Note.
"Guarantee" shall mean, as to any Person, any obligation of such Person directly or indirectly
guaranteeing any Indebtedness of any other Person or in any manner providing for the
payment of any Indebtedness of any other Person or otherwise protecting the holder of such
Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise),
provided that the term "Guarantee" shall not include (i) endorsements for collection or deposit
in the ordinary course of business, or (ii) obligations to make servicing advances for
delinquent taxes and insurance, or other obligations in respect of a Mortgaged Property, to the
extent required by the Lender. The amount of any Guarantee of a Person shall be deemed to
be an amount equal to the stated or determinable amount of the primary obligation in respect
of which such Guarantee is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good faith. The terms
"Guarantee" and "Guaranteed" used as verbs shall have correlative meanings.
"HELOC" shall mean an open end home equity line of credit secured by a second mortgage
lien and underwritten in accordance with the Underwriting Guidelines of either Residential
Funding Corporation or Wells Fargo Home Mortgage Inc.
"High LTV Loan" shall mean a Mortgage Loan which had a Loan-to-Value Ratio at
origination in excess of 80%, but not greater than 125%, and was underwritten in accordance
with the applicable Underwriting Guidelines.
"Indebtedness" shall mean, for any Person: (a) obligations created, issued or incurred by such
Person for borrowed money (whether by loan, the issuance and sale of debt securities or the
sale of Property to another Person subject to an understanding or agreement, contingent or
otherwise, to repurchase such Property from such Person); (b) obligations of such Person to
pay the deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in
the ordinary course of business so long as such trade accounts payable are payable within 90
days of the date the respective goods are delivered or the respective services are rendered;
(c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not
the respective Indebtedness so secured has been assumed by such Person; (d) obligations
(contingent or otherwise) of such Person in respect of letters of credit or similar instruments
issued or accepted by banks and other financial institutions for account of such Person;
(e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase
agreements or like arrangements; (g) Indebtedness of others Guaranteed by such Person;
(h) all obligations of such Person incurred in connection with the acquisition or carrying of
fixed assets by such Person; (i) Indebtedness of general partnerships of which such Person is
a general partner; and (j) any other indebtedness of such Person by a note, bond, debenture or
similar instrument.
"Index" means with respect to each adjustable rate Mortgage Loan, the index set forth in the
related Mortgage Note for the purpose of calculating the interest rate thereon.
"Insurance Proceeds" means with respect to each Mortgage Loan, proceeds of insurance
policies insuring the Mortgage Loan or the related Mortgaged Property.
"Insured Closing Letter" shall have the meaning assigned to such term in the Custodial
Agreement.
"Interest Period" shall mean, with respect to any Advance, (i) initially, the period
commencing on the Funding Date with respect to such Advance and ending on the calendar
day prior to the next succeeding Reset Date, and (ii) thereafter, each period commencing on
the Reset Date of a month and ending on the calendar day prior to the Reset Date of the next
succeeding month. Notwithstanding the foregoing, no Interest Period may end after the
Termination Date.
"Interest Rate Adjustment Date" means with respect to each adjustable rate Mortgage Loan,
the date, specified in the related Mortgage Note and the Mortgage Loan Schedule, on which
the Mortgage Interest Rate is adjusted.
"Interest Rate Protection Agreement" shall mean with respect to any or all of the Mortgage
Loans and/or Advances, any interest rate swap, cap or collar agreement or any other
applicable hedging arrangements providing for protection against fluctuations in interest rates
or the exchange of nominal interest obligations, either generally or under specific
contingencies entered into by the Borrower and reasonably acceptable to the Lender.
"Lender" shall have the meaning assigned thereto in the heading hereto.
"LIBO Base Rate" shall mean with respect to each day an Advance is outstanding (or if such
day is not a Business Day, the next succeeding Business Day), the rate per annum equal to the
rate published by Bloomberg or if such rate is not available, the rate appearing at page 3750
of the Telerate Screen as one-month LIBOR on such date, and if such rate shall not be so
quoted, the rate per annum at which the Lender is offered Dollar deposits at or about
11:00 a.m., eastern time, on such date by prime banks in the interbank eurodollar market
where the eurodollar and foreign currency and exchange operations in respect of its Advances
are then being conducted for delivery on such day for a period of one month and in an amount
comparable to the amount of the Advances to be outstanding on such day.
"LIBO Rate" shall mean with respect to each Interest Period pertaining to an Advance, a rate
per annum determined by the Lender in its sole discretion in accordance with the following
formula (rounded upwards to the nearest 1/100th of one percent), which rate as determined by
the Lender shall be conclusive absent manifest error by the Lender:
LIBO Base Rate
1.00 - LIBO Reserve Requirements
The LIBO Rate shall be calculated each Funding Date and Reset Date commencing with the
first Funding Date.
"LIBO Reserve Requirements" shall mean for any Interest Period for any Advance, the
aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve
requirements applicable to the Lender in effect on such day (including, without limitation,
basic, supplemental, marginal and emergency reserves under any regulations of the Board of
Governors of the Federal Reserve System or other Governmental Authority having
jurisdiction with respect thereto), dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
such Board) maintained by a member bank of such Governmental Authority. As of the
Effective Date, the LIBO Reserve Requirements shall be deemed to be zero.
"Lien" shall mean any mortgage, lien, pledge, charge, security interest or similar
encumbrance.
"Loan Agreement" shall mean this Master Loan and Security Agreement, as may be
amended, supplemented or otherwise modified from time to time as mutually agreed by the
parties in writing.
"Loan Documents" shall mean collectively, this Loan Agreement, the Note, the Custodial
Agreement and the Collection Account Agreement.
"Loan-to-Value Ratio" or "LTV" means with respect to any Mortgage Loan, the ratio of the
original outstanding principal amount of the Mortgage Loan to the lesser of (a) the Appraised
Value of the Mortgaged Property at origination or (b) if the Mortgaged Property was
purchased within 12 months of the origination of the Mortgage Loan, the purchase price of
the Mortgaged Property.
"Market Value" shall mean the value, determined by the Lender in its sole reasonable
discretion, of the Mortgage Loans if sold in their entirety to a single third-party purchaser.
The Lender's determination of Market Value shall be conclusive upon the parties, absent
manifest error on the part of the Lender. The Lender shall have the right to mark to market
the Mortgage Loans on a daily basis which Market Value may be determined to be zero. The
Borrower acknowledges that the Lender's determination of Market Value is for the limited
purpose of determining Collateral Value for lending purposes hereunder without the ability to
perform customary purchaser's due diligence and is not necessarily equivalent to a
determination of the fair market value of the Mortgage Loans achieved by obtaining
competing bids in an orderly market in which the Borrower is not in default and the bidders
have adequate opportunity to perform customary loan and servicing due diligence.
"Material Adverse Effect" shall mean a material adverse effect on (a) the property, business,
operations, financial condition or prospects of the Borrower, (b) the ability of the Borrower to
perform in all material respects its obligations under any of the Loan Documents or any other
gestation, financing or repurchase documents entered into between Lender and Borrower to
which it is a party, (c) the validity or enforceability in all material respects of any of the Loan
Documents, (d) the rights and remedies of the Lender under any of the Loan Documents,
(e) the timely payment of the principal of or interest on the Advances or other amounts
payable in connection therewith or (f) the Collateral (other than changes in Market Value due
to market conditions).
"Material Exception" shall have the meaning assigned thereto in the Custodial Agreement.
"Maximum Committed Amount" shall mean $150 million.
"Maximum Credit" shall mean the sum of the Maximum Committed Amount and the
Maximum Uncommitted Amount (reduced by the amount outstanding under any other
gestation, financing or repurchase documents entered into between Lender and Borrower);
provided, however, the following limitations on Maximum Credit shall apply:
(1) the Maximum Credit for Mortgage Loans which are Wet Loans may not exceed, at any
time, the lesser of (A) $25 million on any day which occurs during the period from the
seventh to last Business Day of each calendar month through and including the sixth Business
Day of the next succeeding calendar month or (D) $15 million on any other date;
(2) the Maximum Credit for Mortgage Loans which are Second Lien Mortgage Loans may
not exceed $5 million at any time.
(3) the Maximum Credit for Mortgage Loans which are HELOCs may not exceed $40 million
at any time;
(4) the Maximum Credit for "B" and "C" credit Mortgage Loans may not exceed $15 million
at any time;
(5) the Maximum Credit for all High LTV Loans may not exceed $5 million at any time; and
(6) the Maximum Credit for all Mortgage Loans that are not covered by a Takeout
Commitment may not exceed $80 million at any time.
"Maximum Uncommitted Amount" shall mean $150 million.
"Monthly Payment" means the scheduled monthly payment of principal and interest on a
Mortgage Loan as adjusted in accordance with changes in the Mortgage Interest Rate
pursuant to the provisions of the Mortgage Note for an adjustable rate Loan other than a
Cooperative Loan, Mortgage Loan.
"Mortgage" shall mean the mortgage, deed of dust or other instrument, which creates a first or
second lien (as indicated on the Mortgage Loan Data Transmission) on either (i) with respect
to a Mortgage Loan other than a Cooperative Loan, the fee simple or leasehold estate in such
real property or (ii) with respect to a Cooperative Loan, the Proprietary Lease and related
Cooperative Shares, which in either case secures the Mortgage Note.
"Mortgage File" shall have the meaning assigned thereto in the Custodial Agreement.
"Mortgage Interest Rate" means the annual rate of interest home on a Mortgage Note, which
shall be adjusted from time to time with respect to adjustable rate Mortgage Loans.
"Mortgage Interest Rate Cap" means with respect to an adjustable rate Mortgage Loan, the
limit on each Mortgage Interest Rate adjustment as set forth in the related Mortgage Note.
"Mortgage Loan" shall mean a conforming mortgage loan (including jumbo mortgage loans
of "A", "B" or "C" credit quality), HELOC, High LTV Loan or Cooperative Loan which the
Custodian has been instructed to hold for the Lender pursuant to the Custodial Agreement,
and which Mortgage Loan includes, without limitation, (i) a Mortgage Note, the related
Mortgage and all other Mortgage Loan Documents and (ii) all right, title and interest of the
Borrower in and to the Mortgaged Property covered by such Mortgage.
"Mortgage Loan Data Transmission" shall mean a computer-readable magnetic or other
electronic format incorporating the fields identified on Exhibit F.
"Mortgage Loan Documents" shall mean, with respect to a Mortgage Loan, the documents
comprising the Mortgage File for such Mortgage Loan.
"Mortgage Loan List" shall mean the hard copy report provided by the Borrower which shall
include with respect to each Mortgage Loan to be included as Collateral the items set forth on
Exhibit D-1 hereto.
"Mortgage Note" shall mean the original executed promissory note or other evidence of the
indebtedness of a mortgagor/borrower with respect to a Mortgage Loan.
"Mortgaged Property" means the real property (including all improvements, buildings,
fixtures, building equipment and personal property thereon and all additions, alterations and
replacements made at any time with respect to the foregoing) and all other collateral securing
repayment of the debt evidenced by a Mortgage Note.
"Mortgage "means either the Borrower or any subsequent holder of a Mortgage Loan.
"Mortgagor" means the obligor on a Mortgage Note.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in Section 3(37) of
ERISA to which contributions have been or are required to be made by the Borrower or any
ERISA Affiliate and that is covered by Title IV of ERISA.
"Net Income" shall mean, for any period, the net income of the Borrower for such period as
determined in accordance with GAAP.
"Net Worth" shall mean, with respect to any Person, the excess of total assets of such Person,
over total liabilities of such Person, determined in accordance with GAAP.
"Note" shall mean the promissory note provided for by Section 2.02(a) hereof for Advances
and any promissory note delivered in substitution or exchange therefor, in each case as the
same shall be modified and supplemented and in effect from time to time.
"Notice of Borrowing and Pledge" shall have the meaning assigned to such term in
Section 2.03(a).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to
any or all of its functions under ERISA.
"Permitted Exceptions" shall mean tire exceptions to lien priority including but not limited to:
(i) the lien of current real property taxes and assessments not yet due and payable;
(ii) covenants, conditions and restrictions, rights of way, easements and other matters of the
public record as of the date of recording acceptable to mortgage lending institutions generally
and specifically referred to in the lender's title insurance policy delivered to the originator of
the Mortgage Loan and (A) referred to or otherwise considered in the appraisal (if any) made
for the originator of the Mortgage Loan or (B) which do not adversely affect the appraised
value of the Mortgaged Property set forth in such appraisal; (iii) other matters to which like
properties are commonly subject which do not materially interfere with the benefits of the
security intended to be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property; and (iv) in the case of a Second Lien
Mortgage Loan, a First Lien on the related Mortgaged Property.
"Person" shall mean any individual, corporation, company, voluntary association, partnership,
joint venture, ]invited liability company, trust, unincorporated association or government (or
any agency, instrumentality or political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or maintained by either the
Borrower or any ERISA Affiliate and that is covered by Title IV of ERISA, other than a
Multiemployer Plan.
"PMI Policy" or "Primary Insurance Policy" means a policy of primary mortgage guaranty
insurance issued by a Qualified Insurer.
"Post-Default Rate" shall mean, in respect of any principal of any Advance or any other
amount under this Loan Agreement, the Note or any other Loan Document that is not paid
when due to the Lender (whether at stated maturity, by acceleration or mandatory prepayment
or otherwise), a rate per annum during the period from and including the due date to but
excluding the date on which such amount is paid in full equal to 3% per annum, plus (a)(i) the
interest rate otherwise applicable to such Advance or other amount, or (ii) if no interest rate is
otherwise applicable, the LIBO Rate plus (b) the Applicable Margin.
"Trope" shall mean any right or interest in or to property of any kind whatsoever, whether
real, personal or mixed and whether tangible or intangible.
"Proprietary Lease" shall mean the lease on a Cooperative Unit evidencing the possessory
interest of the owner of the Cooperative Shares in such Cooperative Unit.
"Qualified Insures" means an insurance company duly qualified as such under the laws of the
states in which the Mortgaged Property is located, duly authorized and licensed in such states
to transact the applicable insurance business and to write the insurance provided, and
approved as an insurer by Fannie Mae and Freddie Mac and whose claims paying ability is
rated in the two highest rating categories by any of the rating agencies with respect to primary
mortgage insurance and in the two highest rating categories by Best's with respect to hazard
and flood insurance.
"Qualified Originator" shall mean (a) the Borrower and (b) any other originator of Mortgage
Loans as may be approved by the Lender in writing from time to time.
"Regulations G, T, U and X" shall mean Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System (or any successor), as the same may be modified
and supplemented and in effect from time to time.
"Requirement of Law" shall mean as to any Person, the certificate of incorporation and
bylaws or other organizational or governing documents of such Person, and any law, treaty,
rule or regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"Required Documents" shall mean those documents identified in Section 2(I) of the Custodial
Agreement.
"Rescission" shall mean the right of a Mortgagor to rescind the related Mortgage Note and
related documents pursuant to applicable law and applicable Agency guides.
"Reset Date" shall mean the first day of each calendar month, or if such day is not a Business
Day, the next succeeding Business Day.
"Responsible Officer" shall mean, as to any Person, the chief executive officer or, with
respect to financial matters, the chief financial officer of such Person; provided, that in the
event any such officer is unavailable at any time he or she is required to take any action
hereunder, Responsible Officer shall mean any officer authorized to act on such officer's
behalf as demonstrated by a certificate of corporate resolution.
"Restricted Payments" shall mean with respect to any Person, collectively, all dividends or
other distributions of any nature (cash, securities, assets or otherwise), and all payments, by
virtue of redemption or otherwise, on any class of equity securities (including, without
limitation, warrants, options or rights therefor) issued by such Person, whether such securities
are now or may hereafter be authorized or outstanding and any distribution in respect of any
of the foregoing, whether directly or indirectly.
"Second Lien" shall mean with respect to each Mortgaged Property, the lien of the mortgage,
deed of trust or other instrument securing a mortgage note which creates a second lien on the
Mortgaged Property.
"Second Lien Mortgage Loan" shall mean an Eligible Mortgage Loan secured by the lien on
the Mortgaged Property, subject to one prior lien on such Mortgaged Property securing
financing obtained by the related Mortgagor and to Permitted Exceptions.
"Secured Obligations" shall have the meaning assigned thereto in Section 4.01(c) hereof.
"Securitization Letter" shall mean that certain letter agreement by and between the Borrower
and the Lender dated the date hereof, outlining rights and obligations with respect to
securitizations and whole loan sales of mortgage loans and home equity lines of credit that
are similar to the Mortgage Loans and HELOCs subject to this Loan Agreement.
"Servicer" shall mean the Borrower in its capacity as servicer or master servicer of the
Mortgage Loans.
"Servicing Agreement" shall have the meaning provided in Section 11.15(c) hereof.
"Servicing File" means with respect to each Mortgage Loan, the file retained by the Borrower
consisting of originals of all material documents in the Mortgage File which are not delivered
to the Custodian and copies of the Mortgage Loan Documents set forth in Section 2 of the
"Servicing Records" shall have the meaning assigned thereto in Section 11.15(b) hereof.
"Servicing Transmission" shall mean a computer-readable magnetic or other electronic
format mutually acceptable to the parties.
"Settlement Agent" shall have the meaning provided in the Custodial Agreement.
"Subservicer" shall have the meaning provided in Section 11.15(c) hereof.
"Subsidiary" shall mean, with respect to any Person, any corporation, partnership or other
entity of which at least a majority of the securities or other ownership interests having by the
terms thereof ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or might have
voting power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or
by such Person and one or more Subsidiaries of such Person.
"Takeout Commitment" shall mean, with respect to any Mortgage Loan, an irrevocable
commitment issued by a Takeout Investor in favor of the Borrower pursuant to which such
Takeout Investor agrees to purchase such Mortgage Loan at a specific price on a forward
delivery basis acceptable to the Lender in its sole discretion.
"Takeout Investor" shall mean a third party which has agreed to purchase Mortgage Loans
pursuant to a Takeout Commitment.
"Tangible Net Worth" shall mean, with respect to any Person, as of any date of determination,
the consolidated Net Worth of such Person and its Subsidiaries, less the consolidated net
book value of all assets of such Person and its Subsidiaries (to the extent reflected as an asset
in the balance sheet of such Person or any Subsidiary at such date) which will be treated as
intangibles under GAAP, including, without ]imitation, such items as deferred financing
expenses, net leasehold improvements, good will, trademarks, trade names, service marks,
copyrights, patents, licenses and unamortized debt discount and expense; provided, that
residual securities issued by such Person or its Subsidiaries shall not be treated as intangibles
for purposes of this definition.
"Termination Date" shall mean 364 days following the Effective Date of this Agreement, or
such earlier date on which this Loan Agreement shall terminate in accordance with the
provisions hereof or by operation of law.
"Total Indebtedness" shall mean with respect to any Person, for any period, the aggregate
Indebtedness of such Person and its Subsidiaries during such period, less the amount of any
nonspecific consolidated balance sheet reserves maintained in accordance with GAAP.
"Tranche A Advances" shall mean Advances so long as, and to the extent that, they are
secured by "A" credit first lien Mortgage Loans which are not Wet Loans or High LTV
Loans.
"Tranche B Advances" shall mean Advances so long as, and to the extent that, they are
secured by "A" credit first lien Wet Loans.
"Tranche C Advances" shall mean Advances so long as, and to the extent that, they are
secured by "B" or "C" credit Mortgage Loans, HELOCs or High LTV Loans.
"Trust Status" shall mean the determination by the Custodian and confirmed by the Lender
whether a Mortgage Loan delivered as a Wet Loan has become a Dry Loan.
"Uncommitted Advance" shall have the meaning assigned to such term in Section 2.01(b)
hereof.
"Underwriting Guidelines" shall mean (i) with respect to Eligible Mortgage Loans that are
agency conforming mortgage loans except with respect to outstanding principal balance, the
underwriting guidelines of the Borrower, which shall be subject to the prior written approval
of the Lender (such approval not to be unreasonably withheld) and which shall delivered to
the Lender prior to making any Advances to be secured by Mortgage Loans underwritten
pursuant to such underwriting guidelines and/or the applicable Takeout Investor's
underwriting requirements; (ii) with respect to agency conforming Eligible & Mortgage
Loans, the underwriting guidelines of Fannie Mae; and (iii) with respect to any HELOC, the
underwriting guidelines of the related Takeout Investor which shall be either Residential
Funding Corporation or Wells Fargo Home Mortgage Inc.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect on the
date hereof in the State of New York; provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, "Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect in such other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
"Wet Loan" shall mean a wet-funded first lien "A" credit Mortgage Loan or HELOC which is
underwritten in accordance with the Underwriting Guidelines and does not contain all the
required Mortgage Loan Documents in the Mortgage File, which in order to be deemed an
Eligible Mortgage Loan shall have the following additional characteristics:
(a) the proceeds thereof have been funded (or, on the date of the Advance supported by a
Notice of Borrowing and Pledge are being funded) by wire transfer or cashier's check, cleared
check or draft or other form of immediately available funds to the Settlement Agent for such
Wet Loan;
(b) the Borrower expects such Wet Loan to close and become a valid first lien securing actual
indebtedness by funding to the order of the Mortgagor thereunder;
(c) the proceeds thereof have not been returned to the Lender from the Settlement Agent for
such Wet Loan;
(d) the Borrower has not learned that such Wet Loan will not be closed and funded to the
order of the Mortgagor; and
(e) upon recordation such Mortgage Loan will constitute a first lien on the premises described
therein.
"Wire Instruction Data" as defined in the Custodial Agreement.
2. Accounting Terms and Determinations. Except as otherwise expressly provided herein, all
accounting terms used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters required to be delivered to the Lender hereunder shall be
prepared, in accordance with GAAP.
3. Advances, Note and Prepayments
.
1. Advances
.
a. Subject to fulfillment of the conditions precedent set forth in Sections 5.01 and 5.02
hereof, and provided that no Default shall have occurred and be continuing
hereunder, the Lender agrees from time to time, on the terms and conditions of this
Loan Agreement, to make loans (individually, a "Committed Advance"; collectively,
the "Committed Advances") to the Borrower in Dollars, on any Business Day from
and including the Effective Date to but excluding the Termination Date in an
aggregate principal amount at any one time outstanding up to but not exceeding the
lesser of (i) the Maximum Committed Amount (which shall be further subject to the
limitations in the definition of Collateral Value and Maximum Credit) and (ii) the
Borrowing Base as in effect from time to time.
b. In addition to the foregoing, the Lender may from time to time in its sole discretion,
on the terms and conditions of this Loan Agreement, make loans (individually, an
"Uncommitted Advance"; collectively, the "Uncommitted Advances") to the
Borrower in Dollars, on any Business Day from and including the Effective Date to
but excluding the Termination Date in an aggregate principal amount at any one time
outstanding up to but not exceeding the lesser of (i) the Maximum Uncommitted
Amount (which shall be further subject to the ]imitations in the definition of
Collateral Value) and (ii) the Borrowing Base as in effect from time to time. Unless
otherwise agreed by the parties, in determining whether Advances secured by
Eligible Mortgage Loans are Committed Advances or Uncommitted Advances, such
Advances shall first be deemed Committed Advances up to the Maximum
Committed Amount, and then the remainder shall be deemed Uncommitted
Advances.
c. Subject to the terms and conditions of this Loan Agreement, during such period the
Borrower may borrow, repay and reborrow hereunder.
d. In no event shall an Advance be made when any Default or Event of Default has
occurred and is continuing.
e. The minimum amount of any Advance made by the Lender hereunder shall be $
500,000.
6. Note.
a. The Advances made by the Lender shall be evidenced by a single promissory note of
the Borrower substantially in the form of Exhibit A hereto (the "Note"), dated the
date hereof, payable to the Lender in a principal amount equal to the amount of the
Maximum Credit as originally in effect and otherwise duly completed. The Lender
shall have the right to have its Note subdivided, by exchange for promissory notes of
lesser denominations or otherwise.
b. The date, amount and interest rate of each Advance made by the Lender to the
Borrower, and each payment made on account of the principal thereof, shall be
recorded by the Lender on its books and, prior to any transfer of the Note, noted by
the Lender m the grid attached to the Note or any continuation thereof; provided, that
the failure of the Lender to make any such recordation or notation shall not affect the
obligations of the Borrower to make a payment when due of any amount owing
hereunder or under the Note in respect of the Advances.
3. Procedure for Borrowing.
a. Borrowing Procedure for Requesting an Advance
. The Borrower may request a bon-owing to be secured by any Mortgage Loans
hereunder, on any Business Day during the period from and including the Effective
Date to the Termination Date, by delivering to the Lender, with a copy to the
Custodian, a Mortgage Loan Data Transmission, an irrevocable Notice of Borrowing
and Pledge substantially in the form of Exhibit D hereto (a "Notice of Borrowing and
Pledge"), appropriately completed and Wire Instruction Data, each of which must be
received no later than 6:00 p.m. (eastern time) one Business Day prior to the
requested Funding Date for any Advance to be made by 9:00 a.m. on the Funding
Date and no later than 3:00 p.m. on the requested Funding Date with respect to an
Advance to be made by 4:00 p.m. on the Funding Date. Such Notice of Borrowing
and Pledge shall clearly indicate those Mortgage Loans that are intended to be Wet
Loans and Dry Loans and include a Mortgage Loan List in respect of the Eligible
Mortgage Loans that the Borrower proposes to pledge to the Lender and to be
included in the Borrowing Base in connection with such borrowing; provided,
however, to the extent that any such requested borrowing shall constitute an
Uncommitted Advance, the Lender may, at its sole option, elect not to make such
Uncommitted Advance. Upon the Lender's request, the Borrower will deliver to the
Lender a Takeout Commitment confirmation and assignment acknowledged by the
Takeout Investor for each Mortgage Loan to be pledged to the Lender hereunder. The
Borrower agrees to immediately report to the Custodian and the Lender by facsimile
transmission within one Business Day of discovery that any Wet Loans that were
previously pledged to the Borrower do not close for any reason including, but not
limited to, a Rescission. The Custodian will deliver a notice of intent to issue a Trust
Receipt to Lender after the Custodian has reviewed the documents contained in
Section 2(a)II of the Custodial Agreement.
b. Pursuant to the Custodial Agreement, the Custodian shall review any Required
Documents delivered by 2:00 p.m. (eastern time) as specified in the Custodial
Agreement on any Business Day in time to include the related Mortgage Loans in
such Borrowing Base determination on the same day. Not later than 4:00 p.m.
(eastern time) on each Business Day, the Custodian shall deliver to the Lender, via
electronic transmission acceptable to the Lender, the Custodian Loan Transmission
showing the status of all Mortgage Loans then held by the Custodian, including but
not limited to the Wet Loans and Dry Loans which are subject to document
exceptions, and the time the related Mortgage Loan Documents have been released
pursuant to Section 5(a) or 5(b) of the Custodial Agreement. Not later than 4:30 p.m.
(eastern time) on each Business Day, the Lender shall calculate the Borrowing Base
of all Mortgage Loans that are held by the Custodian and forward to the Borrower by
facsimile transmission a copy of the Borrowing Base Certificate. In addition, the
Custodian shall deliver to the Lender no later than 4:30 p.m. (eastern time) by
facsimile transmission on each Funding Date, one or more Trust Receipts (as defined
in the Custodial Agreement) relating to either Wet Loans or Dry Loans. The original
copies of such Trust Receipts shall be delivered to Chase Manhattan Bank at Four
New York Plaza, Ground Floor, Outsourcing Department, New York, New York
10004, Attention: Jennifer John for the account of Greenwich Capital Financial
Products, Inc. (telephone number (212) 623-5953), as agent for the Lender by
overnight delivery using a nationally recognized insured overnight delivery service.
c. Upon the Borrower's request for a borrowing pursuant to Section 2.03(a) above, the
Lender shall, assuming all conditions precedent set forth in this Section 2.03 and in
Section 5.01 and 5.02 have been met, and provided no Default shall have occurred
and be continuing (in accordance with Section 2.01), make an Advance to the
Disbursement Account (as determined by Lender) not later than 9:00 a.m. on the
requested Funding date whir respect to an Advance requested in a Notice of
Borrowing and Pledge delivered to the Lender by 6:00 p.m. on the day immediately
preceding the Funding Date and not later than 4:00 p.m. for Advances requested in a
Notice of Borrowing and Pledge delivered to the Lender by 2:00 p.m. on the
requested Funding Date in an amount which would not cause the aggregate amount
of Advances then outstanding to exceed the lesser of (i) the Maximum Credit or
(ii) the Borrowing Base shown on the latest Borrowing Base Certificate of the
Lender. Subject to the foregoing, such borrowing will be made available to the
Borrower by the Lender transferring to the Disbursement Account, via wire transfer,
in the aggregate amount of such borrowing for remittance by the Custodian to the
Settlement Agent in accordance with Section 3(c) of the Custodial Agreement. The
Borrower hereby agrees to deposit into the Disbursement Account any shortfall
created to the extent that any Advance made by the Lender is less than the amount of
the payments required to be made to Settlement Agents.
4. Limitation on Tunes of Advances; Illegality. Anything herein to the contrary notwithstanding,
if, on or prior to the determination of any LIBO Base Rate:
a. the Lender determines, which determination shall be conclusive, that quotations of
interest rates for the relevant deposits referred to in the definition of "LIBO Base
Rate" in Section 1.01 hereof are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining rates of interest for Advances as
provided herein; or
b. it becomes unlawful for the Lender to honor its obligation to make or maintain
Advances hereunder using a LIBO Rate; then the Lender shall give the Borrower
prompt notice thereof and, so long as such condition remains in effect, the Lender
shall be under no obligation to make additional Advances, and the Borrower shall, at
its option, either prepay such Advances or pay interest on such Advances at a rate per
annum as determined by the Lender taking into account the cost to the Lender of
making the Advances and the expected return to the Lender from using a LIBO Rate.
3. Repayment of Advances; Interest.
a. The Borrower shall repay in full on the Termination Date the then aggregate
outstanding principal amount of the Advances (as evidenced by the Note). The
Lender and the Borrower acknowledge that it is the intent of each such party that, not
later than 1:00 p.m. on each Business Day, the Lender may buy eligible mortgage
loans pursuant to the separate gestation program entered into between the Borrower
and the Lender. The Borrower shall sell to the Lender pursuant to such gestation
program any Dry Mortgage Loan as identified/authorized by the Borrower and
approved by the Lender.
b. No later than the Business Day prior to each Reset Date, the Lender shall provide to
the Borrower a report which shall state the interest amount due for the current interest
period on the Advance.
c. The Borrower shall pay to the Lender interest on the unpaid principal amount of each
Advance for the period from and including the date of such Advance to but excluding
the date such Advance shall be paid in full, at a rate per annum equal to the LIBO
Rate plus the Applicable Margin. Notwithstanding the foregoing, the Borrower shall
pay to the Lender interest at the applicable Post- Default late on any principal of any
Advance and on any other amount payable by the Borrower hereunder or under the
Note, that shall not be paid in full when due (whether at stated maturity, by
acceleration or by mandatory prepayment or otherwise), for the period from and
including the due date thereof to but excluding the date the same is paid in full.
Accrued interest on each Advance as calculated in Section 2.05(b) above shall be
payable monthly on each Reset Date (except to the extent the Lender, in its sole
discretion, consents to a later date) and on the Termination Date, except that interest
payable at the Post-Default Rate shall accrue daily and shall be payable promptly
upon receipt of invoice. Promptly after the determination of any interest rate
provided for herein or any change therein, the Lender shall give written notice
thereof to the Borrower.
d. The Borrower and the Lender acknowledge that the proceeds of Collateral may be
held in the Collection Account pursuant to the Collection Account Agreement. The
Lender agrees that if no Event of Default shall have occurred and be continuing, on
each Reset Date, the Collection Bank shall be permitted to remit such amounts then
held in such Collection Account at the direction of the Borrower anti] notified to the
contrary by the Lender.
5. Mandatory Prepayments or Pledge.
On each Advance Date or other date on which there is a change in the Mortgage Loans held
by the Custodian, the Custodian shall deliver to the Lender and the Borrower the Custodian
Loan Transmission. The Lender shall deliver to the Borrower a Borrowing Base Certificate
by 4:30 p.m. (eastern time), the calculation in such certificate to be based on the delinquency
status and principal balance of the Eligible Mortgage Loans as of the later of the funding date
balance or the last calendar day of the prior month. Such information shall be ascertained
from the Servicing Transmission which shall be delivered or caused to be delivered by the
Borrower in accordance with Section 7.20 and shall include all Mortgage Loans which were
funded on or prior to the last date of any Advance. In the event that such Borrowing Base
Certificate indicates or if at any time the aggregate outstanding principal amount of Advances
exceeds the Borrowing Base (a "Borrowing Base Deficiency"), as determined by the Lender
and notified to the Borrower on any Business Day, the Borrower shall no later than one
Business Day after receipt of such written notice, either prepay the Advances in part or in
whole or pledge additional Eligible Mortgage Loans (which Collateral shall be in al] respects
acceptable to the Lender) to the Lender, such that after giving effect to such prepayment or
pledge the aggregate outstanding principal amount of the Advances does not exceed the
Borrowing Base.
6. Optional Prepayments.
a. The Advances are prepayable without premium or penalty, in whole or in part, after
providing not less than one (1) Business Days prior notice (except as specified in
Section 2.05(a)). The Advances are prepayable at any other time, in whole or in part,
in accordance herewith and subject to clause (b) below. Any amounts prepaid shall
be applied to repay the outstanding principal amount of any Advances (together with
interest thereon) until paid in full. Amounts repaid may be reborrowed in accordance
with the terms of this Loan Agreement. If such notice is given, the amount specified
in such notice shall be due and payable on the date specified therein, together with
accrued interest to such date on the amount prepaid. Partial prepayments shall be in
an aggregate principal amount of at least $100,000.
b. If the Borrower makes a prepayment of the Advances other than as provided in
Section 2.07(a) above, the Borrower shall indemnify the Lender and hold the Lender
harmless from any actual loss or expense which the Lender may sustain or incur
arising from (a) the reemployment of funds obtained by the Lender to maintain the
Advances hereunder or from (b) fees payable to terminate the deposits from which
such funds were obtained, in either case, which actual loss or expense shall be equal
to an amount equal to the excess, as reasonably determined by the Lender, of (i) its
cost of obtaining funds for such Advances for the period from the date of such
payment through the following Reset Date over (ii) the amount of interest likely to be
realized by such Lender in redeploying the funds not utilized by reason of such
payment for such period. This Section 2.07 shall survive termination of this Loan
Agreement and payment of the Note.
