Delaware | | | 6162 | | | 47-1776572 |
(State or other jurisdiction of incorporation or organization) | | | (Primary Standard Industrial Classification Code Number) | | | (I.R.S. Employer Identification Number) |
Joseph H. Kaufman, Esq. Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, NY 10017 (212) 455-2000 | | | Michael Kaplan, Esq. Shane Tintle, Esq. Davis Polk & Wardwell LLP 450 Lexington Avenue New York, NY 10017 (212) 450-4000 |
Large accelerated filer | | | ☐ | | | Accelerated filer | | | ☐ |
Non-accelerated filer | | | ☒ | | | Smaller reporting company | | | ☐ |
| | | | Emerging growth company | | | ☒ |
Title of Each Class of Securities to be Registered | | | Amount to be Registered(1) | | | Proposed Maximum Offering Price Per Share(2) | | | Proposed Maximum Aggregate Offering Price(1)(2) | | | Amount of Registration Fee(3) |
Common stock, par value $0.0000000072 per share | | | 14,375,000 | | | $21.00 | | | $301,875,000 | | | $32,935 |
(1) | Includes 1,875,000 additional shares of common stock that the underwriters have the option to purchase. See “Underwriting (Conflicts of Interest).” |
(2) | Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(a) of the Securities Act of 1933, as amended. |
(3) | $10,910 of such fee was previously paid. |
| | Per Share | | | Total | |
Price to the public | | | $ | | | $ |
Underwriting discounts and commissions(1) | | | $ | | | $ |
Proceeds to the selling stockholders (before expenses) | | | $ | | | $ |
(1) | See “Underwriting (Conflicts of Interest)” for additional information regarding underwriter compensation. |
Goldman Sachs & Co. LLC | | | Wells Fargo Securities | | | Morgan Stanley | | | UBS Investment Bank |
Credit Suisse | | | J.P. Morgan | | | BofA Securities |
JMP Securities | | | Piper Sandler | | | R. Seelaus & Co., LLC | | | SPC Capital Markets LLC |
Wedbush Securities | | | Zelman Partners LLC |
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• | “An Agency” or “Agencies” refers to Ginnie Mae, the FHA, the VA, the USDA and/or GSEs. |
• | “CFPB” refers to the Consumer Financial Protection Bureau. |
• | “Fannie Mae” refers to the Federal National Mortgage Association. |
• | “FHA” refers to the Federal Housing Administration. |
• | “Freddie Mac” refers to the Federal Home Loan Mortgage Corporation. |
• | “Ginnie Mae” refers to the Government National Mortgage Association. |
• | “GSE” refers to Government-Sponsored Enterprises, such as Fannie Mae and Freddie Mac. |
• | “Holdings” refers to Home Point Capital LP, a Delaware limited partnership, the direct parent of Home Point Capital Inc. |
• | “HUD” refers to the U.S. Department of Housing and Urban Development. |
• | “MBS” refers to mortgage-backed securities—a type of asset-backed security that is secured by a group of mortgage loans. |
• | “MSRs” refers to mortgage servicing rights—the right and obligation to service a loan or pool of loans and to receive a servicing fee as well as certain ancillary income. MSRs may be bought and sold, resulting in the transfer of loan servicing obligations. MSRs are designated as such when the benefits of servicing the loans are expected to adequately compensate the servicer for performing the servicing. |
• | “Sponsor” or “Stone Point Capital” refers to Stone Point Capital LLC. |
• | “Trident Stockholders” refers, collectively, to one or more investment entities directly or indirectly managed by Stone Point Capital, including Trident VI, L.P., Trident VI Parallel Fund, L.P., Trident VI DE Parallel Fund, L.P. and Trident VI Professionals Fund, L.P. |
• | “USDA” means the U.S. Department of Agriculture. |
• | “VA” means the U.S. Department of Veterans Affairs. |
(1) | Total origination volume excludes origination volume from the Distributed Retail channel, which was included in discontinued operations in our results of operations for the year ended December 31, 2018. |
(2) | Origination volume figures used to calculate market share include $1.0 billion of Distributed Retail originations in our results of operations for the year ended December 31, 2018. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
• | provide us efficient access to both purchase and refinance transactions throughout market cycles; |
• | benefit from the premise that in-market advisors will continue to be a cornerstone of the mortgage origination process; |
• | are highly scalable and flexible; and |
• | provide an optimized experience for our customers. |
(1) | Total origination volume excludes origination volume from the Distributed Retail channel, which was included in discontinued operations in our results of operations for the year ended December 31, 2018. |
(2) | Third Party Partners includes both Broker Partners and Correspondent Partners. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
Activation Rate by Broker Partner Cohort | | | Wallet Share Growth by Broker Partner Cohort Following Initial Onboarding |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
(1) | Third Party Partners includes both Broker Partners and Correspondent Partners. |
(2) | Active broker market coverage is calculated as the total number of active brokers at Home Point divided by the total number of brokers in the market. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
• | economies of scale: allows brokers to benefit from the scale of a larger organization while being able to run their business at a size that can be most responsive to their customers; |
• | optimal choice: rather than needing to work with one originator, brokers have the ability to partner with multiple lenders to determine the best financing alternative for their customers; and |
• | scalability of cost structure: reduce cost per loan and limited overhead. |
| | Three months ended December 31, 2020 | | | Three months ended December 31, 2019 | | | Year ended December 31, 2020 | | | Year ended December 31, 2019 | |
In millions (except Total origination volume in billions) | | | Estimated | | | Actual | | | Estimated | | | Actual |
Total origination volume | | | $24.0 | | | $8.3 | | | $62.0 | | | $22.2 |
Total net revenue | | | $456.7 | | | $96.8 | | | $1,394.2 | | | $202.4 |
Total net income (loss) | | | $184.5 | | | $16.1 | | | $607.0 | | | $(29.2) |
Adjusted net income(1) | | | $171.0 | | | $7.9 | | | $667.7 | | | $28.2 |
Adjusted EBITDA(2) | | | $221.9 | | | $17.1 | | | $910.6 | | | $69.4 |
(1) | The following is a reconciliation of Adjusted net income to Total net income (loss), the nearest U.S. GAAP financial measure. |
| | Three months ended December 31, 2020 | | | Three months ended December 31, 2019 | | | Year ended December 31, 2020 | | | Year ended December 31, 2019 | |
In millions | | | Estimated | | | Actual | | | Estimated | | | Actual |
Total net income (loss) | | | $184.5 | | | $16.1 | | | $607.0 | | | $(29.2) |
Change in fair value of MSR (due to inputs and assumptions), net of hedge | | | $(17.2) | | | $(10.4) | | | $81.1 | | | $74.0 |
Income tax effect of change in fair value of MSR (due to inputs and assumptions), net of hedge | | | $3.7 | | | $2.3 | | | $(20.4) | | | $(17.0) |
Adjusted net income | | | $171.0 | | | $7.9 | | | $667.7 | | | $28.2 |
(2) | The following is a reconciliation of Adjusted EBITDA to Total Net Income (Loss), the nearest U.S. GAAP financial measure. |
| | Three months ended December 31, 2020 | | | Three months ended December 31, 2019 | | | Year ended December 31, 2020 | | | Year ended December 31, 2019 | |
In millions | | | Estimated | | | Actual | | | Estimated | | | Actual |
Total net income (loss) | | | $184.5 | | | $16.1 | | | $607.0 | | | $(29.2) |
Interest expense on Term debt and other borrowings | | | $4.0 | | | $5.4 | | | $18.4 | | | $27.7 |
Income tax expense (benefit) from continuing operations | | | $49.2 | | | $4.6 | | | $198.6 | | | $(9.5) |
Depreciation and amortization | | | $1.4 | | | $1.5 | | | $5.5 | | | $5.9 |
Change in fair value of MSR (due to inputs and assumptions), net of hedge | | | $(17.2) | | | $(10.4) | | | $81.1 | | | $74.5 |
Adjusted EBITDA | | | $221.9 | | | $17.1 | | | $910.6 | | | $69.4 |
| | As of December 31, 2020 | | | As of September 30, 2020 | |
In millions (except MSR servicing portfolio – UPB in billions) | | | Estimated | | | Actual |
MSR servicing portfolio – UPB | | | $88.3 | | | $74.0 |
Cash and cash equivalents(1) | | | $165.2 | | | $271.5 |
Mortgage servicing rights (at fair value) | | | $748.5 | | | $583.3 |
Warehouse lines of credit | | | $3,005.4 | | | $2,092.5 |
Term debt and other borrowings, net | | | $454.0 | | | $374.1 |
Total Debt(2) | | | $ 3,459.4 | | | $2,466.6 |
Tangible Common Equity | | | $916.7 | | | $731.7 |
Total Common Equity | | | $927.5 | | | $742.7 |
(1) | Does not reflect the $25.7 million cash dividend that our board of directors declared and paid to Holdings on January 14, 2021. See “—Recent Developments—Payment of Cash Dividend.” |
(2) | Represents the sum of Term debt and other borrowings, net and Warehouse lines of credit. |
• | the spread of the COVID-19 (as defined below) outbreak and severe disruptions in the U.S. and global economy and financial markets it has caused; |
• | our reliance on our financing arrangements to fund mortgage loans and otherwise operate our business; |
• | the dependence of our loan origination and servicing revenues on macroeconomic and U.S. residential real estate market conditions; |
• | the requirement to repurchase mortgage loans or indemnify investors if we breach representations and warranties; |
• | counterparty risk; |
• | the requirement to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances; |
• | competition for mortgage assets that may limit the availability of desirable originations, acquisitions and result in reduced risk-adjusted returns; |
• | our ability to continue to grow our loan origination business or effectively manage significant increases in our loan production volume; |
• | competition in the industry in which we operate; |
• | our ability to acquire loans and sell the resulting MBS in the secondary markets on favorable terms in our production activities; |
• | our being a “controlled company” within the meaning of NASDAQ rules and, as a result, qualifying for exemptions from certain corporate governance requirements; and |
• | our Sponsor controlling us and its interests conflicting with ours or yours in the future. |
• | the last day of the year following the fifth anniversary of this offering; |
• | the last day of the first year in which our annual gross revenues exceed an amount specified by regulation (currently $1.07 billion); |
• | the day we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second quarter of such year; and |
• | the date on which we have issued more than $1.0 billion in non-convertible debt securities during the preceding three-year period. |
• | no exercise of the underwriters’ option to purchase additional shares of our common stock from the selling stockholders; |
• | an initial public offering price of $20.00 per share of common stock, which is the midpoint of the estimated price range set forth on the cover page of this prospectus; |
• | the filing and effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws immediately prior to the consummation of this offering; |
• | the 1,388,601.11-for-one stock split of our common stock, which we effectuated on January 21, 2021; and |
• | the merger of Holdings with and into the Company immediately prior to the consummation of this offering, with the Company as the surviving entity, whereby each issued and outstanding limited partnership unit of Holdings will be exchanged for approximately 2.6964 issued and outstanding shares of our common stock. |
• | 14,012,669 shares of common stock issuable upon exercise of outstanding options, (i) 2,654,234 of which are vested, with a weighted-average exercise price of $4.61 per share, and (ii) 11,358,435 of which are not vested, with a weighted-average exercise price of $6.29 per share, in each case, issued under our 2015 Option Plan. See “Executive Compensation—Narrative Disclosure to Summary Compensation Table—Equity Awards”; and |
• | 6,943,005 shares of common stock reserved for future issuance under the 2021 Incentive Plan and 1,388,601 shares of common stock reserved for future issuance under the 2021 Employee Stock Purchase Plan, each of which we intend to adopt in connection with this offering. See “Executive Compensation—Actions in Connection with this Offering.” |
| | Nine months ended September 30, | | | Year ended December 31, | |||||||
(In thousands, except shares and per share amounts) | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
| | (unaudited) | | | (audited) | |||||||
Statement of Operations Data | | | | | | | | | ||||
Gain on loans, net | | | $962,778 | | | $135,495 | | | $199,501 | | | $84,068 |
Loan fee income | | | 60,630 | | | 19,829 | | | 32,112 | | | 19,603 |
Interest income | | | 42,370 | | | 35,101 | | | 51,801 | | | 35,179 |
Interest expense | | | (47,845) | | | (41,933) | | | (57,942) | | | (47,486) |
Interest loss, net | | | (5,475) | | | (6,832) | | | (6,141) | | | (12,307) |
Loan servicing fees | | | 133,904 | | | 104,089 | | | 144,228 | | | 119,049 |
Change in fair value of mortgage servicing rights | | | (230,524) | | | (151,168) | | | (173,134) | | | (47,312) |
Other income | | | 1,022 | | | 1,591 | | | 3,159 | | | 1,156 |
Total net revenue | | | 922,335 | | | 103,004 | | | 199,725 | | | 164,257 |
| | | | | | | | |||||
Compensation and benefits | | | 251,462 | | | 104,571 | | | 156,197 | | | 109,577 |
Loan expense | | | 28,581 | | | 10,182 | | | 15,626 | | | 16,882 |
Loan servicing expense | | | 22,742 | | | 15,781 | | | 20,924 | | | 18,488 |
Occupancy and equipment | | | 17,006 | | | 12,567 | | | 16,768 | | | 20,521 |
General and administrative | | | 28,373 | | | 14,687 | | | 21,407 | | | 29,165 |
Depreciation and amortization | | | 4,222 | | | 4,394 | | | 5,918 | | | 7,612 |
Other expenses | | | 12,087 | | | 2,770 | | | 4,296 | | | 4,060 |
Total expenses | | | 364,473 | | | 164,952 | | | 241,136 | | | 206,305 |
| | | | | | | | |||||
Income (loss) from continuing operations before income tax | | | 557,862 | | | (61,948) | | | (41,411) | | | (42,048) |
Income tax expense (benefit) from continuing operations | | | 149,306 | | | (14,080) | | | (9,500) | | | (10,485) |
Income from equity method investment | | | 14,050 | | | 2,591 | | | 2,701 | | | 209 |
Net income (loss) from continuing operations | | | 422,606 | | | (45,277) | | | (29,210) | | | (31,354) |
Net income from discontinued operations before tax | | | — | | | — | | | — | | | 9,707 |
Income tax provision | | | — | | | — | | | — | | | 2,550 |
Income from discontinued operations, net of tax | | | — | | | — | | | — | | | 7,157 |
Total net income (loss) | | | $422,606 | | | $(45,277) | | | $(29,210) | | | $(24,197) |
| | Nine months ended September 30, | | | Year ended December 31, | |||||||
(In thousands, except shares and per share amounts) | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
| | (unaudited) | | | (audited) | |||||||
Basic and diluted earnings per share | | | | | | | | | ||||
Basic and diluted income (loss) per share from continuing operations | | | $3.04 | | | $(0.33) | | | $(0.21) | | | $(0.23) |
Basic and diluted earnings per share from discontinued operations | | | — | | | — | | | — | | | 0.05 |
Basic and diluted total net income (loss) per share | | | $3.04 | | | $(0.33) | | | $(0.21) | | | $(0.17) |
Weighted average shares of common stock outstanding | | | | | | | | | ||||
Basic and diluted | | | 138,860,111 | | | 138,860,111 | | | 138,860,111 | | | 138,860,111 |
| | September 30, | | | December 31, | ||||
(In thousands, except shares and per share amounts) | | | 2020 | | | 2019 | | | 2018 |
| | (unaudited) | | | (audited) | ||||
Balance Sheet Data: | | | | | | | |||
Assets: | | | | | | | |||
Cash and cash equivalents | | | $271,483 | | | $30,630 | | | $44,010 |
Restricted cash | | | 41,907 | | | 51,101 | | | 38,234 |
Cash and cash equivalents and restricted cash | | | 313,390 | | | 81,731 | | | 82,244 |
Mortgage loans held for sale (at fair value) | | | 2,281,835 | | | 1,554,230 | | | 421,754 |
Mortgage servicing rights (at fair value) | | | 583,263 | | | 575,035 | | | 532,526 |
Property and equipment, net | | | 18,595 | | | 12,051 | | | 10,075 |
Accounts receivable, net | | | 79,320 | | | 57,872 | | | 44,422 |
Derivative assets | | | 314,794 | | | 40,544 | | | 18,990 |
Goodwill and intangibles | | | 11,083 | | | 11,935 | | | 10,957 |
GNMA loans eligible for repurchase | | | 2,919,881 | | | 499,207 | | | 451,209 |
Other assets | | | 65,745 | | | 76,162 | | | 64,214 |
Total assets | | | $6,587,906 | | | $2,908,767 | | | $1,636,391 |
| | | | | | ||||
Liabilities and Shareholder’s equity: | | | | | | | |||
Liabilities: | | | | | | | |||
Warehouse lines of credit | | | $2,092,477 | | | $1,478,183 | | | $404,237 |
Term debt and other borrowings, net | | | 374,090 | | | 424,958 | | | 276,277 |
Accounts payable and accrued expenses | | | 269,016 | | | 39,739 | | | 21,243 |
GNMA loans eligible for repurchase | | | 2,919,881 | | | 499,207 | | | 451,209 |
Other liabilities | | | 189,700 | | | 56,368 | | | 44,654 |
Total liabilities | | | $5,845,164 | | | 2,498,455 | | | 1,197,620 |
| | | | | | ||||
Shareholder’s equity: | | | | | | | |||
Common stock (138,860,111 shares issued and outstanding, par value $0.0000000072 per share) | | | — | | | — | | | — |
Additional paid-in-capital | | | 519,177 | | | 454,861 | | | 454,110 |
Retained earnings (accumulated deficit) | | | 223,565 | | | (44,549) | | | (15,339) |
Total shareholder’s equity | | | 742,742 | | | 410,312 | | | 438,771 |
Total liabilities and shareholder’s equity | | | $6,587,906 | | | $2,908,767 | | | $1,636,391 |
| | Nine months ended September 30, | | | Year ended December 31, | |||||||
| | 2020 | | | 2019 | | | 2019 | | | 2018 | |
Other financial data | | | | | | | | | ||||
Adjusted revenue(1) | | | $1,034,687 | | | $190,522 | | | $276,907 | | | $154,118 |
Adjusted net income (loss)(1) | | | 494,598 | | | 20,347 | | | 28,185 | | | (32,006) |
Adjusted EBITDA(1) | | | 688,847 | | | 52,288 | | | 69,410 | | | (19,613) |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
($ in thousands) | | | 2020 | | | 2019 | | | 2019 | | | 2018(2) |
Origination Segment KPIs | | | | | | | | | ||||
| | | | | | | | |||||
Origination Volume by Channel | | | | | | | | | ||||
Wholesale(3) | | | $23,772,112 | | | $7,023,411 | | | $11,564,971 | | | $4,889,220 |
Correspondent(3) | | | 12,696,815 | | | 6,676,458 | | | 10,215,300 | | | 5,081,719 |
Direct(3) | | | 1,576,959 | | | 291,302 | | | 487,322 | | | 608,148 |
Origination volume(3) | | | $38,045,886 | | | $13,991,171 | | | $22,267,593 | | | $10,579,087 |
| | | | | | | | |||||
Gain on sale margin | | | | | | | | | ||||
Gain on sale margin (bps)(4) | | | 253.1 | | | 96.8 | | | 89.6 | | | 79.5 |
| | | | | | | | |||||
Market Share | | | | | | | | | ||||
Overall share of origination market(5) | | | 1.4% | | | 0.9% | | | 1.0% | | | 0.7% |
Share of wholesale channel(6) | | | 6.4% | | | 3.0% | | | 3.5% | | | 2.6% |
| | | | | | | | |||||
Origination Volume by Purpose(7) | | | | | | | | | ||||
Purchase | | | 31.7% | | | 54.4% | | | 50.6% | | | 66.5% |
Refinance | | | 68.3% | | | 45.6% | | | 49.4% | | | 33.5% |
| | | | | | | | |||||
Third Party Partners | | | | | | | | | ||||
Number of Broker Partners(8) | | | 4,921 | | | 2,684 | | | 3,085 | | | 1,623 |
Number of Correspondent Partners(9) | | | 594 | | | 516 | | | 537 | | | 451 |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
($ in thousands) | | | 2020 | | | 2019 | | | 2019 | | | 2018(2) |
Servicing Segment KPIs | | | | | | | | | ||||
| | | | | | | | |||||
Mortgage Servicing | | | | | | | | | ||||
MSR servicing portfolio - UPB(10) | | | $73,951,042 | | | $47,887,643 | | | $52,600,546 | | | $41,423,825 |
Servicing portfolio - Units(11) | | | 307,236 | | | 217,558 | | | 236,362 | | | 189,513 |
| | | | | | | | |||||
60 days or more delinquent(12) | | | 6.6% | | | 2.0% | | | 1.7% | | | 2.3% |
| | | | | | | | |||||
MSR Portfolio | | | | | | | | | ||||
MSR multiple(13) | | | 2.6x | | | 3.2x | | | 3.4x | | | 4.3x |
(1) | We define Adjusted revenue as Total net revenue exclusive of the impact of the change in fair value of MSRs related to changes in valuation inputs and assumptions, net of MSRs hedge and adjusted for Income from equity method investment. |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
($ in thousands) | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
Total net revenue | | | $922,335 | | | $103,004 | | | $199,725 | | | $164,257 |
Income from equity method investment | | | 14,050 | | | 2,591 | | | 2,701 | | | 209 |
Change in fair value of MSR (due to inputs and assumptions), net of hedge | | | 98,302 | | | 84,927 | | | 74,481 | | | (10,348) |
Adjusted revenue | | | $1,034,687 | | | $190,522 | | | $276,907 | | | $154,118 |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
($ in thousands) | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
Total net income (loss) | | | $422,606 | | | $(45,277) | | | $(29,210) | | | $(24,197) |
Change in fair value of MSR (due to inputs and assumptions), net of hedge | | | 98,302 | | | 84,927 | | | 74,481 | | | (10,348) |
Income tax effect of change in fair value of MSR (due to inputs and assumptions), net of hedge | | | (26,310) | | | (19,303) | | | (17,086) | | | 2,539 |
Adjusted net income (loss) | | | $494,598 | | | $20,347 | | | $28,185 | | | $(32,006) |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
($ in thousands) | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
Total net income (loss) | | | $422,606 | | | $(45,277) | | | $(29,210) | | | $(24,197) |
Income from discontinued operations, net of tax | | | — | | | — | | | — | | | (7,157) |
Interest expense on corporate debt | | | 14,411 | | | 22,324 | | | 27,721 | | | 24,962 |
Income tax expense (benefit) from continuing operations | | | 149,306 | | | (14,080) | | | (9,500) | | | (10,485) |
Depreciation and amortization | | | 4,222 | | | 4,394 | | | 5,918 | | | 7,612 |
Change in fair value of MSR (due to inputs and assumptions), net of hedge | | | 98,302 | | | 84,927 | | | 74,481 | | | (10,348) |
Adjusted EBITDA | | | $688,847 | | | $52,288 | | | $69,410 | | | $(19,613) |
(2) | Unless otherwise indicated, our Distributed Retail channel was included in discontinued operations in our results of operations for the year ended December 31, 2018 and as such it has been excluded from our key performance indicators for the year ended December 31, 2018. |
(3) | Origination dollar value of new loans funded by channel. Origination volume excludes Origination volume from the Distributed Retail channel, which was included in discontinued operations in our results of operations for the year ended December 31, 2018. |
(4) | Calculated as Gain on sale, net divided by Origination volume. |
(5) | Calculated as the Company’s originations dollar value for the year divided by the total residential originations in the United States of America per Inside Mortgage Finance, a third party provider of residential mortgage industry news and statistics each year. Origination volume figures used to calculate market share include $1 billion of Distributed Retail originations in our results of operations for the year ended December 31, 2018. |
(6) | Calculated as the Company’s originations dollar value for the year divided by the total wholesale originations in the United States of America per Inside Mortgage Finance, each year. |
(7) | Origination volume excludes Origination volume from the Distributed Retail channel, which was included in discontinued operations in our results of operations for the year ended December 31, 2018. |
(8) | Number of Broker Partners with whom the Company sources loans from. |
(9) | Number of Correspondent Partners from whom the Company purchases loans from. |
(10) | The unpaid principal balance of loans we service on behalf of Ginnie Mae, Fannie Mae, Freddie Mae and others, at period end. |
(11) | Number of loans in our serving portfolio at period end. |
(12) | Total balances of outstanding loan principals for which installment payments are at least 60 days past due as a percentage of the outstanding loan principal as of a specified date. |
(13) | Calculated as the MSR fair market value as of a specified date divided by the related UPB divided by the weighted average service fee. |
• | a general decline in business activity; |
• | negatively impacting demand for our mortgage loan products, as well as borrowers’ ability to fulfill their loan obligations leading to an increase in delinquency rates, which could have a significant impact on the value of our mortgage assets; |
• | the requirement for us to advance material amounts of cash for delinquent principal, interest, taxes and insurance typically paid by borrowers, which may not be reimbursed for an extended period of time; |
• | the costs of preserving and liquidating defaulted properties, as a result of increased serious delinquencies and defaults; |
• | the destabilization of the real estate and mortgage markets, which could negatively impact fair value of our assets, reduce our loan production volume, reduce the profitability of servicing mortgages or adversely affect our ability to sell mortgage loans; |
• | difficulty accessing the capital markets on attractive terms, or at all, and a severe disruption and instability in the global financial markets, including the MBS market, or deteriorations in credit and financing conditions which could affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis; |
• | the inability to promptly foreclose on defaulted mortgage loans and liquidate the underlying real property due to the rapidly changing regulatory and administrative climate, including the suspension of foreclosures and evictions as mandated by governmental bodies; |
• | the potential negative impact on the health of our highly qualified personnel, in particular skilled managers, loan servicers, debt default specialists and underwriters, especially if a significant number of them are impacted; and |
• | a deterioration in our ability to ensure business continuity during a disruption. |
• | restrictive covenants and borrowing conditions in our existing or future financing arrangements that may limit our ability to raise additional debt; |
• | a decline in the liquidity in the credit markets; |
• | prevailing interest rates; |
• | the financial strength of our lenders; |
• | the decisions of lenders from whom we borrow to reduce their exposure to mortgage loans; and |
• | accounting changes that impact the calculations of covenants in our debt agreements. |
• | an increase in the number of similar loans available for sale; |
• | conditions in the loan securitization market or in the secondary market for loans in general or for our loans in particular, which could make our loans less desirable to potential investors; |
• | defaults under loans in general; |
• | loan-level pricing adjustments imposed by Fannie Mae and Freddie Mac, including the recently imposed adjustments for the purchase of loans in forbearance and, although deferred for later implementation, refinancing loans; |
• | the types and volume of loans being originated or sold by us; |
• | the level and volatility of interest rates; and |
• | the quality of loans previously sold by us. |
• | loss of our licenses and approvals to engage in our servicing and lending/loan purchasing businesses; |
• | damage to our reputation in the industry; |
• | governmental investigations and enforcement actions; |
• | administrative fines and penalties and litigation; |
• | civil and criminal liability, including class action lawsuits; |
• | diminished ability to sell loans that we originate or purchase, requirements to sell such loans at a discount compared to other loans or repurchase or address indemnification claims from purchasers of such loans, including the GSEs; |
• | inability to raise capital; and |
• | inability to execute on our business strategy, including our growth plans. |
• | underwriting standards and credit standards for mortgage loans; |
• | our staffing levels and other servicing practices; |
• | the servicing and ancillary fees that we may charge; |
• | our modification standards and procedures; |
• | the amount of reimbursable and non-reimbursable advances that we may make; and |
• | the types of loan products that are eligible for sale or securitization. |
• | a majority of our board of directors consist of “independent directors” as defined under the rules of NASDAQ; |
• | our director nominees be selected, or recommended for our board of directors’ selection by a nominating/governance committee comprised solely of independent directors; and |
• | the compensation of our executive officers be determined, or recommended to our board of directors for determination, by a compensation committee comprised solely of independent directors. |
• | we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, |
• | we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and |
• | we will not be required to hold nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments not previously approved. |
• | results of operations that vary from the expectations of securities analysts and investors; |
• | results of operations that vary from those of our competitors; |
• | changes in expectations as to our future financial performance, including financial estimates and investment recommendations by securities analysts and investors; |
• | changes in economic conditions for companies in our industry; |
• | changes in market valuations of, or earnings and other announcements by, companies in our industry; |
• | declines in the market prices of stocks generally, particularly those of companies in our industry; |
• | additions or departures of key management personnel; |
• | strategic actions by us or our competitors; |
• | announcements by us, our competitors, our suppliers of significant contracts, price reductions, new products or technologies, acquisitions, dispositions, joint marketing relationships, joint ventures, other strategic relationships or capital commitments; |
• | changes in preference of our customers and our market share; |
• | changes in general economic or market conditions or trends in our industry or the economy as a whole; |
• | changes in business or regulatory conditions; |
• | future sales of our common stock or other securities; |
• | investor perceptions of or the investment opportunity associated with our common stock relative to other investment alternatives; |
• | changes in the way we are perceived in the marketplace, including due to negative publicity or campaigns on social media to boycott certain of our products, our business or our industry; |
• | the public’s response to press releases or other public announcements by us or third parties, including our filings with the SEC; |
• | changes or proposed changes in laws or regulations or differing interpretations or enforcement thereof affecting our business; |
• | announcements relating to litigation or governmental investigations; |
• | guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance; |
• | the development and sustainability of an active trading market for our common stock; |
• | exchange rate fluctuations; |
• | tax developments; |
• | changes in accounting principles; and |
• | other events or factors, including those resulting from informational technology system failures and disruptions, epidemics, pandemics, natural disasters, war, acts of terrorism, civil unrest or responses to these events. |
• | a classified board of directors, as a result of which our board of directors will be divided into three classes, with each class serving for staggered three-year terms; |
• | the ability of our board of directors to issue one or more series of preferred stock; |
• | advance notice requirements for nominations of directors by stockholders and for stockholders to include matters to be considered at our annual meetings; |
• | certain limitations on convening special stockholder meetings; |
• | the removal of directors only for cause and only upon the affirmative vote of the holders of at least 66 2/3% of the shares of common stock entitled to vote generally in the election of directors if our Sponsor and its affiliates cease to beneficially own at least 40% of shares of common stock entitled to vote generally in the election of directors; and |
• | that certain provisions may be amended only by the affirmative vote of at least 66 2/3% of shares of common stock entitled to vote generally in the election of directors if our Sponsor and its affiliates cease to beneficially own at least 40% of shares of common stock entitled to vote generally in the election of directors. |
• | the spread of the COVID-19 outbreak and severe disruptions in the U.S. and global economy and financial markets it has caused; |
• | our reliance on our financing arrangements to fund mortgage loans and otherwise operate our business; |
• | the dependence of our loan origination and servicing revenues on macroeconomic and U.S. residential real estate market conditions; |
• | the requirement to repurchase mortgage loans or indemnify investors if we breach representations and warranties; |
• | counterparty risk; |
• | the requirement to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances; |
• | competition for mortgage assets that may limit the availability of desirable originations, acquisitions and result in reduced risk-adjusted returns; |
• | our ability to continue to grow our loan origination business or effectively manage significant increases in our loan production volume; |
• | competition in the industry in which we operate; |
• | our success and growth of our production and servicing activities and the dependence upon our ability to adapt to and implement technological changes; |
• | the effectiveness of our risk management efforts; |
• | our ability to detect misconduct and fraud; |
• | any failure to attract and retain a highly skilled workforce, including our senior executives; |
• | our ability to obtain, maintain, protect and enforce our intellectual property; |
• | any cybersecurity risks, cyber incidents and technology failures; |
• | material changes to the laws, regulations or practices applicable to reverse mortgage programs operated by FHA and HUD; |
• | our vendor relationships; |
• | our failure to deal appropriately with various issues that may give rise to reputational risk, including legal and regulatory requirements; |
• | any employment litigation and related unfavorable publicity; |
• | exposure to new risks and increased costs as a result of initiating new business activities or strategies or significantly expanding existing business activities or strategies; |
• | any failure to comply with the significant amount of regulation applicable to our new investment management subsidiary; |
• | the impact of changes in political or economic stability or by government policies on our material vendors with operations in India; |
• | our ability to fully utilize our NOL and other tax carryforwards; |
• | any challenge by the IRS of the amount, timing and/or use of our NOL carryforwards; |
• | possible changes in legislation and the effect on our ability to use the tax benefits associated with our NOL carryforwards; |
• | the impact of other changes in tax laws; |
• | the impact of interest rate fluctuations; |
• | risks associated with hedging against interest rate exposure; |
• | the impact of any prolonged economic slowdown, recession or declining real estate values; |
• | risks associated with financing our assets with borrowings; |
• | risks associated with a decrease in value of our collateral; |
• | the dependence of our operations on access to our financing arrangements, which are mostly uncommitted; |
• | risks associated with the financial and restrictive covenants included in our financing agreements; |
• | our exposure to volatility in the London Inter-Bank Offered Rate; |
• | our ability to raise the debt or equity capital required to finance our assets and grow our business; |
• | risks associated with higher risk loans that we service; |
• | risks associated with derivative financial instruments; |
• | our ability to foreclose on our mortgage assets in a timely manner or at all; |
• | our ability to obtain and/or maintain licenses and other approvals in those jurisdictions where required to conduct our business; |
• | the impact of revised rules and regulations and enforcement of existing rules and regulations by the CFPB; |
• | legislative and regulatory changes that impact the mortgage loan industry or housing market; |
• | changes in regulations or the occurrence of other events that impact the business, operations or prospects of government agencies such as Ginnie Mae, the FHA or the VA, the USDA, or GSEs such as Fannie Mae or Freddie Mac, or such changes that increase the cost of doing business with such entities; |
• | the Dodd-Frank Act and its implementing regulations and regulatory agencies, and any other legislative and regulatory changes that impact the business, operations or governance of mortgage lenders; |
• | the CFPB, and its issued and future rules and the enforcement thereof; |
• | changes in government support of homeownership; |
• | changes in government or government sponsored home affordability programs; |
• | changes in governmental regulations, accounting treatment, tax rates and similar matters; |
• | risks associated with our acquisition of MSRs; |
• | the impact of our counterparties terminating our servicing rights under which we conduct servicing activities; and |
• | our failure to deal appropriately with issues that may give rise to reputational risk. |
• | on an actual basis; and |
• | on a pro forma basis, giving effect to the Debt Transaction. |
| | September 30, 2020 | ||||
(Unaudited) (In thousands, except shares and per share data) | | | Actual | | | Pro Forma for the Debt Transaction |
Cash and cash equivalents(1) | | | $271,483 | | | $271,256 |
| | | | |||
Debt | | | | | ||
Warehouse lines of credit | | | $2,092,477 | | | $2,092,477 |
Term debt and other borrowings, net(2) | | | 374,090 | | | 643,203 |
Total debt | | | $2,466,567 | | | $2,735,680 |
| | | | |||
Stockholder’s equity | | | | | ||
Common stock, par value $0.0000000072 per share (138,860,111 shares authorized, issued and outstanding, actual and pro forma) | | | $— | | | $— |
Additional paid in capital | | | 519,177 | | | 473,402 |
Retained earnings | | | 223,565 | | | — |
Total stockholder’s equity | | | 742,742 | | | $473,402 |
| | | | |||
Total capitalization | | | $3,209,309 | | | $3,209,082 |
(1) | Does not include Restricted cash. Also excludes the impact of (a) the cash dividend declared by our board of directors on September 30, 2020 in the amount of $154.5 million, which was paid to Holdings, the sole stockholder, on October 5, 2020. (b) the cash dividend declared by our board of directors on January 12, 2021 in the amount of $25.7 million, which was paid to Holdings on January 14, 2021 and (c) the fees and expenses of this offering of approximately $5.1 million. See “Prospectus Summary—Recent Developments—Payment of Cash Dividend.” |
(2) | Net of issuance costs. |
Assumed initial public offering price per share of common stock | | | $20.00 |
Pro forma net tangible book value per share of common stock as of September 30, 2020 | | | 5.27 |
Dilution per share of common stock to investors in this offering | | | $14.73 |
| | Shares Purchased | | | Total Consideration | | | Average Price Per Share | |||||||
Name of Beneficial Owners | | | Number | | | Percent | | | Amount | | | Percent | | ||
Existing owners | | | 126,360,111 | | | 91.0% | | | $360,589,002 | | | 59.1% | | | $2.85 |
New investors in this offering | | | 12,500,000 | | | 9.0% | | | $250,000,000 | | | 40.9% | | | $20.00 |
Total | | | 138,860,111 | | | 100.0% | | | $610,589,002 | | | 100.0% | | |
• | the issuance in January 2021 of $550.0 million aggregate principal amount of Senior Unsecured Notes; |
• | the use of $269.8 million of the net proceeds from the issuance of the Senior Unsecured Notes and $0.2 million of cash on hand to repay $270.0 million outstanding amounts under our MSR Facility; and |
• | the use of $269.3 million of the net proceeds from the issuance of the Senior Unsecured Notes to fund a distribution to our existing shareholder. |
| | Home Point Capital As Reported | | | Pro Forma Adjustments Related to Debt Transaction | | | Footnotes | | | Home Point Capital Pro Forma | |
Assets: | | | | | | | | | ||||
Cash and cash equivalents | | | $271,483 | | | $(227) | | | (A) | | | $271,256 |
Restricted cash | | | 41,907 | | | | | | | 41,907 | ||
Cash and cash equivalents and restricted cash | | | 313,390 | | | (227) | | | | | 313,163 | |
Mortgage loans held for sale (at fair value) | | | 2,281,835 | | | | | | | 2,281,835 | ||
Mortgage servicing rights (at fair value) | | | 583,263 | | | | | | | 583,263 | ||
Property and equipment, net | | | 18,595 | | | | | | | 18,595 | ||
Accounts receivable, net | | | 79,320 | | | | | | | 79,320 | ||
Derivative assets | | | 314,794 | | | | | | | 314,794 | ||
Goodwill and intangibles | | | 11,083 | | | | | | | 11,083 | ||
GNMA loans eligible for repurchase | | | 2,919,881 | | | | | | | 2,919,881 | ||
Other assets | | | 65,745 | | | | | | | 65,745 | ||
Total assets | | | $6,587,906 | | | $(227) | | | | | $6,587,679 | |
| | | | | | | | |||||
Liabilities and Shareholders’ Equity: | | | | | | | | | ||||
Liabilities: | | | | | | | | | ||||
Warehouse lines of credit | | | $2,092,477 | | | | | | | $2,092,477 | ||
Term debt and other borrowings, net | | | 374,090 | | | 269,113 | | | (B) | | | 643,203 |
Accounts payable and accrued expenses | | | 269,017 | | | | | | | 269,017 | ||
GNMA loans eligible for repurchase | | | 2,919,881 | | | | | | | 2,919,881 | ||
Other liabilities | | | 189,700 | | | | | | | 189,700 | ||
Total liabilities | | | $5,845,165 | | | $269,113 | | | | | $6,114,278 | |
| | | | | | | | |||||
Shareholders’ Equity: | | | | | | | | | ||||
Common stock (138,860,111 shares issued and outstanding, par value $0.0000000072 per share) | | | — | | | | | | | — | ||
Additional paid-in capital | | | 519,177 | | | (45,775) | | | (D) | | | 473,402 |
Retained earnings (accumulated deficit) | | | 223,565 | | | (223,565) | | | (C) | | | — |
Total shareholders' equity | | | 742,742 | | | (269,340) | | | | | 473,402 | |
Total liabilities and shareholders' equity | | | $6,587,906 | | | (227) | | | | | $6,587,679 |
| | Home Point Capital As Reported | | | Pro Forma Adjustments Related to Debt Transaction | | | Footnotes | | | Home Point Capital Pro Forma | |
Revenue: | | | | | | | | | ||||
Gain on loans, net | | | $962,778 | | | | | | | $962,778 | ||
Loan fee income | | | 60,630 | | | | | | | 60,630 | ||
Interest income | | | 42,370 | | | | | | | 42,370 | ||
Interest expense | | | (47,845) | | | 14,694 | | | (A) | | | (33,151) |
Interest loss, net | | | (5,476) | | | 14,694 | | | | | 9,219 | |
Loan servicing fees | | | 133,904 | | | | | | | 133,904 | ||
Change in fair value of mortgage servicing rights | | | (230,524) | | | | | | | (230,524) | ||
Other income | | | 1,022 | | | | | | | 1,022 | ||
Total net revenue | | | 922,335 | | | 14,694 | | | | | $937,029 | |
| | | | | | | | |||||
Expenses: | | | | | | | | | ||||
Compensation and benefits | | | 251,462 | | | | | | | 251,462 | ||
Loan expense | | | 28,581 | | | | | | | 28,581 | ||
Loan servicing expense | | | 22,742 | | | | | | | 22,742 | ||
Occupancy and equipment | | | 17,006 | | | | | | | 17,006 | ||
General and administrative | | | 28,373 | | | | | | | 28,373 | ||
Depreciation and amortization | | | 4,222 | | | | | | | 4,222 | ||
Other expenses | | | 12,087 | | | | | | | 12,087 | ||
Total expenses | | | 364,473 | | | 0 | | | | | 364,473 | |
| | | | | | | | |||||
Income (loss) before income tax | | | 557,862 | | | 14,694 | | | | | 572,556 | |
Income tax expense (benefit) | | | 149,306 | | | 3,831 | | | (B) | | | 153,137 |
Income from equity method investment | | | 14,050 | | | | | | | 14,050 | ||
| | | | | | | | |||||
Total net income (loss) | | | $422,606 | | | 10,863 | | | | | $433,469 | |
| | | | | | | | |||||
Pro Forma Earnings Per Share: | | | | | | | | | ||||
Basic and diluted earnings per share | | | | | | | (C) | | | $3.12 | ||
Pro Forma Number of Shares Used in Computing EPS: | | | | | | | | | ||||
Basic and Diluted | | | | | | | | | 138,860,111 |
| | Home Point Capital As Reported | | | Pro Forma Adjustments Related to Debt Transaction | | | Footnotes | | | Home Point Capital Pro Forma | |
Revenue: | | | | | | | | | ||||
Gain on loans, net | | | $199,501 | | | | | | | $199,501 | ||
Loan fee income | | | 32,112 | | | | | | | 32,112 | ||
Interest income | | | 51,801 | | | | | | | 51,801 | ||
Interest expense | | | (57,942) | | | 15,537 | | | (A) | | | (42,405) |
Interest loss, net | | | (6,141) | | | 15,537 | | | | | 9,396 | |
Loan servicing fees | | | 144,228 | | | | | | | 144,228 | ||
Change in fair value of mortgage servicing rights | | | (173,134) | | | | | | | (173,134) | ||
Other income | | | 3,159 | | | | | | | 3,159 | ||
Total net revenue | | | 199,725 | | | 15,537 | | | | | 215,262 | |
| | | | | | | | |||||
Expenses: | | | | | | | | | ||||
Compensation and benefits | | | 156,197 | | | | | | | 156,197 | ||
Loan expense | | | 15,626 | | | | | | | 15,626 | ||
Loan servicing expense | | | 20,924 | | | | | | | 20,924 | ||
Occupancy and equipment | | | 16,768 | | | | | | | 16,768 | ||
General and administrative | | | 21,407 | | | | | | | 21,407 | ||
Depreciation and amortization | | | 5,918 | | | | | | | 5,918 | ||
Other expenses | | | 4,296 | | | | | | | 4,296 | ||
Total expenses | | | 241,136 | | | 0 | | | | | 241,136 | |
| | | | | | | | |||||
Income (loss) before income tax | | | (41,411) | | | 15,537 | | | | | (25,874) | |
Income tax expense (benefit) | | | (9,500) | | | 4,055 | | | (B) | | | (5,445) |
Income from equity method investment | | | 2,701 | | | | | | | 2,701 | ||
| | | | | | | | |||||
Total net income (loss) | | | $(29,210) | | | 11,482 | | | | | $(17,728) | |
| | | | | | | | |||||
Pro Forma Earnings Per Share: | | | | | | | | | ||||
Basic and diluted loss per share | | | | | | | (C) | | | $(0.13) | ||
Pro Forma Number of Shares Used in Computing EPS: | | | | | | |||||||
Basic and diluted | | | | | | | | | 138,860,111 |
(A) | Represents the net adjustment to Cash and cash equivalents to reflect the difference between the face amount of $550.0 million of the Senior Unsecured Notes, (i) the payment of $270.0 million to repay a portion of the MSR Facility which was funded using $269.8 million from the Senior Unsecured Notes, (ii) $269.3 million distributed to our existing shareholder, and (iii) $10.9 million used to pay debt issuance costs related to the issuance of the Senior Unsecured Notes. |
(B) | Represents the net adjustment to Term debt and other borrowings, net associated with the issuance of Senior Unsecured Notes (in millions). |
Issuance of the Senior Unsecured Notes | | | $550.0 |
Debt issuance costs of Senior Unsecured Notes | | | (10.9) |
Repayment of portion of the MSR Facility | | | (270.0) |
Net adjustment to Term debt and other borrowings, net | | | $269.1 |
(C) | Represents the adjustment to reduce retained earnings to zero to reflect the $223.6 million of the total $269.3 million distribution paid to our existing shareholder from the net proceeds of the Senior Unsecured Notes. The remainder of the distribution, $45.8 million, has been reflected as a decrease to Additional paid-in capital as discussed in note (D). |
(D) | Represents the adjustment to reduce Additional paid-in capital in excess of Retained earnings balance by $45.8 million as a result of the distribution paid to our existing shareholder from the net proceeds of the Senior Unsecured Notes. |
(A) | Represents the net adjustment to Interest expense associated with the payment of a portion of the MSR Facility and the issuance of the Senior Unsecured Notes (in thousands): |
| | Nine months ended September 30, 2020 | | | Year ended December 31, 2019 | |
Interest expense — Senior Unsecured Notes | | | $21,992 | | | $29,053 |
Interest expense — MSR Facility | | | (7,228) | | | (13,515) |
Net adjustments to Interest expense | | | $14,694 | | | $15,537 |
(B) | Represents a reduction of $3.8 million and $4.1 million in Income tax expense for the nine months ended September 30, 2020 and for the year ended December 31, 2019, respectively. The adjustments were based on the statutory tax rates of 26.07% and 26.10% for the nine months ended September 30, 2020 and for the year ended December 31, 2019, respectively. The adjustment is the result of the net increase in pro forma interest expense arising from the issuance of the Senior Unsecured Notes partially offset by the repayment of a portion of the MSR Facility. |
(C) | Pro forma basic and diluted earnings per share has been calculated based on the number of shares of common stock outstanding as of September 30, 2020 and December 31, 2019, respectively. The following table sets forth the computation of unaudited pro forma basic and diluted earnings per share (in thousands, except for share and per share data): |