3. Requirements of Law.
a. If any Requirement of Law (other than with respect to any amendment made to the
Lender's certificate of incorporation and by laws or other organizational or governing
documents) or any change in the interpretation or application thereof or compliance
by the Lender with any request or directive (whether or not having the force of law)
from any central bank or other Governmental Authority made subsequent to the date
hereof
i. shall subject the Lender to any tax of any kind whatsoever with respect to
this Loan Agreement, the Note or any Advance made by it (excluding net
income taxes) or change the basis of taxation of payments to the Lender in
respect thereof;
ii. shall impose, modify or hold applicable any reserve, special deposit,
compulsory Advance or similar requirement against assets held by deposits
or other liabilities in or for the account of Advances or other extensions of
credit by, or any other acquisition of funds by any office of the Lender which
is not otherwise included in the determination of the LIBO Base Rate
hereunder;
iii. shall impose on the Lender any other condition;
and the result of any of the foregoing is to increase the cost to the Lender, by an
amount which the Lender deems to be material, of making, continuing or maintaining
any Advance or to reduce any amount receivable hereunder in respect thereof, then,
in any such case, the Borrower shall promptly pay the Lender such additional amount
or amounts as will compensate the Lender for such increased cost or reduced amount
receivable thereafter incurred.
b. If the Lender shall have determined that the adoption of or any change in any
Requirement of Law (other than with respect to any amendment made to the Lender's
certificate of incorporation and by-laws or other organizational or governing
documents) regarding capital adequacy or in the interpretation or application thereof
or compliance by the Lender or any corporation controlling the Lender with any
request or directive regarding capital adequacy (whether or not having the force of
law) from any Governmental Authority made subsequent to the date hereof shall
have the effect of reducing the rate of return on the Lender's or such corporation's
capital as a consequence of its obligations hereunder to a level below that which the
Lender or such corporation (taking into consideration the Lender's or such
corporation's policies with respect to capital adequacy) by an amount deemed by the
Lender to be material, then from time to time, the Borrower shall promptly pay to the
Lender such additional amount or amounts as will thereafter compensate the Lender
for such reduction.
c. If the Lender becomes entitled to claim any additional amounts pursuant to this
subsection, it shall promptly notify the Borrower of the event by reason of which it
has become so entitled. A certificate as to any additional amounts payable pursuant to
this subsection submitted by the Lender to the Borrower shall be conclusive in the
absence of manifest error.
4. Purpose of Advances.
Each Advance shall be used to finance the origination or purchase of Eligible Mortgage Loans
identified to the Lender in writing on each Mortgage Loan Schedule as such Mortgage Loan Schedule
may be amended from time to time.
2. Payments; Computations; Taxes; Commitment Fee.
1. Payments
.
Except to the extent otherwise provided herein, all payments of principal, interest and other
amounts to be made by the Borrower under this Loan Agreement and the Note, shall be made
in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to the
Lender at the following account maintained by the Lender at The Chase Manhattan Bank:
Account Number 140095961, For the A/C of Greenwich Capital Financial Products, Inc.,
ABA# 021000021, Attn: Brett Kibbe, not later than 1:00 p.m., eastern time, on the date on
which such payment shall become due (each such payment made after such time on such due
date to be deemed to have been made on the next succeeding Business Day). The Borrower
acknowledges that it has no rights of withdrawal from the foregoing account.
2. Computations. Interest on the Advances shall be computed on the basis of a 3 60-day year for
the actual days elapsed (including the first day but excluding the last day) occurring in the
period for which payable.
3. U
.S. Taxes.
a. The Borrower agrees to pay to the Lender such additional amounts as are necessary
in order that the net payment of any amount due to the Lender hereunder after
deduction for or withholding in respect of any U.S. Tax (as defined below) imposed
with respect to such payment (or in lieu thereof, payment of such U.S. Tax by the
Lender), will not be less than the amount stated herein to be then due and payable;
provided, that the foregoing obligation to pay such additional amounts shall not
apply:
i. to any payment to the Lender hereunder unless the Lender is entitled to
submit a Form 1001 (relating to the Lender and entitling it to a complete
exemption from withholding on all interest to be received by it hereunder in
respect of the Advances) or Form 4224 (relating to all interest to be received
by the Lender hereunder in respect of the Advances), or
ii. to any U.S. Tax imposed solely by reason of the failure by the Lender to
comply with applicable certification, information, documentation or other
reporting requirements concerning the nationality, residence, identity or
connections with the United States of America of the Lender if such
compliance is required by statute or regulation of the United States of
America as a precondition to relief or exemption from such U.S. Tax.
For the purposes of this Section 3.03(a), (w) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (x) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form such
successor and related forms as may from time to time be adopted by the relevant
taxing authorities of the United States of America to document a claim to which such
Form relates), and (y) "U.S. Taxes" shall mean any present or future tax, assessment
or other charge or levy imposed by or on behalf of the United States of America or
any taxing authority thereof or therein.
b. Within 30 days after paying any such amount to the Lender, and within 30 days after
it is required by law to remit such deduction or withholding to any relevant taxing or
other authority, the Borrower shall deliver to the Lender evidence satisfactory to the
Lender of such deduction, withholding or payment (as the case may be).
c. The Lender represents and warrants to the Borrower that on the date hereof the
Lender is either incorporated under the laws of the United States or a State thereof or
is entitled to submit a Form 1001 (relating to the Lender and entitling it to a complete
exemption from withholding on all interest to be received by it hereunder in respect
of the Advances) or Form 4224 (relating to all interest to be received by the Lender
hereunder in respect of the Advances).
4. Commitment Fee. Subject to Section 5.02(i) hereof, the Borrower agrees to pay to the Lender
a commitment fee equal to $750,000, such payment to be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to the Lender. The Commitment
Fee shall be paid in two equal installments of $375,000, the first installment to be paid on the
Effective Date and the second installment to be paid on the three month anniversary of the
Effective Date.
5. Non-Utilization Fee
. On a monthly basis, Lender shall determine the average monthly utilization during such
month by Borrower of the Maximum Committed Amount made available hereunder by
dividing (a) the sum of the Advances outstanding on each day during such month divided by
(b) the number days in such calendar month. If such average amount determined for any
month as a percentage of the then applicable Maximum Committed Amount (the "Utilization
Percentage") is less than 50%, Borrower shall pay to Lender, on the Payment Date in the next
following calendar month or on the Termination Date if such date is sooner, a non-utilization
fee equal to the product of (i) 0.25% (.0025) per annum, times (ii) the Maximum Committed
Amount, times (iii) 1 minus the Utilization Percentage. If the Utilization Percentage in any
month is greater than or equal to 50% Lender shall not be entitled to a non-utilization fee for
that month. Lender may, in its sole discretion, net such non-utilization fee from the proceeds
of any Advance made to Borrower hereunder.
4. Collateral Security
.
1. Collateral; Security Interest
.
a. Pursuant to the Custodial Agreement, the Custodian shall hold the Mortgage Loan
Documents as exclusive bailee and agent for the Lender pursuant to the terms of the
Custodial Agreement and shall deliver to the Lender Trust Receipts with Exception
Reports (as such terms are defined in the Custodial Agreement) to the effect that it
has reviewed such Mortgage Loan Documents in the manner required by the
Custodial Agreement and identifying any deficiencies in such Mortgage Loan
Documents as so reviewed.
b. Each of the following items or types of property, whether now owned or hereafter
acquired, now existing or hereafter created and wherever located, is hereinafter
referred to as the "Collateral":
i. all Mortgage Loans identified on a Notice of Borrowing and Pledge
delivered by the Borrower to the Lender and the Custodian from time to
time;
ii. all Mortgage Loan Documents, including without limitation all promissory
notes, and all Servicing Records (as defined in Section 11.15(b) below), and
any other collateral pledged or otherwise relating to such Mortgage Loans,
together with all files, material documents, instruments, surveys (if
available), certificates, correspondence, appraisals, computer records,
computer storage media, Mortgage Loan accounting records and other books
and records relating thereto;
iii. all mortgage guaranties and insurance (issued by governmental agencies or
otherwise) and any mortgage insurance certificate or other document
evidencing such mortgage guaranties or insurance relating to any Mortgage
Loans and all claims and payments thereunder;
iv. all other insurance policies and insurance proceeds relating to any Mortgage
Loans or the related Mortgaged Property;
v. all Interest Rate Protection Agreements relating to any or all of the
foregoing;
vi. any purchase agreements or other agreements or contracts relating to or
constituting any or all of the foregoing;
vii. all purchase or take-out commitments relating to or constituting any or all of
the foregoing;
viii. all "accounts", "chattel paper" and "genera] intangibles" as defined in the
Uniform Commercial Code relating to or constituting any or all of the
foregoing; and
ix. any and all replacements, substitutions, distributions on or proceeds of any or
all of the foregoing.
j. The Borrower hereby assigns, pledges and grants a security interest to the Lender in
all of its right, title and interest in, to and under all the Collateral, whether now
owned or hereafter acquired, now existing or hereafter created and wherever located,
to secure the repayment of principal of and interest on all Advances and all other
amounts owing to the Lender hereunder, under the Note and under the other Loan
Documents (collectively, the "Secured Obligations a~"). The Borrower agrees to
mark their computer records and tapes to evidence the security interests granted to
the Lender hereunder.
3. Further Documentation. At any time and from time to time, upon the written request of the
Lender, and at the sole expense of the Borrower, the Borrower will promptly and duly
execute and deliver, or will promptly cause to be executed and delivered, such further
instruments and documents and take such further action as the Lender may reasonably request
for the purpose of obtaining or preserving the full benefits of this Loan Agreement and of the
rights and powers herein granted, inching, without limitation, the filing of any financing or
continuation statements under the Uniform Commercial Code in effect in any jurisdiction
with respect to the Liens created hereby. The Borrower also hereby authorizes the Lender to
file any such financing or continuation statement without the signature of the Borrower to the
extent permitted by applicable law. A carbon, photographic or other reproduction of this Loan
Agreement shall be sufficient as a financing statement for filing in any jurisdiction.
4. Changes in Locations, Name, etc
. The Borrower shall not (i) change the location of its chief executive office/chief place of
business from that specified in Section 6 hereof or (ii) change its name, identity or corporate
structure (or the equivalent) or change the location where it maintains its records with respect
to the Collateral unless it shall have given the Lender at least 30 days prior written notice
thereof and shall have delivered to the Lender all Uniform Commercial Code financing
statements and amendments thereto as the Lender shall request and taken all other actions
deemed reasonably necessary by the Lender to continue its perfected status in the Collateral
with the same or better priority.
5. Lender's Appointment as Attorney in Fact
.
a. The Borrower hereby irrevocably constitutes and appoints the Lender and any officer
or agent thereof, with fill power of substitution, as its true and lawful attorney in-fact
with full irrevocable power and authority in the place and stead of the Borrower and
in the name of the Borrower or in its own name, from time to time in the Lender's
discretion, for the purpose of carrying out the terms of this Loan Agreement, to take
any and all appropriate action and to execute any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of this Loan
Agreement, and, without limiting the generality of the foregoing, the Borrower
hereby gives the Lender the power and right, on behalf of the Borrower, without
assent by, but with notice to, the Borrower, if an Event of Default shall have occurred
and be continuing, to do the following:
i. in the name of the Borrower or its own name, or otherwise, to take
possession of and endorse and collect any checks, drafts, notes, acceptances
or other instruments for the payment of moneys due under any mortgage
insurance or with respect to any other Collateral and to file any claim or to
take any other action or proceeding in any court of law or equity or otherwise
deemed appropriate by the Lender for the purpose of collecting any and all
such moneys due under any such mortgage insurance or with respect to any
other Collateral whenever payable;
ii. to pay or discharge taxes and Liens levied or placed on or threatened against
the Collateral; and
iii. (A) to direct any party liable for any payment under any Collateral to make
payment of any and al] moneys due or to become due thereunder directly to
the Lender or as the Lender shall direct; (B) to ask or demand for, collect,
receive payment of and receipt for, any and all moneys, claims and other
amounts due or to become due at any time in respect of or arising out of any
Collateral; (C) to sign and endorse any invoices, assignments, verifications,
notices and other documents in connection with any of the Collateral; (D) to
commence and prosecute any suits, actions or proceedings at law or in equity
in any court of competent jurisdiction to collect the Collateral or any thereof
and to enforce any other right in respect of any Collateral; (E) to defend any
suit, action or proceeding brought against the Borrower with respect to any
Collateral; (F) to settle, compromise or adjust any suit, action or proceeding
described in clause (E) above and, in connection therewith, to give such
discharges or releases as the Lender may deem appropriate; and
(G) generally, to sell, transfer, pledge and make any agreement with respect
to or otherwise deal with any of the Collateral as fully and completely as
though the Lender were the absolute owner thereof for all purposes, and to
do, at the Lender's option and the Borrower's expense, at any time, or from
time to time, all acts and things which the Lender deems necessary to
protect, preserve or realize upon the Collateral and the Lender's Liens
thereon and to effect the intent of this Loan Agreement, all as fully and
effectively as the Borrower might do.
The Borrower hereby ratifies all that said attorneys shall lawfully do or cause to be
done by virtue hereof. This power of attorney is a power coupled with an interest and
shall be irrevocable.
b. The Borrower also authorizes the Lender, at any time and from time to time, to
execute, in connection with the sale provided for in Section 4.07 hereof, any
endorsements, assignments or other instruments of conveyance or transfer with
respect to the Collateral.
c. The powers conferred on the Lender are solely to protect the Lender's interests in the
Collateral and shall not impose any duty upon the Lender to exercise any such
powers. The Lender shall be accountable only for amounts that it actually receives as
a result of the exercise of such powers, and neither the Lender nor any of its officers,
directors, or employees shall be responsible to the Borrower for any act or failure to
act hereunder, except for its own gross negligence or willful misconduct.
4. Performance by Lender of Borrower's Obligations. If the Borrower fails to perform or comply
with any of its material agreements contained in the Loan Documents and the Lender may
itself perform or comply, or otherwise cause performance or compliance, with such
agreement, the reasonable out-of-pocket expenses of the Lender incurred in connection with
such performance or compliance, together with interest thereon at a rate per annum equal to
the Post-Default Rate, shall be payable by the Borrower to the Lender on demand and shall
constitute Secured Obligations.
5. Proceeds
. If an Event of Default shall occur and be continuing, (a) all proceeds of Collateral received
by the Borrower consisting of cash, checks and other near- cash items shall be held by the
Borrower in trust for the Lender, segregated from other funds of the Borrower, and shall
forthwith upon receipt by the Borrower be fumed over to the Lender in the exact form
received by the Borrower (duly endorsed by the Borrower to the Lender, if required) and
(b) any and all such proceeds received by the Lender will be applied by the Lender against,
the Secured Obligations. Any balance of such proceeds remaining after the Secured
Obligations shall have been paid in full and this Loan Agreement shall have been terminated
shall be promptly paid over to the Borrower or to whomsoever may be lawfully entitled to
receive the same. For purposes hereof, proceeds shall include, but not be limited to, all
principal and interest payments, all prepayments and payoffs, insurance claims,
condemnation awards, sale proceeds, real estate owned rents and any other income and all
other amounts received with respect to the Collateral.
6. Remedies
. If an Event of Default shall occur and be continuing, the Lender may exercise, in addition to
all other rights and remedies granted to it in this Loan Agreement and in any other instrument
or agreement securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the Uniform Commercial Code. Without limiting the
generality of the foregoing, the Lender without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice required by law
referred to below) to or upon the Borrower or any other Person (all and each of which
demands, defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or
otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of
the foregoing), in one or more parcels or as an entirety at public or private sale or sales, at any
exchange, broker's board or office of the Lender or elsewhere upon such terms and conditions
and at prices that are consistent with the prevailing market for similar collateral as it may
deem advisable and at such prices as it may deem best, for cash or on credit or for fixture
delivery without assumption of any credit risk. The Lender shall act in good faith to obtain
the best execution possible under prevailing market conditions. The Lender shall lave the
right upon any such public sale or sales, and, to the extent permitted by law, upon any such
private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any
right or equity of redemption in the Borrower, which right or equity is hereby waived or
released. The Borrower further agrees, at the Lender's request, to assemble the Collateral and
make it available to the Lender at places which the Lender shall reasonably select, whether at
the Borrower's premises or elsewhere. The Lender shall apply the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable
costs and expenses of every kind incurred therein or incidental to the care or safekeeping of
any of the Collateral or in any way relating to the Collateral or the rights of the Lender
hereunder, including, without ]imitation, reasonable attorneys' fees and disbursements, to the
payment in whole or in part of the Secured Obligations, in such order as the Lender may
elect, and only after such application and after the payment by the Lender of any other
amount required or permitted by any provision of law, including, without ]imitation,
Section 9-504(1)(c) of the Uniform Commercial Code, need the Lender account for the
surplus, if any, to the Borrower. To the extent permitted by applicable law, the Borrower
waives all claims, damages and demands it may acquire against the Lender arising out of the
exercise by the Lender of any of its rights hereunder, other than those claims, damages and
demands arising from the gross negligence or willful misconduct of the Lender. If any notice
of a proposed sale or other disposition of Collateral shall be required by law, such notice shall
be deemed reasonable and proper if given at least 10 days before such sale or other
disposition. The Borrower shall remain liable for any deficiency (plus accrued interest
thereon as contemplated pursuant to Section 2.05(b) hereof) if the proceeds of any sale or
other disposition of the Collateral are insufficient to pay the Secured Obligations and the
reasonable fees and disbursements of any attorneys employed by the Lender to collect such
deficiency.
7. Limitation on Duties Regarding Presentation of Collateral
. The Lender's duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Uniform Commercial Code or
otherwise, shall be to deal with it in the same manner as the Lender deals with similar
property for its own account. Neither the Lender nor any of its directors, officers or
employees shall be liable for failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Borrower or otherwise.
8. Powers Coupled with an Interest
. All authorizations and agencies herein contained with respect to the Collateral are
irrevocable and powers coupled with an interest.
9. Release of Security Interest
. Upon termination of this Loan Agreement and repayment to the Lender of all Secured
Obligations and the performance of all obligations under the Loan Documents the Lender
shall release its security interest in any remaining Collateral; provided that if any payment, or
any part thereof, of any of the Secured Obligations is rescinded or must otherwise be restored
or returned by the Lender upon the insolvency, bankruptcy, dissolution, liquidation or
reorganization of the Borrower, or upon or as a result of the appointment of a receiver,
intervenor or conservator of, or a trustee or similar officer for the Borrower or any substantial
part of its Property, or otherwise, this Loan Agreement, all rights hereunder and the Liens
created hereby shall continue to be effective, or be reinstated, until such payments have been
made.
10. Establishment of the Collection Amount
.
a. The Borrower shall establish and maintain the Collection Account, which shall be
entitled "Greenwich Capital Financial Products, Inc." The Borrower shall not change
the name of the account without the prior written consent of the Lender. Such
Collection Account shall be subject to a Collection Account Agreement.
b. The Borrower shall and shall cause each Subservicer to deposit all Collections in the
Collection Account in accordance with the applicable Servicing Agreement.
2. Conditions Precedent.
1. Initial Advance
. The obligation of the Lender to make its initial Advance hereunder is subject to the
satisfaction, immediately prior to or concurrently with the making of such Advance, of the
following conditions precedent:
a. Loan Agreement
. The Lender shall have received this Loan Agreement, executed and delivered by a
duly authorized officer of the Borrower.
b. Loan Documents
. The Lender shall have received the following documents, each of which shall be
satisfactory to the Lender in form and substance:
i. Note
. The Note, duly completed and executed; and
ii. Custodial Agreement
. The Custodial Agreement, duly executed and delivered by the Borrower
and the Custodian. In addition, the Borrower shall have filed all Uniform
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
Commercial Code and related filings and performed under the Custodial
Agreement and taken such other action as the Lender shall have requested in
order to perfect the security interests created pursuant to the Loan
Agreement.
Organizational Documents
. A good standing certificate and certified copies of the charter and by-laws (or
equivalent documents) of the Borrower and of all corporate or other authority for the
Borrower with respect to the execution, delivery and performance of the Loan
Documents and each other document to be delivered by the Borrower from time to
time in connection herewith (and the Lender may conclusively rely on such
certificate until it receives notice in writing from the Borrower to the contrary).
Legal Opinion
A legal opinion of counsel to the Borrower, substantially in the form attached hereto
as Exhibit C.
Collection Account Agreement
. The Lender shall have received a Collection Account Agreement substantially in the
form of Exhibit G hereof executed by duly authorized officers of the Borrower and
the Collection Bank.
Filings, Registrations, Recordings
. Any documents (including, without limitation, financing statements) required to be
filed, registered or recorded in order to create, in favor of the Lender, a perfected,
first-priority security interest in ale Collateral, subject to no Liens other than those
created hereunder, shall have been properly prepared and executed for filing
(including the applicable county(ies) if the Lender determines such filings are
necessary in its reasonable discretion), registration or recording in each office in each
jurisdiction in which such filings, registrations and recordations are required to
perfect such first-priority security interest.
Fees and Expenses
. The Lender shall have received all fees and expenses required to be paid by the
Borrower on or prior to the initial Funding Date pursuant to Section 11.03(b) and
such fees and expenses may be netted out of any Advance made by the Lender
hereunder.
Financial Statements
. The Lender shall have received the financial statements referenced in
Section 7.01(a).
Underwriting Guidelines
. The Lender and the Borrower shall have agreed upon the Underwriting Guidelines
for Mortgage Loans and the Lender shall have received a copy thereof.
Consents, Licenses, Approvals, etc
. The Lender shall have received copies certified by the Borrower of all consents,
licenses and approvals, if any, required in connection with the execution, delivery
and performance by the Borrower of, and the validity and enforceability of, the Loan
Documents, which consents, licenses and approvals shall be in full force and effect.
Insurance
. The Lender shall have received evidence in form and substance satisfactory to the
Lender showing compliance by the Borrower as of such initial Funding Date with
Section 7.22 hereof.
(1) Securitization Letter. The Lender shall have received the Securitization Letter, in
form and substance satisfactory to the Lender and executed by a duly authorized
officer of the Borrower.
Gestation Documents
. The Lender and the Borrower shall have executed the program documents for a
gestation program between the Borrower and the Lender, in form and substance
satisfactory to the Lender.
n. Additional Collateral
. The Borrower shall deliver to the Lender cash collateral in an amount equal to
$2,500,000 which shall be held by the Lender as additional Collateral; provided that
such cash collateral shall not be taken into account in determining whether a
Borrowing Base Deficiency exists hereunder.
o. Other Documents
. The Lender shall have received such other documents as the Lender or its counsel
may reasonably request.
The Borrower's delivery to the Lender of the items listed in clauses (a), (b), (i), (c), (k), (1)
and (m) of this Section 5.01 shall be a condition precedent to the execution of this Loan
Agreement by the Lender.
3. Initial and Subsequent Advances. The making of each Advance to the Borrower (including
the initial Advance) on any Business Day is subject to the following further conditions
precedent, both immediately prior to the making of such Advance and also after giving effect
thereto and to the intended use thereof
a. no Default or Event of Default shall have occurred and be continuing;
b. both immediately prior to the making of such Advance and also after giving effect
thereto and to the intended use thereof, the representations and warranties made by
the Borrower in Section 6 hereof, and in each of the other Loan Documents, shall be
true and complete on and as of the date of the making of such Advance in all respects
(in the case of the representations and warranties in Section 6.23 and Schedule 1,
solely with respect to Mortgage Loans included in the Borrowing Base) with the
same force and effect as if made on and as of such date (or, if any such representation
or warranty is expressly stated to have been made as of a specific date, as of such
specific date). At the request of the Lender, the Lender shall have received an
officer's certificate signed by a Responsible Officer of the Borrower certifying as to
the truth and accuracy of the above, which certificate shall specifically include a
statement that the Borrower is in compliance with all governments] licenses and
authorizations and is qualified to do business and in good standing in all required
jurisdictions;
c. the aggregate outstanding principal amount of the Advances shall not exceed the
Borrowing Base or the Maximum Credit;
d. subject to the Lender's right to perform one or more Due Diligence Reviews pursuant
to Section 11.16 hereof, the Lender shall have completed its due diligence view of
the Mortgage Loan Documents for each Advance and such other documents, records,
agreements, instruments, mortgaged properties or information relating to such
Advances as the Lender in its reasonable discretion deems appropriate to review and
such review shall be satisfactory to the Lender in its reasonable discretion)
e. the Lender shall have received a Notice of Borrowing and Pledge, Loan List and
Mortgage Loan Data Transmission and all other documents required under
Section 2.03;
f. the Lender shall have received from the Custodian a Custodian Loan Transmission
and one or more Trust Receipts in respect of Mortgage Loans to be pledged
hereunder on such Business Day and an Exception Report, in each case dated such
Business Day and duly completed;
g. in the event that the Mortgage Loans to be pledged would cause the aggregate
outstanding principal balance of Mortgage Loans pledged secured by Mortgaged
Property from any state to exceed 15% of the aggregate outstanding principal balance
of Mortgage Loans pledged hereunder, then the Borrower shall, upon request by the
Lender, deliver an opinion of counsel acceptable to the Lender in such state,
substantially in the form of items number 12 and 13 of Exhibit C;
h. with respect to any Mortgage Loan that was funded in the name of or acquired by a
Qualified Originator which is an Affiliate of the Borrower, the Lender may, in its
sole discretion, require the Borrower to provide evidence sufficient to satisfy the
Lender that such Mortgage Loan was acquired in a legal sale, including without
limitation, an opinion, in form and substance and from an attorney, in both cases,
acceptable to the Lender in its sole discretion, that such Mortgage Loan was acquired
in a legal sale;
i. neither of the following shall have occurred and/or be continuing:
i. an event or events resulting in the inability of the Lender to finance any
Advances with traditional counterparties at rates which would have been
reasonable prior to the occurrence of such event or events or a material
adverse change in the financial condition of the Lender which affects (or can
reasonably be expected to affect) materially and adversely the ability of the
Lender to fixed its obligations under or otherwise comply with the temps of
this Loan Agreement; or;
ii. any other event beyond the control of the Lender shall have occurred which
the Lender reasonably determines may result in the Lender's inability to
perform its obligations under this Loan Agreement including, without
limitation, acts of God, strikes, lockouts, riots, acts of war or terrorism,
epidemics, nationalization, expropriation, currency restrictions, fire,
communication line failures, computer viruses, power failures, earthquakes,
or other disasters of a similar nature to the foregoing.
In the event of an occurrence of any of the events described in clauses (i) or
(ii) above, the Commitment Fee payable by the Borrower shall be prorated on the
basis of the actual number of days during which this Loan Agreement was in effect.
j. if any Mortgage Loans to be pledged hereunder were acquired by the Borrower, such
Mortgage Loans shall conform to the Borrower's Underwriting Guidelines or the
Lender shall have received Underwriting Guidelines for such Mortgage Loans
acceptable to the Lender in its reasonable discretion; and
k. the Lender shall have received all information requested from the Borrower relating
to Interest Rate Protection Agreements pursuant to Section 7.25, and the Lender shall
have reasonably determined that such Interest Rate Protection Agreements
adequately protect the Borrower from interest rate fluctuations.
Each request for a borrowing by the Borrower hereunder shall constitute a certification by the
Borrower to the effect set forth in this Section (both as of the date of such notice, request or
confirmation and as of the date of such borrowing).
2. Representations and Warranties.
The Borrower represents and warrants to the Lender that throughout the term of this Loan Agreement:
1. Existence. The Borrower (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has all requisite corporate or
other power, and has all governmental licenses, authorizations, consents and approvals,
necessary to own its assets and carry on its business as now being or as proposed to be
conducted, except where the lack of such licenses, authorizations, consents and approvals
would not be reasonably likely to have a material adverse effect on its property, business or
financial condition, or prospects; and (c) is qualified to do business and is in good standing in
all other jurisdictions in which the nature of the business conducted by it makes such
qualification necessary, except where failure so to qualify would not be reasonably (either
individually or in the aggregate) to have a material adverse effect on its property, business or
financial condition, or prospects and (d) is in compliance in all material respect with all
Requirements of Law.
2. Financial Condition
. The Borrower has heretofore furnished to the Lender a copy of its audited consolidated
balance sheets and the audited consolidated balance sheets of its consolidated Subsidiaries,
each as at December 31, 2001 with the opinion thereon of PricewaterhouseCoopers LLP, a
copy of which has been provided to Lender. The Borrower has also heretofore furnished to
the Lender the related consolidated statements of income and retained earnings and of cash
flows for the Borrower and its consolidated Subsidiaries for the period, setting forth
comparative form the figures for the previous year. All such financial statements are
materially complete and correct and fairly present the consolidated financial condition of the
Borrower and its Subsidiaries and the consolidated results of their operations for the fiscal
year ended on said date, all in accordance with GAAP applied on a consistent basis. Since
December 31, 2001 there has been no development or event nor any prospective development
or event which has had or should reasonably be expected to have a Material Adverse Effect.
3. Litigation
. There are no actions, suits, arbitrations, investigations or proceedings pending or, to its
knowledge, threatened against the Borrower or any of its Subsidiaries or affecting any of the
property thereof before any Governmental Authority, (i) as to which individually or in the
aggregate there is a reasonable likelihood of an adverse decision which would be reasonably
likely to have a material adverse effect on the property, business or financial condition, or
prospects of the Borrower or (ii) which questions the validity or enforceability of any of the
Loan Documents or any action to be taken in connection with the transactions contemplated
hereby and there is a reasonable likelihood of a materially adverse effect or decision.
4. No Breach
. Neither (a) the execution and delivery of the Loan Documents or (b) the consummation of
the transactions therein contemplated in compliance with the terms and provisions thereof
will conflict with or result in a breach of the charter or by-haws of the Borrower, or any
applicable law, rule or regulation, or any order, writ, injunction or decree of any
Governmental Authority, or other material agreement or instrument to which the Borrower, or
any of its Subsidiaries, is a party or by which any of them or any of their property is bound or
to which any of them is subject, or constitute a default under any such material agreement or
instrument, or (except for the Liens created pursuant to this Loan Agreement) result in the
creation or imposition of any Lien upon any property of the Borrower or any of its
Subsidiaries, pursuant to the terms of any such agreement or instrument.
5. Action
. The Borrower has all necessary corporate or other power, authority and legal right to
execute, deliver and perform its obligations under each of the Loan Documents to which it is
a party; the execution, delivery and performance by the Borrower of each of the Loan
Documents to which it is a party has been duly authorized by all necessary corporate or other
action on its part; and each Loan Document has been duly and validly executed and delivered
6.
7.
8.
9.
10.
11.
12.
by the Borrower and constitutes a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms.
Approvals
. No authorizations, approvals or consents of, and no filings or registrations with, any
Governmental Authority, or any other Person, are necessary for the execution, delivery or
performance by the Borrower of the Loan Documents to which it is a party or for the legality,
validity or enforceability thereof, except for filings and recordings in respect of the Liens
created pursuant to this Loan Agreement.
Margin Relations
. Neither the making of any Advance hereunder, nor the use of the proceeds thereof, will
violate or be inconsistent with the provisions of Regulation G, T, U or X.
Taxes
. The Borrower and its Subsidiaries have filed all Federal income tax returns and all other
material tax returns that are required to be filed by them and have paid all taxes due pursuant
to such returns or pursuant to any assessment received by any of them, except for any such
taxes, if any, that are being appropriately contested in good faith by appropriate proceedings
diligently conducted and with respect to which adequate reserves have been provided. The
charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of the Borrower, adequate.
Investment Company Act
. Neither the Borrower nor any of its Subsidiaries is an "investment company", or a company
"controlled" by an "investment company", within the meaning of the Investment Company
Act of 1940, as amended. The Borrower is not subject to any Federal or state statute or
regulation which limits its ability to incur indebtedness.
No Legal Bar
. The execution, delivery and performance of this Loan Agreement and the Note, the
borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of
Law or Contractual Obligation of the Borrower or of any of its Subsidiaries and will not
result in, or require, the creation or imposition of any Lien (other than the Liens created
hereunder) on any of its or their respective properties or revenues pursuant to any such
Requirement of Law or Contractual Obligation.
No Default
. Neither the Borrower nor any of its Subsidiaries is in default under or with respect to any of
its Contractual Obligations in any respect which should reasonably be expected to have a
Material Adverse Effect. No Default or Event of Default has occurred and is continuing.
Collateral; Collateral Security
.
a. The Borrower has not assigned, pledged, or otherwise conveyed or encumbered any
Mortgage Loan to any other Person, and immediately prior to the pledge of any such
Mortgage Loan, the Borrower was the sole owner of such Mortgage Loan and had
good and marketable title thereto, free and clear of all Liens, in each case except for
Liens to be released simultaneously with the Liens granted in favor of the Lender
hereunder and no Person other than the Borrower has any Lien on any Mortgage
Loan.
b. The provisions of this Loan Agreement are effective to create in favor of the Lender
a valid security interest in all right, title and interest of the Borrower in, to and under
the Collateral.
c. Upon receipt by the Custodian of each Mortgage Note, endorsed in blank by a duly
authorized officer of the Borrower, the Lender shall have a fully perfected first
priority security interest therein, in the Mortgage Loan evidenced thereby and in the
Borrower's interest in the related Mortgaged Property.
5.
6.
7.
8.
9.
10.
d. Upon the filing of financing statements on Form UCC-1 naming the Lender as
"Secured Party" and the Borrower as "Debtor", and describing the Collateral, in the
jurisdictions and recording offices listed on Schedule 2 attached hereto, the security
interests granted hereunder in the Collateral will constitute fully perfected first
priority security interests under the Uniform Commercial Code in all right, title and
interest of the Borrower in, to and under such Collateral, which can be perfected by
filing under the Uniform Commercial Code.
Chief Executive Office; Chief Operating Office. The Borrower's chief executive office and
chief operating office on the Effective Date is located at 5875 Arnold Road, Dublin,
California 94568.
Location of Books and Records
. The location where the Borrower keeps its books and records including all computer tapes
and records relating to the Collateral is its chief executive office or chief operating office or
the offices of the Custodian.
True and Complete Disclosure
. The information, reports, financial statements, exhibits and schedules furnished in writing
by or on behalf of the Borrower to the Lender in connection with the negotiation, preparation
or delivery of this Loan Agreement and the other Loan Documents or included herein or
therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any
untrue statement of material fact or omit to state any material fact necessary to make the
statements herein or therein, in light of the circumstances under which they were made, not
misleading. All written information famished after the date hereof by or on behalf of the
Borrower to the Lender in connection with this Loan Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby will be true, complete and
accurate in every material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified. There is no fact
known to a Responsible Officer that, after due inquiry, could reasonably be expected to have
a Material Adverse Effect that has not been disclosed herein, in the in the other Loan
Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other
writing furnished to the Lender for use in connection with the transactions contemplated
hereby or thereby.
Tangible Net Worth; Liquidity
. The Borrower's Tangible Net Worth is not less than the greater of (i) $30,000,000 or (ii) any
higher amount provided under any other repurchase, financing, credit or other similar
transaction to which the Borrower is a party. The Borrower has Cash Equivalents in an
amount not less than $15,000,000 (taking into account any amounts held by the Lender
pursuant to Section 5.01(n) of this Loan Agreement). The ratio of the Borrower's Total
Indebtedness to Tangible Net Worth is not greater than the lesser of (i) 10:1 or (ii) any ratio
provided under any other repurchase, financing, credit or other similar transaction to which
the Borrower is a party.
ERISA
. Each Plan to which the Borrower or its Subsidiaries make direct contributions, and, to the
knowledge of the Borrower, each other Plan and each Multiemployer Plan, is in compliance
in all material respects with, and has been administered in all material respects in compliance
with, the applicable provisions of ERISA, the Code and any other Federal or State law. No
event or condition has occurred and is continuing as to which the Borrower would be under
an obligation to furnish a report to the Lender under Section 7.01(d) hereof.
Licenses
. The Lender will not be required as a result of financing or taking a pledge of the Mortgage
Loans to be licensed, registered or approved or to obtain permits or otherwise qualify (i) to do
11.
12.
13.
14.
15.
16.
17.
18.
19.
business in any state in which it currently so required or (ii) under any state consumer
lending, fair debt collection or other applicable state statute or regulation.
Relevant States
. Schedule 3 sets forth all of the states or other jurisdictions (the "Relevant States") in which
the Borrower originates Mortgage Loans in its own name or through brokers on the date of
this Loan Agreement.
True Sales
. Any and all interest of a Qualified Originator in, to and under any Mortgage funded in the
name of or acquired by such Qualified Originator or seller which is an Affiliate of the
Borrower has been sold, transferred, conveyed and assigned to the Borrower pursuant to a
legal sale and such Qualified Originator retains no interest in such Mortgage Loan, and if so
requested by the Lender, is covered by an opinion of counsel to that effect in form and
substance acceptable to the Lender.
No Burdensome Restrictions
. No Requirement of Law or Contractual Obligation of the Borrower or any of its Subsidiaries
has a Material Adverse Effect.
Subsidiaries
. All of the Subsidiaries of the Borrower at the date hereof are listed on Schedule 4 to this
Loan Agreement.
Origination and Acquisition of Mortgage Loans
. The Mortgage Loans were originated or acquired by the Borrower, and the origination and
collection practices used by the Borrower or Qualified Originator, applicable, with respect to
the Mortgage Loans have been, in all material respects legal, proper, prudent and customary
in the residential mortgage loan servicing business, and in accordance with the Underwriting
Guidelines. With respect to Mortgage Loans acquired by the Borrower, all such Mortgage
Loans are in conformity with the Underwriting Guidelines. Each of the Mortgage Loans
complies with the representations and warranties listed in Schedule I hereto.
No Adverse Selection
. The Borrower used no selection procedures that identified the Mortgage Loans as being less
desirable or valuable than other comparable Mortgage Loans owned by the Borrower.
Borrower Solvent; Fraudulent Conveyance
. As of the date hereof and immediately after giving effect to each Advance, the fair value of
the assets of the Borrower is greater than the fair value of the liability (including, without
limitation, contingent liabilities if and to the extent required to be recorded as a liability on
the financial statements of the Borrower in accordance with GAAP) of the Borrower and the
Borrower is and will be solvent, is and will be able to pay its debts as they mature and does
not and will not have an unreasonably small capita] to engage in the business in which it is
engaged and proposes to engage. Borrower does not intend to incur, or believe that it has
incurred, debt beyond its ability to pay such debts as they mature. Borrower is not
contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of Borrower or any of its assets. Borrower is not transferring any Mortgage
Loans with any intent to hinder, delay or defraud any of its creditors.
Insured Closing Letter
. As of the date hereof and as of the date of each delivery of a Mortgage Loan, the Settlement
Agent has obtained an Insured Closing Letter, closing protection letter or similar
authorization letter from a nationally recognized title insurance company approved by the
Lender, copies of which shall be delivered by the Borrower to the Custodian prior to the
Funding Date.
Escrow Agreement
. As of the date hereof and as of the date of each delivery of a Mortgage Loan, the Settlement
Agent has executed an escrow agreement or letter stating that in the event of a Rescission or
any other reason the Mortgage Loan fails to fund on a given day, the party conducting the
closing is holding all funds which would have been disbursed on behalf of the Mortgagor as
agent for and for the benefit of the Lender and such funds shall be redeposited in the
Disbursement Account for benefit of the Lender not later than one Business Day after the
date of Rescission or other failure of the Mortgage Loan to fund on a given day.
13. Covenants of the Borrower
. The Borrower covenants and agrees with the Lender that, so long as any Advance is outstanding and
until payment in full of all Secured Obligations:
1. Financial Statements
. The Borrower shall deliver to the Lender:
a. as soon as available and in any event within 15 days after the end of each month, the
consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at
the end of such month and the related unaudited consolidated statements of income
and retained earnings and of cash flows for the Borrower and its consolidated
Subsidiaries for such month and the portion of the fiscal year through the end of such
month, setting forth in each case in comparative form the figures for the previous
year, accompanied by a certificate of a Responsible Officer of the Borrower, which
certificate shall state that said consolidated financial statements fairly present the
consolidated financial condition and results of operations of the Borrower and its
Subsidiaries in accordance with GAAP, consistently applied, as at the end of, and for,
such month (subject to normal year-end audit adjustments);
i. as soon as available and in any event within 45 days after the end of each of
the first three quarterly fiscal periods of each fiscal year of the Borrower, the
consolidated balance sheets of the Borrower and its consolidated
Subsidiaries as at the end of such period and the related unaudited
consolidated statements of income and retained earnings and of cash flows
for the Borrower and its consolidated Subsidiaries for such period and the
portion of the fiscal year through the end of such period, setting forth in each
case in comparative form the figures for the previous year, accompanied by a
certificate of a Responsible Officer of the Borrower, which certificate shall
state that said consolidated financial statements fairly present the
consolidated financial condition and results of operations of the Borrower
and its Subsidiaries in accordance with GAAP, consistently applied, as at the
end of, and for, such period (subject to normal year-end audit adjustments);
b. as soon as available and in any event within 90 days after the end of each fiscal year
of the Borrower, the consolidated balance sheets of the Borrower and its consolidated
Subsidiaries as at the end of such fiscal year and the related consolidated statements
of income and retained earnings and of cash flows for the Borrower and its
consolidated Subsidiaries for such year, setting forth in tech case in comparative
form the figures for the previous year, accompanied by an opinion thereon of
independent certified public accountants of recognized national standing, which
opinion shall not be qualified as to scope of audit or going concern and shall state
that said consolidated financial statements fairly present the consolidated financial
condition and results of operations of the Borrower and its consolidated Subsidiaries
at the end of, and for, such fiscal year in accordance with GAAP, and a certificate of
such accountants stating that, in making the examination necessary for their opinion,
they obtained no knowledge, except as specifically stated, of any Default or Event of
Default;
c. from time to time such other information regarding the financial condition,
operations, or business of the Borrower as the Lender may reasonably request; and
d. as soon as reasonably possible, and in any event within thirty (30) days after a
Responsible Officer knows, or with respect to any Plan or Multiemployer Plan to
which the Borrower or any of its Subsidiaries makes direct contributions, has reason
to believe, that any of the events or conditions specified below with respect to any
Plan or Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of the Borrower setting forth details respecting such event or
condition and the action, if any, that the Borrower or its ERISA Affiliate proposes to
take with respect thereto (and a copy of any report or notice required to be filed with
or given to PBGC by the Borrower or an ERISA Affiliate with respect to such event
or condition):
i. any reportable event, as defined in Section 4043(b) of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which PBGC has
not by regulation or otherwise waived the requirement of Section 4043(a) of
ERISA that it be notified within thirty (30) days of the occurrence of such
event (provided that a failure to meet the minimum funding standard of
Section 412 of the Code or Section 302 of ERISA, including, without
limitation, the failure to make on or before its due date a required installment
under Section 412(m) of the Code or Section 302(e) of ERISA, shall be a
reportable event regardless of the issuance of any waivers in accordance with
Section 412(d) of the Code); and any request for a waiver under
Section 412(d) of the Code for any Plan;
ii. the distribution under Section 4041(c) of ERISA of a notice of intent to
terminate any Plan or any action taken by the Borrower or an ERISA
Affiliate to terminate any Plan;
iii. the institution by PBGC of proceedings under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by the Borrower or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by PBGC with respect to
such Multiemployer Plan;
iv. the complete or partial withdrawal from a Multiemployer Plan by the
Borrower or any ERISA Affiliate that results in liability under Section 4201
or 4204 of ERISA (including the obligation to satisfy secondary liability as a
result of a purchaser default) or the receipt by the Borrower or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in reorganization or
insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to
terminate or has terminated under Section 4041A of ERISA;
v. the institution of a proceeding by a fiduciary of any Multiemployer Plan
against the Borrower or any ERISA Affiliate to enforce Section 515 of
ERISA, which proceeding is not dismissed within 30 days; and
vi. the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the
loss of tax-exempt status of the trust of which such Plan is a part if the
Borrower or an ERISA Affiliate fails to timely provide security to such Plan
in accordance with the provisions of said Sections.
The Borrower will furnish to the Lender, at the time it furnishes each set of financial
statements pursuant to paragraphs (a) and (b) above, a certificate of a Responsible Officer of
the Borrower to the effect that, to the best of such Responsible Officer's knowledge, the
Borrower during such fiscal period or year has observed or performed all of its covenants and
other agreements, and satisfied every material condition, contained in this Loan Agreement
and the other Loan Documents to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or Event of Default except as
specified in such certificate (and, if any Default or Event of Default has occurred and is
continuing, describing the same in reasonable detail and describing the action the Borrower
has taken or proposes to take with respect thereto).
2. Litigation. The Borrower will promptly, and in any event within 7 days after service process
on any of the following, give to the Lender notice of all legal or arbitrable proceedings
affecting the Borrower or any of its Subsidiaries that questions or challenges the validity or
enforceability of any of the Loan Documents or as to which there is a reasonable likelihood of
adverse determination which would result in a Material Adverse Effect.
3. Existence, Etc
. Each of the Borrower and its Subsidiaries will:
a. preserve and maintain its legal existence and all of its material rights, privileges,
licenses and franchises;
b. comply with the requirements of all applicable laws, rules, regulations and orders of
Governmental Authorities (including, without limitation, truth in lending, real estate
settlement procedures and all environmental laws) if failure to comply with such
requirements would be reasonably likely (either individually or in the aggregate) to
have a Material Adverse Effect;
c. keep adequate records and books of account, in which complete entries will be made
in accordance with GAAP consistently applied;
d. not move its chief executive office or chief operating office from the addresses
referred to in Section 6.13 unless it shall have provided the Lender 30 days prior
written notice of such change;
e. pay and discharge all taxes, assessments and governmental charges or levies imposed
on it or on its income or profits or on any of its Property prior to the date on which
penalties attach thereto, except for any such tax, assessment, charge or levy the
payment of which is being contested in good faith and by proper proceedings and
against which adequate reserves are being maintained; and
f. permit representatives of the Lender, during normal business hours upon three (3)
Business Days' prior written notice at a mutually desirable time, to examine, copy
and make extracts from its books and records, to inspect any of its Properties, and to
discuss its business and affairs with its officers, all to the extent reasonably requested
by the Lender.
7. Prohibition of Fundamental Change. The Borrower shall not enter into any transaction of
merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer
any liquidation, winding up or dissolution) or sell all or substantially all of its assets;
provided, that the Borrower may merge or consolidate with (a) any wholly owned subsidiary
of the Borrower, or (b) any other Person if the Borrower is the surviving corporation; and
provided further, that if after giving effect thereto, no Default would exist hereunder.
8. Borrowing Base Deficiency
. If at any time there exists a Borrowing Base Deficiency the Borrower shall cure same in
accordance with Section 2.06 hereof.
9. Notices
. The Borrower shall give notice to the Lender promptly:
a. upon the Borrower becoming aware of, and in any event within one (1) Business Day
after, the occurrence of any Default or Event of Default or any Event of Default or
Default under any other material agreement of the Borrower;
b. upon, and in any event within three (3) Business Days after, service of process on the
Borrower or any of its Subsidiaries, or any agent thereof for service of process, in
respect of any legal or arbitrable proceedings affecting the Borrower or any of its
Subsidiaries (i) that questions or challenges the validity or enforceability of any of
the Loan Documents or (ii) in which the amount in controversy exceeds $500,000;
c. upon the Borrower becoming aware of any default related to any Collateral, any
Material Adverse Effect and any event or change in circumstances which should
reasonably be expected to have a Material Adverse Effect;
d. upon the Borrower becoming aware during the normal course of its business that the
Mortgaged Properly in respect of any Mortgage Loan or Mortgage Loans with an
aggregate unpaid principal balance of at least $500,000 has been damaged by waste,
fire, earthquake or earth movement, windstorm, flood, tornado or other casualty, or
otherwise damaged so as to materially and adversely affect the Collateral Value of
such Mortgage Loan;
e. upon the entry of a judgment or decree in an amount in excess of $500,000.
Each notice pursuant to this Section 7,06 (other than 7,06(e)) shall be accompanied by a
statement of a Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the Borrower has taken or proposes to take with
respect thereto.
6. Servicing. Except as provided in Section 11.15(c), the Borrower shall not permit any Person
other than the Borrower to service Mortgage Loans without the prior written consent of the
Lender, which consent shall not be unreasonably withheld.
7. Intentionally Omitted
.
8. Underwriting Guidelines
. The Borrower shall notify the Lender in writing of any material modifications to the
Underwriting Guidelines prior to implementation of such change, and unless the Lender
objects in writing within 5 Business Days of receipt of notice, the proposed modifications
shall be deemed acceptable.
9. Lines of Business
. The Borrower will not engage to any substantial extent in any line or lines of business
activity other than the businesses generally carried on by it as of the Effective Date.
10. Transactions with Affiliates
. The Borrower will not enter into any transaction, including, without limitation, any
purchase, sale, lease or exchange of property or the rendering of any service, with any
Affiliate unless such transaction is (a) otherwise permitted under this Loan Agreement, (b) in
the ordinary course of the Borrower's business and (c) upon fair and reasonable terms no less
favorable to the Borrower than it would obtain in a comparable arm's length transaction with
a Person which is not an Affiliate, or make a payment that is not otherwise permitted by this
Section 7.11 to any Affiliate.
11. Use of Proceeds
. The Borrower will use the proceeds of the Advances solely to originate, fiend, manage and
service Eligible Mortgage Loans.
12. Limitation on Liens
. The Borrower will not, nor will it permit or allow others to, create, incur or permit to exist
any Lien, security interest or claim on or to any of the Collateral, except for Liens on the
Collateral created pursuant to this Loan Agreement. The Borrower will defend the Collateral
against, and will take such other action as is necessary to remove, any Lien, security interest
or claim on or to the Collateral, other than the security interests created under this Loan
13.
14.
15.
16.
17.
18.
19.
20.
21.
Agreement, and the Borrower will defend the right, title and interest of the Lender in and to
any of the Collateral against the claims and demands of all persons whomsoever.
Limitation on Sale of Assets
. The Borrower shall not convey, sell, lease, assign, transfer or otherwise dispose of
(collectively, "Transfer"), all or substantially all of its Property, business or assets (including,
without limitation, receivables and leasehold interests) whether now owned or hereafter
acquired or allow any Subsidiary to Transfer substantially all of its assets to any Person;
provided, that the Borrower may after prior written notice to the Lender allow such action
with respect to any Subsidiary which is not a material part of the Borrower's overall business
operations.
Limitation on Distributions
. Without the Lender's consent, the Borrower shall not make any payment on account of, or
set apart assets for a sinking or other analogous fund for the purchase, redemption,
defeasance, retirement or other acquisition of, any stock or senior or subordinate debt of the
Borrower, whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in obligations of the
Borrower.
Maintenance of Liquidity
. The Borrower shall insure that, as of the end of each calendar month, it has Cash
Equivalents in an amount of not less than $15,000,000 (taking into account any amounts held
by the Lender pursuant to Section 5.01(n) of this Loan Agreement).
Maintenance of Tangible Net Worth
. The Borrower shall not permit Tangible Net Worth at any time to be less than $30,000,000
or such higher amount provided under any other repurchase, financing, credit or other similar
facility entered into by the Borrower.
Maintenance of Ratio of Total Indebtedness to Tangible Net Worth
. The Borrower shall not permit the ratio of Total Indebtedness to Tangible Net Worth at any
time to be greater than 10:1 or such lower ratio provided under any other repurchase,
financing credit or other similar facility entered into by the Borrower.
Restricted Payment
. The Borrower shall not make any Restricted Payments following an Event of Default.
Servicing Transmission
. The Borrower shall provide to the Lender within two (2) Business Days of the Lender's
written request (i) the Servicing Transmission, on a loam-by-loan basis and in the aggregate,
with respect to the Mortgage Loans serviced hereunder by the Borrower which were funded
prior to the first day of the current month, summarizing the Borrower's delinquency and loss
experience with respect to Mortgage Loans serviced by the Borrower (including, in the case
of the Mortgage Loans, the following categories: current, 30-59, and 60+) and (ii) any other
information reasonably requested by the Lender with respect to the Mortgage Loans.
No Amendment or Waiver
. The Borrower will not, nor will it permit or allow others to amend, modify, terminate or
waive any provision of any Mortgage Loan to which the Borrower is a party in any manner
which shall reasonably be expected to materially and adversely affect the value of such
Mortgage Loan as Collateral.
Maintenance of Property; Insurance
. The Borrower shall keep all property useful and necessary in its business in good working
order and condition. The Borrower shall maintain errors and omissions insurance and/or
mortgage impairment insurance and blanket bond coverage in such amounts as are in effect
on the Effective Date (as disclosed to Lender in writing) and shall not reduce such coverage
without the written consent of the Lender, and shall also maintain such other insurance with
financially sound and reputable insurance companies, and with respect to property and risks
of a character usually maintained by entities engaged in the same or similar business similarly
situated, against loss, damage and liability of the kinds and in the amounts customarily
maintained by such entities.
22. Further Identification of Collateral
. The Borrower will furnish to the Lender firm time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection with the
Collateral as the Lender or any Lender may reasonably request, all in reasonable detail.
23. Mortgage Loan Determined to be Defective
. Upon discovery by the Borrower or the Lender of any breach of any representation or
warranty listed on Schedule 1 hereto applicable to any Mortgage Loan, the party discovering
such breach shall promptly give notice of such discovery to the other.
24. Interest Rate Protection Agreements
. Upon the Lender's request, the Borrower shall deliver to the Lender any and all information
relating to Interest Rate Protection Agreements.
25. Certificate of a Responsible Officer of the Borrower
. At the time that the Borrower delivers financial statements to the Lender in accordance with
Section 7.01 hereof, the Borrower shall forward to the Lender a certificate of a Responsible
Officer of the Borrower which demonstrates that the Borrower is in compliance with the
covenants set forth in Sections 7.16, 7.17 and 7.18 above.
26. Committed Warehouse Facilities
. Borrower shall at all times have available under committed revolving facilities (other than
with Lender) with a term at least equal to that provided under this Loan Agreement at least
$50,000,000. Such other committed revolving facilities shall permit Borrower to borrow at
least $20,000,000 secured by wet loans.
2. Events of Default
. Each of the following events shall constitute an event of default (an "Event of Default") hereunder:
a. the Borrower shall default in the payment of any principal of or interest on any
Advance when due (whether at stated maturity, upon acceleration or at mandatory
prepayment); or
b. the Borrower shall default in the payment of any other amount payable by it
hereunder or under any other Loan Document after notification by the Lender of such
default, and such default shall have continued unremedied for three Business Days;
or
c. any representation, warranty or certification made or deemed made herein or in any
other Loan Document by the Borrower or any certificate furnished to the Lender
pursuant to the provisions thereof, shall prove to have been false or misleading in any
material respect as of the time made or furnished (other than the representations and
warranties set forth in Schedule 1 which shall be considered solely for the purpose of
determining the Collateral Value of the Mortgage Loans; unless Borrower shall have
made any such representations and warranties with knowledge that they were
materially false or misleading at the time made); or
d. the Borrower shall fail to comply with the requirements of Section 7.03(a),
Section 7.04, Section 7.06 (a) or (c), Sections 7.12 through 7.19 Section 7.22(b), or
Section 7.27 hereof; or the Borrower shall default in the performance of its
obligations under Section 7.05 hereof, and such default shall continue unremedied for
a period of one (1) Business Day; or the Borrower shall otherwise fail to observe or
perform any other agreement contained in this Loan Agreement or any other Loan
Document and such failure to observe or perform shall continue unremedied for a
period of five (5) Business Days; or
e. a final judgment or judgments for the payment of money in excess of $1,000,000 in
the aggregate (to the extent that it is, in the reasonable determination of the Lender,
f.
g.
h.
i.
j.
k.
uninsured and provided that any insurance or other credit posted in connection with
an appeal shall not be deemed insurance for these purposes) shall be rendered against
the Borrower or any of its Subsidiaries by one or more courts, administrative
tribunals or other bodies having jurisdiction over them and the same shall not be
discharged (or provision shall not be made for such discharge) or bonded, or a stay of
execution thereof shall not be procured, within 60 days from the date of entry thereof
and the Borrower or any such Subsidiary shall not, within said period of 60 days, or
such longer period during which execution of the same shall have been stayed or
bonded, appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
the Borrower shall admit in writing its inability to pay its debts as such debts become
due; or
the Borrower or any of its Subsidiaries shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
examiner or liquidator of itself or of all or a substantial part of its property, (ii) make
a genera] assignment for the benefit of its creditors, (iii) commence a voluntary case
under the Bankruptcy Code, (iv) file a petition seeking to take advantage of any other
law relating to bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up, or composition or readjustment of debts, (v) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to, any petition
filed against it in an involuntary case under the Bankruptcy Code or (vi) take any
corporate or other action for the purpose of effecting any of the foregoing; or
a proceeding or case shall be commenced, without the application or consent of the
Borrower or any of its Subsidiaries, in any court of competent jurisdiction, seeking
(i) its reorganization, liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a receiver,
custodian, trustee, examiner, liquidator or the like of the Borrower or any such
Subsidiary or of all or any substantial part of its property, or (iii) similar relief in
respect of the Borrower or any such Subsidiary under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts, and
such proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue unstayed
and in effect, for a period of 60 or more days; or an order for relief against the
Borrower or any such Subsidiary shall be entered in an involuntary case under the
Bankruptcy Code; or
the Custodial Agreement or any Loan Document shall for whatever reason (including
an event of default thereunder) be terminated or the lien on the Collateral created by
this Agreement or Borrower's material obligations hereunder shall cease to be in full
force and effect, or the enforceability thereof shall be contested by the Borrower; or
any materially adverse change in the Properties, business or financial condition, or
prospects of the Borrower or any of its Subsidiaries or Affiliates, in each case as
determined by the Lender in its sole discretion, or the existence of any other
condition which, in the Lender's sole discretion, constitutes a material impairment of
the Borrower's ability to perform its obligations under this Loan Agreement, the Note
or any other Loan Document; or
(i) any Person shall engage in any "prohibited transaction" (as defined in Section 406
of ERISA or Section 4975 of the Code) involving any Plan, (ii) any material
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or
not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a
Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity,
(iii) a Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of the Lenders,
likely to result in the termination of such Plan for purposes of Title IV of ERISA,
(iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA,
(v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable
opinion of the Lenders is likely to, incur any liability in connection with a withdrawal
from, or the insolvency or reorganization of, a Multiemployer Plan or (vi) any other
event or condition shall occur or exist with respect to a Plan; and in each case in
clauses (i) through (vi) above, such event or condition, together with all other such
events or conditions, if any, could reasonably be expected to have a Material Adverse
Effect; or
l. any Change of Control of the Borrower shall have occurred without the prior consent
of the Lender; or
m. the Borrower shall grant, or suffer to exist, any Lien on any Collateral except the
Liens contemplated hereby; or the Liens contemplated hereby shall cease to be first
priority perfected Liens on the Collateral in favor of the Lender or shall be Liens in
favor of any Person other than the Lender; or
n. the Lender shall reasonably request, specifying the reasons for such request,
information, and/or written responses to such requests, regarding the financial wellbeing of the Borrower and such information and/or responses shall not have been
provided within three Business Days of such request; or
o. the Borrower or its Affiliates shall default under or fail to perform as requested
under, the terms of any repurchase agreement, loan and security agreement or similar
credit facility or agreement for borrowed fiends or any other material agreement
entered into by the Lender or its Affiliate and any third party, which default or failure
entitles any party to require acceleration or prepayment of any indebtedness
thereunder or the Borrower or its Affiliate shall default under or fail to materially
perform as requested under the terms of any Agreement with the Lender or its
Affiliate.
1. Remedies Upon Default.
a. Upon the occurrence of one or more Events of Default (subject to the expiration of
the applicable cure period contained therein) other than those referred to in
Section 8(g) or (h), the Lender may immediately declare the principal amount of the
Advances then outstanding under the Note to be immediately due and payable,
together with all interest thereon and reasonable fees and out-of-pocket expenses
accruing under this Loan Agreement; provide d that upon the occurrence of an Event
of Default referred to in Sections 8(g) or (h), such amounts shall immediately and
automatically become due and payable without any further action by any Person.
Upon such declaration or such automatic acceleration, the balance then outstanding
on the Note shall become immediately due and payable, without presentment,
demand, protest or other formalities of any kind, all of which are hereby expressly
waived by the Borrower and may thereupon exercise any remedies available to it at
law and pursuant to the Loan Documents including, but not limited to, the transfer of
servicing or the liquidation of the Collateral on a servicing released basis.
b. Upon the occurrence of one or more Events of Default, the Lender shall have the
right to obtain physical possession of the Servicing Records and all other files of the
Borrower relating to the Collateral and all documents relating to the Collateral which
are then or may thereafter come in to the possession of the Borrower or any third
party acting for the Borrower and the Borrower shall deliver to the Lender such
assignments as the Lender shall request. The Lender shall be entitled to specific
performance of all agreements of the Borrower contained in this Loan Agreement.
1. No Duty on Lender's Part. The powers conferred on the Lender hereunder are solely to protect the
Lender's interests in the Collateral and shall not impose any duty upon it to exercise any such powers.
The Lender shall be accountable only for amounts that it actually receives as a result of the exercise of
such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible
to the Borrower for any act or failure to act hereunder, except for its or their own gross negligence or
willful misconduct.
2. Miscellaneous
.
1. Waiver
. No failure on the part of the Lender to exercise and no delay in exercising, and no course of
dealing with respect to, any right, power or privilege under any Loan Document shall operate
as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege
under any Loan Document preclude any other or further exercise thereof or the exercise of
any other right, power or privilege. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
2. Notices
. Except as otherwise expressly permitted by this Loan Agreement, all notices, requests and
other communications provided for herein and under the Custodial Agreement (including,
without limitation, any modifications of, or waivers, requests or consents under, this Loan
Agreement) shall be given or made in writing (including, without limitation, by telex or
telecopy) delivered to the intended recipient at the "Address for Notices" specified below its
name on the signature pages hereof; or, as to any party, at such other address as shall be
designated by such party in a written notice to each other party. Except as otherwise provided
in this Loan Agreement and except for notices given under Section 2 (which shall be effective
only on receipt), all such communications shall be deemed to have been duly given when
transmitted by telex or telecopier or personally delivered or, in the case of a mailed notice,
upon receipt, in each case given or addressed as aforesaid.
3. Indemnification and Expenses
.
a. The Borrower agrees to hold the Lender harmless from and indemnify the Lender
against all liabilities, losses, damages, judgments, costs and expenses of any kind
which may be imposed on, incurred by, or asserted against the Lender, relating to or
arising out of, this Loan Agreement, the Note, any other Loan Document or any
transaction contemplated hereby or thereby, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, this Loan
Agreement, the Note, any other Loan Document or any transaction contemplated
hereby or thereby, that, in each case, results from anything other than the Lender's
gross negligence or willful misconduct. In any suit, proceeding or action brought by
the Lender in connection with any Mortgage Loan for any sum owing thereunder, or
to enforce any provisions of any Mortgage Loan, the Borrower will save, indemnify
and hold the Lender harmless from and against all expense, loss or damage suffered
by reason of any defense, set-off, counterclaim, recoupment or reduction or liability
whatsoever of the account debtor or obligor thereunder, arising out of a breach by the
Borrower of any obligation thereunder or arising out of any other agreement,
indebtedness or liability at any time owing to or in favor of such account debtor or
obligor or its successors from the Borrower. The Borrower also agrees to reimburse
the Lender as and when billed by the Lender for all the Lender's reasonable out-ofpocket costs and expenses incurred in connection with the enforcement or the
preservation of the Lender's rights under this Loan Agreement, the Note, any other
3.
4.
5.
6.
7.
8.
Loan Document or any transaction contemplated hereby or thereby, including
without limitation the reasonable fees and disbursements of its counsel. The
Borrower hereby acknowledges that, notwithstanding the fact that the Note is secured
by the Collateral, the obligation of the Borrower under the Note is a recourse
obligation of the Borrower.
b. The Borrower agrees to pay as and when billed by the Lender all of the out- ofpocket costs and expenses incurred by the Lender in connection with the
development, preparation and execution of, and any amendment, supplement or
modification to, this Loan Agreement, the Note, any other Loan Document or any
other documents prepared in connection herewith or therewith. The Borrower agrees
to pay as and when billed by the Lender all of the out-of-pocket costs and expenses
incurred in connection with the consummation and administration of the transactions
contemplated hereby and thereby including, without limitation, (i) all the reasonable
fees, disbursements and expenses of counsel to the Lender, (ii) all the due diligence,
inspection, testing and review costs and expenses incurred by the Lender with respect
to Collateral under this Loan Agreement, including, but not limited to, those costs
and expenses incurred by the Lender in connection with the approval of any Takeout
Commitments and pursuant to Sections 11.03(a), 11.14 and 11.16 hereof other than
any costs and expenses incurred in connection with the Lender's rehypothecation of
the Mortgage Loans prior to an Event of Default and (iii) initial and ongoing fees and
expenses incurred by the Custodian and any trustee with respect to the Mortgage
Loans. All of the foregoing amounts shall be paid promptly by the Borrower or may
be netted out of any Advance made by the Lender hereunder.
Amendments. Except as otherwise expressly provided in this Loan Agreement, any provision
of this Loan Agreement may be modified or supplemented only by an instrument in writing
signed by the Borrower and the Lender and any provision of this Loan Agreement may be
waived by the Lender.
Successors and Assigns
. This Loan Agreement shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
Survival
. The obligations of the Borrower under Sections 3.03 and 11.03 hereof shall survive the
repayment of the Advances and the termination of this Loan Agreement. In addition, each
representation and warranty made, or deemed to be made by a request for a borrowing, herein
or pursuant hereto shall survive the making of such representation and warranty, and the
Lender shall not be deemed to have waived, by reason of making any Advance, any Default
that may arise by reason of such representation or warranty proving to have been false or
misleading, notwithstanding that the Lender may have had notice or knowledge or reason to
believe that such representation or warranty was false or misleading at the time such Advance
was made.
Captions
. The table of contents and captions and section headings appearing herein are included solely
for convenience of reference and are not intended to affect the interpretation of any provision
of this Loan Agreement.
Counterparts
. This Loan Agreement maybe executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument, and any of the parties hereto may
execute this Loan Agreement by signing any such counterpart.
Loan Agreement Constitutes Security Agreement; Governing Law
. This Loan Agreement shall be governed by New York law without reference to choice of
law doctrine (but with reference to Section 5-1401 of the New York General Obligations
9.
5.
6.
4.
5.
Law, which by its terms applies to this Loan Agreement), and shall constitute a security
agreement within the meaning of the Uniform Commercial Code.
SUBMISSION TO JURISDICTION; WAIVERS
. EACH LOAN PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY:
a. SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LOAN AGREEMENT, THE NOTE AND
THE OTHER LOAN DOCUMENTS, OR FOR RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE
NONEXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES
OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND
APPELLATE COURTS FROM ANY THEREOF;
b. CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE
BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW,
WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE
SAME;
c. AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR
FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH
UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF
WHICH THE LENDER SHALL HAVE BEEN NOTIFIED; AND
d. AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION.
WAIVER OF JURY TRIAL. EACH OF THE BORROWER AND THE LENDER HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT, ANY
OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY
OR THEREBY.
Acknowledgments
. The Borrower hereby acknowledges that:
a. it has been advised by counsel in the negotiation, execution and delivery of this Loan
Agreement, the Note and the other Loan Documents to which it is a party;
b. the Lender has no fiduciary relationship to the Borrower, and the relationship
between the Borrower and the Lender is solely that of debtor and creditor; and
c. no joint venture exists among or between the Lender and the Borrower.
Hypothecation or Pledge of Collateral. The Lender shall have free and unrestricted use of all
Collateral and nothing in this Loan Agreement shall preclude the Lender from engaging in
repurchase transactions with the Collateral or otherwise pledging, repledging, transferring,
hypothecating, or rehypothecating the Collateral. Nothing contained in this Loan Agreement
shall obligate the Lender to segregate any Collateral delivered to the Lender by the Borrower.
Assignments; Participations
.
a. The Borrower may assign any of its rights or obligations hereunder or under the Note
with the prior written consent of the Lender which consent shall not be unreasonably
withheld. The Lender may assign or transfer to any bank or other financial institution
that makes or invests in loans or any Affiliate of the Lender all or any of its rights or
obligations under this Loan Agreement and the other Loan Documents.
b. The Lender may, in accordance with applicable law, at any time sell to one or more
lenders or other entities ("Participants") participating interests in any Advance, the
Note, its commitment to make Advances, or any other interest of the Lender
hereunder and under the other Loan Documents. In the event of any such sale by the
Lender of participating interests to a Participant, the Lender's obligations under this
Loan Agreement to the Borrower shall remain unchanged, the Lender shall remain
solely responsible for the performance thereof, the Lender shall remain the holder of
the Note for all purposes under this Loan Agreement and the other Loan Documents,
and the Borrower and the Lender shall continue to deal solely and directly with the
Lender in connection with the Lender's rights and obligations under this Loan
Agreement and the other Loan Documents. The Borrower agrees that if amounts
outstanding under this Loan Agreement and the Note are due or unpaid, or shall have
been declared or shall have become due and payable upon the occurrence of an Event
of Default, each Participant shall be deemed to have the right of set- off in respect of
its participating interest in amounts owing under this Loan Agreement and the Note
to the same extent as if the amount of its participating interest were owing directly to
it as a Lender under this Loan Agreement or the Note; provide d, that such
Participant shall only be entitled to such right of set-off if it shall have agreed in the
agreement pursuant to which it shall have acquired its participating interest to share
with the Lender the proceeds thereof. The Lender also agrees that each Participant
shall be entitled to the benefits of Sections 2.07 and 11.03 with respect to its
participation in the Advances outstanding from time to time; provided, that the
Lender and all Participants shall be entitled to receive no greater amount in the
aggregate pursuant to such Sections than the Lender would have been entitled to
receive had no such transfer occurred.
c. The Lender may furnish any information concerning the Borrower or any of its
Subsidiaries in the possession of such Lender from time to time to assignees and
participants (including prospective assignees and participants) only after notifying
the Borrower in writing and securing signed confidentiality statements (a form of
which is attached hereto as Exhibit R and only for the sole purpose of evaluating
participations and for no other purpose.
d. The Borrower agrees to cooperate with the Lender in connection with any such
assignment and/or participation, to execute and deliver such replacement notes, and
to enter into such restatements of, and amendments, supplements and other
modifications to, this Loan Agreement and the other Loan Documents in order to
give effect to such assignment and/or participation. The Borrower further agrees to
furnish to any Participant identified by the Lender to the Borrower copies of all
reports and certificates to be delivered by the Borrower to the Lender hereunder, as
and when delivered to the Lender.