| | Nine months ended September 30, 2020 | | | Year ended December 31, 2019 | |
Numerator | | | | | ||
Pro forma net income (loss) (basic and diluted) | | | $433,469 | | | ($17,728) |
Denominator | | | | | ||
Weighted average shares of common stock outstanding (basic and dilutive) | | | 138,860,111 | | | 138,860,111 |
Pro forma net income (loss) per share (basic and dilutive) | | | $3.12 | | | ($0.13) |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
(In thousands, except shares and per share amounts) | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
| | (unaudited) | | | (audited) | |||||||
Statement of Operations Data | | | | | | | | | ||||
Gain on loans, net | | | $962,778 | | | $135,495 | | | $199,501 | | | $84,068 |
Loan fee income | | | 60,630 | | | 19,829 | | | 32,112 | | | 19,603 |
Interest income | | | 42,370 | | | 35,101 | | | 51,801 | | | 35,179 |
Interest expense | | | (47,845) | | | (41,933) | | | (57,942) | | | (47,486) |
Interest loss, net | | | (5,475) | | | (6,832) | | | (6,141) | | | (12,307) |
Loan servicing fees | | | 133,904 | | | 104,089 | | | 144,228 | | | 119,049 |
Change in fair value of mortgage servicing rights | | | (230,524) | | | (151,168) | | | (173,134) | | | (47,312) |
Other income | | | 1,022 | | | 1,591 | | | 3,159 | | | 1,156 |
Total net revenue | | | 922,335 | | | 103,004 | | | 199,725 | | | 164,257 |
| | | | | | | | |||||
Compensation and benefits | | | 251,462 | | | 104,571 | | | 156,197 | | | 109,577 |
Loan expense | | | 28,581 | | | 10,182 | | | 15,626 | | | 16,882 |
Loan servicing expense | | | 22,742 | | | 15,781 | | | 20,924 | | | 18,488 |
Occupancy and equipment | | | 17,006 | | | 12,567 | | | 16,768 | | | 20,521 |
General and administrative | | | 28,373 | | | 14,687 | | | 21,407 | | | 29,165 |
Depreciation and amortization | | | 4,222 | | | 4,394 | | | 5,918 | | | 7,612 |
Other expenses | | | 12,087 | | | 2,770 | | | 4,296 | | | 4,060 |
Total expenses | | | 364,473 | | | 164,952 | | | 241,136 | | | 206,305 |
| | | | | | | | |||||
Income (loss) from continuing operations before income tax | | | 557,862 | | | (61,948) | | | (41,411) | | | (42,048) |
Income tax expense (benefit) from continuing operations | | | 149,306 | | | (14,080) | | | (9,500) | | | (10,485) |
Net income (loss) from continuing operations | | | 408,556 | | | (47,868) | | | (31,911) | | | (31,563) |
Net income from discontinued operations before tax | | | — | | | — | | | — | | | 9,707 |
Income tax provision | | | — | | | — | | | — | | | 2,550 |
Income from discontinued operations, net of tax | | | — | | | — | | | — | | | 7,157 |
Income from equity method investment | | | 14,050 | | | 2,591 | | | 2,701 | | | 209 |
Total net income (loss) | | | $422,606 | | | $(45,277) | | | $(29,210) | | | $(24,197) |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
(In thousands, except shares and per share amounts) | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
| | (unaudited) | | | (audited) | |||||||
Basic and diluted loss earnings per share: | | | | | | | | | ||||
Basic and diluted income (loss) per share from continuing operations | | | $3.04 | | | $(0.33) | | | $(0.21) | | | $(0.23) |
Basic and diluted earnings per share from discontinued operations | | | — | | | — | | | — | | | 0.05 |
Basic and diluted total net income (loss) per share | | | $3.04 | | | $(0.33) | | | $(0.21) | | | $(0.17) |
Weighted average shares of common stock outstanding | | | | | | | | | ||||
Basic and diluted | | | 138,860,111 | | | 138,860,111 | | | 138,860,111 | | | 138,860,111 |
| | September 30, | | | December 31, | ||||
(In thousands, except shares and per share amounts) | | | 2020 | | | 2019 | | | 2018 |
| | (unaudited) | | | (audited) | ||||
Balance Sheet Data | | | | | | | |||
Assets: | | | | | | | |||
Cash and cash equivalents | | | $271,483 | | | $30,630 | | | $44,010 |
Restricted cash | | | 41,907 | | | 51,101 | | | 38,234 |
Cash and cash equivalents and restricted cash | | | 313,390 | | | 81,731 | | | 82,244 |
Mortgage loans held for sale (at fair value) | | | 2,281,835 | | | 1,554,230 | | | 421,754 |
Mortgage servicing rights (at fair value) | | | 583,263 | | | 575,035 | | | 532,526 |
Property and equipment, net | | | 18,595 | | | 12,051 | | | 10,075 |
Accounts receivable, net | | | 79,320 | | | 57,872 | | | 44,422 |
Derivative assets | | | 314,794 | | | 40,544 | | | 18,990 |
Goodwill and intangibles | | | 11,083 | | | 11,935 | | | 10,957 |
GNMA loans eligible for repurchase | | | 2,919,881 | | | 499,207 | | | 451,209 |
Other assets | | | 65,745 | | | 76,162 | | | 64,214 |
Total assets | | | $6,587,906 | | | $2,908,767 | | | $1,636,391 |
| | | | | | ||||
Liabilities and Shareholder’s equity: | | | | | | | |||
Liabilities: | | | | | | | |||
Warehouse lines of credit | | | $2,092,477 | | | $1,478,183 | | | $404,237 |
Term debt and other borrowings, net | | | 374,090 | | | 424,958 | | | 276,277 |
Accounts payable and accrued expenses | | | 269,016 | | | 39,739 | | | 21,243 |
GNMA loans eligible for repurchase | | | 2,919,881 | | | 499,207 | | | 451,209 |
Other liabilities | | | 189,700 | | | 56,368 | | | 44,654 |
Total liabilities | | | $5,845,164 | | | 2,498,455 | | | 1,197,620 |
| | | | | | ||||
Shareholder’s equity: | | | | | | | |||
Common stock (138,860,111 shares issued and outstanding, par value $0.0000000072 per share) | | | — | | | — | | | — |
Additional paid-in-capital | | | 519,177 | | | 454,861 | | | 454,110 |
Retained earnings (accumulated deficit) | | | 223,565 | | | (44,549) | | | (15,339) |
Total shareholder’s equity | | | 742,742 | | | 410,312 | | | 438,771 |
Total liabilities and shareholder’s equity | | | $6,587,906 | | | $2,908,767 | | | $1,636,391 |
| | Nine Months Ended September 30, | | | Year Ended December 31 | |||||||
($ in thousands) | | | 2020 | | | 2019 | | | 2019 | | | 2018(a) |
Origination Volume by Channel | | | | | | | | | ||||
Wholesale(b) | | | $23,772,112 | | | $7,023,411 | | | $11,564,971 | | | $4,889,220 |
Correspondent(b) | | | 12,696,815 | | | 6,676,458 | | | 10,215,300 | | | 5,081,719 |
Direct(b) | | | 1,576,959 | | | 291,302 | | | 487,322 | | | 608,148 |
Origination volume(b) | | | $38,045,886 | | | $13,991,171 | | | $22,267,593 | | | $10,579,087 |
| | | | | | | |
| | Nine Months Ended September 30, | | | Year Ended December 31 | |||||||
($ in thousands) | | | 2020 | | | 2019 | | | 2019 | | | 2018(a) |
Gain on sale margin | | | | | | | | | ||||
Gain on sale margin (bps)(c) | | | 253.1 | | | 96.8 | | | 89.6 | | | 79.5 |
| | | | | | | | |||||
Market Share | | | | | | | | | ||||
Overall share of origination market(d) | | | 1.4% | | | 0.9% | | | 1.0% | | | 0.7% |
Share of wholesale channel(e) | | | 6.4% | | | 3.0% | | | 3.5% | | | 2.6% |
| | | | | | | | |||||
Origination Volume by Purpose(f) | | | | | | | | | ||||
Purchase | | | 31.7% | | | 54.4% | | | 50.6% | | | 66.5% |
Refinance | | | 68.3% | | | 45.6% | | | 49.4% | | | 33.5% |
| | | | | | | | |||||
Third Party Partners | | | | | | | | | ||||
Number of Broker Partners(g) | | | 4,921 | | | 2,684 | | | 3,085 | | | 1,623 |
Number of Correspondent Partners(h) | | | 594 | | | 516 | | | 537 | | | 451 |
| | Nine Months Ended September 30, | | | Year Ended December 31 | |||||||
($ in thousands) | | | 2020 | | | 2019(a) | | | 2019 | | | 2018(a) |
Mortgage Servicing | | | | | | | | | ||||
MSR Servicing Portfolio - UPB(i) | | | $73,951,042 | | | $47,887,643 | | | $52,600,546 | | | $41,423,825 |
MSR Servicing Portfolio - Units(j) | | | 307,236 | | | 217,558 | | | 236,362 | | | 189,513 |
| | | | | | | | |||||
60 days or more delinquent(k) | | | 6.6% | | | 2.0% | | | 1.7% | | | 2.3% |
| | | | | | | | |||||
MSR Portfolio | | | | | | | | | ||||
MSR multiple(l) | | | 2.6x | | | 3.2x | | | 3.4x | | | 4.3x |
(a) | Unless otherwise indicated, our Distributed Retail channel was included in discontinued operations in our results of operations for the year ended December 31, 2018 and as such it has been excluded from our key performance indicators for the year ended December 31, 2018. |
(b) | Origination dollar value of new loans funded by channel. Origination volume excludes Origination volume from the Distributed Retail channel, which was included in discontinued operations in our results of operations for the year ended December 31, 2018. |
(c) | Calculated as Gain on sale, net divided by Origination volume. |
(d) | Calculated as the Company’s originations dollar value for the year divided by the total residential originations in the United States of America per Inside Mortgage Finance, a third party provider of residential mortgage industry news and statistics each year. Origination volume figures used to calculate market share include $1 billion of Distributed Retail originations in our results of operations for the year ended December 31, 2018. |
(e) | Calculated as the Company’s originations dollar value for the year divided by the total wholesale originations in the United States of America per Inside Mortgage Finance, each year. |
(f) | Origination volume excludes Origination volume from the Distributed Retail channel, which was included in discontinued operations in our results of operations for the year ended December 31, 2018. |
(g) | Number of Broker Partners with whom the Company sources loans from. |
(h) | Number of Correspondent Partners from whom the Company purchases loans. |
(i) | The unpaid principal balance of loans we service on behalf of Ginnie Mae, Fannie Mae, Freddie Mae and others, at period end. |
(j) | Number of loans in our serving portfolio at period end. |
(k) | Total balances of outstanding loan principals for which installment payments are at least 60 days past due as a percentage of the outstanding loan principal as of a specified date. |
(l) | Calculated as the MSR fair market value as of a specified date divided by the related UPB divided by the weighted average service fee. |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
($ in thousands) | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
Total net revenue | | | $922,335 | | | $103,004 | | | $199,725 | | | $164,257 |
Income from equity method investment | | | 14,050 | | | 2,591 | | | 2,701 | | | 209 |
Change in fair value of MSR (due to inputs and assumptions), net of hedge(a) | | | 98,302 | | | 84,927 | | | 74,481 | | | (10,348) |
Adjusted revenue | | | $1,034,687 | | | $190,522 | | | $276,907 | | | $154,118 |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
($ in thousands) | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
Total net income (loss) | | | $422,606 | | | $(45,277) | | | $(29,210) | | | $(24,197) |
Change in fair value of MSR (due to inputs and assumptions), net of hedge(a) | | | 98,302 | | | 84,927 | | | 74,481 | | | (10,348) |
Income tax effect of change in fair value of MSR (due to inputs and assumptions), net of hedge(b) | | | (26,310) | | | (19,303) | | | (17,086) | | | 2,539 |
Adjusted net income (loss) | | | $494,598 | | | $20,347 | | | $28,185 | | | $(32,006) |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
($ in thousands) | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
Total net income (loss) | | | $422,606 | | | $(45,277) | | | $(29,210) | | | $(24,197) |
Income from discontinued operations, net of tax | | | — | | | — | | | — | | | (7,157) |
Interest expense on corporate debt | | | 14,411 | | | 22,324 | | | 27,721 | | | 24,962 |
Income tax expense (benefit) from continuing operations | | | 149,306 | | | (14,080) | | | (9,500) | | | (10,485) |
Depreciation and amortization | | | 4,222 | | | 4,394 | | | 5,918 | | | 7,612 |
Change in fair value of MSR (due to inputs and assumptions), net of hedge(a) | | | 98,302 | | | 84,927 | | | 74,481 | | | (10,348) |
Adjusted EBITDA | | | $688,847 | | | $52,288 | | | $69,410 | | | $(19,613) |
(a) | MSR fair value changes due to valuation inputs and assumptions are measured using a stochastic discounted cash flow model that includes assumptions such as prepayment speeds, delinquencies, discount rates, and effects of changes in market interest rates. Refer to “Note 2, Basis of Presentation and Significant Accounting Policies” and “Note 5, Mortgage Servicing Rights” to our unaudited condensed consolidated financial statements included elsewhere in this prospectus and to “Note 2, Basis of Presentation and Significant Accounting Policies” and “Note 7, Mortgage Servicing Rights” to our audited consolidated financial statements included elsewhere in this prospectus. The change in the value of the MSR hedge is measured based on third party market values and cash settlement. Refer to “Note 14, Fair Value Measurements”, to our unaudited condensed consolidated financial statements included elsewhere in this prospectus and “Note 18, Fair Value Measurements” to our audited consolidated financial statements included elsewhere in this prospectus. We exclude changes in fair value of MSRs, net of hedge from Adjusted revenue as they add volatility and we believe that they are not indicative of the Company’s operating performance or results of operations. This adjustment does not include changes in fair value of MSRs due to realization of cash flows, which remain in Adjusted EBITDA. Realization of cash flows occurs when cash is collected as customers make scheduled payments, partial prepayments of principal, or pay their mortgage in full. |
(b) | The income tax effect of change in fair value of MSR (due to inputs and assumptions), net of hedge is calculated as the MSR valuation change, net of hedge multiplied by the quotient of Income tax expense (benefit) divided by Income (loss) before income tax. |
| | Nine Months Ended September 30, | | | | | ||||||
($ in thousands) | | | 2020 | | | 2019 | | | $ Change | | | % Change |
Gain on loans, net | | | 962,778 | | | 135,495 | | | 827,283 | | | 610.6% |
Loan fee income | | | 60,630 | | | 19,829 | | | 40,801 | | | 205.8% |
Interest income | | | 42,370 | | | 35,101 | | | 7,269 | | | 20.7% |
Interest expense | | | (47,845) | | | (41,933) | | | (5,912) | | | 14.1% |
Interest loss, net | | | (5,475) | | | (6,832) | | | 1,357 | | | 19.9% |
Loan servicing fees | | | 133,904 | | | 104,089 | | | 29,815 | | | 28.6% |
Change in fair value of mortgage servicing rights | | | (230,524) | | | (151,168) | | | (79,356) | | | 52.5% |
Other income | | | 1,022 | | | 1,591 | | | (569) | | | (35.8)% |
Total net revenue | | | 922,335 | | | 103,004 | | | 819,331 | | | 795.4% |
| | | | | | | | |||||
Compensation and benefits | | | 251,462 | | | 104,571 | | | 146,891 | | | 140.5% |
Loan expense | | | 28,581 | | | 10,182 | | | 18,399 | | | 180.7% |
Loan servicing expense | | | 22,742 | | | 15,781 | | | 6,961 | | | 44.1% |
Occupancy and equipment | | | 17,006 | | | 12,567 | | | 4,439 | | | 35.3% |
General and administrative | | | 28,373 | | | 14,687 | | | 13,686 | | | 93.2% |
Depreciation and amortization | | | 4,222 | | | 4,394 | | | (172) | | | (3.9)% |
Other expenses | | | 12,087 | | | 2,770 | | | 9,317 | | | 336.4% |
Total expenses | | | 364,473 | | | 164,952 | | | 199,521 | | | 121.0% |
| | | | | | | | |||||
Income (loss) before income tax | | | 557,862 | | | (61,948) | | | 619,810 | | | 1,000.5% |
Income tax expense (benefit) | | | 149,306 | | | (14,080) | | | 163,386 | | | 1,160.4% |
Income from equity method investment | | | 14,050 | | | 2,591 | | | 11,459 | | | 442.3% |
Total net income (loss) | | | 422,606 | | | (45,277) | | | 467,883 | | | 1,033.4% |
| | Nine Months Ended September 30, | ||||
($ in thousands) | | | 2020 | | | 2019 |
Gain on sales, net(a) | | | $657,355 | | | $(37,127) |
Origination of mortgage service rights | | | 352,118 | | | 175,756 |
Change in fair value of loans held for sale, IRLCs, and related hedges | | | 301,173 | | | 55,599 |
Realized and unrealized gain (loss) from derivative financial instruments | | | (330,851) | | | (56,569) |
Provision for losses relating to representations and warranties | | | (17,017) | | | (2,164) |
Gain on loans, net | | | $962,778 | | | $135,495 |
(a) | The Gain on sales, net includes income related to originations of mortgage servicing rights. |
Nine Months Ended September 30, | | |||||
(in thousands) | | | 2020 | | | 2019 |
Origination volume | | | 38,045,886 | | | 13,991,171 |
Originated MSR - UPB | | | 37,066,235 | | | 12,678,916 |
Gain on sale margin(a) | | | 253.1 | | | 96.8 |
Retained servicing (UPB)(b) | | | 99.2% | | | 96.2 % |
(a) | Gain on sale margin represents the margin on loans sold, including the realized and unrealized gains and losses on sales of mortgage loans, as well as the changes in fair value of all loan-related derivatives, including interest rate lock commitments, freestanding loan-related derivatives, and representation and warranty reserve, and is calculated as the ratio of Gain on loans, net to the Sales volume UPB. |
(b) | Represents the percentage of our loan sales UPBs for which we retained the underlying servicing UPB during the period. |
| | Nine Months Ended September 30, | ||||
($ in thousands) | | | 2020 | | | 2019 |
Retained servicing fees, net of guarantees | | | $135,813 | | | $101,138 |
Late fees and other | | | (1,909) | | | 2,951 |
Loan servicing fees | | | $133,904 | | | $104,089 |
| | Nine Months Ended September 30, | ||||
($ in thousands) | | | 2020 | | | 2019 |
MSR Servicing Portfolio - UPB | | | $73,951,042 | | | $47,887,643 |
Average MSR Servicing Portfolio - UPB | | | $63,275,795 | | | $44,655,734 |
MSR Servicing Portfolio – units | | | 307,236 | | | 217,558 |
MSRs Fair Value Multiple (x) | | | 2.57x | | | 3.15x |
Delinquency Rates (%) | | | 12.6% | | | 2.2% |
Weighted average credit score | | | 734 | | | 721 |
Weighted average servicing fee, net (bps) | | | 0.3 | | | 0.3 |
| | Nine Months Ended September 30, | ||||
($ in thousands) | | | 2020 | | | 2019 |
Realization of cash flows | | | $(132,222) | | | $(66,241) |
Valuation inputs and assumptions | | | (211,667) | | | (163,025) |
Hedge | | | 113,365 | | | 78,098 |
Change in fair value of MSRs | | | (230,524) | | | (151,168) |
| | Nine Months Ended September 30, | ||||
($ in thousands) | | | 2020 | | | 2019 |
Interest income | | | 42,370 | | | 35,101 |
Interest expense | | | (47,845) | | | (41,933) |
Interest loss, net | | | (5,475) | | | (6,832) |
• | Our Origination segment consists of a combination of retail and third-party loan production operations. The increase in revenues for the Origination segment was primarily driven by an increase in loan Origination volume. |
• | Our Servicing segment consists of servicing loans the Company had initially originated and subsequently sold, for which the Company retained servicing rights as well as MSRs the Company occasionally purchases from others. The decrease in revenues for the Servicing segment was primarily driven by a decrease in interest rates. |
| | Nine Months Ended September 30, | ||||
($ in thousands) | | | 2020 | | | 2019 |
Gain on loans, net | | | 962,778 | | | 135,853 |
Loan fee income | | | 60,630 | | | 19,788 |
Loan servings fees | | | (1,982) | | | (459) |
Interest income | | | 1,804 | | | 2,237 |
Change in FV of MSRs | | | — | | | — |
Other income | | | — | | | — |
Total Origination segment revenue | | | 1,023,230 | | | 157,419 |
Directly attributable expense | | | 231,315 | | | 97,041 |
Contribution margin | | | 791,915 | | | 60,378 |
| | Nine Months Ended September 30, | ||||
($ in thousands) | | | 2020 | | | 2019 |
Gain on loans, net | | | $— | | | $(358) |
Loan servicing fees | | | 135,886 | | | 104,548 |
Change in fair value of mortgage servicing rights | | | (230,524) | | | (151,168) |
Interest income | | | 7,130 | | | 13,255 |
Other income | | | 205 | | | 4 |
Total Servicing segment revenue | | | (87,303) | | | (33,719) |
Change in mortgage servicing rights due to valuation, net of hedge | | | (98,302) | | | (84,927) |
Directly attributable expense | | | 42,664 | | | 29,754 |
Contribution margin | | | $(31,665) | | | $21,454 |
| | Year Ended December 31, | | | | | ||||||
($ in thousands) | | | 2019 | | | 2018 | | | $ Change | | | % Change |
Gain on loans, net | | | $199,501 | | | $84,068 | | | $115,433 | | | 137.3% |
Loan fee income | | | 32,112 | | | 19,603 | | | 12,509 | | | 64.0% |
Interest income | | | 51,801 | | | 35,179 | | | 16,622 | | | 47.2% |
Interest expense | | | (57,942) | | | (47,486) | | | (10,456) | | | 22.0% |
Interest loss, net | | | (6,141) | | | (12,307) | | | 6,166 | | | -50.1% |
Loan servicing fees | | | 144,228 | | | 119,049 | | | 25,179 | | | 21.2% |
Change in fair value of mortgage servicing rights | | | (173,134) | | | (47,312) | | | (125,822) | | | 265.9% |
Other income | | | 3,159 | | | 1,156 | | | 2,003 | | | 173.3% |
Total net revenue | | | 199,725 | | | 164,257 | | | 35,468 | | | 21.6% |
| | | | | | | | |||||
Compensation and benefits | | | 156,197 | | | 109,577 | | | 46,620 | | | 42.5% |
Loan expense | | | 15,626 | | | 16,882 | | | (1,256) | | | -7.4% |
Loan servicing expense | | | 20,924 | | | 18,488 | | | 2,436 | | | 13.2% |
Occupancy and equipment | | | 16,768 | | | 20,521 | | | (3,753) | | | -18.3% |
General and administrative | | | 21,407 | | | 29,165 | | | (7,758) | | | -26.6% |
Depreciation and amortization | | | 5,918 | | | 7,612 | | | (1,694) | | | -22.3% |
Other expenses | | | 4,296 | | | 4,060 | | | 236 | | | 5.8% |
Total expenses | | | 241,136 | | | 206,305 | | | 34,833 | | | 16.9% |
| | | | | | | | |||||
Loss from continuing operations before income tax | | | (41,411) | | | (42,048) | | | 637 | | | -1.5% |
Income tax benefit from continuing operations | | | (9,500) | | | (10,485) | | | 985 | | | -9.4% |
Income from equity method investments | | | 2,701 | | | 209 | | | 2,492 | | | 1,192.3% |
Net loss from continuing operations | | | (29,210) | | | (31,354) | | | 2,144 | | | -6.8% |
Net income from discontinued operations before tax | | | — | | | 9,707 | | | (9,707) | | | N/M |
Income tax provision from discontinued operations | | | — | | | 2,550 | | | (2,550) | | | N/M |
Income from discontinued operations, net of tax | | | — | | | 7,157 | | | (7,157) | | | N/M |
Total net loss | | | $(29,210) | | | $(24,197) | | | $(5,013) | | | 20.7% |
| | Year Ended December 31, | ||||
($ in thousands) | | | 2019 | | | 2018 |
Gain on sales, net(a) | | | $209,261 | | | $80,536 |
Change in fair value of loans held for sale, IRLCs, and related hedges | | | 54,723 | | | (17,818) |
Realized and unrealized gain (loss) from derivative financial instruments | | | (60,290) | | | 22,717 |
Provision for losses relating to representations and warranties | | | (4,193) | | | (1,367) |
Gain on loans, net | | | $199,501 | | | $84,068 |
(a) | The Gain on sales, net includes income related to originations of mortgage servicing rights. |
| | Year Ended December 31, | ||||
(in thousands) | | | 2019 | | | 2018 |
Origination volume(a) | | | 22,267,593 | | | 10,579,087 |
Originated MSR UPB | | | 20,484,918 | | | 11,690,884 |
Gain on sale margin(a)(b) | | | 89.6 | | | 79.5 |
Retained servicing (UPB)(c) | | | 96.8% | | | 97.4% |
(a) | Origination volume excludes Origination volume from the Distributed Retail channel, which was included in discontinued operations in our results of operations for the year ended December 31, 2018. |
(b) | Gain on sale margin represents the margin on loans sold, including the realized and unrealized gains and losses on sales of mortgage loans, as well as the changes in fair value of all loan-related derivatives, including interest rate lock commitments, freestanding loan-related derivatives, and representation and warranty reserve, and is calculated as the ratio of Gain on loans, net to the Sales volume UPB |
(c) | Represents the percentage of our loan sales UPBs for which we retained the underlying servicing UPB during the period |
| | Year Ended December 31, | ||||
($ in thousands) | | | 2019 | | | 2018 |
Retained servicing fees, net of guarantees | | | $141,195 | | | $118,096 |
Late fees and other | | | 3,033 | | | 953 |
Loan servicing fees | | | $144,228 | | | $119,049 |
| | Year Ended December 31, | ||||
($ in thousands) | | | 2019 | | | 2018 |
MSR Servicing Portfolio (UPB) | | | $52,600,546 | | | $41,423,825 |
Average MSR Servicing Portfolio (UPB) | | | $47,012,186 | | | $37,037,889 |
MSR Servicing Portfolio (Loan Count) | | | 236,362 | | | 189,513 |
MSRs Fair Value Multiple (x) | | | 3.4x | | | 4.3x |
Delinquency Rates (%) | | | 3.5 | | | 3.8 |
Weighted average credit score | | | 722 | | | 721 |
Weighted average servicing fee, net (bps) | | | 0.3 | | | 0.3 |
| | Year Ended December 31, | ||||
($ in thousands) | | | 2019 | | | 2018 |
Realization of cash flows | | | $(98,650) | | | (57,659) |
Valuation inputs and assumptions | | | (133,997) | | | (9,903) |
Hedge | | | 59,513 | | | 20,250 |
Change in fair value of MSRs | | | (173,134) | | | (47,312) |
| | Year Ended December 31, | ||||
($ in thousands) | | | 2019 | | | 2018 |
Interest income | | | 51,801 | | | 35,179 |
Interest expense | | | (57,942) | | | (47,486) |
Interest (loss), net | | | (6,141) | | | (12,307) |
• | Our Origination segment consists of a combination of retail and third-party loan production operations. The increase in revenues for the Origination segment was primarily driven by an increase in loan Origination volume. |
• | Our Servicing segment consists of servicing loans the Company had initially originated and subsequently sold, for which the Company retained servicing rights as well as MSRs the Company occasionally purchases from others. The decrease in revenues for the Servicing segment was primarily driven by a decrease in interest rates. |
| | Year Ended December 31, | ||||
($ in thousands) | | | 2019 | | | 2018 |
Gain on loans, net | | | $200,646 | | | $84,127 |
Loan fee income | | | 32,072 | | | 18,462 |
Loan servings fees | | | (846) | | | — |
Interest income | | | 2,697 | | | 6,028 |
Other income | | | — | | | 44 |
Total Origination segment revenue | | | 234,569 | | | 108,661 |
Directly attributable expense | | | 145,113 | | | 108,410 |
Contribution margin | | | $89,456 | | | $251 |
| | Year Ended December 31, | ||||
($ in thousands) | | | 2019 | | | 2018 |
Gain on loans, net(a) | | | $(1,145) | | | $(59) |
Loan servicing fees | | | 145,074 | | | 119,049 |
Change in fair value of mortgage servicing rights | | | (173,134) | | | (47,312) |
Interest income | | | 18,883 | | | 2,228 |
Other income | | | 13 | | | (98) |
Total Servicing segment revenue | | | (10,309) | | | 73,808 |
Change in mortgage servicing rights due to valuation, net of hedge | | | (74,481) | | | 10,348 |
Directly attributable expense | | | 39,579 | | | 37,280 |
Contribution margin | | | $24,593 | | | $26,180 |
(a) | Gain on loans, net includes a loss on a prior sale of servicing that we reserved for the year ended December 31, 2019. For the year ended December 31, 2018, the loss is from a loss on GNMA note modifications completed by Servicing. |
• | Borrowings, including under our warehouse funding facilities and other secured and unsecured financing facilities |
• | Cash flow from our operations, including: |
• | Sale of mortgage loans held for sale |
• | Loan origination fees |
• | Servicing fee income |
• | Interest income on loans held for sale, and |
• | Cash and marketable securities on hand |
• | Origination of loans |
• | Payment of interest expense |
• | Repayment of debt |
• | Payment of operating expenses, and |
• | Changes in margin requirements for derivative contracts |
| | Nine Months Ended September 30, | | | Year Ended December 31, | |||||||
($ in thousands) | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
Net cash (used in) provided by operating activities | | | $(385,095) | | | $(975,613) | | | $(1,206,693) | | | $262,832 |
Net cash (used in) provided by investing activities | | | (9,914) | | | (5,401) | | | (10,608) | | | 149,281 |
Net cash provided by (used in) financing activities | | | 626,668 | | | 986,606 | | | 1,216,788 | | | (412,457) |
Net increase (decrease) in Cash and cash equivalents and restricted cash | | | 231,659 | | | 5,592 | | | (513) | | | (344) |
Cash and cash equivalents and restricted cash at end of period | | | $313,390 | | | $87,836 | | | 81,731 | | | 82,244 |
($ in thousands) | | | Nine Months Ended September 30, | | | Year Ended December 31, | ||||||
Cash flows from: | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
Mortgage loans held for sale (at fair value) | | | $51,131 | | | $(904,170) | | | $(1,113,232) | | | $380,500 |
Other operating sources | | | (436,226) | | | (71,443) | | | (93,461) | | | (117,668) |
Net cash (used in) provided by operating activities | | | (385,095) | | | (975,613) | | | (1,206,693) | | | 262,832 |
($ in thousands) | | | Nine Months Ended September 30, | | | Year Ended December 31, | ||||||
Cash flows from: | | | 2020 | | | 2019 | | | 2019 | | | 2018 |
Warehouse borrowings | | | $614,294 | | | $931,498 | | | 1,073,946 | | | (521,784) |
Other financing sources | | | 12,374 | | | 55,108 | | | 142,842 | | | 109,327 |
Net cash provided by (used in) financing activities | | | 626,668 | | | 986,606 | | | 1,216,788 | | | (412,457) |
($ in thousands) | | | Total | | | Less than 1 year | | | 1-3 years | | | 3-5 years | | | More than 5 years |
Term debt(a) | | | 366,708 | | | — | | | 366,708 | | | — | | | — |
Interest on long term debt | | | 52,673 | | | 20,348 | | | 32,325 | | | — | | | — |
Advance facilities(b) | | | 48,250 | | | 48,250 | | | — | | | — | | | — |
Warehouse facilities(b) | | | 1,478,183 | | | 1,478,183 | | | — | | | — | | | — |
Operating line of credit(b) | | | 10,000 | | | 10,000 | | | — | | | — | | | — |
Mortgage-backed securities forward trades | | | 3,350,161 | | | 3,350,161 | | | | | | | |||
Interest rate lock commitments | | | 3,171,868 | | | 3,171,868 | | | | | | | |||
Operating Leases(c) | | | 23,320 | | | 7,512 | | | 13,320 | | | 2,488 | | | — |
Total | | | 8,501,163 | | | 8,086,322 | | | 412,353 | | | 2,488 | | | — |
(a) | The rate used to estimate interest was the rate as of December 31, 2019. The rate is based on the LIBOR rate and there has been a significant decline in the rate in 2020 which is not reflected above. Term debt is net of debt issuance costs. |
(b) | Interest expense on advance, warehouse facilities and operating lines of credit is not presented in this table due to the short-term nature of these facilities. |
(c) | Payments due for our leases of office space and equipment expiring at various dates through 2025. The payments represent future minimum rental payments under the leases having an initial or remaining non-cancelable term in excess of one year. |
(1) | Total origination volume excludes origination volume from the Distributed Retail channel, which was included in discontinued operations in our results of operations for the year ended December 31, 2018. |
(2) | Origination volume figures used to calculate market share include $1.0 billion of Distributed Retail originations in our results of operations for the year ended December 31, 2018. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
• | provide us efficient access to both purchase and refinance transactions throughout market cycles; |
• | benefit from the premise that in-market advisors will continue to be a cornerstone of the mortgage origination process; |
• | are highly scalable and flexible; and |
• | provide an optimized experience for our customers. |
(1) | Total origination volume excludes origination volume from the Distributed Retail channel, which was included in discontinued operations in our results of operations for the year ended December 31, 2018. |
(2) | Third Party Partners includes both Broker Partners and Correspondent Partners. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
Activation Rate by Broker Partner Cohort | | | Wallet Share Growth by Broker Partner Cohort Following Initial Onboarding |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
(1) | Third Party Partners includes both Broker Partners and Correspondent Partners. |
(2) | Active broker market coverage is calculated as the total number of active brokers at Home Point divided by the total number of brokers in the market. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
* | LTM 3Q’20 represents the twelve months ended September 30, 2020. |
(1) | Freddie Mac Primary Mortgage Market Survey, December 10, 2020. 50bps buffer represents an assumption on the cost of refinancing. |
• | economies of scale: allows brokers to benefit from the scale of a larger organization while being able to run their business at a size that can be most responsive to their customers; |
• | optimal choice: rather than needing to work with one originator, brokers have the ability to partner with multiple lenders to determine the best financing alternative for their customers; and |
• | scalability of cost structure: reduce cost per loan and limited overhead. |
• | the Real Estate Settlement Procedures Act and Regulation X, which (1) require certain disclosures to be made to the borrower at application, as to the lender’s good faith estimate of loan origination costs, and at closing with respect to the real estate settlement statement, (2) apply to certain loan servicing practices |
• | The Truth In Lending Act, or TILA, Home Ownership and Equity Protection Act of 1994, and Regulation Z, which regulate mortgage loan origination activities, require certain disclosures be made to borrowers throughout the loan process regarding terms of mortgage financing, provide for a three-day right to rescind some transactions, regulate certain higher-priced and high-cost mortgages, require lenders to make a reasonable and good faith determination that consumers have the ability to repay the loan, mandate home ownership counseling for mortgage applicants, impose restrictions on loan originator compensation, and apply to certain loan servicing practices; |
• | Regulation N, which prohibits certain unfair and deceptive acts and practices related to mortgage advertising; |
• | certain provisions of the Dodd-Frank Act, including the Consumer Financial Protection Act, which, among other things, prohibit unfair, deceptive or abusive acts or practices; |
• | the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, and Regulation V, which regulate the use and reporting of information related to the credit history of consumers, require disclosures to consumers regarding the use of credit report information in certain credit decisions and require lenders to undertake remedial actions if there is a breach in the lender’s data security; |
• | the Equal Credit Opportunity Act and Regulation B, which prohibit discrimination on the basis of age, race and certain other characteristics in the extension of credit and require certain disclosures to applicants for credit; |
• | the Homeowners Protection Act, which requires certain disclosures and the cancellation or termination of mortgage insurance once certain equity levels are reached; |
• | the Home Mortgage Disclosure Act and Regulation C, which require reporting of loan origination data, including the number of loan applications taken, approved, denied and withdrawn; |
• | the Fair Housing Act, which prohibits discrimination in housing on the basis of race, sex, national origin, and certain other characteristics; |
• | the Fair Debt Collection Practices Act, which regulates the timing and content of third-party debt collection communications; |
• | the Gramm-Leach-Bliley Act, which requires initial and periodic communication with consumers on privacy matters and the maintenance of privacy regarding certain consumer data in our possession; |
• | the Bank Secrecy Act and related regulations from the Office of Foreign Assets Control, and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act, or the USA PATRIOT Act, which impose certain due diligence and recordkeeping requirements on lenders to detect and block money laundering that could support terrorist or other illegal activities; |
• | the Secure and Fair Enforcement for Mortgage Licensing Act, or the SAFE Act, which imposes state licensing requirements on mortgage loan originators; |
• | the Military Lending Act, or MLA, which restricts, among other things, the interest rate and other terms that can be offered to active military personnel and their dependents on most types of consumer credit, requires certain disclosures and prohibits certain terms, such as mandatory arbitration if a dispute arises concerning the consumer credit product; |
• | the Servicemembers Civil Relief Act, which provides financial protections for eligible service members; |
• | the Federal Trade Commission Act, the FTC Credit Practices Rules and the FTC Telemarketing Sales Rule, which prohibit unfair or deceptive acts or practices and certain related practices; |
• | the Telephone Consumer Protection Act, which restricts telephone and text solicitations and communications and the use of automatic telephone equipment; |
• | the Electronic Signatures in Global and National Commerce Act, or ESIGN, and similar state laws, particularly the Uniform Electronic Transactions Act, or UETA, which require businesses that use electronic records or signatures in consumer transactions and provide required disclosures to consumers electronically, to obtain the consumer’s consent to receive information electronically; |
• | the Electronic Fund Transfer Act of 1978, or EFTA, and Regulation E, which protect consumers engaging in electronic fund transfers; |
• | the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 and the FTC’s rules promulgated pursuant to such Act, or the CAN-SPAM Act, which establish requirements for certain “commercial messages” and “transactional or relationship messages” transmitted via email; and |
• | the Bankruptcy Code and bankruptcy injunctions and stays, which can restrict collection of debts. |
• | loss of our licenses and approvals to engage in our servicing and lending businesses; |
• | governmental investigations and enforcement actions; |
• | administrative fines and penalties and litigation; |
• | civil and criminal liability, including class action lawsuits and actions to recover incentive and other payments made by governmental entities; |
• | breaches of covenants and representations resulting in defaults and cross-defaults under our servicing and trade agreements and financing arrangements; |
• | damage to our reputation; |
• | inability to obtain new financing and maintain existing financing; |
• | inability to raise capital; or |
• | inability to execute on our business strategy. |
Name | | | Age | | | Position |
William A. Newman | | | 56 | | | Director, President and Chief Executive Officer |
Andrew J. Bon Salle | | | 54 | | | Chairperson of the Board of Directors |
Mark E. Elbaum | | | 58 | | | Chief Financial Officer |
Maria N. Fregosi | | | 55 | | | Chief Investment Officer |
Phillip R. Shoemaker Jr. | | | 41 | | | President of Originations |
Phillip M. Miller | | | 51 | | | Chief Operating Officer |
Brian R. Ludtke | | | 53 | | | Chief Administrative Officer and Corporate Secretary |
Perry Hilzendeger | | | 53 | | | President of Servicing |
Laurie S. Goodman | | | 65 | | | Director Nominee* |
Agha S. Khan | | | 41 | | | Director |
Stephen A. Levey | | | 46 | | | Director |
Timothy R. Morse | | | 51 | | | Director Nominee* |
Eric L. Rosenzweig | | | 38 | | | Director |
* | To be elected to the board upon or before the consummation of this offering. |
• | any breach of the director’s duty of loyalty to us or our stockholders; |
• | any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; |
• | unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the DGCL; or |
• | any transaction from which the director derived an improper personal benefit. |
• | selecting, evaluating, compensating and overseeing the independent registered public accounting firm; |
• | overseeing our financial reporting activities and the accounting standards and principles followed; |
• | reviewing and discussing with management and the independent auditor, as appropriate, the effectiveness of our internal control over financial reporting; |
• | as required by the listing standards of NASDAQ, reviewing our major financial risk exposures (and the steps management has taken to monitor and control these risks) and our risk assessment and risk management practices and the guidelines, policies and processes for risk assessment and risk management; |
• | approving audit and non-audit services provided by the independent registered public accounting firm; |
• | reviewing and, if appropriate, approving or ratifying transactions with related persons required to be disclosed under SEC rules; |
• | meeting with management and the independent registered public accounting firm to review and discuss our financial statements and other matters; |
• | overseeing our internal audit function, including reviewing its organization, performance and audit findings, and reviewing our internal controls; |
• | monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters; |
• | establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal controls, auditing or compliance matters; |
• | reviewing proposed waivers of the code of conduct for directors and executive officers; and |
• | reviewing the audit committee charter and the committee’s performance at least annually. |
• | select, or recommend that our board of directors select, the director nominees to stand for election at each annual general meeting of our stockholders or to fill vacancies on our board of directors; |
• | review our management succession planning; |
• | develop and recommend to our board of directors a set of corporate governance guidelines applicable to us and monitor compliance with such guidelines; and |
• | oversee the annual performance evaluation of our board of directors (and any committees thereof) and management. |
• | review and approve, or recommend to the full board of directors, the goals and objectives relating to the compensation of our executive officers, including any long-term incentive components of our compensation programs; |
• | evaluate the performance of our executive officers in light of the goals and objectives of our compensation programs and approve, or recommend to the full board of directors, each executive officer’s compensation based on such evaluation; |
• | oversee the evaluation of each of our executive officers’ performance; |
• | review and approve, or recommend to the full board of directors, subject, if applicable, to stockholder approval, our compensation programs; |
• | review the operation and efficacy of our executive compensation programs in light of their goals and objectives; |
• | review and assess risks arising from our compensation programs; |
• | periodically review that our executive compensation programs comport with the compensation committee’s stated compensation philosophy; |
• | review and recommend to the board of directors the appropriate structure and amount of compensation for our directors; |
• | establish and periodically review policies for the administration of our equity compensation plans; and |
• | review the adequacy of the compensation committee and its charter and recommend any proposed changes to the board of directors not less than annually. |
Name and Principal Position | | | Year | | | Salary ($)(1) | | | Bonus ($)(2) | | | Option Awards ($)(3) | | | Non-Equity Incentive Plan Compensation ($) | | | All Other Compensation ($) | | | Total ($) |
William Newman President and Chief Executive Officer | | | 2020 | | | 400,000 | | | 1,125,000 | | | — | | | — | | | — | | | 1,525,000 |
Maria Fregosi Chief Investment Officer(4) | | | 2020 | | | 350,000 | | | 223,500 | | | — | | | — | | | — | | | 573,500 |
Phil Shoemaker President of Originations | | | 2020 | | | 375,000 | | | 120,000 | | | — | | | — | | | — | | | 495,000 |
(1) | The amounts reported represent the named executive officer’s base salary earned during the fiscal year covered. |
(2) | The amounts reported represent the 2020 Special Bonuses in an amount equal to: $1,125,000 for Mr. Newman, $223,500 for Ms. Fregosi and $125,000 for Mr. Shoemaker. See “—Special Bonus Agreement” below. The named executive officers are also eligible to receive a discretionary bonus based on fiscal 2020 performance. We expect that such bonuses will be determined and paid in February 2021. |
(3) | The amounts reported represent the aggregate grant-date fair value of performance-vesting options awarded to the named executive officer in 2020, calculated in accordance with FASB ASC Topic 718 (“Topic 718”), utilizing the assumptions discussed in Note 20 – Stock Options, to our consolidated financial statements included elsewhere in this prospectus. The performance-vesting options are subject to market conditions and an implied performance condition as defined under applicable accounting standards. The grant date fair value of the performance-vesting options was computed based upon the probable outcome of the performance conditions as of the grant date in accordance with Topic 718. Achievement of the performance conditions for the performance-vesting options was not deemed probable on the grant date and, accordingly, no value is included in the table for these awards pursuant to the SEC’s disclosure rules. Assuming achievement of the performance conditions, the aggregate grant date fair values of the performance-vesting options granted in fiscal 2020 to each of our named executive officers would have been: Mr. Newman ($342,322); Ms. Fregosi ($224,757); and Mr. Shoemaker ($273,857). |
(4) | Until December 2020, Ms. Fregosi served as our Chief Financial Officer. |
• | A portion of the special incentive bonus was paid to each of the named executive officers on October 9, 2020 (the “2020 Special Bonus”). |
• | A portion of the special incentive bonus will be paid to Ms. Fregosi and Mr. Shoemaker in equal installments on the first payroll date after the end of each fiscal quarter of the Company beginning on December 31, 2020 and continuing until December 31, 2023 (the “Time-Vesting Bonus”). |
• | A portion of the special incentive bonus will be paid to each of the named executive officers upon the consummation of a “sponsor exit transaction” or a “public offering” (each as defined in the 2015 Option Plan), subject to the satisfaction of specified transfer and financial targets in connection with the sponsor exit transaction or public offering (the “Performance-Vesting Bonus”). |
Executive | | | 2020 Special Bonus ($) | | | Time- Vesting Bonus ($) | | | Performance- Vesting Bonus ($) | | | Total Special Incentive Bonus ($) |
William Newman | | | 1,125,000 | | | — | | | 1,875,000 | | | 3,000,000 |
Maria Fregosi | | | 223,500 | | | 76,500 | | | 600,000 | | | 900,000 |
Phil Shoemaker | | | 120,000 | | | 480,000 | | | 1,200,000 | | | 1,800,000 |
• | 50% of the common units granted pursuant to each option are “time-vesting options,” which generally vest in annual installments over the first five years of the grant date, except that all unvested time-vesting options vest on a “sponsor exit transaction” (as defined in the 2015 Option Plan); and |
• | 50% of the common units granted pursuant to the options are “performance-vesting options” that vest only upon the consummation of a “sponsor exit transaction” (as defined in the 2015 Option Plan) or certain initial public offerings of equity securities of Holdings or any of its subsidiaries pursuant to an effective registration statement under the Securities Act (a “public offering”) and only if specified transfer and financial targets are satisfied. |
| | Option Awards | ||||||||||||||||
Name | | | Date of Grant | | | Number of Securities Underlying Unexercised Options (#) Exercisable(1) | | | Number of Securities Underlying Unexercised Options (#) Unexercisable(2) | | | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)(3) | | | Option Exercise Price ($) | | | Option Expiration Date |
| | | | | | | | | | | | |||||||
William Newman | | | 4/1/15 | | | 1,011,137 | | | — | | | 1,011,137 | | | 3.71 | | | 4/1/25 |
| 2/28/20 | | | — | | | — | | | 674,091 | | | 3.89 | | | 2/28/30 | ||
Maria Fregosi | | | 4/1/15 | | | 168,523 | | | — | | | 168,523 | | | 3.71 | | | 4/1/25 |
| 2/16/16 | | | 10,785 | | | 2,696 | | | 13,482 | | | 3.71 | | | 2/16/26 | ||
| 4/16/18 | | | 8,089 | | | 12,134 | | | 20,223 | | | 3.88 | | | 4/16/28 | ||
| 12/5/18 | | | 26,964 | | | 40,445 | | | 67,409 | | | 3.80 | | | 12/5/28 | ||
| 2/28/20 | | | — | | | — | | | 134,818 | | | 3.89 | | | 2/28/30 | ||
| 6/15/20 | | | — | | | — | | | 134,818 | | | 3.89 | | | 6/15/30 | ||
Phil Shoemaker | | | 12/5/18 | | | 215,709 | | | 323,564 | | | 539,273 | | | 3.80 | | | 12/5/28 |
| 2/28/20 | | | — | | | — | | | 539,273 | | | 3.89 | | | 2/28/30 |
(1) | The numbers in this column represent vested and exercisable time-vesting options. |
(2) | The numbers in this column represent unvested outstanding time-vesting options. |
(3) | The numbers in this column represent unvested outstanding performance-vesting options. The vesting terms of these options are described above under “Narrative Disclosure to Summary Compensation Table.” |
• | Annual cash retainer of $75,000; |
• | Additional annual cash retainer of $10,000 for each committee on which the outside director serves ($15,000 if serving as the chairperson of such committee); and |
• | An annual grant of restricted stock units with a fair market value at the time of grant to be determined annually, which will vest at the next annual stockholders meeting; provided that for 2021 the restricted stock unit grant will vest at the 2022 annual stockholders meeting. |