5. Servicing.
a. The Borrower covenants to maintain or cause the servicing of the Mortgage Loans to
be maintained in conformity with Accepted Servicing Practices. In the event that the
preceding language is interpreted as constituting one or more servicing contracts,
each such servicing contract shall terminate automatically upon the earliest of (i) an
Event of Default, or (ii) the date on which all the Secured Obligations have been paid
in full, or (iii) the transfer of servicing to any entity approved by the Lender.
b. During the period the Borrower is servicing the Mortgage Loans, (i) the Borrower
agrees that Lender has a first priority perfected security interest in all servicing
records, including but not limited to any and all servicing agreements, files,
documents, records, data bases, computer tapes, copies of computer tapes, proof of
insurance coverage, insurance policies, appraisals, other closing documentation,
payment history records, and any other records relating to or evidencing the servicing
of such Mortgage Loans (the "Servicing Records"), and (ii) the Borrower grants the
Lender a security interest in all servicing fees and rights relating to the Mortgage
Loans and all Servicing Records to secure the obligation of the Borrower or its
designee to service in conformity with this Section and any other obligation of
Borrower to the Lender. The Borrower covenants to safeguard such Servicing
Records and to deliver them promptly to the Lender or its designee (including the
Custodian) at the Lender's request. It is understood and agreed by the parties that
prior to an Event of Default, the Borrower shall retain the servicing fees with respect
to the Mortgage Loans.
c. If the Mortgage Loans are serviced by any other third party servicer (such third party
servicer, the "Subservicer"), the Borrower shall provide a copy of the related
servicing agreement to the Lender at least three (3) Business Days prior to the
applicable Funding Date or the date on which the Subservicer shall begin
subservicing the Mortgage Loans, which shall be in the form and substance
acceptable to Lender (the "Servicing Agreement") and shall have obtained the written
consent of the Lender for such Subservicer to subservice the Mortgage Loans.
d. The Borrower agrees that upon the occurrence of an Event of Default, the Lender
may terminate the Borrower in its capacity as servicer and terminate any Servicing
Agreement and transfer such servicing to the Lender or its designee, at no cost or
expense to the Lender. The Borrower agrees to cooperate with the Lender in
connection with the transfer of servicing.
e. After the Funding Date, until the pledge of any Mortgage Loan is relinquished by the
Custodian, the Borrower will have no right to modify or alter the terms of the
Mortgage Loan or consent to the modification or alteration of the terms of any
Mortgage Loan, and the Borrower will have no obligation or right to repossess any
Mortgage Loan or substitute another Mortgage Loan, except as provided in any
f. The Borrower shall permit the Lender to inspect upon reasonable prior written notice
(which shall be no more than five (5) Business Days prior to such date) at a mutually
convenient time, the Borrower's or its Affiliate's servicing facilities, as the case may
be, for the purpose of satisfying the Lender that the Borrower or its Affiliate, as the
case may be, has the ability to service the Mortgage Loans as provided in this Loan
Agreement. In addition, with respect to any Subservicer which is not an Affiliate of
the Borrower, the Borrower shall use its best efforts to enable the Lender to inspect
the servicing facilities of such Subservicer.
7. Periodic Due Diligence Review. The Borrower acknowledges that the Lender has the right to
perform continuing due diligence reviews with respect to the Mortgage Loans, for purposes
of verifying compliance with the representations, warranties and specifications made
hereunder, or otherwise, and the Borrower agrees that upon reasonable (but no less than one
(1) Business Day's) prior notice to the Borrower, the Lender or its authorized representatives
will be permitted during normal business hours to examine, inspect, make copies of, and
make extracts of, the Mortgage Files and any and all documents, records, agreements,
instruments or information relating to such Mortgage Loans in the possession, or under the
control, of the Borrower and/or the Custodian. The Borrower also shall make available to the
Lender a knowledgeable financial or accounting officer for the purpose of answering
questions respecting the Mortgage Files and the Mortgage Loans. Without limiting the
generality of the foregoing, the Borrower acknowledges that the Lender shall make Advances
to the Borrower based solely upon the information provided by the Borrower to the Lender in
the Mortgage Loan Data Transmission and the representations, warranties and covenants
contained herein, and that the Lender, at its option, has the right, at any time to conduct a
partial or complete due diligence review on some or all of the Mortgage Loans securing such
Advance, including, without limitation, ordering new credit reports, new appraisals on the
related Mortgaged Properties and otherwise re-generating the information used to originate
such Mortgage Loan. The Lender may underwrite such Mortgage Loans itself or engage a
mutually agreed upon third party underwriter to perform such underwriting. The Borrower
agrees to cooperate with the Lender and any third party underwriter in connection with such
underwriting, including, but not limited to, providing the Lender and any third party
underwriter with access to any and all documents, records, agreements, instruments or
information relating to such Mortgage Loans in the possession, or under the control, of the
Borrower. In addition, the Lender has the right to perform continuing Due Diligence Reviews
of the Borrower and its Affiliates, directors, officers, employees and significant shareholders.
The Borrower and Lender further agree that all out-of-pocket costs and expenses incurred by
the Lender in connection with the Lender's activities pursuant to this Section 11.16 shall be
paid for as agreed by such parties.
8. Set-Off
. In addition to any rights and remedies of the Lender provided by this Loan Agreement and
by law, upon the occurrence of an Event of Default, the Lender shall have the right, without
prior notice to the Borrower, any such notice being expressly waived by the Borrower to the
extent permitted by applicable law, upon any amount becoming due and payable by the
Borrower hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off
and appropriate and apply against such amount any and all Property and deposits (genera] or
special, time or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by the Lender or any Affiliate
thereof to or for the credit or the account of the Borrower. The Lender may set-off cash, the
proceeds of the liquidation of any Collateral and all other sums or obligations owed by the
Lender or its Affiliates to the Borrower against all of the Borrower's obligations to the Lender
or its Affiliates, whether under this Loan Agreement or under any other agreement between
the parties or between the Borrowers and any affiliate of the Lender, or otherwise, whether or
not such obligations are then due, without prejudice to the Lender's or its Affiliate's right to
recover any deficiency. The Lender agrees promptly to notify the Borrower after any such
set-off and application made by the Lender; provided that the failure to give such notice shall
not affect the validity of such set-off and application.
9. Intent. The parties recognize that each Advance is a "securities contract" as that term is
defined in Section 741 of Title 11 of the United States Code, as amended.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement to be duly executed alai delivered as
of the day and year first above written.
BORROWER
E-LOAN, INC.
By:
Title:
Address for Notices
:
5875 Arnold Road
Attention:
Telecopier No.:
Telephone No.:
With a copy to:
Attention: Treasurer
Telecopier No.: 925-560-3408
Telephone No.: 925-241-2510
and
Attention: General Counsel
Telecopier No.: 925-803-3503
LENDER
By:
Title:
Address for Notices
:
600 Steamboat Road
Greenwich, Connecticut 06830
Attention: Anthony Palmisano
Telecopier No.: (203) 618-2135
Telephone No.: (203) 618-2341
With a copy to:
Telephone No.: (203) 625-2700
Schedule 1
REPRESENTATIONS AND WARRANTIES RE: MORTGAGE LOANS
Eligible Mortgage Loans
As to each Mortgage Loan that forms part of the Collateral hereunder (and the related Mortgage, Mortgage Note,
Assignment of Mortgage and Mortgaged Property), the Borrower shall be deemed to make the following
representations and warranties to the Lender as of such date and as of each date Collateral Value is determined:
(a) Mortgage Loans as Described. The information set forth in the Mortgage Loan Data Transmission with respect to
the Mortgage Loan is complete, true and correct in all material respects.
(b) Payments Current. The first Monthly Payment shall have been made prior to the second scheduled Monthly
Payment becoming due.
(c) No Outstanding Charges. There are no defaults in complying with the terms of the Mortgage securing the
Mortgage Loan, and all taxes, governmental assessments, insurance premiums, water, sewer and municipal charges,
leasehold payments or ground rents which previously became due and owing have been paid, or 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. Neither the Borrower nor the Qualified Originator from which the Borrower
acquired the Mortgage Loan has advanced fiends, or induced, solicited or knowingly received any advance of finds by
a party other than the Mortgagor, directly or indirectly, for the payment of any amount required under the Mortgage
Loan, except for interest accruing from the date of the Mortgage Note or date of disbursement of the proceeds of the
Mortgage Loan, whichever is more recent, to the day which precedes by one month the Due Date of the first
installment of principal and interest thereunder.
(d) Original Terms Unmodified. The terms of the Mortgage Note and Mortgage have not been impaired, waived,
altered or modified in any respect, from the date of origination; except by a written instrument which has been
recorded, if necessary to protect the interests of the Lender, and which has been delivered to the Custodian and the
terms of which are reflected in the Mortgage Loan Schedule. The substance of any such waiver, alteration or
modification has been approved by the title insurer, to the extent required by the title insurance policy, and its terms
are reflected on the Mortgage Loan Schedule. No Mortgagor in respect of the Mortgage Loan has been released, in
whole or in part, except in connection with an assumption agreement approved by the title insurer, to the extent
required by such policy, and which assumption agreement is part of the Mortgage File delivered to the Custodian and
the terms of which are reflected in the Mortgage Loan Schedule.
(e) No Defenses. The Mortgage Loan is not subject to any right of rescission, setoff, counterclaim or defense,
including without limitation the defense of usury, nor will the operation of any of the terms of the Mortgage Note or
the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable,
in whole or in part and no such right of rescission, set-off, counterclaim or defense has been asserted with respect
thereto, and no Mortgagor in respect of the Mortgage Loan was a debtor in any state or Federal bankruptcy or
insolvency proceeding at the time the Mortgage Loan was originated.
(f) Hazard Insurance. The Mortgaged Property is insured by a fire and extended perils insurance policy, issued by a
Qualified Insurer, and such other hazards as are customary in the area where the Mortgaged Property is located, and to
the extent required by the Borrower as of the date of origination consistent with the Underwriting Guidelines, against
earthquake and other risks insured against by Persons operating like properties in the locality of the Mortgaged
Property, in an amount not less than the greatest of (i) 100% of the replacement cost of all improvements to the
Mortgaged Property, (ii) either (A) the outstanding principal balance of the Mortgage Loan with respect to each First
Lien Mortgage Loan or (B) with respect to each Second Lien Mortgage Loan, the sum of the outstanding principal
balance of the First Lien Mortgage Loan and the outstanding principal balance of the Second Lien Mortgage Loan,
(iii) the amount necessary to avoid the operation of any co-insurance provisions with respect to the Mortgaged
Property, and consistent with the amount that would have been required as of the date of origination in accordance
with the Underwriting Guidelines or (iv) the amount necessary to fully compensate for any damage or loss to the
improvements that are a part of such property on a replacement cost basis. If any portion of the Mortgaged Property is
in an area identified by any federal Governmental Authority as having special flood hazards, and flood insurance is
available, a flood insurance policy meeting the current guidelines of the Federal Insurance Administration is in effect
with a generally acceptable insurance carrier, in an amount representing coverage not less than the least of (1) the
outstanding principal balance of the Mortgage Loan, (2) the full insurable value of the Mortgaged Property, and (3) the
maximum amount of insurance available under the Flood Disaster Protection Act of 1973, as amended. All such
insurance policies (collectively, the "hard insurance policy") contain a standard mortgagee clause naming the
Borrower, its successors and assigns (including without limitation, subsequent owners of the Mortgage Loan), as
mortgagee, and may not be reduced, terminated or canceled without 30 days' prior written notice to the mortgagee. No
such notice has been received by the Borrower. All premiums due and owing on such insurance policy have been paid.
The related Mortgage obligates the Mortgagor to maintain all such insurance and, at such Mortgagor's failure to do so,
authorizes the mortgagee to maintain such insurance at the Mortgagor's cost and expense and to seek reimbursement
therefor from such Mortgagor. Where required by state law or regulation, the Mortgagor has been given an
opportunity to choose the corner of the required hazard insurance, provided the policy is not a "master" or "blanket"
hazard insurance policy covering a condominium, or any hazard insurance policy covering the common facilities of a
planned unit development. The hazard insurance policy is the valid and binding obligation of the insurer and is in full
force and effect. The Borrower has not engaged in, and has no knowledge of the Mortgagor's having engaged in, any
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 including, without limitation, no unlawful fee, commission,
kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any
attorney, firm or other Person, and no such unlawful items have been received, retained or realized by the Borrower.
(g) Compliance with Applicable Laws. Any and all requirements of any federal, state or local law including, without
limitation, usury, truth- in- lending, real estate settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws applicable to the Mortgage Loan have been complied with, the consummation of the
transactions contemplated hereby will not involve the violation of any such laws or regulations, and the Borrower shall
maintain or shall cause its agent to maintain in its possession, available for the inspection of the Lender, and shall
deliver to the Lender, upon two Business Days' request, evidence of compliance with all such requirements.
(h) No Satisfaction of Mortgage. The Mortgage has not been satisfied, canceled, subordinated or rescinded, in whole
or in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole-or in part, nor
has any instrument been executed that would effect any such release, cancellation, subordination or rescission other
than in the case of a release of a portion of the land comprising a Mortgaged Property or a release of a blanket
Mortgage which release will not cause the Mortgage Loan to fail to satisfy the Underwriting Guidelines. The Borrower
has not waived the performance by the Mortgagor of any action, if the Mortgagor's failure to perform such action
would cause the Mortgage Loan to be in default, nor has the Borrower waived any default resulting from any action or
inaction by the Mortgagor.
(i) Location and Type of Mortgaged Property. The Mortgaged Property is located in the state identified in the
Mortgage Loan Schedule and consists of a single parcel of real property with a detached single family residence
erected thereon, or a two- to four-family dwelling, or an individual condominium unit in a condominium project, or an
individual unit in a planned unit development or a de minimis planned unit development, provided, however, that any
condominium unit or planned unit development shall conform with the applicable Fannie Mae and Freddie Mac
requirements regarding such dwellings, that a de minimis percentage of the Mortgage Loans may be Cooperative
Loans and that no residence or dwelling is a mobile home or a manufactured dwelling. No portion of the Mortgaged
Property is used for commercial purposes.
(j) Valid Lien. The Mortgage is a valid, subsisting, enforceable and perfected (A) first lien and first priority security
interest with respect to each Mortgage Loan which is indicated by the Borrower to be a First Lien Mortgage Loan (as
reflected on the Mortgage Loan Data Transmission) or (B) second lien and second priority security interest with
respect to each Mortgage Loan which is indicated by the Borrower to be a Second Lien (as reflected on the Mortgage
Loan Data Transmission), in either case, on the real property included in the Mortgaged Property, including all
buildings on the Mortgaged Property and all installations and mechanical, electrical, plumbing, heating and air
conditioning systems located in or annexed to such buildings, and all additions, alterations and replacements made at
any time with respect to the foregoing and with respect to Cooperative Loans, including the Proprietary Lease and the
Cooperative Shares. The lien of the Mortgage is subject only to:
(1) the lien of current real property taxes and assessments not yet due and payable;
(2) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the
date of recording acceptable to prudent mortgage lending institutions generally and specifically referred to in the
Lender's title insurance policy delivered to the originator of the Mortgage Loan and (a) referred to or otherwise
considered in the appraisal made for the originator of the Mortgage Loan or (b) which do not adversely affect the
Appraised Value of the Mortgaged Property set forth in such appraisal;
(3) other matters to which like properties are commonly subject which do not materially interfere with the benefits of
the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related
Mortgaged Property; and
(4) with respect to each Mortgage Loan which is indicated by the Borrower to be a Second Lien Mortgage Loan (as
reflected on the Mortgage Loan Data Transmission), a First Lien on the Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the
Mortgage Loan establishes and creates a valid, subsisting and enforceable (A) first lien and first priority security
interest with respect to each Mortgage Loan which is indicated by the Borrower to be a First Lien Mortgage Loan (as
reflected on the Mortgage Loan Data Transmission or (B) second lien and second priority security interest with respect
to each Mortgage Loan which is indicated by the Borrower to be a Second Lien Mortgage Loan (as reflected on the
Mortgage Loan Data Transmission), in either case, on the property described therein and the Borrower has full right to
pledge and assign the same to the Lender. The Mortgaged Property was not, as of the date of origination of the
Mortgage Loan, subject to a mortgage, deed of trust, deed to secure debt or other security instrument creating a lien
subordinate to the lien of the Mortgage.
(k) Validity of Mortgage Documents. The Mortgage Note and the Mortgage and any other agreement executed and
delivered by a Mortgagor or guarantor, if applicable, in connection with a Mortgage Loan are genuine, and each is the
legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms. All parties to the
Mortgage Note, the Mortgage and any other such related agreement had legal capacity to enter into the Mortgage Loan
and to execute and deliver the Mortgage Note, the Mortgage and any such agreement, and the Mortgage Note, the
Mortgage and any other such related agreement have been duly and properly executed by such related parties. No
fraud, error, omission, misrepresentation, negligence or similar occurrence with respect to a Mortgage Loan has taken
placed on the part of any Person, including, without ]imitation, the Mortgagor, any appraiser, any builder or developer,
or any other party involved in the origination of the Mortgage Loan. The Borrower has reviewed all of the documents
constituting the Servicing File and has made such inquiries as it deems necessary to make and confirm the accuracy of
the representations set forth herein.
(l) Full Disbursement of Proceeds. The proceeds of the Mortgage Loan have been My disbursed (or shall be fully
disbursed pursuant to the terms of the Custodial Agreement) and, except with respect to any open end HELOC, there
is no further requirement for future advances thereunder, and any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making or closing the Mortgage Loan and the recording of the Mortgage were paid, and
the Mortgagor is not entitled to any refund of any amounts paid or due under the Mortgage Note or Mortgage.
(m) Ownership. The Borrower is the sole owner and holder of the Mortgage Loan. All Mortgage Loans acquired by
the Borrower from third parties (including affiliates) were acquired in a true and legal sale pursuant to which such
third party sold, transferred, conveyed and assigned to the Borrower all of its right, title and interest in, to and under
such Mortgage Loan and retained no interest in such Mortgage Loan. In connection with such sale, such third party
received reasonably equivalent value and fair consideration and, in accordance with GAAP and for federal income tax
purposes, reported the sale of such Mortgage Loan to the Borrower as a sale of its interests in such Mortgage Loan.
The Mortgage Loan is not assigned or pledged, and the Borrower has good, indefeasible and marketable title thereto,
and has full right to transfer, pledge and assign the Mortgage Loan to the Lender free and clear of any encumbrance,
equity, participation interest, lien, pledge, charge, claim or security interest, and has full right and authority subject to
no interest or participation of, or agreement with, any other party, to assign, transfer and pledge each Mortgage Loan
pursuant to this Loan Agreement and following the pledge of each Mortgage Loan, the Lender will hold such
Mortgage Loan free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security
interest except any such security interest created pursuant to the terms of this Loan Agreement.
(n) Doing Business. All parties which have had any interest in the Mortgage Loan, whether as mortgagee, assignee,
pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (i) in
compliance with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property
is located, and (ii) either (A) organized under the laws of such state, (B) qualified to do business in such state, (C) a
federal savings and loan association, a savings bank or a national bank having a principal office in such state or
(D) not doing business in such state.
(o) LTV. As of the date of origination of the Mortgage Loan, the LTV is identified on the Mortgage Loan Data
Transmission.
(p) Title Insurance. The Mortgage Loan is covered by either (i) an attorney's opinion of title and abstract of title, the
form and substance of which is acceptable to prudent mortgage lending institutions making mortgage loans in the
wherein the Mortgaged Property is located or (ii) an ALTA Lender's title insurance policy or other generally
acceptable form of policy or insurance acceptable to Fannie Mae or Freddie Mac and each such title insurance policy
is issued by a title insurer acceptable to Fannie Mae or Freddie Mac and qualified to do business in the jurisdiction
where the Mortgaged Property is located, insuring the Borrower, its successors and assigns, as to the first priority lien
of the Mortgage in the original principal amount of the Mortgage Loan (or to the extent a Mortgage Note provides for
negative amortization, the maximum amount of negative amortization in accordance with the Mortgage), subject only
to the exceptions contained in clauses (1), (2), (3) and, with respect to each Mortgage Loan which is indicated by the
Borrower to be a Second Lien Mortgage Loan (as reflected on the Mortgage Loan Data Transmission), (4) of
paragraph (j) of this Part I of Schedule 1, and in the case of adjustable rate Mortgage Loans, against any loss by reason
of the invalidity or unenforceability of the lien resulting from the provisions of the Mortgage providing for adjustment
to the Mortgage Interest Rate and Monthly Payment. Where required by state law or regulation, the Mortgagor has
been given the opportunity to choose the carrier of the required mortgage title insurance. Additionally, such Lender's
title insurance policy affirmatively insures ingress and egress and against encroachments by or upon the Mortgaged
Property or any interest therein. The title policy does not contain any special exceptions (other than the standard
exclusions) for zoning and uses and has been marked to delete the standard survey exception or to replace the standard
survey exception with a specific survey reading. The Borrower, its successors and assigns, are the sole insureds of
such Lender's title insurance policy, and such Lender's title insurance policy is valid and remains in full force and
effect and will be in force and effect upon the consummation of the transactions contemplated by this Loan
Agreement. No claims have been made under such Lender's title insurance policy, and no prior holder or servicer of
the related Mortgage, including the Borrower, has done, by act or omission, anything which would impair the
coverage of such Lender's title insurance policy, including, without ]imitation, no unlawful fee, commission, kickback
or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney,
firm or other Person, and no such unlawful items have been received, retained or realized by the Borrower.
(q) No Defaults. There is no default, breach, violation or event of acceleration existing under the Mortgage or the
Mortgage Note and no event has occurred which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a default, breach, violation or event of acceleration, and neither the Borrower
nor its predecessors have waived any default, breach, violation or event of acceleration. With respect to each Mortgage
Loan which is indicated by the Borrower to be a Second Lien Mortgage Loan (as reflected on the Mortgage Loan Data
Transmission) (i) the First Lien is in full force and effect, (ii) there is no default, breach, violation or event of
acceleration existing under such First Lien mortgage or the related mortgage note, (iii) no event which, with the
passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach,
violation or event of acceleration thereunder, and either (A) the First Lien mortgage contains a provision which allows
or (B) applicable law requires, the mortgagee under the second lien Mortgage Loan to receive notice of, and affords
such mortgagee an opportunity to cure any default by payment in full or otherwise under the First Lien Mortgage
Loan.
(r) No Mechanics' Liens. At origination, there were no mechanics' or similar liens or claims which have been filed for
work, labor or material (and no rights are outstanding that under the law could give rise to such liens) affecting the
Mortgaged Property which are or may be liens prior to, or equal or coordinate with the lien of the Mortgage.
(s) Location of Improvements: No Encroachments. All improvements which were considered in determining the
Appraised Value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the
Mortgaged Property, and no improvements on adjoining properties encroach upon the Mortgaged Property. No
improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning and building
law, ordinance or regulation.
(t) Origination: Payment Terms. The Mortgage Loan was originated by or in conjunction with a mortgagee approved
by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act, a
savings and loan association, a savings bank, a commercial bank, credit union, insurance company or similar banking
institution which is supervised and examined by a federal or state authority. Principal payments on the Mortgage Loan
commenced no more than sixty (60) days after fields were disbursed in connection with the Mortgage Loan. The
Mortgage Interest Rate is adjusted, with respect to adjustable rate Mortgage Loans, on each Interest Rate Adjustment
Date to equal the Index plus the Gross Margin (rounded up or down to the nearest. 125 %), subject to the Mortgage
Interest Rate Cap. The Mortgage Note is payable on the day set forth in the Mortgage Note in equal monthly
installments of principal and interest, which installments of interest, with respect to adjustable rate Mortgage Loans,
are subject to change due to the adjustments to the Mortgage Interest Rate on each Interest Rate Adjustment Date, with
interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date,
over an original term of not more than 30 years from commencement of amortization. The Due Date of the first
payment under the Mortgage Note is no more than 60 days from the date of the Mortgage Note.
(u) Customary Provisions. The Mortgage Note has a stated maturity. The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization
against the Mortgaged Property of the benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise by 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 Mortgaged
Property. There is no homestead or other exemption available to a Mortgagor which would interfere with the right to
sell the Mortgaged Property at a trustee's sale or the right to foreclose the Mortgage.
(v) Conformance with Underwriting Guidelines and Agency Standards. The Mortgage Loan was underwritten in
accordance with the applicable Underwriting Guidelines. The Mortgage Note and Mortgage are on forms similar to
those used by Freddie Mac or Fannie Mae and the Borrower has not made any representations to a Mortgagor that are
inconsistent with the mortgage instruments used.
(w) Occupancy of the Mortgaged Property. As of the Funding Date the Mortgaged Property is either vacant or
]awfully occupied under applicable law. All inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same,
including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained
from the appropriate authorities. The Borrower has not received written notification from any governmental authority
that the Mortgaged Property is in material non-compliance with such laws or regulations, is being used, operated or
occupied unlawfully or has failed to have or obtain such inspection, licenses or certificates, as the case may be. The
Borrower has not received notice of any violation or failure to conform with any such law, ordinance, regulation,
standard, license or certificate. Except as otherwise set forth in the Mortgage Loan Data Transmission, the Mortgagor
represented at the time of origination of the Mortgage Loan that the Mortgagor would occupy the Mortgaged Property
as the Mortgagor's primary residence.
(x) No Additional Collateral. The Mortgage Note is not and has not been secured by any collateral except the lien of
the corresponding Mortgage and the security interest of any applicable security agreement or chattel mortgage referred
to in clause (j) above.
(y) Deeds of Trust. In the event the Mortgage constitutes a deed of trust, a trustee, authorized and duly qualified under
applicable law to serve as such, has been properly designated and currently so serves and is named in the Mortgage,
and no fees or expenses are or will become payable by the Custodian or the Lender to the trustee under the deed of
trust, except in connection with a trustee's sale after default by the Mortgagor.
(z) Delivery of Mortgage Documents. If the Mortgage Loan is a Dry Loan, the Mortgage Note, the Mortgage, the
Assignment of Mortgage and any other documents required to be delivered under the Custodial Agreement for each
Mortgage Loan have been delivered to the Custodian. The Borrower or its agent is in possession of a complete, true
and materially accurate Mortgage File in compliance with the Custodial Agreement, except for such documents the
originals of which have been delivered to the Custodian.
(aa) Transfer of Mortgage Loans. If the Mortgage Loan is a Dry Loan, 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.
(bb) Due-On-Sale. The Mortgage contains an enforceable provision for the acceleration of the payment of the unpaid
principal balance of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the
prior written consent of the mortgagee thereunder.
(cc) No Buydown Provisions: No Graduated Payments or Contingent Interests. The Mortgage Loan does not contain
provisions pursuant to which Monthly Payments are paid or partially paid with funds deposited in any separate
account established by the Borrower, the Mortgagor, or anyone on behalf of the Mortgagor, or paid by any source
other than the Mortgagor nor does it contain any other similar provisions which may constitute a "buydown"
provision. The Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan does not have a
shared appreciation or other contingent interest feature.
(dd) Consolidation of Future Advances. Any future advances made to the Mortgagor prior to the origination of the
Mortgage Loan have been consolidated with the outstanding principal amount secured by the Mortgage, and the
secured principal amount, as consolidated, bears a single interest rate and single repayment term. The lien of the
Mortgage securing the consolidated principal amount is expressly insured as having (A) first lien priority with respect
to each Mortgage Loan which is indicated by the Borrower to be a First Lien Mortgage Loan (as reflected on the
Mortgage Loan Data Transmission) or (B) second lien priority with respect to each Mortgage Loan which is indicated
by the Borrower to be a Second Lien Mortgage Loan (as reflected on the Mortgage Loan Data Transmission), in either
case, by a title insurance policy, an endorsement to the policy insuring the mortgagee's consolidated interest or by
other title evidence acceptable to Fannie Mae and Freddie Mac. The consolidated principal amount does not exceed
the original principal amount of the Mortgage Loan.
(ee) Mortgaged Property Undamaged. The Mortgaged Property (and with respect to any Cooperative Loan, the
Cooperative Unit) is undamaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other
casualty so as to affect adversely the value of the Mortgaged Property as security for the Mortgage Loan or the use for
which the premises were intended and each Mortgaged Property is in good repair. There have not been any
condemnation proceedings with respect to the Mortgaged Property and the Borrower has no knowledge of any such
proceedings.
(f1) Collection Practices: Escrow Deposits: Interest Rate Adjustments. The origination and collection practices used
by the originator, each servicer of the Mortgage Loan and the Borrower with respect to the Mortgage Loan have been
in all material respects in compliance with Accepted Servicing Practices, applicable laws and regulations, and have
been in all respects legal and proper. With respect to escrow deposits and Escrow Payments (other than with respect to
each Mortgage Loan which is indicated by the Borrower to be a Second Lien Mortgage Loan and for which the
mortgagee under the First Lien Mortgage Loan is collecting Escrow Payments (as reflected on the Mortgage Loan
Data Transmission), all such payments are in the possession of, or under the control of, the Borrower and there exist
no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made.
All Escrow Payments have been collected in full compliance with state and federal law. An escrow of funds is not
prohibited by applicable law and has been established in an amount sufficient to pay for every item that remains
unpaid and has been assessed but is not yet due and payable. No escrow deposits or Escrow Payments or other charges
or payments due the Borrower have been capitalized under the Mortgage or the Mortgage Note. All Mortgage Interest
Rate adjustments have been made in strict compliance with state and federal law and the terms of the related Mortgage
Note. Any interest required to be paid pursuant to state, federal and local law has been properly paid and credited.
(gg) Other Insurance Policies. No action, inaction or event has occurred and no state of facts exists or has existed that
has resulted or will result in the exclusion from, denial of, or defense to coverage under any applicable special hazard
insurance policy, PMI Policy or bankruptcy bond, irrespective of the cause of such failure of coverage. In connection
with the placement of any such insurance, no commission, fee, or other compensation has been or will be received by
the Borrower or by any officer, director, or employee of the Borrower or any designee of the Borrower or any
corporation in which the Borrower or any officer, director, or employee had a financial interest at the time of
placement of such insurance.
(hh) Soldiers' and Sailors' Civil Relief Act. The Mortgagor has not notified the Borrower, and the Borrower has no
knowledge, of any relief requested or allowed to the Mortgagor under the Soldiers' and Sailors' Civil Relief Act of
1940.
(ii) Appraisal. The Mortgage File contains an appraisal of the related Mortgaged Property signed prior to the approval
of the Mortgage Loan application by a qualified appraiser, duly appointed by the Borrower or the Qualified Originator,
who had no interest, direct or indirect in the Mortgaged Property or in any loan made on the security thereof, and
whose compensation is not affected by the approval or disapproval of the Mortgage Loan, and the appraisal and
appraiser both satisfy the requirements of Fannie Mae or Freddie Mac and Title XI of the Federal Institutions Reform,
Recovery, and Enforcement Act of 1989 as amended and the regulations promulgated thereunder, all as in effect on
the date the Mortgage Loan was originated.
(jj) Disclosure Materials. The Mortgagor has executed a statement to the effect that the Mortgagor has received all
disclosure materials required by applicable law with respect to the making of adjustable rate mortgage loans, and the
Borrower maintains such statement in the Mortgage File.
(kk) Construction or Rehabilitation of Mortgaged Property. No Mortgage Loan was made in connection with the
construction or rehabilitation of a Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged
Property.
(ll) No Defense to Insurance Coverage. No action has been taken or failed to be taken, no event has occurred and no
state of facts exists or has existed on or prior to the Funding Date (whether or not known to the Borrower on or prior to
such date) which has resulted or will result in an exclusion from, denial of, or defense to coverage under any private
mortgage insurance (including, without limitation, any exclusions, denials or defenses which would limit or reduce the
availability of the timely payment of the full amount of the loss otherwise due thereunder to the insured) whether
arising out of actions, representations, errors, omissions, negligence, or fraud of the Borrower, the related Mortgagor
or any party involved in the application for such coverage, including the appraisal, plans and specifications and other
exhibits or documents submitted therewith to the insurer under such insurance policy, or for any other reason under
such coverage, but not including the failure of such insurer to pay by reason of such insurer's breach of such insurance
policy or such insurer's financial inability to pay.
(mm) Capitalization of Interest. The Mortgage Note does not by its terms provide for the capitalization or forbearance
of interest.
(nn) No Equity Participation. No document relating to the Mortgage Loan provides for any contingent or additional
interest in the form of participation in the cash flow of the Mortgaged Property or a sharing in the appreciation of the
value of the Mortgaged Property. The indebtedness evidenced by the Mortgage Note is not convertible to an
ownership interest in the Mortgaged Property or the Mortgagor and the Borrower has not financed nor does it own
directly or indirectly, any equity of any form in the Mortgaged Property or the Mortgagor.
(oo) Withdrawn Mortgage Loans. If the Mortgage Loan has been released to the Borrower pursuant to a Request for
Release as permitted under Section S of the Custodial Agreement, then the promissory note relating to the Mortgage
Loan was returned to the Custodian within 10 days (or if such tenth day was not a Business Day, the next succeeding
Business Day).
(pp) No Exception. Other than as noted by the Custodian on the Exception Report; no Material Exception exists (as
defined in the Custodial Agreement) with respect to the Mortgage Loan which would materially adversely affect the
Mortgage Loan or the Lender's security interest, granted by the Borrower, in the Mortgage Loan as determined by the
Lender in its sole discretion.
(qq) Qualified Originator. The Mortgage Loan has been originated by, and, if applicable, purchased by the Borrower
from, a Qualified Originator.
(rr) Mortgage Submitted for Recordation. The Mortgage has been submitted for recordation in the appropriate
governmental recording office of the jurisdiction where the Mortgaged Property is located.
(ss) Acceptable Investment. No specific circumstances or conditions exist with respect to the Mortgage, the Mortgaged
Property, the Mortgagor or the Mortgagor's credit standing that should reasonably be expected to (i) cause private
institutional investors which invest in Mortgage Loans similar to the Mortgage Loan to regard the Mortgage Loan as
an unacceptable investment, (ii) cause the Mortgage Loan to be more likely to become past due in comparison to
similar Mortgage Loans, or (iii) adversely affect the value or marketability of the Mortgage Loan in comparison to
similar Mortgage Loans.
(tt) Environmental Matters. The Mortgaged Property is free from any and all toxic or hazardous substances and there
exists no violation of any local, state or federal environmental law, rule or regulation.
(uu) Ground Leases. With respect to each ground lease to which the Mortgaged Property is subject (a "Ground
Lease"): (i) the Mortgagor is the owner of a valid and subsisting interest as tenant under the Ground Lease; (ii) the
Ground Lease is in full force and effect, unmodified and not supplemented by any writing or otherwise; (iii) all rent,
additional rent and other charges reserved therein have been paid to the extent they are payable to the date hereof;
(iv) the Mortgagor enjoys the quiet and peaceful possession of the estate demised thereby, subject to any sublease;
(v) the Mortgagor is not in default under any of the terms thereof and there are no circumstances which, with the
passage of time or the giving of notice or both, would constitute an event of default thereunder; (vii) the lessor under
the Ground Lease is not in default under any of the temps or provisions thereof on the part of the lessor to be observed
or performed; (vii) the lessor under the Ground Lease has satisfied all of its repair or construction obligations, if any,
to date pursuant to the terms of the Ground Lease; and (ix) the execution, delivery and performance of the Mortgage
do not require the consent (other than those consents which have been obtained and are in full force and effect) under,
and will not contravene any provision of or cause a default under, the Ground Lease.
(vv) Value of Mortgage Property. The Borrower has no knowledge of any circumstances existing that should
reasonably be expected to adversely affect the value or the marketability of the Mortgaged Property or the Mortgage
Loan or to cause the Mortgage Loan to prepay during any period materially faster or slower than the Mortgage Loans
originated by the Borrower generally.
(ww) Section 32 Mortgages; Overages. The Borrower has provided the related Mortgagor with al] disclosure materials
required by Section 226.32 of the Federal Reserve Board Regulation Z with respect to any Mortgage Loans subject to
such Section of the Federal Reserve Board Regulation Z. The Borrower has not made or caused to be made any
payment in the nature of an "overage" or "yield spread premium" to a mortgage broker or like Person which has not
been fully disclosed to the Mortgagor.
(xx) Cooperative Loans. With respect to each Cooperative Loan, each original UCC financing statement, continuation
statement or other governmental filing or recordation necessary to create or preserve the perfection and priority of the
first priority lien and security interest in the Cooperative Shares and Proprietary Lease has been timely and properly
made. Any security agreement, chattel mortgage or equivalent document related to the Cooperative Loan and
delivered to the Borrower or its designee establishes in the Borrower a valid and subsisting perfected first lien on and
security interest in the Mortgaged Property described therein, and the Borrower has full right to sell and assign the
same.