• | 50% of the common units granted pursuant to the option are “time-vesting options,” which vest as to 20% of the options on the grant date and on each of the first four anniversaries thereafter, except that all unvested time-vesting options vest on a “sponsor exit transaction” (as defined in the 2015 Option Plan); and |
• | 50% of the common units granted pursuant to the options are “performance-vesting options” that vest only upon the consummation of a sponsor exit transaction or certain initial public offerings of equity securities of Holdings or any of its subsidiaries pursuant to an effective registration statement under the Securities Act (a “public offering”) and only if specified transfer and financial targets are satisfied. |
• | entering into or effecting a “Change in Control” as defined in the stockholders’ agreement; |
• | entering into any agreement providing for the acquisition or divestiture of assets or equity securities, in each case providing for aggregate consideration in excess of $100 million, other than such agreements entered into in the ordinary course of business; |
• | entering into any joint venture or similar business alliance having a fair market value as of the date of formation thereof (as reasonably determined by the Board) in excess of $100 million; |
• | initiating a voluntary liquidation, dissolution, receivership, bankruptcy or other insolvency proceeding involving the Company or any subsidiary of the Company that is a “significant subsidiary” as defined in Rule 1-02 of Regulation S-X under the Exchange Act; |
• | any material change in the nature of the business of the Company and its subsidiaries, taken as a whole; |
• | the incurrence of indebtedness for borrowed money in an aggregate principal amount in excess of $100 million in any transaction or series of related transactions, other than borrowings under any mortgage warehouse funding facilities or other lines of credit in the ordinary course of business or consistent with past practice or industry practice; |
• | terminating the employment of the Chief Executive Officer of the Company or any subsidiary or hiring a new Chief Executive Officer of the Company or any subsidiary; and |
• | any increase or decrease in the size or composition of the Board, committees of the Board, and boards and committees of our subsidiaries, subject to certain other provisions in the stockholders’ agreement. |
| | Shares of common stock beneficially owned prior to this offering | | | Number of Shares Being Sold in this Offering | | | Shares of common stock beneficially owned after this offering assuming no exercise of underwriters’ option | | | Shares of common stock beneficially owned after this offering assuming full exercise of underwriters’ option | |||||||||||||
Name of Beneficial Owners(1) | | | Shares of common stock | | | Percentage of Total Outstanding Common Stock (%) | | | No exercise of underwriters’ option | | | Full exercise of underwriters’ option | | | Shares of common stock | | | Percentage of Total Outstanding Common Stock (%) | | | Shares of common stock | | | Percentage of Total Outstanding Common Stock (%) |
Greater than 5% Stockholders | | | | | | | | | | | | | | | | | ||||||||
Trident Stockholders(2) | | | 134,818,216 | | | 96.0% | | | 11,999,728 | | | 13,874,728 | | | 122,818,488 | | | 88.4% | | | 120,943,488 | | | 87.0% |
| | | | | | | | | | | | | | | | |||||||||
Named Executive Officers | | | | | | | | | | | | | | | | | ||||||||
William A. Newman | | | 2,089,682 | | | 1.5% | | | 185,996 | | | 185,996 | | | 1,903,686 | | | 1.4% | | | 1,903,686 | | | 1.4% |
Maria N. Fregosi | | | 351,875 | | | * | | | 31,319 | | | 31,319 | | | 320,556 | | | * | | | 320,556 | | | * |
Phillip R. Shoemaker Jr. | | | 348,143 | | | * | | | 30,987 | | | 30,987 | | | 317,156 | | | * | | | 317,156 | | | * |
| | | | | | | | | | | | | | | | |||||||||
Directors and Director Nominees | | | | | | | | | | | | | | | | | ||||||||
Andrew J. Bon Salle | | | 134,818 | | | * | | | 12,000 | | | 12,000 | | | 122,818 | | | * | | | 122,818 | | | * |
Laurie S. Goodman(3) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
Agha S. Khan | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
Stephen A. Levey | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
Timothy R. Morse(3) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
Eric L. Rosenzweig | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
| | | | | | | | | | | | | | | | |||||||||
Directors, Director Nominees and Executive Officers as a group (9 persons) | | | 2,924,518 | | | 2.1% | | | 260,302 | | | 260,302 | | | 2,664,216 | | | 1.9% | | | 2,664,216 | | | 1.9% |
Other Selling Stockholders: | | | | | | | | | | | | | | | | | ||||||||
Weiser Family Investments LLC(4) | | | 1,617,818 | | | 1.2% | | | 143,997 | | | 143,997 | | | 1,473,821 | | | 1.1% | | | 1,473,821 | | | 1.1% |
Other Selling Stockholders as a Group(5) | | | 1,078,272 | | | * | | | 95,973 | | | 95,973 | | | 982,299 | | | * | | | 982,299 | | | * |
* | Less than 1% of common stock outstanding. |
(1) | Unless otherwise indicated below, the address of each of the individuals named above is: c/o Home Point Capital Inc., 2211 Old Earhart Road, Suite 250, Ann Arbor, Michigan 48105. |
(2) | Following the consummation of this offering, Trident VI, L.P. (“Trident VI”), Trident VI Parallel Fund, L.P. (“Trident VI Parallel”), Trident VI DE Parallel Fund, L.P. (“Trident VI DE”) and Trident VI Professionals Fund, L.P. (“Trident VI Professionals”) will hold shares of our |
(3) | To be elected to the board upon or before the consummation of this offering. |
(4) | The principal business address of the entity identified in this footnote is c/o Weiser Family Investments, 320 Main Street, Suite 200, Ann Arbor, MI 48104. |
(5) | Shares shown in the table include shares owned by the selling stockholders other than those named in the table that in the aggregate beneficially own less than 1% of our common stock as of January 22, 2021. |
• | the designation of the series; |
• | the number of shares of the series, which our board of directors may, except where otherwise provided in the preferred stock designation, increase (but not above the total number of authorized shares of the class) or decrease (but not below the number of shares then outstanding); |
• | whether dividends, if any, will be cumulative or non-cumulative and the dividend rate of the series; |
• | the dates at which dividends, if any, will be payable; |
• | the redemption rights and price or prices, if any, for shares of the series; |
• | the terms and amounts of any sinking fund provided for the purchase or redemption of shares of the series; |
• | the amounts payable on shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of the Company; |
• | whether the shares of the series will be convertible into shares of any other class or series, or any other security, of the Company or any other corporation and, if so, the specification of the other class or series or other security, the conversion price or prices or rate or rates, any rate adjustments, the date or dates as of which the shares will be convertible and all other terms and conditions upon which the conversion may be made; |
• | restrictions on the issuance of shares of the same series or of any other class or series; and |
• | the voting rights, if any, of the holders of the series. |
• | prior to such time, our board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
• | upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding certain shares; or |
• | at or subsequent to that time, the business combination is approved by our board of directors and by the affirmative vote of holders of at least 66 2⁄3% of the outstanding voting stock that is not owned by the interested stockholder. |
• | the provision requiring a 66 2/3% supermajority vote for stockholders to amend our amended and restated bylaws; |
• | the provisions providing for a classified board of directors (the election and term of our directors); |
• | the provisions regarding resignation and removal of directors; |
• | the provisions regarding competition and corporate opportunities; |
• | the provisions regarding entering into business combinations with interested stockholders; |
• | the provisions regarding stockholder action by written consent; |
• | the provisions regarding calling special meetings of stockholders; |
• | the provisions regarding filling vacancies on our board of directors and newly created directorships; |
• | the provisions eliminating monetary damages for breaches of fiduciary duty by a director; and |
• | the amendment provision requiring that the above provisions be amended only with a 66 2/3% supermajority vote. |
• | 1% of the number of shares of our common stock then outstanding, which will equal approximately 1,388,601 shares immediately after this offering; or |
• | the average reported weekly trading volume of our common stock on NASDAQ during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
• | an individual citizen or resident of the United States; |
• | a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia; |
• | an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
• | a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons as defined under the Code, have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person. |
• | the gain is effectively connected with a trade or business of the non-U.S. holder in the United States (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment of the non-U.S. holder); |
• | the non-U.S. holder is an individual who is present in the United States for 183 days or more in the taxable year of that disposition, and certain other conditions are met; or |
• | we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes, at any time within the five-year period preceding the disposition or the non-U.S. holder’s holding period, which period is shorter and certain other conditions are met. |
Underwriter | | | Number of Shares |
Goldman Sachs & Co. LLC | | | |
Wells Fargo Securities, LLC | | | |
Morgan Stanley & Co. LLC | | | |
UBS Securities LLC | | | |
Credit Suisse Securities (USA) LLC | | | |
J.P. Morgan Securities LLC | | | |
BofA Securities, Inc. | | | |
JMP Securities LLC | | | |
Piper Sandler & Co. | | | |
R. Seelaus & Co., LLC | | | |
SPC Capital Markets LLC | | | |
Wedbush Securities Inc. | | | |
Zelman Partners LLC | | | |
Total | | | 12,500,000 |
| | No Exercise | | | Full Exercise | |
Per Share | | | $ | | | $ |
Total | | | $ | | | $ |
| | No Exercise | | | Full Exercise | |
Per Share | | | $ | | | $ |
Total | | | $ | | | $ |
(a) | to any legal entity which is a qualified investor as defined under the Prospectus Regulation; |
(b) | to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation); or |
(c) | in any other circumstances falling within Article 1(4) of the Prospectus Regulation, |
(a) | to any legal entity which is a qualified investor as defined in Article 2 of the UK Prospectus Regulation; |
(b) | to fewer than 150 natural or legal persons (other than qualified investors as defined in Article 2 of the UK Prospectus Regulation); or |
(c) | in any other circumstances falling within section 86 of the Financial Services and Markets Act 2000 (“FSMA”), |
• | does not constitute a disclosure document or a prospectus under Chapter 6D.2 of the Corporations Act 2001 (Cth) (the “Corporations Act”); |
• | has not been, and will not be, lodged with the Australian Securities and Investments Commission (“ASIC”), as a disclosure document for the purposes of the Corporations Act and does not purport to include the information required of a disclosure document for the purposes of the Corporations Act; and |
• | may only be provided in Australia to select investors who are able to demonstrate that they fall within one or more of the categories of investors, available under section 708 of the Corporations Act (“Exempt Investors”). |
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS | | | |
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AUDITED CONSOLIDATED FINANCIAL STATEMENTS | | | |
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| | September 30, 2020 (unaudited) | | | December 31, 2019 | |
Assets: | | | | | ||
Cash and cash equivalents | | | $271,483 | | | $30,630 |
Restricted cash | | | 41,907 | | | 51,101 |
Cash and cash equivalents and Restricted cash | | | 313,390 | | | 81,731 |
Mortgage loans held for sale (at fair value) | | | 2,281,835 | | | 1,554,230 |
Mortgage servicing rights (at fair value) | | | 583,263 | | | 575,035 |
Property and equipment, net | | | 18,595 | | | 12,051 |
Accounts receivable, net | | | 79,320 | | | 57,872 |
Derivative assets | | | 314,794 | | | 40,544 |
Goodwill and intangibles | | | 11,083 | | | 11,935 |
GNMA loans eligible for repurchase | | | 2,919,881 | | | 499,207 |
Other assets | | | 65,745 | | | 76,162 |
Total assets | | | $6,587,906 | | | $2,908,767 |
Liabilities and Shareholders’ Equity: | | | | | ||
Liabilities: | | | | | ||
Warehouse lines of credit | | | $2,092,477 | | | $1,478,183 |
Term debt and other borrowings, net | | | 374,090 | | | 424,958 |
Accounts payable and accrued expenses | | | 269,016 | | | 39,739 |
GNMA loans eligible for repurchase | | | 2,919,881 | | | 499,207 |
Other liabilities | | | 189,700 | | | 56,368 |
Total liabilities | | | $5,845,164 | | | $2,498,455 |
Commitments and Contingencies (Note 11) | | | | | ||
| | | | |||
Shareholders’ Equity: | | | | | ||
Common stock (138,860,111 shares issued and outstanding, par value $0.0000000072 per share) | | | — | | | — |
Additional paid-in capital | | | 519,177 | | | 454,861 |
Retained earnings (accumulated deficit) | | | 223,565 | | | (44,549) |
Total shareholders' equity | | | 742,742 | | | 410,312 |
Total liabilities and shareholders' equity | | | $6,587,906 | | | $2,908,767 |
| | Nine months Ended September 30, | ||||
| | 2020 | | | 2019 | |
Revenue: | | | | | ||
Gain on loans, net | | | $962,778 | | | $135,495 |
Loan fee income | | | 60,630 | | | 19,829 |
Interest income | | | 42,370 | | | 35,101 |
Interest expense | | | (47,845) | | | (41,933) |
Interest loss, net | | | (5,475) | | | (6,832) |
Loan servicing fees | | | 133,904 | | | 104,089 |
Change in fair value of mortgage servicing rights | | | (230,524) | | | (151,168) |
Other income | | | 1,022 | | | 1,591 |
Total net revenue | | | $922,335 | | | $103,004 |
Expenses: | | | | | ||
Compensation and benefits | | | 251,462 | | | 104,571 |
Loan expense | | | 28,581 | | | 10,182 |
Loan servicing expense | | | 22,742 | | | 15,781 |
Occupancy and equipment | | | 17,006 | | | 12,567 |
General and administrative | | | 28,373 | | | 14,687 |
Depreciation and amortization | | | 4,222 | | | 4,394 |
Other expenses | | | 12,087 | | | 2,770 |
Total expenses | | | $364,473 | | | $164,952 |
Income (loss) before income tax | | | 557,862 | | | (61,948) |
Income tax expense (benefit) | | | 149,306 | | | (14,080) |
Income from equity method investment | | | 14,050 | | | 2,591 |
Total net income (loss) | | | $422,606 | | | $(45,277) |
| | | | |||
Basic and diluted loss earnings per share: | | | | | ||
Basic and diluted total net income (loss) per share | | | $3.04 | | | $(0.33) |
| | Common Stock | | | Additional Paid in Capital | | | Retained Earnings (Accumulated Deficit) | | | Total Shareholders’ Equity | ||||
| | Shares | | | Amount | | |||||||||
Ending balance, December 31, 2018 | | | 138,860,111 | | | — | | | $454,110 | | | $(15,339) | | | $438,771 |
Stock based compensation | | | — | | | — | | | 534 | | | — | | | 534 |
Net loss | | | — | | | — | | | — | | | (45,277) | | | (45,277) |
Ending balance, September 30, 2019 | | | 138,860,111 | | | — | | | $454,644 | | | $(60,616) | | | $394,028 |
Ending balance, December 31, 2019 | | | 138,860,111 | | | — | | | $454,861 | | | $(44,549) | | | $410,312 |
Capital contributions from parent | | | — | | | — | | | 63,774 | | | — | | | 63,774 |
Cash dividends declared | | | — | | | — | | | — | | | (154,492) | | | (154,492) |
Stock based compensation | | | — | | | — | | | 542 | | | — | | | 542 |
Net income | | | — | | | — | | | — | | | 422,606 | | | 422,606 |
Ending balance, September 30, 2020 | | | 138,860,111 | | | — | | | $519,177 | | | $223,565 | | | $742,742 |
| | Nine months Ended September 30, | ||||
| | 2020 | | | 2019 | |
Operating activities: | | | | | ||
Net income (loss) | | | $422,606 | | | $(45,277) |
Adjustments to reconcile net income (loss) to cash used in operating activities: | | | | | ||
Depreciation | | | 3,370 | | | 2,779 |
Amortization of intangible assets | | | 852 | | | 1,615 |
Amortization of debt issuance costs | | | 531 | | | 5,669 |
Gain on loans, net | | | (962,778) | | | (135,495) |
Provision for representation and warranty reserve | | | 10,025 | | | 900 |
Stock based compensation expense | | | 542 | | | 534 |
Deferred income tax | | | 133,645 | | | (15,046) |
Gain on equity investment | | | (14,050) | | | (2,591) |
Origination of mortgage loans held for sale | | | (38,534,747) | | | (14,735,416) |
Proceeds on sale and payments from mortgage loans held for sale | | | 38,585,878 | | | 13,831,246 |
Change in fair value of mortgage servicing rights | | | 230,524 | | | 151,168 |
Change in fair value of mortgage loans held for sale | | | (54,709) | | | (31,013) |
Change in fair value of derivative assets | | | (274,250) | | | (31,340) |
Changes in operating assets and liabilities: | | | | | ||
Increase in accounts receivable, net | | | (21,448) | | | (2,518) |
Decrease in other assets | | | 3,798 | | | 705 |
Increase in accounts payable and accrued expenses | | | 74,787 | | | 11,081 |
Increase in other liabilities | | | 10,329 | | | 17,386 |
Net cash used in operating activities | | | $(385,095) | | | $(975,613) |
| | | | |||
Investing activities: | | | | | ||
Purchases of property and equipment, net of disposals | | | (9,914) | | | (3,633) |
Equity method investment | | | | | 5 | |
Business acquisitions, net of cash acquired | | | | | (1,773) | |
Net cash used in investing activities | | | $(9,914) | | | $(5,401) |
| | | | |||
Financing activities: | | | | | ||
Proceeds from warehouse borrowings | | | 38,381,219 | | | 14,697,210 |
Payments on warehouse borrowings | | | (37,766,925) | | | (13,765,712) |
Proceeds from term debt borrowings | | | 47,600 | | | 309,000 |
Payments on term debt borrowings | | | (60,000) | | | (245,156) |
Proceeds from other borrowings | | | 64,500 | | | 159,600 |
Payments on other borrowings | | | (103,500) | | | (166,000) |
Payments of debt issuance costs | | | | | (2,336) | |
Capital contributions from parent | | | 63,774 | | | — |
Net cash provided by financing activities | | | 626,668 | | | 986,606 |
Net increase in cash, cash equivalents and restricted cash | | | $231,659 | | | $5,592 |
Cash, cash equivalents and restricted cash at beginning of period | | | 81,731 | | | 82,244 |
Cash, cash equivalents and restricted cash at end of period | | | $313,390 | | | $87,836 |
Supplemental disclosure: | | | | | ||
Cash paid for interest | | | 46,715 | | | 35,054 |
Cash paid for taxes | | | 22,034 | | | 966 |
1. | All of Platinum Mortgage, Inc.’s rights and ownership in certain tangible and intangible property, including but not limited to information, books, and records of the Platinum Mortgage, Inc. such as filers, invoices, credit and sales records, personnel records, and all agreements to which Platinum Mortgage, Inc. is a party and identified as material contracts; |
2. | Employees, including underwriters, closers, account managers, administrative staff; |
3. | Building lease and all related facilities contracts; |
4. | Retained assets, including office furniture and computer equipment. |
Fair value of assets acquired: | | | |
Fixed assets | | | $93 |
Consideration transferred: | | | |
Cash | | | 124 |
Earnout | | | 1,648 |
| | $1,772 | |
Goodwill | | | $1,679 |
Fair value of assets acquired: | | | |
Cash | | | $2 |
Mortgage loans held for sale | | | 214 |
Mortgage servicing rights | | | 1,528 |
Servicing advances | | | 181 |
Accounts receivable | | | 31 |
Foreclosure assets | | | 334 |
Real estate owned | | | 247 |
Prepaid expenses and other assets | | | 20 |
GNMA loans eligible for repurchase | | | 1,580 |
Total assets | | | $4,137 |
| | ||
Representation and warranty reserve | | | 85 |
Accrued expenses | | | 424 |
Deferred tax liability, net | | | 304 |
GNMA loans eligible for repurchase | | | 1,580 |
Total liabilities | | | $2,393 |
Net assets | | | $1,744 |
| | ||
Consideration transferred: | | | |
Cash | | | 2,152 |
Holdback | | | 1,000 |
Goodwill | | | $1,408 |
| | September 30, 2020 | |||||||
| | Unpaid Principal | | | Fair Value Adjustment | | | Total Fair Value | |
Conventional(1) | | | $1,479,984 | | | $66,285 | | | $1,546,269 |
Government(2) | | | 699,775 | | | 35,599 | | | 735,374 |
Reverse(3) | | | 275 | | | (83) | | | 192 |
Total | | | $2,180,034 | | | $101,801 | | | $2,281,835 |
(1) | Conventional includes FNMA and FHLMC mortgage loans. |
(2) | Government includes GNMA mortgage loans (including Federal Housing Administration, Department of Veterans Affairs, and United States Department of Agriculture). |
(3) | Reverse loan presented in Mortgage loans held for sale on the condensed consolidated balance sheets as a result of a repurchase |
| | December 31, 2019 | |||||||
| | Unpaid Principal | | | Fair Value Adjustment | | | Total Fair Value | |
Conventional(1) | | | $454,225 | | | $8,787 | | | $463,012 |
Government(2) | | | 1,052,638 | | | 38,388 | | | 1,091,026 |
Reverse(3) | | | 275 | | | (83) | | | 192 |
Total | | | $1,507,138 | | | $47,092 | | | $1,554,230 |
(1) | Conventional includes FNMA and FHLMC mortgage loans. |
(2) | Government includes GNMA mortgage loans (including Federal Housing Administration, Department of Veterans Affairs and United States Department of Agriculture). |
(3) | Reverse loan presented in Mortgage loans held for sale on the condensed consolidated balance sheets as a result of a repurchase |
| | Nine Months Ended September 30, | ||||
| | 2020 | | | 2019 | |
Fair value at beginning of period | | | $1,554,230 | | | $421,754 |
Mortgage loans originated and purchased(1) | | | 38,534,747 | | | 14,735,416 |
Proceeds on sales and payments received(1) | | | (38,585,878) | | | (13,831,246) |
Change in fair value | | | 54,709 | | | 31,013 |
Gain on loans(2) | | | 724,027 | | | 37,837 |
Fair value at end of period | | | $2,281,835 | | | $1,394,774 |
(1) | This line as presented on the condensed consolidated statements of cash flows for the nine months ended September 30, 2019, excludes the portion related to HPMAC, which is included in Business acquisitions within Investing activities. The portion related to HPMAC is recorded on Business acquisitions, net of cash acquired line. This schedule contains HPMAC. |
(2) | This line as presented on the condensed consolidated statements of cash flows excludes OMSR and MSR hedging. |
| | Nine Months Ended September 30, | ||||
| | 2020 | | | 2019 | |
Balance at beginning of period | | | $575,035 | | | $532,526 |
MSRs originated | | | 352,118 | | | 175,756 |
Changes in valuation model inputs | | | (211,668) | | | (163,026) |
Change in cash payoffs and principal amortization | | | (132,222) | | | (66,240) |
Balance at end of period | | | $583,263 | | | $479,016 |
| | | |
| | September 30, 2020 | | | December 31, 2019 | |
Ginnie Mae | | | $26,319,278 | | | $24,611,487 |
Fannie Mae | | | 29,140,239 | | | 14,895,853 |
Freddie Mac | | | 18,432,195 | | | 13,021,778 |
Other | | | 59,330 | | | 71,428 |
Total mortgage servicing portfolio | | | $73,951,042 | | | $52,600,546 |
MSR balance | | | $583,263 | | | $575,035 |
MSR balance as % of unpaid mortgage principal balance | | | 0.79% | | | 1.09% |
| | Discount Rate | | | Prepayment Speeds | |||||||
| | 100 BPS Adverse Change | | | 200 BPS Adverse Change | | | 10% Adverse Change | | | 20% Adverse Change | |
September 30, 2020 | | | | | | | | | ||||
HPF Portfolio | | | $(19,124) | | | $(36,901) | | | $(37,208) | | | $(70,451) |
HPMAC Portfolio | | | (27) | | | (51) | | | (59) | | | (112) |
December 31, 2019 | | | | | | | | | ||||
HPF Portfolio | | | $(20,938) | | | $(40,288) | | | $(29,530) | | | $(56,176) |
HPMAC Portfolio | | | (52) | | | (100) | | | (81) | | | (154) |
| | September 30, 2020 | | | December 31, 2019 | |
Total unpaid principal balance | | | $75,248,444 | | | $54,329,300 |
Loans 30-89 days delinquent | | | 1,509,076 | | | 1,308,095 |
Loans delinquent 90 or more days or in foreclosure(1) | | | 4,335,046 | | | 735,282 |
(1) | Of the $4.3 billion of loans delinquent 90 days or more, approximately $3.8 billion are in forbearance primarily related to COVID-19 forbearance provided under the CARES Act. |
| | Nine Months Ended September 30, | ||||
| | 2020 | | | 2019 | |
Contractual servicing fees | | | $135,813 | | | $101,138 |
Late fees | | | 4,564 | | | 4,437 |
Other | | | (6,473) | | | (1,486) |
Loan servicing fees | | | $133,904 | | | $104,089 |
| | Nine Months Ended September 30, 2020 | ||||||||||
| | Notional Value | | | Derivative Asset | | | Derivative Liability | | | Recorded Gain/(Loss) | |
Mortgage-backed securities forward trades | | | 9,848,702 | | | $2,793 | | | 23,586 | | | $(16,565) |
Interest rate lock commitments | | | 15,103,027 | | | 272,837 | | | — | | | 252,274 |
Hedging Mortgage Servicing Rights | | | 4,306,000 | | | 8,730 | | | — | | | 73,489 |
Margin | | | | | 30,434 | | | | | |||
Total | | | | | 314,794 | | | 23,586 | | | ||
Cash placed with counterparties, net | | | | | 30,435 | | | | |
| | Nine Months Ended September 30, 2019 | ||||||||||
| | Notional Value | | | Derivative Asset | | | Derivative Liability | | | Recorded Gain | |
Mortgage-backed securities forward trades | | | 3,182,711 | | | $4,580 | | | $6,941 | | | $4,786 |
Interest rate lock commitments | | | 3,690,218 | | | 31,626 | | | — | | | 23,636 |
Hedging Mortgage Servicing Rights | | | 1,355,000 | | | 14,124 | | | — | | | 57,811 |
Margin | | | | | | | 4,330 | | | |||
Total | | | | | 50,330 | | | 11,271 | | | ||
Cash held from counterparties, net | | | | | | | 4,330 | | |
| | September 30, 2020 | |||||||
| | Gross Amount of Recognized Assets (liabilities) | | | Gross Offset | | | Net Assets (Liabilities) | |
Balance at September 30, 2020 | | | | | | | |||
Derivatives subject to master netting agreements: | | | | | | | |||
Assets: | | | | | | | |||
Mortgage-backed securities forward trades | | | $2,793 | | | $(17,749) | | | $(14,956) |
Hedging mortgage servicing rights | | | 1,893 | | | (40) | | | 1,853 |
Margin (cash placed with counterparties) | | | 30,434 | | | (1,926) | | | 28,508 |
Liabilities: | | | | | | | |||
Mortgage-backed securities forward trades | | | (23,546) | | | 17,749 | | | (5,797) |
Hedging mortgage servicing rights | | | (40) | | | 40 | | | — |
Margin (cash placed with counterparties) | | | — | | | 1,926 | | | 1,926 |
| | | | | | ||||
Derivatives not subject to master netting agreements: | | | | | | | |||
Assets: | | | | | | | |||
Interest rate lock commitments | | | 272,837 | | | — | | | 272,837 |
Hedging Mortgage Servicing Rights | | | 6,837 | | | — | | | 6,837 |
Total derivatives | | | | | | | |||
Assets | | | 314,794 | | | (19,715) | | | 295,079 |
Liabilities | | | (23,586) | | | 19,715 | | | (3,871) |
| | December 31, 2019 | |||||||
| | Gross Amount of Recognized Assets (liabilities) | | | Gross Offset | | | Net Assets (Liabilities) | |
Balance at December 31, 2019 | | | | | | | |||
Derivatives subject to master netting agreements: | | | | | | | |||
Assets: | | | | | | | |||
Mortgage-backed securities forward trades | | | $1,443 | | | $(1,061) | | | $382 |
Hedging mortgage servicing rights | | | 1,005 | | | (2) | | | 1,003 |
Margin (cash placed with counterparties) | | | — | | | 706 | | | 706 |
Liabilities: | | | | | | | |||
Mortgage-backed securities forward trades | | | (5,632) | | | 1,061 | | | (4,571) |
Hedging mortgage servicing rights | | | (2) | | | 2 | | | — |
Margin (cash placed with counterparties) | | | 3,372 | | | (706) | | | 2,666 |
| | | | | | ||||
Derivatives not subject to master netting agreements: | | | | | | | |||
Assets: | | | | | | | |||
Interest rate lock commitments | | | 25,618 | | | | | 25,618 | |
Hedging Mortgage Servicing Rights | | | 12,478 | | | | | 12,478 | |
Total derivatives | | | | | | | |||
Assets | | | $40,544 | | | $(357) | | | $40,187 |
Liabilities | | | $(2,262) | | | $357 | | | $(1,905) |
| | As of September 30, 2020 | | | As of December 31, 2019 | |
Prepaid and other | | | $20,298 | | | $24,098 |
Equity method investments | | | 45,447 | | | 31,397 |
Deferred tax asset, net | | | — | | | 20,667 |
Total | | | $65,745 | | | $76,162 |
| | As of September 30, 2020 | | | As of December 31, 2019 | |
Servicing advance receivable | | | $69,427 | | | $53,531 |
Servicing advance reserves | | | (7,263) | | | (4,308) |
Servicing receivable-general | | | 922 | | | 3,523 |
Income tax receivable | | | 13,900 | | | 1,031 |
Interest on servicing deposits | | | 86 | | | 1,105 |
Other | | | 2,248 | | | 2,990 |
Accounts receivable, net | | | 79,320 | | | $57,872 |
| | Maturity Date | | | Balance at September 30, 2020 | |
$300M Warehouse Facility | | | August 2021 | | | $262.9 million |
$500M Warehouse Facility | | | September 2021 | | | $353.4 million |
$300M Warehouse Facility | | | Evergreen | | | $213.7 million |
$800M Warehouse Facility | | | May 2021 | | | $485.9 million |
$500M Warehouse Facility | | | September 2021 | | | $318.3 million |
$300M Warehouse Facility | | | June 2021 | | | $201.7 million |
$400M Warehouse Facility | | | August 2021 | | | $256.6 million |
Total warehouse lines of credit | | | | | $2,092.5 million |
| | Maturity Date | | | Balance at December 31, 2019 | |
$300M Warehouse Facility(1) | | | July 2020 | | | $299.3 million |
$300M Warehouse Facility(2) | | | September 2020 | | | $292.5 million |
$200M Warehouse Facility(3) | | | Evergreen | | | $143.0 million |
$600M Warehouse Facility(4) | | | May 2020 | | | $501.8 million |
$250M Warehouse Facility(5) | | | May 2020 | | | $238.9 million |
$0.8M Warehouse Facility(6) | | | Feb 2020 | | | $0.8 million |
$50M Warehouse Facility(7) | | | Evergreen | | | $1.9 million |
Total warehouse lines of credit | | | | | $1,478.2 million |
(1) | Subsequent to December 31, 2019, this facility was amended with a maturity date of August 2021. |
(2) | Subsequent to December 31, 2019, this facility was amended with a maturity date of September 2021 and an increased capacity up to $500 million. |
(3) | Subsequent to December 31, 2019, this facility was amended with an increased capacity up to $300 million. |
(4) | Subsequent to December 31, 2019, this facility was amended with a maturity date of May 2021 and an increased capacity up to $800 million. |
(5) | Subsequent to December 31, 2019, this facility was amended with a maturity date of September 2021 and an increased capacity up to $500 million. |
(6) | Subsequent to December 31, 2019, this facility was not renewed upon maturity. |
(7) | Subsequent to December 31, 2019, this facility was closed in May 2020. |
| | Maturity Date | | | Collateral | | | Balance at September 30, 2020 | | | Balance at December 31, 2019 | |
$500M MSR Line of Credit | | | January 2023 | | | Mortgage Servicing Rights | | | $356.6 million | | | $369.0 million |
$85M Servicing Advance Facility | | | May 2021 | | | Servicing Advances | | | $18.3 million | | | $48.2 million |
$10M Operating Line of Credit | | | May 2021 | | | Mortgage loans | | | $1.0 million | | | $10.0 million |
Total | | | | | | | $375.9 million | | | $427.2 million | ||
Debt issuance costs | | | | | | | $(1.8) million | | | $(2.3) million | ||
Term debt and other borrowings, net | | | | | | | $374.1 million | | | $424.9 million |
• | Base of $2,500 plus 25 basis points of outstanding UPB for total loans serviced. |
• | Adjusted/Tangible Net Worth comprises of total equity less goodwill, intangible assets, affiliate receivables, deferred tax assets and certain pledged assets. |
• | Base of $2,500 plus 35 basis points of the issuer’s total single-family effective outstanding obligations. |
• | Adjusted/Tangible Net Worth comprises of total equity less goodwill, intangible assets, affiliate receivables, deferred tax assets and certain pledged assets. |
• | 3.5 basis points of total Agency servicing. |
• | Incremental 200 basis points of total nonperforming Agency, measured as 90 plus day delinquencies, servicing in excess of 6% of the total Agency servicing UPB. |
• | Allowable assets for liquidity may include: cash and cash equivalents (unrestricted); available for sale or held for trading investment grade securities (e.g., Agency MBS, Obligations of Government Sponsored Entities (“GSE”), US Treasury Obligations); and unused/available portion of committed servicing advance lines. |
• | Maintain liquid assets equal to the greater of $1,000 or 10 basis points of our outstanding single-family MBS. |
| | Nine Months Ended September 30, | ||||
| | 2020 | | | 2019 | |
Repurchase reserve, at beginning of period | | | $3,964 | | | $3,429 |
Additions | | | 17,017 | | | 2,165 |
Charge-offs | | | (6,992) | | | (1,265) |
Repurchase reserves, at end of period | | | $13,989 | | | $4,329 |
Level Input: | | | Input Definition: |
| | ||
Level 1 | | | Unadjusted, quoted prices in active markets for identical assets or liabilities. |
| | ||
Level 2 | | | Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company. These may include quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk and others. |
| | ||
Level 3 | | | Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity), unobservable inputs may be used. Unobservable inputs reflect the Company's own assumptions about the factors that market participants would use in pricing the asset or liability and are based on the best information available in the circumstances. |
| | September 30, 2020 | ||||||||||
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Assets: | | | | | | | | | ||||
Mortgage loans held for sale | | | $— | | | $2,281,835 | | | $— | | | $2,281,835 |
Derivative assets (IRLCs) | | | — | | | — | | | 272,837 | | | 272,837 |
Derivative assets (MBS forward trades) | | | — | | | 3,625 | | | — | | | 3,625 |
Derivative assets (MSRs) | | | — | | | 7,897 | | | — | | | 7,897 |
Mortgage servicing rights | | | — | | | — | | | 583,263 | | | 583,263 |
Total assets | | | $— | | | $2,293,357 | | | $856,100 | | | $3,149,457 |
| | September 30, 2020 | ||||||||||
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Liabilities: | | | | | | | | | ||||
Derivative liabilities (MBS forward trades) | | | $— | | | $23,586 | | | $— | | | $23,586 |
Total liabilities | | | $— | | | $23,586 | | | $— | | | $23,586 |
| | December 31, 2019 | ||||||||||
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Assets: | | | | | | | | | ||||
Mortgage loans held for sale | | | $— | | | $1,551,136 | | | $— | | | $1,551,136 |
Mortgage loans held for sale – EBO | | | — | | | — | | | 3,094 | | | 3,094 |
Derivative assets (IRLCs) | | | — | | | — | | | 25,618 | | | 25,618 |
Derivative assets (MBS forward trades) | | | — | | | 1,750 | | | — | | | 1,750 |
Derivative assets (MSRs) | | | — | | | 13,176 | | | — | | | 13,176 |
Mortgage servicing rights | | | — | | | — | | | 575,035 | | | 575,035 |
Total assets | | | $— | | | $1,566,062 | | | $603,747 | | | $2,169,809 |
Liabilities: | | | | | | | | | ||||
Derivative liabilities (MBS forward trades) | | | $— | | | $5,634 | | | $— | | | $5,634 |
Total liabilities | | | $— | | | $5,634 | | | $— | | | $5,634 |
| | Nine Months Ended September 30, 2020 | |||||||
| | MSRs | | | IRLC | | | EBO | |
Balance at beginning of period | | | $575,035 | | | $25,618 | | | $3,094 |
Purchases, sales, issuances, contributions and settlements | | | 352,118 | | | — | | | (2,171) |
Change in fair value | | | (343,890) | | | 247,219 | | | — |
Transfers in/out(1) | | | — | | | — | | | (923) |
Balance at end of period | | | $583,263 | | | $272,837 | | | $— |
| | Nine Months Ended September 30, 2019 | |||||||
| | MSRs | | | IRLC | | | EBO | |
Balance at beginning of period | | | $532,526 | | | $7,517 | | | $5,232 |
Purchases, Sales, Issuances, Contributions and Settlements | | | 175,756 | | | — | | | (481) |
Change in fair value | | | (229,266) | | | 24,109 | | | (21) |
Transfers in/out(1) | | | — | | | — | | | (727) |
Balance at end of period | | | $479,016 | | | $31,626 | | | $4,003 |
(1) | Transfers in/out represents acquired assets and assets transferred out due to reclassification as real estate owned, foreclosure or claims. |
| | Fair Value | | | Principal Amount Due Upon Maturity | | | Difference(1) | |
Balance at September 30, 2020 | | | $2,281,835 | | | $2,180,034 | | | $101,801 |
Balance at December 31, 2019 | | | $1,551,136 | | | $1,507,139 | | | $43,997 |
(1) | Represents the amount of gains related to changes in fair value of items accounted for using the fair value option included in Gain on loans, net within the condensed consolidated statements of operations. |
| | | | September 30, 2020 | |||||
Asset | | | Key Input | | | Range | | | Weighted Average |
Mortgage servicing rights | | | Discount rate | | | 9.0% - 12.2% | | | 9.6% |
| | Prepayment speeds | | | 15.5% - 18.3% | | | 16.1% | |
Interest rate lock commitments | | | Pull-through rate | | | 17% - 100% | | | 72% |
| | | | December 31, 2019 | |||||
Asset | | | Key Input | | | Range | | | Weighted Average |
Mortgage servicing rights | | | Discount rate | | | 9.0% - 12.2% | | | 9.8% |
| | Prepayment speeds | | | 11.1% - 13.3% | | | 12.5% | |
Interest rate lock commitments | | | Pull-through rate | | | 19% - 100% | | | 82% |
| | Number of Shares | | | Weighted Average Exercise Price | | | Weighted Average Contractual Life (Years) | | | Weighted Average Grant Date Fair Value | |
Outstanding at December 31, 2019 | | | 3,291,875 | | | $10.12 | | | 7.15 | | | $2.41 |
Granted | | | 1,606,500 | | | $11.26 | | | 9.56 | | | $2.10 |
Exercised | | | — | | | — | | | — | | | — |
Forfeited | | | (276,500) | | | $10.27 | | | 6.85 | | | $2.02 |
Outstanding at September 30, 2020 | | | 4,621,875 | | | $10.50 | | | 7.36 | | | $2.33 |
| | Number of Shares | | | Weighted Average Grant Date Fair Value | |
Non-vested at December 31, 2019 | | | 2,555,487 | | | $2.46 |
Granted | | | 1,606,500 | | | $2.10 |
Vested | | | (203,187) | | | $2.24 |
Exercised | | | — | | | — |
Forfeited | | | (276,500) | | | $2.02 |
Non-vested at September 30, 2020 | | | 3,682,300 | | | $2.35 |
| | Nine Months Ended September 30 | ||||
| | 2020 | | | 2019 | |
Income (loss) before income taxes | | | $557,862 | | | $(61,948) |
Total provision/(benefit) from income taxes | | | 149,306 | | | (14,080) |
Effective tax provision rate | | | 26.8% | | | 22.7% |
| | Nine Month Ended September 30, 2020 | |||||||||||||||||||
| | Origination | | | Servicing | | | Segments Total | | | All Other | | | Total | | | Reconciliation Item(1) | | | Total Consolidated | |
Revenue | | | | | | | | | | | | | | | |||||||
Gain on loans, net | | | $962,778 | | | $— | | | $962,778 | | | | | $962,778 | | | | | $962,778 | ||
Loan fee income | | | 60,630 | | | — | | | 60,630 | | | | | 60,630 | | | | | 60,630 | ||
Loan servicing fees | | | (1,982) | | | 135,886 | | | 133,904 | | | | | 133,904 | | | | | 133,904 | ||
Change in FV of MSRs | | | — | | | (230,524) | | | (230,524) | | | | | (230,524) | | | | | (230,524) | ||
Interest income (loss), net | | | 1,804 | | | 7,130 | | | 8,934 | | | (14,409) | | | (5,475) | | | | | (5,475) | |
Other income | | | — | | | 205 | | | 205 | | | 14,867 | | | 15,072 | | | (14,050) | | | 1,022 |
Total U.S. GAAP Revenue | | | 1,023,230 | | | (87,303) | | | 935,927 | | | 458 | | | 936,385 | | | (14,050) | | | 922,335 |
Contribution margin | | | $791,915 | | | $(31,665) | | | $760,250 | | | $(90,036) | | | $670,214 | | | | | — |
(1) | The Company includes the income from its equity method investments in the All Other category. In order to reconcile to Total net revenue on the condensed consolidated statements of operations, it must be removed as is presented above. |
| | Nine Months Ended September 30, 2019 | |||||||||||||||||||
| | Origination | | | Servicing | | | Segments Total | | | All Other | | | Total | | | Reconciliation Item(1) | | | Total Consolidated | |
Revenue | | | | | | | | | | | | | | | |||||||
Gain on loans, net | | | $135,853 | | | $(358) | | | $135,495 | | | $— | | | $135,495 | | | | | $135,495 | |
Loan fee income | | | 19,788 | | | — | | | 19,788 | | | 41 | | | 19,829 | | | | | 19,829 | |
Loan servicing fees | | | (459) | | | 104,548 | | | 104,089 | | | — | | | 104,089 | | | | | 104,089 | |
Change in FV of MSRs | | | — | | | (151,168) | | | (151,168) | | | — | | | (151,168) | | | | | (151,168) | |
Interest income (loss), net | | | 2,237 | | | 13,255 | | | 15,492 | | | (22,324) | | | (6,832) | | | | | (6,832) | |
Other income | | | — | | | 4 | | | 4 | | | 4,178 | | | 4,182 | | | (2,591) | | | 1,591 |
Total U.S. GAAP Revenue | | | 157,419 | | | (33,719) | | | 123,700 | | | (18,105) | | | 105,595 | | | (2,591) | | | 103,004 |
Contribution margin | | | $60,378 | | | $21,454 | | | $81,832 | | | $(56,262) | | | $25,570 | | | | | — |
(1) | The Company includes the income from its equity method investments in the All Other segment. In order to reconcile to Total net revenue on the condensed consolidated statements of operations, it must be removed as is presented above. |
| | Nine Months Ended September 30, | ||||
| | 2020 | | | 2019 | |
Income (loss) before income tax | | | $557,862 | | | $(61,948) |
Decrease (increase) in MSRs due to valuation assumptions | | | 98,302 | | | 84,927 |
Income from equity method investment | | | 14,050 | | | 2,591 |
Contribution margin, excluding change in MSRs due to valuation assumption | | | $670,214 | | | $25,570 |
| | September 30, 2020 (unaudited) | | | December 31, 2019 | |
Cash and cash equivalents | | | $41 | | | $202 |
Investment in subsidiary | | | 703,516 | | | 380,961 |
Equity method investment | | | 45,447 | | | 31,283 |
Other assets | | | 4,280 | | | 486 |
Total assets | | | $753,284 | | | $412,932 |
Accounts payable | | | $2,362 | | | $2,137 |
Deferred tax liabilities | | | 8,180 | | | 483 |
Total liabilities | | | 10,542 | | | 2,620 |
| | | | |||
Equity: | | | | | ||
Common stock (138,860,111 shares issued and outstanding, par value $0.0000000072 per share) | | | — | | | — |
Additional paid in capital | | | 519,177 | | | 454,861 |
Retained earnings (accumulated deficit) | | | 223,565 | | | (44,549) |
Total liabilities and equity | | | $753,284 | | | $412,932 |
| | Nine Months Ended September 30, | ||||
| | 2020 | | | 2019 | |
Interest income | | | $2 | | | $2 |
Other income | | | 5 | | | — |
Net gain (loss) of subsidiaries | | | 412,673 | | | (46,987) |
Total gain (loss) | | | 412,680 | | | (46,985) |
Total expenses | | | 655 | | | 241 |
Income (loss) before tax | | | 412,025 | | | (47,226) |
Income tax provision | | | 3,469 | | | 642 |
Income from equity method investments | | | 14,050 | | | 2,591 |
Total net income (loss) | | | $422,606 | | | $(45,277) |
| | Nine Months Ended September 30, | ||||
| | 2020 | | | 2019 | |
Operating activities: | | | | | ||
Net income (loss) | | | $422,606 | | | $(45,277) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | | | | | ||
Net income (loss) of subsidiaries | | | (412,673) | | | 46,987 |
(Gain) on equity investment | | | (14,050) | | | (2,591) |
Decrease in deferred taxes | | | 7,696 | | | 589 |
(Increase) decrease in prepaid expenses and other assets | | | (3,794) | | | 353 |
Decrease in accounts payable and other assets | | | 224 | | | 1,546 |
Net cash provided by operating cash flows activities | | | 9 | | | 1,607 |
| | | | |||
Investing activities: | | | | | ||
Investment in subsidiaries | | | (63,945) | | | (1,840) |
Net cash used in investing cash flows activities | | | (63,945) | | | (1,840) |
| | | | |||
Financing activities: | | | | | ||
Capital contributions from parent | | | 63,774 | | | — |
Net cash provided by financing activities | | | 63,774 | | | — |
| | | | |||
Net increase in cash, cash equivalents and restricted cash | | | (162) | | | (233) |
Cash, cash equivalents and restricted cash at beginning of period | | | 203 | | | 460 |
Cash, cash equivalents and restricted cash at end of period | | | 41 | | | 227 |
| | | | |||
Cash paid for interest | | | — | | | — |
Cash paid for income taxes | | | — | | | 54 |
| | December 31, | ||||
| | 2019 | | | 2018 | |
Assets: | | | | | ||
Cash and cash equivalents | | | $30,630 | | | $44,010 |
Restricted cash | | | 51,101 | | | 38,234 |
Cash and cash equivalents and Restricted cash | | | 81,731 | | | 82,244 |
Mortgage loans held for sale (at fair value) | | | 1,554,230 | | | 421,754 |
Mortgage servicing rights (at fair value) | | | 575,035 | | | 532,526 |
Property and equipment, net | | | 12,051 | | | 10,075 |
Accounts receivable, net | | | 57,872 | | | 44,422 |
Derivative assets | | | 40,544 | | | 18,990 |
Goodwill and intangibles | | | 11,935 | | | 10,957 |
GNMA loans eligible for repurchase | | | 499,207 | | | 451,209 |
Other assets | | | 76,162 | | | 64,214 |
Total assets | | | $2,908,767 | | | $1,636,391 |
Liabilities and Shareholders’ Equity: | | | | | ||
Liabilities: | | | | | ||
Warehouse lines of credit | | | $1,478,183 | | | $404,237 |
Term debt and other borrowings, net | | | 424,958 | | | 276,277 |
Accounts payable and accrued expenses | | | 39,739 | | | 21,243 |
GNMA loans eligible for repurchase | | | 499,207 | | | 451,209 |
Other liabilities | | | 56,368 | | | 44,654 |
Total liabilities | | | 2,498,455 | | | 1,197,620 |
Commitments and Contingencies (Note 15) | | | | | ||
| | | | |||
Shareholders’ Equity: | | | | | ||
Common stock (138,860,111 shares issued and outstanding, par value $0.0000000072 per share) | | | — | | | — |
Additional paid-in capital | | | 454,861 | | | 454,110 |
Accumulated deficit | | | (44,549) | | | (15,339) |
Total shareholders' equity | | | 410,312 | | | 438,771 |
Total liabilities and shareholders' equity | | | $2,908,767 | | | $1,636,391 |
| | Years Ended December 31, | ||||
| | 2019 | | | 2018 | |
Revenue: | | | | | ||
Gain on loans, net | | | $199,501 | | | $84,068 |
Loan fee income | | | 32,112 | | | 19,603 |
Interest income | | | 51,801 | | | 35,179 |
Interest expense | | | (57,942) | | | (47,486) |
Interest loss, net | | | (6,141) | | | (12,307) |
Loan servicing fees | | | 144,228 | | | 119,049 |
Change in fair value of mortgage servicing rights | | | (173,134) | | | (47,312) |
Other income | | | 3,159 | | | 1,156 |
Total net revenue | | | 199,725 | | | 164,257 |
Expenses: | | | | | ||
Compensation and benefits | | | 156,197 | | | 109,577 |
Loan expense | | | 15,626 | | | 16,882 |
Loan servicing expense | | | 20,924 | | | 18,488 |
Occupancy and equipment | | | 16,768 | | | 20,521 |
General and administrative | | | 21,407 | | | 29,165 |
Depreciation and amortization | | | 5,918 | | | 7,612 |
Other expenses | | | 4,296 | | | 4,060 |
Total expenses | | | 241,136 | | | 206,305 |
Loss from continuing operations before income tax | | | (41,411) | | | (42,048) |
Income tax benefit from continuing operations | | | (9,500) | | | (10,485) |
Income from equity method investments | | | 2,701 | | | 209 |
Net loss from continuing operations | | | (29,210) | | | (31,354) |
Net income from discontinued operations before tax | | | — | | | 9,707 |
Income tax provision | | | — | | | 2,550 |
Income from discontinued operations, net of tax | | | — | | | 7,157 |
Total net loss | | | $(29,210) | | | $(24,197) |
| | | | |||
Basic and diluted loss earnings per share: | | | | | ||
Basic and diluted loss per share from continuing operations | | | $(0.21) | | | $(0.23) |
Basic and diluted earnings per share from discontinued operations | | | — | | | 0.05 |
Basic and diluted total net loss per share | | | $(0.21) | | | $(0.17) |
| | Common Stock | | | Additional Paid in Capital | | | Retained Earnings (Accumulated Deficit) | | | Total Shareholders’ Equity | ||||
| | Shares | | | Amount | | |||||||||
Balance January 1, 2018 | | | 138,860,111 | | | — | | | $410,758 | | | $8,858 | | | $419,616 |
Contributed capital | | | — | | | — | | | 42,970 | | | — | | | 42,970 |
Stock based compensation | | | — | | | — | | | 382 | | | — | | | 382 |
Net loss | | | — | | | — | | | — | | | (24,197) | | | (24,197) |
Ending balance, December 31, 2018 | | | 138,860,111 | | | — | | | 454,110 | | | (15,339) | | | 438,771 |
| | | | | | | | | | ||||||
Contributed capital | | | — | | | — | | | — | | | — | | | — |
Stock based compensation | | | — | | | — | | | 751 | | | — | | | 751 |
Net loss | | | — | | | — | | | — | | | (29,210) | | | (29,210) |
Ending balance, December 31, 2019 | | | 138,860,111 | | | — | | | $454,861 | | | $(44,549) | | | $410,312 |
| | Years Ended December 31, | ||||
| | 2019 | | | 2018 | |
Operating activities: | | | | | ||
Net loss | | | $(29,210) | | | $(24,197) |
Adjustments to reconcile net loss to cash (used in) provided by operating activities: | | | | | ||
Depreciation | | | 3,807 | | | 4,110 |
Amortization of intangible assets | | | 2,111 | | | 3,564 |
Amortization of debt issuance costs | | | 5,839 | | | 1,386 |
Gain on loans, net | | | (199,501) | | | (116,228) |
Gain on sale of Natty Mac | | | — | | | (909) |
Provision for representation and warranty reserve | | | 451 | | | (770) |
Stock based compensation expense | | | 751 | | | 382 |
Deferred income tax | | | (9,144) | | | (7,047) |
Gain on equity investment | | | (2,701) | | | (209) |
Origination of mortgage loans held for sale | | | (23,116,236) | | | (12,067,560) |
Proceeds on sale and payments from mortgage loans held for sale | | | 22,003,004 | | | 12,448,060 |
Change in fair value of mortgage servicing rights | | | 173,134 | | | 47,312 |
Change in fair value of mortgage loans held for sale | | | (33,643) | | | 11,429 |
Change in fair value of derivative assets | | | (21,554) | | | (6,815) |
Changes in operating assets and liabilities: | | | | |||
Increase in accounts receivable, net | | | (13,238) | | | (11,670) |
Increase (decrease) in other assets | | | 188 | | | (10,740) |
Increase in accounts payable and accrued expenses | | | 18,071 | | | (16,255) |
Decrease in assets and liabilities – discontinued operations | | | — | | | 396 |
Increase in other liabilities – discontinued operations | | | — | | | (262) |
Increase in other liabilities | | | 11,178 | | | 8,855 |
Net cash (used in) provided by operating activities | | | (1,206,693) | | | 262,832 |
| | Years Ended December 31, | ||||
| | 2019 | | | 2018 | |
Investing activities: | | | | | ||
Purchases of property and equipment, net of disposals | | | (5,690) | | | (3,499) |
Purchases of property and equipment, net of disposals- discontinued operations | | | — | | | 751 |
Proceeds from sale of mortgage servicing rights | | | — | | | 40,939 |
Business acquisitions, net of cash acquired | | | (4,923) | | | — |
Disposition of intangible assets | | | — | | | 191 |
Proceeds from sale of Natty Mac | | | — | | | 2,500 |
Purchases of mortgage servicing rights | | | — | | | (7,044) |
Equity method investment | | | 5 | | | (2,500) |
Decrease in warehouse lending receivables | | | — | | | 117,943 |
Net cash (used in) provided by investing activities | | | (10,608) | | | 149,281 |
| | | | |||
Financing activities: | | | | | ||
Proceeds from warehouse borrowings | | | 23,012,034 | | | 12,537,123 |
Payments on warehouse borrowings | | | (21,938,088) | | | (13,058,907) |
Proceeds from term debt borrowings | | | 369,000 | | | 15,000 |
Payments on term debt borrowings | | | (245,156) | | | (4,844) |
Proceeds from other borrowings | | | 21,850 | | | 26,400 |
Payments of debt issuance costs | | | (2,852) | | | (199) |
Decrease in subordinated debt | | | — | | | 30,000 |
Capital contributions from parent | | | — | | | 42,970 |
Net cash provided by (used in) financing activities | | | 1,216,788 | | | (412,457) |
Net decrease in cash, cash equivalents and restricted cash | | | (513) | | | (344) |
Cash, cash equivalents and restricted cash at beginning of period | | | 82,244 | | | 82,588 |
Cash, cash equivalents and restricted cash at end of period | | | $81,731 | | | $82,244 |
Supplemental disclosure: | | | | | ||
Cash paid for interest | | | $50,518 | | | $48,551 |
Cash paid for taxes | | | 330 | | | 2 |
1. | All of Platinum Mortgage, Inc.’s rights and ownership in certain tangible and intangible property, including but not limited to information, books, and records of the Platinum Mortgage, Inc. such as filers, invoices, credit and sales records, personnel records, and all agreements to which Platinum Mortgage, Inc. is a party and identified as material contracts; |
2. | Employees, including underwriters, closers, account managers, administrative staff; |
3. | Building lease and all related facilities contracts; |
4. | Retained assets, including office furniture and computer equipment. |
Fair value of assets acquired: | | | |
Fixed assets | | | $93 |
Consideration transferred: | | | |
Cash | | | 124 |
Earnout | | | 1,648 |
| | $1,772 | |
Goodwill | | | $1,679 |
Fair value of assets acquired: | | | |
Cash | | | $2 |
Mortgage loans held for sale | | | 214 |
Mortgage servicing rights | | | 1,528 |
Servicing advances | | | 181 |
Accounts receivable | | | 31 |
Foreclosure assets | | | 334 |
Real estate owned | | | 247 |
Prepaid expenses and other assets | | | 20 |
GNMA loans eligible for repurchase | | | 1,580 |
Total assets | | | $4,137 |
| |
Representation and warranty reserve | | | 85 |
Accrued expenses | | | 424 |
Deferred tax liability, net | | | 304 |
GNMA loans eligible for repurchase | | | 1,580 |
Total liabilities | | | 2,393 |
| | ||
Net assets | | | 1,744 |
| | ||
Consideration transferred: | | | |
Cash | | | 2,152 |
Holdback | | | 1,000 |
Goodwill | | | $1,408 |
Consideration received | | | $2,500 |
Less: Fair value of assets | | | (1,591) |
Gain on sale | | | $909 |
1. | Buyer 1: The purchase price was an earnout payment which equaled five basis points per the aggregate loan volume funded (not to exceed $41.0 million) that was produced by transfer employees while employed by the Buyer. The payments were paid quarterly during 2019, in February, April, July, and October. |
2. | Buyer 2: The purchase price consisted of 0.17% of aggregate unpaid principal balance (“UPB”) of all first-lien residential mortgage loans that are originated by transferred employees, closed in the buyer’s name on or after September 1, 2018 for a period of 12 months. Certain fixed assets were considered to be included in the earnout rate. |
| | Year Ended December 31, 2018 | |
Gain on loans, net | | | $32,160 |
Loan fee income | | | 5,932 |
Total Revenue | | | $38,092 |
Compensation and benefits | | | $(21,778) |
Occupancy and equipment | | | (3,131) |
General and administrative | | | (2,398) |
Amortization and depreciation | | | (253) |
Other expenses | | | (825) |
Income before income tax expense | | | 9,707 |
Income tax expense | | | (2,550) |
Net income from discontinued operations | | | $7,157 |
| | Year Ended December 31, 2019 | |||||||
| | Unpaid Principal | | | Fair Value Adjustment | | | Total Fair Value | |
Conventional(1) | | | $454,225 | | | $8,787 | | | $463,012 |
Government(2) | | | 1,052,638 | | | 38,388 | | | 1,091,026 |
Reverse(3) | | | 275 | | | (83) | | | 192 |
Total | | | $1,507,138 | | | $47,092 | | | $1,554,230 |
(1) | Conventional includes FNMA and FHLMC mortgage loans. |
(2) | Government includes GNMA mortgage loans (including Federal Housing Administration, Department of Veterans Affairs and United States Department of Agricultural mortgage loans). |
(3) | Reverse loan presented in Mortgage loans held for sale on the consolidated balance sheets as a result of a repurchase |
| | Year Ended December 31, 2018 | |||||||
| | Unpaid Principal | | | Fair Value Adjustment | | | Total Fair Value | |
Conventional(1) | | | $128,255 | | | $2,932 | | | $131,187 |
Government(2) | | | 279,742 | | | 10,630 | | | 290,372 |
Reverse(3) | | | 279 | | | (84) | | | 195 |
Total | | | $408,276 | | | $13,478 | | | $421,754 |
(1) | Conventional includes FNMA and FHLMC mortgage loans. |
(2) | Government includes GNMA mortgage loans (including Federal Housing Administration, Department of Veterans Affairs and United States Department of Agricultural mortgage loans). |
(3) | Reverse loan presented in Mortgage loans held for sale on the consolidated balance sheets as a result of a repurchase |
| | Year Ended December 31, | ||||
| | 2019 | | | 2018 | |
Fair value at beginning of period | | | $421,754 | | | $847,897 |
Mortgage loans originated and purchased(1) | | | 23,116,236 | | | 12,067,560 |
Proceeds on sales and payments received(1) | | | (22,003,004) | | | (12,448,060) |
Change in fair value | | | 33,643 | | | (11,429) |
Gain on Sale(2) | | | (14,399) | | | (34,214) |
Fair value at end of period | | | $1,554,230 | | | $421,754 |
(1) | This line as presented on the 2019 consolidated statements of cash flows excludes the portion related to HPMAC, which is included in Business acquisitions within Investing activities. The portion related to HPMAC is recorded on Business acquisitions, net of cash acquired line. This schedule contains HPMAC. |
(2) | This line as presented on the consolidated statements of cash flows excludes OMSR and MSR hedging. |
| | Year Ended December 31, | ||||
| | 2019 | | | 2018 | |
Balance at beginning of period | | | $532,526 | | | $463,291 |
MSRs originated | | | 273,628 | | | 170,692 |
MSRs purchased | | | 1,528 | | | 7,044 |
MSRs sold | | | — | | | (40,939) |
Changes in valuation model inputs | | | (133,997) | | | (9,903) |
Change in cash payoffs and principal amortization | | | (98,650) | | | (57,659) |
Balance at end of period | | | $575,035 | | | $532,526 |
| | Year Ended December 31, | ||||
| | 2019 | | | 2018 | |
Ginnie Mae | | | $24,611,487 | | | $ 18,762,163 |
Fannie Mae | | | 14,895,853 | | | 10,681,477 |
Freddie Mac | | | 13,021,778 | | | 11,905,232 |
Other | | | 71,428 | | | 74,953 |
Total mortgage servicing portfolio | | | $ 52,600,546 | | | $ 41,423,825 |
| | | | |||
MSR balance | | | $575,035 | | | $532,526 |
MSR balance as % of unpaid mortgage principal balance | | | 1.09% | | | 1.29% |
| | Year Ended December 31, | ||||
| | 2019 | | | 2018 | |
HPF Portfolio | | | | | ||
Discount rate | | | 9.75% | | | 9.50% |
Prepayment speeds | | | 12.53% | | | 9.44% |
HPMAC Portfolio | | | | | ||
Discount rate | | | 10.37% | | | — |
Prepayment speeds | | | 13.30% | | | — |
| | Discount Rate | | | Prepayment Speeds | |||||||
| | 100 BPS Adverse Change | | | 200 BPS Adverse Change | | | 10% Adverse Change | | | 20% Adverse Change | |
2019 | | | | | | | | | ||||
HPF Portfolio | | | $(20,938) | | | $(40,288) | | | $(29,530) | | | $(56,176) |
HPMAC Portfolio | | | (52) | | | (100) | | | (81) | | | (154) |
2018 | | | | | | | | | ||||
HPF Portfolio | | | (20,838) | | | (40,213) | | | (22,221) | | | (42,721) |
| | Year Ended December 31, | ||||
| | 2019 | | | 2018 | |
Total unpaid principal balance | | | $54,329,300 | | | $41,895,379 |
Loans 30-89 days delinquent | | | 1,308,095 | | | 1,068,685 |
Loans delinquent 90 or more days or in foreclosure | | | 735,282 | | | 639,761 |
| | Year Ended December 31, | ||||
| | 2019 | | | 2018 | |
Contractual servicing fees | | | $141,195 | | | $118,096 |
Late fees | | | 6,291 | | | 4,033 |
Other | | | (3,258) | | | (3,080) |
Loan servicing fees | | | $144,228 | | | $119,049 |
| | Year Ended December 31, 2019 | ||||||||||
| | Notional Value | | | Derivative Asset | | | Derivative Liability | | | Recorded Gain/(Loss) | |
Balance at December 31, 2019 | | | | | | | | | ||||
Mortgage-backed securities forward trades | | | $3,350,161 | | | $1,443 | | | $5,634 | | | $2,764 |
Interest rate lock commitments | | | 3,171,868 | | | 25,618 | | | — | | | 17,424 |
Hedging Mortgage Servicing Rights | | | 3,140,000 | | | 13,483 | | | — | | | 40,364 |
Margin | | | | | — | | | (3,372) | | | ||
Derivatives before netting | | | | | $40,544 | | | $2,262 | | | ||
Cash placed with counterparties, net | | | | | | | $3,372 | | |
| | Year Ended December 31, 2018 | ||||||||||
| | Notional Value | | | Derivative Asset | | | Derivative Liability | | | Recorded Gain/(Loss) | |
Balance at December 31, 2018 | | | | | | | | | ||||
Mortgage-backed securities forward trades | | | $736,000 | | | $28 | | | $6,980 | | | $(6,529) |
Interest rate lock commitments | | | 814,133 | | | 7,516 | | | — | | | (4,980) |
Hedging Mortgage Servicing Rights | | | 863,021 | | | 11,446 | | | — | | | 19,464 |
Margin | | | | | — | | | (6,163) | | | ||
Total | | | | | $18,990 | | | $817 | | | ||
| | | | | | | | |||||
Cash placed with counterparties, net | | | | | | | $6,163 | | |
| | Year Ended December 31, 2019 | |||||||
| | Gross Amount of Recognized Assets (liabilities) | | | Gross Offset | | | Net Assets (Liabilities) | |
Balance at December 31, 2019 | | | | | | | |||
Derivatives subject to master netting agreements: | | | | | | | |||
Assets: | | | | | | | |||
Mortgage-backed securities forward trades | | | $1,443 | | | $(1,061) | | | $382 |
Hedging mortgage servicing rights | | | 1,005 | | | (2) | | | 1,003 |
Margin (cash placed with counterparties) | | | — | | | 706 | | | 706 |
Liabilities: | | | | | | | |||
Mortgage-backed securities forward trades | | | (5,632) | | | 1,061 | | | (4,571) |
Hedging mortgage servicing rights | | | (2) | | | 2 | | | — |
Margin (cash placed with counterparties) | | | 3,372 | | | (706) | | | 2,666 |
| | | | | | ||||
Derivatives not subject to master netting agreements: | | | | | | | |||
Assets: | | | | | | | |||
Interest rate lock commitments | | | 25,618 | | | | | 25,618 | |
Hedging Mortgage Servicing Rights | | | 12,478 | | | | | 12,478 | |
Total derivatives | | | | | | | |||
Assets | | | $40,544 | | | $(357) | | | $40,187 |
Liabilities | | | $(2,262) | | | $357 | | | $(1,905) |
| | Year Ended December 31, 2018 | |||||||
| | Gross Amount of Recognized Assets (liabilities) | | | Gross Offset | | | Net Assets (Liabilities) | |
Balance at December 31, 2018 | | | | | | | |||
Derivatives subject to master netting agreements: | | | | | | | |||
Assets: | | | | | | | |||
Mortgage-backed securities forward trades | | | $28 | | | $(6) | | | $22 |
Hedging mortgage servicing rights | | | 2,975 | | | — | | | 2,975 |
Margin (cash placed with counterparties) | | | — | | | 639 | | | 639 |
Liabilities: | | | | | | | |||
Mortgage-backed securities forward trades | | | (6,980) | | | 6 | | | (6,974) |
Margin (cash placed with counterparties) | | | 6,163 | | | (639) | | | 5,524 |
Derivatives not subject to master netting agreements: | | | | | | | |||
Assets: | | | | | | | |||
Interest rate lock commitments | | | 7,517 | | | | | 7,517 | |
Hedging Mortgage Servicing Rights | | | 8,470 | | | | | 8,470 | |
Total derivatives | | | | | | | |||
Assets | | | $18,990 | | | $633 | | | $19,623 |
Liabilities | | | $(817) | | | $(633) | | | $(1,450) |
| | Origination | | | Servicing | | | Total | |
Goodwill as of December 31, 2018 | | | $5,604 | | | $2,098 | | | $7,702 |
Acquisitions | | | 1,408 | | | 1,679 | | | 3,087 |
Goodwill as of December 31, 2019 | | | $7,012 | | | $3,777 | | | 10,789 |
| | Year Ended December 31, 2019 | |||||||||||||
| | Amortization Period (months) | | | Gross Carrying Value | | | Accumulated Amortization | | | Impairment Charges | | | Net Carrying Value | |
Customer relationships | | | 36 | | | $5,700 | | | $(4,908) | | | — | | | $792 |
Lease intangible | | | 84 | | | 1,330 | | | (390) | | | (586) | | | 354 |
Total finite-lived intangibles | | | | | 7,030 | | | $(5,298) | | | $(586) | | | $1,146 |
| | Year Ended December 31, 2018 | |||||||||||||
| | Amortization Period (months) | | | Gross Carrying Value | | | Accumulated Amortization | | | Impairment Charges | | | Net Carrying Value | |
Customer relationships | | | 36 | | | $5,700 | | | $(3,009) | | | — | | | $2,691 |
Lease intangible | | | 84 | | | 1,330 | | | (300) | | | (466) | | | 564 |
Total finite-lived intangibles | | | | | 7,030 | | | $(3,309) | | | $(466) | | | $3,255 |
| | Year Ended December 31, 2019 | |
2020 | | | $873 |
2021 | | | 80 |
2022 | | | 80 |
2023 | | | 80 |
2024 | | | 33 |
| | $1,146 |
| | Year Ended December 31, | ||||
| | 2019 | | | 2018 | |
Prepaid expenses | | | $24,098 | | | $23,983 |
Equity method investments | | | 31,397 | | | 28,700 |
Deferred tax asset, net | | | 20,667 | | | 11,531 |
Total | | | $76,162 | | | $64,214 |
| | Year Ended December 31, | ||||
| | 2019 | | | 2018 | |
Computer and telephone | | | $10,546 | | | $7,171 |
Office furniture and equipment | | | 4,605 | | | 4,333 |
Leasehold improvements | | | 5,286 | | | 4,949 |
Work-in-process for internal use software | | | 1,748 | | | 79 |
Total | | | 22,185 | | | 16,532 |
Less accumulated depreciation | | | (10,134) | | | (6,457) |
Property and equipment, net | | | $12,051 | | | $10,075 |
| | Year Ended December 31, | ||||
| | 2019 | | | 2018 | |
Servicing advance receivable | | | $53,531 | | | $41,424 |
Servicing advance reserves | | | (4,308) | | | (4,609) |
Servicing receivable-general | | | 3,523 | | | 2,682 |
Interest on servicing deposits | | | 1,105 | | | 1,006 |
Other | | | 4,021 | | | 3,919 |
Accounts receivable, net at end of period | | | $57,872 | | | $44,422 |
| | Year Ended December 31, | ||||
| | 2019 | | | 2018 | |
Servicing advance reserve, at beginning of period | | | ($4,609) | | | ($10,153) |
Additions | | | (3,137) | | | (1,767) |
Charge-offs | | | 3,438 | | | 7,311 |
Servicing advance reserve, at end of period | | | ($4,308) | | | ($4,609) |
Year Ended December 31, 2019 | ||||||||||||
| | Interest Rate | | | Maturity Date | | | Collateral(8) | | | Balance at December 31, 2019 | |
$300M Warehouse Facility(1) | | | One Month Libor + 1.50% or 3% | | | July 2020 | | | Mortgage loans | | | $299.3 million |
$300M Warehouse Facility(2) | | | One Month Libor + 1.75%* | | | September 2020 | | | Mortgage loans | | | $292.5 million |
$200M Warehouse Facility(3) | | | One Month Libor + 1.50%* | | | Evergreen | | | Mortgage loans | | | $143.0 million |
$600M Warehouse Facility(4) | | | Weighted Average Coupon less 1% or 3.5% | | | May 2020 | | | Mortgage loans | | | $501.8 million |
$250M Warehouse Facility(5) | | | One Month Libor -0.55% | | | May 2020 | | | Mortgage loans | | | $238.9 million |
$0.8M Warehouse Facility(6) | | | Borrowing rate + debenture rate | | | Feb 2020 | | | Mortgage loans | | | $0.8 million |
$50M Warehouse Facility(7) | | | One Month Libor + 2.50% or 4.75% | | | Evergreen | | | Mortgage loans | | | $1.9 million |
Total warehouse lines of credit | | | | | | | | | $1,478.2 million |
* | Pricing incentives given for average utilization greater than a threshold. |
(1) | Subsequent to December 31, 2019, this facility was amended with a maturity date of August 2021. |
(2) | Subsequent to December 31, 2019, this facility was amended with a maturity date of September 2021 and an increased capacity up to $500 million. |
(3) | Subsequent to December 31, 2019, this facility was amended with an increased capacity up to $300 million. |
(4) | Subsequent to December 31, 2019, this facility was amended with a maturity date of May 2021 and an increased capacity up to $800 million. Additionally, the interest rate changed from weighted average coupon less 1% or 3.5% to weighted average coupon less 1% or 3% |
(5) | Subsequent to December 31, 2019, this facility was amended with a maturity date of September 2021 and an increased capacity up to $500 million. Additionally, the interest rate changed from one month LIBOR + .55% to one month LIBOR + 1.5%. |
(6) | Subsequent to December 31, 2019, this facility was not renewed upon maturity. |
(7) | Subsequent to December 31, 2019, this facility was closed in May 2020. |
(8) | The Company’s borrowings are 100% secured by the fair value of the mortgage loans held for sale at fair value. |
Year Ended December 31, 2018 | ||||||||||||
| | Interest Rate | | | Maturity Date | | | Collateral(1) | | | Balance at December 31, 2018 | |
$200M Warehouse Facility | | | One Month Libor + 1.50% | | | July 2019 | | | Mortgage loans | | | $65.1 million |
$125M Warehouse Facility | | | One Month Libor + 1.75% | | | September 2019 | | | Mortgage loans | | | $16.4 million |
$100M Warehouse Facility | | | One Month Libor + 1.75% | | | Evergreen | | | Mortgage loans | | | $11.6 million |
$600M Warehouse Facility | | | Weighted Average Coupon less 1.25% | | | May 2019 | | | Mortgage loans | | | $233.3 million |
$100M Warehouse Facility | | | One Month Libor + 0.25% | | | May 2019 | | | Mortgage loans | | | $69.3 million |
$8.3M Warehouse Facility | | | Borrowing rate + debenture rate | | | Evergreen | | | Mortgage loans | | | $8.3 million |
$2M Warehouse Facility | | | Prime + 1.00% or 4.00% min | | | May 2019 | | | Mortgage loans | | | $0.2 million |
Total warehouse lines of credit | | | | | | | | | $404.2 million |
(1) | The Company’s borrowings are 100% secured by the fair value of the mortgage loans held for sale. |
$300M Warehouse Facility | | | June 2020 |
$400M Warehouse Facility | | | August 2020 |
$500M Warehouse Facility | | | October 2020 |
$50M Warehouse Facility (GNMA FHA EBO) | | | October 2020 |
$150M Gestation Facility | | | October 2020 |
| | Year Ended December 31, 2019 | |
| | ||
2020 | | | $— |
2021 | | | — |
2022 | | | 338,250 |
2023 | | | 30,750 |
2024 and Thereafter | | | — |
| | $369,000 |
Year Ended December 31, 2019 | ||||||||||||
| | Interest Rate | | | Maturity Date | | | Collateral | | | Balance at December 31, 2019 | |
$10M Operating Line of Credit(1) | | | Prime or 4.00% min | | | May 2020 | | | Mortgage loans | | | $10.0 million |
$70M Servicing Advance Facility(2) | | | Libor +3.50% | | | May 2020 | | | Servicing Advances | | | $48.2 million |
$500M Line of Credit | | | 3-month LIBOR (floored at 1%) plus 3.50% and 3.75% annualized cost of funds for FNMA/FHLMC and GNMA collateral | | | January 2023 | | | Servicing Advances | | | $369.0 million |
Total | | | | | | | | | $427.2 million | |||
Debt issuance costs | | | | | | | | | $ (2.3) million | |||
Term debt and other borrowings, net | | | | | | | | | $424.9 million |
(1) | Subsequent to December 31, 2019, this facility was amended with a maturity date of May 2021. Additionally, the interest rate changed from Prime or 4.00% to Prime or 3.25%. |
(2) | Subsequent to December 31, 2019, this facility was amended with a maturity date of June 2021 and an increased capacity up to $85 million. |
Year Ended December 31, 2018 | ||||||||||||
| | Interest Rate | | | Maturity Date | | | Collateral | | | Balance at December 31, 2018 | |
$10M Operating Line of Credit | | | Prime or 4.00% min | | | May 2019 | | | Mortgage loans | | | $10.0 million |
$50M Servicing Advance Facility | | | Libor +3.50% | | | January 2019 | | | Servicing Advances | | | $26.4 million |
$250M Term Debt | | | One Month LIBOR (floored at 1%) + 7% annualized cost of funds | | | October 2022 | | | Servicing Advances | | | $245.2 million |
Total | | | | | | | | | $281.6 million | |||
Debt issuance costs | | | | | | | | | $ (5.3) million | |||
Term debt and other borrowings, net | | | | | | | | | $ 276.3 million |
| | Year Ended December 31, 2019 | |
2020 | | | $7,512 |
2021 | | | 5,830 |
2022 | | | 4,814 |
2023 | | | 2,676 |
2024 | | | 1,634 |
Thereafter | | | 854 |
Total | | | $23,320 |
• | Base of $2,500 plus 25 basis points of outstanding UPB for total loans serviced. |
• | Adjusted/Tangible Net Worth comprises of total equity less goodwill, intangible assets, affiliate receivables, deferred tax assets and certain pledged assets. |
• | Base of $2,500 plus 35 basis points of the issuer’s total single-family effective outstanding obligations. |
• | Adjusted/Tangible Net Worth comprises of total equity less goodwill, intangible assets, affiliate receivables, deferred tax assets and certain pledged assets. |
• | 3.5 basis points of total Agency servicing. |
• | Incremental 200 basis points of total nonperforming Agency, measured as 90 plus day delinquencies, servicing in excess of 6% of the total Agency servicing UPB. |
• | Allowable assets for liquidity may include: cash and cash equivalents (unrestricted); available for sale or held for trading investment grade securities (e.g., Agency MBS, Obligations of GSEs, US Treasury Obligations); and unused/available portion of committed servicing advance lines. |
• | Maintain liquid assets equal to the greater of $1,000 or 10 basis points of our outstanding single-family MBS. |
Home Point Financial Corporation | ||||||
| | Adjusted Net Worth | | | Net Worth Required | |
HUD | | | $366,250 | | | $2,500 |
Ginnie Mae | | | $366,250 | | | $93,583 |
Fannie Mae | | | $366,250 | | | $137,945 |
Freddie Mac | | | $366,250 | | | $137,945 |
Various States | | | $366,250 | | | $0 - 1,000 |
Home Point Mortgage Acceptance Corporation | ||||||
| | Adjusted Net Worth | | | Net Worth Required | |
HUD | | | $3,563 | | | $2,500 |
Ginnie Mae | | | $3,563 | | | $2,995 |
Fannie Mae | | | $3,563 | | | $2,878 |
Freddie Mac | | | $3,563 | | | $2,878 |
Various States | | | $3,563 | | | $0 - 1,000 |
| | Year Ended December 31, | ||||
| | 2019 | | | 2018 | |
Repurchase reserve, at beginning of period | | | $3,429 | | | $4,199 |
Additions | | | 4,276 | | | 1,367 |
Charge-offs | | | (3,741) | | | (2,137) |
Repurchase reserves, at end of period | | | $3,964 | | | $3,429 |
Level Input: | | | Input Definition: |
Level 1 | | | Unadjusted, quoted prices in active markets for identical assets or liabilities. |
Level 2 | | | Prices determined using other significant observable inputs. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company. These may include quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk and others. |
Level 3 | | | Prices determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity), unobservable inputs may be used. Unobservable inputs reflect the Company's own assumptions about the factors that market participants would use in pricing the asset or liability and are based on the best information available in the circumstances. |
| | Year Ended December 31, 2019 | ||||||||||
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Assets: | | | | | | | | | ||||
Mortgage loans held for sale | | | $— | | | $1,551,136 | | | $— | | | $1,551,136 |
Mortgage loans held for sale – EBO | | | — | | | — | | | 3,094 | | | 3,094 |
Derivative assets (IRLCs) | | | — | | | — | | | 25,618 | | | 25,618 |
Derivative assets (MBS forward trades) | | | — | | | 1,750 | | | — | | | 1,750 |
Derivative assets (MSRs) | | | — | | | 13,176 | | | — | | | 13,176 |
Mortgage servicing rights | | | — | | | — | | | 575,035 | | | 575,035 |
Total assets | | | $— | | | $1,566,062 | | | $603,747 | | | $2,169,809 |
Liabilities: | | | | | | | | | ||||
Derivative liabilities (MBS forward trades) | | | $— | | | $5,634 | | | $— | | | $5,634 |
Total liabilities | | | $— | | | $5,634 | | | $— | | | $5,634 |
| | Year Ended December 31, 2018 | ||||||||||
| | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
Assets: | | | | | | | | | ||||
Mortgage loans held for sale | | | $— | | | $416,522 | | | $— | | | $416,522 |
Mortgage loans held for sale – EBO | | | — | | | — | | | 5,232 | | | 5,232 |
Derivative assets (IRLCs) | | | — | | | — | | | 7,517 | | | 7,517 |
Derivative assets (MBS forward trades) | | | — | | | 28 | | | — | | | 28 |
Derivative assets (MSRs) | | | — | | | 11,445 | | | — | | | 11,445 |
Mortgage servicing rights | | | — | | | — | | | 532,526 | | | 532,526 |
Total assets | | | $— | | | $427,995 | | | $545,275 | | | $973,270 |
Liabilities: | | | | | | | | | ||||
Derivative liabilities (MBS forward trades) | | | $— | | | $6,980 | | | $— | | | $6,980 |
Total liabilities | | | $— | | | $6,980 | | | $— | | | $6,980 |
| | Year Ended December 31, 2019 | |||||||
| | MSRs | | | IRLC | | | EBO | |
Balance at beginning of period | | | $532,526 | | | $7,517 | | | $5,232 |
Purchases, Sales, Issuances, Contributions and Settlements | | | 273,628 | | | — | | | (1,358) |
Change in fair value | | | (232,647) | | | 18,101 | | | (63) |
Transfers In/Out(1) | | | 1,528 | | | | | (716) | |
Balance at end of period | | | $575,035 | | | $25,618 | | | $3,095 |
| | Year Ended December 31, 2018 | |||||||
| | MSRs | | | IRLC | | | EBO | |
Balance at beginning of period | | | $463,291 | | | $11,142 | | | $9,670 |
Purchases, Sales, Issuances, Contributions and Settlements | | | 129,753 | | | — | | | (1,448) |
Change in fair value | | | (67,562) | | | (3,625) | | | 1,097 |
Transfers In/Out(1) | | | 7,044 | | | | | (4,087) | |
Balance at end of period | | | $532,526 | | | $7,517 | | | $5,232 |
(1) | Transfers In/Out represents acquired assets and assets transferred out due to reclassification as REO, foreclosure or claims. |
| | Fair Value | | | Principal Amount Due Upon Maturity | | | Difference(1) | |
Balance at December 31, 2019 | | | $1,551,136 | | | $1,507,139 | | | $43,997 |
Balance at December 31, 2018 | | | $416,522 | | | $408,276 | | | $8,246 |
(1) | Represents the amount of gains related to changes in fair value of items accounted for using the fair value option included in Gain on sale, net within the consolidated statements of operations. |
| | Number of Shares | | | Weighted Average Exercise Price | | | Weighted Average Contractual Life (Years) | | | Weighted Average Grant Date Fair Value | |
Outstanding at January 1, 2018 | | | 2,707,200 | | | $10.00 | | | 8.07 | | | $2.23 |
Granted | | | 1,350,625 | | | $10.26 | | | 9.55 | | | $3.15 |
Exercised | | | (3,000) | | | $10.00 | | | — | | | $3.07 |
Forfeited | | | (815,625) | | | $10.05 | | | 7.41 | | | $2.59 |
Outstanding at December 31, 2018 | | | 3,239,200 | | | $10.10 | | | 7.48 | | | $2.52 |
Granted | | | 427,500 | | | $10.20 | | | 9.67 | | | $1.88 |
Exercised | | | — | | | — | | | — | | | — |
Forfeited | | | (374,825) | | | $10.05 | | | 6.15 | | | $2.56 |
Outstanding at December 31, 2019 | | | 3,291,875 | | | $10.12 | | | 7.15 | | | $2.41 |
| | Number of Shares | | | Weighted Average Grant Date Fair Value | |
Non-vested at January 1, 2018 | | | 2,361,600 | | | $2.25 |
Granted | | | 1,350,625 | | | $3.15 |
Vested | | | (181,400) | | | $2.10 |
Exercised | | | (3,000) | | | $3.07 |
Forfeited | | | (815,625) | | | $2.59 |
Non-vested at December 31, 2018 | | | 2,712,200 | | | $2.60 |
Granted | | | 427,500 | | | $1.88 |
Vested | | | (209,388) | | | $2.24 |
Exercised | | | — | | | — |
Forfeited | | | (374,825) | | | $2.56 |
Non-vested at December 31, 2019 | | | 2,555,487 | | | $2.46 |
| | Years Ended December 31, | ||||
| | 2019 | | | 2018 | |
Expected life (in years) | | | 8.3 | | | 8.3 |
Risk-free interest rate | | | 1.70%-2.59% | | | 2.33%-2.95% |
Expected volatility | | | 23.3% | | | 23.3% |
Dividend yield | | | — | | | — |
| | Year Ended December 31, 2019 | |||||||
| | Federal | | | State | | | Total | |
Current | | | $(378) | | | $22 | | | $(356) |
Deferred | | | (6,658) | | | (2,486) | | | (9,144) |
Total income tax expense (benefit) | | | $(7,036) | | | $(2,464) | | | $(9,500) |
| | Year Ended December 31, 2018 | |||||||
| | Federal | | | State | | | Total | |
Current | | | $(887) | | | $— | | | $(887) |
Deferred | | | (5,296) | | | (1,752) | | | (7,048) |
Total income tax expense (benefit) | | | $(6,183) | | | $(1,752) | | | $(7,935) |
| | Years Ended December 31, | ||||
| | 2019 | | | 2018 | |
Income/(Loss) before income taxes | | | $(41,411) | | | $(42,048) |
Statutory federal income tax (21%) | | | (8,697) | | | (8,830) |
State income tax expense, net of federal tax | | | (2,073) | | | (2,185) |
Change in valuation allowance | | | (64) | | | (581) |
Impact of tax rate change | | | 54 | | | 924 |
Impact of equity investments | | | 705 | | | 55 |
Other | | | 575 | | | 132 |
Total income tax expense (benefit) | | | $(9,500) | | | $(10,485) |
Effective tax rate | | | 22.9% | | | 24.9% |
| | Years Ended December 31, | ||||
| | 2019 | | | 2018 | |
Deferred tax asset | | | | | ||
Federal NOL carryforward | | | $62,988 | | | $60,069 |
State NOL carryforward | | | 14,062 | | | 13,551 |
Installment sale – Natty Mac | | | — | | | 24,473 |
Interest expense | | | — | | | 1,330 |
Other | | | 5,873 | | | 5,208 |
Total deferred tax asset | | | 82,923 | | | 104,631 |
Deferred tax liability | | | | | ||
MSR | | | (49,205) | | | (88,647) |
Derivatives | | | (6,687) | | | (1,975) |
Investment in Longbridge | | | (4,457) | | | — |
Other | | | — | | | (507) |
Total deferred tax liability | | | (60,349) | | | (91,129) |
Valuation Allowance | | | (1,907) | | | (1,971) |
Net tax asset | | | $20,667 | | | $11,531 |
| | Year Ended December 31, 2019 | |||||||||||||||||||
| | Origination | | | Servicing | | | Segments Total | | | All Other | | | Total | | | Reconciliation Item(1) | | | Total Consolidated | |
Revenue | | | | | | | | | | | | | | | |||||||
Gain on loans, net | | | $200,646 | | | $(1,145) | | | $199,501 | | | $— | | | $199,501 | | | | | $199,501 | |
Loan fee income | | | 32,072 | | | — | | | 32,072 | | | 40 | | | 32,112 | | | | | 32,112 | |
Loan servicing fees | | | (846) | | | 145,074 | | | 144,228 | | | — | | | 144,228 | | | | | 144,228 | |
Change in FV of MSRs | | | — | | | (173,134) | | | (173,134) | | | — | | | (173,134) | | | | | (173,134) | |
Interest income | | | 2,697 | | | 18,883 | | | 21,580 | | | (27,721) | | | (6,141) | | | | | (6,141) | |
Other income | | | — | | | 13 | | | 13 | | | 5,847 | | | 5,847 | | | (2,701) | | | 3,159 |
Total U.S. GAAP Revenue | | | $234,569 | | | $(10,309) | | | $224,260 | | | $(21,834) | | | $202,426 | | | $(2,701) | | | $199,725 |
Contribution margin | | | $89,456 | | | $24,593 | | | $114,049 | | | $(78,278) | | | $35,771 | | | | |
(1) | The Company includes the income from its equity method investments in the All Other category. In order to reconcile to Total net revenue on the consolidated statements of operations, it must be removed as is presented above. |
| | Year Ended December 31, 2018 | |||||||||||||||||||
| | Origination | | | Servicing | | | Segments Total | | | All Other | | | Total | | | Reconciliation Item(1) | | | Total Consolidated | |
Revenue | | | | | | | | | | | | | | | |||||||
Gain on loans, net | | | $84,127 | | | $(59) | | | $84,068 | | | $— | | | $84,068 | | | | | $84,068 | |
Loan fee income | | | 18,462 | | | — | | | 18,462 | | | 1,141 | | | 19,603 | | | | | 19,603 | |
Loan servicing fees | | | — | | | 119,049 | | | 119,049 | | | — | | | 119,049 | | | | | 119,049 | |
Change in FV of MSRs | | | — | | | (47,312) | | | (47,312) | | | — | | | (47,312) | | | | | (47,312) | |
Interest income | | | 6,028 | | | 2,228 | | | 8,256 | | | (20,563) | | | (12,307) | | | | | (12,307) | |
Other income | | | 44 | | | (98) | | | (54) | | | 1,419 | | | 1,365 | | | (209) | | | 1,156 |
Total U.S. GAAP Revenue | | | $108,661 | | | $73,808 | | | $182,469 | | | $(18,003) | | | $164,466 | | | $(209) | | | $164,257 |
Contribution margin | | | $251 | | | $26,180 | | | $26,431 | | | $(78,618) | | | $(52,187) | | | | |
(1) | The Company includes the income from its equity method investments in the All Other segment. In order to reconcile to Total net revenue on the consolidated statements of operations, it must be removed as is presented above. |
| | Years Ended December 31, | ||||
| | 2019 | | | 2018 | |
Loss from continuing operations before income tax | | | $(41,411) | | | $(42,048) |
Decrease (increase) in MSRs due to valuation assumptions | | | 74,481 | | | (10,348) |
Income from equity method investment | | | 2,701 | | | 209 |
Contribution margin, excluding change in MSRs due to valuation assumption | | | $35,771 | | | $(52,187) |
| | December 31, | ||||
| | 2019 | | | 2018 | |
Cash and cash equivalents | | | $202 | | | $460 |
Investment in subsidiary | | | 380,961 | | | 409,068 |
Equity method investment | | | 31,283 | | | 28,701 |
Other assets | | | 486 | | | 566 |
Total assets | | | $412,932 | | | $438,795 |
Accounts payable | | | $2,137 | | | $24 |
Deferred tax liabilities | | | 483 | | | — |
Total liabilities | | | 2,620 | | | 24 |
| | | | |||
Equity: | | | | | ||
Common stock (138,860,111 shares issued and outstanding, par value $0.0000000072 per share) | | | — | | | — |
Additional paid in capital | | | 454,861 | | | 454,110 |
Accumulated deficit | | | (44,549) | | | (15,339) |
Total liabilities and equity | | | $412,932 | | | $438,795 |
| | Years Ended December 31, | ||||
| | 2019 | | | 2018 | |
Interest income | | | $3 | | | $3 |
Net loss of subsidiaries | | | (30,873) | | | (24,494) |
Total loss | | | $(30,870) | | | $(24,491) |
Total expenses | | | 390 | | | (201) |
Income (loss) before tax | | | (31,260) | | | (24,290) |
Income tax provision | | | (651) | | | (116) |
Income from equity method investments | | | 2,701 | | | 209 |
Total net loss | | | $(29,210) | | | $(24,197) |
| | Years Ended December 31, | ||||
| | 2019 | | | 2018 | |
Cash flows from operating activities: | | | | | ||
Net Income | | | $(29,210) | | | $(24,197) |
Adjustments to reconcile net loss to net cash used in operating activities: | | | | | ||
Net loss of subsidiaries | | | 30,873 | | | 24,494 |
Depreciation | | | — | | | 13 |
(Gain) on equity investment | | | (2,701) | | | (2,709) |
Decrease in deferred taxes, net | | | 1,032 | | | 51 |
Increase in prepaid expenses and other assets | | | (468) | | | (1,428) |
(Decrease) increase in accounts payable and other assets | | | 2,113 | | | (282) |
Total operating cash flows | | | $1,639 | | | $(4,058) |
| | | | |||
Cash flows from investing activities: | | | | | ||
Purchases of property and equipment, net of disposals | | | — | | | 23 |
Investment in subsidiaries | | | (1,896) | | | (38,944) |
Total investing cash flows | | | $(1,896) | | | $ (38,921) |
| | | | |||
Cash flows from financing activities: | | | | | ||
Capital contributions from parent | | | — | | | 42,970 |
Investment in subsidiaries | | | | | ||
Total net cash (used in) provided by financing activities | | | $— | | | $42,970 |
| | | | |||
Net increase in cash, cash equivalents and restricted cash | | | $(257) | | | $(9) |
Cash, cash equivalents and restricted cash at beginning of period | | | $460 | | | $469 |
Cash, cash equivalents and restricted cash at end of period | | | $203 | | | $460 |
| | | | |||
Cash paid for interest | | | — | | | — |
Cash paid for income taxes | | | — | | | 54 |
| | Percentage of Origination | |
2019 | | | |
State: | | | |
California | | | 22.9% |
Florida | | | 7.0% |
New Jersey | | | 5.2% |
2018 | | | |
State: | | | |
California | | | 22.2% |
Florida | | | 9.7% |
New Jersey | | | 8.3% |
Illinois | | | 7.0% |
| | Percentage of Servicing Unpaid Principal Balance | |
2019 | | | |
State: | | | |
California | | | 19.35% |
Florida | | | 7.24% |
New Jersey | | | 7.08% |
Illinois | | | 5.27% |
2018 | | | |
State: | | | |
California | | | 20.21% |
Florida | | | 6.89% |
New Jersey | | | 7.98% |
Illinois | | | 5.76% |
| | Years Ended December 31, | ||||||||||
| | 2019 | | | 2018 | |||||||
GNMA | | | $ 10,066,347 | | | 47.5% | | | $5,000,967 | | | 41.6% |
FNMA | | | 6,609,090 | | | 31.2% | | | 2,684,593 | | | 22.0% |
FHLMC | | | 3,691,617 | | | 17.4% | | | 3,994,671 | | | 33.3% |
Other | | | 816,779 | | | 3.9% | | | 368,447 | | | 3.1% |
| | $ 21,183,833 | | | 100% | | | $ 12,012,678 | | | 100% |
| | As Reported December 31, 2019 | | | Dividends Adjustment(1) | | | Pro Forma | |
Accounts payable and accrued expenses | | | $39,793 | | | 154,500 | | | 194,239 |
Total liabilities | | | $ 2,498,455 | | | 154,500 | | | 2,652,955 |
Total shareholder’s equity | | | $410,312 | | | (154,500) | | | 255,812 |
(1) | The Company paid a dividend on October 5, 2020 of $154.5 million, which was fully funded through the use of cash on hand. For purposes of the unaudited pro forma combined balance sheets, the payment of the dividend is reflected as a reduction to shareholders’ equity of $154.5 million and the recognition of a payable of $154.5 million. |
Goldman Sachs & Co. LLC | | | Wells Fargo Securities | | | Morgan Stanley | | | UBS Investment Bank |
Credit Suisse | | | J.P. Morgan | | | BofA Securities |
JMP Securities | | | Piper Sandler | | | R. Seelaus & Co., LLC | | | SPC Capital Markets LLC |
Wedbush Securities | | | Zelman Partners LLC |
Item 13. | Other Expenses of Issuance and Distribution. |
| | Amount to be paid | |
SEC registration fee | | | $32,935 |
FINRA filing fee | | | 45,782 |
Nasdaq listing fee | | | 295,000 |
Legal fees and expenses | | | 2,500,000 |
Accounting fees and expenses | | | 1,774,000 |
Printing and engraving expenses | | | 165,000 |
Transfer agent and registrar fees | | | 10,000 |
Miscellaneous fees and expenses | | | 277,283 |
Total | | | $5,100,000 |
Item 14. | Indemnification of Directors and Officers. |
Item 15. | Recent Sales of Unregistered Securities. |
Item 16. | Exhibits and Financial Statement Schedules. |
(A) | Exhibits. |
Exhibit Number | | | Description |
| | Form of Underwriting Agreement. | |
| | Form of Amended and Restated Certificate of Incorporation of the Registrant. | |
| | Form of Amended and Restated Bylaws of the Registrant. | |
| | Form of Registration Rights Agreement among the Registrant and certain of its stockholders. | |
| | Indenture, dated as of January 19, 2021, by and among Home Point Capital Inc., the guarantors party thereto and U.S. Bank National Association, as trustee, governing the 5.000% Senior Notes due 2026. | |
| | Opinion of Simpson Thacher & Bartlett LLP. | |
| | Master Participation Agreement, dated as of May 31, 2017, by and between Home Point Financial Corporation, as seller, and Merchants Bank of Indiana, as participant. | |
| | Confirmation and Amendment of Participation Agreement, dated as of May 29, 2020, by and between Home Point Financial Corporation, as seller, and Merchants Bank of Indiana, as participant. |
Exhibit Number | | | Description |
| | Master Repurchase Agreement and Securities Contract, dated as of June 3, 2020, by and between Home Point Financial Corporation, as seller, Morgan Stanley Bank, N.A., as buyer, and Morgan Stanley Mortgage Capital Holdings LLC, as agent. | |
| | Amendment No. 1 to Master Repurchase Agreement and Securities Contract, dated as of August 14, 2020, by and between Home Point Financial Corporation, as seller, Morgan Stanley Bank, N.A., as buyer, and Morgan Stanley Mortgage Capital Holdings LLC, as agent. | |
| | Amendment No. 2 to Master Repurchase Agreement and Securities Contract, dated as of November 18, 2020, by and between Home Point Financial Corporation, as seller, Morgan Stanley Bank, N.A., as buyer, and Morgan Stanley Mortgage Capital Holdings LLC, as agent. | |
| | Amendment No. 3 to Master Repurchase Agreement and Securities Contract, dated as of December 23, 2020, by and between Home Point Financial Corporation, as seller, Morgan Stanley Bank, N.A., as buyer, and Morgan Stanley Mortgage Capital Holdings LLC, as agent. | |
| | Master Repurchase Agreement, dated as of October 23, 2020, by and among Credit Suisse First Boston Mortgage Capital LLC, as administrative agent, Credit Suisse AG, as buyer, Alpine Securitization LTD, as buyer, the other buyers from time to time party thereto, Home Point Financial Corporation, as seller, and each underlying entity joined thereto from time to time. | |
| | Mortgage Warehouse Agreement, dated as of August 5, 2020, by and between Home Point Financial Corporation, as seller, and Texas Capital Bank, National Association. | |
| | Addendum to Mortgage Warehouse Agreement (New York Committed Facility), effective as of September 2, 2020, by and between Home Point Financial Corporation, as seller, and Texas Capital Bank, National Association. | |
| | Amended and Restated Master Repurchase Agreement, dated as of September 18, 2020, by and among Home Point Financial Corporation, as seller, TIAA, FSB, as administrative agent and a buyer, and the other buyers from time to time party thereto. | |
| | Amendment No. 1 to Amended and Restated Master Repurchase Agreement and Amended and Restated Pricing Letter, dated as of December 15, 2020, by and among Home Point Financial Corporation, as seller, TIAA, FSB, as administrative agent and a buyer, and Capital One, National Association, as a buyer. | |
| | Amendment No. 2 to Amended and Restated Master Repurchase Agreement and Amended and Restated Pricing Letter, dated as of January 13, 2021, by and among Home Point Financial Corporation, as seller, TIAA, FSB, as administrative agent and a buyer, and Capital One, National Association, as a buyer. | |
| | Master Repurchase Agreement, dated as of October 28, 2015, by and between UBS Bank USA, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 1 to Master Repurchase Agreement, dated as of May 4, 2016, by and between UBS Bank USA, as buyer, and Home Point Financial Corporation, as seller. | |
| | Assignment and Amendment No. 2 to Master Repurchase Agreement and Assignment and Amendment No. 8 to Pricing Letter, dated September 15, 2016, by and among Home Point Financial Corporation, as seller, UBS Bank USA, as assignor, and UBS AG, as assignee. | |
| | Amendment No. 3 to Master Repurchase Agreement, dated as of September 28, 2016, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 4 to Master Repurchase Agreement, dated as of January 5, 2017, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 5 to Master Repurchase Agreement, dated as of October 6, 2017, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 6 to Master Repurchase Agreement, dated as of November 9, 2017, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 7 to Master Repurchase Agreement, dated as of May 7, 2018, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 8 to Master Repurchase Agreement, dated as of July 16, 2018, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 9 to Master Repurchase Agreement, dated as of October 19, 2018, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 10 to Master Repurchase Agreement, dated as of February 25, 2019, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. |
Exhibit Number | | | Description |
| | Amendment No. 11 to Master Repurchase Agreement, dated as of September 20, 2019, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 12 to Master Repurchase Agreement, dated as of December 12, 2019, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 13 to Master Repurchase Agreement, dated as of July 6, 2020, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 14 to Master Repurchase Agreement, dated as of September 18, 2020, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 15 to Master Repurchase Agreement, dated as of October 6, 2020, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Amendment No. 16 to Master Repurchase Agreement, dated as of December 22, 2020, by and between UBS AG, as buyer, and Home Point Financial Corporation, as seller. | |
| | Master Repurchase Agreement and Securities Contract, dated as of November 23, 2015, by and between Wells Fargo Bank, N.A., as buyer, and Home Point Financial Corporation, as seller. | |
| | Master Repurchase Agreement, dated as of October 1, 2020, by and between Amherst Pierpont Securities LLC, as buyer, and Home Point Financial Corporation, as seller. | |
| | Master Repurchase Agreement, dated as of August 14, 2020, by and between Barclays Bank PLC, as purchaser and agent, and Home Point Financial Corporation, as seller. | |
| | Amended and Restated Credit Agreement, dated as of July 11, 2019, by and among Home Point Financial Corporation, as borrower, Home Point Capital Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent, and the lenders party thereto. | |
| | First Amendment to Amended and Restated Credit Agreement, dated as of November 27, 2019, by and among Home Point Financial Corporation, as borrower, Home Point Capital Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent, and the lenders party thereto. | |
| | Second Amendment to Amended and Restated Credit Agreement, dated as of August 5, 2020, by and among Home Point Financial Corporation, as borrower, Home Point Capital Inc., as guarantor, Goldman Sachs Bank USA, as administrative agent, and the lenders party thereto. | |
| | Form of Stockholders’ Agreement. | |
| | Employment Agreement, dated March 31, 2015, by and between Home Point Capital Inc. and William A. Newman. | |
| | Home Point Capital LP 2015 Option Plan, dated as of March 31, 2015. | |
| | Amendment No. 1 to Home Point Capital LP 2015 Option Plan, dated January 31, 2020. | |
| | Form of the 2021 Incentive Plan. | |
| | Form of Substitute Option Agreement under the 2021 Incentive Plan. | |
| | Form of 2021 Employee Stock Purchase Plan. | |
| | Master Repurchase Agreement and Securities Contract, dated as of January 8, 2021, by and between Bank of Montreal, as buyer, and Home Point Financial Corporation, as seller. | |
| | Consulting Agreement, dated January 9, 2021, by and between Home Point Financial Corporation and Andrew Bon Salle. | |
| | Amendment No. 2 to Home Point Capital LP 2014 Option Plan, dated January 6, 2021. | |
| | Form of Non-Employee Director RSU Agreement under the 2021 Incentive Plan | |
| | Subsidiaries of the Registrant. | |
| | Consent of BDO USA, LLP. | |
| | Consent of Simpson Thacher & Bartlett LLP (included as part of Exhibit 5.1). | |
| | Consent of Laurie S. Goodman to be named as a director nominee. | |
| | Consent of Timothy R. Morse to be named as a director nominee. | |
| | Power of Attorney (included on signature pages to this registration statement). | |
| | Power of Attorney of Andrew J. Bon Salle. |
* | Previously filed |
** | Filed herewith. |
† | Compensatory arrangements for director(s) and/or executive officer(s). |
+ | Certain portions of this exhibit have been redacted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Company agrees to furnish supplementally an unredacted copy of the exhibit to the Securities and Exchange Commission upon its request. |
(B) | Financial Statement Schedules. |
Item 17. | Undertakings. |
(1) | For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus as filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. |
(2) | For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| | Home Point Capital Inc. | |||||||
| | | | | | ||||
| | By: | | | /s/ William A. Newman | ||||
| | | | Name: | | | William A. Newman | ||
| | | | Title: | | | President and Chief Executive Officer |
Signature | | | Capacity |
| | ||
/s/ William A. Newman | | | President, Chief Executive Officer and Director (Principal Executive Officer) |
William A. Newman | | ||
| | ||
* | | | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
Mark E. Elbaum | | ||
| | ||
* | | | Chairperson |
Andrew J. Bon Salle | | | |
| | ||
* | | | Director |
Agha S. Khan | | ||
| | ||
* | | | Director |
Stephen A. Levey | | ||
| | ||
* | | | Director |
Eric L. Rosenzweig | |
*By: | /s/ William A. Newman |
Very truly yours,
|
||||
Home Point Capital Inc.