(yy) Takeout Commitment. Each Mortgage Loan is subject to a Takeout Commitment which is a valid, binding and
subsisting obligation enforceable in accordance with its terms unless otherwise waived by the Lender.
(zz) First Lien Consent. With respect to each Mortgage Loan which is a Second Lien Mortgage Loan, (i) if the related
first lien provides for negative amortization, the LTV was calculated at the maximum principal balance of such first
lien that could result upon application of such negative amortization feature, and (ii) either no consent for the
Mortgage Loan is required by the holder of the first lien or such consent has been obtained and is contained in the
Mortgage File.
Schedule 2
FILING JURISDICTIONS AND OFFICES
California -- Secretary of State
Delaware -- Secretary of State
Schedule 3
RELEVANT STATES
All States and the District of Columbia
Schedule 4
SUSIDIARIES
None
EXHIBIT A
[FORM OF PROMISSORY NOTE]
$300,000,000
[Month] __, _____,
New York, New York
FOR VALUE RECEIVED, E-LOAN, INC., a Delaware corporation (the "Borrower"), hereby promises to pay to the
order of GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. (the "Lender"), at the principal office of the
Lender at 600 Steamboat Road, Greenwich, Connecticut 06830, in lawful money of the United States, and in
immediately available funds, the principal sum of THREE HUNDRED MILLION DOLLARS ($300,000,000) (or
such lesser amount as shall equal the aggregate unpaid principal amount of the Advances made by the Lender to the
Borrower under the Loan Agreement), on the dates and in the principal amounts provided in the Loan Agreement, and
to pay interest on the unpaid principal amount of each such Advance, at such office, in like money and funds, for the
period commencing on the date of such Advance until such Advance shall be paid in fill, at the rates per annum and on
the dates provided in the Loan Agreement.
The date, amount and interest rate of each Advance made by the Lender to the Borrower, and each payment made on
account of the principal thereof, shall be recorded by the Lender on its books and, prior to any transfer of this Note,
endorsed by the Lender on the schedule attached hereto or any continuation thereof; provided, that the failure of the
Lender to make any such recordation or endorsement shall not affect the obligations of the Borrower to make a
payment when due of any amount owing under the Loan Agreement or hereunder in respect of the Advances made by
the Lender.
This Note is the Note referred to in the Master Loan and Security Agreement dated as of March 21, 2002 (as amended,
supplemented or otherwise modified and in effect from time to time, the "Loan Agreement") between the Borrower,
and the Lender, and evidences Advances made by the Lender thereunder. Terms used but not defined in this Note have
the respective meanings assigned to them in the Loan Agreement.
The Borrower agrees to pay al] the Lender's costs of collection and enforcement (including reasonable attorneys' fees
and disbursements of Lender's counsel) in respect of this Note when incurred, including, without limitation, reasonable
attorneys' fees through appellate proceedings.
Notwithstanding the pledge of the Collateral, the Borrower hereby acknowledges, admits and agrees that the
Borrower's obligations under this Note are recourse obligations of the Borrower to which the Borrower pledges its full
faith and credit.
The Borrower, and any indorsers or guarantors hereof, (a) severally waive diligence, presentment, protest and demand
and also notice of protest, demand, dishonor and nonpayments of this Note, (b) expressly agree that this Note, or any
payment hereunder, may be extended from time to time, and consent to the acceptance of further Collateral, the release
of any Collateral for this Note, the release of any party primarily or secondarily liable hereon, and (c) expressly agree
that it will not be necessary for the Lender, in order to enforce payment of this Note, to first institute or exhaust the
Lender's remedies against the Borrower or any other party liable hereon or against any Collateral for this Note. No
extension of time for the payment of this Note, or any installment hereof, made by agreement by the Lender with any
person now or hereafter liable for the payment of this Note, shall affect the liability under this Note of the Borrower,
even if the Borrower is not a party to such agreement; provided, however, that the Lender and the Borrower, by
written agreement between them, may affect the liability of the Borrower.
Any reference herein to the Lender shall be deemed to include and apply to every subsequent holder of this Note.
Reference is made to the Loan Agreement for provisions concerning optional and mandatory prepayments, Collateral,
acceleration and other material terms affecting this Note.
Any enforcement action relating to this Note may be brought by motion for summary judgment in lieu of a complaint
pursuant to Section 3213 of the New York Civil Practice Law and Rules. The Borrower hereby submits to New York
jurisdiction with respect to any action brought with respect to this Note and waives any right with respect to the
doctrine of forum non conveniens with respect to such transactions.
This Note shall be governed by and construed under the laws of the State of New York (without reference to
choice of law doctrine but with reference to Section 5-1401 of the New York General Obligations Law, which by
its terms applies to this Note) whose laws the Borrower expressly elects to apply to this Note. The Borrower
agrees that any action or proceeding brought to enforce or arising out of this Note may be commenced in the
Supreme Court of the State of New York, Borough of Manhattan, or in the District Court of the United States
for the Southern District of New York.
E-LOAN, INC.
By:
Name:
Title:
SCHEDULE OF LOANS
This Note evidences Advances made under the within-described Loan Agreement to the Borrower, on the dates, in the
principal amounts and bearing interest at the rates set forth below, and subject to the payments and prepayments of
principal set forth below:
Date Made
Principal
Amount of
Loan
Amount Paid
or Prepaid
Unpaid
Principal
Amount
Notation
Made by
EXHIBIT B
CUSTODIAL AGREEMENT
CUSTODIAL AGREEMENT (this "Custodial Agreement") dated as of June 21, 2000, made by and among:
(i) E-LOAN.COM, INC., a Delaware corporation (the "Borrower");
(ii) BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as custodian for the Lender (in such capacity, the
"Custodian"); and
(iii) GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., a Delaware corporation (the "Lender").
RECITALS
The Borrower and the Lender are parties to the Master Loan and Security Agreement, dated as of May 10, 1999 (as
amended, supplemented or otherwise modified and in effect from time to time, the "Loan Agreement"), pursuant to
which the Lender has agreed, subject to the terms and conditions of the Loan Agreement, to make revolving credit
loans to the Borrower to finance Eligible Mortgage Loans (as defined therein) owned by the Borrower.
It is a condition precedent to the effectiveness of the Loan Agreement that the parties hereto execute and deliver this
Custodial Agreement to provide for the appointment of the Custodian as custodian hereunder. Accordingly, the parties
hereto agree as follows:
Section 1. Definitions.
Unless otherwise defined herein, terms defined in the Loan Agreement shall have their respective assigned meanings
when used herein, and the following terms shall have the following meanings:
"Acceptable Attorney" shall mean any attorney-at-law to which the Custodian has sent an Attorney's Bailee Letter,
except for an attorney whom the Lender has notified the Custodian and the Borrower in writing that such attorney is
not reasonably satisfactory to the Lender.
"Advance" shall mean a loan made by the Lender to Borrower from time to time, on the terms and conditions set forth
in the Loan Agreement.
"Advance Balance" shall mean the aggregate outstanding principal balance of an Advance secured by the applicable
pledged Mortgage Loans.
"AM Funded Wet Loan" shall have the meaning specified in Section 3(g) hereof.
"Approved Purchaser" shall mean a third party purchaser or Takeout Investor approved by the Lender in its sole
discretion, front time to time and as provided on list delivered to the Custodian by the Lender.
"Approved Title Insurance Company" shall mean a title insurance company approved by the Lender in its sole
discretion, provided on a list delivered to the Custodian by the Lender.
"Assignment of Mortgage" shall mean with respect to any Mortgage, an assignment of the Mortgage, notice of transfer
or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related
Mortgaged Property is located to reflect the assignment and pledge of the Mortgage.
"Attorney's Bailee Letter" shall mean a letter substantially in the form of Annex 12 hereto.
"Authorized Representative" shall have the meaning specified in Section 18 hereof.
"Business Day" shall mean any day other than (i) a Saturday or Sunday, or (ii) a day on which the New York Stock
Exchange, the Federal Reserve Bank of New York, the Lender or the Custodian is authorized or obligated by law or
executive order to be closed.
"Borrowing Base" shall mean the aggregate Collateral Value of all Eligible Mortgage Loans that have been, and
remain, pledged to the Lender hereunder.
"Borrowing Base Deficiency" shall have the meaning provided in the Loan Agreement.
"Collateral" shall have the meaning assigned thereto in the Loan Agreement.
"Cooperative Corporation" shall mean with respect to any Cooperative Loan, the cooperative apartment corporation
that holds legal title to the related Cooperative Project and grants occupancy rights to units therein to stockholders
through Proprietary Leases or similar arrangements.
"Cooperative Loan" shall mean a Mortgage Loan that is secured by a first lien on and a perfected security interest in
Cooperative Shares and the related Proprietary Lease granting exclusive rights to occupy the related Cooperative Unit
in the building owned by the related Cooperative Corporation.
"Cooperative Project" shall mean with respect to any Cooperative Loan, all real property and improvements thereto
and rights therein and thereto owned by a Cooperative Corporation including without limitation the land, separate
dwelling units and all common elements.
"Cooperative Shares" shall mean with respect to any Cooperative Loan, the shares of stock issued by a Cooperative
Corporation and allocated to a Cooperative Unit and represented by a stock certificate.
"Cooperative Unit" shall mean with respect to any Cooperative Loan, a specific unit in a Cooperative Project.
"Custodial Delivery Failure" shall have the meaning specified in Section 13 hereof.
"Custodian Loan Transmission" shall mean in the case of each Mortgage Loan, a computer-readable transmission
containing the follow in" information to be delivered by the Custodian to the Lender pursuant to this Custodial
Agreement: the Mortgage Loan number, Mortgagor's name, Exception Report and, with respect to any Mortgage Files
which have been released (i) to the Borrower pursuant to Section 5(a) hereof pursuant to a Transmittal Letter, (ii) as
described in Section 5(b) hereof, or (iii) pursuant to an Attorney Bailee Letter as described in Section 5(c) hereof, the
date such Mortgage Files were released and to whom they were released. The Custodian shall incorporate all current
data provided by the Borrower to the Custodian into the Custodian Loan Transmission.
"Disbursement Account" shall have the meaning specified in Section 3(d) hereof.
"Dry Loan" shall mean a first lien Mortgage Loan which is underwritten in accordance with the Underwriting
Guidelines (as defined in the Loan Agreement) which Mortgage File contains all required Mortgage Loan Documents
for which the Custodian holds in its possession the documents pursuant to Section 2(a).
"Escrow Letter" shall mean an escrow agreement or letter stating that in the a vent of a Rescission or any other reason
the Mortgage Loan fails to fund on a given day, the party conducting the closing is holding all funds which would
have been disbursed on behalf of the Mortgagor as agent for and for the benefit of the Lender and such funds shall be
redeposited in the Disbursement Account for benefit of the Lender not later than one Business Day after the date of
Rescission or other failure of the Mortgage Loan to fund on a given day.
"Event of Default" shall have the meaning provided in Section 8 of the Loan Agreement.
"Exception" shall mean, with respect to any Mortgage Loan any variance from the requirements of Section 2 hereof
with respect to the Mortgage Files (taking into consideration the Borrower's right to deliver certified copies in lieu of
original documents in certain circumstances).
"Exception Report" means a list, in a format mutually acceptable to the Lender, the Custodian and the Borrower, of
Mortgage Loans delivered by the Custodian to the Lender and the Borrower as provided in Section 3 hereof, reflecting
the Mortgage Loans held by the Custodian for the benefit of the Lender, which includes codes as described in
Annex 13 indicating any Exceptions with respect to each Mortgage Loan listed thereon. Each Exception Report shall
set forth (a) the Mortgage Loans being pledged to the Lender on any applicable Funding Date as well as the Mortgage
Loans previously pledged to the Lender and held by the Custodian hereunder, which such Mortgage Loans shall be
listed separately from those funded on the current Funding Date, and (b) all Exceptions with respect thereto, with and
updates thereto from the time last delivered.
"Funding Date" means the date on which an Advance is made pursuant to the Loan Agreement.
"Insured Closing Letter" shall mean a letter of indemnification from an Approved Title Insurance Company addressed
to the Borrower with coverage that is customarily acceptable to Persons engaged in the origination of mortgage loans,
identifying the Settlement Agent covered thereby.
"Loan Documents" shall have the meaning assigned thereto in the Loan Agreement.
"Material Exception" shall mean, with respect to any Mortgage Loan, (a) any Exception identified as a Material
Exception on Annex 13 hereto or as otherwise reasonably determined by the Lender; or (b) with respect to which the
Custodian receives written notice or has actual knowledge of a lien or security interest in favor of a Person other than
the Lender with respect to such Mortgage Loan.
"Mortgage" shall mean the mortgage, deed of trust or other instrument, which creates a first lien on either (i) \s 4th
respect to a Mortgage Loan other than a Cooperative Loan, the fee simple or leasehold estate in such real properly or
(ii) with respect to a Cooperative Loan, the Proprietary Lease and related Cooperative Shares, which in either case
secures the Mortgage Note.
"Mortgage File" shall mean, as to each Mortgage Loan, those documents listed in Section 2(a) of this Custodial
Agreement that are delivered to the Custodian or which at any time come into the possession of the Custodian.
"Mortgage Loan" shall mean a mortgage loan or Cooperative Loan which the Custodian has been instructed to hold for
the Lender pursuant to this Custodial Agreement, and which Mortgage Loan includes, without limitation, (i) a
Mortgage Note, the related Mortgage and all other Mortgage Loan Documents and (ii) all right, title and interest of the
Borrower in and to the Mortgaged Property covered by such Mortgage.
"Mortgage Loan Documents" shall mean, with respect to a Mortgage Loan, the documents comprising the Mortgage
File for such Mortgage Loan.
"Mortgage Loan Transmission" shall mean a computer-readable transmission in a standardized text format delivered
by the Borrower to the GCFP bulletin board and the Custodian incorporating the fields identified on Annex 1 or as
otherwise mutually agreed upon by the Lender, the Borrower and the Custodian which shall include the applicable
information relating to funding for the origination of a Wet Loan delivered by the Borrower to the Lender which data
shall include the applicable Wire Instruction Data.
"Mortgage Note" shall mean the original executed promissory note or other evidence of the indebtedness of a
Mortgagor with respect to a Mortgage Loan.
"Mortgaged Property" means the real property (including all improvements, buildings, fixtures, building equipment
and personal proper affixed thereto and all additions, alterations and replacements made at any time with respect to the
foregoing) and all other collateral securing repayment of the debt evidenced by a Mortgage Note.
"Mortgagor" means the obligor on a Mortgage Note.
"Note" shall have the meaning assigned thereto in the Loan Agreement.
"Notice of Borrowing and Pledge" shall mean an irrevocable Notice of Borrowing and Pledge provided pursuant to the
Loan Agreement.
"Notice of Intent to Issue Trust Receipt" shall mean Custodian's notification, in the fonts of Annex 17 hereto, to the
Lender and the Borrower that requirements in Section 2 have been met and any such Wet Loans are intended to be
funded to Settlement Agents on the next Business Day provided the Lender has also provided notice to the Custodian
that the Lender has approved of such funding.
"Notice of Sale and Request for Release" shall mean a notice to the Custodian and the Lender in the form of Annex 3
hereto that certain of the Mortgage Loans are being sold and specifying the date of such sale and the amount of the
Advance Balance being paid off with the proceeds of such sale and requesting that certain documents with respect to
such Mortgage Loans be delivered to the related Takeout Investor.
"Officer's Certificate" shall mean a certificate signed by a Responsible Officer of the Person delivering such certificate
and delivered as required by this Custodial Agreement.
"Operating Account" shall have the meaning specified in Section 3(g) hereof.
"Opinion of Counsel" shall mean a written opinion letter of counsel in form and substance reasonably acceptable to the
party receiving such opinion letter.
"Pledgee" shall have the meaning specified in Section 25 hereof.
"PM Funded Wet Loan" shall have the meaning specified in Section 3(g) hereof.
"Proceeds" shall mean whatever is receivable or received when Collateral or proceeds are sold, collected, exchanged
or otherwise disposed of, whether such disposition is voluntary or involuntary, and includes, without limitation, all
rights to payment, including return premiums, with respect to any insurance relating thereto.
"Proprietary Lease" shall mean the lease on a Cooperative Unit evidencing the possessory interest of the owner of the
Cooperative Shares in Such Cooperative Unit.
"Purchase Advice" shall mean the written notice provided by the Borrower to the Lender that the Lender will be
receiving a wire transfer on such date.
"Rescission" shall mean the right of a Mortgagor to rescind the related Mortgage Note and related documents pursuant
to applicable law and applicable agency guides.
"Responsible Officer" shall mean, as to any Person, the chief executive officer or, with respect to financial matters, the
chief financial officer of such Person; provided, that in the event any such officer is unavailable at any time he or she
is required to take any action hereunder, Responsible Officer shall mean any officer authorized to act on such officer's
behalf as demonstrated by a certificate of corporate resolution.
"Review Procedures" shall have the meaning specified in Section 3(a) hereof.
"Secured Obligations" shall have the meaning assigned thereto in the Loan Agreement.
"Servicing Transmission" shall have the meaning assigned thereto in the Loan Agreement.
"Settlement Agent" shall mean, with respect to any, Wet Loan, the Person specified in the Notice of Borrowing (which
may be a title company, escrow company or attorney in accordance with local law and practice in the jurisdiction
where the related Wet Loan is being originated and which is not listed as an Unapproved Settlement Agent on
Annex 15 attached hereto as revised from time to time by the Lender) to which the proceeds of the related Advance
are to be distributed by the Custodian in accordance with the instructions of the Borrower provided in the applicable
Mortgage Loan Transmission.
"Takeout Commitment" shall mean, with respect to any Mortgage Loan, an irrevocable commitment issued by a
Takeout Investor in favor of the Borrower pursuant to which such Takeout Investor agrees to purchase such Mortgage
Loan at a specific price on a forward delivery basis.
"Takeout Investor" shall mean any of the parties listed on Exhibit M to the Loan Agreement (as modified from timeto-time upon prior approval by the Lender in its reasonable discretion.
"Transmittal Letter" shall mean a letter substantially in the form of Annex 11 hereto.
"Trust Receipt" shall mean the trust receipt in the form annexed hereto as Annex 2 delivered to the Lender by the
Custodian covering the Mortgage Loans subject to this Custodial Agreement from time to time. Separate Trust
Receipts will be delivered in connection with Dry Loans and Wet Loans.
"Trust Receipt Interest" shall mean an interest in the Mortgage Loans covered by the Trust Receipt which the Lender
has pledged to a third party.
"Wet Loan" shall mean a wet-funded first lien Mortgage Loan which is underwritten in accordance with the
Underwriting Guidelines and does not contain all the required Mortgage Loan Documents in the Mortgage File, which
in order to be deemed to be an Eligible Mortgage Loan, shall have the following additional characteristics:
(a) the proceeds thereof have been funded (or, on the date of the Advance supported by a Notice of Borrowing and
Pledge are being funded) by wire transfer or cashier's check, cleared check or draft or other form of immediately
available funds to the Settlement Agent for such Wet Loan;
(b) the Borrower expects such Wet Loan to close and become a valid lien securing actual indebtedness by funding to
the order of the Mortgagor thereunder;
(c) the proceeds thereof have not been returned to the Lender from the Settlement Agent for such Wet Loan;
(d) the Borrower has not learned that such Wet Loan will not be closed and funded to the order of the Mortgagor;
(e) upon recordation such Mortgage Loan will constitute a first lien on the premises described therein; and
(f) the Borrower shall haze obtained an Insured Closing Letter and Escrow Letter with respect to such Wet Loan.
"Wire Instruction Data" shall mean the applicable information provided relating to funding for the origination of a Wet
Loan, which data shall include the amount of the related wire transfer and related depository information as required
by Lender
Section 2. Delivery of Mortgage File.
(a) The Borrower shall from time to time deliver Mortgage Files to the Custodian to be held hereunder, which shall be
reviewed by the Custodian as provided in Section 3. With respect to each Advance, (i) in the case of Dry Loans, the
Borrower shall provide written notice, in the form of a Notice of Borrowing and Pledge together with the related
Mortgage Loan Transmission, to the Lender and the Custodian with respect to such Dry Loans which are to be used as
Collateral no later than 6:00 p.m. (eastern time) on the day prior to the requested Funding Date, (ii) in the case of AM
Funded Wet Loans, the Borrower shall provide written notice, in the form of a Notice of Borrowing and Pledge
together with the related Mortgage Loan Transmission and copies of the related Insured Closing Letters and Escrow
Letters, to the Lender and the Custodian with respect to such AM Funded Wet Loans which are to be used as
Collateral no later than 6:00 p.m. (eastern time) on the day prior to the requested Funding Date, (iii) in the case of PM
Funded Wet Loans, the Borrower shall provide written notice, in the form of a Notice of Borrowing and pledge
together with the related Mortgage Loan Transmission and copies of the related Insured Closing Letters and Escrow
Letters, to the Lender and the Custodian with respect to such PM Funded Wet Loans which are to be used as Collateral
no later than 3:00 p.m. (eastern time) on the requested Funding Date, and (iv) in the case of Dry Loans, the Borrower
shall have delivered to the Custodian the items set forth on Annex 16 hereto pertaining to the Dry Loans which shall
secure the Advance to be made on such Funding Date, not later than 11:00 a.m. (eastern time) on such Funding Date.
Notwithstanding anything herein to the contrary, in the event that more than 100 Mortgage Files with respect to Dry
Loans are to be delivered on any Funding Date, the Custodian shall have such additional time to complete its review of
such Mortgage Files in excess of 100 as agreed between the Custodian and the Borrower. In such event, the Borrower
shall deliver the Mortgage Files to the Custodian so that the Custodian shall have the time required to complete its
review and issue the required Trust Receipts on the Funding Date.
Following the Custodian's review of the items specified above, the Custodian shall deliver to the Lender a Notice of
Intent to Issue Trust Receipt not later than 9:00 p.m. (eastern time) on the day prior to the requested Funding Date for
any AM Funded Wet Loans, not later than 4:00 p.m. (eastern time) on the requested Funding Date for any PM Funded
Wet Loans, and not later than 12:00 noon (eastern time) on the request Funding Date for any Dry Loans.
(b) From time to time, the Borrower shall forward to the Custodian additional original documents or additional
documents evidencing any assumption, modification, consolidation or extension of a Mortgage Loan approved by the
Borrower, in accordance with the terms of the Loan Agreement, and upon receipt of any such other documents, the
Custodian shall hold such other documents for the Lender hereunder.
With respect to any documents which have been delivered or are being delivered to recording offices for recording and
have not been returned to the Borrower in time to permit their delivery hereunder at the time required, in lieu of
delivering such original documents, the Borrower shall deliver to the Custodian a copy thereof certified by the
Borrower or the Settlement Agent as a true, correct and complete copy of the original which has been transmitted for
recordation. The Borrower shall deliver such original documents to the Custodian promptly when they are received if
the related Mortgage Loan is then subject to this Custodial Agreement.
(c) With respect to airy Mortgage Loan, if the Custodian has identified such Mortgage Loan as having any Exception
or if the Borrower has knowledge of any Exception, the Borrower shall promptly and diligently notify the Lender of
any such Exception and shall promptly and diligently attempt to cure any such Exception.
Section 3. Mortgage Loan Transmission; Exception Report Trust Receipt; Disbursement Account.
(a) If the Custodian has received a Mort-age File for a Mortgage Loan identified on the Mortgage Loan Transmission
as provided in the preceding section, the Custodian shall review the documents required to be delivered pursuant to
Section 2(a) above. The Custodian will deliver by electronic transmission, no later than 5:00 p.m. (eastern time) oil
each day to the Borrower and the Lender, a Custodian Loan Transmission. The Custodian shall deliver an original
Trust Receipt and Custodian Loan Transmission to Chase Manhattan Bank at Four New York Plaza, Ground Floor,
Outsourcing Department, New York, New York 10004, Attention: Jennifer John for the account of Greenwich Capital
Financial Products, Inc. (telephone number (212) 623-5953) each Funding Date, or day that mortgage files are
released following any sale of the related Mortgage Loan, by overnight delivery using a nationally recognized
overnight delivery service at the Borrower's expense. Not later than 5:30 p.m. (eastern time) on each Funding Date, the
Custodian shall deliver copies of each Trust Receipt via facsimile to the Lender. Separate Trust Receipts shall be
issued for Wet Loans and Dry Loans. Each Trust Receipt and Custodian Loan Transmission subsequently delivered by
the Custodian to the Lender shall supersede and cancel the Trust Receipt and Custodian Loan Transmission previously
delivered by the Custodian to the Lender hereunder, and shall replace the then existing Custodian Loan Transmission
and the then existing Trust Receipt.
The delivery of each Trust Receipt and Custodian Loan Transmission to the Lender shall be the Custodian's
representation that, other than the Exceptions listed: (i) all documents in respect of such Mortgage Loan required to be
delivered at such time pursuant to Section 2 of this Custodial Agreement have been delivered and are in the possession
of the Custodian as part of the Mortgage File for such Mortgage Loan: (ii) all such documents have been reviewed by
the Custodian in accordance with the review procedures attached hereto as Annex 4 (the "Review Procedures") and
appear on their face to be regular and to relate to such Mortgage Loan and to satisfy the requirements set forth in
Section 2 of this Custodial Agreement; and (iii) each Mortgage Loan identified in such Custodian Loan Transmission
is being held by the Custodian as bailee for the Lender and/or its designees pursuant to this Custodial Agreement.
(b) In connection with any Trust Receipt and Custodian Loan Transmission delivered hereunder by the Custodian, the
Custodian makes no representations as to and shall not be responsible to verify (A) the validity, legality,
enforceability, due authorization, recordability, sufficiency, or genuineness of any of the documents contained in each
Mortgage File or (B) the collectability, insurability, effectiveness or suitability of and such Mortgage Loan. Subject to
the following- sentence, the Borrower and the Lender hereby give the Custodian notice that from and after the Funding
Date, the Lender shall have a security interest in each Mortgage Loan identified on a Custodian Loan Transmission
until such time that the Custodian receives written notice from the Lender that the Lender no longer has a security
interest in such Mortgage Loan.
(c) In addition to the foregoing, in the case of Wet Loans, the delivery of the Notice of Borrowing and Pledge,
Mortgage Loan Transmission and copies of the Insured Closing Letter and Escrow Letter to the Custodian shall be
deemed to constitute required documents with respect to the related Wet Loan. Notwithstanding the foregoing.
Borrower shall deposit with the Custodian the documents described in Annex 16 hereto for such Wet Loan as soon as
possible and, in any event, within ten (10) days after the date the Advance is made with respect to such Wet Loan.
Upon deposit of such documents with Custodian, Custodian shall review such documents in accordance with the
Review Procedures, shall promptly notify Lender if such documents do not comply with the requirements thereof and
shall indicate on its records that Custodian maintains possession of such documents for Lender hereunder. Borrower
hereby represents warrants and covenants to Lender and Custodian that Borrower and an), person or entity acting on
behalf of Borrower that has possession of any of the documents described in Annex 16 hereto for such Wet Loan prior
to the deposit thereof with Custodian will hold such documents in trust for Lender.
(d) The Custodian shall establish and maintain a disbursement account (the "Disbursement Account") for and on
behalf of the Lender entitled "Disbursement Account, Bankers Trust Company of California, N.A., as Custodian for
Greenwich Capital Financial Products, Inc., Reference Number EL990C." All amounts remitted on account of
Advances made by the Lender to the Borrower, which the Borrower requests the Lender to remit to the Custodian,
shall be remitted no later than 9:00 a.m. (eastern time) with respect to AM Funded Wet Loans and no later than
4:00 p.m. (eastern time) with respect to PM Funded Wet Loans, and shall be deposited in such Disbursement Account
by the Custodian upon receipt. The Lender shall not be required to remit any funds to the Disbursement Account,
unless and until all conditions precedent set forth in the Loan Agreement have been satisfied. All related fees and
expenses for the Disbursement Account shall be borne by the Borrower. Upon request, the Custodian shall provide the
Borrower, or the Lender, with the federal wire reference number for a particular payment made by the Custodian out
of the Disbursement Account. The Disbursement Account shall be owned by and under the exclusive dominion and
control of the Lender. Neither the Borrower nor any other Person claiming on behalf of or through the Borrower shall
have any right or authority, whether express or implied, to close or make use of, or, except as expressly provided in the
following sentence, withdraw any funds from, the Disbursement Account. The Lender hereby authorizes the Custodian
for purposes hereof, that unless the Custodian shall receive notice in writing from the Lender to the contrary by
9:00 a.m. (eastern time) with respect to AM Funded Wet Loans or by 3:00 p.m. (eastern time) with respect to PM
Funded Wet Loans, to disburse all funds received from the Lender which are deposited to the Disbursement Account
as directed by the Borrower in its Mortgage Loan Transmission. Funds retained in the Disbursement Account shall
remain uninvested, The Custodian shall reconcile the Disbursement Account on a daily basis. With respect to any
Advance that shall be secured b~ a Wet Loan, the amount required to fund such Wet Loan shall be disbursed to the
related Settlement Agent from the Disbursement Account pursuant to Section 3(g) below. The Custodian shall use
reasonable efforts to identify all funds received in connection with the Rescission of any Mortgage Loan.
The Borrower hereby represents that it shall be solely responsible for assuring that the information provided in the
Mortgage Loan Transmission is correct.
(e) (i) On each Funding Date, the Custodian will disburse funds in the Disbursement Account to the Settlement Agents
in accordance with the Wire Instruction Data in the Mortgage Loan Transmission by 10:30 a.m. (eastern time) with
respect to AM Funded Wet Loans or by 5:30 p.m. (eastern time) with respect to PM Funded Wet Loans, provided, that
(A) sufficient funds exist in the Disbursement Account; (B) such instructions do not include the Borrower or any
Affiliate of the Borrower as pa) ee, unless otherwise authorized by the Lender in writing to the Custodian; and (C) if a
conflict exists between the instructions of the Lender and the instructions of the Borrower, the Custodian shall follow
the Lender's instructions.
(ii) If any funds disbursed on any date in accordance with clause (i) of this Section 3(e) are returned to the
Disbursement Account (A) the Custodian shall release such funds from the Disbursement Account in accordance with
Section 3(f), and (B) the Lender shall, upon receipt of such amounts, apply the same to the prepayment of the Advance
or Advances relating to such Mortgage Loan or Mortgage Loans. The Borrower shall instruct each Settlement Agent
regarding funds disbursed to such Settlement Agent in accordance with the terms of the Loan Agreement. The
Custodian shall provide to the Borrower and Lender not later than 2:00 p.m. (eastern time), on each Business Day a
report of all Rescission amounts credited to the Disbursement Account on such Business Day.
(f) Unless otherwise instructed by the Lender, before the close of business on each Business Day, the Custodian shall
withdraw all collected amounts as of 5:30 p.m. (eastern time) then standing to the credit of the Disbursement Account
related to Rescissions or other unfunded Mortgage Loans and forward such amounts to the following account
maintained by the Lender: Chase Manhattan Bank, for the A/C of Greenwich Capital Financial Products, Inc., ABA
#021-000-021, Account #1400-9561, Attn: Brett Kibbe.
The Lender hereby agrees to wire to the Borrower on such Business Day all amounts received by the Lender from the
Disbursement Account on such Business Day pursuant to this Section 3(f) which are not required to be paid to the
Lender in accordance with the Loan Agreement. The Borrower will be obligated to cover any shortfalls related to the
Disbursement Account if the Lender's requirement to Advance will not be sufficient to cover disbursements to the
Disbursement Agent due to a Rescission or other reason the Mortgage Loan expected to be funded with such funds did
not close. In addition, in connection with any Wet Loan, the Borrower shall be required to deposit in the Disbursement
Account prior to the closing of such Mortgage Loan an amount equal to the excess of (i) the amount required to be
remitted in connection with the closing of such Mortgage Loan over (ii) the amount to be advanced by the Lender
pursuant to the Loan Agreement with respect to such Mortgage Loan.
(g) In connection with the funding of any Wet Loans pursuant to the Disbursement Account, the Borrower shall
establish an Operating Account (the "Operating Account") with the Custodian to be designated "E-LOAN.COM
Operating Account, maintained by Bankers Trust Company of California in trust for E-LOAN.COM, Inc.". With
respect to any Wet Loan to be funded in the morning on any Business Day (an "AM Funded Wet Loan"), the Borrower
by delivery of the Mortgage Loan Transmission indicating thereon which Mortgage Loans are AM Funded Wet Loans
requests that the Custodian, and the Custodian shall, transfer from the Operating Account to the Disbursement
Account by 9:00 a.m. (eastern time) on the day of closing for such AM Funded Wet Loan all of the funds necessary to
close such AM Funded Wet Loan. With respect to any Wet Loan to be funded in the afternoon on any Business Day (a
"PM Funded Wet Loan"), the Borrower by delivery of the Mortgage Loan Transmission indicating thereon which
Mortgage Loans are PM Funded Wet Loans requests that the Custodian, and the Custodian shall, transfer from the
Operating Account to the Disbursement Account by 4:00 p.m. (eastern time) on the day of closing for such PM
Funded Wet Loan all of the funds necessary to close such PM Funded Wet Loan.
Section 4. Obligations of the Custodian.
(a) The Custodian shall maintain continuous custody of all items constituting the Mortgage Files in secure facilities in
accordance with customary standards for such custody and shall reflect in its records the interest of the Lender therein.
Each Mortgage Note (and Assignment of Mortgage) shall be maintained in fire resistant facilities.
(b) With respect to the documents constituting each Mortgage File, the Custodian shall (i) act exclusively as the bailee
of, and custodian for, the Lender, (ii) hold all documents constituting such Mortgage File received by it for the
exclusive use and benefit of the Lender, and (iii) make disposition thereof only in accordance with the terms of this
Custodial Agreement or with written instructions furnished by the Lender; provided, however, that in the event of a
conflict between the terms of this Custodial Agreement and the written instructions of the Lender, the Lender's written
instructions shall control.
(c) In the event that (i) the Lender, the Borrower or the Custodian shall be served by a third part) with any type of levy,
attachment, writ or court order with respect to any Mortgage File or any document included within a Mortgage File or
(ii) a third party shall institute any court proceeding by which any Mortgage File or a document included within a
Mortgage File shall be required to be delivered otherwise than in accordance with the provisions of this Custodial
Agreement, the party receiving such service shall promptly deliver or cause to be delivered to the other parties to this
Custodial Agreement copies of all court papers, orders, documents and other materials concerning such proceedings.
The Custodian shall, to the extent permitted by law, continue to hold and maintain all the Mortgage Files that are the
subject of such proceedings pending a final, nonappealable order of a court of competent jurisdiction permitting or
directing disposition thereof. Upon final determination of such court, the Custodian shall dispose of such Mortgage
File or any document included within such Mortgage File as directed by the Lender which shall give a direction
consistent with such determination. Expenses of the Custodian (including reasonable attorneys' fees and related
expenses) incurred as a result of such proceedings shall be borne by the Borrower.
(d) The Lender hereby acknowledges that the Custodian shall not be responsible for the validity and perfection of the
Lender's security interest in the Collateral hereunder, other than the Custodian's obligation to take possession of
Collateral as set forth in Section 2 hereof.
Section 5. Release of Collateral.