|
||||
By:
|
||||
Name:
|
||||
Title:
|
||||
Trident VI, L.P.
|
||||
By:
|
||||
Name:
|
||||
Title:
|
||||
Trident VI Parallel Fund, L.P.
|
||||
By:
|
||||
Name:
|
||||
Title:
|
||||
Trident VI DE Parallel Fund, L.P.
|
||||
By:
|
||||
Name:
|
||||
Title:
|
||||
Trident VI Professionals Fund, L.P.
|
||||
By:
|
||||
Name:
|
||||
Title:
|
||||
[Management Sellers]
|
||||
By:
|
||||
Name:
|
||||
Title:
|
||||
As Attorney-in-Fact acting on behalf of each of the Selling Stockholders named in Schedule II to this Agreement
|
||||
Accepted as of the date hereof:
|
||||
Goldman Sachs & Co. LLC
|
||||
Wells Fargo Securities, LLC
|
||||
On behalf of each of the Underwriters
|
||||
Goldman Sachs & Co. LLC
|
||||
By:
|
||||
Name:
|
||||
Title:
|
||||
Wells Fargo Securities, LLC
|
||||
By:
|
||||
Name:
|
||||
Title:
|
Underwriter
|
Total Number of
Firm Shares to
be Purchased
|
Number of Optional
Shares to be
Purchased if
Maximum Option
Exercised
|
Goldman Sachs & Co. LLC
|
||
Wells Fargo Securities, LLC
|
||
Morgan Stanley & Co. LLC
|
||
UBS Securities LLC
|
||
Credit Suisse Securities (USA) LLC
|
||
J.P. Morgan Securities LLC
|
||
BofA Securities, Inc.
|
||
JMP Securities LLC
|
||
Piper Sandler & Co.
|
||
R. Seelaus & Co., LLC
|
||
SPC Capital Markets LLC
|
||
Wedbush Securities Inc.
|
||
Zelman Partners LLC
|
||
Total
|
Total Number of
Firm Shares
to be Sold
|
Number of Optional
Shares to be
Sold if
Maximum Option
Exercised
|
||
The Company
|
|||
The Selling Stockholder(s):
|
|||
Trident VI, L.P.
|
|||
Trident VI Parallel Fund, L.P.
|
|||
Trident VI DE Parallel Fund, L.P.
|
|||
Trident VI Professionals Fund, L.P.
|
|||
[Management Sellers]
|
|||
Total
|
(a)
|
Issuer Free Writing
Prospectuses not included in the Pricing Disclosure Package: Electronic roadshow dated [•]
|
(b)
|
Additional Documents
Incorporated by Reference: None
|
(c)
|
Information other than the Pricing Prospectus that comprise the Pricing Disclosure Package:
|
The initial public offering price per share for the Shares is $[•]
|
|
The number of Firm Shares purchased by the Underwriters is [•].
|
|
The number of Optional Shares purchased by the Underwriters is [●].
|
|
(d)
|
Written Testing-the-Waters Communications: [ ]
|
Very truly yours,
|
|
Exact Name of Shareholder
|
|
Authorized Signature
|
|
Title
|
1. |
prior to such time, the Board of Directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder, or
|
2. |
upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock (as defined below) of the Corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by (i) persons who are directors and also officers
and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or
|
3. |
at or subsequent to such time, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66⅔% of the
outstanding voting stock of the Corporation which is not owned by the interested stockholder.
|
1. |
“affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another person.
|
2. |
“associate,” when used to indicate a relationship with any person, means: (i) any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or
indirectly, the owner of 20% or more of any class of voting stock; (ii) any trust or other estate in which such person has at least a 20% beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity;
and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.
|
3. |
“business combination,” when used in reference to the Corporation and any interested stockholder of the Corporation, means:
|
(i) |
any merger or consolidation of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation (a) with the interested stockholder, or (b) with any other corporation, partnership, unincorporated association or
other entity if the merger or consolidation is caused by the interested stockholder and as a result of such merger or consolidation Section (B) of this Article X is not applicable to the surviving entity;
|
(ii) |
any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder of the Corporation, to or with the interested stockholder, whether as
part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to 10% or more of either the aggregate market value
of all the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the Corporation;
|
(iii) |
any transaction which results in the issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any stock of the Corporation or of such subsidiary to the interested stockholder,
except: (a) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which securities were outstanding prior to the time that the
interested stockholder became such; (b) pursuant to a merger under Section 251(g) of the DGCL; (c) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for
or convertible into stock of the Corporation or any such subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the Corporation subsequent to the time the interested stockholder became such; (d)
pursuant to an exchange offer by the Corporation to purchase stock made on the same terms to all holders of said stock; or (e) any issuance or transfer of stock by the Corporation; provided, however, that in no case under items (c)-(e) of this subsection (iii) shall there be an increase in the interested stockholder’s proportionate share of the stock of any class or series of the Corporation
or of the voting stock of the Corporation (except as a result of immaterial changes due to fractional share adjustments);
|
(iv) |
any transaction involving the Corporation or any direct or indirect majority-owned subsidiary of the Corporation which has the effect, directly or indirectly, of increasing the proportionate share of the stock of any class or series, or
securities convertible into the stock of any class or series, of the Corporation or of any such subsidiary which is owned by the interested stockholder, except as a result of immaterial changes due to fractional share adjustments or as a
result of any purchase or redemption of any shares of stock not caused, directly or indirectly, by the interested stockholder; or
|
(v) |
any receipt by the interested stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges, or other financial benefits (other than those
expressly permitted in subsections (i)-(iv) above) provided by or through the Corporation or any direct or indirect majority-owned subsidiary.
|
4. |
“control,” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting stock, by contract, or otherwise. A person who is the owner of 20% or more of the outstanding voting stock of the Corporation, partnership, unincorporated association or other
entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting
stock, in good faith and not for the purpose of circumventing this Article X, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.
|
5. |
“interested stockholder” means any person (other than the Corporation or any direct or indirect majority-owned subsidiary of the Corporation) that (i) is the owner of 15% or more of the outstanding voting stock of the Corporation,
or (ii) is an affiliate or associate of the Corporation and was the owner of 15% or more of the outstanding voting stock of the Corporation at any time within the three (3) year period immediately prior to the date on which it is sought to
be determined whether such person is an interested stockholder; and the affiliates and associates of such person; but “interested stockholder” shall not include or be deemed to include, in any case, (a) Stone Point, any Stone Point Direct
Transferee, any Stone Point Indirect Transferee or any of their respective affiliates or successors or any “group,” or any member of any such group, to which such persons are a party under Rule 13d-5 of the Exchange Act, or (b) any person
whose ownership of shares in excess of the 15% limitation set forth herein is the result of any action taken solely by the Corporation, provided that such person shall be an interested stockholder
if thereafter such person acquires additional shares of voting stock of the Corporation, except as a result of further corporate action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is
an interested stockholder, the voting stock of the Corporation deemed to be outstanding shall include stock deemed to be owned by the person through application of the definition of “owner” below but shall not include any other unissued
stock of the Corporation which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
|
6. |
“owner,” including the terms “own” and “owned,” when used with respect to any stock, means a person that individually or with or through any of its affiliates or associates:
|
(i) |
beneficially owns such stock, directly or indirectly; or
|
(ii) |
has (a) the right to acquire such stock (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the owner of stock tendered pursuant to a tender or exchange
offer made by such person or any of such person’s affiliates or associates until such tendered stock is accepted for purchase or exchange; or (b) the right to vote such stock pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any stock because of such person’s right to vote such stock if the agreement, arrangement or
understanding to vote such stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to ten (10) or more persons; or
|
(iii) |
has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (b) of subsection (ii) above), or disposing of such stock with any
other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, such stock.
|
7. |
“person” means any individual, corporation, partnership, unincorporated association or other entity.
|
8. |
“stock” means, with respect to any corporation, capital stock and, with respect to any other entity, any equity interest.
|
9. |
“Stone Point Direct Transferee” means any person that acquires (other than in a registered public offering or through a broker’s transaction executed on any securities exchange or other over-the-counter market) directly from Stone
Point or any of its affiliates or successors or any “group,” or any member of any such group, of which such persons are a party under Rule 13d-5 of the Exchange Act beneficial ownership of 5% or more of the then-outstanding voting stock of
the Corporation.
|
10. |
“Stone Point Indirect Transferee” means any person that acquires (other than in a registered public offering or through a broker’s transaction executed on any securities exchange or other over-the-counter market) directly from any
Stone Point Direct Transferee or any other Stone Point Indirect Transferee beneficial ownership of 5% or more of the then-outstanding voting stock of the Corporation.
|
11. |
“voting stock” means stock of any class or series entitled to vote generally in the election of directors.
|
Home Point Capital Inc.
|
||
By:
|
||
Name:
|
||
Title:
|
Page
|
||
ARTICLE I DEFINITIONS
|
1
|
|
SECTION 1.1
|
Certain Definitions
|
1
|
SECTION 1.2
|
Other Definitional Provisions; Interpretation
|
6
|
ARTICLE II REGISTRATION RIGHTS
|
6
|
|
SECTION 2.1
|
Piggyback Rights
|
6
|
SECTION 2.2
|
Demand Registration
|
8
|
SECTION 2.3
|
Registration Procedures
|
12
|
SECTION 2.4
|
Other Registration-Related Matters
|
16
|
ARTICLE III INDEMNIFICATION
|
19
|
|
SECTION 3.1
|
Indemnification by the Company
|
19
|
SECTION 3.2
|
Indemnification by the Holders and Underwriters
|
20
|
SECTION 3.3
|
Notices of Claims, Etc.
|
20
|
SECTION 3.4
|
Contribution
|
21
|
SECTION 3.5
|
Other Indemnification
|
22
|
SECTION 3.6
|
Non-Exclusivity
|
22
|
ARTICLE IV OTHER
|
22
|
|
SECTION 4.1
|
Notices
|
22
|
SECTION 4.2
|
Assignment
|
23
|
SECTION 4.3
|
Amendments; Waiver
|
23
|
SECTION 4.4
|
Third Parties
|
23
|
SECTION 4.5
|
Governing Law
|
23
|
SECTION 4.6
|
CONSENT TO JURISDICTION.
|
23
|
SECTION 4.7
|
MUTUAL WAIVER OF JURY TRIAL
|
24
|
SECTION 4.8
|
Specific Performance
|
24
|
SECTION 4.9
|
Entire Agreement
|
24
|
SECTION 4.10
|
Severability
|
24
|
SECTION 4.11
|
Counterparts
|
24
|
SECTION 4.12
|
Effectiveness
|
25
|
SECTION 4.13
|
Confidentiality
|
25
|
SECTION 4.14
|
No Recourse
|
25
|
SECTION 4.15
|
Independent Nature of the Rights and Obligations of Holders
|
25
|
|
||
SECTION 4.16
|
Termination as to a Holder
|
25
|
(a) |
a registration statement covering such Registrable Securities has been declared effective and such Registrable Securities have been disposed of pursuant to such effective registration statement;
|
(b) |
such Registrable Securities shall have been sold pursuant to Rule 144 or 145 (or any similar provision then in effect) under the Securities Act; or
|
(c) |
such Registrable Securities cease to be outstanding.
|
(a) |
all registration and filing fees (including, without limitation, all SEC, stock exchange, and FINRA registration and filing fees and the fees and expenses of any “qualified independent underwriter,” as such term
is defined in Rule 5121 of FINRA, and of its counsel);
|
(b) |
all fees and expenses of complying with securities or blue sky Laws (including fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities);
|
(c) |
all printing, messenger, telephone and delivery expenses;
|
(d) |
all fees and expenses incurred in connection with the listing of the Registrable Securities on any securities exchange or FINRA and all rating agency fees;
|
(e) |
the reasonable fees and disbursements of counsel for the Company and of its independent certified public accountants, including the expenses of any special audits and/or “comfort” letters required by or incident
to such performance and compliance;
|
(f) |
any fees and disbursements of underwriters customarily paid by the issuers or sellers of Securities, including liability insurance if the Company so desires or if the underwriters so require, and the reasonable
fees and expenses of any special experts retained in connection with the requested registration, but excluding underwriting discounts and commissions and transfer taxes, if any;
|
(g) |
the reasonable fees and out-of-pocket expenses of not more than one law firm together with appropriate local counsel (as selected by the Holders of a majority of the Registrable Securities included in such
registration) representing the Holders in connection with the registration;
|
(h) |
other reasonable out-of-pocket expenses of the holders of Registrable Securities incurred in connection with the registration;
|
(i) |
the costs and expenses of the Company relating to analyst and investor presentations or any “road show” undertaken in connection with the registration and/or marketing of the Registrable Securities (including the
reasonable out-of-pocket expenses of the Holders); and
|
(j) |
any other fees and disbursements customarily paid by the issuers of securities.
|
COMPANY:
|
||
HOME POINT CAPITAL INC.
|
||
By:
|
||
Name:
|
||
Title:
|
STONE POINT:
|
||
TRIDENT VI, L.P.
|
||
By: Stone Point Capital LLC, its manager
|
||
By:
|
||
Name:
|
||
Title:
|
||
TRIDENT VI PARALLEL FUND, L.P.
|
||
By: Stone Point Capital LLC, its manager
|
||
By:
|
||
Name:
|
||
Title:
|
||
TRIDENT VI DE PARALLEL FUND, L.P.
|
||
By: Stone Point Capital LLC, its manager
|
||
By:
|
||
Name:
|
||
Title:
|
||
TRIDENT VI PROFESSIONALS FUND, L.P.
|
||
By: Stone Point Capital LLC, its manager
|
||
By:
|
||
Name:
|
||
Title:
|
Exhibit 4.2
Execution Version
HOME POINT CAPITAL INC.
as Issuer,
THE GUARANTORS PARTY HERETO
and
U.S. BANK NATIONAL ASSOCIATION
as Trustee
Indenture
Dated as of January 19, 2021
5.000% Senior Notes Due 2026
Execution Version
TABLE OF CONTENTS
ARTICLE 1 | ||
Definitions and Incorporation by Reference | 1 | |
Section 1.01. | Definitions | 1 |
Section 1.02. | Rules of Construction | 46 |
Section 1.03. | Limited Condition Transactions | 47 |
ARTICLE 2 | ||
The Notes | 48 | |
Section 2.01. | Form, Dating and Denominations; Legends | 49 |
Section 2.02. | Execution and Authentication; Additional Notes | 50 |
Section 2.03. | Registrar, Paying Agent and Authenticating Agent; Paying Agent to Hold Money in Trust | 51 |
Section 2.04. | Replacement Notes | 51 |
Section 2.05. | Outstanding Notes | 51 |
Section 2.06. | Temporary Notes | 52 |
Section 2.07. | Cancellation | 52 |
Section 2.08. | CUSIP and CINS Numbers | 53 |
Section 2.09. | Registration, Transfer and Exchange | 53 |
Section 2.10. | Restrictions on Transfer and Exchange | 56 |
Section 2.11. | Temporary Offshore Global Notes | 58 |
ARTICLE 3 | ||
Redemption; Offer to Purchase | 59 | |
Section 3.01. | Optional Redemption | 59 |
Section 3.02. | Redemption with Proceeds of Equity Offering | 59 |
Section 3.03. | Method and Effect of Redemption | 60 |
Section 3.04. | Offer to Purchase | 61 |
ARTICLE 4 | ||
Covenants | 63 | |
Section 4.01. | Payment of Notes | 63 |
Section 4.02. | Maintenance of Office or Agency | 64 |
Section 4.03. | Existence | 64 |
Section 4.04. | Payment of Taxes and other Claims | 65 |
Section 4.05. | Maintenance of Properties and Insurance | 65 |
Section 4.06. | Limitation on Debt and Disqualified or Preferred Stock | 65 |
Section 4.07. | Limitation on Restricted Payments | 71 |
Section 4.08. | Limitation on Liens | 76 |
Section 4.09. | Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries | 77 |
Section 4.10. | Limitation on Guarantees by Restricted Subsidiaries | 78 |
Section 4.11. | Repurchase of Notes Upon a Change of Control | 79 |
Section 4.12. | Limitation on Asset Sales | 80 |
Section 4.13. | Limitation on Transactions with Affiliates | 82 |
Section 4.14. | [Reserved.] | 86 |
Section 4.15. | Designation of Restricted and Unrestricted Subsidiaries | 86 |
Section 4.16. | Financial Reports | 87 |
Section 4.17. | Reports to Trustee | 91 |
Section 4.18. | Suspension Of Certain Covenants | 91 |
ARTICLE 5 | ||
Consolidation, Merger or Sale of Assets | 92 | |
Section 5.01. | Consolidation, Merger or Sale of Assets by the Issuer; No Lease of All or Substantially All Assets | 92 |
Section 5.02. | Consolidation, Merger or Sale of Assets by a Guarantor | 94 |
ARTICLE 6 | ||
Default and Remedies | 94 | |
Section 6.01. | Events of Default | 94 |
Section 6.02. | Acceleration | 96 |
Section 6.03. | Other Remedies | 97 |
Section 6.04. | Waiver of Past Defaults | 97 |
Section 6.05. | Control by Majority | 97 |
Section 6.06. | Limitation on Suits | 97 |
Section 6.07. | Rights of Holders to Receive Payment | 98 |
Section 6.08. | Collection Suit by Trustee | 98 |
Section 6.09. | Trustee May File Proofs of Claim | 98 |
Section 6.10. | Priorities | 99 |
Section 6.11. | Restoration of Rights and Remedies | 99 |
Section 6.12. | Undertaking for Costs | 99 |
Section 6.13. | Rights and Remedies Cumulative | 100 |
Section 6.14. | Delay or Omission Not Waiver | 100 |
Section 6.15. | Waiver of Stay, Extension or Usury Laws | 100 |
ARTICLE 7 | ||
The Trustee | 100 | |
Section 7.01. | General | 100 |
Section 7.02. | Certain Rights of Trustee | 101 |
Section 7.03. | Individual Rights of Trustee | 103 |
Section 7.04. | Trustee’s Disclaimer | 103 |
Section 7.05. | Notice of Default | 104 |
Section 7.06. | [Reserved.] | 106 |
Section 7.07. | Compensation and Indemnity | 106 |
Section 7.08. | Replacement of Trustee | 107 |
Section 7.09. | Successor Trustee by Merger | 107 |
Section 7.10. | Eligibility | 108 |
Section 7.11. | Money Held in Trust | 108 |
ARTICLE 8 | ||
Defeasance and Discharge | 108 | |
Section 8.01. | Discharge of Issuer’s Obligations | 108 |
Section 8.02. | Legal Defeasance | 109 |
Section 8.03. | Covenant Defeasance | 110 |
Section 8.04. | Application of Trust Money | 110 |
Section 8.05. | Repayment to Issuer | 110 |
Section 8.06. | Reinstatement | 111 |
ARTICLE 9 | ||
Amendments, Supplements and Waivers | 111 | |
Section 9.01. | Amendments Without Consent of Holders | 111 |
Section 9.02. | Amendments with Consent of Holders | 112 |
Section 9.03. | Effect of Consent | 113 |
Section 9.04. | Trustee’s Rights and Obligations | 113 |
ARTICLE 10 | ||
Note Guarantees | 113 | |
Section 10.01. | The Note Guarantees | 113 |
Section 10.02. | Note Guarantee Unconditional | 114 |
Section 10.03. | Discharge; Reinstatement | 114 |
Section 10.04. | Waiver by the Guarantors | 115 |
Section 10.05. | Subrogation and Contribution | 115 |
Section 10.06. | Stay of Acceleration | 115 |
Section 10.07. | Limitation on Amount of Note Guarantee | 115 |
Section 10.08. | Execution and Delivery of Note Guarantee | 115 |
Section 10.09. | Release of Guarantee | 115 |
ARTICLE 11 | ||
Miscellaneous | 116 | |
Section 11.01. | [Reserved.] | 116 |
Section 11.02. | Noteholder Communications; Noteholder Actions | 116 |
Section 11.03. | Notices | 117 |
Section 11.04. | Certificate and Opinion as to Conditions Precedent | 119 |
Section 11.05. | Statements Required in Certificate or Opinion | 119 |
Section 11.06. | Payment Date Other Than a Business Day | 119 |
Section 11.07. | Governing Law | 119 |
Section 11.08. | No Adverse Interpretation of Other Agreements | 119 |
Section 11.09. | Successors | 120 |
Section 11.10. | Duplicate Originals | 120 |
Section 11.11. | Separability | 120 |
Section 11.12. | Table of Contents and Headings | 120 |
Section 11.13. | No Liability of Directors, Officers, Employees, Incorporators, Members and Shareholders | 120 |
Section 11.14. | Patriot Act | 120 |
Section 11.15. | Waiver of Jury Trial | 120 |
Section 11.16. | Special, Consequential and Indirect Damages | 120 |
EXHIBITS |
EXHIBIT A – Form of Note | |
EXHIBIT B – Form of Supplemental Indenture | |
EXHIBIT C – Restricted Legend | |
EXHIBIT D – DTC Legend | |
EXHIBIT E – Regulation S Certificate | |
EXHIBIT F – Rule 144A Certificate | |
EXHIBIT G – Institutional Accredited Investor Certificate | |
EXHIBIT H – Certificate of Beneficial Ownership | |
EXHIBIT I – Temporary Offshore Global Note Legend | |
EXHIBIT J – Form of Net Short Representation |
Execution Version
INDENTURE, dated as of January 19, 2021, by and among HOME POINT CAPITAL INC., a Delaware corporation, as the Issuer, the Guarantors (as defined herein) listed on the signature pages hereto, and US BANK NATIONAL ASSOCIATION, a national banking association, as Trustee.
RECITALS
The Issuer has duly authorized the execution and delivery of the Indenture to provide for the issuance of up to $550,000,000 aggregate principal amount of the Issuer’s 5.000% Senior Notes due 2026 and, if and when issued, any Additional Notes (the “Notes”). All things necessary to make this Indenture a valid agreement of the Issuer, in accordance with its terms, have been done, and the Issuer has done all things necessary to make the Notes (in the case of the Additional Notes, when duly authorized), when executed by the Issuer and authenticated and delivered by the Trustee and duly issued by the Issuer, the valid obligations of the Issuer as hereinafter provided.
Except with respect to specific provisions of the Trust Indenture Act expressly referenced in the provisions of this Indenture, the Trust Indenture Act shall not be applicable to, and shall not govern, this Indenture and the Notes.
THIS INDENTURE WITNESSETH
For and in consideration of the premises and the purchase of the Notes by the Holders thereof, the parties hereto covenant and agree, for the equal and proportionate benefit of all Holders, as follows:
Article 1
Definitions and Incorporation by Reference
Section 1.01. Definitions.
“Acquired Debt” means, with respect to any specified Person, (a) Debt of any Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary or merges with or into the Issuer or a Restricted Subsidiary or (b) assumed in connection with the acquisition of property or assets from such Person, in each case whether or not Incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary or such merger or acquisition, and Debt secured by a Lien encumbering any property or asset acquired by such specified Person. Acquired Debt shall be deemed to have been Incurred, with respect to clause (a) of the preceding sentence, on the date such Person becomes a Restricted Subsidiary or merges with or into the Issuer or a Restricted Subsidiary and, with respect to clause (b) of the preceding sentence, on the date of consummation of such acquisition of property or assets. The term “Acquired Debt” does not include Debt of a Person that is redeemed, defeased, retired or otherwise repaid at the time of or immediately upon consummation of the transactions by which such Person becomes a Restricted Subsidiary or merges with or into the Issuer or a Restricted Subsidiary or such
property or assets are acquired, which Debt of such Person will not be deemed to be Debt of the Issuer or any Restricted Subsidiary.
“Additional Notes” means any notes issued under this Indenture in addition to the Initial Notes, having the same terms in all respects as the Initial Notes, or in all respects except with respect to interest paid or payable on or prior to the first interest payment date after the issuance of such Additional Notes.
“Affiliate” means, with respect to any Person,
any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlling,” “controlled
by” and “under common control with”) with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise. No Person shall be an “Affiliate” of the Issuer or any Subsidiary solely because it is an unrelated portfolio operating company of any Investor.
“Affiliated Investors” has the meaning assigned to such term in Section 2.01(b)(6).
“Agent” means any Registrar, Paying Agent or Authenticating Agent.
“Agent Member” means a member of, or a participant in, the Depositary.
“Applicable Law” has the meaning assigned to such term in Section 11.14.
“Applicable Premium” means, the greater of (1) 1.0% of the principal amount of such Note; and (2) the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of such Note on February 1, 2023 (as stated in the table set forth in Section 3.01(a)), plus (ii) all required interest payments due on such Note through February 1, 2023 (excluding accrued but unpaid interest, if any, to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (b) the principal amount of such Note. The Issuer shall calculate, or cause the calculation of the Applicable Premium and the Trustee shall have no duty to calculate, or verify the Issuer’s calculations of, the Applicable Premium.
“Approved Commercial Bank” means a commercial bank with a consolidated combined capital and surplus of at least $5,000,000,000.
“Asset Sale” means any sale, lease, transfer or other disposition of any assets by the Issuer or any Restricted Subsidiary, including by means of a merger, consolidation or similar transaction and including any sale or issuance of the Equity Interests of any Restricted Subsidiary (each of the above referred to as a “disposition”), provided that the following are not included in the definition of “Asset Sale”:
(1) a sale, conveyance, disposition or other transfer (in one or more transactions) by a Restricted Subsidiary to the Issuer or another Restricted
Subsidiary or by the Issuer to a Restricted Subsidiary, including the sale or issuance by the Issuer or any Restricted Subsidiary of any Equity Interests of any Restricted Subsidiary to the Issuer or any Restricted Subsidiary;
(2) the sale, conveyance, dispositions or other transfer (in one or more transactions) by the Issuer or any Restricted Subsidiary (A) of (i) cash, Cash Equivalents and cash management investments, (ii) inventory and other assets (including REO Assets, Receivables, Securitization Assets, Residual Interests or other Financeable Assets) and any interests in any of the foregoing in the ordinary course of business, (iii) damaged, worn out or obsolete assets or other assets no longer useful, or economically practicable to maintain, in the conduct of the business, or (iv) rights granted to others pursuant to leases or licenses or (B) of Servicing Advances, mortgage loans and Mortgage Servicing Rights or any interests therein;
(3) a transaction covered by Section 5.01 or any disposition that constitutes a Change of Control;
(4) a Restricted Payment permitted under Section 4.07, including, but not limited to, any Permitted Investment;
(5) the issuance of Disqualified Stock or Preferred Stock pursuant to Section 4.06.
(6) sales, conveyances, dispositions or other transfers (in one or more transactions) of assets pursuant to the terms of Funding Indebtedness;
(7) sale, conveyance, disposition or other transfer (in one or more transactions) of Investments or other assets and disposition or compromise of receivables (including, but not limited to, Receivables), contract rights or claims, in each case, in connection with the workout, modification, compromise, settlement or collection thereof or exercise of remedies with respect thereto, in the ordinary course of business or in bankruptcy, foreclosure or similar proceedings, including foreclosure, repossession and disposition of REO Assets and other collateral for loans serviced and/or originated by the Issuer or any of its Subsidiaries;
(8) foreclosures, condemnation, expropriation, forced dispositions, eminent domain or any similar action (whether by deed of condemnation or otherwise) with respect to assets, and the creation of a Lien (but not the sale or other disposition of the property subject to such Lien) permitted by Section 4.08;
(9) transactions pursuant to repurchase agreements entered into in the ordinary course of business;
(10) any sale, conveyance, disposition or other transfer in a transaction or series of related transactions of assets with a fair market value of less than the greater of (A) $40.0 million and (B) 1.0% of Net Consolidated Total Assets;
provided that the aggregate amount under this clause (10) shall not exceed $40.0 million in any calendar year;
(11) sales, conveyances, dispositions or other transfers (in one or more transactions) of Equity Interests in, or Debt or other securities of, an Unrestricted Subsidiary;
(12) licensing, sub-licensing or cross-licensing of intellectual property;
(13) any Co-Investment Transaction;
(14) sales, conveyances, dispositions or other transfers (in one or more transactions) pursuant to Non-Recourse Debt;
(15) any sale-leaseback transaction;
(16) any sale, conveyance, disposition or other transfer (in one or more transactions) of a minority interest in any Person that is not a Subsidiary, that constituted a Restricted Payment or a Permitted Investment; provided that (x) the majority interests in such Person shall also be concurrently sold or transferred on the same terms and (y) the Net Cash Proceeds from the sale or transfer of such minority interest are applied in accordance with Section 4.12;
(17) the sale, conveyance, disposition or other transfer (in one or more transactions) of any assets or rights required or advisable as a result of statutory or regulatory changes or requirements (including any settlements with any regulatory agencies) as determined in good faith by the Board of Managers; provided that any cash or Cash Equivalents received must be applied as Net Cash Proceeds in accordance with Section 4.12;
(18) the sale, conveyance or other disposition of advances, Mortgage Servicing Rights, mortgages, other loans, customer receivables, mortgage related securities or derivatives or other assets (or any interests in any of the foregoing) in the ordinary course of business, the sale, transfer or discount in the ordinary course of business of accounts receivable or other assets that by their terms convert into cash, any sale of Mortgage Servicing Rights in connection with the origination of the associated mortgage loan in the ordinary course of business or any sale of securities in respect of additional fundings under reverse mortgage loans in the ordinary course of business;
(19) the modification of any mortgages or other loans owned or serviced by the Issuer or any of its Restricted Subsidiaries in the ordinary course of business;
(20) a sale, conveyance or other disposition (in one or more transactions) of Servicing Advances, mortgage loans or Mortgage Servicing Rights or any part thereof in the ordinary course of business (x) in connection with the transfer or
termination of the related Mortgage Servicing Rights or (y) in connection with any Excess Spread Sales;
(21) the unwinding of any Hedging Obligations;
(22) sales, transfers and other dispositions of Investments in joint ventures to the extent required by, or made pursuant to, customary buy/sell arrangements between the joint venture parties set forth in joint venture arrangements and similar binding arrangements;
(23) the lapse, abandonment or invalidation of intellectual property rights, which in the reasonable determination of the Board of Managers of the Issuer or the senior management thereof are not material to the conduct of the business of the Issuer and its Restricted Subsidiaries taken as a whole or are no longer used or useful or economically practicable or commercially reasonable to maintain;
(24) the disposition of any assets (including Equity Interests) (i) acquired in a transaction permitted under this Indenture, which assets are not used or useful in the core or principal business of the Issuer and its Restricted Subsidiaries, or (ii) made in connection with the approval of any applicable antitrust authority; and
(25) dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) an amount equal to the net proceeds of such disposition are promptly applied to the purchase price of such replacement property.
“Authenticating Agent” refers to a Person engaged to authenticate the Notes in the stead of the Trustee.
“Average Life” means, with respect to any Debt, the quotient obtained by dividing (i) the sum of the products of (x) the number of years from the date of determination to the dates of each successive scheduled principal payment of such Debt and (y) the amount of such principal payment by (ii) the sum of all such principal payments.
“bankruptcy default” has the meaning assigned to such term in Section 6.01(8).
“Board of Managers” means with respect to a Person means the managers, board of directors (or similar body) of such Person or any committee thereof duly authorized to act on behalf of such managers, board of directors (or similar body).
“Board Resolution” means a resolution duly adopted by the Board of Managers which is certified by the Secretary or an Assistant Secretary of the Issuer and remains in full force and effect as of the date of its certification.
“Business Day” means each day which is not a Legal Holiday.
“Capital Lease” means any lease of property which is required to be classified as a capital lease in conformity with GAAP and the amount of Indebtedness represented by such obligation will be the capitalized amount of such obligation at the time any determination thereof is to be made as determined in accordance with GAAP, and the Stated Maturity thereof will be the date of the last payment of rent or any other amount due under such lease prior to the first date such lease may be terminated without penalty, in each case. For the avoidance of doubt, Capital Lease shall exclude all operating lease and non-finance lease liabilities that are required to be capitalized and reflected as liabilities on the balance sheet in accordance with GAAP.
“Capital Stock” means, with respect to any Person, any and all shares of stock of a corporation, partnership interests or other equivalent interests (however designated, whether voting or non-voting) in such Person’s equity, entitling the holder to receive a share of the profits and losses, and a distribution of assets, after liabilities, of such Person.
“Capital Stock Proceeds” has the meaning assigned to such term in Section 4.06(b)(13).
“Cash Equivalents” means:
(1) United States Dollars, or money in other currencies received in the ordinary course of business;
(2) U.S. Government Obligations with maturities not exceeding one year from the date of acquisition;
(3) (i) demand deposits, (ii) time deposits and certificates of deposit with maturities of one year or less from the date of acquisition, (iii) bankers’ acceptances with maturities not exceeding one year from the date of acquisition, and (iv) overnight bank deposits, in each case with any bank or trust company organized or licensed under the laws of the United States or any state thereof having capital, surplus and undivided profits in excess of $500.0 million;
(4) repurchase obligations with a term of not more than sixty (60) days for underlying securities of the type described in clauses (2) and (3) above entered into with any financial institution meeting the qualifications specified in clause (3) above;
(5) commercial paper rated at least P-1 by Moody’s or A-1 by S&P and maturing within six months after the date of acquisition;
(6) securities with maturities of one year or less from the date of acquisition issued or fully 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;
(7) securities with maturities of one year or less from the date of acquisition backed by standby letters of credit issued by any financial institution meeting the qualifications specified in clause (3) above;
(8) securities held in the Issuer’s accounts (or in the account of any Restricted Subsidiary), less any margin or other debt secured by any of such accounts; and
(9) shares of money market mutual or similar funds.
“Certificate of Beneficial Ownership” means a certificate substantially in the form of Exhibit G.
“Certificated Note” means a Note in registered individual form without interest coupons.
“CFC” means a “controlled foreign corporation” within the meaning of Section 957 of the Code.
“Change of Control” means:
(1) the merger or consolidation of the Issuer with or into another Person or the merger of another Person with or into the Issuer or the merger of any Person with or into a Subsidiary of the Issuer if Capital Stock of the Issuer is issued in connection therewith, or the sale of all or substantially all the assets (net of any associated non-recourse or secured obligations) of the Issuer to another Person (in each case, unless such other Person is a Permitted Holder), other than any Required Asset Sale, unless the direct or indirect holders of a majority of the aggregate voting power of the Voting Stock of the Issuer, immediately prior to such transaction, hold directly or indirectly securities of the surviving or transferee Person that represent, immediately after such transaction, at least a majority of the aggregate voting power of the Voting Stock of the surviving Person;
(2) any “person” or “group” (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, is or becomes the “beneficial owner” (as such term is used in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 50% of the total voting power of the Voting Stock of the Issuer, and thereafter, the Permitted Holders are the beneficial owners, directly or indirectly, of less than 50% of the total voting power of the Voting Stock of the Issuer or any Parent Entity; or
(3) the adoption of a plan relating to the liquidation or dissolution of the Issuer;
provided that, for the avoidance of doubt, in no event shall any transaction contemplated by the IPO Transactions constitute a Change of Control.
“Code” means the Internal Revenue Code of 1986, as amended.
“Co-Investment Transaction” means a transaction pursuant to which a portion of Mortgage Servicing Rights or the right to receive fees in respect of Mortgage Servicing Rights are transferred for fair value to another Person.
“Commission” means the Securities and Exchange Commission.
“Issuer” means the party named as such in the first paragraph of this Indenture or any successor obligor under this Indenture and the Notes pursuant to Article 5.
“Consolidated Net Income” means, for any period, the aggregate net income (or loss) of the Issuer and its Restricted Subsidiaries for such period determined on a consolidated basis in conformity with GAAP; provided that the following (without duplication) will be excluded in computing Consolidated Net Income:
(1) the net income or loss of any Person that is not a Restricted Subsidiary, except to the extent of in the case of net income, the dividends or other distributions actually paid in cash to the Issuer or any of its Restricted Subsidiaries (subject to clause (3) below) by such Person during such period;
(2) any net income (or loss) of any Person acquired in a pooling of interests transaction for any period prior to the date of such acquisition;
(3) the net income (but not loss) of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income would not have been permitted for the relevant period by charter or by any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to such Restricted Subsidiary;
(4) any net after-tax gains or losses attributable to Asset Sales (other than, for purposes of the calculation described in clause (a)(3) under Section 4.07 where such gains or losses shall be included) or the extinguishment of Debt;
(5) any valuation allowance for mortgage loans held-for-investment and/or any change in fair value of mortgage loans held for sale and corresponding debt in relation to securitized loans in accordance with GAAP that require no additional capital or equity contributions to such Person;
(6) any change in fair value of Mortgage Servicing Rights and reverse mortgage loans or the amortization of Mortgage Servicing Rights;
(7) any gain or loss related to the fair market value of economic hedges related to Mortgage Servicing Rights or other mortgage related assets or securities, to the extent that such other mortgage related assets or securities are valued at fair market value and gains and losses with respect to such related assets or securities have been excluded pursuant to another clause of this provision;
(8) any net after-tax extraordinary gains or losses;
(9) the cumulative effect of a change in accounting principles;
(10) impairment charges or reversals;
(11) Public Company Costs; and
(12) any equity-based or non-cash compensation or similar charge or expense or reduction of revenue, including any such charge, expense or amount arising from grants of stock appreciation or similar rights, stock options, restricted stock, profits interests or other rights or equity or equity-based incentive programs (“equity incentives”), any cash charges associated with the equity incentives or other long-term incentive compensation plans (including under deferred compensation arrangements of the Issuer, any Restricted Subsidiary or any Parent Entity), rollover, acceleration, or payout of Equity Interests by management, other employees or business partners of such Person or of a Restricted Subsidiary or any Parent Entity.
“Corporate Trust Office” means the office of the Trustee at which the corporate trust business of the Trustee is principally administered, which at the date of this Indenture is located at (a) solely for purposes of the transfer, exchange, or surrender of the Notes, 1 Federal Street, Boston, MA 02210, Attention: Global Corporate Trust Services – Home Point Capital Inc., and (b) for all other purposes, 111 Fillmore Avenue, St. Paul, MN 55107, Attention: Global Corporate Trust Services – Home Point Capital Inc., or such other address as the Trustee may designate from time to time by notice to the Holders and the Issuer, or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Issuer).
“Credit Enhancement Agreements” means, collectively, any documents, instruments, guarantees or agreements entered into by the Issuer, any of its Restricted Subsidiaries or any Securitization Entity for the purpose of providing credit support (that is customary) with respect to any Funding Indebtedness or Permitted Securitization Indebtedness.
“Credit Facilities” means one or more debt facilities, credit agreements, commercial paper facilities, note purchase agreements, indentures, or other agreements, in each case with banks, lenders, purchasers, investors, trustees, agents or other representatives of any of the foregoing, providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables or interests in receivables to such lenders or other persons or to special purpose entities formed to borrow from such lenders or other persons against such receivables or sell such receivables or interests in receivables), letters of credit, notes or other borrowings or other extensions of credit, including any notes, mortgages, guarantees, collateral documents, instruments and agreements executed in connection therewith, in each case, as amended, restated, modified, renewed, refunded, restated, restructured, increased, supplemented, replaced or
refinanced in whole or in part from time to time, including any replacement, refunding or refinancing facility or agreement that increases the amount permitted to be borrowed thereunder or alters the maturity thereof or adds entities as additional borrowers or guarantors thereunder and whether by the same or any other agent, lender, group of lenders, or otherwise.
“Currency Agreement” means, with respect to any specified Person, any foreign exchange contract, currency swap agreement, futures contracts, options on futures contracts or other similar agreement or arrangement designed to protect such Person or any of its Restricted Subsidiaries against fluctuations in currency values.
“customary” means that in the good faith judgment of the Issuer’s senior management, (a) the terms are customary in the market or (b) such terms are not customary but are not materially worse for the Holders of the Notes than customary terms.
“Debt” means, with respect to any Person, without duplication,
(1) all indebtedness of such Person for borrowed money;
(2) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;
(3) all obligations of such Person in respect of letters of credit, bankers, acceptances or other similar instruments, excluding obligations in respect of trade letters of credit or bankers’ acceptances issued in respect of trade payables to the extent not drawn upon or presented, or, if drawn upon or presented, the resulting obligation of the Person is paid within 10 Business Days;
(4) all obligations of such Person to pay the deferred and unpaid purchase price of property or services which are recorded as liabilities under GAAP, excluding trade payables arising in the ordinary course of business;
(5) all obligations of such Person as lessee under Capital Leases;
(6) all Debt of other Persons Guaranteed by such Person to the extent so Guaranteed;
(7) all Debt of other Persons secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person;
(8) all obligations of such Person under Speculative Hedging Obligations;
(9) all obligations in respect of Securitization Securities issued by such Person in a Securitization Transaction (regardless of whether denominated as debt or equity securities); and
(10) to the extent not otherwise included in this definition, all Funding Indebtedness of such Person;
provided, however, that notwithstanding the foregoing, in no event shall the following constitute Debt: (i) obligations under or in respect of the financing of accounts receivable incurred in the ordinary course of business, (ii) intercompany liabilities that would be eliminated on the consolidated balance sheet of the Issuer, (iii) prepaid or deferred revenue arising in the ordinary course of business, (iv) mortgage-backed securities guaranteed or insured by a GSE, the Federal Housing Administration, the Veterans Administration or any similar governmental agencies or government sponsored programs, owned, invested in, or sold by such Person, (v) the sale by the Issuer or any Guarantor to a third party of a partial interest in an asset, which sale is not deemed to be an Asset Sale and (vi) operating leases.
The amount of Debt of any Person will be deemed to be:
(A) with respect to contingent obligations, the amount of the corresponding liability shown on the balance sheet calculated in accordance with GAAP;
(B) with respect to Debt secured by a Lien on an asset of such Person but not otherwise the obligation, contingent or otherwise, of such Person, the lesser of (x) the fair market value of such asset on the date of determination and (y) the amount of such Debt;
(C) with respect to any Debt issued with original issue discount, the face amount of such Debt less the remaining unamortized portion of the original issue discount of such Debt;
(D) with respect to any Speculative Hedging Obligations, the net amount payable if such Speculative Hedging Obligations terminated at that time due to default by such Person;
(E) with respect to any Warehousing Indebtedness, the amount of any particular Warehousing Indebtedness as of any date of determination shall be the greater of (x) the consideration received by the Issuer or any Restricted Subsidiary under such Warehousing Facility and not previously repaid to the holder of such Warehousing Indebtedness and (y) in the case of a purchase facility, the book value of the Receivables financed under such Warehousing Facility until such time as such Receivables are (i) securitized, (ii) repurchased by the Issuer or any Restricted Subsidiary or (iii) sold to a Person who is not an Affiliate of the Issuer; and
(F) otherwise, the outstanding principal amount thereof.
Notwithstanding anything in this definition to the contrary, Debt shall not include obligations under any Permitted Hedging Obligations.
For all purposes during the term of this Indenture, each lease in existence on the Issue Date that as of the Issue Date would be treated as an operating lease under GAAP shall have the same characterization as an operating lease.
“Debt-to-Equity Ratio” means, on any date of determination, the ratio of (1) (x) the aggregate amount of Non-Funding Indebtedness of the Issuer and its Restricted Subsidiaries on a consolidated basis on such date of determination less (y) the amount of cash and Cash Equivalents (but excluding in all cases cash proceeds from Indebtedness incurred on the date of determination) of the Issuer and its Restricted Subsidiaries (for such purpose, excluding all cash and Cash Equivalents listed as restricted cash on the financial statements of the Issuer and its Restricted Subsidiaries (other than cash and Cash Equivalents listed as restricted cash on the financial statements of the Issuer and its Restricted Subsidiaries securing Non-Funding Indebtedness included in clause (x) of this clause (1)) to (2) Total Shareholders’ Equity on such date of determination.
“Default” means any event that is, or after notice or passage of time or both would be, an Event of Default.
“Derivative Instrument” with respect to a Person, means any contract, instrument or other right to receive payment or delivery of cash or other assets to which such Person or any Affiliate of such Person that is acting in concert with such Person in connection with such Person’s investment in the Notes (other than a Regulated Bank or a Screened Affiliate) is a party (whether or not requiring further performance by such Person), the value and/or cash flows of which (or any material portion thereof) are materially affected by the value and/or performance of the Notes and/or the creditworthiness of the Issuer or any one or more Guarantors.
“Designated Non-cash Consideration” means the fair market value (as determined in good faith by the Issuer) of non-cash consideration received by the Issuer or a Restricted Subsidiary in connection with an Asset Sale that is so designated as Designated Non-cash Consideration pursuant to an Officers’ Certificate, setting forth such valuation, less the amount of cash received in connection with a subsequent sale, or other disposition, redemption or payment of, on or with respect to such Designated Non-cash Consideration.
“Depositary” means the depositary of each Global Note, which will initially be DTC.
“Directing Holder” has the meaning assigned to such term in Section 7.05.