(a) From time to time until the Custodian is otherwise notified in writing by an Authorized Representative of the
Lender, which notice shall be given by the Lender only following the occurrence of an Event of Default, the Custodian
is hereby authorized upon receipt of written request of the Borrower which is acknowledged by the Lender to release
Mortgage Files relating to Mortgage Loans in the possession of the Custodian to the Borrower, or its designee, for the
purpose of servicing or correcting documentary deficiencies relating thereto against a request for release of Mortgage
Files and receipt (a "Request for Release and Receipt") executed by the Borrower and the Lender (except with respect
to any Mortgage Loan which has been paid in full by the related Mortgagor) in the form of Annex 5 hereto. The
Custodian shall keep track of the release of such Mortgage Files. The Lender hereby agrees to respond to a Request for
Release and Receipt, via facsimile, no later than one (I) Business Day after the Lender's receipt thereof. The Borrower
or its designee shall return to the Custodian each Mortgage File previously released by the Custodian within tell (10)
calendar days after receipt thereof other than for any Mortgage Loan which has been paid in full by the related
Mortgagor. The Borrower hereby further represents a-id warrants to the Lender that any such request b~ the Borrower
for release of Collateral shall be solely for the purposes set forth in the Request for Release and Receipt and that the
Borrower has requested such release in compliance with all terms and conditions of such release set forth in the Loan
Agreement.
(b) (i) From time to time until otherwise notified in writing by the Lender, which notice shall be given by the Lender
only following the occurrence of an Event of Default, the Custodian is hereby authorized upon receipt of written
request of the Borrower at least two (2) Business Days prior to the date of the anticipated sale, to release Mortgage
Files in the possession of the Custodian to a third-party purchaser (subject to the written consent of the Lender if such
third party purchaser is not alt Approved Purchaser) for the purpose of resale thereof against a Notice of Sale and
Request for Release executed by the Borrower and the Lender (in its discretion) in the form of Annex 3 hereto. On
such Notice of Sale and Request for Release, the Borrower shall indicate the Mortgage Loans to be sold, such
information to be provided in electronic medium acceptable to the Borrower and the Custodian, the approximate
amount of sale proceeds anticipated to be received, the date of such anticipated sale, the name and address of the thirdparty purchaser and the preferred method and date of delivery.
(ii) Any transmittal of Mortgage Files for Mortgage Loans in the possession of the Custodian in connection with the
sale thereof to a third-party purchaser will be under cover of a transmittal letter substantially in the form attached
hereto as Annex 11 duly completed by the Custodian and executed by the Custodian. Promptly upon receipt by Lender
of the full amount of the Takeout Proceeds (constituting not less than the "Payoff Amount") into the account set forth
in such transmittal letter and receipt from the Borrower of a Purchase Advice specifying the amount and source of
wire along with information identifying the Mortgage Loans to which such wire transfer relates, the Lender shall
notify the Custodian thereof in writing by 3:00 p.m. (eastern time) for proceeds received no later than 1:00 p.m.
(eastern time) on such day. Any Payoff Amount sent by a third-party purchaser of Mortgage Loans in connection with
Section 5(b)(ii) above shall be sent to the account designated by the Lender. Any excess proceeds received by the
Lender shall be remitted to the Borrower in accordance with the terms of the Loan Agreement.
(c) (iii) From time to time and as appropriate for the foreclosure of any of the Mortgage Loans, the Custodian is hereby
authorized, upon receipt of a Request for Release and Receipt from the Borrower, executed by the Lender to send to an
Acceptable Attorney copies or originals of the Mortgage Files listed in the Request for Release and Receipt. The
Custodian shall retain copies of all Mortgage Files forwarded to an Acceptable Attorney pursuant to the preceding
sentence. The Custodian may destroy any such copies retained upon the earliest to occur of (A) the original Mortgage
File is returned to the Custodian, (B) the foreclosure with respect to such Mortgage Loan is complete, (C) the date
upon which such Mortgage Loan is released from the terms of this Custodial Agreement or (D) the original Mortgage
File is not returned within 180 days of release. In accordance with the terms of the Attorney's Bailee Letter, the
Acceptable Attorney to whom such Mortgage Files are sent is instructed to acknowledge receipt of each such
document by faxing to the Lender and the Custodian a list of such Mortgage Files confirming that such Acceptable
Attorney is holding the same as bailee of the Lender under the applicable Attorney's Bailee Letter, for receipt as soon
as possible and in any event no later than three (3) Business Days following receipt thereof by such Acceptable
Attorney. The Lender may, by notice to the Custodian and the Borrower, respectively, exclude and attorney-at-law
with whom the Lender is not reasonably satisfied, from being an Acceptable Attorney.
(iv) In accordance with each Attorney's Bailee Letter, no later than three (3) Business Da: s prior to the foreclosure of
any Mortgage Loan, the Acceptable Attorney party thereto shall notify the Borrower of the scheduled date of
foreclosure of each such Mortgage Loan (the "Scheduled Foreclosure Date"), and of any subsequent changes to the
Scheduled Foreclosure Date. The Borrower hereby agrees in any event to promptly notify the Custodian and Lender in
writing upon completions of any foreclosure. On the date of foreclosure, such Mortgage Loan shall be deemed deleted
from any Trust Receipt then outstanding.
(d) From time to time until the Custodian is otherwise notified by the Lender, and with the prior written consent of the
Lender, the Borrower may substitute for one or more Eligible Mortgage Loans constituting the Collateral one or more
substitute Eligible Mortgage Loans having aggregate Collateral Value equal to or greater than the Collateral Value of
the Mortgage Loans being substituted for, or obtain the release of one or more Mortgage Loans constituting Collateral
hereunder; provided that, after giving effect to such substitution or relapse, the Secured Obligations then outstanding
shall not exceed the Borrowing Base, which determination shall be made solely by the Lender in accordance with the
Loan Agreement. In connection with any such requested substitution or release, the Borrower will provide notice to
the Custodian and the Lender no later than 12:00 p.m. (eastern time), on the date of such request, specifying the
Mortgage Loans to be substituted for or released and the substitute Mortgage Loans to be pledged hereunder in
substitution therefor, if any, and shall deliver with such notice a revised Mortgage Loan Transmission indicating any
substitute Mortgage Loans. If the Custodian and Lender have received notice in accordance with the preceding
sentence, the Custodian will effect the requested substitution or release no later than 3:00 p.m. (eastern time), two (2)
Business Days following the day on which such request was made after the Custodian has certified to the Lender on
such Business Day that the matters set forth in Section 3(a) hereof with respect to any substitute Mortgage Loans are
true and correct. Each such substitution or release shall be deemed to be a representation and warranty) by, the
Borrower that any substitute Mortgage Loans are Eligible Mortgage Loans and that after giving effect to such
substitution or release, the Secured Obligations then outstanding shall not exceed the Borrowing Base.
(e) So long as no Event of Default has occurred and is continuing and to the extent written notice has been provided to
the Custodian, the Custodian and the Lender shall take such steps as they may reasonably be directed from time to
time by the Borrower in writing, which the Borrower deems necessary and appropriate, to transfer promptly and
deliver to the Borrower any Mortgage File in the possession of the Custodian relating to any Mortgage I pan
previously included in the Borrowing Base but which the Borrower, with the written consent of the Lender, has
notified the Custodian has ceased to be included in the Borrowing Base, or any Mortgage Loan in respect of which the
Borrower has paid the applicable Advance Balance in full. The Lender agrees to reply promptly to any such request
for transfer and delivery, and if any such request is received by 12:00 p.m. (eastern time), the Lender agrees to reply
on the Business Day following the Business Day such request is received.
(f) The Lender agrees to maintain a settlement account into which all proceeds from the sale of and Mortgage Loans to
any Takeout Investor or other Approved Purchaser shall be deposited. The Borrower agrees to provide appropriate
wire transfer instructions for such settlement account to all Takeout Investors or other Approved Purchasers.
Section 6. Fees and Expenses of Custodian.
The Custodian shall charge such fees for its services under this Custodial Agreement as are set forth in a separate
agreement between the Custodian and the Borrower, the payment of which fees, together with the Custodian's
expenses in connection herewith, shall be solely the obligation of the Borrower.
Section 7. Removal or Resignation of Custodian.
(a) The Custodian may at any time resign and terminate its obligations under this Custodial Agreement upon at least
60 days' prior written notice to the Borrower and the Lender. Promptly after receipt of notice of the Custodian's
resignation, the Borrower shall appoint, by written instrument, a successor custodian, subject to written approval by
the Lender (which approval shall not be unreasonably withheld). One original counterpart of such instrument of
appointment shall be delivered to each of the Lender, the Borrower, the Custodian and the successor custodian. If the
successor Custodian shall not have been appointed within 60 days of the Custodian's providing such notice, the
Custodian may petition any court of competent jurisdiction to appoint a successor Custodian.
(b) The Lender or the Borrower, with the consent of the other (which consent shall not be unreasonable withheld),
upon at least 60 days' prior written notice to the Custodian, may remove and discharge the Custodian (or any successor
custodian thereafter appointed) from the performance of its obligations under this Custodial Agreement. Promptly
after the giving of notice of removal of the Custodian, the Lender shall appoint, by written instrument, a successor
custodian, which appointment shall be reasonably acceptable to the Borrower. One original counterpart of such
instrument of appointment shall be delivered to each of the Lender, the Borrower, the Custodian and the successor
custodian.
(c) In the event of any such resignation or removal; the Custodian shall promptly upon the simultaneous surrender of
and outstanding Trust Receipts held by Lender, transfer to the successor custodian, as directed in writing, all the
Mortgage Files being administered under this Custodial .Agreement and, if the endorsements on the Mortgage Notes
and the Assignments of Mortgage have been completed in the name of the Custodian, assign the Mortgages and
endorse without recourse the Mortgage Notes to the successor Custodian or as otherwise directed by the Lender. The
cost of the shipment of Mortgage Files arising out of the resignation of the Custodian shall be at the expense of the
Custodian; and any cost of shipment arising out of the removal of the Custodian shall be at the expense of the Lender.
The Borrower shall be responsible for the fees and expenses of the successor custodian and the fees and expenses for
endorsing the Mortgage Notes and assigning the Mortgages to the successor custodian if required pursuant to this
paragraph.
Section 8. Examination of Mortgage Files.
Upon reasonable prior notice to the Custodian (which shall be two (2) Business Days or such shorter period of time
agreed to by the Custodian and the Lender) and at the Borrower's expense, the Lender and each of its respective
agents, accountants, attorneys and auditors will be permitted during normal business hours to examine the Mortgage
Files, documents, records and other papers in the possession of or under the control of the Custodian relating to any or
all of the Mortgage Loans.
Section 9. Insurance of Custodian.
At its own expense, the Custodian shall maintain at all times during the existence of this Custodial Agreement and
keep in full force and effect fidelity insurance, theft of documents insurance, forgery insurance and errors and
omissions insurance. All such insurance shall be in amounts, with standard coverage and subject to deductibles, all as
is customary for insurance typically maintained by banks which act as custodian of collateral substantially similar to
the Collateral and act in a collateral agent capacity. Upon request, the Lender or the Borrower shall be entitled to
receive a certificate of the respective insurer that such insurance is in full force and effect.
Section 10. Representations and Warranties.
The Custodian represents and warrants to the Lender that:
(a) (i) the Custodian has the power and authority and the legal right to execute and deliver, and to perform its
obligations under, this Custodial Agreement, and has taken all necessary corporate action to authorize its execution,
delivery and performance of this Custodial Agreement;
(ii) no consent or authorization of, filing with, or other act by or in respect of, any arbitrator or Governmental
Authority and no consent of any other Person (including, without limitation, any stockholder or creditor of the
Custodian) is required in connection with the execution, delivery, performance, validity or enforceability of this
Custodial Agreement;
(iii) this Custodial Agreement has been duly executed and delivered on behalf of the Custodian and constitutes a legal,
valid and binding obligation of the Custodian enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity (whether enforcement is sought in a proceeding in equity
or at law); and
(iv) the Custodian is not an Affiliate of the Borrower.
Section 11. Statements.
Upon the request of the Lender or the Borrower, the Custodian shall provide the Lender or the Borrower, as
applicable, with a list of all the Mortgage Loans for which the Custodian holds a Mortgage File pursuant to this
Custodial Agreement. Such list shall be in the form of a Custodian Loan Transmission and an Exception Report.
Section 12. No Adverse Interest of Custodian.
By execution of this Custodial Agreement, the Custodian represents and warrants that it currently holds, and during
the existence of this Custodial Agreement shall hold, no adverse interest, by way of security or otherwise, in any
Mortgage Loan, and hereby waives and releases any such interest which it may have in any Mortgage Loan as of the
date hereof. The Mortgage Loans shall not be subject to any security interest, lien or right to set-off b) Custodian or
any third party claiming through Custodian, and Custodian shall not pledge, encumber, hypothecate, transfer, dispose
of, or otherwise grant any third party interest in, the Mortgage Loans.
Section 13. Indemnification of Custodian.
The Borrower agrees to reimburse, indemnify and hold the Custodian and its directors, officers, agents and employees
harmless against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, or outof-pocket expenses of any kind or nature whatsoever, including reasonable attorney's fees, that may be imposed on,
incurred by, or asserted against it or them in any way relating to or arising out of this Custodial Agreement or any
action taken or not taken by it or them hereunder unless such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, or out-of-pocket expenses were imposed on, incurred by or asserted against the
Custodian because of the breach by the Custodian of its obligations hereunder, or caused by the negligence, lack of
good faith or willful misconduct on the part of the Custodian or any of its directors, officers, agents or employees. The
foregoing indemnification shall survive any resignation or removal of the Custodian or the termination or assignment
of this Custodial Agreement.
In the event that the Custodian fails to produce a Mortgage Note, Assignment of Mortgage or any other document
related to a Mortgage Loan that was in its possession pursuant to Section 2 within two (2) Business Days after written
request therefor by the Lender or the Borrower in accordance with the terms and conditions of this Custodial
Agreement; provided that (i) Custodian previously delivered to the Lender a Trust Receipt. Custodian Loan
Transmission and an Exception Report which did not list such document as an Exception on the related date of pledge;
(ii) such document is not outstanding pursuant to a Request for Release and Receipt in the form annexed hereto as
Annex 5-A; and (iii) such document was held by the Custodian on behalf of the Borrower or Lender, as applicable (a
"Custodial Delivery Failure"), then the Custodian shall (a) with respect to any missing Mortgage Note, promptly
deliver to the Lender or Borrower, upon request, a Lost Note Affidavit in the form of Annex 9 hereto and (b) with
respect to any missing document related to such Mortgage Loan, including but not limited to a missing Mortgage
Note, indemnify the Borrower or Lender in accordance with the succeeding paragraph of this Section 13.
Notwithstanding the foregoing, it the event that the Custodian fails to produce a Mortgage Note with respect to a
Mortgage Loan requested pursuant to Section 5(b) hereof, the Custodian shall then promptly (but no later than two (2)
Business Days following such request) provide the Lender or Borrower, as applicable, with a Lost Note Affidavit. In
the event that such original Mortgage Note is subsequently found and delivered to the Lender or Borrower, as
applicable, such party shall return the Lost Note Affidavit to the Custodian.
The Custodian agrees to indemnify and hold the Lender and Borrower, and their respective designees harmless against
any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, or out-of-pocket
expenses, including reasonable attorney's fees, that may be imposed on, incurred by, or asserted against it or them in
any way relating to or arising out of a Custodial Delivery Failure or the Custodian's negligence, lack of good faith or
misconduct or any breach of the conditions, representations or warranties contained herein. The foregoing
indemnification shall survive any termination or assignment of this Custodial Agreement.
Section 14. Reliance of Custodian.
In the absence of bad faith on the part of the Custodian, the Custodian may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any request, instruction, certificate, opinion or
other document furnished to the Custodian, reasonably believed by the Custodian to be genuine and to have been
signed or presented by the proper party or parties and conforming to the requirements of this Custodial Agreement; but
in the case of any Mortgage Loan Document or other request, instruction, document or certificate which by and
provision hereof is specifically required to be furnished to the Custodian, the Custodian shall be under a duty to
examine the same in accordance with the requirements of this Custodial Agreement.
Section 15. Term of Custodial Agreement.
Promptly after written notice from the Lender of the termination of the Loan Agreement and payment in full of all
amounts owing to the Lender thereunder and under the Note, the Custodian shall deliver all documents remaining in
the Mortgage Files to the Borrower, and this Custodial Agreement shall thereupon terminate.
Section 16. Notices.
All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given
when received by the recipient party at the address shown on its signature page hereto, or at such other addresses as
may hereafter be furnished to each of the other parties by like notice. Any such demand, notice or communication
hereunder shall be deemed to have been received on the date delivered to or received at the premises of the addressee.
Any demand, notice or communication hereunder shall be (i) sent by telecopy, (ii) delivered in person, or
(iii) transmitted by a recognized private (overnight) courier service. The Custodian's office is located at the address set
forth on its signature page hereto, and each party hereto agrees to notify each other party if its address should change.
Section 17. Governing Law.
This Custodial Agreement 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
regard to the conflict of laws doctrine applied in such state.
Section 18. Authorized Representatives.
Each individual designated as an authorized representative of the Lender or its successors or assigns, the Borrower and
the Custodian, respectively (an "Authorized Representative"), is authorized to give and receive notices, requests and
instructions and to deliver certificates and documents in connection with this Custodial Agreement on behalf of the
Lender, the Borrower and the Custodian, as the case may be, and the specimen signature for each such Authorized
Representative, initially authorized hereunder, is set forth on Annexes 6, 7 and 8 hereof, respectively. From time to
time, the Lender, the Borrower or the Custodian or their respective successors or permitted assigns may, by delivering
to the others a revised annex, change the information previously given pursuant to this Section 18, but each of the
parties hereto shall be entitled to rely conclusively on the then current annex until receipt of a superseding annex.
Section 19. Amendment.
This Custodial Agreement may, be amended from time to time by written agreement signed by the Borrower, the
Lender and the Custodian.
Section 20. Cumulative Rights.
The rights, powers and remedies of the Custodian and the Lender under this Custodial Agreement shall be in addition
to all rights, powers and remedies given to the Custodian and the Lender by virtue of any statute or rule of law, the
Loan Agreement or any other agreement, all of which rights, powers and remedies shall be cumulative and may be
exercised successively or concurrently without impairing the Lender's security interest in the Collateral.
Section 21. Binding Upon Successors.
All rights of the Custodian, the Borrower and the Lender under this Custodial Agreement shall inure to the benefit of
the Custodian and the Lender and their successors and permitted assigns.
Section 22. Entire Agreement; Severability.
This Custodial Agreement and the other Loan Documents contain the entire agreement with respect to the Collateral
among the Custodian, the Lender and the Borrower. If any of the provisions of this Custodial Agreement shall be held
invalid or unenforceable, this Custodial Agreement shall be construed as if not containing such provisions, and the
rights and obligations of the parties hereto shall be construed and enforced accordingly.
Section 23. Execution In Counterparts.
This Custodial Agreement may be executed in counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same agreement.
Section 24. Tax Reports.
The Custodian shall not be responsible for the preparation or filing of any reports or returns relating to federal, state or
local income taxes with respect to this Custodial Agreement, other than in respect of the Custodian's compensation or
for reimbursement of expenses.
Section 25. Pledging of the Mortgage Loans by the Lender.
In connection with a pledge of the Mortgage Loans or Trust Receipt Interest, as applicable, as collateral for an
obligation of the Lender, the Lender may pledge its interest in the Mortgage Files held by the Custodian for the benefit
of the Lender from time to time (provided that such use of the Mortgage Loans or Trust Receipt Interest, as applicable,
(i) shall be subject to the Borrower's rights to redeem the Collateral, taking into account any Takeout Commitment,
upon repayment of the principal of and interest on all Advances and all other amounts owing to the Lender under the
Loan Agreement, under the Note and under the other Loan Documents and (ii) will not impair the Lender's ability to
perform its obligations under the Loan Agreement or hereunder) by delivering, at the Lender's option, written notice to
the Custodian in the form of Annex 10 hereto stating that the Lender has pledged its interest in the identified Mortgage
Loans and Mortgage Files, and the identity of the party to whom the Mortgage Loans or Trust Receipt Interest have
been pledged (such party, the "Pledge"). Upon receipt of such notice from the Lender, the Custodian shall mark its
records to reflect the pledge of the Mortgage Loans or Trust Receipt Interest, as applicable, by the Lender to the
Pledgee. The Custodian's records shall reflect the pledge of the Mortgage Loans or Trust Receipt Interest, as
applicable, by the Lender to the Pledgee until such time as the Custodian receives written instructions from the Lender
with consent from the Pledgee that the Mortgage Loans or Trust Receipt Interest, as applicable, are no longer pledged
by the Lender to the Pledgee, at which time the Custodian shall change its records to reflect the release of the pledge
of the Mortgage Loans or Trust Receipt Interest, as applicable, and that the Custodian is holding the Mortgage Loans
or Trust Receipt Interest, as applicable, as custodian for, and for the benefit of, the Lender. Until such time as the
Custodian receives notice from the Lender that there exists an event of default with respect to a pledge of its interest in
the Mortgage Loans and Mortgage Files, the Custodian shall take directions solely from Lender.
Section 26. Transmission of Mortgage Files.
Prior to any shipment of any Mortgage Files, or other loan documents hereunder, the Borrower shall deliver to the
Custodian written instructions as to the method of shipment and shipper(s) the Custodian is to utilize in connection
with the transmission of Mortgage Files or other loan documents in the performance of the Custodians duties
hereunder. The Borrower shall arrange for the provision of such services at its sole cost and expense (or, at the
Custodian's option, reimburse the Custodian for all costs and expenses incurred b) the Custodian consistent with such
instructions) and will maintain such insurance against loss or damage to mortgage files or other loan documents as the
Borrower deems appropriate. Without limiting the generality of the provisions of Section 13 above, it is expressly
agreed that in no event shall the Custodian have any liability for any losses or damages to any person, including
without limitation, the Borrower, arising, out of actions of the Custodian consistent with the instructions of the
Borrower. In the event the Custodian does not receive such written instructions, the Custodian shall be authorized and
shall be indemnified as provided herein to utilize a nationally recognized courier service.
IN WITNESS WHEREOF, this Custodial Agreement was duly executed by the parties hereto as of the day and year
first above written.
E-LOAN, INC.
By:
Name:
Title:
Address for Notices:
5875 Arnold Road
Attention: Steve Majerus
Telecopier No.: (925)556-2614
Telephone No.: (925) 241-2407
BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as Custodian
By:
Name: Aimee Kemmeter
Title: Assistant Vice President
Address for Notices
:
1761 East St. Andrew Place
Santa Ana, California 92705
Attention: Mortgage Custody/Greenwich E-Loan: EL000C
Telephone No.: (714) 247-6000
By:
Name: Anthony Palmisano
Title: Vice President
Address for Notices
:
600 Steamboat Road
Attention: Anthony Palmisano
Telephone No.: (203) 618-2341
With a copy to:
Telephone No.: (203) 625-2700
Annex 1
to Custodial Agreement
REQUIRED FIELDS FOR MORTGAGE LOAN TRANSMISSION
(1) The Borrower's reference number;
(2) The name of the Borrower's applicable program;
(3) The Mortgage Loan number;
(4) The last name of the Mortgagor;
(5) The face amount of the Mortgage Note;
(6) The original number of months to maturity of the Mortgage Loan;
(7) The original interest rate borne by the Mortgage Note;
(8) The name of the Takeout Investor;
(9) The sale price of the Mortgage Loan to the Takeout Investor or Approved Purchaser;
(10) The commitment number;
(11) The expiration date of the Takeout Commitment;
(12) The date the Mortgage Loan is scheduled to be delivered to the Takeout Investor or Approved Purchaser;
(13) The Release Payment;
(14) The name of the Warehouse Lender, if any;
(15) The Agency's payee number, if applicable;
(16) The name of the Settlement Agent;
(17) The address of the Mortgage Property;
(18) The original maturity date; and
(19) a code indicating whether such Mortgage Loan is a Cooperative Loan.
Annex 2
GCFP Customer Code:_____
[WET LOAN][DRY LOAN] TRUST RECEIPT
Overnight Courier Tracking No._____
# of Loans:_____
Original Quantity $_____
Greenwich Capital Financial Products, Inc.
600 Steamboat Road
Attn: __________
Re: Custodial Agreement, dated as of June 21, 2000 (the "Custodial Agreement"), among E-LOAN.COM. Inc, as
Borrower, Bankers Trust Company of California, N.A., as Custodian, and Greenwich Capital Financial Products, Inc.,
as Lender.
Ladies and Gentlemen:
In accordance with the provisions of Section 3 of the above-referenced Custodial Agreement (capitalized terms not
otherwise defined herein having the meanings ascribed to them in the Custodial Agreement, or if not defined in the
Custodial Agreement, then in that certain Master Loan and Security Agreement dated as of May 10, 1999 between the
Borrower and the Lender (as amended, the "Security Agreement")), the undersigned, as the Custodian, hereby certifies
as to each Mortgage Loan described in the attached Custodian Loan Transmission all matters (subject to the
Exceptions listed therein) set forth in Section 3 of the Custodial Agreement, subject to the limitation set forth in
Section 3(b) of the Custodial Agreement.
The delivery of this Trust Receipt evidences that (i) the Custodian has reviewed all documents required to be delivered
in respect of each Mortgage Loan listed herein pursuant to Section 2 of the Custodial Agreement, and such documents
other than the Exceptions listed herein are in the possession of the Custodian as part of the Mortgage File for such
Mortgage Loan, (ii) the Custodian is holding each Mortgage Loan identified on the Custodian Loan Transmission
attached hereto, pursuant to the Custodial Agreement, as the bailee of and custodian for the Lender and (iii) such
documents have been reviewed by the Custodian and appear on their face to be regular and to relate to such Mortgage
Loan and satisfy the requirements set forth in Section 3(a) of the Custodial Agreement and the Review Procedures.
The Custodian makes no representations as to, and shall not be responsible to verify, (i) the validity, legality,
enforceability, due authorization, recordability, sufficiency, or genuineness of any of the documents contained in each
Mortgage File or (ii) the collectability, insurability, effectiveness or suitability of any such Mortgage Loan.
On each date the Custodian delivers to the Lender a Trust Receipt, it shall supersede the Trust Receipt, previously
delivered by the Custodian to the Lender hereunder. The most recently delivered Trust Receipt, shall control and be
binding upon the parties hereto.
BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as Custodian
By:
Name:
Title:
Annex 3
FORM OF NOTICE OF SALE AND REQUEST FOR RELEASE
Date: __________, _____
The undersigned, E-LOAN.COM, INC. (the "Borrower"), hereby provides notice of the proposed sale of the below
referenced mortgage loans to __________ (the "Approved Purchaser"). Such Mortgage Loans have previously been
delivered to BANKERS TRUST COMPANY OF CALIFORNIA, N.A., acting as agent, bailee and custodian (in such
capacity "Custodian") for the exclusive benefit of the Greenwich Capital Financial Products, Inc., (the "Lender")
pursuant to the Custodial Agreement dated as of June 21, 2000 made by and among the Borrower, Custodian and the
Lender. The closing date for such sale is __________ and the anticipated purchase proceeds to be paid to the Lender
directly is __________ (if amount is zero, remaining collateral is sufficient to protect Lender Advances and shall not
result in a Borrowing Base Deficiency).
The Borrower requests release from the Custodian of the following described documentation for the identified
Mortgage Loans, possession of which shall be delivered to the Approved Purchaser in connection with the sale
thereof.
Mortgagor Name
Loan Number
Note Amount
Loan Document
Delivered
Please send the referenced documentation to:
[NAME OF APPROVED PURCHASER]
[ADDRESS]
[TELEPHONE]
[ATTENTION:]
Please deliver documents to the Approved Purchaser via ____________________, accompanied by a transmittal letter
in the form of Annex 10.
E-LOAN.COM, INC.
By:
Name:
Title:
Acknowledged and Consented to:
By:
Name:
Title:
Date:
Capitalized terms not otherwise defined herein are defined in that certain Master Loan and Security Agreement (the
"Security Agreement"), dated as of May 10, 1999, between the Borrower and the Lender, as amended.
E-LOAN.COM, INC.
By:
Name:
Title:
Annex 4
REVIEW PROCEDURES
This Annex sets forth the Custodian's review procedures for each item listed below delivered by the Borrower
pursuant to the Custodial Agreement (the "Agreement") to which this Annex is attached. Capitalized terms used herein
and not defined herein shall have the meanings ascribed to them in the Agreement.
In the case of Dry Loans:
1. The Mortgage Note and the Mortgage each appear to bear an original signature or signatures purporting to be the
signature or signatures of the Person or Persons named as the maker and Mortgagor or grantor, or in the case of copies
of the Mortgage permitted under Section 2(b) of the Agreement, that such copies bear a reproduction of such
signature.
2. The amount of the Mortgage Note is the same as the amount specified on the related Mortgage.
3. The original mortgagee is the same as the payee on the Mortgage Note.
4. The Mortgage contains a legal description other than address, city and state.
5. The notary section (acknowledgment) is present and attached to the related Mortgage and is signed.
6. Neither the original Mortgage Note, nor the copy of the Mortgage delivered pursuant to the Agreement, nor the
original Assignment of Mortgage contain any alterations which appear irregular on their face.
7. The Mortgage Note is endorsed in blank by the Borrower.
8. Each original Assignment of Mortgage and any intervening assignment of mortgage, if applicable, appears to bear
the original signature of the named mortgagee or beneficiary including any subsequent assignors (and any other
necessary party ), as applicable, or in the case of copies permitted under Section 2(b) of the Agreement, that such
copies appear to bear a reproduction of such signature or signatures and such copies have been certified by an officer
as true, complete and correct copies of any originals, and the intervening assignments of mortgage evidence a
complete chain of assignment and transfer of the related Mortgage from the originating Person to the Borrower.
9. The date of each intervening assignment is on or after the date of the related Mortgage and/or the immediately
preceding assignment, as the case may be.
10. The notary section (acknowledgment) is present and attached to each intervening assignment and is signed.
11. Based upon a review of the Mortgage Note, the Mortgage Loan number, the Mortgagor's name, the address of the
Mortgaged Property, the original amount of the Mortgage Note, the original mortgage interest rate, the maturity date
and any other fields as mutually agreed upon as set forth in the Mortgage Loan Transmission delivered by the
Borrower to the Custodian are correct.
In the case of Wet Loans:
1. To the extent of any items listed in Annex 16 are available, the procedures set forth with respect to Dry Loans.
2. To the extent the items listed in Annex 16 are not available, the original Notice of Borrowing and Pledge with a loan
listing attached has been received and matches the facsimile copy previously delivered.
3. The Insured Closing Letter has been executed.
4. The Escrow Letter has been executed.
Annex 5
REQUEST FOR RELEASE AND RECEIPT
Date: __________, _____
The undersigned, E-LOAN.COM, INC. (the "Borrower"), acknowledges receipt from BANKERS TRUST
COMPANY OF CALIFORNIA, N.A., acting as bailee of, and custodian for, (in such capacity, the "Custodian") the
exclusive benefit of GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. (the "Lender") (capitalized terms not
otherwise defined herein are defined in that certain Custodial Agreement, dated as of June 21, 2000 (the "Custodial
Agreement") or if not defined in the Custodial Agreement, then in that certain Master Loan and Security Agreement
dated as of May 10, 1999 between the Borrower and the Lender (as amended, the "Security Agreement")), of the
following described documentation for the identified Mortgage Loan, possession of which is entrusted to the Borrower
solely for the purpose referenced below:
Mortgagor Name
Loan Number
Note Amount
Mtg. Loan Document
Reason for Requesting File (check one)
___ 1. Mortgage Loan Paid in Full.
___ 2. Correction of Document Deficiencies.
___ 3. Mortgage Required for Sen icing.
___ 4. Foreclosure.
___ 5. Other [Describe].
If item 2, 3, 4 or 5 is checked, it is hereby acknowledged that a security interest pursuant to the Uniform Commercial
Code in the Collateral hereinabove described and in the proceeds of said Collateral has been granted to the Lender
pursuant to the Loan Agreement.
If item 2. 3, 4 or 5 is checked, in consideration of the aforesaid delivery by the Custodian, the Borrower hereby agrees
to ]told said Collateral in trust for the Lender as provided under and in accordance with all provisions of the Custodial
Agreement and to return said Collateral to the Custodian no later than the close of business on the tenth day following
the date hereof or, if such day is not a Business Day, on the immediately succeeding Business Day.
E-LOAN.COM, INC.
By:
Name:
Title:
Acknowledged and Consented to:
By:
Name:
Title:
Documents returned to Custodian:
By:
Name:
Its:
Date:
Annex 6
AUTHORIZED REPRESENTATIVES OF LENDER
Name
Specimen Signature
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
Annex 7
AUTHORIZED REPRESENTATIVES OF BORROWER
Name
Specimen Signature
Steven M. Majerus
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
Annex 8
AUTHORIZED REPRESENTATIVES OF CUSTODIAN
Name
Specimen Signature
Steven M. Majerus
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
____________________
Annex 9
FORM OF LOST NOTE AFFIDAVIT
I, as ____________________ (title) (hereinafter called "Deponent") of ____________________ (the "Custodian"), am
authorized to make this Lost Note Affidavit (this "Affidavit") on behalf of the Custodian. In connection with the
administration of the Mortgage Loans held by the Custodian on behalf of Greenwich Capital Financial Products, Inc.
(the "Lender"), Deponent being duly sworn, deposes and says that:
1. Custodian's address is:
[CUSTODIAN'S Address]
2. Custodian previously delivered to the Lender a Custodian Loan Transmission and an Exception Report with respect
to that certain Mortgage Note made by __________ in an original principal balance of $__________, secured by a
Mortgage on a property located at __________, which did not indicate such Mortgage Note is missing;
3. Such Mortgage Note was assigned or sold to the Lender by E-LOAN.COM, INC, pursuant to the terms and
provisions of a Master Loan and Security Agreement dated and effective as of __________;
4. Such Mortgage Note is not outstanding pursuant to a Request for Release of Documents;
5. Aforesaid Mortgage Note (hereinafter called the "Original") has been lost;
6. Deponent has made or has caused to be made diligent search for the Original and has been unable to find or recover
same;
7. The Custodian vas the Custodian of the Original at the time of loss;
8. Deponent agrees that, if said Original should ever come into Custodian's possession, custody or poser, Custodian
will immediately and without consideration surrender the Original to the Lender;
9. Attached hereto is a true and correct copy of (i) the Mortgage Note, endorsed in blank by the Mortgagee, as
provided by __________ or its designee and (ii) the Mortgage which secures the Mortgage Note, which Mortgage
Note is recorded at
10. Deponent hereby agrees that the Custodian (a) shall indemnify and hold harmless the [Lender][Borrower], its
successors, and assigns, against any loss, liability or damage, including reasonable attorney's fees, resulting from the
unavailability of any Originals, including but not limited to any loss, liability or damage arising from (i) any false
statement contained in this Affidavit, (ii) any claim of any party that it has already purchased a mortgage loan
evidenced by the Originals or any interest in such mortgage loan, (iii) any claim of ally borrower with respect to the
existence of terms of a Mortgage Loan evidenced by the Originals, (iv) the issuance of new instrument in lieu thereof
and (v) any claim whether or not based upon or arising from honoring or refusing to honor the Original when
presented by anyone (items (i) through (iv) above are hereinafter referred to as the "Losses"); and
11. This Affidavit is intended to be relied on by the Lender, its successors, and assigns and the Custodian represents
and warrants that it has the authority to perform its obligations under this Affidavit.