“Disqualified Equity Interests” means Equity Interests that by their terms or upon the happening of any event are:
(1) required to be redeemed or redeemable at the option of the holder on or prior to the date 91 days after the earlier of the Stated Maturity or the date the Notes are no longer outstanding other than Qualified Equity Interests; or
(2) convertible at the option of the holder into Disqualified Equity Interests or exchangeable for Debt on or prior to the date 91 days after the earlier of the Stated Maturity or the date the Notes are no longer outstanding;
provided that Equity Interests will not constitute Disqualified Equity Interests (x) solely because of provisions giving holders thereof the right to require repurchase or redemption upon an “asset sale” or “change of control” occurring prior to the Stated Maturity of the Notes if those provisions
(A) are no more favorable to the holders than Section 4.11 and Section 4.12, and
(B) specifically state that repurchase or redemption pursuant thereto will not be required prior to the Issuer’s repurchase of the Notes as required by this Indenture;
or (y) if such Equity Interests are issued pursuant to any plan for the benefit of future, current or former employees, directors, officers, managers, members of management, consultants or independent contractors of the Issuer or its Subsidiaries or any Parent Entity or by any such plan to such employees, directors, officers, managers, members of management, consultants or independent contractors if the redemption or repurchase provisions of such Equity Interests specifically provide that the it may be required to be repurchased by the Issuer or its Subsidiaries solely in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s, director’s, officer’s, manager’s, management member’s, consultant’s or independent contractor’s termination, death or disability.
“Disqualified Stock” means Capital Stock constituting Disqualified Equity Interests.
“DTC” means The Depository Trust Company, a New York corporation, and its successors.
“DTC Legend” means the legend set forth in Exhibit D.
“Dollars” or “$” means the lawful currency of the United States of America.
“Domestic Restricted Subsidiary” means any Restricted Subsidiary that is a Domestic Subsidiary.
“Domestic Subsidiary” means any Subsidiary formed under the laws of the United States of America or any state thereof, the District of Columbia or any United States territory.
“EBITDA” means, for any period, the sum of:
(1) Consolidated Net Income; plus
(2) Fixed Charges, to the extent deducted in calculating Consolidated Net Income; plus
(3) to the extent included in calculating Consolidated Net Income and as determined on a consolidated basis for the Issuer and its Restricted Subsidiaries in conformity with GAAP:
(A) income taxes;
(B) depreciation, amortization and all other non-cash items reducing Consolidated Net Income (not including non-cash charges in a period which reflect accrued expenses paid or to be paid in another period in cash), less all non-cash items increasing Consolidated Net Income (but excluding any such amortization or non-cash items in respect of Funding Indebtedness);
(C) all non-recurring losses (and minus all non-recurring gains);
(D) costs associated with exit and disposal activities incurred in connection with a restructuring as defined in ASC 420-10;
(E) non-controlling interest income (loss); and
(F) all losses (and minus all gains) resulting from any change in fair value of Mortgage Servicing Rights due to (i) collection/realization of cash flows in respect of Mortgage Servicing Rights and (ii) changes in model inputs and assumptions; minus
(4) the fair value of Mortgage Servicing Rights capitalized by the Issuer and its Restricted Subsidiaries during such period;
provided that, with respect to any Restricted Subsidiary, such items will be added only to the extent and in the same proportion that the relevant Restricted Subsidiary’s net income was included in calculating Consolidated Net Income.
“Equityholding Vehicle” means any direct or indirect parent entity of the Issuer and any equityholder thereof through which future, present or former employees, directors, officers, managers, members or partners of the Issuer or any of its Subsidiaries or direct or indirect parent entities hold Capital Stock of the Issuer or such parent entity.
“Equity Interests” means all Capital Stock and all warrants or options with respect to, or other rights to purchase, Capital Stock, but excluding Debt convertible into equity.
“Equity Offering” means any private or underwritten public offering, after the Issue Date, of Qualified Stock of the Issuer or any Parent Entity where the proceeds are contributed as equity to the Issuer other than an issuance registered on Form S-4 or S-8 or
any successor thereto or any issuance pursuant to employee benefit plans or otherwise in compensation to officers, directors or employees.
“Event of Default” has the meaning assigned to such term in Section 6.01.
“Excess Proceeds” has the meaning assigned to such term in Section 4.12(a)(4).
“Excess Spread Sale” means any sale in the ordinary course of business and for Fair Market Value of any excess servicing fee spread under any Mortgage Servicing Right.
“Exchange Act” means the Securities Exchange Act of 1934.
“Excluded Equity” has the meaning assigned to such term in Section 4.07(a).
“Excluded Subsidiary” means (a) each Unrestricted Subsidiary, (b) each Domestic Subsidiary that is not a Wholly Owned Subsidiary (for so long as such Subsidiary remains a non-Wholly Owned Subsidiary), (c) each Domestic Restricted Subsidiary that is prohibited from guaranteeing the Notes by any requirement of law or that would require consent, approval, license or authorization of a governmental (including regulatory) authority to guarantee the Notes (unless such consent, approval, license or authorization has been received), (d) each Domestic Restricted Subsidiary that is prohibited by any applicable contractual requirement from guaranteeing the Notes (and in each case for so long as such restriction or any replacement or renewal thereof is in effect), (e) any Foreign Subsidiary, (f) any Domestic Subsidiary (i) that owns no material assets (directly or through its Subsidiaries) other than equity interests of one or more Foreign Subsidiaries that are CFCs or (ii) that is a direct or indirect Subsidiary of a Foreign Subsidiary, (g) any Securitization Entity, (h) any Subsidiary (other than a Significant Subsidiary) that (i) did not, as of the last day of the fiscal quarter of the Issuer’s most recently ended, have assets with a value in excess of 5% of the Net Consolidated Total Assets or revenues representing in excess of 5% of total revenues of the Issuer and the Restricted Subsidiaries on a consolidated basis as of such date and (ii) taken together with all other such Subsidiaries being excluded pursuant to this clause (h), as of the last day of the fiscal quarter of the Issuer most recently ended, did not have assets with a value in excess of 10% of the Net Consolidated Total Assets or revenues representing in excess of 10% of total revenues of the Issuer and the Restricted Subsidiaries on a consolidated basis as of such date and (i) any Subsidiary for which providing a Note Guarantee could reasonably be expected to result in adverse tax consequences to the Issuer or any Subsidiary or Parent Entity as determined in good faith by the Issuer; provided that no Subsidiary shall be an Excluded Subsidiary if such Subsidiary Guarantees other Non-Funding Indebtedness of the Issuer or a Restricted Subsidiary.
“Fair Market Value” means, with respect to any asset (including any Equity Interests of any Person), the price at which a willing buyer that is not an Affiliate of the seller and a willing seller, would reasonably be expected to agree to purchase and sell such asset, as determined in good faith by the Issuer or the Restricted Subsidiary
purchasing or selling such asset. For the avoidance of doubt, any sale, contribution, assignment or other transfer shall not be deemed to be for less than Fair Market Value solely because such sale, contribution, assignment or transfer was made at a discount to par.
“Financeable Assets” means (a) Receivables, (b) Mortgage Servicing Rights, (c) Residual Interests, (d) Servicing Advances, (e) Securitization Assets, (f) REO Assets, and (g) to the extent not otherwise included, any assets related thereto that are of the type transferred in connection with securitization transactions involving assets such as, or similar to, such Receivables, Residual Interests, Servicing Advances, Securitization Assets, or REO Assets, as the case may be, including, but not limited to, related Securitization Securities, mortgage related securities and derivatives, other mortgage related receivables or other similar assets, interests in any of the foregoing and any collections or proceeds of any of the foregoing.
“Fitch” means Fitch Ratings, Inc. and its successors.
“Fixed Charge Coverage Ratio” means, on any date (the “transaction date”), the ratio of:
(x) the aggregate amount of EBITDA for the four fiscal quarters immediately prior to the transaction date for which internal financial statements are available (the “reference period”); to
(y) the aggregate Fixed Charges during such reference period.
In making the foregoing calculation,
(1) pro forma effect will be given to any Debt, Disqualified Stock or Preferred Stock Incurred during or after the reference period to the extent the Debt, Disqualified Stock or Preferred Stock is outstanding or is to be Incurred on the transaction date as if the Debt, Disqualified Stock or Preferred Stock had been Incurred on the first day of the reference period;
(2) pro forma calculations of interest on Debt bearing a floating interest rate will be made as if the rate in effect on the transaction date (taking into account any Hedging Obligation applicable to the Debt if the Hedging Obligation has a remaining term of at least 12 months) had been the applicable rate for the entire reference period;
(3) Fixed Charges related to any Debt, Disqualified Stock or Preferred Stock no longer outstanding or to be repaid or redeemed, defeased or otherwise discharged on the transaction date, except for Interest Expense accrued during the reference period under a revolving credit to the extent of the commitment thereunder (or under any successor revolving credit) in effect on the transaction date, will be excluded;
(4) pro forma effect will be given to:
(A) the creation, designation or redesignation of Restricted and Unrestricted Subsidiaries;
(B) the acquisition or disposition of companies, divisions or lines of businesses or other Investments or purchases of Mortgage Servicing Rights or Servicing Advances by the Issuer and its Restricted Subsidiaries, including any such action since the beginning of the reference period by a Person that became a Restricted Subsidiary after the beginning of the reference period; and
(C) the discontinuation of any discontinued operations but, in the case of Fixed Charges, only to the extent that the obligations giving rise to the Fixed Charges will not be obligations of the Issuer or any Restricted Subsidiary following the transaction date.
that have occurred since the beginning of the reference period as if such events had occurred, and, in the case of any disposition, the proceeds thereof applied, on the first day of the reference period. To the extent that pro forma effect is to be given to an acquisition or disposition of a company, division or line of business, the pro forma calculation will be based upon the most recent four full fiscal quarters for which the relevant financial information is available. The pro forma calculations shall be made by a responsible accounting officer of the Issuer in good faith based on the information reasonably available to it at the time of such calculation and may include cost savings and operating expense reductions resulting from such Investment, acquisition or purchase (whether or not such cost savings or expense reductions would be allowable under Regulation S-X promulgated under the Securities Act or any other regulation or policy of the SEC related thereto).
“Fixed Charges” means, for any period, the sum of:
(1) Interest Expense for such period; and
(2) cash and non-cash dividends paid, declared, accrued or accumulated on any Disqualified or Preferred Stock of the Issuer or a Restricted Subsidiary, except for dividends payable in the Issuer’s Qualified Stock or paid to the Issuer or to a Restricted Subsidiary.
“Foreign Subsidiary” means a Restricted Subsidiary not organized or existing under the laws of the United States of America or any state thereof or the District of Columbia.
“Funding Indebtedness” means (i) any Permitted Servicing Advance Facility Indebtedness, (ii) any Permitted Warehousing Indebtedness, (iii) any MSR Indebtedness (iv) any Permitted Residual Indebtedness, (v) any Permitted Securitization Indebtedness, (vi) any Debt of the type set forth in clauses (i) through (v) of this definition that is acquired by the Issuer or any of its Restricted Subsidiaries in connection with an acquisition permitted under this Indenture, (vii) Debt under any Credit Enhancement
Agreements, (viii) any facility that combines any Debt under clauses (i), (ii), (iii), (iv),(v), (vi) or (vii) of this definition and (ix) any refinancing of the Debt under clauses (i), (ii), (iii), (iv), (v), (vi), (vii) or (viii) of this definition existing on the Issue Date or created thereafter, provided, however, solely as of the date of the incurrence of such Funding Indebtedness, the amount of the excess (determined as of the most recent date for which internal financial statements are available), if any, of (1) the amount of any Debt incurred in accordance with this clause (ix) for which the holder thereof has contractual recourse to the Issuer or its Restricted Subsidiaries to satisfy claims with respect thereto (excluding recourse for carve-out matters such as fraud, misappropriation, breaches of representations, warranties and covenants and misapplication and customary indemnities in connection with such transactions) over (2) the aggregate (without duplication of amounts) Realizable Value of the assets that secure such Debt shall not be Funding Indebtedness (but shall not be deemed to be a new Incurrence of Debt subject to the provisions of Section 4.06, except with respect to, and solely to the extent of, any such excess that exists upon the initial incurrence of such Debt incurred under this clause (ix)).
“GAAP” means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession. All ratios and computations based on GAAP contained in this Indenture will be computed in conformity with GAAP, except that in the event the Issuer is acquired in a transaction that is accounted for using purchase accounting, the effects of the application of purchase accounting shall be disregarded in the calculation of such ratios and other computations contained in this Indenture. Notwithstanding the foregoing, for purposes of this Indenture, GAAP shall be determined, all terms of an accounting or financial nature shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any change in accounting for leases pursuant to GAAP resulting from the implementation of Financial Accounting Standards Board ASU No. 2016-02, Leases (Topic 842), to the extent such adoption would require treating any lease (or similar arrangement conveying the right to use) as a capitalized asset with a corresponding lease liability where such lease (or similar arrangement) would not have been required to be so treated under GAAP prior to the effective date of ASU No. 2016-02.
“Global Note” means a Note in registered global form without interest coupons.
“GSE” means a government sponsored enterprise of the United States of America, including, but not limited to, Federal National Mortgage Association (“Fannie Mae”), Federal Home Loan Mortgage Corporation (“Freddie Mac”), Government National Mortgage Association (“GNMA”), any Federal Home Loan Bank (“FHLB”), and any public or privately owned successor entity to any of the foregoing.
“Guarantee” means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Debt or other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof or to protect such obligee against loss in respect thereof, in whole or in part; provided that the term “Guarantee” does not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” used as a verb has a corresponding meaning.
“Guarantor” means each Restricted Subsidiary that executes this Indenture or a supplemental indenture providing for a Note Guarantee, unless and until such Guarantor is released from its Note Guarantee pursuant to this Indenture.
“Hedging Obligations” means, with respect to any Person, (1) the obligations of such Person under any interest rate swap agreement, interest rate cap agreement, interest rate floor agreement, interest rate collar agreement, forward hedge and TBA contracts, mortgage sale contracts, “interest only” mortgage derivative assets or other mortgage derivative products, future contracts and options on future contracts on the Eurodollar, Federal Funds, Treasury bills and Treasury rates, foreign exchange contract, currency swap agreement or similar agreement providing for the transfer, modification or mitigation of interest rate or currency, either generally or under specific contingencies and (2) any and all transactions of any kind, and the related confirmations.
“Holder” or “Noteholder” means the Person in whose name a Note is registered on the Registrar’s books.
“Holding Company” means any Person so long as the Issuer is a direct or indirect Subsidiary of such Person, and at the time the Issuer became a Subsidiary of such Person, no Person and no group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any such group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) (other than any Permitted Holder), shall have beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision), directly or indirectly, of more than 50.0% of the total voting power of the Voting Stock of such Person.
“Immediate Family Members” means with respect to any individual, such individual’s child, stepchild, grandchild or more remote descendant, parent, stepparent, grandparent, spouse, former spouse, qualified domestic partner, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law (including adoptive relationships), and any trust, partnership or other bona fide estate-planning vehicle the only beneficiaries of which are any of the foregoing individuals or any private foundation or fund that is controlled by any of the foregoing individuals or any donor-advised fund of which any such individual is the donor.
“Incur”, “Incurred” or “Incurrence” means, with respect to any Debt or Capital Stock, to incur, create, issue, assume or Guarantee such Debt or Capital Stock. If any Person becomes a Restricted Subsidiary on any date after the date of this Indenture (including by redesignation of an Unrestricted Subsidiary or failure of an Unrestricted Subsidiary to meet the qualifications necessary to remain an Unrestricted Subsidiary), the Debt and Capital Stock of such Person outstanding on such date will be deemed to have been Incurred by such Person on such date for purposes of Section 4.06, but will not be considered the sale or issuance of Equity Interests for purposes of Section 4.12. The accretion of original issue discount or payment of interest in kind will not be considered an Incurrence of Debt.
“Indenture” means this indenture, as amended or supplemented from time to time.
“Initial Notes” means the Notes issued on the Issue Date and any Notes issued in replacement thereof.
“Initial Purchasers” means the initial purchasers party to a purchase agreement with the Issuer relating to the sale of the Notes by the Issuer.
“Institutional Accredited Investor” means an institutional “accredited investor” (as defined) in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
“Institutional Accredited Investor Certificate” means a certificate substantially in the form of Exhibit G hereto.
“Interest Expense” means, for any period, (a) the consolidated interest expense of the Issuer and its Restricted Subsidiaries, plus, to the extent not included in such consolidated interest expense, and to the extent incurred, accrued or payable by the Issuer or its Restricted Subsidiaries, without duplication, (i) interest expense attributable to Capital Leases, (ii) amortization of debt discount and debt issuance costs, (iii) capitalized interest, (iv) non-cash interest expense, (v) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing, (vi) net costs associated with Hedging Obligations hedging interest rates in respect of Debt for borrowed money (including the amortization of fees), (vii) any of the above expenses with respect to Debt of another Person Guaranteed by the Issuer or any of its Restricted Subsidiaries to the extent paid by the Issuer or any Restricted Subsidiary and (viii) any premiums, fees, discounts, expenses and losses on the sale of accounts receivable (and any amortization thereof) payable by the Issuer or any Restricted Subsidiary in connection with a Securitization, but (b) excluding any commissions, discounts and other fees and charges, including interest, on Funding Indebtedness or Non-Recourse Debt of the Issuer or its Restricted Subsidiaries, as determined on a consolidated basis and in accordance with GAAP.
“Interest Payment Date” means each February 1 and August 1 of each year, commencing August 1, 2021.
“Investment” means:
(1) any direct or indirect advance, loan or other extension of credit to another Person;
(2) any capital contribution to another Person, by means of any transfer of cash or other property or in any other form;
(3) any purchase or acquisition of Equity Interests, bonds, notes or other Debt, or other instruments or securities issued by another Person, including the receipt of any of the above as consideration for the disposition of assets or rendering of services; or
(4) any Guarantee of any obligation of another Person.
If the Issuer or any Restricted Subsidiary (x) sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary so that, after giving effect to that sale or disposition, such Person is no longer a Subsidiary of the Issuer, or (y) designates any Restricted Subsidiary as an Unrestricted Subsidiary in accordance with Section 4.15, all remaining Investments of the Issuer and the Restricted Subsidiaries in such Person shall be deemed to have been made at such time.
“Investment Grade” means, with respect to a debt rating of the Notes or a corporate credit rating, as the case may be, two of the following (i) BBB - or higher by S&P, (ii) Baa3 or higher by Moody’s and (iii) BBB - or higher by Fitch, or the equivalent of such ratings by another Rating Agency.
“Investment Grade Buyer” has the meaning assigned to such term in Section 5.01(d).
“Investment Grade Securities” means:
(1) securities issued or directly and fully guaranteed or insured by the U.S. government or any agency or instrumentality thereof (other than Cash Equivalents);
(2) debt securities or debt instruments with an Investment Grade rating, but excluding any debt securities or instruments constituting loans or advances among the Issuer and its Subsidiaries;
(3) investments in any fund that invests at least 90% of its assets in investments of the type described in clauses (1) and (2), which fund may also hold immaterial amounts of cash pending investment or distribution; and
(4) corresponding instruments in countries other than the United States customarily utilized for high-quality investments.
“Investors” means any of the Trident Funds and any of their Affiliates but not including, however, any of its or such Affiliate’s portfolio operating companies.
“IPO Transactions” means the proposed IPO and the merger of Home Point Capital LP with and into the Issuer, in each case as described under “Summary—Recent Developments—Filing for Initial Public Offering of Common Stock” of the Offering Memorandum.
“Issue Date” means the date on which the Notes are originally issued under this Indenture.
“LCT Election” has the meaning assigned to such term in Section 1.03.
“LCT Test Date” has the meaning assigned to such term in Section 1.03.
“Legal Holiday” means a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York or the city in which the Corporate Trust Office of the Trustee is located are authorized or required by law to close.
“Lien” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or Capital Lease); provided that in no event shall an operating lease or a transfer of assets pursuant to a Co-Investment Transaction be deemed to constitute a Lien.
“Limited Condition Transaction” means (1) any Investment or acquisition (whether by merger, amalgamation, consolidation or other business combination or the acquisition of Capital Stock or otherwise), whose consummation is not conditioned on the availability of, or on obtaining, third-party financing, (2) any redemption, repurchase, defeasance, satisfaction and discharge or repayment of Debt, Disqualified Stock or Preferred Stock requiring irrevocable notice in advance of such redemption, repurchase, defeasance, satisfaction and discharge or repayment and (3) any Restricted Payment requiring irrevocable notice in advance thereof.
“Long Derivative Instrument” means a Derivative Instrument (i) the value of which generally increases, and/or the payment or delivery obligations under which generally decrease, with positive changes the Issuer or any one or more Guarantors and/or (ii) the value of which generally decreases, and/or the payment or delivery obligations under which generally increase, with negative changes to the Issuer or any one or more Guarantors.
“Management Stockholders” means the future, present or former employees, directors, officers, managers, members or partners (and their Controlled Investment Affiliates and Immediate Family Members) of the Issuer (or its direct or indirect parent entities) or any Restricted Subsidiary who are or become direct or indirect holders of Equity Interests of the Issuer or any direct or indirect parent companies of the Issuer, including any such future, present or former employees, directors, officers, managers, members or partners owning through an Equityholding Vehicle.
“Market Capitalization” means an amount equal to (1) the total number of issued and outstanding shares of common Equity Interests of the Issuer or any Parent Entity on the date of the declaration of a Restricted Payment under Section 4.07
multiplied by (2) the arithmetic mean of the closing prices per share of such common Equity Interests on the principal securities exchange on which such common Equity Interests are traded for the 30 consecutive trading days immediately preceding the date of declaration of such Restricted Payment.
“Merger” means a statutory merger, consolidation, amalgamation or similar transaction under applicable law, and “Merge” means to consummate any of the foregoing transactions.
“Moody’s” means Moody’s Investors Service, Inc. and its successors.
“Mortgage Servicing Right” means, with respect to any Person, the right of such Person to receive cash flows in its capacity as servicer of any Receivable or pool of Receivables, and any interests in such right including, but not limited to, participation certificates or excess fee strips, together with any assets related thereto that are of the type transferred in connection with securitization transactions involving assets such as, or similar to, Mortgage Servicing Rights, and any collections or proceeds thereof, including all contracts and contract rights, security interests, financing statements or other documentation in respect of such Mortgage Servicing Rights, all general intangibles under or arising out of or relating to such Mortgage Servicing Rights and any guarantees, indemnities, warranties or other obligations in respect of such Mortgage Servicing Rights. For purposes of determining the amount of a Mortgage Servicing Right at any time, such amount shall be determined in accordance with GAAP, consistently applied, as of the most recent practicable date.
“MSR Facility” means any financing arrangement of any kind, including, but not limited to, financing arrangements in the form of purchase facilities, repurchase facilities, early purchase facilities, re-pledge facilities, loan agreements, note issuance facilities and commercial paper facilities, with a financial institution or other lender (including, but not limited to, any GSE) or purchaser, in each case, primarily to finance or refinance the purchase, origination, pooling or funding by the Issuer or a Restricted Subsidiary of Mortgage Servicing Rights originated, purchased or owned by the Issuer or any Restricted Subsidiary of the Issuer, including, for the avoidance of doubt, any arrangement secured by Mortgage Servicing Rights or any interest therein held by the Issuer or any Restricted Subsidiary.
“MSR Facility Trust” means any Person (whether or not a Subsidiary of the Issuer) established for the purpose of issuing notes or other securities, including, but not limited to, Securitization Securities, or holding, pledging or re-pledging Mortgage Servicing Rights or pledges thereof, or interests in other MSR Facility Trusts or entering into an MSR Facility with the Issuer or a Restricted Subsidiary, in each case in connection with an MSR Facility, which (i) notes and securities are backed by, or represent interests in, Mortgage Servicing Rights originated or purchased by, and/or contributed to, such Person from the Issuer or any of its Restricted Subsidiaries or interests in other MSR Facility Trusts or (ii) notes and securities are backed by, or represent interests in, specified Mortgage Servicing Rights purchased by, and/or
contributed to, such Person from the Issuer or any of its Restricted Subsidiaries or interests in other MSR Facility Trusts.
“MSR Indebtedness” means Debt in connection with an MSR Facility.
“Net Cash Proceeds” means, with respect to any Asset Sale, the proceeds of such Asset Sale in the form of cash (including (i) payments in respect of deferred payment obligations to the extent corresponding to principal, but not interest, when received in the form of cash, and (ii) proceeds from the conversion of other consideration received when converted to cash), net of:
(1) brokerage commissions and other fees and expenses related to such Asset Sale, including fees and expenses of counsel, accountants and investment bankers;
(2) survey costs, title and recordation expenses, title insurance premiums, payments made in order to obtain a necessary consent or required by applicable law and brokerage and sales commissions and any relocation expenses incurred as a result thereof;
(3) provisions for taxes as a result of such Asset Sale taking into account the consolidated results of operations of the Issuer and its Restricted Subsidiaries;
(4) any costs associated with unwinding any related Hedging Obligations in connection with such transaction;
(5) payments or distributions required to be made to holders of minority interests in Restricted Subsidiaries as a result of such Asset Sale or to repay Debt outstanding at the time of such Asset Sale that is secured by a Lien on the property or assets sold or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law, be repaid from the proceeds thereof;
(6) appropriate amounts to be provided as a reserve against liabilities associated with such Asset Sale, including pension and other post-employment benefit liabilities, liabilities related to environmental matters and indemnification obligations associated with such Asset Sale, and any amounts placed in escrow (whether as a reserve for an adjustment of the purchase price, satisfaction of indemnities or otherwise), in each case with any subsequent reduction of the reserve (other than by payments made and charged against the reserved amount), and any subsequent release from escrow deemed to be a receipt of cash; and
(7) without duplication, any reserves that the Board of Managers determines in good faith should be made in respect of the sale price of such asset or assets for post-closing adjustments.
“Net Consolidated Total Assets” means the total assets of the Issuer and its Restricted Subsidiaries, excluding GNMA loans eligible for repurchase, determined on a consolidated basis in accordance with GAAP, as shown on the balance sheet as of the end of the most recent fiscal quarter for which internal financial statements are available, adjusted on a pro forma basis to reflect any acquisition or dispositions of assets that have been completed or are subject to a definitive agreement from the date of such balance sheet to the date of such event giving rise to the requirement to determine Net Consolidated Total Assets.
“Net Short” means, with respect to a Noteholder or beneficial owner, as of a date of determination, either (i) the value of its Short Derivative Instruments exceeds the sum of (x) the value of its Notes plus (y) the value of its Long Derivative Instruments as of such date of determination or (ii) it is reasonably expected that such would have been the case were a Failure to Pay or Bankruptcy Credit Event (each as defined in the 2014 ISDA Credit Derivatives Definitions) to have occurred with respect to the Issuer or any Guarantor immediately prior to such date of determination.
“Non-U.S. Person” means a Person that is not a U.S. person, as defined in Regulation S.
“Non-Funding Indebtedness” means all Debt other than Funding Indebtedness of the Issuer or a Restricted Subsidiary.
“Non-Recourse Debt” means with respect to any specified Person, Debt that is:
(1) specifically advanced to finance the acquisition of investment assets and secured only by the assets to which such Debt relates without recourse to such Person or any of its Restricted Subsidiaries (other than subject to such customary carve-out matters for which such Person or its Restricted Subsidiaries acts as a guarantor in connection with such Debt, such as fraud, misappropriation, breach of representation and warranty and misapplication, unless, until and for so long as a claim for payment or performance has been made thereunder against such Person (which has not been satisfied) at which time the obligations with respect to any such customary carve-out shall not be considered Non-Recourse Debt, to the extent that such claim is a liability of such Person for GAAP purposes);
(2) advanced to (i) such Person or its Restricted Subsidiaries that holds investment assets or (ii) any of such Person’s Subsidiaries or group of such Person’s Subsidiaries formed for the sole purpose of acquiring or holding investment assets, in each case, against which a loan is obtained that is made without recourse to, and with no cross-collateralization against, such Person’s or any of such Person’s Restricted Subsidiaries’ other assets (other than: (A) cross-collateralization against assets which serve as collateral for other Non-Recourse Debt; and (B) subject to such customary carve-out matters for which such Person or its Restricted Subsidiaries acts as a guarantor in connection with such Debt, such as fraud, misappropriation, breach of representation and warranty and
misapplication, unless, until and for so long as a claim for payment or performance has been made thereunder against such Person (which has not been satisfied) at which time the obligations with respect to any such customary carve-out shall not be considered Non-Recourse Debt, to the extent that such claim is a liability of such Person for GAAP purposes) and upon complete or partial liquidation of which the loan must be correspondingly completely or partially repaid, as the case may be; or
(3) specifically advanced to finance the acquisition of real property and secured by only the real property to which such Debt relates without recourse to such Person or any of its Restricted Subsidiaries (other than subject to such customary carve-out matters for which such Person or any of its Restricted Subsidiaries acts as a guarantor in connection with such Debt, such as fraud, misappropriation, breach of representation and warranty and misapplication, unless, until and for so long as a claim for payment or performance has been made thereunder against such Person (which has not been satisfied) at which time the obligations with respect to any such customary carve-out shall not be considered Non-Recourse Debt, to the extent that such claim is a liability of such Person for GAAP purposes);
provided that (A) no Non-Recourse Debt shall be secured by Mortgage Servicing Rights, other than Mortgage Servicing Rights acquired with the proceeds of such Non-Recourse Debt, and (B) notwithstanding the foregoing, to the extent that any Non-Recourse Debt is made with recourse to other assets of a Person or its Restricted Subsidiaries, only that portion of such Non-Recourse Debt that is recourse to such other assets or Restricted Subsidiaries shall be deemed not to be Non-Recourse Debt.
“Notes” has the meaning assigned to such term in the Recitals.
“Note Guarantee” means the guarantee of the Notes by a Restricted Subsidiary pursuant to this Indenture.
“Noteholder Direction” has the meaning assigned to such term in Section 7.05.
“Obligations” means, with respect to any Debt, all obligations (whether in existence on the Issue Date or arising afterwards, absolute or contingent, direct or indirect) for or in respect of principal (when due, upon acceleration, upon redemption, upon mandatory repayment or repurchase pursuant to a mandatory offer to purchase, or otherwise), premium, interest, penalties, fees, indemnification, reimbursement and other amounts payable and liabilities with respect to such Debt, including all interest accrued or accruing after the commencement of any bankruptcy, insolvency or reorganization or similar case or proceeding at the contract rate (including, but not limited to, any contract rate applicable upon default) specified in the relevant documentation, whether or not the claim for such interest is allowed as a claim in such case or proceeding.
“Offer to Purchase” has the meaning assigned to such term in Section 3.04(a).
“Offering Memorandum” means the Offering Memorandum dated January 13, 2021, related to the offer and sale of the Notes.
“Officer” means the Chairman, the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary of the Issuer or any Parent Entity.
“Officers’ Certificate” means a certificate signed by two Officers.
“Offshore Global Note” means a Global Note representing Notes issued and sold pursuant to Regulation S.
“Opinion of Counsel” means a written opinion from legal counsel who is acceptable to the Trustee. The counsel may be an employee of or counsel to the Issuer or any Parent Entity or the Trustee.
“ordinary course of business” means that, in the good faith judgment of the Issuer’s senior management, (a) such matter or transaction is one that occurs in the ordinary course of the Issuer’s business or in the ordinary course of business for other mortgage lenders in the market or (b) such matter or transaction is not one that occurs in the ordinary course of business but the terms thereof are not materially worse for the Holders of the Notes than the terms applicable to matters or transactions that do occur in the ordinary course of business.
“Parent Entity” means any Person that is, or becomes after the Issue Date, a direct or indirect parent of the Issuer.
“Paying Agent” refers to a Person engaged to perform the obligations of the Trustee in respect of payments made or funds held hereunder in respect of the Notes.
“Permanent Offshore Global Note” means an Offshore Global Note that does not bear the Temporary Offshore Global Note Legend.
“Permitted Business” means any of the businesses in which the Issuer and its Restricted Subsidiaries are engaged on the Issue Date, and any business reasonably related, incidental, complementary or ancillary thereto or any business deemed strategically desirable by the Issuer in good faith in connection therewith.
“Permitted Debt” has the meaning assigned to such term in Section 4.06(b).
“Permitted Hedging Obligation” means any Hedging Obligation entered into by the Issuer or any Restricted Subsidiary for the purpose of limiting risks associated with the business of the Issuer and its Restricted Subsidiaries and not for speculation.
“Permitted Holders” means any of (i) each of the Investors, (ii) each of the Management Stockholders (including any Management Stockholders holding Equity Interests through an Equityholding Vehicle), (iii) any Person who is acting solely as an underwriter in connection with a public or private offering of Capital Stock of the Issuer
or any of its direct or indirect parent companies, acting in such capacity, (iv) any group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act or any successor provision) of which any of the foregoing, any Holding Company, Permitted Plan or any Person or group that becomes a Permitted Holder specified in the last sentence of this definition are members and any member of such group; provided that in the case of such group and without giving effect to the existence of such group or any other group, Persons referred to in subclauses (i) through (iv), collectively, have beneficial ownership of more than 50.0% of the total voting power of the Voting Stock of the Issuer or any of its direct or indirect parent companies held by such group, (v) any Holding Company and (vi) any Permitted Plan. Any Person or group whose acquisition of beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made or waived in accordance with the requirements of this Indenture, will thereafter, together with its Affiliates, constitute an additional Permitted Holder.
“Permitted Investments” means:
(1) any Investment in the Issuer or in a Restricted Subsidiary of the Issuer;
(2) any Investment in Cash Equivalents or Investment Grade Securities;
(3) any Investment by the Issuer or any Subsidiary of the Issuer in a Person, if as a result of such Investment;
(A) such Person becomes a Restricted Subsidiary of the Issuer, or
(B) such Person is merged or consolidated with or into, or transfers or conveys substantially all its assets to, or is liquidated into, the Issuer or a Restricted Subsidiary;
(4) Investments received as non-cash consideration in (i) an Asset Sale made pursuant to and in compliance with Section 4.12 or (ii) a transaction not constituting an Asset Sale;
(5) Hedging Obligations otherwise permitted under this Indenture;
(6) (i) receivables (including Receivables) owing to the Issuer or any Restricted Subsidiary if created or acquired in the ordinary course of business, (ii) customary deposits into reserve accounts related to securitization transactions, (iii) endorsements for collection or deposit in the ordinary course of business, and (iv) securities, instruments or other obligations or Investments received in compromise or settlement of debts (including, but not limited to, by foreclosure) created in the ordinary course of business, or by reason of a composition or readjustment of debts or reorganization of another Person, or in satisfaction of claims or judgments;
(7) (i) payroll, travel and other advances in the ordinary course of business to officers, consultants and employees and (ii) other loans, or advances to, or Guarantees issued to support the obligations of, officers, consultants and employees, provided that the amount pursuant to this clause (ii) shall not be in excess of $35.0 million outstanding at any time;
(8) extensions of credit to customers and suppliers, including, but not limited to, lenders, in the ordinary course of business;
(9) (i) Investments in Residual Interests in connection with any Securitization, Warehousing Facility, other Funding Indebtedness or other Debt permitted by this Indenture and any increases in the aggregate amount thereof resulting from (A) subsequent sales or contributions to such Securitization Entity of Financeable Assets required by the terms of such Securitization, Warehousing Facility, other Funding Indebtedness or other Debt permitted by this Indenture or (B) Standard Securitization Undertakings, but excluding any other capital contribution, loan or advance to, or any other Investment in, any Securitization Entity, (ii) Investments in Guarantees of obligations of any Securitization Entity, including, but not limited to, any that may be deemed to exist pursuant to Standard Securitization Undertakings and (iii) Investments by a Securitization Entity or any other Person in connection with a Securitization, Warehousing Facility, MSR Facility or other Debt permitted by this Indenture, including investments of funds held in accounts required by the arrangements governing such Securitization, Warehousing Facility, MSR Facility or other Debt or any related Securitization Indebtedness, Funding Indebtedness or other Debt;
(10) any Investment in Receivables, REO Assets or other Financeable Assets (including, but not limited to, in the form of repurchase arrangements of any of the foregoing) and any Investment represented by Servicing Advances (other than Equity Interests of any Person);
(11) Investments in Securitization Entities, Warehousing Facility Trusts, MSR Facility Trusts, mortgage related securities or charge-off receivables in the ordinary course of business;
(12) Investments in and making or origination of Servicing Advances, residential or commercial mortgage loans and Securitization Assets (whether or not made in conjunction with the acquisition of Mortgage Servicing Rights);
(13) Investments in or guarantees of Debt of one or more entities the sole purpose of which is to originate, acquire, securitize, finance and/or sell loans that are purchased, insured, guaranteed, financed or securitized by any GSE; provided that the aggregate amount of (i) Investments in such entities plus (ii) the aggregate principal amount of Debt of such entities that are not Wholly Owned Restricted Subsidiaries which is recourse to the Issuer or any Guarantor shall not exceed an amount equal to 10.0% of the Issuer’s book equity as of any date of determination;
(14) any Investment existing on the Issue Date or made pursuant to binding commitments in effect on the Issue Date or an Investment consisting of any extension, modification or renewal of any Investment existing on the Issue Date; provided that the amount of any such Investment may not be increased other than as required by the terms of such Investment as in existence on the Issue Date or as permitted by Section 4.13(b)(6);
(15) in addition to Investments listed above, (A) Investments in an aggregate amount, taken together with all other Investments made in reliance on this clause and that are outstanding at the time, not to exceed the greater of (x) $180.0 million and (y) 5.0% of Net Consolidated Total Assets (net of, with respect to the Investment in any particular Person made pursuant to this clause, the cash return thereon received after the Issue Date as a result of any sale for cash, repayment, redemption, liquidating distribution or other cash realization (not included in Consolidated Net Income) not to exceed the amount of such Investments in such Person made after the Issue Date in reliance on this clause) and (B) any other Investment if, on the date of such Investment, after giving effect thereto, the Total Debt-to-Equity Ratio does not exceed 1.0 to 1.0; provided that if any Investment pursuant to this clause (15) is made in any Person that is not a Restricted Subsidiary at the date of making of such Investment and such Person becomes a Restricted Subsidiary after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (1) above and shall cease to have been pursuant to this clause (15) for so long as such Person continues to be a Restricted Subsidiary;
(16) Investments of a Person that becomes a Restricted Subsidiary due to an acquisition after the Issue Date to the extent the Investment was not made in connection with, or in contemplation of, such acquisition;
(17) Investments arising out of purchases of all remaining outstanding asset-backed securities of any Securitization Entity and/or Financeable Assets or Securitization Assets of any Securitization Entity in the ordinary course of business or for the purpose of relieving the Issuer or a Subsidiary of the Issuer of the administrative expense of servicing such Securitization Entity;
(18) any Co-Investment Transaction;
(19) any transaction to the extent it constitutes an Investment that is permitted and made in accordance with the provisions of Section 4.13(b) (except transactions described in clauses (3), (11), and (15) of Section 4.13(b));
(20) Investments to the extent made in exchange for, or where the consideration paid consists of, the issuance of Equity Interests (other than Disqualified Stock) of the Issuer or any Unrestricted Subsidiary or Equity Interests of any Parent Entity;
(21) guarantees of Debt permitted under Section 4.06;
(22) Investments in Mortgage Servicing Rights (including in the form of repurchases of Mortgage Servicing Rights) in the ordinary course of business;
(23) purchases of mortgage backed securities or similar debt instruments;
(24) repurchases of the Notes;
(25) Investments in the ordinary course of business or consistent with past practice consisting of Uniform Commercial Code Article 3 endorsements for collection or deposit and Article 4 customary trade arrangements with customers consistent with past practices;
(26) contributions to a “rabbi” trust for the benefit of employees, directors, managers, consultants, independent contractors or other service providers or other grantor trust subject to claims of creditors in the case of a bankruptcy of the Issuer or any Restricted Subsidiary; and
(27) any Investment (a) in a Similar Business having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (27) that are at that time outstanding, not to exceed the greater of (x) $260.0 million and (y) 7.0% of Net Consolidated Total Assets of the Issuer (determined as of the most recent date for which internal financial statements are available), at the time of such Investment (in each case, determined on the date such Investment is made, with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value) and (b) without duplication with clause (a), in an amount equal to the net cash proceeds from any sale or disposition of, or any distribution in respect of, Investments acquired after the Issue Date, to the extent the acquisition of such Investments was financed in reliance on clause (a) and provided that such amount will not increase the amount available for Restricted Payments; provided, however, that if any Investment pursuant to this clause (27) is made in any Person that is not a Restricted Subsidiary at the date of the making of such Investment and such Person becomes a Restricted Subsidiary after such date, such Investment shall thereafter be deemed to have been made pursuant to clause (16) above and shall cease to have been made pursuant to this clause (27).
“Permitted Liens” means
(1) Liens existing on the Issue Date (including with respect to after-acquired assets) not otherwise permitted hereby;
(2) Liens securing any Debt of the Issuer or any Restricted Subsidiary Incurred under clauses (b)(1), (b)(7) or (b)(12) of Section 4.06 (and Obligations in respect thereof);
(3) Liens on assets of a Restricted Subsidiary that is not a Guarantor securing any Debt of a Restricted Subsidiary that is not a Guarantor (and Obligations in respect thereof);
(4) Liens on Financeable Assets or any part thereof or interests therein, assets originated, acquired or funded with the proceeds of the Debt secured by such assets, any intangible contract rights and other accounts, documents, records and other property or rights directly related to the foregoing assets and any proceeds thereof and rights under related hedging obligations (and, in the case of any Funding Indebtedness, cash, restricted accounts or securities held in any account with the counterparty to the applicable facility pledged to secure such facility) and Standard Securitization Undertakings, securing any Funding Indebtedness of the Issuer or any Restricted Subsidiary (and Obligations in respect thereof);
(5) Liens, pledges or deposits under worker’s compensation laws, unemployment insurance laws or similar legislation and other types of social security or obtaining of insurance, or Liens, pledges or deposits in connection with bids, tenders, contracts or leases, or to secure public or statutory obligations, utility deposits, surety bonds, customs duties and the like, or for the payment of rent, in each case incurred in the ordinary course of business and not securing payment of borrowed money;
(6) Liens imposed by law, such as carriers’, vendors’, warehousemen’s and mechanics’ liens, in each case incurred in the ordinary course of business;
(7) Liens in respect of taxes, assessments and governmental charges which are not yet delinquent more than 60 days or which are being contested in good faith and by appropriate proceedings;
(8) Liens securing reimbursement obligations with respect to letters of credit that encumber documents and other property relating to such letters of credit and the proceeds thereof;
(9) survey exceptions, title exceptions, encumbrances, easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property, not interfering in any material respect with the conduct of the business of the Issuer and its Restricted Subsidiaries;
(10) licenses, sublicenses, leases or subleases as licensor, sublicensor, lessor or sublessor of any of its property, including intellectual property, in the ordinary course of business;
(11) customary Liens in favor of trustees and escrow agents, Liens to secure cash management services or to implement pooling arrangements and netting and setoff rights, banker’s liens and the like in favor of financial
institutions, depositories, securities intermediaries and counterparties to financial obligations and instruments;
(12) Liens on assets pursuant to merger agreements, stock or asset purchase agreements and similar agreements in respect of the disposition of such assets, including, but not limited to, such Liens that are the subject of an Excess Spread Sale entered into in the ordinary course of business securing obligations under such Excess Spread Sale;
(13) options, put and call arrangements, rights of first refusal and similar rights relating to Investments in joint ventures, partnerships and the like;
(14) judgment liens, and Liens securing appeal bonds or letters of credit issued in support of or in lieu of appeal bonds, so long as no Event of Default then exists as a result thereof;
(15) Liens incurred in the ordinary course of business not securing Debt and not in the aggregate materially detracting from the value of the properties or their use in the operation of the business of the Issuer and its Restricted Subsidiaries;
(16) Liens (including the interest of a lessor under a Capital Lease) on assets or property (including, but not limited to, Mortgage Servicing Rights) that secure Debt Incurred pursuant to Section 4.06(b)(9); provided that any Liens securing such Debt may not extend to any other assets or property owned by the Issuer or any of its Restricted Subsidiaries at the time the Lien is Incurred (other than assets and property affixed or appurtenant thereto) and the Debt secured by the Lien may not be Incurred more than 270 days after the latter of the acquisition, purchase, lease, or completion of the development, construction, repair, maintenance or improvement of the assets or property subject to the Lien;
(17) Liens on assets, property or Equity Interests of a Person at the time such Person becomes a Restricted Subsidiary of the Issuer, is merged with or into the Issuer or any Restricted Subsidiary, provided such Liens (other than Liens to secure Debt Incurred pursuant to Section 4.06(b)(7)) were not created in contemplation thereof and do not extend to any other property of the Issuer or any Restricted Subsidiary;
(18) Liens on assets or property at the time the Issuer or any of the Restricted Subsidiaries acquires such property, including any acquisition by means of a merger or consolidation with or into the Issuer or a Restricted Subsidiary of such Person, provided such Liens were not created in contemplation thereof and do not extend to any other property of the Issuer or any Restricted Subsidiary;
(19) Liens securing Debt or other obligations of a Restricted Subsidiary to the Issuer or another Restricted Subsidiary;
(20) Liens securing Hedging Obligations;
(21) Liens on Residual Interests, Securitization Assets, any intangible contract rights and other accounts, documents, records and assets directly related to the foregoing assets and the proceeds thereof (i) Incurred in connection with Funding Indebtedness, Standard Securitization Undertakings or permitted guarantees of any of the foregoing or (ii) Incurred in connection with any Securitization not covered by clause (i) securing obligations in respect of Securitization Securities; provided, however, that recourse to such Residual Interests, Securitization Assets, intangible contract rights and other accounts, documents, records and assets described in this clause (ii) is limited in a manner consistent with Standard Securitization Undertakings and the ratio of the amount of such Residual Interests to the amount of such Securitization Securities is not significantly greater than the ratio of sellers’ retained interests to the financed portion of assets in similar securitization transactions;
(22) any pledge of the Capital Stock of an Unrestricted Subsidiary to secure Debt of such Unrestricted Subsidiary, to the extent such pledge constitutes an Investment permitted under Section 4.07;
(23) extensions, renewals or replacements of any Liens referred to in clauses (1), (16), (17) or (18) of this definition in connection with the refinancing, refunding, extension, renewal, or replacement of the obligations secured thereby, provided that such Lien does not extend to any other property (other than improvements on such property) and, except as contemplated by the definition of “Permitted Refinancing Debt”, the amount secured by such Lien is not increased;
(24) Liens arising from the recourse that a GSE may have with respect to an alleged breach of any representation or warranty given to such GSE in respect of, and upon the sale of a Receivable;
(25) Liens securing Non-Recourse Debt so long as such Lien shall encumber only (i) any Equity Interests of the Subsidiary which owes such Debt, (ii) the assets originated, acquired or funded with the proceeds of such Debt and (iii) any intangible contract rights and other accounts, documents, records and other property directly related to the foregoing;
(26) Liens on client deposits securing the obligation to such client;
(27) Liens on spread accounts and credit enhancement assets, Liens on the Equity Interests of Restricted Subsidiaries substantially all of which are spread accounts and credit enhancement assets and Liens on interests in Securitization Entities, in each case incurred in connection with Credit Enhancement Agreements;
(28) Liens on cash, cash equivalents or other property arising in connection with the discharge of Debt;
(29) Liens with respect to obligations at any one time outstanding that do not exceed the greater of (x) $130.0 million and (y) 3.5% of Net Consolidated Total Assets;
(30) Liens on insurance policies and the proceeds thereof securing the financing of premiums with respect thereto, provided that such Liens shall not exceed the amount of such premiums so financed;
(31) Liens securing Debt under Currency Agreements;
(32) Liens on Equity Interests of Unrestricted Subsidiaries; and
(33) Liens securing Debt incurred pursuant to a Regulatory Debt Facility.
“Permitted Payments to Parent” means the declaration and payment of dividends or distributions by the Issuer or a Restricted Subsidiary to, or the making of loans or advances to, any Parent Entity in amounts required for any Parent Entity to pay, in each case without duplication:
(1) franchise, excise and similar taxes, and other fees and expenses, required to maintain its corporate or legal existence;
(2) customary salary, bonus, severance and other benefits payable to, and indemnities provided on behalf of, employees, directors, officers and managers of any Parent Entity and any payroll, social security or similar taxes thereof, to the extent such salaries, bonuses, severance, indemnities and other benefits are attributable to the ownership or operation of the Issuer and its Restricted Subsidiaries;
(3) general corporate operating, administrative, compliance and overhead costs and expenses of any Parent Entity and, following the first public offering of the Issuer’s common stock or the common stock of any Parent Entity, listing fees and other costs and expenses of such Parent Entity attributable to being a publicly traded company;
(4) fees and expenses related to any unsuccessful equity or debt offering of any Parent Entity;
(5) [reserved];
(6) cash payments in lieu of issuing fractional shares in connection with the exercise of warrants, options or other securities convertible into or exchangeable for Equity Interests of the Issuer or any Parent Entity;
(7) for the financing of Permitted Investments; provided, that (a) such Restricted Payment shall be made substantially concurrently with the closing of such Investment or other acquisition, (b) such Parent Entity shall, promptly
following the closing thereof, cause (x) all property acquired (whether assets or Equity Interests) to be contributed to the capital of the Issuer or one of its Restricted Subsidiaries or (y) the merger or amalgamation of the Person formed or acquired into the Issuer or one of its Restricted Subsidiaries (to the extent not prohibited by this Indenture) in order to consummate such Investment or other acquisition, (c) such Parent Entity and its Affiliates (other than the Issuer or a Restricted Subsidiary) receives no consideration or other payment in connection with such transaction except to the extent the Issuer or a Restricted Subsidiary could have given such consideration or made such payment in compliance with this Indenture, (d) any property received by the Issuer shall not increase amounts available for Restricted Payments under this Indenture and (e) to the extent constituting an Investment, such Investment shall be deemed to be made by the Issuer or such Restricted Subsidiary pursuant to another provision of this Indenture or pursuant to the definition of “Permitted Investments”;
(8) to the extent constituting Restricted Payments, amounts that would be permitted to be paid by the Issuer under Section 4.13; and
(9) interest or principal on Debt the proceeds of which have been contributed to the Issuer or any Restricted Subsidiary or that has been guaranteed by, or is otherwise, considered Debt of, the Issuer or any Restricted Subsidiary incurred under Section 4.06.
“Permitted Refinancing Debt” has the meaning assigned to such term in Section 4.06(b)(4).
“Permitted Residual Indebtedness” means any Debt of the Issuer or any of its Subsidiaries under a Residual Funding Facility; provided that the excess (determined as of the most recent date for which internal financial statements are available), if any of (x) the amount of any such Permitted Residual Indebtedness for which the holder thereof has contractual recourse to the Issuer or its Restricted Subsidiaries to satisfy claims with respect to such Permitted Residual Indebtedness (excluding recourse for carve-out matters such as fraud, misappropriation, breaches of representations, warranties and covenants and misapplication and customary indemnities in connection with such transactions) over (y) the aggregate (without duplication of amounts) Realizable Value of the assets that secure such Permitted Residual Indebtedness shall be deemed not to be Permitted Residual Indebtedness (but shall not be deemed to be a new incurrence of Debt subject to the provisions of Section 4.06 except with respect to, and solely to the extent of, any such excess that exists upon the initial incurrence of such Debt).
“Permitted Securitization Indebtedness” means Securitization Indebtedness; provided (i) that in connection with any Securitization, any Warehousing Indebtedness, MSR Indebtedness or other Funding Indebtedness used to finance the purchase, origination or pooling of any Receivables, Mortgage Servicing Rights or other asset subject to such securitization is repaid in connection with such securitization to the extent of the net proceeds received by the Issuer and its Restricted Subsidiaries from the applicable Securitization Entity or other purchaser of Receivables, Securitization
Securities or other Financeable Assets, and (ii) the excess (determined as of the most recent date for which internal financial statements are available), if any, of (x) the amount of any such Securitization Indebtedness for which the holder thereof has contractual recourse to the Issuer or its Restricted Subsidiaries to satisfy claims with respect to such Securitization Indebtedness (excluding recourse for carve-out matters such as fraud, misappropriation, breaches of representations, warranties and covenants and misapplication and customary indemnities in connection with such transactions) over (y) the aggregate (without duplication of amounts) Realizable Value of the assets that secure such Securitization Indebtedness shall not be Permitted Securitization Indebtedness (but shall not be deemed to be a new Incurrence of Debt subject to the provisions of Section 4.06 except with respect to, and solely to the extent of, any such excess that exists upon the initial Incurrence of such Debt).
“Permitted Servicing Advance Facility Indebtedness” means any Debt of the Issuer or any of its Subsidiaries incurred under a Servicing Advance Facility; provided, however, that the excess (determined as of the most recent date for which internal financial statements are available), if any of (x) the amount of any such Permitted Servicing Advance Facility Indebtedness for which the holder thereof has contractual recourse to the Issuer or its Restricted Subsidiaries to satisfy claims with respect to such Permitted Servicing Advance Facility Indebtedness (excluding recourse for carve- out matters such as fraud, misappropriation, breaches of representations, warranties and covenants and misapplication and customary indemnities in connection with such transactions) over (y) the aggregate (without duplication of amounts) Realizable Value of the assets that secure such Permitted Servicing Advance Facility Indebtedness shall not be Permitted Servicing Advance Facility Indebtedness (but shall not be deemed to be a new Incurrence of Debt subject to the provisions of Section 4.06 except with respect to, and solely to the extent of, any such excess that exists upon the initial incurrence of such Debt).
“Permitted Warehousing Indebtedness” means Warehousing Indebtedness; provided, however, that the excess (determined as of the most recent date for which internal financial statements are available), if any, of (x) the amount of any such Warehousing Indebtedness for which the holder thereof has contractual recourse to the Issuer or its Restricted Subsidiaries to satisfy claims with respect to such Warehousing Indebtedness (excluding recourse for carve-out matters such as fraud, misappropriation, breaches of representations, warranties and covenants and misapplication and customary indemnities in connection with such transactions) over (y) the aggregate (without duplication of amounts) Realizable Value of the assets which secure such Warehousing Indebtedness shall not be Permitted Warehousing Indebtedness (but shall not be deemed to be a new Incurrence of Debt subject to the provisions of Section 4.06, except with respect to, and solely to the extent of, any such excess that exists upon the initial Incurrence of such Debt.
“Person” means an individual, a corporation, a partnership, a limited liability Issuer, an association, a trust or any other entity, including a government or political subdivision or an agency or instrumentality thereof.
“Position Representation” has the meaning assigned to such term in Section 7.05.
“Preferred Stock” means, with respect to any Person, any and all Capital Stock which is preferred as to the payment of dividends or distributions, upon liquidation or otherwise, over another class of Capital Stock of such Person.
“principal” of any Debt means the principal amount of such Debt, (or if such Debt was issued with original issue discount, the face amount of such Debt less the remaining unamortized portion of the original issue discount of such Debt), together with, unless the context otherwise indicates, any premium then payable on such Debt.
“Public Company Costs” means the initial costs relating to establishing compliance with the Sarbanes-Oxley Act of 2002, as amended, and other expenses arising out of or incidental to the Issuer or its Restricted Subsidiaries’ or any Parent Entity’s initial establishment of compliance with the obligations of a reporting company, including costs, fees and expenses (including legal, accounting and other professional fees) relating to compliance with provisions of the Securities Act and Exchange Act.
“Qualified Equity Interests” means all Equity Interests of a Person other than Disqualified Equity Interests.
“Qualified Stock” means all Capital Stock of a Person other than Disqualified Stock.
“Rating Agencies” means S&P, Moody’s and Fitch; provided that if two of S&P, Moody’s or Fitch shall cease issuing a rating on the Notes for reasons outside the control of the Issuer, then the Issuer may select a nationally recognized statistical rating agency to substitute for S&P, Moody’s and/or Fitch (as applicable).
“Realizable Value” of an asset means (i) with respect to any REO Asset, the value realizable upon the disposition of such asset as determined by the Issuer in its reasonable discretion and consistent with customary industry practice and (ii) with respect to any other asset, the lesser of (x) the face value of such asset and (y) the market value of such asset as determined by the Issuer in accordance with the agreement governing the applicable Warehousing Indebtedness or MSR Indebtedness or Permitted Residual Indebtedness, as the case may be (or, if such agreement does not contain any related provision, as determined by senior management of the Issuer in good faith); provided, however, that the Realizable Value of any asset described in clause (i) or (ii) above which an unaffiliated third party has a binding contractual commitment to purchase from the Issuer or any of its Restricted Subsidiaries shall be the minimum price payable to the Issuer or such Restricted Subsidiary for such asset pursuant to such contractual commitment.
“Receivables” means mortgage loans and other mortgage related receivables (and related Mortgage Servicing Rights) arising in the ordinary course of business, together with any assets related thereto that are of the type transferred in connection with securitization transactions involving assets such as, or similar to, such Receivables, and
any collections or proceeds of any of the foregoing, including all collateral securing such Receivables, all contracts and contract rights, security interests, financing statements or other documentation in respect of such Receivables, all general intangibles under or arising out of or relating to such Receivables and any guarantees, indemnities, warranties or other obligations in respect of such Receivables; provided, however, that (i) for purposes of determining the amount of a Receivable at any time, such amount shall be determined in accordance with GAAP, consistently applied, as of the most recent practicable date and (ii) “Receivables” shall exclude Residual Interests and Servicing Advance Receivables.
“refinance” has the meaning assigned to such term in Section 4.06(b)(4).
“Register” has the meaning assigned to such term in Section 2.09.
“Registrar” means a Person engaged to maintain the Register.
“Regular Record Date” for the interest payable on any Interest Payment Date means the January 15 or July 15 (whether or not a Business Day) next preceding such Interest Payment Date.
“Regulation S” means Regulation S under the Securities Act.
“Regulation S Certificate” means a certificate substantially in the form of Exhibit E hereto.
“Related Party Transaction” has the meaning assigned to such term in Section 4.13(a).
“Relevant Condition” means, at any date of determination, Total Shareholders’ Equity is at least $1,000.0 million.
“Regulated Bank” means an Approved Commercial Bank that is (i) a U.S. depository institution the deposits of which are insured by the Federal Deposit Insurance Corporation; (ii) a corporation organized under section 25A of the U.S. Federal Reserve Act of 1913; (iii) a branch, agency or commercial lending company of a foreign bank operating pursuant to approval by and under the supervision of the Board of Governors under 12 CFR part 211; (iv) a non-U.S. branch of a foreign bank managed and controlled by a U.S. branch referred to in clause (iii); or (v) any other U.S. or non-U.S. depository institution or any branch, agency or similar office thereof supervised by a bank regulatory authority in any jurisdiction.
“Regulatory Debt Facility” means, with respect to the Issuer or any of the Issuer’s Subsidiaries, one or more debt facilities entered into pursuant to the laws, rules or regulations of the United States (including, for the avoidance of doubt, any agency or instrumentality of the United States, including the Federal Reserve and other federal bank regulatory agencies) promulgated under the Coronavirus Aid, Relief, and Economic Security Act or any other legislation, regulation, act or similar law of the United States in
response to, or related to the effect of, COVID-19, in each case, as amended from time to time.
“REO Asset” of a Person means a real estate asset owned by such Person and acquired as a result of the foreclosure or other enforcement of a Lien on such asset securing a Receivable or Servicing Advance Receivable or other mortgage-related receivable.
“Required Asset Sale” means any Asset Sale that is a result of a repurchase right or obligation or a mandatory sale right or obligation related to (1) Mortgage Servicing Rights, (2) pools or portfolios of Mortgage Servicing Rights, or (3) the Capital Stock of any Person that holds Mortgage Servicing Rights or pools or portfolios of Mortgage Servicing Rights, which rights or obligations are either in existence on the date of this Indenture (or substantially similar in nature to such rights or obligations in existence on the date of this Indenture or pursuant to the guidelines or regulations of a GSE).
“Residual Funding Facility” means any funding arrangement with a financial institution or institutions or other lenders or purchasers under which advances are made to the Issuer or any Restricted Subsidiary secured by Residual Interests.
“Residual Interest” means (i) any residual, subordinated, reserve accounts and ownership, participation or equity interest held by the Issuer or a Restricted Subsidiary in Securitization Entities, Warehousing Facility Trusts and/or MSR Facility Trusts or their assets, regardless of whether required to appear on the face of the consolidated financial statements in accordance with GAAP or (ii), with respect to any Securitization Entity, the residual right (which may be represented by an equity interest or a subordinated debt obligation of such entity) owned or held by the Issuer or a Restricted Subsidiary (other than a Securitization Entity) to receive cash flows from the Financeable Assets sold to such Securitization Entity in excess of amounts needed to pay principal of, interest on and other amounts in respect of Securitization Entity Indebtedness of such entity, servicing expenses of such entity, costs in respect of Hedging Obligations of such entity (if any) and other fees and obligations in respect of the Third-Party Securities issued by such entity and secured by such Financeable Assets.
“Responsible Officer” means any officer of the Trustee, in the case of the Trustee, or any officer of the Paying Agent, in the case of the Paying Agent, in each case in its corporate trust department who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such Person’s knowledge of and familiarity with the particular subject and, in each case, with direct responsibility for the administration of such role under this Indenture.
“Restricted Legend” means the legend set forth in Exhibit C.
“Restricted Payment” has the meaning assigned to such term in Section 4.07(a).
“Restricted Period” means the relevant 40-day distribution compliance period as defined in Regulation S.
“Restricted Subsidiary” means any Subsidiary of the Issuer other than an Unrestricted Subsidiary.
“Reversion Date” has the meaning assigned to such term in Section 4.18.
“Rule 144A” means Rule 144A under the Securities Act.
“Rule 144A Certificate” means (i) a certificate substantially in the form of Exhibit F hereto or (ii) a written certification addressed to the Issuer and the Trustee to the effect that the Person making such certification (x) is acquiring such Note (or beneficial interest) for its own account or one or more accounts with respect to which it exercises sole investment discretion and that it and each such account is a qualified institutional buyer within the meaning of Rule 144A, (y) is aware that the transfer to it or exchange, as applicable, is being made in reliance upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A, and (z) acknowledges that it has received such information regarding the Issuer as it has requested pursuant to Rule 144A(d)(4) or has determined not to request such information.
“Sale and Lease-Back Transaction” means any arrangement with any Person providing for the leasing by the Issuer or any of its Restricted Subsidiaries of any real property or tangible personal property, which property has been or is to be sold or transferred by the Issuer or such Restricted Subsidiary to such Person in contemplation of such leasing.
“S&P” means S&P Global Ratings, a business unit of Standard & Poor’s Financial Services LLC, and any successor to its rating agency business.
“Screened Affiliate” means any Affiliate of a Noteholder (i) that makes investment decisions independently from such Noteholder and any other Affiliate of such Noteholder that is not a Screened Affiliate, (ii) that has in place customary information screens between it and such Noteholder and any other Affiliate of such Noteholder that is not a Screened Affiliate and such screens prohibit the sharing of information with respect to the Issuer or its Subsidiaries, (iii) whose investment policies are not directed by such Noteholder or any other Affiliate of such Noteholder that is acting in concert with such Noteholder in connection with its investment in the Notes, and (iv) whose investment decisions are not influenced by the investment decisions of such Noteholder or any other Affiliate of such Noteholder that is acting in concert with such Noteholders in connection with its investment in the Notes.
“Similar Business” means any business conducted or proposed to be conducted by the Issuer and its Restricted Subsidiaries on the Issue Date or any business that is similar, reasonably related, complementary, incidental or ancillary thereto, or is a reasonable extension, development or expansion thereof.
“Securities Act” means the Securities Act of 1933.
“Securitization” means a public or private transfer, pledge, re-pledge, sale or financing, on a fixed or revolving basis, (collectively, “financing”)of (i) Servicing Advances or Mortgage Servicing Rights, (ii) mortgage loans, (iii) installment contracts, (iv) deferred servicing fees, (v) warehouse loans secured by mortgage loans, (vi) mortgage backed and other asset backed securities, including interest only securities, and Securitization Securities, (vii) dealer floorplan loans, (viii) other loans and related assets, and/or (ix) other receivables (including, but not limited to, Receivables), Residual Interests, REO Assets, other Financeable Assets, collections or proceeds of any of the foregoing or similar assets (or any interests in any of the foregoing or in Securitization Entities owning any of the foregoing, including, but not limited to, Securitization Securities) and any other asset capable of being securitized or transferred, pledged, re-pledged or sold in connection with Securitizations, (clauses (i)—(ix) above, collectively, the “Securitization Assets”), in each case where such financing of Securitization Assets is done in a manner by which the Issuer or any of its Restricted Subsidiaries directly or indirectly securitizes a pool of Securitization Assets including, but not limited to, any such transaction involving the sale, transfer, contribution, pledge or re-pledge of Securitization Assets to a Securitization Entity or the issuance by a Securitization Entity of Securitization Securities that are used to directly or indirectly finance Securitization Assets.
“Securitization Assets” has the meaning specified in the definition of “Securitization.”
“Securitization Entity” means (i) any MSR Facility Trust, any Warehousing Facility Trust, and any other Person (whether or not a Restricted Subsidiary of the Issuer but excluding the Issuer) established for the purpose of issuing asset- backed or mortgaged-backed or mortgage pass-through securities of any kind (including collateralized mortgage obligations, net interest margin securities, certificates of beneficial or participation interests or other Securitization Securities), (ii) any special purpose Subsidiary established for the purpose of selling, depositing, or contributing Securitization Assets into a Person described in clause (i) or holding securities in any related Securitization Entity, regardless of whether such person is an issuer of securities; provided that such Person is not an obligor with respect to any Debt of the Issuer or any Guarantor, and (iii) any special purpose Subsidiary of the Issuer formed exclusively for the purpose of satisfying the requirements of Credit Enhancement Agreements and regardless of whether such Subsidiary is an issuer of securities; provided that such Person is not an obligor with respect to any Debt of the Issuer or any Guarantor other than under Credit Enhancement Agreements.
“Securitization Indebtedness” means (i) Debt (including Securitization Securities) of the Issuer or any of its Restricted Subsidiaries Incurred pursuant to on-balance sheet Securitizations and (ii) any Debt (including Securitization Securities) consisting of advances or other loans made to the Issuer or any of its Restricted Subsidiaries based upon securities (including Securitization Securities) issued by a Securitization Entity pursuant to a Securitization, and acquired or retained by the Issuer or any of its Restricted Subsidiaries. Without limiting the foregoing, it is expressly understood and agreed that each of the following transactions are Securitization
Indebtedness: (i) the sale of loans to Fannie Mae, Freddie Mac, or the FHLB, (ii) the issuance of securities by the Issuer or a Restricted Subsidiary under one of Ginnie Mae’s mortgage-backed securities programs, including a home-equity conversion mortgage program, and (iii) liabilities associated with the Issuer or its Restricted Subsidiaries’ Home Equity Conversion Mortgage loan inventory where the securitization of such loan inventory does not meet the GAAP criteria for sale treatment; provided that the foregoing transactions shall be deemed to be Securitization Indebtedness only to the extent that such transactions continue to satisfy the terms described in the first sentence of this definition.
“Securitization Securities” means, with respect to any Securitization, Funding Indebtedness, Permitted Refinancing Indebtedness, notes, bonds or other debt instruments, beneficial interests in a trust, undivided ownership or participation interests in an entity or in a pool or pools of Financeable Assets or any interest in any of the foregoing or other securities issued, sold, pledged or re-pledged by the Issuer, the relevant Restricted Subsidiary or Securitization Entity to banks, investors, other financing sources, the Issuer or its Restricted Subsidiaries.
“Servicing Advance Facility” means any funding arrangement with lenders collateralized in whole or in part by Servicing Advances under which advances are made to the Issuer or any of its Restricted Subsidiaries based on such collateral.
“Servicing Advance Receivables” means rights to collections under mortgage related receivables of or other rights to reimbursement of Servicing Advances that the Issuer or a Restricted Subsidiary of the Issuer has made in the ordinary course of business and on customary industry terms.
“Servicing Advances” means advances made by the Issuer or any of its Restricted Subsidiaries in its capacity as servicer of any mortgage-related receivables to fund principal, interest, escrow, foreclosure, insurance, tax or other payments or advances when the borrower on the underlying receivable is delinquent in making payments on such receivable; to enforce remedies, manage and liquidate REO Assets; or that the Issuer or any of its Restricted Subsidiaries otherwise advances in its capacity as servicer.
“Short Derivative Instrument” means a Derivative Instrument (i) the value of which generally decreases, and/or the payment or delivery obligations under which generally increase, with positive changes to the Issuer or any one or more Guarantors and/or (ii) the value of which generally increases, and/or the payment or delivery obligations under which generally decrease, with negative changes to the Issuer or any one or more Guarantors.
“Significant Subsidiary” means any Restricted Subsidiary that would be a “Significant Subsidiary” of the Issuer within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC (or any successor provision).
“Speculative Hedging Obligation” means any Hedging Obligation other than a Permitted Hedging Obligation.
“Standard Securitization Undertakings” means all representations, warranties, covenants and indemnities (including obligations to repurchase any Financeable Assets sold in such securitization and any margin calls under any Warehousing Facilities or MSR Facilities) entered into by the Issuer or a Restricted Subsidiary (other than a Securitization Entity) in connection with Funding Indebtedness or MSR Indebtedness.
“Stated Maturity” means (i) with respect to any Debt, the date specified as the fixed date on which the final installment of principal of such Debt is due and payable or (ii) with respect to any scheduled installment of principal of or interest on any Debt, the date specified as the fixed date on which such installment is due and payable as set forth in the documentation governing such Debt, not including any contingent obligation to repay, redeem or repurchase prior to the regularly scheduled date for payment.
“Subordinated Debt” means any Debt of the Issuer which is subordinated in right of payment to the Notes, as applicable, pursuant to a written agreement to that effect.
“Subsidiary” means with respect to any Person, (i) any corporation, association or other business entity of which more than 50% of the outstanding Voting Stock is owned, directly or indirectly, by, or, in the case of a partnership, the sole general partner or the managing partner or the only general partners of which are, such Person and one or more Subsidiaries of such Person (or a combination thereof), and (ii) any Securitization Entity established by or for the benefit of the Issuer or any Restricted Subsidiary in connection with any Funding Indebtedness. Unless otherwise specified, “Subsidiary” means a Subsidiary of the Issuer.
“Suspended Covenants” has the meaning assigned to such term in Section 4.18.
“Suspension Period” has the meaning assigned to such term in Section 4.18.
“Total Debt-to-Equity Ratio” means, on any date of determination, the ratio of (1) the aggregate amount of Non-Funding Indebtedness of the Issuer and its Restricted Subsidiaries on a consolidated basis on such date of determination to (2) Total Shareholders’ Equity on such date of determination.
“Temporary Offshore Global Note” means an Offshore Global Note that bears the Temporary Offshore Global Note Legend.
“Temporary Offshore Global Note Legend” means the legend set forth in Exhibit I.
“Total Shareholders’ Equity” means, at any date of determination, the consolidated shareholders’ equity of the Issuer and its Restricted Subsidiaries, calculated excluding:
(1) any amounts attributable to Disqualified Stock;
(2) treasury stock;
(3) the cumulative effect of a change in accounting principles; and
(4) any non-controlling interest owned by any Person in any Subsidiary of the Issuer.
“Transactions” means the offer and sale of the Notes and the use of proceeds therefrom as described under the caption “Use of Proceeds” in the Offering Memorandum.
“Treasury Rate” means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days prior to the redemption date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from the redemption date to February 1, 2023; provided that if the period from the redemption date to February 1, 2023 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used.
“Trident Funds” refers, collectively, to one or more investment entities directly or indirectly managed by Stone Point Capital LLC, including Trident VI, L.P., Trident VI Parallel Fund, L.P., Trident VI DE Parallel Fund, L.P. and Trident VI Professionals Fund, L.P.
“Trustee” means the party named as such in the first paragraph of this Indenture or any successor trustee under this Indenture pursuant to Article 7.
“Trust Indenture Act” means the Trust Indenture Act of 1939 (15 U.S.C. §§ 77aaa-77bbbb), as in effect on the Issue Date.
“U.S. Global Note” means a Global Note that bears the Restricted Legend representing Notes issued and sold pursuant to Rule 144A.
“U.S. Government Obligations” means obligations issued or directly and fully guaranteed or insured by the United States of America or by any agent or instrumentality thereof, provided that the full faith and credit of the United States of America is pledged in support thereof.
“Unrestricted Subsidiary” means:
(1) any Subsidiary of the Issuer that at the time of determination has previously been designated, and continues to be, an Unrestricted Subsidiary in accordance with Section 4.15; and
(2) any Subsidiary of an Unrestricted Subsidiary.
“Verification Covenant” has the meaning assigned to such term in Section 7.05.
“Voting Stock” means, with respect to any Person, Capital Stock of any class or kind ordinarily having the power to vote for the election of directors, managers or other voting members of the governing body of such Person.
“Warehousing Facility” means any financing arrangement of any kind, including financing arrangements in the form of purchase facilities, repurchase facilities, early purchase facilities, re-pledge facilities, loan agreements, note and/or other security issuance facilities and commercial paper facilities (and excluding, in all cases, Securitizations), with a financial institution or other lender (including, but not limited to, any GSE) or purchaser, in each case exclusively to finance or refinance (i) the purchase, origination, pooling or funding of Receivables or other Financeable Assets by the Issuer or any Restricted Subsidiary prior to sale to a third party, (ii) Servicing Advances, (iii) the carrying of REO Assets related to Receivables or other Financeable Assets, (iv) funded debt draws with respect to mortgages that have not yet cleared (drafts payable) that will be funded by such facility, or (v) any other Financeable Assets; provided that such purchase, origination, pooling, funding, refinancing, carrying and/or draw is in the ordinary course of business.
“Warehousing Facility Trusts” means any Person (whether or not a Subsidiary of the Issuer) established for the purpose of issuing notes or other securities (including, but not limited to, Securitization Securities) or holding, pledging or re-pledging any of the assets described in clauses (i) through (iv) below, or interests therein or pledges thereof, or entering into a Warehousing Facility with the Issuer or a Restricting Subsidiary, in each case in connection with a Warehousing Facility, which notes and securities are backed by, or represent interests in, (i) loans, mortgage-related securities, Financeable Assets or other receivables originated or purchased by, and/or contributed to, such Person from the Issuer or any Restricted Subsidiary of the Issuer; (ii) specified Servicing Advances originated or purchased by, and/or contributed to, such Person from the Issuer or any Restricted Subsidiary of the Issuer; (iii) the carrying of REO Assets related to loans and other receivables originated or purchased by, and/or contributed to, such Person from the Issuer or any Restricted Subsidiary of the Issuer; or (iv) interests in other Warehousing Facility Trusts.
“Warehousing Indebtedness” means Debt in connection with a Warehousing Facility.
“Wholly Owned Subsidiary” of any Person means a Subsidiary of such Person 100% of the outstanding Capital Stock or other ownership interests of which (other than directors’ qualifying shares or shares required pursuant to applicable law) shall at the time be owned by such Person or by one or more Wholly Owned Subsidiaries of such Person.
Section 1.02. Rules of Construction. Unless the context otherwise requires or except as otherwise expressly provided,
(1) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;
(2) “herein,” “hereof’ and other words of similar import refer to this Indenture as a whole and not to any particular Section, Article or other subdivision;
(3) all references to Sections or Articles or Exhibits refer to Sections or Articles or Exhibits of or to this Indenture unless otherwise indicated;
(4) references to agreements or instruments, or to statutes or regulations, are to such agreements or instruments, or statutes or regulations, as amended from time to time (or to successor statutes and regulations);
(5) in the event that a transaction meets the criteria of more than one category of permitted transactions or listed exceptions the Issuer may classify such transaction as it, in its sole discretion, determines; and
(6) in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person, and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.
Section 1.03. Limited Condition Transactions.
When calculating the availability under any basket or ratio under this Indenture or compliance with any provision of this Indenture in connection with any Limited Condition Transaction and any actions or transactions related thereto (including acquisitions, Investments, the incurrence or issuance of Debt, Disqualified Stock or Preferred Stock and the use of proceeds thereof, the incurrence of Liens, repayments, Restricted Payments and Asset Sales), in each case, at the option of the Issuer (the Issuer’s election to exercise such option, an “LCT Election”), the date of determination for availability under any such basket or ratio and whether any such action or transaction is permitted (or any requirement or condition therefor is complied with or satisfied (including as to the absence of any continuing Default or Event of Default)) under this Indenture shall be deemed to be the date (the “LCT Test Date”) the definitive agreements for such Limited Condition Transaction are entered into (or, if applicable, the date of delivery of an irrevocable notice, declaration of a Restricted Payment or similar event), and if, after giving pro forma effect to the Limited Condition Transaction and any actions or transactions related thereto (including acquisitions, Investments, the incurrence or issuance of Debt, Disqualified Stock or Preferred Stock and the use of proceeds thereof, the incurrence of Liens, repayments, Restricted Payments and Asset Sales) and any related pro forma adjustments, the Issuer or any of its Restricted Subsidiaries would have been permitted to take such actions or consummate such transactions on the relevant LCT Test Date in compliance with such ratio, test or basket (and any related requirements and conditions), such ratio, test or basket (and any related requirements and conditions) shall
be deemed to have been complied with (or satisfied) for all purposes (in the case of Debt, for example, whether such Debt is committed, issued or incurred at the LCT Test Date or at any time thereafter); provided, that (a) if financial statements for one or more subsequent fiscal quarters shall have become available, the Issuer may elect, in its sole discretion, to re-determine all such ratios, tests or baskets on the basis of such financial statements, in which case, such date of redetermination shall thereafter be deemed to be the applicable LCT Test Date for purposes of such ratios, tests or baskets, (b) except as contemplated in the foregoing clause (a), compliance with such ratios, tests or baskets (and any related requirements and conditions) shall not be determined or tested at any time after the applicable LCT Test Date for such Limited Condition Transaction and any actions or transactions related thereto (including acquisitions, Investments, the incurrence or issuance of Debt, Disqualified Stock or Preferred Stock and the use of proceeds thereof, the incurrence of Liens, repayments, Restricted Payments and Asset Sales) and (c) Fixed Charges for purposes of Fixed Charge Coverage Ratio will be calculated using an assumed interest rate based on the indicative interest margin contained in any financing commitment documentation with respect to such Debt or, if no such indicative interest margin exists, as reasonably determined by the Issuer in good faith.
For the avoidance of doubt, the Issuer shall have made an LCT Election, (1) if any of the ratios, tests or baskets for which compliance was determined or tested as of the LCT Test Date would at any time after the LCT Test Date have been exceeded or otherwise failed to have been complied with as a result of fluctuations in any such ratio, test or basket, including due to fluctuations in EBITDA or Net Consolidated Total Assets of the Issuer or the Person subject to such Limited Condition Transaction, such baskets, tests or ratios will not be deemed to have been exceeded or failed to have been complied with as a result of such fluctuations; (2) if any related requirements and conditions (including as to the absence of any continuing Default or Event of Default) for which compliance or satisfaction was determined or tested as of the LCT Test Date would at any time after the LCT Test Date not have been complied with or satisfied (including due to the occurrence or continuation of a Default or Event of Default), such requirements and conditions will not be deemed to have been failed to be complied with or satisfied (and such Default or Event of Default shall be deemed not to have occurred or be continuing); and (3) in calculating the availability under any ratio, test or basket in connection with any action or transaction unrelated to such Limited Condition Transaction following the relevant LCT Test Date and prior to the earlier of the date on which such Limited Condition Transaction is consummated or the date that the definitive agreement or date for redemption, purchase or repayment specified in an irrevocable notice for such Limited Condition Transaction is terminated, expires or passes, as applicable, without consummation of such Limited Condition Transaction, any such ratio, test or basket shall be determined or tested on a pro forma basis assuming such Limited Condition Transaction and other transactions in connection therewith (including any incurrence of debt and the use of proceeds thereof (but without netting the cash proceeds thereof)) had been consummated.
Article 2
The Notes
Section 2.01. Form, Dating and Denominations; Legends. (a) The Notes and the Trustee’s certificate of authentication will be substantially in the form attached as Exhibit A. The terms and provisions contained in the form of the Notes annexed as Exhibit A constitute, and are hereby expressly made, a part of this Indenture. The Notes may have notations, legends or endorsements required by law, rules of or agreements with national securities exchanges to which the Issuer is subject, or usage. Each Note will be dated the date of its authentication. The Notes will be issuable in denominations of $2,000 in principal amount and any multiple of $1,000 in excess thereof.
(b) (1) Except as otherwise provided in paragraph (c) of this Section 2.01, Section 2.10(b)(3), (b)(5), or (c) or Section 2.09(b)(4), each Note, whether an Initial Note or an Additional Note (other than a Permanent Offshore Note), will bear the Restricted Legend.
(2) Each Global Note, whether an Initial Note or Additional Note, will bear the DTC Legend.
(3) Each Temporary Offshore Global Note will bear the Temporary Offshore Global Note Legend.
(4) Notes (whether Initial Notes or Additional Notes) offered and sold in reliance on Regulation S will be issued as provided in Section 2.11(a).
(5) Notes (whether Initial Notes or Additional Notes) offered and sold in reliance on any exception under the Securities Act other than Regulation S and Rule 144A will be issued, and upon the request of the Issuer to the Trustee, Notes (whether Initial Notes or Additional Notes) offered and sold in reliance on Rule 144A may be issued, in the form of Certificated Notes.
(6) Notes (whether Initial Notes or Additional Notes) resold to Institutional Accredited Investors or individual “accredited investors” affiliated with the Issuer (“Affiliated Investors”) will be in the form of an IAI Global Note.
(c) If the Issuer determines (upon the advice of counsel and such other certifications and evidence as the Issuer may reasonably require) that a Note is eligible for resale pursuant to Rule 144 under the Securities Act (or a successor provision) without the need for current public information and that the Restricted Legend is no longer necessary or appropriate in order to ensure that subsequent transfers of the Note (or a beneficial interest therein) are effected in compliance with the Securities Act, the Issuer may instruct the Trustee in writing to cancel the Note and issue to the Holder thereof (or to its transferee) a new Note of like tenor and amount, registered in the name of the Holder thereof (or its transferee), that does not bear the Restricted Legend, and the Trustee will comply with such instruction.
(d) By its acceptance of any Note bearing the Restricted Legend (or any beneficial interest in such a Note), each Holder thereof and each owner of a beneficial interest therein acknowledges the restrictions on transfer of such Note (and any such beneficial interest) set forth in this Indenture and in the Restricted Legend and agrees that
it will transfer such Note (and any such beneficial interest) only in accordance with this Indenture and such legend.
Each Note shall be dated the date of its authentication.
Section 2.02. Execution and Authentication; Additional Notes. (a) An Officer shall execute the Notes for the Issuer by facsimile or manual signature in the name and on behalf of the Issuer. If an Officer whose signature is on a Note no longer holds that office at the time the Note is authenticated, the Note will still be valid.
(b) A Note will not be valid until the Trustee manually signs the certificate of authentication on the Note, with the signature constituting conclusive evidence that the Note has been authenticated under this Indenture.
(c) At any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver Notes executed by the Issuer to the Trustee for authentication. The Trustee will, upon the written direction of the Issuer, authenticate and deliver:
(i) Initial Notes for original issue in the aggregate principal amount not to exceed $550,000,000, and
(ii) Subject to Article 4, Additional Notes from time to time for original issue in aggregate principal amounts specified by the Issuer in writing,
After receipt by the Trustee of an Officers’ Certificate specifying:
(1) the amount of Notes to be authenticated and the date on which the Notes are to be authenticated;
(2) whether the Notes are to be Initial Notes or Additional Notes;
(3) in the case of Additional Notes, that the issuance of such Notes does not contravene any provision of Article 4;
(4) whether the Notes are to be issued as one or more Global Notes or Certificated Notes; and
(5) other information the Issuer may determine to include or the Trustee may reasonably request.
(d) The Initial Notes and any Additional Notes will be treated as a single class for all purposes under this Indenture and will vote together as a single class on all matters with respect to the Notes; provided, however, that if any such Additional Notes are not fungible with the Initial Notes for U.S. federal income tax purposes, such Additional Notes will have a separate CUSIP number.
Section 2.03. Registrar, Paying Agent and Authenticating Agent; Paying Agent to Hold Money in Trust. (a) The Issuer may appoint one or more Registrars and one or more Paying Agents, and the Trustee may appoint an Authenticating Agent, in which case each reference in this Indenture to the Trustee in respect of the obligations of the Trustee to be performed by that Agent will be deemed to be references to the Agent. The Issuer may act as Registrar or (except for purposes of Article 8) Paying Agent. In each case the Issuer and the Trustee will enter into an appropriate agreement with the Agent implementing the provisions of this Indenture relating to the obligations of the Trustee to be performed by the Agent and the related rights. The Issuer initially appoints, upon the terms and subject to the conditions herein set forth, U.S. Bank National Association as Trustee, Registrar and Paying Agent. In acting hereunder and in connection with the Notes, the Registrar and the Paying Agent shall act solely as agents of the Issuer, and will not thereby assume any obligations towards or relationship of agency or trust for or with any Holder of the Notes
(b) The Issuer will require each Paying Agent other than the Trustee to agree in writing that the Paying Agent will hold in trust for the benefit of the Holders or the Trustee all money held by the Paying Agent for the payment of principal of and interest on the Notes and will promptly notify the Trustee in writing of any default by the Issuer in making any such payment. The Issuer at any time may require a Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed, and the Trustee may at any time during the continuance of any payment default, upon written request to a Paying Agent, require the Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed. Upon doing so, the Paying Agent will have no further liability for the money so paid over to the Trustee.
Section 2.04. Replacement Notes. If a mutilated Note is surrendered to the Trustee or if a Holder claims that its Note has been lost, destroyed or wrongfully taken, the Issuer will issue and the Trustee will authenticate, upon the written direction of the Issuer and the provision of evidence satisfactory to the Trustee that such Note was lost, destroyed or wrongfully taken, a replacement Note of like tenor and principal amount and bearing a number not contemporaneously outstanding. Every replacement Note is an additional obligation of the Issuer and entitled to the benefits of this Indenture. If required by the Trustee or the Issuer, an indemnity and/or security must be furnished that is sufficient in the judgment of both the Trustee and the Issuer to protect the Issuer and the Trustee from any loss they may suffer if a Note is replaced. The Issuer and/or Trustee may charge the Holder for the expenses of the Issuer and the Trustee in replacing a Note. In case the mutilated, lost, destroyed or wrongfully taken Note has become or is about to become due and payable, the Issuer in its discretion may pay the Note instead of issuing a replacement Note.
Section 2.05. Outstanding Notes. (a) Notes outstanding at any time are all Notes that have been authenticated by the Trustee except for:
(1) Notes cancelled by the Trustee or delivered to it for cancellation;
(2) any Note which has been replaced or paid pursuant to Section 2.04 unless and until the Trustee and the Issuer receive proof satisfactory to them that the replaced Note is held by a bona fide purchaser; and
(3) on or after the maturity date or any redemption date or date for purchase of the Notes pursuant to an Offer to Purchase, those Notes payable or to be redeemed or purchased on that date for which the Trustee (or Paying Agent, other than the Issuer or an Affiliate of the Issuer) holds money sufficient to pay all amounts then due.
(b) A Note does not cease to be outstanding because the Issuer or one of its Affiliates holds the Note; provided that in determining whether the Holders of the requisite principal amount of the outstanding Notes have given or taken any request, demand, authorization, direction, notice, consent, waiver or other action hereunder, Notes owned by the Issuer or any Affiliate of the Issuer will be disregarded and deemed not to be outstanding (it being understood that in determining whether the Trustee is protected in relying upon any such request, demand, authorization, direction, notice, consent, waiver or other action, only Notes which a Responsible Officer of the Trustee has received written notice from the Issuer that such Notes are so owned will be so disregarded). Notes so owned which have been pledged in good faith may be regarded as outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not the Issuer or any Affiliate of the Issuer.
Section 2.06. Temporary Notes. Until definitive Notes are ready for delivery, the Issuer may prepare and the Trustee will, upon the written direction of the Issuer, authenticate temporary Notes. Temporary Notes will be substantially in the form of definitive Notes but may have insertions, substitutions, omissions and other variations determined to be appropriate by the Officer executing the temporary Notes, as evidenced by the execution of the temporary Notes. If temporary Notes are issued, the Issuer will cause definitive Notes to be prepared without unreasonable delay. After the preparation of definitive Notes, the temporary Notes will be exchangeable for definitive Notes upon surrender of the temporary Notes at the office or agency of the Issuer designated for the purpose pursuant to Section 4.02, without charge to the Holder. Upon surrender for cancellation of any temporary Notes the Issuer will execute and the Trustee will, upon the written direction of the Issuer, authenticate and deliver in exchange therefor a like principal amount of definitive Notes of authorized denominations. Until so exchanged, the temporary Notes will be entitled to the same benefits under this Indenture as definitive Notes.
Section 2.07. Cancellation. The Issuer at any time may deliver to the Trustee for cancellation any Notes previously authenticated and delivered hereunder which the Issuer may have acquired in any manner whatsoever, and may deliver to the Trustee for cancellation any Notes previously authenticated hereunder which the Issuer has not issued and sold. Any Registrar or the Paying Agent will forward to the Trustee any Notes surrendered to it for transfer, exchange or payment. The Trustee will cancel all Notes surrendered for transfer, exchange, payment or cancellation and dispose of them in
accordance with its normal procedures. The Issuer may not issue new Notes to replace Notes it has paid in full or delivered to the Trustee for cancellation.
Section 2.08. CUSIP and CINS Numbers. The Issuer in issuing the Notes may use “CUSIP” and “CINS” numbers, and the Trustee will use CUSIP numbers or CINS numbers in notices of redemption or exchange or in Offers to Purchase as a convenience to Holders, the notice to state that no representation is made as to the correctness of such numbers either as printed on the Notes or as contained in any notice of redemption or exchange or Offer to Purchase. The Issuer will promptly notify the Trustee of any change in the CUSIP or CINS numbers.
Section 2.09. Registration, Transfer and Exchange. (a) The Notes will be issued in registered form only, without coupons, and the Issuer shall cause the Registrar to maintain a register (the “Register”) of the Notes, for registering the record ownership of the Notes by the Holders and transfers and exchanges of the Notes.
(b) (1) Each Global Note will be registered in the name of the Depositary or its nominee and, so long as DTC is serving as the Depositary thereof, will bear the DTC Legend.
(2) Each Global Note will be delivered to the Trustee as custodian for the Depositary. Transfers of a Global Note (but not a beneficial interest therein) will be limited to transfers thereof in whole, but not in part, to the Depositary, its successors or their respective nominees, except (1) as set forth in Section 2.09(b)(4) and (2) transfers of portions thereof in the form of Certificated Notes may be made upon request of an Agent Member (for itself or on behalf of a beneficial owner) by written notice given to the Trustee by or on behalf of the Depositary in accordance with customary procedures of the Depositary and in compliance with this Section and Section 2.10.
(3) Agent Members will have no rights under this Indenture with respect to any Global Note held on their behalf by the Depositary, and the Depositary may be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute owner and Holder of such Global Note for all purposes whatsoever. Notwithstanding the foregoing, the Depositary or its nominee may grant proxies and otherwise authorize any Person (including any Agent Member and any Person that holds a beneficial interest in a Global Note through an Agent Member) to take any action which a Holder is entitled to take under this Indenture or the Notes, and nothing herein will impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any security.
(4) If (x) the Depositary notifies the Issuer that it is unwilling or unable to continue as Depositary for a Global Note and a successor depositary is not appointed by the Issuer within 90 days of the notice or (y) an Event of Default has occurred and is continuing and the Trustee has received a request from the Depositary, the Trustee will promptly exchange each beneficial interest in the
Global Note for one or more Certificated Notes in authorized denominations having an equal aggregate principal amount registered in the name of the owner of such beneficial interest, as identified to the Trustee by the Depositary, and thereupon the Global Note will be deemed canceled. If such Note does not bear the Restricted Legend, then the Certificated Notes issued in exchange therefor will not bear the Restricted Legend. If such Note bears the Restricted Legend, then the Certificated Notes issued in exchange therefor will bear the Restricted Legend, provided that any Holder of any such Certificated Note issued in exchange for a beneficial interest in a Temporary Offshore Global Note will have the right upon presentation to the Trustee of a duly completed Certificate of Beneficial Ownership after the Restricted Period to exchange such Certificated Note for a Certificated Note of like tenor and amount that does not bear the Restricted Legend, registered in the name of such Holder.
(c) Each Certificated Note will be registered in the name of the holder thereof or its nominee.
(d) A Holder may transfer a Note (or a beneficial interest therein) to another Person or exchange a Note (or a beneficial interest therein) for another Note or Notes of any authorized denomination by presenting to the Trustee a written request therefor stating the name of the proposed transferee or requesting such an exchange, accompanied by any certification, opinion or other document required by Section 2.10. The Registrar will promptly register any transfer or exchange that meets the requirements of this Section by noting the same in the register maintained by the Registrar for the purpose; provided that:
(x) no transfer or exchange will be effective until it is registered in such Register; and
(y) the Trustee will not be required (i) to issue, register the transfer of or exchange any Note for a period of 15 days before a selection of Notes to be redeemed or purchased pursuant to an Offer to Purchase, (ii) to register the transfer of or exchange any Note so selected for redemption or purchase in whole or in part, except, in the case of a partial redemption or purchase, that portion of any Note not being redeemed or purchased, or (iii) if a redemption or a purchase pursuant to an Offer to Purchase is to occur after a Regular Record Date but on or before the corresponding Interest Payment Date, to register the transfer of or exchange any Note on or after the Regular Record Date and before the date of redemption or purchase. Prior to the registration of any transfer, the Issuer, the Trustee and their agents will treat the Person in whose name the Note is registered as the owner and Holder thereof for all purposes (whether or not the Note is overdue), and will not be affected by notice to the contrary.
From time to time the Issuer will execute and the Trustee will, upon the written direction of the Issuer, authenticate additional Notes as necessary in order to permit the registration of a transfer or exchange in accordance with this Section.
No service charge will be imposed in connection with any transfer or exchange of any Note, but the Issuer and/or the Trustee may require payment of a sum sufficient to cover any transfer tax or similar governmental charge payable in connection therewith (other than a transfer tax or other similar governmental charge payable upon exchange pursuant to subsection (b)(4) of this Section 2.09).
(e) (1) Global Note to Global Note. If a beneficial interest in a Global Note is transferred or exchanged for a beneficial interest in another Global Note, the Trustee will (x) record a decrease in the principal amount of the Global Note being transferred or exchanged equal to the principal amount of such transfer or exchange and (y) record a like increase in the principal amount of the other Global Note. Any beneficial interest in one Global Note that is transferred to a Person who takes delivery in the form of an interest in another Global Note, or exchanged for an interest in another Global Note, will, upon transfer or exchange, cease to be an interest in such Global Note and become an interest in the other Global Note and, accordingly, will thereafter be subject to all transfer and exchange restrictions, if any, and other procedures applicable to beneficial interests in such other Global Note for as long as it remains such an interest.
(2) Global Note to Certificated Note. If a beneficial interest in a Global Note is transferred or exchanged for a Certificated Note, the Trustee will (x) record a decrease in the principal amount of such Global Note equal to the principal amount of such transfer or exchange and (y) deliver one or more new Certificated Notes in authorized denominations having an equal aggregate principal amount to the transferee (in the case of a transfer) or the owner of such beneficial interest (in the case of an exchange), registered in the name of such transferee or owner, as applicable.
(3) Certificated Note to Global Note. If a Certificated Note is transferred or exchanged for a beneficial interest in a Global Note, the Trustee will (x) cancel such Certificated Note, (y) record an increase in the principal amount of such Global Note equal to the principal amount of such transfer or exchange and (z) in the event that such transfer or exchange involves less than the entire principal amount of the canceled Certificated Note, deliver to the Holder thereof one or more new Certificated Notes in authorized denominations having an aggregate principal amount equal to the untransferred or unexchanged portion of the canceled Certificated Note, registered in the name of the Holder thereof.
(4) Certificated Note to Certificated Note. If a Certificated Note is transferred or exchanged for another Certificated Note, the Trustee will (x) cancel the Certificated Note being transferred or exchanged, (y) deliver one or more new Certificated Notes in authorized denominations having an aggregate principal amount equal to the principal amount of such transfer or exchange to the transferee (in the case of a transfer) or the Holder of the canceled Certificated Note (in the case of an exchange), registered in the name of such transferee or Holder, as applicable, and (z) if such transfer or exchange involves less than the entire principal amount of the canceled Certificated Note, deliver to the Holder thereof one or more Certificated Notes in authorized denominations having an
aggregate principal amount equal to the untransferred or unexchanged portion of the canceled Certificated Note, registered in the name of the Holder thereof.
(f) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Note, a member of, or a participant in, DTC or other Person with respect to the accuracy of the records of DTC or its nominee or of any participant or member thereof, with respect to any ownership interest in the Notes or with respect to the delivery to any participant, member, beneficial owner or other Person (other than DTC) of any notice (including any notice of redemption or purchase) or the payment of any amount or delivery of any Notes (or other security or property) under or with respect to such Notes. All notices and communications to be given to the Holders and all payments to be made to Holders in respect of the Notes shall be given or made only to the registered Holders (which shall be DTC or its nominee in the case of a Global Note). The rights of beneficial owners in any Global Note shall be exercised only through DTC subject to the applicable rules and procedures of DTC. The Trustee may rely and shall be fully protected in relying upon information furnished by DTC with respect to its members, participants and any beneficial owners.
(g) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Note (including any transfers between or among DTC participants, members or beneficial owners in any Global Note) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. Neither the Trustee nor any Agent shall have any responsibility or liability for any actions taken or not taken by the Depositary.
Section 2.10. Restrictions on Transfer and Exchange. (a) The transfer or exchange of any Note (or a beneficial interest therein) may only be made in accordance with this Section and Section 2.09 and, in the case of a Global Note (or a beneficial interest therein), the applicable rules and procedures of the Depositary. The Trustee shall refuse to cause the registration of any requested transfer or exchange that does not comply with the preceding sentence.
(b) Subject to paragraph (c), the transfer or exchange of any Note (or a beneficial interest therein) of the type set forth in column A below for a Note (or a beneficial interest therein) of the type set forth opposite in column B below may only be made in compliance with the certification requirements (if any) described in the clause of this paragraph set forth opposite in column C below.