EXECUTED THIS _____ day of __________, _____ on behalf of the Custodian by:
Signature
Typed Name
On this day of __________, _____, before me appeared __________, to me personally know, who being duly sworn
did say that she/he is the __________ of __________, and that said Lost Note Affidavit __________ was signed and
sealed on behalf of such corporation and said __________ acknowledged this instrument to be the free act and deed of
said corporation.
Notary Public in and for the
State of
My Commission expires:
Annex 10
NOTICE OF PLEDGE
To: [CUSTODIAN]
From: ____________________
Date: ____________________
You are hereby notified that as of [date] the undersigned has pledged all of its right, title and interest in and to the
Mortgage Loans identified in the schedule attached hereto to [Pledgee's name and address]. You are hereby instructed
to hold such Mortgage Loans pursuant to the terms of the Custodial Agreement, dated as of June 21, 2000 (the
"Custodial Agreement"), among E-LOAN.COM, Inc. (the "Borrower"). Bankers Trust Company of California, N.A.
(the "Custodian") and Greenwich Capital Financial Products, Inc. (the "Lender"), for the sole and exclusive benefit of
[name of Pledgee] subject to the terms of the Custodial Agreement by which [name of Pledgee] hereby agrees to be
bound.
When you have received written instructions from the Lender with the Pledgee's consent thereon that the Mortgage
Loans are no longer pledged by the Lender to the Pledgee, you shall change your records to reflect the release of the
pledge of the Mortgage Loans and that you are holding the Mortgage Loans as custodian for, and for the benefit of, the
Lender.
By:
Name:
Title:
Date:
[NAME OF PLEDGEE]
By:
Name:
Title:
Date:
Annex 11
TRANSMITTAL LETTER
[Custodian Letterhead]
[Approved Purchaser]
____________________
____________________
Re: ______________________________
Attached please find those Mortgage Loans listed separately on the attached schedule, which Mortgage Loans are
owned by E-LOAN.COM, INC. (the "Borrower") and are being delivered to you for purchase.
Capitalized terms used herein and not otherwise defined shall have the meanings set forth in that certain Custodial
Agreement dated as of June 21, 2000, by and among Bankers Trust Company of California, N.A. (the "Custodian"),
the Borrower, and Greenwich Capital Financial Products, Inc., as lender (the "Lender"), and if not defined in the
Custodial Agreement, then in that certain Master Loan and Security Agreement (the "Security Agreement"), dated as
of May 10, 1999, between the Borrower and the Lender, as amended.
The Mortgage Loans comprise a portion of the "Collateral." Each of the Mortgage Loans is subject to a security
interest in favor of the Lender, which security interest shall be automatically released upon remittance of the purchase
price for such Mortgage Loan (the "Payoff Amount") by wire transfer to the following account:
WIRE INSTRUCTIONS:
Bank Name: Chase Manhattan Bank
City, State: New York, NY
ABA #: 021-000-021
Account #: 1400-9561
Account Name: GCFP
Attention: Brett Kibbe/E-Loan.com
Pending the purchase of each Mortgage Loan and until the Payoff Amount is received, the aforesaid security interest
therein shall remain in full force and effect, and you shall hold possession of such Collateral and the documentation
evidencing same as custodian, agent and bailee for and on behalf of the Lender. In the event that any Mortgage Loan is
unacceptable for purchase, return the rejected item directly to the Custodian at its address set forth below. In no event
shall any Mortgage Loan be returned to, or sales proceeds remitted to, the Borrower. The Mortgage Loan must be so
returned or Payoff Amount remitted in full no later than ten (10) days from the date hereof. If you are unable to
comply with the above instructions, please so advise the undersigned Custodian immediately.
NOTE: BY ACCEPTING THE MORTGAGE LOANS DELIVERED TO YOU WITH THIS LETTER, YOU
CONSENT TO BE THE CUSTODIAN, AGENT AND BAILEE FOR THE LENDER ON THE TERMS
DESCRIBED IN THIS LETTER. THE CUSTODIAN REQUESTS THAT YOU ACKNOWLEDGE RECEIPT OF
THE ENCLOSED MORTGAGE LOANS AND THIS LETTER BY SIGNING AND RETURNING THE
ENCLOSED COPY OF THIS LETTER TO THE CUSTODIAN; HOWEVER, YOUR FAILURE TO DO SO DOES
NOT NULLIFY SUCH CONSENT.
Very truly yours,
as Custodian
By:
Name:
Title:
Address:
RECEIPT ACKNOWLEDGED
:
[APPROVED PURCHASER]
By:
Name:
Title:
Date:
Annex 12
[ATTORNEY'S BAILEE LETTER]
[Letterhead of Borrower]
Name of Attorney
[Address]
Custodian:
Attn:
Facsimile:
Telephone:
Lender: Greenwich Capital Financial Products.
Inc.
600 Steamboat Road
Attn: Joseph Bartolotta
Telecopier No.: 203-618-2148/2149
Borrower:
Attn:
Facsimile:
Telephone:
Dear Sir or Madam:
From time to time, we, E-LOAN.COM, Inc. (the "Borrower"), will send to you (or have sent to you) mortgage loans
for which you have agreed to commence and prosecute a foreclosure action. In connection with such foreclosure
activities, [copies of] one or more of the documents evidencing or otherwise relating to such mortgage loans (Documents")will be delivered to you.
Greenwich Capital Financial Products, Inc. (the "Lender"), has financed the sale to us or origination of such mortgage
loans, and with such sale or origination we granted a security interest in the Documents referred to below and the
mortgage loans to which such Documents relate to the Lender. Bankers Trust Company of California. N.A. (the
"Custodian") is acting as custodian for the Lender in connection with the Documents.
Whenever we send you Documents to be covered by this letter agreement, we will send such Documents to you under
a transmittal letter identifying the specific documents delivered, and the mortgage loan(s) to which they relate, with a
space at the end of the letter for you to sign and to acknowledge your receipt of such Documents. Upon your receipt of
any such Documents, you hereby agree to fax to the Lender and the Custodian, no later than three (3) Business Days
after your receipt thereof, our transmittal letter, signed in the acknowledgment space by you, pursuant to which you
(i) acknowledge receipt of the Documents listed in the transmittal letter, and (ii) acknowledge that with respect to such
listed documents you are acting as bailee of the Lender in accordance with the terms of this Attorney's Bailee Letter.
By signing this letter agreement below where indicated, (a) you agree that on and after the date hereof until you are
otherwise notified by the Lender or the Custodian, any Documents delivered to you as described above will be held by
you as bailee for the Lender, (b) you certify that, as of the date of your receipt of any Documents, you have not
received notice of any interest of any other person or entity in such Documents or the related mortgage loans, (c) you
agree that you will commence and diligently prosecute foreclosure proceedings with respect to the mortgage loan to
which any such Documents relate and (d) you certify that if either you or your law firm has any security interest in the
Documents or the mortgage loan to which those Documents relate you agree to waive any interest you or your firm
may acquire therein at any time, whether arising pursuant to law or otherwise or to refuse delivery of such Documents
and return them immediately to the Custodian.
The Borrower and the Lender hereby irrevocably instruct you that any, Documents in your possession are to be held
by you as bailee for the Lender, as provided herein until they are returned to the Custodian at the address noted above
together with a cope of this letter agreement; provided that if the Lender or the Custodian notifies you that the Lender's
security interest in any of above-referenced mortgage loans has been released or did not attach (the "Release Notice"),
from the date of such Release Notice you will hold the Documents relating to such mortgage loan (and no others) as
bailee for the Borrower, in which case you will follow the Borrower's instructions regarding such Documents, and
such Documents shall be released to the Borrower at the address noted above, or its designee, upon conclusion of the
foreclosure action, instead of returning them to the Custodian; and provide further that prior to the date of any Release
Notice, notwithstanding anything herein or elsewhere to the contrary, if you receive instructions from the Lender or
the Custodian which do not comport with instructions you may have received froth the Borrower, including, without
limitation, instructions to deliver the Documents to the Custodian, the Lender or any other person or entity, you shall
abide by the instructions of the Custodian or Lender.
You agree to immediately give telephonic notice (followed by written notice) to the Custodian if you receive notice or
any inquiry from any other person or entity of or with respect to any interest in the Documents or the related mortgage
loan and you agree that you shall immediately notify each such person in writing, with a copy to the Custodian, of the
prior interest of the Lender therein.
This letter agreement supersedes any letter agreement or other agreement or arrangement that may exist between you
and the Borrower. Notwithstanding any contrary understanding with you, the Borrower or any other person or entity,
or an;, instructions to you from the Borrower, the Borrower or any other person or entity, you shall abide by the terms
of this letter. No deviation in performance of the terms of any previous letter agreement between YOU and any of the
undersigned shall alter any of your duties or responsibilities as set forth herein.
Because time is of the essence, please promptly sign and date the enclosed copy of this letter agreement and return it
via overnight delivery service to the Custodian at the above address and via telecopier, send a copy of this executed
letter agreement to the Borrower. It is important that the Custodian receive a copy of this letter agreement executed by
you. Thank you for your cooperation in assisting us with this project.
NOTE: BY ACCEPTING THE MORTGAGE LOANS DELIVERED TO YOU WITH THIS LETTER, YOU
CONSENT TO BE THE CUSTODIAN, AGENT AND BAILEE FOR THE LENDER ON THE TERMS
DESCRIBED IN THIS LETTER. THE CUSTODIAN REQUESTS THAT YOU ACKNOWLEDGE RECEIPT OF
THE ENCLOSED MORTGAGE LOANS AND THIS LETTER BY SIGNING AND RETURNING THE
ENCLOSED COPY OF THIS LETTER TO THE CUSTODIAN; HOWEVER, YOUR FAILURE TO DO SO DOES
NOT NULLIFY SUCH CONSENT.
Very truly yours,
E-LOAN.COM, INC., Borrower
By:
Name:
Title:
GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., Lender
By:
Name:
Title:
ACKNOWLEDGED AND AGREED:
By:
Print Name:
Date:
Rider A
[Letterhead of ____________________]
__________, _____
Name of Attorney
[Address]
Re: Mortgagor:
Address of Property:
Loan Number:
Dear __________:
We refer to that certain letter (the "Attorney's Bailee Letter"), dated __________, from us to you and signed by us and
by Greenwich Capital Financial Products, Inc., as lender (the "Lender"), describing the terms under which you agreed
to hold certain mortgage loan documents to be sent to you from time to time under the Attorney's Bailee Letter.
The following documents evidencing or otherwise relating to the above- referenced mortgage loans (collectively, the
"Documents") are being sent to you under cover of this letter for the purpose of commencement and prosecution of a
foreclosure action:
[LIST ONLY THOSE DOCUMENTS THAT ARE BEING SENT]
(i) The [original] [copy of the] Mortgage Note.
(ii) The [original] [copy] of the guarantee executed in connection with the Mortgage Note.
(iii) The [original] [copy of the] Mortgage with evidence of recording thereon, or a certified copy thereof.
(iv) The [originals] [copies] of all assumption, modification, consolidation or extension agreements (if any) with
evidence of recording thereon, or certified copies thereof.
(v) An [original] [copy of the] Assignment of Mortgage in blank.
(vi) The [originals] [copies] of [identify any particular] intervening assignments of mortgage with evidence of
recording thereon, or certified copies thereof.
(vii) The [original] [copy of the] [attorney's opinion of title and abstract of title] or [the original mortgagee title
insurance policy], [or if the original mortgagee title insurance policy has not been issued, the irrevocable commitment
to issue the mortgagee title insurance policy [as marked by the title company or its authorized agent]], [or the
preliminary title report for appropriate jurisdictions].
(viii) The [original] [copy] of any security agreement, chattel mortgage or equivalent document executed in connection
with the Mortgage Loan.
(ix) The [original] [copy of the] power of attorney or other authorizing instrument [with evidence of recording
thereon].
(x) [Identify any other documents which may be lent].
Please sign this letter in the space provided below to indicate your acknowledgment of receipt of the documents listed
above with respect to the mortgage loan(s) identified above, and to confirm that you will hold such documents as
bailee for the Lender under and in accordance with the terms of the Attorney's Bailee Letter. As required by the
Attorney's Bailee Letter, please fax to the Lender and the Custodian (with a copy to us), a copy of this letter signed by
you, not later than three (3) business days after your receipt of this letter. We appreciate your cooperation.
Sincerely yours,
By:
Name:
Title:
ACKNOWLEDGMENT
:
I acknowledge receipt of the Documents as listed above in this letter and of notice of the security interests in such
documents described in the Attorney's Bailee Letter referred to above. I confirm the certifications made by me in the
Attorney's Bailee Letter with respect to such documents and agree to act as bailee for the Lender with respect to such
documents on the terms set forth in the Attorney's Bailee Letter and to comply in all other respects with the terms of
the Attorney's Bailee Letter.
Print Name:
Date:
Annex 13
Material Exceptions-Using Bankers Trust Codes
DOC DESCRIPTION
Note
EXCEPTION
CODE
O*
EXCEPTION
DESCRIPTION
Original with comment
Note
P
Photo-Copy
Note
M
Not Received
Note
CT
Copy-Certified
Note
DNE
Document Unexecuted
Note
INC
Incomplete/Incorrect
Note
CV
Can't Verify
Note
DNR
Document/Data Not
Reviewed
Note
NA
Not Applicable
Endorsement
M
Not Received
Endorsement
DNE
Document Unexecuted
Endorsement
O*
Endorsement
INC
Endorsement
BRK
Break in Chain
Applies to
Amount, Name,
Address
Endorsement
CV
Can't Verify
Endorsement
DNR
Document/Data Not
Reviewed
Endorsement
P
Photo-Copy
Endorsement
EXT
Extra
Endorsement
NA
Not Applicable
Intervening Endorsement
M
Not Received
O*
DNE
Document Unexecuted
INC
BRK
Break in Chain
CV
Can't Verify
DNR
Document/Data Not
Reviewed
DNE
Document Unexecuted
NA
Not Applicable
P
Photo-Copy
Mortgage/Deed of Trust
M
Not Received
O*
P
Photo-Copy
DNE
Document Unexecuted
INC
CV
Can't Verify
DNR
Document/Data Not
Reviewed
NA
Not Applicable
P
Photo-Copy
Assignment
M
Not Received
Assignment
P
Photo-Copy
Applies to
Amount, Name,
Address, Legal
Desc., Riders
Assignment
INC
Assignment
BRK
Break in Chain
Assignment
CV
Can't Verify
Assignment
DNE
Document Unexecuted
Assignment
INC
Assignment
DNR
Document/Data Not
Reviewed
Assignment
BKT
Blanket Assignment
Assignment
NA
Not Applicable
Assignment
O*
Intervening Assignment
INC
M
Not Received
P
Photo-Copy
Applies to
Amount, Name,
Address, Legal
Desc., Riders
Applies to
Amount, Name,
Address
Applies to
Amount, Name,
Address
BRK
Break in Chain
CV
Can't Verify
DNE
Document Unexecuted
DNR
Document/Data Not
Reviewed
BKT
Blanket Assignment
NA
Not Applicable
O*
POWER OF ATTORNEY
M
Not Received
POWER OF ATTORNEY
P
Photo-Copy
POWER OF ATTORNEY
INC
Address Private Mortgage
Insurance
CV
Can't Verify
Private Mortgage
Insurance
M
Not Received
Title Police
CV
Can't Verify
Applies to Name,
Title Policy
M
Not Received
Title Policy
NA
Not Applicable
Title Policy
INC
Title Policy Commitment
CV
Can't Verify
M
Not Received
NA
Not Applicable
INC
Applies to
Amount, Name,
Address
Applies to
Amount, Name,
Address
Amount Less than
Mortgage; Missing
Legal Desc.
UCC 1
INC
UCC 1
M
Not Received
UCC-3
M
Not Received
UCC-3
INC
Amount Less than
Mortgage; Missing
Legal Desc.
CONSOLIDATION/
EXTNSN/MOD AGRMT
M
Not Received
CONSOLIDATION/
EXTNSN/MOD AGRMT
INC
CONSOLIDATION/
EXTNSN/MOD AGRMT
CV
Can't Verify
CONSOLIDATION/
EXTNSN/MOD AGRMT
DNE
Document Unexecuted
CONSOLIDATION/
EXTNSN/MOD AGRMT
DNR
Document/Data Not
Reviewed
CONSOLIDATION/
EXTNSN/MOD AGRMT
M
Not Received
CONSOLIDATION/
EXTNSN/MOD AGRMT
NA
Not Applicable
Proprietary Lease/
Occupancy Agreement
CV
Can't Verify
Proprietary Lease/
Occupancy Agreement
DNE
Document Unexecuted
Proprietary Lease/
Occupancy Agreement
DNR
Document/Data Not
Reviewed
Amount Less than
Mortgage; Missing
Legal Desc.
Proprietary Lease/
Occupancy Agreement
M
Not Received
Proprietary Lease/
Occupancy Agreement
NA
Not Applicable
Chattel Mortgage
M
Not Received
Chattel Mortgage
NA
Not Applicable
Assignment in Blank of
Proprietary Lease/
Occupancy Agreement
P
Photo-Copy
Proprietary Lease/
Occupancy Agreement
INC
Proprietary Lease/
Occupancy Agreement
M
Not Received
UCC3 TO BLANK
P
Photo-Copy
UCC3 TO BLANK
INC
UCC3 TO BLANK
M
Not Received
Amount Less than
Mortgage; Missing
Legal Desc.
Annex 15
LIST OF UNAPPROVED SETTLEMENT AGENTS
[To Be Provided By The Lender]
Annex 16
APPROVED TAKEOUT INVESTOR SUBMISSION PACKAGE
With respect to each Mortgage Loan being offered by the Borrower for pledge to the Lender, pursuant to a Takeout
Commitment, the Borrower shall deliver and release to Custodian the following documents:
(i) The original Mortgage Note bearing all intervening endorsements from the originator to the Borrower endorsed,
"Pay to the order of _, without recourse" and signed in the name of the Borrower by an authorized officer of the
Borrower; (if applicable), the original assumption agreement, together with the original of any surety agreement or
guaranty agreement relating to the Mortgage Note or any such assumption agreement, and if the Mortgage Note has
been signed by a third part), on behalf of the Mortgagor, the original power of attorney or other instrument that
authorized and empowered such Entity to sign or a copy of such power of attorney together with an officer's certificate
from the Borrower (or a certificate from the county recorder's office or the Settlement Agent) certifying that such
copy, presents a true and correct reproduction of the original and that such original has been duly recorded or delivered
for recordation in the appropriate records of the jurisdiction in which the related Mortgaged Property is located;
(ii) A Mortgage meeting one of the following requirements:
(A) The original Mortgage bearing evidence that the Mortgage has been duly recorded in the records of the jurisdiction
in which the Mortgaged Property is located; or
(B) A copy, of the Mortgage together with either (i) an officer's certificate (which may be a blanket officer's certificate
of the Borrower covering all such Mortgage Loans), or (ii) a certificate from the county recorder's office, certifying
that such copy represents a true and correct reproduction of the original or (iii) a stamped certificate from the related
title company or Settlement Agent certifying that such copy, represents a true and correct reproduction of the original,
in such case that such original has been duly recorded or delivered for recordation in the appropriate records of the
jurisdiction in which the Mortgaged Property is located;
(iii) If the Borrower did not originate the Mortgage Loan, all original intervening assignments duly executed and
acknowledged and in recordable form, evidencing the chain of mortgage assignments from the originator of the
Mortgage Loan to the Borrower, and/or a copy, of each such intervening mortgage assignment, together with either
(i) an officer's certificate, (ii) a certificate from the recorder's office, certifying that such copy represents a true and
correct reproduction of the original, or (iii) a stamped certificate from the related title company or Settlement Agent
certifying that such copy represents a true and correct reproduction of the original, in such case that such original has
been dull recorded or delivered for recordation in the appropriate records of the jurisdiction in which the Mortgaged
Property is located:
(iv) An original Assignment of Mortgage, in blank, in recordable form but unrecorded signed in the name of the
Borrower by an authorized officer;
(v) A Warehouse Lender's Release, from any warehouse lender having a security interest in the Mortgage Loans or, or
if there is no warehouse lender with respect to such Mortgage Loans, a Borrower's Release, from the Borrower,
addressed to the Lender, releasing any and all right, title and interest in such Mortgage Loans; and
(vi) With respect to each Cooperative Loan, (i) the original Mortgage Note bearing all intervening endorsements,
endorsed "Pay to the order of , without recourse" and signed in the name of the Borrower by an authorized officer of
the Borrower (in the event that the Mortgage Loan was acquired in a merger, the signature must be in the following
form: "[owner], successor by merger to [name of predecessor]"; in the event that the Mortgage Loan was acquired or
originated while doing business under another name, the signature must be in the following form: "[owner], formerly
known as [previous name]"); (ii) the originals of all assumption, modification, consolidation or extension agreements,
in each case with evidence of recording thereon, if any; (iii) an original executed copy of the Uniform Commercial
Code (UCC) financing statement (UCC-1 ), and, an original, if any, UCC financing statement changes (UCC-3),
bearing the file stamp of the relevant filing office(s); (iv) a certified copy of the assignment of the UCC financing
statement (UCC-3) from the Borrower in blank; (v) the Cooperative Shares, membership certificate, or other
contractual agreement evidencing ownership; (vi) the original executed blank stock power; (vii) the original
Proprietary Lease or occupancy agreement; (viii) the original recognition agreement and the original assignment of the
recognition agreement in blank; (ix) the original or copies of any security agreement, chattel mortgage or equivalent
document executed in connection with the Mortgage (if any); and (x) the original assignment of Proprietary Lease or
occupancy agreement, in blank, if applicable.
Annex 17
NOTICE OF INTENT TO ISSUE [WET LOAN][DRY LOAN] TRUST RECEIPT
No. _____ Date: __________
# of Loans: __________
Original Quantity $__________
GCFP Customer Code: __________
Bankers Trust Company of California, N.A., as custodian (the "Custodian") hereby notifies GREENWICH CAPITAL
FINANCIAL PRODUCTS, INC. (the "Lender") that the Custodian shall issue a Trust Receipt certifying that the
Custodian is holding certain mortgage loans (the "Mortgage Loans") pursuant to the Custodial Agreement, as the
bailee of and custodian for the Lender, which Mortgage Loans are listed by identifying number on the schedule
attached to this Notice of Intent to Issue Trust Receipt and further identified in the books and records of the Custodian,
owned of record and serviced by E- LOAN.COM, Inc. (the "Borrower").
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
as Custodian
By:
Authorized Officer
MORTGAGE LOANS
Following are the identifying numbers of the Mortgage Loans subject to this Notice of Intent to Issue Trust Receipt:
EXHIBIT C
[FORM OF OPINION OF COUNSEL TO THE BORROWER]
(date)
600 Steamboat Road
Dear Sirs and Mesdames:
You have requested [our] [my] opinion, as counsel to E-LOAN, INC., a Delaware corporation, (the "Borrower"), with
respect to certain matters in connection with that certain Master Loan and Security Agreement, dated as of March 21,
2002 (the "Loan and Security Agreement"), by and between the Borrower and Greenwich Capital Financial Products,
Inc. (the "Lender"), being executed contemporaneously with a Promissory Note slated March 21, 2002 from the
Borrower to the Lender (the "Note"), a Custodial Agreement, dated as of June 20, 2000, as amended (the "Custodial
Agreement"), by and among the Borrower, Bankers Trust Company of California, N.A. (the "Custodian"), and the
Lender. Capitalized temps not otherwise defined herein have the meanings set forth in the Loan and Security
Agreement.
[We] [I] have examined the following documents:
(1) the Loan and Security Agreement;
(2) the Note;
(3) Custodial Agreement;
(4) unfiled copies of the financing statements listed on Schedule 1 (collectively, the "Financing Statements") naming
the Borrower as Debtor and the Lender as Secured Party and describing the Collateral (as defined in the Loan and
Security Agreement) as to which security interests may be perfected by filing under the Uniform Commercial Code of
the States listed on Schedule 1 (the "Filing Collateral"), which I understand will be filed in the filing offices listed on
Schedule 1 (the "Filing Offices");
(5) the reports listed on Schedule 2 as to UCC financing statements (collectively, the "UCC Search Report"); and
(6) such other documents, records and papers as we have deemed necessary and relevant as a basis for this opinion.
To the extent [we] [I] have deemed necessary and proper, [we] [I] have relied upon the representations and warranties
of the Borrower contained in the Loan and Security Agreement. [We] [I] have assumed the authenticity of all
documents submitted to me as originals, the genuineness of all signatures, the legal capacity of natural persons and the
conformity to the originals of all documents.
Based upon the foregoing, it is [our] [my] opinion that:
(1) The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the state of
[state] and is qualified to transact business in, duly licensed and is in good standing under, the laws of each state in
which any Mortgaged Property is located to the extent necessary to ensure the enforceability of each Mortgage Loan
and the servicing of each Mortgage Loan pursuant to the Loan and Security Agreement.
(2) The Borrower has the corporate power to engage in the transactions contemplated by the Loan and Security
Agreement, the Note, and the Custodial Agreement and all requisite corporate power, authority and legal right to
execute and deliver the Loan and Security Agreement, the Note, and the Custodial Agreement and observe the terms
and conditions of such instruments. The Borrower has all requisite corporate power to borrow under the Loan and
Security Agreement and to grant a security interest in the Collateral pursuant to the Loan and Security Agreement.
(3 ) The execution, delivery and performance by the Borrower of the Loan and Security Agreement the Note, and the
Custodial Agreement, and the borrowings by the Borrower and the pledge of the Collateral under the Loan and
Security Agreement have been duly authorized by all necessary corporate action on the part of the Borrower. Each of
the Loan and Security Agreement, the Note and the Custodial Agreement have been executed and delivered by the
Borrower and are legal, valid and binding agreements enforceable in accordance with their respective terms against the
Borrower, subject to bankruptcy laws and other similar laws of general application affecting rights of creditors and
subject to the application of the rules of equity, including those respecting the availability of specific performance,
none of which will materially interfere with the realization of the benefits provided thereunder or with the Lender's
security interest in the Mortgage Loans.
(4) No consent, approval, authorization or order of, and no filing or registration with, any court or governmental
agency or regulatory body is required on the part of the Borrower for the execution, delivery or performance by the
Borrower of the Advance and Security Agreement, the Note and the Custodial Agreement or for the borrowings by the
Borrower under the Loan and Security Agreement or the granting of a security interest to the Lender in the Collateral,
pursuant to the Loan and Security Agreement.
(5) The execution, delivery and performance by the Borrower of, and the consummation of the transactions
contemplated by, the Loan and Security Agreement, the Note and the Custodial Agreement do not and will not
(a) violate any provision of the Borrower's charter or by-laws, (b) violate any applicable law, rule or regulation,
(c) violate any order, writ, injunction or decree of any court or governmental authority or agency or any arbitral award
applicable to the Borrower of which I have knowledge (after due inquiry) or (d) result in a breach of, constitute a
default under, require any consent under, or result in the acceleration or required prepayment of arty indebtedness
pursuant to the terms of, any agreement or instrument of which I have knowledge (after due inquiry) to which the
Borrower is a party or by which it is bound or to which it is subject, or (except for the Liens created pursuant to the
Loan and Security Agreement) result in the creation or imposition of any Lien upon any Property of the Borrower
pursuant to the terms of any such agreement or instrument.
(6) There is no action, suit, proceeding or investigation pending or, to the best of [our] [my] knowledge, threatened
against the Borrower which, in [our] [my] judgment, either in any one instance or in the aggregate, would be
reasonably likely to result in any material adverse change in the properties, business or financial condition, or
prospects of the Borrower or in any material impairment of the right or ability of the Borrower to carry on its business
substantially as now conducted or in any material liability on the part of the Borrower or which would draw into
question the validity of the Loan and Security Agreement, the Note, the Custodial Agreement or the Mortgage Loans
or of any action taken or to be taken in connection with the transactions contemplated thereby, or which would be
reasonably likely to impair materially the ability of the Borrower to perform under the terms of the Loan and Security
Agreement, the Note, the Custodial Agreement or the Mortgage Loans.
(7) The Loan and Security Agreement is effective to create, in favor of the Lender, a valid security interest under the
Uniform Commercial Code in all of the right, title and interest of the Borrower in, to and under the Collateral as
collateral security for the payment of the Secured obligations (as defined in the Loan and Security Agreement), except
that (a) such security interests will continue in Collateral after its sale, exchange or other disposition only to the extent
provided in Section 9-306 of the Uniform Commercial Code, (b) the security interests in Collateral in which the
Borrower acquires rights after the commencement of a case under the Bankruptcy Code in respect of the Borrower
may be limited by Section 552 of the Bankruptcy Code.
(8) When the Mortgage Notes are delivered to the Custodian, endorsed in blank by a duly authorized officer of the
Borrower, the security interest referred to in paragraph 7 above in the Mortgage Notes will constitute a fully perfected
first priority security interest in all right, title and interest of the Borrower therein, in the Mortgage Loan evidenced
thereby and in the Borrower's interest in the related Mortgaged Property.
(9) (a) Upon the filing of financing statements on Form UCC-1 naming the Lender as "Secured Party" and the
Borrower as "Debtor", and describing the Collateral, in the jurisdictions and recording offices listed on Schedule 1
attached hereto, the security interests referred to in paragraph 8 above will constitute fully perfected security interests
under the Uniform Commercial Code in all right, title and interest of the Borrower in, to and under such Collateral,
which can be perfected by filing under the Uniform Commercial Code.
(b) The UCC Search Report sets forth the proper filing offices and the proper debtors necessary to identify those
Persons who have on file in the jurisdictions listed on Schedule 1 financing statements covering the Filing Collateral
as of the dates and times specified on Schedule 2. Except for the matters listed on Schedule 2, the UCC Search Report
identifies no Person who has filed in any Filing Office a financing statement describing the Filing Collateral prior to
the effective dates of the UCC Search Report.
(10) The Assignments of Mortgage are in recordable form, except for the insertion of the name of the assignee, and
upon the name of the assignee being inserted, are acceptable for recording under the laws of the state where each
related Mortgaged Property is located.
(11) The Borrower is duly registered as a [__________] in each state in which Mortgage Loans were originated to the
extent such registration is required by applicable law, and has obtained all other licenses and governmental approvals
in each jurisdiction to the extent that the failure to obtain such licenses and approvals would render any Mortgage
Loan unenforceable or would materially and adversely affect the ability of the Borrower to perform any of its
obligations under, or the enforceability of, the Loan Documents.
(12) Assuming that all other elements necessary to render a Mortgage Loan legal, valid, binding and enforceable were
present in connection with the execution, delivery and performance of each Mortgage Loan (including completion of
the entire Mortgage Loan fully, accurately and in compliance with all applicable laws, rules and regulations) and
assuming further that no action was taken in connection with the execution, delivery and performance of each
Mortgage Loan (including in connection with the sale of the related Mortgaged Properly) that would give rise to a
defense to the legality, validity, binding effect and enforceability of such Mortgage Loan, nothing in the forms of such
Mortgage Loans, as attached hereto as Exhibit A, would render such Mortgage Loans other than legal, valid, binding
and enforceable.
(13 ) Assuming their validity, binding effect and enforceability in all other respects (including completion of the entire
Mortgage Loan filly, accurately and in compliance with all applicable laws, rules and regulations), the forms of
Mortgage Loans attached hereto as Exhibit A are in sufficient compliance with __________ law and Federal consumer
protection laws so as not to be rendered void or voidable at the election of the Mortgagor thereunder.
Very truly yours,
EXHIBIT D
[FORM OF NOTICE OF BORROWING AND PLEDGE]
[insert date]
600 Steamboat Road
Attention: __________
Notice of Borrowing and Pledge No.: __________
Ladies/Gentlemen:
Reference is made to the Master Loan and Security Agreement, dated as of March 21, 2002 (the "Loan Agreement";
capitalized terms used but not otherwise defined herein shall have the meaning given them in the Loan Agreement),
between E-Loan, Inc. (the "Borrower") and Greenwich Capital Financial Products, Inc. (the "Lender").
In accordance with Section 2.03(a) of the Loan Agreement, the undersigned Borrower hereby requests that you, the
Lender, make Advances to us in connection with our deliver of Mortgage Loans on __________ [insert requested
Funding Date,], in connection with which we shall pledge to you as Collateral the Mortgage Loans (along with all
previous pledges defined as Eligible Mortgage Loans for such date) set forth on the Mortgage Loan Schedule attached
hereto.
The Borrower hereby certifies, as of such Funding Date, that:
(a) no Default or Event of Default has occurred and is continuing on the date hereof nor will occur after giving effect
to such Advance as a result of such Advance;
(b) each of the representations and warranties made by the Borrower in or pursuant to the Loan Documents is true and
correct in all material respects on and as of such date (in the case of the representations and warranties in respect of
Mortgage Loans, solely with respect to Mortgage Loans being included the Borrowing Base on the Funding Date) as if
made on and as of the date hereof (or, if any such representation or warranty is expressly stated to have been made as
of a specific date, as of such specific date);
(c) the Borrower is in compliance with all governmental licenses and authorizations and is qualified to do business and
is in good standing in all required jurisdictions; and
(d) the Borrower has satisfied all conditions precedent in Section 5.02 of the Loan Agreement and all other
requirements of the Loan Agreement.
The undersigned duly authorized officer of Borrower further represents and warrants that (1) the documents
constituting the Custodial File (as defined in the Custodial Agreement) with respect to the Mortgage Loans that are the
subject of the Advance requested herein and more specifically identified on the mortgage loan schedule or computer
readable magnetic transmission delivered to both the Lender and the Custodian in connection herewith (the "Receipted
Mortgage Loans") [with respect to Dry Loans: have been or are hereby submitted] [with respect to Wet Loans: shall
be delivered, within ten (10) days of the date of the execution of this Notice of Borrowing and Pledge,] to Custodian
and such Required Documents are to be held by the Custodian subject to Lender's first priority security interest
thereon, (2) all other documents related to such Receipted Mortgage Loans (including, but not limited to, mortgages,
insurance policies, loan applications and appraisals) have been or will be created and held by Borrower in trust for
Lender, (3) all documents related to such Receipted Mortgage Loans withdrawn from Custodian shall be held in trust
by Borrower for Lender, and Borrower will not attempt to pledge, hypothecate or otherwise transfer such Receipted
Mortgage Loans to any other party anti] the Advance to which such Receipted Mortgage Loans are related has been
paid in full by Borrower and (4) Borrower has granted a first priority perfected security interest in and lien on the
Receipted Mortgage Loans.
Borrower hereby represents and warrants that (x) the Receipted Mortgage Loans have an unpaid principal balance as
of the date hereof of $__________ and (y) the number of Receipted Mortgage Loans is
Very truly yours,
By:
Name:
Title:
EXHIBIT D-1
to Notice of Borrowing and Pledge
[MORTGAGE LOANS PROPOSED TO BE PLEDGED
TO LENDER ON FUNDING DATE]
MORTGAGE LOAN LIST
Type of Transaction: ¦ Cash Window Transaction ¦ Conduit Transaction
REF
NO.
LOA
N#
LAST
NAM
E
FACE
AMOUN
T
# OF
MONTHS
TO
MATURIT
Y
NOT
E
RAT
E
TAKEOU
T
INVESTO
R
SALE
PRIC
E
COMMI
TMENT
#
COMMITMENT
EXPIRATIO
N DATE
DELIVER
Y DATE
RELEASE
PAYMEN
T
EXHIBIT E
Reserved
EXHIBIT F
REQUIRED FIELDS FOR MORTGAGE LOAN DATA TRANSMISSION
(1) The Borrower's reference number;
(2) The name of the Borrower's applicable program;
(3) The Mortgage Loan number;
(4) The last name of the Mortgagor;
(5) The face amount of the Mortgage Note;
(6) The original number of months to maturity of the Mortgage Loan;
(7) The original interest rate home by the Mortgage Note;
(8) The name of the Takeout Investor;
(9) The sale price of the Mortgage Loan to the Takeout Investor;
(10) The commitment number;
(11) The expiration date of the Takeout Commitment;
(12) The date the Mortgage Loan is scheduled to be delivered to the Takeout Investor;
(13 ) The Release Payment;
(14) The name of the Warehouse Lender, if any;
(15) The Agency's payee number, if applicable;
CONFIR
MATION
NUMBER
WAREHOUSE
LENDE
R
(16) The name of the Settlement Agent;
(17) The address of the Mortgaged Property;
(18) The original maturity date; and
(19) A code indicating whether such Mortgage Loan is a Cooperative Mortgage Loan.
(20) With respect to any Wet Loan, a code indicating that an escrow letter has been obtained and the identity of the
escrow agent.
(21) With respect to any Wet Loan, a code indicating that an Insured Closing Letter has been obtained.
In addition, with respect to each HELOC the following fields shall be included,
(1) First Mortgage Balance
(2) Borrower Debt Ratio
(3) Original Draw
(4) Last Draw
(5) Date of Last Draw
(6) Property Appraisal Value
(7) Property Purchase Price
(8) Date of Appraisal
(9) Date of Original Draw
(10) Draw Percentage
EXHIBIT G
[FORM OF COLLECTION ACCOUNT AGREEMENT]
__________, 200_
[Bankers Trust]
Attn:__________
Re: Account Established by Greenwich Capital Financial Products, Inc. ("Lender"), pursuant to that certain Master
Loan and Security Agreement (as amended, supplemented or otherwise modified from time to time, the "Loan
Agreement"), dated as of March 21, 2002, by and among the Lender, [Bankers Trust] (the "Collection Bank"), and
Loan, Inc. ("Borrower"
We refer to the collection account established by the Borrower pursuant to the Loan Agreement, at the Collection
Bank, [CITY, STATE], Account No. [ACCOUNT #], ABA# [ABA #], [sub]account identified with respect to Eligible
Assets pledged to the Lender (the "Collection Account"), which the Borrower maintains in accordance with the Loan
Agreement.
From time to time, certain third-party servicers (each a "Subservicer") will deposit funds received in accordance with a
related servicing agreement into the Collection Account. Greenwich Capital Financial Products, Inc. (the "Lender")
has established a secured loan arrangement with the Borrower. By its execution of this letter, the Collection Bank and
the undersigned Borrower acknowledges that the Borrower has granted a security interest in all of the Borrower's right,
title and interest in and to the Collection Account and any funds from time to time on deposit therein with respect to
such Eligible Assets, that such funds are received by the Collection Bank in trust for the benefit of the Lender and,
except as provided below, are for application against the Borrower's liabilities to the Lender.
By the Collection Bank's and the undersigned Borrower's execution of this letter, each party agrees: (a) that all funds
from time to time hereafter in the Collection Account are the property of the Borrower held in trust for the benefit of,
and subject to a security interest in favor of, the Lender; (b) that neither the Collection Bank nor the Borrower will
exercise any right of set-off, banker's lien or any similar right in connection with such funds provide d, that in the
event any check is returned to the Collection Bank or the Borrower because of insufficient funds (or is otherwise
unpaid) such parry shall be entitled to set off the amount of any such returned check; (c) that following such time as
the Lender shall provide notice to the Collection Bank in writing, in its sole discretion, revoking the Borrower's ability
to make withdrawals from the Collection Account, the Borrower will not withdraw, nor shall the Collection Bank
permit the Borrower or any other person or entity to withdraw or transfer funds from the Collection Account; and
(d) that if the Lender shall notify the Collection Bank that an event of default has occurred and is continuing under the
Lender's secured lending arrangement with the Borrower, the Collection Bank shall cause or permit withdrawals from
the Collection Account in any other manner as the Lender may instruct.
All bank statements in respect to the Collection Account shall be sent to the Borrower with copies to:
600 Steamboat Road
Attention: David Katze
Kindly acknowledge your agreement with the terms of this agreement by signing the enclosed copy of this letter and
returning it to the undersigned.
Very truly yours,
By:
Name:
Title:
Agreed and acknowledged:
E-LOAN, INC.
By:
Name:
Title:
Agreed and acknowledged:
[BANKERS TRUST]
By:
Name:
Title:
EXHIBIT H
[FORM OF CONFIDENTIALITY AGREEMENT]
In connection with your consideration of a possible or actual acquisition of a participating interest (the "Transaction")
in an advance, note or commitment of Greenwich Capita] Financial Products, Inc. ("Greenwich") pursuant to a Master
Loan and Security Agreement between Greenwich and E-Loan, Inc. (the "Borrower"") dated March 21, 2002, you
have requested the right to review certain nonpublic information regarding the Borrower that is in the possession of
Greenwich. In consideration of, and as a condition to, furnishing you with such information and any other information
(whether communicated in writing or communicated orally) delivered to you by Greenwich or its affiliates, directors,
officers, employees, advisors, agents or "controlling persons" (within the meaning of the Securities Exchange Act of
1934, as amended (the "1934 Act")) (such affiliates and other persons being herein referred to collectively as
Greenwich "Representatives") in connection with the consideration of a Transaction (such information being herein
referred to as "Evaluation Material"), Greenwich hereby requests your agreement as follows:
1. The Evaluation Material will be used solely for the propose of evaluating a possible Transaction with Greenwich
involving you or your affiliates, and unless and until you have completed such Transaction pursuant to a definitive
agreement between you or any such affiliate and Greenwich, such Evaluation Material will be kept strictly confidential
by you and your affiliates, directors, officers, employees, advisors, agents or controlling persons (such affiliates and
other persons being herein referred to collectively as "your Representatives"), except that the Evaluation Material or
portions thereof may be disclosed to those of your Representatives who need to know such information for the purpose
of evaluating a possible Transaction with Greenwich (it being understood that prior to such disclosure your
Representatives will be informed of the confidential nature of the Evaluation Material and shall agree to be bound by
this Agreement). You agree to be responsible for any breach of this Agreement by your Representatives.
2. The term "Evaluation Material" does not include any information which (i) at the time of disclosure or thereafter is
generally known by the public (other than as a result of its disclosure by you or your Representatives) or (ii) was or
becomes available to you on a nonconfidential basis from a person not otherwise bound by a confidential agreement
with Greenwich or its Representatives or is not otherwise prohibited from transmitting the information to you. As used
in this Agreement, the term "person" shall be broadly interpreted to include, without limitation, any corporation,
company, joint venture, partnership or individual
3. In the event that you receive a request to disclose all or any part of the information contained in the Evaluation
Material under the terms of a valid and effective subpoena or order issued by a court of competent jurisdiction, you
agree to (i) immediately notify Greenwich and the Borrower of the existence, terms and circumstances surrounding
such a request, (ii) consult with the Borrower on the advisability of taking legally available steps to resist or narrow
such request, and (iii) if disclosure of such information is required, exercise your best efforts to obtain an order or
other reliable assurance that confidential treatment will be accorded to such information.
4. Unless otherwise required by law in the opinion of your counsel, neither you nor your Representative will, without
our prior written consent, disclose to any person the fact that the Evaluation Material has been made available to you.
5. You agree not to initiate or maintain contact (except for those contacts made in the ordinary course of business)
with any officer, director or employee of the Borrower regarding the business, operations, prospects or finances of the
Borrower or the employment of such officer, director or employee, except with the express written permission of the
Borrower.
6. You understand and acknowledge that the Borrower is not making any representation or warranty, express or
implied, as to the accuracy or completeness of the Evaluation Material or any other information provided to you by
Greenwich. The Borrower, its respective affiliates or Representatives, nor any of its respective officers, directors,
employees, agents or controlling persons (within the meaning of the 1934 Act) shall have any liability to you or any
other person (including, without limitation, any of your Representatives) resulting from your use of the Evaluation
Material.
7. You agree that neither Greenwich or the Borrower has not granted you any license, copyright, or similar right with
respect to any of the Evaluation Material or any other information provided to you by Greenwich.
8. If you determine that you do not wish to proceed with the Transaction, you will promptly deliver to Greenwich all
of the Evaluation Material, including all copies and reproductions thereof in your possession or in the possession of
any of your Representatives.
9. Without prejudice to the rights and remedies otherwise available to the Borrower, the Borrower shall be entitled to
equitable relief by way of injunction if you or any of your Representatives breach or threaten to breach any of the
provisions of this Agreement. You agree to waive, and to cause your Representatives to waive, any requirement for the
securing or posting of any bond in connection with such remedy.
10. The validity and interpretation of this Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the State of New York applicable to agreements made and to be fully performed therein (excluding
the conflicts of law rules). You submit to the jurisdiction of any court of the State of New York or the United States
District Court for the Southern District of the State of New York for the purpose of any suit, actions or other
proceeding arising out of this Agreement.
11. The benefits of this Agreement shall inure to the respective successors and assigns of the parties hereto, and the
obligations and liabilities assumed in this Agreement by the parties hereto shall be binding upon the respective
12. If it is found in a final judgment by a court of competent jurisdiction (not subject to further appeal) that any term or
provision hereof is invalid or unenforceable, (i) tile remaining terms and provisions hereof shall be unimpaired and
shall remain in full force and effect and (ii) the invalid or unenforceable provision or term shall be replaced by a term
or provision that is valid and enforceable and that comes closest to expressing the intention of such invalid or
unenforceable term or provision.
13. This Agreement embodies the entire agreement and understanding of the parties hereto and supersedes any and all
prior agreements, arrangements and understandings relating to the matters provided for herein. No alteration, waiver,
amendments, or change or supplement hereto shall be binding or effective unless the same is set forth in writing by a
duly authorized representative of each party and may be modified or waived only by a separate letter executed by the
Borrower and you expressly so modifying or waiving such Agreement.
14. For the convenience of the parties, any number of counterparts of this Agreement may be executed by the parties
hereto. Each such counterpart shall be, and shall be deemed to be, an original instrument, but all such counterparts
taken together shall constitute one and the same Agreement.
Kindly execute and return one copy of this letter which will constitute our Agreement with respect to the subject
matter of this letter.
By:
Confirmed and agreed to
this __________ day of
__________, 200__.
By:
Name:
Title:
Section 1. Definitions and Accounting Matters *
1.01 Certain Defined Terms *
1.02 Accounting Terms and Determinations *
Section 2. Advances, Note and Prepayments *
2.01 Advances *
2.02 Note *
2.03 Procedure for Borrowing *
2.04 Limitation on Tunes of Advances; Illegality *
2.05 Repayment of Advances; Interest *
2.06 Mandatory Prepayments or Pledge *
2.07 Optional Prepayments *
2.08 Requirements of Law *
2.09 Purpose of Advances *
Section 3. Payments; Computations; Taxes; Commitment Fee *
3.01 Payments *
3.02 Computations *
3.03 U *
3.04 Commitment Fee *
3.05 Non-Utilization Fee *
Section 4. Collateral Security *
4.01 Collateral; Security Interest *
4.02 Further Documentation *
4.03 Changes in Locations, Name, etc *
4.04 Lender's Appointment as Attorney in Fact *
4.05 Performance by Lender of Borrower's Obligations *
4.06 Proceeds *
4.07 Remedies *
4.08 Limitation on Duties Regarding Presentation of Collateral *
4.09 Powers Coupled with an Interest *
4.10 Release of Security Interest *
4.11 Establishment of the Collection Amount *
Section 5. Conditions Precedent *
5.01 Initial Advance *
5.02 Initial and Subsequent Advances *
Section 6. Representations and Warranties *
6.01 Existence *
6.02 Financial Condition *
6.03 Litigation *
6.04 No Breach *
6.05 Action *
6.06 Approvals *
6.07 Margin Relations *
6.08 Taxes *
6.09 Investment Company Act *
6.10 No Legal Bar *
6.11 No Default *
6.12 Collateral; Collateral Security *
6.13 Chief Executive Office; Chief Operating Office *
6.14 Location of Books and Records *
6.15 True and Complete Disclosure *
6.16 Tangible Net Worth; Liquidity *
6.17 ERISA *
6.18 Licenses *
6.19 Relevant States *
6.20 True Sales *
6.21 No Burdensome Restrictions *
6.22 Subsidiaries *
6.23 Origination and Acquisition of Mortgage Loans *
6.24 No Adverse Selection *
6.25 Borrower Solvent; Fraudulent Conveyance *
6.26 Insured Closing Letter *
6.27 Escrow Agreement *
Section 7. Covenants of the Borrower *
7.01 Financial Statements *
7.02 Litigation *
7.03 Existence, Etc *
7.04 Prohibition of Fundamental Change *
7.05 Borrowing Base Deficiency *
7.06 Notices *
7.07 Servicing *
7.08 Intentionally Omitted *
7.09 Underwriting Guidelines *
7.10 Lines of Business *
7.11 Transactions with Affiliates *
7.12 Use of Proceeds *
7.13 Limitation on Liens *
7.14 Limitation on Sale of Assets *
7.15 Limitation on Distributions *
7.16 Maintenance of Liquidity *
7.17 Maintenance of Tangible Net Worth *
7.18 Maintenance of Ratio of Total Indebtedness to Tangible Net Worth *
7.19 Restricted Payment *
7.20 Servicing Transmission *
7.21 No Amendment or Waiver *
7.22 Maintenance of Property; Insurance *
7.23 Further Identification of Collateral *
7.24 Mortgage Loan Determined to be Defective *
7.25 Interest Rate Protection Agreements *
7.26 Certificate of a Responsible Officer of the Borrower *
7.27 Committed Warehouse Facilities *
Section 8. Events of Default *
Section 9. Remedies Upon Default *
Section 10. No Duty on Lender's Part *
Section 11. Miscellaneous *
11.01 Waiver *
11.02 Notices *
11.03 Indemnification and Expenses *
11.04 Amendments *
11.05 Successors and Assigns *
11.06 Survival *
11.07 Captions *
11.08 Counterparts *
11.09 Loan Agreement Constitutes Security Agreement; Governing Law *
11.10 SUBMISSION TO JURISDICTION; WAIVERS *
11.11 WAIVER OF JURY TRIAL *
11.12 Acknowledgments *
11.13 Hypothecation or Pledge of Collateral *
11.14 Assignments; Participations *
11.15 Servicing *
11.16 Periodic Due Diligence Review *
11.17 Set-Off *
11.18 Intent *
SCHEDULES
SCHEDULE 1 Representations and Warranties re: Mortgage Loans
SCHEDULE 2 Filing Jurisdictions and Offices
SCHEDULE 3 Relevant States
SCHEDULE 4 Subsidiaries
EXHIBITS
EXHIBIT A Form of Promissory Note
EXHIBIT B Form of Custodial Agreement
EXHIBIT C Form of Opinion of Counsel to the Borrower
EXHIBIT D Form of Notice of Borrowing and Pledge
EXHIBIT E Reserved
EXHIBIT F Required Fields for Mortgage Loan Data Transmission
EXHIBIT G Form of Collection Account Agreement
EXHIBIT H Form of Confidentiality Agreement
Exhibit 10.160
AMENDMENT NUMBER ONE
to the
Custodial Agreement
dated as of June 21, 2000
By and Among
E-LOAN, INC.,
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.
and
This AMENDMENT NUMBER ONE (this "Amendment") is made this 21st day of March, 2002, among E-LOAN,
INC. (the "Borrower"), Bankers Trust Company of California, N.A. (the "Custodian") and Greenwich Capital
Financial Products, Inc. (the "tender") to the CUSTODIAL AGREEMENT, dated as of June 21, 2000 (the "Custodial
Agreement").
RECITALS
WHEREAS, the Borrower has requested that Lender and the Custodian agree to amend the Custodial Agreement,
subject to the terms hereof, and the Lender and the Custodian have agreed to such request.
acknowledged, and of the mutual covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. Effective as of March 21, 2002, the first paragraph in the "Recitals" section of the Custodial Agreement
is hereby amended by deleting the date "June 21, 2000" and replacing it with "March 21, 2002".
SECTION 2. Defined Terms. Any terms capitalized but not otherwise defined herein shall have the respective
meanings set forth in the Custodial Agreement.
SECTION 3. Limited Effect. Except as expressly amended and modified by this Amendment Number One, the
Custodial Agreement shall continue in full force and effect in accordance with its terms. Reference to this Amendment
Number One need not be made in the Custodial Agreement or any other instrument or document executed in
connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the
Custodial Agreement, any reference in any of such items to the Custodial Agreement being sufficient to refer to the
Custodial Agreement as amended hereby.
SECTION 4. GOVERNING LAW. THIS AMENDMENT NUMBER ONE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS, AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS WITHOUT
REGARD TO CONFLICT OF LAWS DOCTRINE APPLIED IN SUCH STATE (OTHER THAN SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW).
SECTION 5. Counterparts. This Amendment Number One may be executed by each of the parties hereto on any
number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one
and the same instrument.
IN WITNESS WHEREOF, Borrowers, Lender and Custodian have caused this amendment to be executed and
delivered by their duly authorized officers as of the day and year first above written.
E-LOAN, INC.,
Borrower
By:
Name:
Title:
Lender
By:
Name:
Title:
BANKERS TRUST COMPANY OF CALIFORNIA, N.A.,
Custodian
By:
Name:
Title:
Exhibit 10.161
SECOND MODIFICATION AND EXTENSION OF LOAN AGREEMENT
AND OTHER LOAN DOCUMENTS BY AND BETWEEN
BANK ONE, NA, AND E-LOAN, INC.
This Second Modification and Extension of Loan Agreement and Other Loan Documents ("Modification Agreement")
is entered into as of April 1, 2002, by and between BANK ONE, NA, a national banking association with its principal
offices in Columbus, Ohio ("Lender") and E-LOAN, INC., a Delaware corporation, ( "Borrower").
RECITALS:
A.
Effective as of April 2, 2001, the Lender and the Borrower entered into a financing transaction ("Financing
Transaction") evidenced by a Loan Agreement, a Revolving Credit Note and various other Loan Documents.
B.
The Commitment Termination Date of the Financing Transaction is April 2, 2002. The Lender has determined to
terminate the Financing Transaction and, by this Modification Agreement, will extend the Commitment Termination
Date to provide the Borrower sufficient time to satisfy its Obligations to the Lender. The Borrower and the Lender
have agreed to the terms and provisions of this Modification Agreement to provide for an orderly termination of the
Borrower's relationship with Lender under the Financing Transaction.
C.
Accordingly, by this Modification Agreement, the Lender and the Borrower shall reduce the Commitment, extend the
Commitment Termination Date and modify certain provisions of the Loan Agreement and other Loan Documents and
shall confirm their respective obligations under the Loan Agreement and other Loan Documents, as modified hereby.
WHEREAS, in consideration of the mutual covenants herein, the parties agree as follows:
Incorporation and Cross-Reference.
All of the terms, agreements, conditions, provisions, covenants and remedies contained in the Loan Agreement and
all other Loan Documents are incorporated herein by this reference and, except as modified by this Modification
Agreement, shall remain in full force and effect in accordance with their respective terms. All terms defined in the Loan
Agreement and the Loan Documents shall have the same meaning herein as therein except as otherwise provided in this
Modification Agreement or except as the context of this Modification Agreement clearly requires or intends otherwise.
The Recitals as set forth above and this Incorporation and Cross-Reference shall be deemed a part of this Modification
Agreement.
1. Conditions Precedent to Modification Agreement. This Modification Agreement shall be effective only upon
compliance with the following conditions precedent, all of which shall be in a form and substance satisfactory to Lender:
1.1 Modification Agreement.
This Modification Agreement shall have been duly executed and delivered to Lender by the Borrower.
1.2 Proceedings Regarding Authority. Lender shall have received a copy of the Resolution of the Board of Directors
of the Borrower authorizing: (i) the execution, delivery and performance of this Modification Agreement, together with
a certificate of incumbency identifying the officer of the Borrower authorized to execute this Modification Agreement
with specimen signature and; (ii) the consummation of the transactions hereunder; all of the above certified by the
appropriate officer of the Borrower. Such certificate shall state that the resolution set forth therein has not been
amended, modified, revoked or rescinded as of the date of such certificate.
2. Modification of Loan Agreement. The Loan Agreement shall be modified as follows:
2.1 The Commitment. Section 1.12 Commitment of the Loan Agreement shall be deleted and shall be replaced by the
following:
1.12 Commitment
means the commitment of the Lender to make Revolving Credit Loans to Borrower pursuant to Section 2.1 hereof in
an aggregate principal amount at any one time outstanding not to exceed Ten Million and 00/100 Dollars
($10,000,000) or such lower amount as may be provided for pursuant to the terms of this Agreement.
2.2 Commitment Termination Date. Section 1.15 Commitment Termination Date of the Loan Agreement shall be
deleted and shall be replaced by the following:
1.15
Commitment Termination Date means the earlier of (i) noon, Eastern Time, on July 31, 2002, and (ii) the date on
which the Commitment is otherwise terminated in accordance with the terms of this Agreement.
3. Affirmation of Representations and Warranties.
Borrower affirms each representation and warranty contained in the Loan Agreement and other Loan Documents as of
the date of this Modification Agreement.
4. Affirmation of Collateral Interests.
Borrower acknowledges and affirms that the Liens, security interests and assignments of Lender on all Collateral
continue to be first priority Liens on all Collateral and such Liens are valid, enforceable and unavoidable and
Borrower confirms all prior grants to Lender of Liens on, security interests in and assignments of the Collateral.
5. Affirmation of Enforceability.
Borrower acknowledges and affirms that all terms, conditions and provisions of the Loan Agreement and the Loan
Documents remain in full force and effect and are enforceable in accordance with their terms except as previously
modified or as modified by this Modification Agreement.
6. Acknowledgment of Performance.
Borrower acknowledges that Lender has fully performed its obligations under the Loan Agreement and the Loan
Documents through and including the date of this Modification Agreement and that the obligations of Borrower under
the Loan Agreement and the Loan Documents are not subject to defense, counterclaim, offset or avoidance as of the
date of this Modification Agreement and that such obligations are valid, enforceable and unavoidable according to
their terms as modified by this Modification Agreement.
7. Certification of No Default.
Borrower represents and warrants to Lender that, as of the date of this Modification Agreement, no Event of Default
exists under the Loan Agreement or the other Loan Documents.
8. Expenses.
The Borrower and the Lender agree that the expenses incurred in connection with this Modification Agreement shall
be paid by the Borrower. The Borrower acknowledges that the Loan Agreement together with all other Loan
Documents is a contract of indebtedness pursuant to O.R.C. 1301.21.
Each of the parties executing this Modification Agreement represents it has read this Modification Agreement, has
consulted with counsel regarding such undertakings, understands all of its terms and has executed the same with full
knowledge of its significance and with all requisite authority.
[Balance of Page Intentionally Blank]
LENDER:
Bank One, NA
By:___________________________
Robert N. Kent, Jr.
Its: First Vice President
BORROWER:
E-LOAN, INC.
By: _____________________________
Its: _____________________________
Exhibit 10.162
FOURTH MODIFICATION AGREEMENT
THIS FOURTH MODIFICATION AGREEMENT (the "Agreement") is made as of the 28th day of March, 2002, by
and among E-LOAN, INC. (the "Borrower"), and GMAC Bank, a federal saving bank (the "Lender").
BACKGROUND
The Borrower and the Lender entered into a Warehouse Credit Agreement, dated as of November 1, 2001, as amended
(as so amended, the "Warehouse Credit Agreement") pursuant to which the Lender agreed to make advances (the
"Advances") to the Borrower in accordance with the provisions of the Warehouse Credit Agreement. All capitalized
terms used herein and not otherwise defined shall have the meanings set forth in the Warehouse Credit Agreement.
The Advances are evidenced by the Borrower's Amended and Restated Note, dated as of December 17, 2001 (the
"Note") in the stated principal amount of $70,000,000 and secured by, among other things, a Warehouse Security
Agreement dated as of November 1, 2001, as amended (as so amended, the "Warehouse Security Agreement") between
the Borrower and the Lender granting the Lender a security interest in certain of the Borrower's assets.
The Borrower has requested that the Lender make certain modifications to the terms of the Warehouse Credit
Agreement, and the Lender has agreed to such modification, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:
1. Warehouse Credit Agreement. The Warehouse Credit Agreement is hereby amended as follows:
(a) The definition of "Commitment" contained in Section 1.01 of the Warehouse Credit Agreement is amended to read
in full as follows:
""Commitment" shall mean the obligation of the Lender to make Advances in an aggregate principal amount
outstanding at any time not to exceed $50,000,000, or such other amount as Lender, in its sole discretion, may determine
from time to time."
(b) The definition of "Expiry Date " contained in Section 1.01 of the Warehouse Credit Agreement is revised as
follows:
"Expiry Date" shall mean the earlier of (i) March 31, 2003, as such date may be extended upon mutual agreement
between the Borrower and the Lender from time to time, and (ii) the date that is 120 days after the date on which the
Lender shall have given the Borrower the notice referred to in Section 9.13 hereof.
(c) Section 2.01 of the Warehouse Credit Agreement is amended to read in full as follows:
"2.01 Commitment. Subject to and upon the terms and conditions set forth herein, the Lender agrees, at any time and
from time to time prior to the Expiry Date (or such earlier date as the Commitment shall have been terminated pursuant
to the terms hereof), to make an advance or advances (each an "Advance" and, collectively, the "Advances") to the
Borrower, which Advance: (i) shall be made at any time and from time to time in accordance with the terms hereof on
and after the Effective Date and prior to the Expiry Date; (ii) shall bear interest as provided in Section 2.07; (iii) may
be prepaid and reborrowed in accordance with the provisions hereof; and (iv) shall be made against the pledge by the
Borrower of Eligible Mortgage Loans, Eligible Nonconforming Mortgage Loans, Eligible HELOCs or Liquid Assets
as Collateral for such Advance as provided herein and in the Warehouse Security Agreement; provided, however,
that (1) the aggregate principal amount of Advances outstanding at any time shall not exceed the lesser of (x) the
Commitment and (y) an amount equal to: the Borrowing Base, at such time minus (b) $2,000,000, (2) the aggregate
principal amount of Advances outstanding at any time secured by Mortgage-backed Securities shall not exceed 0% of
the Commitment, (3) the aggregate principal amount of Wet Advances outstanding at any time shall not exceed 40% of
the Commitment, (4) the aggregate principal amount of Advances outstanding at any time secured by Jumbo Loans shall
not exceed 40% of the Commitment, (5) the aggregate principal amount of Advances outstanding at any time secured
by Eligible Nonconforming Mortgage Loans shall not exceed $5,000,000 (the "Nonconforming Commitment"), (6) the
aggregate principal amount of Advances outstanding at any time secured by Credit A- Loans shall not exceed 100%
of the Nonconforming Commitment, (7) the aggregate principal amount of Advances outstanding at any time secured
by Credit B Loans shall not exceed 100% of the Nonconforming Commitment, (8) the aggregate principal amount of
Advances outstanding at any time secured by Credit C Loans shall not exceed 50% of the Nonconforming Commitment,
(9) the aggregate principal amount of Advances outstanding at any time secured by Credit D Loans shall not exceed 0%
of the Nonconforming Commitment, (10) the aggregate principal amount of Advances outstanding at any time secured
by Eligible HELOCs shall not exceed $5,000,000 (the "HELOC Commitment") and (11) the aggregate principal amount
of Advances outstanding at any time secured by Eligible Nonconforming Mortgage Loans and Eligible HELOCs shall
not exceed $5,000,000."
(d) Section 2.07(a) of the Warehouse Credit Agreement is amended to read in full as follows:
"2.07 Interest. The Borrower agrees to pay interest in respect of the outstanding principal amount of the Advances from
the date the proceeds thereof are made available to the Borrower until the maturity thereof (whether by acceleration
or otherwise) (i) with respect to Advances secured by Eligible Mortgage Loans, at a rate per annum equal to 1.50%
in excess of the LIBOR Rate in effect from time to time and (ii) with respect to Advances secured by Eligible
Nonconforming Mortgage Loans or Eligible HELOCs, at a rate per annum equal to 2.00% in excess of the LIBOR Rate
in effect from time to time; provided, however, that with respect to any Advance which is disbursed by cashier's check,
the applicable rate of interest, calculated in accordance with the provisions of this Section 2.07(a), shall be reduced
by 0.25% during the first fifteen (15) days that such Advance is outstanding; and provided, further, that, with respect
to any Advance secured by a Mortgage Loan which is the subject of an Interest Rate Commitment, the applicable
rate of interest, calculated in accordance with the provisions of this Section 2.07(a), shall be reduced by 0.25%, and
provided, further, that, with respect to any Advance secured by an Eligible Aged Mortgage Loan, Eligible Aged
Nonconforming Mortgage Loan, or an Eligible Aged HELOC, the applicable rate of interest, calculated in accordance
with the provisions of this Section 2.07(a), shall be increased by 0.50%."
(e) Sections 4.02(a), 4.02(c) and 4.02(d) of the Warehouse Credit Agreement is amended to read in full as follows:
"(a) if on any date the aggregate principal amount of Advances outstanding (after giving effect to all other repayments
thereof on such date) exceeds the lesser of (x) the Commitment or (y) an amount equal to: (i) the Borrowing Base as
then in effect minus (ii) $2,000,000, the Borrower shall immediately prepay the principal of Advances in an aggregate
amount equal to such excess;"
(f) Section 4.03(a) of the Warehouse Credit Agreement is amended to read in full as follows:
"(a) So long as no Default or Event of Default has occurred and is continuing or would result therefrom, upon the
Borrower's request therefor accompanied by a prepayment by the Borrower of Advances in an amount sufficient to
cause the amount of Advances outstanding to be less than or equal to: (x) the Borrowing Base (calculated without
reference to any Collateral which the Borrower requests be released from the Lien granted pursuant to the Warehouse
Security Agreement) minus (y) $2,000,000, and a deposit by the Borrower of such amount as the Lender shall designate
as a reserve for application to any fees, accrued interest or breakage costs payable with respect to the calendar month in
which such prepayment occurs, the Lender shall, within one Business Day after the later of the receipt of such request or
such prepayment and deposit, release from the Lien granted pursuant to the Warehouse Security Agreement and deliver
to the Borrower in accordance with the terms of the Warehouse Security Agreement (i) the Collateral corresponding to
such Mortgage Loan(s) or Mortgage-backed Security(ies) and (ii) the Collateral Documents pertaining thereto."
(g) Section 4.04(c) of the Warehouse Credit Agreement is amended to read in full as follows:
"(c) The Borrower shall make a deposit in immediately available funds into the Warehouse Payment Account by 4:00
p.m. on the Business Day on which the release of the Lender's security interest in such Mortgage Loan or Mortgagebacked Securities is scheduled to occur pursuant to the purchase by an Investor under a Purchase Commitment, in an
amount equal to the amount by which the aggregate amount of Advances outstanding exceeds: (i) the Borrowing Base
(calculated without reference to any such Mortgage Loan or Mortgage-backed Security) minus (ii) $2,000,000."
(e) Section 8.15 of the Warehouse Credit Agreement is amended to read in full as follows:
"8.15 Portfolio Aging. The Borrower will not at any time permit the aggregate principal amount of the Eligible
Mortgage Loans then pledged as Collateral that have an Origination Date that is more than 60 days prior to such time
("Eligible Aged Mortgage Loans"), to exceed 12% of the aggregate principal amount of all Eligible Mortgage Loans
that are pledged as Collateral at such time and will not at any time permit the aggregate principal amount of the Eligible
Nonconforming Mortgage Loans then pledged as Collateral that have an Origination Date that is more than 60 days
prior to such time ("Eligible Aged Nonconforming Mortgage Loans"), to exceed 15% of the aggregate principal amount
of all Eligible Nonconforming Mortgage Loans that are pledged as Collateral at such time, and will not at any time
permit the aggregate principal amount of the Eligible HELOCs then pledged as Collateral that have an Origination Date
that is more than 60 days prior to such time ("Eligible Aged HELOCs"), to exceed 0% of the aggregate principal amount
of all Eligible Nonconforming Mortgage Loans that are pledged as Collateral at such time."
2. Warehouse Security Agreement. Section 4(a) of the Warehouse Security Agreement is amended to read in full as
follows:
"(a) So long as no Default or Event of Default has occurred and is continuing or would result therefrom, upon the
Assignor's request therefor and a prepayment by the Assignor of Advances in an amount sufficient to cause the amount
of Advances outstanding to be less than or equal to: (x) the Borrowing Base (calculated without reference to any
Collateral which the Assignor requests be released from the Lien granted pursuant hereto) minus (y) $2,000,000, and a
deposit by the Assignor of such amount as the Lender shall designate as a reserve for application to any fees, accrued
interest or breakage costs payable under the Warehouse Credit Agreement with respect to the calendar month in which
such prepayment occurs, the Lender shall, within one Business Day after the later of the receipt of such request or such
prepayment and deposit, release from the Lien granted pursuant hereto and deliver to the Assignor (i) the Collateral
corresponding to such Mortgage Loan(s) or Mortgage-backed Security(ies) and (ii) the Collateral Documents pertaining
thereto."
3. References to Credit Documents. Upon the effectiveness of this Agreement:
(a) Each reference in the Warehouse Credit Agreement to "this Agreement," "hereunder," "hereof," "herein" or words
of like import, and each reference in the Restated Note and the Warehouse Security Agreement to the Warehouse Credit
Agreement, shall mean and be a reference to the Warehouse Credit Agreement as amended hereby;
(b) Each reference in the Warehouse Credit Agreement and the Warehouse Security Agreement to the Note shall mean
and be a reference to the Restated Note; and
(c) Each reference in the Warehouse Credit Agreement and the Note to the Warehouse Security Agreement shall mean
and be a reference to the Warehouse Security Agreement as amended hereby.
4. Ratification of Documents.
(a) Except as specifically amended herein or amended and restated in the Restated Note, the Warehouse Credit
Agreement, the Note and the Warehouse Security Agreement shall remain unaltered and in full force and effect and are
hereby ratified and confirmed.
(b) The execution, delivery and effectiveness of this Agreement and the Restated Note shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of the Lender under the Warehouse Credit
Agreement, the Note or the Warehouse Security Agreement nor constitute a waiver of any default or Event of Default
under the Warehouse Credit Agreement, the Note or the Warehouse Security Agreement.
5. Representations and Warranties. The Borrower hereby certifies that (i) the representations and warranties which it
made in the Warehouse Credit Agreement and the Warehouse Security Agreement are true and correct as of the date
hereof and (ii) no Event of Default and no event which could become an Event of Default with the passage of time or
the giving of notice, or both, under the Note, the Warehouse Credit Agreement or the Warehouse Security Agreement
exists on the date hereof.
6. Miscellaneous.
(a) This Agreement shall be governed by and construed according to the laws of the State of Delaware without regard
to principles of conflicts of laws and shall be binding upon and shall inure to the benefit of the parties hereto, their
(b) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
(c) This Agreement is intended to take effect as a document under seal.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.
E-LOAN, INC.
By:____________________________________
President
GMAC Bank
By:____________________________________
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No.333-68834) and
Form S-8 (No.333-63372) of E-Loan, Inc. of our report dated April 1, 2002, relating to the financial statements and
financial statement schedules, which appears in this Form 10-K.
/s/ PRICEWATERHOUSECOOPERS LLP
San Francisco, California
April 1, 2002

E LOAN INC (Form: 10-K, Filing Date: 04/01/2002)

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