A | B | C |
U.S. Global Note | U.S. Global Note | (1) |
U.S. Global Note | Offshore Global Note | (2) |
U.S. Global Note | Certificated Note | (3) |
Offshore Global Note | U.S. Global Note | (4) |
Offshore Global Note | Offshore Global Note | (1) |
Offshore Global Note | Certificated Note | (5) |
Certificated Note | U.S. Global Note | (4) |
Certificated Note | Offshore Global Note | (2) |
Certificated Note | Certificated Note | (3) |
(1) No certification is required.
(2) The Person requesting the transfer or exchange must deliver or cause to be delivered to the Trustee a duly completed and executed Regulation S Certificate; provided that if the requested transfer or exchange is made by the Holder of a Certificated Note that does not bear the Restricted Legend, then no certification is required.
(3) The Person requesting the transfer or exchange must deliver or cause to be delivered to the Trustee (x) a duly completed and executed Rule 144A Certificate, (y) a duly completed and executed Regulation S Certificate or (z) a duly completed and executed Institutional Accredited Investor Certificate, and/or an Opinion of Counsel and such other certifications and evidence as the Issuer may reasonably require in order to determine that the proposed transfer or exchange is being made in compliance with the Securities Act and any applicable securities laws of any state of the United States; provided that if the requested transfer or exchange is made by the Holder of a Certificated Note that does not bear the Restricted Legend, then no certification is required. In the event that (i) the requested transfer or exchange takes place after the Restricted Period and a duly completed and executed Regulation S Certificate is delivered to the Trustee or (ii) a Certificated Note that does not bear the Restricted Legend is surrendered for transfer or exchange, upon transfer or exchange the Trustee will deliver a Certificated Note that does not bear the Restricted Legend.
(4) The Person requesting the transfer or exchange must deliver or cause to be delivered to the Trustee a duly completed and executed Rule 144A Certificate.
(5) Notwithstanding anything to the contrary contained herein, no such exchange is permitted if the requested exchange involves a beneficial interest in a Temporary Offshore Global Note. If the requested transfer involves a beneficial interest in a Temporary Offshore Global Note, the Person requesting the transfer must deliver or cause to be delivered to the Trustee (x) a duly completed and executed Rule 144A Certificate or (y) a duly completed and executed Institutional Accredited Investor Certificate and/or an Opinion of Counsel and such other certifications and evidence as the Issuer may reasonably require in order to determine that the proposed transfer is being made in compliance with the Securities Act and any applicable securities laws of any state of the United States. If the requested transfer or exchange involves a beneficial interest in a Permanent Offshore Global Note, no certification is required and the Trustee will deliver a Certificated Note that does not bear the Restricted Legend.
(c) No certification is required in connection with any transfer or exchange of any Note (or a beneficial interest therein) after such time (if any) as the Issuer determines that the Notes are eligible for resale pursuant to Rule 144 under the Securities Act (or a successor provision) without the need for current public information; provided that the Issuer has provided the Trustee with an Officers’ Certificate to that effect, and the Issuer and/or the Trustee may require from any Person requesting a transfer or exchange in reliance upon this paragraph (c) an Opinion of Counsel and any other reasonable certifications and evidence in order to support such certificate.
Any Certificated Note delivered in reliance upon this paragraph will not bear the Restricted Legend.
(d) The Trustee will retain copies of all certificates, opinions and other documents received in connection with the transfer or exchange of a Note (or a beneficial interest therein), and the Issuer will have the right to inspect and make copies thereof at any reasonable time upon written notice within a reasonable period of time to the Trustee.
(e) None of the Trustee or the Registrar shall have any duty to monitor the Issuer’s compliance with or have any responsibility with respect to the Issuer’s compliance with any federal or state securities laws in connection with registrations of transfers and exchanges of the Notes. The Trustee and the Registrar shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Notes (including any transfers between or among the Depositary’s Participants or beneficial owners of interests in any Global Note) other than to require delivery of such certificates and other documentation, as is expressly required by, and to do so if and when expressly required by, the terms of this Indenture or the Notes and to examine the same to determine substantial compliance as to form with the express requirements hereof.
Section 2.11. Temporary Offshore Global Notes. (a) Each Note originally sold by the Initial Purchasers in reliance upon Regulation S will be evidenced during the Restricted Period by one or more Offshore Global Notes that bear the Temporary Offshore Global Note Legend.
(b) An owner of a beneficial interest in a Temporary Offshore Global Note (or a Person acting on behalf of such an owner) may provide to the Trustee (and the Trustee will accept) a duly completed Certificate of Beneficial Ownership at any time after the Restricted Period (it being understood that the Trustee will not accept any such certificate during the Restricted Period). Promptly after acceptance of a Certificate of Beneficial Ownership with respect to such a beneficial interest, the Trustee will cause such beneficial interest to be exchanged for an equivalent beneficial interest in a Permanent Offshore Global Note, and will (x) permanently reduce the principal amount of such Temporary Offshore Global Note by the amount of such beneficial interest and (y) increase the principal amount of such Permanent Offshore Global Note by the amount of such beneficial interest.
(c) Notwithstanding paragraph (b), if after the Restricted Period any Initial Purchaser owns a beneficial interest in a Temporary Offshore Global Note, such Initial Purchaser may, upon written request to the Trustee accompanied by a certification as to its status as an Initial Purchaser, exchange such beneficial interest for an equivalent beneficial interest in a Permanent Offshore Global Note, and the Trustee will comply with such request and will (x) permanently reduce the principal amount of such Temporary Offshore Global Note by the amount of such beneficial interest and (y) increase the principal amount of such Permanent Offshore Global Note by the amount of such beneficial interest.
(d) Notwithstanding anything to the contrary contained herein, any owner of a beneficial interest in a Temporary Offshore Global Note shall not be entitled to receive payment of principal of, or interest or premium on, such beneficial interest or other amounts in respect of such beneficial interest until such beneficial interest is exchanged for an interest in a Permanent Offshore Global Note or transferred for an interest in another Global Note or a Certificated Note.
Article 3
Redemption; Offer to Purchase
Section 3.01. Optional Redemption. (a) At any time and from time to time on or after February 1, 2023, the Issuer may redeem the Notes at its option, in whole or in part, upon not less than 10 nor more than 60 days, notice, at the redemption prices expressed as a percentage of principal amount set forth below plus accrued and unpaid interest, if any, to but excluding, the redemption date, in cash, if redeemed during the twelve-month period beginning on February 1 in the years indicated below.
12-month period |
Percentage |
2023 | 102.500% |
2024 | 101.250% |
2025 and thereafter | 100.000% |
(b) At any time and from time to time prior to February 1, 2023, upon not less than 10 nor more than 60 days’ notice, the Issuer may redeem some or all of the Notes at a price of 100.000% of the principal amount of the Notes redeemed plus the Applicable Premium, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.
Section 3.02. Redemption with Proceeds of Equity Offering. At any time and from time to time prior to February 1, 2023, the Issuer may redeem Notes with the net cash proceeds received by the Issuer from any Equity Offering at a redemption price equal to 105.000% of the principal amount plus accrued and unpaid interest, if any, to but excluding the redemption date, in an aggregate principal amount for all such redemptions not to exceed 40% of the original aggregate principal amount of the Notes (calculated after giving effect to any issuance of any Additional Notes), provided that:
(1) in each case the redemption takes place not later than 180 days after the closing of the related Equity Offering; and
(2) not less than 50% of the principal amount of the Notes (calculated after giving effect to any Additional Notes issued under this Indenture) remains outstanding immediately thereafter excluding any Notes held by the Issuer or its Subsidiaries (unless all Notes are otherwise redeemed substantially concurrently).
Section 3.03. Method and Effect of Redemption. (a) If the Issuer elects to redeem Notes, it must notify the Trustee of the redemption date and the principal amount of Notes to be redeemed by delivering an Officers’ Certificate at least 10 days before the redemption date (unless a shorter period is satisfactory to the Trustee). If fewer than all of the Notes are being redeemed, the Officers’ Certificate must also specify a record date not less than five days after the date of the notice of redemption is given to the Trustee, and the Trustee will select the Notes to be redeemed pro rata, by lot or by any other method the Trustee in its sole discretion deems fair and appropriate, in accordance with the procedures of the Depositary, in denominations of $2,000 principal amount and higher integral multiples of $1,000. The Trustee will notify the Issuer promptly of the Notes or portions of Notes to be called for redemption. Notice of redemption must be sent by the Issuer or at the Issuer’s prior written request (not less than two Business Days prior to the date notice is to be given, unless a shorter period is acceptable to the Trustee), by the Trustee in the name and at the expense of the Issuer, to Holders whose Notes are to be redeemed at least 10 days but not more than 60 days before the redemption date.
(b) The notice of redemption will identify the Notes to be redeemed and will include or state the following:
(1) the redemption date and any conditions to such redemption;
(2) the redemption price, including the portion thereof representing any accrued interest;
(3) the place or places where Notes are to be surrendered for redemption;
(4) Notes called for redemption must be so surrendered in order to collect the redemption price;
(5) on the redemption date, subject to satisfaction of any conditions specified therein, the redemption price will become due and payable on Notes called for redemption, and interest on Notes called for redemption will cease to accrue on and after the redemption date;
(6) if any Note is redeemed in part, on and after the redemption date, upon surrender of such Note, new Notes equal in principal amount to the unredeemed portion will be issued; and
(7) if any Note contains a CUSIP or CINS number, no representation is being made as to the correctness of the CUSIP or CINS number either as printed on the Notes or as contained in the notice of redemption and that the Holder should rely only on the other identification numbers printed on the Notes.
(c) Notice of any redemption upon any corporate transaction or other event (including any Equity Offering, incurrence of Debt, Change of Control or other transaction) may be given prior to the completion thereof. In addition, any redemption or notice thereof may, at the Issuer’s discretion, be subject to one or more conditions precedent, including, but not limited to, completion of a corporate transaction or other event. For the avoidance of doubt, (1) if any redemption date shall be delayed as contemplated by this Section 3.03 and the terms of the applicable notice of redemption, such redemption date as so delayed may occur at any time after the original redemption date set forth in the applicable notice of redemption and after the satisfaction of any applicable conditions precedent, including, but not limited to, on a date that is less than 10 days after the original redemption date or more than 60 days after the date of the applicable notice of redemption and (2) any such redemption may not occur and such notice of redemption may be rescinded in the event any or all such conditions shall not have been satisfied by the redemption date or by any delayed redemption date. To the extent that the redemption date will occur on a date other than the original redemption date set forth in the applicable notice of redemption, the Issuer shall notify the Holders and the Trustee of the final redemption date prior to such date; provided that the failure to give such notice, or any defect therein, shall not impair or affect the validity of any redemption under this Article 3.
(d) Once notice of redemption is sent to the Holders, Notes called for redemption become due and payable at the redemption price on the redemption date except as provided in Section 3.03(c), and upon surrender of the Notes called for redemption, the Issuer shall redeem such Notes at the redemption price. Commencing on the redemption date, Notes redeemed will cease to accrue interest. Upon surrender of any Note redeemed in part, the Holder will receive a new Note equal in principal amount to the unredeemed portion of the surrendered Note.
Section 3.04. Offer to Purchase. (a) An “Offer to Purchase” means an offer by the Issuer or a third party to purchase Notes as required by this Indenture. An Offer to Purchase must be made by written offer (the “offer”) sent to the Holders. The Issuer or third party will notify the Trustee in writing at least two Business Days (or such shorter period as is acceptable to the Trustee) prior to sending the offer to Holders of its obligation to make an Offer to Purchase, and the offer will be sent by the Issuer or, at the Issuer’s written request, by the Trustee in the name and at the expense of the Issuer.
(b) The offer must include or state the following as to the terms of the Offer to Purchase:
(1) the provision of this Indenture pursuant to which the Offer to Purchase is being made;
(2) the aggregate principal amount of the outstanding Notes offered to be purchased by the Issuer pursuant to the Offer to Purchase (including, if less than 100%, the manner by which such amount has been determined pursuant to this Indenture) (the “purchase amount”);
(3) the purchase price, including the portion thereof representing accrued interest;
(4) an expiration date (the “expiration date”) not less than 30 days or more than 60 days after the date of the offer, and a settlement date for purchase (the “purchase date”) not more than five Business Days after the expiration date;
(5) a Holder may tender all or any portion of its Notes, subject to the requirement that any portion of a Note tendered must be in minimum denomination of $2,000 principal amount and integral multiples of $1,000 principal amount in excess thereof;
(6) the place or places where Notes are to be surrendered for tender pursuant to the Offer to Purchase;
(7) each Holder electing to tender a Note pursuant to the offer will be required to surrender such Note at the place or places specified in the offer prior to the close of business on the expiration date (such Note being, if the Issuer or the Trustee so requires, duly endorsed or accompanied by a duly executed written instrument of transfer);
(8) interest on any Note not tendered, or tendered but not purchased by the Issuer pursuant to the Offer to Purchase, will continue to accrue;
(9) on the purchase date the purchase price will become due and payable on each Note accepted for purchase, and interest on Notes purchased will cease to accrue on and after the purchase date;
(10) Holders are entitled to withdraw Notes tendered by giving notice, which must be received by the Issuer or the Trustee not later than the close of business on the expiration date, setting forth the name of the Holder, the principal amount of the tendered Notes, the certificate number of the tendered Notes and a statement that the Holder is withdrawing all or a portion of the tender;
(11) (i) if Notes in an aggregate principal amount less than or equal to the purchase amount are duly tendered and not withdrawn pursuant to the Offer to Purchase, the Issuer will purchase all such Notes, and (ii) if the Offer to Purchase is for less than all of the outstanding Notes and Notes in an aggregate principal amount in excess of the purchase amount are tendered and not withdrawn pursuant to the offer, the Issuer will purchase Notes having an aggregate principal amount equal to the purchase amount on a pro rata basis, with adjustments so that only Notes in minimum denominations of $2,000 and integral multiples of $1,000 principal amount in excess thereof will be purchased;
(12) if any Note is purchased in part, new Notes equal in principal amount to the unpurchased portion of the Note will be issued; and
(13) if any Note contains a CUSIP or CINS number, no representation is being made as to the correctness of the CUSIP or CINS number either as printed on the Notes or as contained in the offer and that the Holder should rely only on the other identification numbers printed on the Notes.
(c) Prior to the purchase date, the Issuer will accept tendered Notes for purchase as required by the Offer to Purchase and deliver to the Trustee all Notes so accepted together with an Officers’ Certificate specifying which Notes have been accepted for purchase.
(d) Notes repurchased by the Issuer pursuant to an Offer to Purchase will have the status of Notes issued but not outstanding or will be retired and canceled at the option of the Issuer. Notes purchased by a third party pursuant to the preceding paragraphs will have the status of notes issued and outstanding.
(e) The Issuer will comply with Rule 14e-1 under the Exchange Act and all other applicable laws in making any Offer to Purchase, and the above procedures will be deemed modified as necessary to permit such compliance. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Indenture, the Issuer will comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Indenture by virtue thereof.
(f) On the purchase date the purchase price will become due and payable on each Note accepted for purchase, and interest on Notes purchased will cease to accrue on and after the purchase date. The Trustee will promptly return to Holders any Notes not accepted for purchase and send to Holders new Notes equal in principal amount to any unpurchased portion of any Notes accepted for purchase in part.
(g) Except under Section 4.11, Noteholders will not be permitted to require the Issuer to repurchase or redeem Notes in the event of a takeover, recapitalization or similar transaction.
Article 4
Covenants
Section 4.01. Payment of Notes. (a) The Issuer agrees to pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. Not later than 10:00 A.M. (New York City time) on the due date of any principal of or interest on any Notes, or any redemption or purchase price of the Notes, the Issuer will deposit with the Trustee (or Paying Agent) money in immediately available funds sufficient to pay such amounts, provided that to the extent any such funds are received by the Trustee (or Paying Agent) from the Issuer after such time on such date, such funds will be distributed to such Persons within one Business Day of the receipt thereof, provided further that if the Issuer or any Affiliate of the Issuer is acting as
Paying Agent, it will, on or before each due date, segregate and hold in a separate trust fund for the benefit of the Holders a sum of money sufficient to pay such amounts until paid to such Holders or otherwise disposed of as provided in this Indenture. In each case the Issuer will promptly notify the Trustee in writing of its compliance with this paragraph.
(b) An installment of principal or interest will be considered paid on the date due if, not later than 10:00 A.M. (New York City time) on such date, the Trustee (or Paying Agent, other than the Issuer or any Affiliate of the Issuer) holds on that date money designated for and sufficient to pay the installment. If the Issuer or any Affiliate of the Issuer acts as Paying Agent, an installment of principal or interest will be considered paid on the due date only if paid to the Holders.
(c) The Issuer agrees to pay interest on overdue principal, and overdue installments of interest at the rate per annum specified in the Notes.
(d) Payments in respect of the Notes represented by the Global Notes are to be made by wire transfer of immediately available funds to the accounts specified by the Holders of the Global Notes. With respect to Certificated Notes, the Issuer will make all payments by wire transfer of immediately available funds to the accounts specified by the Holders thereof or, if no such account is specified, by mailing a check to each Holder’s registered address.
Section 4.02. Maintenance of Office or Agency. The Issuer will maintain in the Borough of Manhattan, the City of New York, an office or agency where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer hereby initially designates the Corporate Trust Office of the Trustee as such office of the Issuer. The Issuer will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer fails to maintain any such required office or agency or fails to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served to the Trustee at its Corporate Trust Office.
The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be surrendered or presented for any of such purposes and may from time to time rescind such designations. The Issuer will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.
Section 4.03. Existence. The Issuer will do or cause to be done all things necessary to preserve and keep in full force and effect its existence and the existence of each of its Restricted Subsidiaries in accordance with their respective organizational documents, and the material rights, licenses and franchises of the Issuer and each Restricted Subsidiary, provided that the Issuer is not required to preserve any such right, license or franchise, or the existence of any Restricted Subsidiary, if the maintenance or preservation thereof is no longer desirable in the conduct of the business of the Issuer and
its Restricted Subsidiaries taken as a whole; and provided further that this Section does not prohibit any transaction otherwise permitted by Section 4.12 or Article 5.
Section 4.04. Payment of Taxes and other Claims. The Issuer will pay or discharge, and cause each of its Subsidiaries to pay or discharge before the same become delinquent (i) all material taxes, assessments and governmental charges levied or imposed upon the Issuer or any Subsidiary or its income or profits or property, and (ii) all material lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of the Issuer or any Subsidiary, other than any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established.
Section 4.05. Maintenance of Properties and Insurance. (a) The Issuer will cause all properties used or useful in the conduct of its business or the business of any of its Restricted Subsidiaries to be maintained and kept in good condition, repair and working order as in the judgment of the Issuer may be necessary so that the business of the Issuer and its Restricted Subsidiaries may be properly and advantageously conducted at all times; provided that nothing in this Section prevents the Issuer or any Restricted Subsidiary from discontinuing the use, operation or maintenance of any of such properties or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Issuer, desirable in the conduct of the business of the Issuer and its Restricted Subsidiaries taken as a whole.
(b) The Issuer will provide or cause to be provided, for itself and its Restricted Subsidiaries, insurance (including appropriate self-insurance) against loss or damage of the kinds customarily insured against by corporations similarly situated and owning like properties, including, but not limited to, products liability insurance and public liability insurance, with reputable insurers, in such amounts, with such deductibles and by such methods as are customary for corporations similarly situated in the industry in which the Issuer and its Restricted Subsidiaries are then conducting business.
Section 4.06. Limitation on Debt and Disqualified or Preferred Stock. (a) The Issuer:
(1) will not, and will not permit any Restricted Subsidiary to, Incur any Non-Funding Indebtedness; and
(2) will not, and will not permit any Restricted Subsidiary to, Incur any Disqualified Stock, and will not permit any of its Restricted Subsidiaries that is not a Guarantor to Incur any Preferred Stock (other than Disqualified or Preferred Stock of Restricted Subsidiaries held by the Issuer or a Restricted Subsidiary, so long as it is so held);
provided, that the Issuer or any Restricted Subsidiary may Incur Non-Funding Indebtedness or Disqualified Stock and any Restricted Subsidiary may Incur Preferred Stock if, on the date of the Incurrence, after giving effect to the Incurrence and the receipt
and application of the proceeds therefrom as if the same had occurred at the beginning of the most recently ended fiscal quarter of the Issuer for which internal financial statements are available, either (x) the Fixed Charge Coverage Ratio is no less than 3.0 to 1.0 or (y) the Debt-to-Equity Ratio does not exceed 2.0 to 1.0.
(b) Notwithstanding the foregoing, the Issuer and, to the extent provided below, any Restricted Subsidiary may Incur the following (“Permitted Debt”):
(1) Debt of the Issuer and any Restricted Subsidiary under any Credit Facilities in an aggregate principal amount at any one time outstanding not to exceed the greater of (A) $260.0 million and (B) 7.0% of Net Consolidated Total Assets;
(2) Debt owed to and held by the Issuer or any Restricted Subsidiary so long as such Debt continues to be owed to the Issuer or a Restricted Subsidiary and which, if the obligor is the Issuer or a Guarantor, is subordinated in right of payment to the Notes upon bankruptcy, insolvency or similar event;
(3) Debt pursuant to the Notes and Note Guarantees (other than Additional Notes);
(4) Debt (“Permitted Refinancing Debt”) constituting an extension or renewal of, replacement of, or substitution for, or issued or Incurred in exchange for, or the net proceeds of which are used to repay, prepay, defease, retire, redeem, repurchase, extend, refinance or refund, including by way of any defeasance or discharge mechanism (all of the above, for purposes of this clause, “refinance”) in whole or in part then outstanding Debt in an amount (after deduction of any original issue discount) not to exceed the principal amount of the Debt so refinanced, plus premiums, defeasance costs, tender premiums, accrued interest, fees and expenses including Debt that refinances Permitted Refinancing Debt; provided that:
(A) in case the Debt (and any guarantees in respect thereof) to be refinanced is Subordinated Debt, the new Debt (and the corresponding guarantees in respect thereof), by its terms or by the terms of any agreement or instrument pursuant to which it is outstanding, is expressly made subordinate in right of payment to the Notes and the Note Guarantees at least to the extent that the Debt to be refinanced is subordinated to the Notes and the Note Guarantees;
(B) (i) the new Debt does not have a Stated Maturity prior to (x) the Stated Maturity of the Debt to be refinanced or (y) 91 days following the maturity of the Notes, and (ii) the Average Life of the new Debt is at least equal to the remaining Average Life of the Debt to be refinanced;
(C) in no event may Debt of the Issuer or any Guarantor be refinanced pursuant to this clause by means of any Debt of any Restricted Subsidiary that is not a Guarantor or Debt of the Issuer or any Restricted
Subsidiary be refinanced pursuant to this clause by means of any Debt of any Unrestricted Subsidiary; and
(D) Debt Incurred pursuant to clauses (1), (2), (5), (6), (10), (11), (14) (to the extent such Debt continues to be Non-Recourse Debt), (15), (16) and (18) through (25) of this Section 4.06(b) may not be refinanced pursuant to this clause but shall instead be refinanced pursuant to Debt incurred under such clauses or another clause hereunder;
(5) Debt Incurred under a Regulatory Debt Facility;
(6) Debt of the Issuer or any Restricted Subsidiary with respect to (i) performance, bid, appeal, customs or surety bonds and completion guarantees in the ordinary course of business or in connection with judgments that do not result in an Event of Default, obligations in respect of any workers’ compensation claims, early retirement or termination obligations, deferred compensatory or employee or director equity plans, pension fund obligations or contributions or similar claims, obligations or contributions or social security or wage taxes, payment obligations in connection with self-insurance, or similar requirements, including letters of credit and bankers’ acceptances supporting any of the foregoing or anything else that is not Debt, or supporting any of the following items in clauses (ii) or (iii), (ii) financing insurance premiums or (iii) indemnification, adjustment of purchase price or similar obligations incurred in connection with the acquisition or disposition of any business or assets;
(7) (i) Debt Incurred or issued by the Issuer or any Restricted Subsidiary in connection with an acquisition or other purchase of assets (including Financeable Assets) by the Issuer, any Restricted Subsidiary or any Parent Entity or (ii) Acquired Debt; provided that, in each case, any assets acquired or purchased pursuant to this Section 4.06(b)(7) are contributed to (or, in the case of Persons, merged into or amalgamated with) the Issuer or any Restricted Subsidiary; and provided, further, that after giving effect to such acquisition, merger, amalgamation or consolidation or other purchase of assets, (1) the aggregate amount of such Debt incurred pursuant to this Section 4.06(b)(7), together with the aggregate principal amount of any outstanding Permitted Refinancing Debt in respect thereof, does not exceed the greater of (x) $130.0 million and (y) 3.5% of Net Consolidated Total Assets or (2) either the Issuer (x) could Incur at least $1.00 of additional Debt under Section 4.06(a) or (y) has a Debt-to-Equity Ratio equal to or better than the Debt-to-Equity Ratio of the Issuer immediately prior to such transaction or (z) has a Fixed Charge Coverage Ratio no less than the Fixed Charge Coverage Ratio of the Issuer immediately prior to such transaction;
(8) Debt of the Issuer or any Restricted Subsidiary pursuant to agreements outstanding on the Issue Date in an aggregate principal amount at any time outstanding not to exceed the maximum amount available under each such agreement as in effect on the Issue Date (and, for purposes of clause (4)(D) of this
Section 4.06(b), not otherwise constituting Permitted Debt, it being understood that Debt otherwise constituting Permitted Debt pursuant to another clause of this Section 4.06(b) shall be incurred thereunder);
(9) Debt (including Capital Leases) Incurred to finance the purchase, lease, expansion, construction, development, installation, replacement, relocation, renewal, maintenance, upgrade, repair or improvement of property, equipment or any other asset (whether in the nature of real property or personal property, including, but not limited to, assets consisting of Financeable Assets, mortgage related securities or derivatives, consumer receivables, and other similar assets (or any interests in any of the foregoing)) by the Issuer or any Restricted Subsidiary (including the acquisition or purchase of any assets though the acquisition of any Person that becomes a Restricted Subsidiary or by the merger of a Person with or into the Issuer or any Restricted Subsidiary) which Debt is Incurred on or after the Issue Date and no later than 365 days after the date of completion of the purchase, lease, expansion, construction, development, installation, replacement, relocation, renewal, maintenance, upgrade, repair or improvement of such assets; provided that the amount of such Debt does not exceed the Fair Market Value on the date that such Debt is incurred of the assets or property developed, constructed, purchased, leased, repaired, maintained, expanded, replaced, upgraded, installed or improved with the proceeds of such Debt;
(10) to the extent otherwise constituting Debt, Debt deemed to exist as a result of Standard Securitization Undertakings or Credit Enhancement Agreements;
(11) Debt of the Issuer or any Restricted Subsidiary consisting of Guarantees of Debt or other Obligations of the Issuer or any Restricted
Subsidiary Incurred under any other clause of this Section 4.06 or Guarantees of Funding Indebtedness;
(12) Debt of the Issuer or any Restricted Subsidiary Incurred on or after the Issue Date not otherwise permitted in an aggregate principal amount at any time outstanding not to exceed (a) the greater of (x) $130.0 million and (y) 3.5% of Net Consolidated Total Assets less (b) the aggregate outstanding amount of Permitted Refinancing Debt Incurred to refinance Debt Incurred pursuant to this clause;
(13) Debt or Disqualified Stock of the Issuer or any Restricted Subsidiary in an aggregate principal amount or liquidation preference up to 200% of the net cash proceeds and the fair market value, as determined in good faith by an Officer, of marketable securities or other property received by the Issuer since the Issue Date from any Equity Offering or cash contributed to the capital of the Issuer to the extent that such net cash proceeds has not been applied to permitted payments under Section 4.07 (such contributed equity, “Capital Stock Proceeds”);
(14) Non-Recourse Debt;
(15) to the extent otherwise constituting Debt, obligations arising from agreements providing for indemnification, adjustment of purchase price, earn-outs or similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business, assets or a Subsidiary, including, but not limited to, any Servicing Advances, Mortgage Servicing Rights, Receivables, mortgage related securities or derivatives, consumer receivables, REO Assets, Residual Interests, other Financeable Assets and other similar assets (or any interests in any of the foregoing) purchased or originated by the Issuer or any of its Restricted Subsidiaries arising in the ordinary course of business;
(16) to the extent constituting Debt, Debt under Excess Spread Sales incurred in the ordinary course of business;
(17) Debt arising out of or to fund purchases of all remaining outstanding asset-backed securities of any Securitization Entity in the ordinary course of business or for the purpose of relieving the Issuer or a Restricted Subsidiary of the administrative expense of servicing such Securitization Entity;
(18) Debt consisting of Debt from the repurchase, retirement or other acquisition or retirement for value by the Issuer of Equity Interests of the Issuer or any Parent Entity from any future, current or former officer, director, manager or employee (or any spouses, successors, executors, administrators, heirs or legatees of any of the foregoing) of the Issuer or any of its Subsidiaries or any Parent Entity to the extent described in Section 4.07(b)(7);
(19) Debt in respect of netting services, overdraft protections, automated clearing house transactions, and otherwise in connection with treasury and/or cash management services, including, but not limited to, controlled disbursement services, overdraft facilities, foreign exchange facilities, deposit and other accounts and merchant services;
(20) Guarantees by the Issuer or any Restricted Subsidiaries of the Issuer to owners of servicing rights in the ordinary course of business;
(21) Debt under Currency Agreements; provided that in the case of Currency Agreements which are related to Debt, such Currency Agreements do not increase the Debt of the Issuer and its Restricted Subsidiaries outstanding other than as a result of fluctuations in foreign currency exchange rates or by reason of fees, indemnities and compensation payable thereunder;
(22) Debt arising from the honoring by a bank or other financial institution of a check, draft or similar instrument drawn against insufficient funds in the ordinary course of business, provided that such Debt is extinguished within five business days of its incurrence;
(23) Debt to the extent that the net proceeds thereof are promptly deposited to defease or to satisfy and discharge the notes and Note Guarantees;
(24) Debt of (i) any Foreign Subsidiary, the proceeds of which are used for ordinary course business purposes and (ii) Restricted Subsidiaries of the Issuer that are not Guarantors, in an aggregate principal amount, at any time outstanding, not to exceed the greater of (x) $130.0 million and (y) 3.5% of Net Consolidated Total Assets; and
(25) Debt of a joint venture Incurred since the Issue Date or the guarantee by the Issuer or a Restricted Subsidiary of the same in an aggregate principal amount, taken together with all other Debt incurred pursuant to this clause, at any time outstanding not to exceed (x) $130.0 million and (y) 3.5% of Net Consolidated Total Assets.
(c) Notwithstanding any other provision of this Section 4.06, for purposes of determining compliance with this Section 4.06, increases in Debt solely due to fluctuations in the exchange rates of currencies will not be deemed to exceed the maximum amount that the Issuer or a Restricted Subsidiary may Incur under this Section 4.06. For purposes of determining compliance with any U.S. dollar-denominated restriction on the Incurrence of Debt, the U.S. dollar-equivalent principal amount of Debt denominated in a foreign currency shall be calculated based on the relevant currency exchange rate in effect on the date such Debt was Incurred; provided that if such Debt is Incurred to refinance other Debt denominated in a foreign currency, and such refinancing would cause the applicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevant currency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominated restriction shall be deemed not to have been exceeded so long as the principal amount of such refinancing Debt does not exceed the principal amount of such Debt being refinanced. The principal amount of any Debt Incurred to refinance other Debt, if Incurred in a different currency from the Debt being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such respective Debt is denominated that is in effect on the date of such refinancing.
(d) In the event that an item of Debt meets the criteria of more than one of the types of Debt described in this Section 4.06, the Issuer, in its sole discretion, will classify items of Debt and will only be required to include the amount and type of such Debt in one of such clauses and the Issuer will be entitled to divide and classify an item of Debt in more than one of the types of Debt described in this Section 4.06. Further, any Debt originally classified as incurred pursuant to clause (a) or one of the clauses in paragraph (b) of this Section 4.06 may later be reclassified by the Issuer at any time and from time to time at the Issuer’s discretion such that it will be deemed as having been incurred pursuant to paragraph (a) of this Section 4.06 or another clause in paragraph (b) of this Section 4.06, as applicable, to the extent that such reclassified Debt could be incurred pursuant to such paragraph at the time of such reclassification.
(e) For the avoidance of doubt, nothing in this Section 4.06 shall prohibit the Incurrence of Funding Indebtedness by the Issuer or any Restricted Subsidiary of the Issuer; provided that to the extent that any Funding Indebtedness of the Issuer or a Restricted Subsidiary ceases to constitute Funding Indebtedness in accordance with the definition thereof, such Debt shall be deemed to be Incurred by the Issuer or such Restricted Subsidiary, as the case may be, at such time.
(f) The principal amount of any Disqualified Stock of the Issuer or a Restricted Subsidiary, or Preferred Stock of a Restricted Subsidiary that is not a Guarantor, will be deemed to be equal to the greater of the maximum mandatory redemption or repurchase price (not including, in either case, any redemption or repurchase premium) and the liquidation preference thereof, exclusive of any accrued dividends.
(g) Accrual of interest, accrual of dividends, the accretion of accreted value or original issue discount, the amortization of debt discount, the payment of interest in the form of additional Debt, fees, expenses, charges, additional contingent interest and the payment of dividends in the form of additional shares of Preferred Stock or Disqualified Stock will not be deemed to be an Incurrence of Debt for purposes of this Section 4.06. The amount of any Debt outstanding as of any date shall be (i) the accreted value thereof in the case of any Debt issued with original issue discount or the aggregate principal amount outstanding in the case of Debt issued with interest payable in kind and (ii) the principal amount or liquidation preference thereof in the case of any other Debt.
Section 4.07. Limitation on Restricted Payments. (a) The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly (the payments and other actions described in the following clauses being collectively “Restricted Payments”):
(i) declare or pay any dividend or make any distribution on its Equity Interests (other than dividends or distributions paid in the Issuer’s or any Parent Entity’s Qualified Equity Interests) held by Persons other than the Issuer or any of its Restricted Subsidiaries;
(ii) purchase, redeem or otherwise acquire or retire for value any Equity Interests of the Issuer or any Parent Entity held by Persons other than the Issuer or any of its Restricted Subsidiaries;
(iii) repay, redeem, repurchase, defease or otherwise acquire or retire for value, or make any payment on or with respect to, any Subordinated Debt (except (i) a payment of interest or principal at Stated Maturity or (ii) any Debt Incurred pursuant to Section 4.06(b)(2)); or
(iv) make any Investment other than a Permitted Investment;
unless, at the time of, and after giving effect to, the proposed Restricted Payment:
(1) no Default has occurred and is continuing or would occur as a consequence thereof,
(2) the Relevant Condition is satisfied at the time thereof, or the Issuer could Incur at least $1.00 of Debt under Section 4.06(a), and
(3) the aggregate amount expended for all Restricted Payments made on or after the Issue Date would not, subject to paragraph (c), exceed the sum of:
(A) (i) in the event that the Relevant Condition is not satisfied at the time thereof and after giving effect thereto, 50% of the aggregate amount of the Consolidated Net Income (or, if the Consolidated Net Income is a loss, minus 100% of the amount of the loss) accrued on a cumulative basis during the period, taken as one accounting period, beginning on January 1, 2021 and ending on the last day of the Issuer’s most recently completed fiscal quarter for which internal financial statements are available; or
(ii) in the event that the Relevant Condition is satisfied at the time thereof and after giving effect thereto, 100% of the aggregate amount of the Consolidated Net Income (or, if the Consolidated Net Income is a loss, minus 100% of the amount of the loss) accrued on a cumulative basis during the period, taken as one accounting period, beginning on January 1, 2021 and ending on the last day of the Issuer’s most recently completed fiscal quarter for which internal financial statements are available;
plus
(B) subject to paragraph (c), 100% of the aggregate net cash proceeds and the fair market value, as determined in good faith by the Board of Managers, of marketable securities or other property received by the Issuer or its Subsidiaries after the Issue Date (other than (x) from a Subsidiary; or (y) constituting Capital Stock Proceeds to the extent used to incur Debt under Section 4.06(b)(13) (“Excluded Equity”)) from:
(i) the issuance and sale of the Issuer’s or any Parent Entity’s Qualified Equity Interests, including by way of issuance of the Issuer’s or any Parent Entity’s Disqualified Equity Interests or Debt to the extent since converted into Qualified Equity Interests of the Issuer or Parent Entity; or
(ii) as a contribution to its common equity; plus
(C) an amount equal to the sum, for all Unrestricted Subsidiaries, of the following:
(x) 0% of cash dividends or cash distributions received directly or indirectly by the Issuer or any Guarantor from any Unrestricted Subsidiary or the cash return on Investments in an Unrestricted Subsidiary made after the first day of the first fiscal quarter ended after the Issue Date pursuant to this paragraph (a) as a result of any sale for cash, repayment, redemption, liquidating distribution or other cash realization (not included in Consolidated Net Income); plus
(y) the portion (proportionate to the Issuer’s equity interest in such Subsidiary) of the fair market value of the assets less liabilities of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary (as determined in good faith by the Issuer);
not to exceed, in the case of any Unrestricted Subsidiary, the amount of Investments made after the Issue Date by the Issuer and its Restricted Subsidiaries in such Unrestricted Subsidiary pursuant to this paragraph (a); plus
(D) the amount equal to the net reduction in Investments (other than Permitted Investments) made by the Issuer or any of its Restricted Subsidiaries in any Person resulting from: (x) the repurchases or redemptions of such Investments by such Person, proceeds realized upon the sale of such Investment, or repayments of loans or advances or other transfers of property or assets (including by way of dividend or distribution) by such Person to the Issuer or any Restricted Subsidiary (other than for reimbursement of tax payments) or (y) the release of any Guarantee (except to the extent any amounts are paid under such Guarantee), in either case which amount was included in the calculation of the amount of Restricted Payments; provided, however, that no amount will be included under this clause to the extent it is already included in Consolidated Net Income; plus
(E) the greater of (x) $30.0 million and (y) 0.75% of Net Consolidated Total Assets.
The amount expended in any Restricted Payment, if other than in cash, will be deemed to be the fair market value of the relevant non-cash assets, as determined in good faith by the Board of Managers.
(b) The foregoing will not prohibit:
(1) the payment of any dividend or other distribution or the consummation of any irrevocable redemption within 60 days after the date of declaration thereof or the giving of the redemption notice if, at the date of declaration, as the case may be, such payment, distribution or redemption would comply with paragraph (a);
(2) dividends or distributions by a Restricted Subsidiary payable, on a pro rata basis or on a basis more favorable to the Issuer, to all holders of any class of Capital Stock of such Restricted Subsidiary a majority of which is held, directly or indirectly through Restricted Subsidiaries, by the Issuer;
(3) the repayment, redemption, repurchase, defeasance or other acquisition or retirement for value of Subordinated Debt with the proceeds of, or in exchange for, Permitted Refinancing Debt;
(4) the purchase, redemption or other acquisition or retirement for value of Equity Interests of the Issuer or any Parent Entity in exchange for, or out of the proceeds of a substantially concurrent offering of, Qualified Equity Interests of the Issuer or any Parent Entity (to the extent contributed to the Issuer) or of a cash contribution to the common equity of the Issuer (other than Excluded Equity);
(5) the repayment, redemption, repurchase, defeasance or other acquisition or retirement of Subordinated Debt of the Issuer in exchange for, or out of the proceeds of, a substantially concurrent offering of, Qualified Equity Interests of the Issuer or any Parent Entity (to the extent contributed to the Issuer) or of a cash contribution to the common equity of the Issuer (other than Excluded Equity);
(6) any Investment made in exchange for, or out of the net cash proceeds of, a substantially concurrent offering of Qualified Equity Interests of the Issuer or any Parent Entity (to the extent contributed to the Issuer) or of a cash contribution to the common equity of the Issuer (other than Excluded Equity);
(7) purchases, redemptions or other acquisition or retirement for value by the Issuer to permit the purchase, redemption or other acquisition or retirement for value by the Issuer of Equity Interests held by officers, directors or employees or former officers, directors or employees or the Issuer or any Parent Entity (or their estates or beneficiaries under their estates), upon death, disability, retirement, severance or termination of employment or pursuant to any agreement under which the Equity Interests were issued; provided that the aggregate cash consideration paid therefor in any twelve-month period does not exceed an aggregate amount of (i) $35.0 million, plus (ii) the cash proceeds of any “key-man” life insurance policies received by the Issuer or any of its Restricted Subsidiaries that are used to make such purchase, redemption or other acquisition or retirement for value, plus (iii) the cash proceeds received by the Issuer or any of its Restricted Subsidiaries from the sale of Qualified Equity Interests of the
Issuer or any Parent Entity of the Issuer (to the extent contributed to the Issuer) to officers, directors or employees of the Issuer and its Restricted Subsidiaries or any Parent Entity of the Issuer that occurs after the Issue Date; provided, however, that the amount of such cash proceeds utilized for any such purchase, redemption or other acquisition or retirement for value will not increase the amount available for Restricted Payments under Section 4.07(a)(3); provided that if any amounts under clauses (i), (ii) and (iii) are not utilized during any twelve-month period they may be carried forward and utilized in any subsequent twelve-month periods; provided, further, that cancellation of Debt owing to the Issuer or its Restricted Subsidiary or any Parent Entity of the Issuer from any such Person in connection with a purchase, redemption or other acquisition or retirement for value of Equity Interests will not be deemed to constitute a Restricted Payment;
(8) (a) the repurchase of any Subordinated Debt at a purchase price not greater than (i) 101% of the principal amount thereof in the event of a change of control pursuant to a provision no more favorable to the holders thereof than Section 4.11 or (ii) 100% of the principal amount thereof in the event of an Asset Sale pursuant to a provision no more favorable to the holders thereof than Sections 4.12 and (b) any other Restricted Payments made with Net Cash Proceeds from Asset Sales remaining after completion of the required Asset Sale Offer as required by Section 4.12; provided that, in each case, prior to the repurchase the Issuer has made an Offer to Purchase and repurchased all Notes issued under this Indenture that were validly tendered for payment in connection with the required Offer to Purchase;
(9) Restricted Payments not otherwise permitted hereby in an aggregate amount following the Issue Date not to exceed the greater of (x) $130.0 million and (y) 3.5% of Net Consolidated Total Assets;
(10) any Restricted Payments, so long as, after giving pro forma effect to the payment of any such Restricted Payment, the Total Debt-to-Equity Ratio does not exceed 0.75 to 1.0;
(11) the declaration and payment of dividends or distributions to holders of Equity Interests of the Issuer pursuant to the “Use of Proceeds” as described in the Offering Memorandum;
(12) the declaration and payment of dividends or distributions to holders of any class or series of Disqualified Stock of the Issuer or any Restricted Subsidiary issued or incurred in accordance with Section 4.06.
(13) payments in lieu of the issuance of fractional shares;
(14) payments or distributions to dissenting shareholders pursuant to applicable law in connection with any merger, consolidation or disposition in accordance with the terms of this Indenture;
(15) the purchase, redemption, acquisition, cancellation or other retirement of any Equity Interests of the Issuer or a Restricted Subsidiary to the extent necessary, in the good faith judgment of the Issuer, to prevent the loss or secure the renewal or reinstatement of any license, permit or other authorization held by the Issuer or any of its Subsidiaries issued by any governmental or regulatory authority or to comply with government contracting regulations;
(16) the declaration and payment of dividends or distributions on the Qualified Equity Interests of the Issuer (or the payment of dividends to any Parent Entity to fund a payment of dividends on such entity’s Equity Interests) in an amount not to exceed the sum of (A) up to 6.0% per annum of the net cash proceeds received by or contributed to the Issuer in or from any public offering of the Issuer’s Qualified Equity Interests or the Equity Interests of any Parent Entity, other than public offerings with respect to common equity registered on Form S-4 or Form S-8 and other than any public sale the proceeds of which were used to finance a Restricted Payment pursuant to clause (1) above and (B) an aggregate amount per annum not to exceed 7.0% of Market Capitalization;
(17) any Restricted Payments to current or former employees, officers, or directors of the Issuer or any Restricted Subsidiaries or any Parent Entity (or any spouses, ex-spouses, or estate of any of the foregoing) solely in the form of forgiveness of Debt of such Persons owing to the Issuer or any Restricted Subsidiaries or any Parent Entity on account of repurchases of the stock options, restricted stock units, purchased shares or other Equity Interests of the Issuer held by such Persons; provided that such Debt was incurred by such Persons solely to acquire Equity Interests of the Issuer;
(18) [reserved]; and
(19) Permitted Payments to Parent;
provided that, in the case of clauses (2), (7) and (9), no Default has occurred and is continuing or would occur as a result thereof.
(c) Proceeds of the issuance of Qualified Equity Interests will be included under clause (3) of Section 4.07(a) only to the extent they are not applied as described in clause (4), (5) or (6) of Section 4.07(b). Restricted Payments permitted pursuant to clause (3), (4), (5), (6), (7), (8), (9), (11), (12), (13), (14), (15), (16) and (17) of Section 4.07(b) will not be included in making the calculations under clause (3) of Section 4.07(a).
Section 4.08. Limitation on Liens. The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Lien of any nature whatsoever on any of its properties or assets (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, other than Permitted Liens; provided, however, that any Lien on such property shall be permitted notwithstanding that it is not a Permitted Lien if all Obligations under the Indenture and
the Notes are secured on an equal and ratable basis with (or, if the obligation to be secured by the Lien is subordinated in right of payment to prior payment of the Notes) the obligations so secured for so long as such obligations are no longer secured by a Lien on such property.
Section 4.09. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.
(a) Except as provided in paragraph (b), the Issuer will not, and will not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any encumbrance or restriction of any kind on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on any Equity Interests of the Restricted Subsidiary owned by the Issuer or any other Restricted Subsidiary;
(2) pay any Debt or other obligation owed to the Issuer or any other Restricted Subsidiary;
(3) make loans or advances to the Issuer or any other Restricted Subsidiary; or
(4) transfer any of its property or assets to the Issuer or any other Restricted Subsidiary.
(b) The provisions of paragraph (a) do not apply to any encumbrances or restrictions:
(1) existing on the Issue Date in this Indenture or in any other agreements in effect on the Issue Date, and any amendment, extensions, renewals, replacements or refinancings of any of the foregoing; provided that the encumbrances and restrictions in the extension, renewal, replacement or refinancing are, taken as a whole, no less favorable in any material respect to the Noteholders than the encumbrances or restrictions being extended, renewed, replaced or refinanced;
(2) existing under or by reason of applicable law;
(3) existing:
(A) with respect to any Person, or to the property or assets of any Person, at the time the Person is acquired by the Issuer or any Restricted Subsidiary; or
(B) with respect to any Unrestricted Subsidiary at the time it is designated or is deemed to become a Restricted Subsidiary,
which encumbrances or restrictions (i) are not applicable to any other Person or the property or assets of any other Person and (ii) were not put in place in anticipation of such event and any extensions, renewals, replacements or refinancings of any of the foregoing, provided the encumbrances and restrictions in the extension, renewal, replacement or refinancing are, taken as a whole, no less favorable in any material respect to the Noteholders than the encumbrances or restrictions being extended, renewed, replaced or refinanced;
(4) of the type described in clause (a)(4) of this Section 4.09 arising or agreed to (i) in the ordinary course of business that restrict in a customary manner the subletting, assignment or transfer of any property or asset that is subject to a lease or license or (ii) by virtue of any Lien on, or agreement to transfer, option or similar right with respect to any property or assets of, the Issuer or any Restricted Subsidiary;
(5) with respect to a Restricted Subsidiary and imposed pursuant to an agreement that has been entered into for the sale or disposition of all or substantially all of the Capital Stock of, or property and assets of, such Restricted Subsidiary that is permitted by Section 4.12;
(6) pursuant to the requirements of any Securitization, Warehousing Facility or Funding Indebtedness with respect to any Securitization Entity, special purpose Subsidiary of the Issuer or any Restricted Subsidiary formed in connection therewith, in each case that are exclusively applicable to any Securitization, Warehousing Facility, Funding Indebtedness or Financeable Assets of the Issuer or any Restricted Subsidiary formed in connection therewith or that are, in the good faith judgment of the Issuer, not reasonably expected to materially affect the Issuer’s ability to make principal or interest payments on the notes;
(7) contained in an instrument governing or relating to Debt that is customary, based on general market conditions, and that are, in the good faith judgment of the Issuer’s senior management, not reasonably expected to materially affect the Issuer’s ability to make principal or interest payments on the notes;
(8) required pursuant to this Indenture; or
(9) customary provisions in joint venture agreements and other similar agreements (in each case relating solely to the respective joint venture or similar entity, its assets or the equity interests therein) entered in the ordinary course of business.
Section 4.10. Limitation on Guarantees by Restricted Subsidiaries. The Issuer will not permit any of its Domestic Restricted Subsidiaries (unless such Restricted Subsidiary is an Excluded Subsidiary or a Guarantor) to guarantee the payment of (i) any
syndicated Credit Facility incurred under Section 4.06(b)(1) or (ii) capital market debt securities of the Issuer or any Guarantor in an aggregate principal amount in excess of $150.0 million unless:
(1) such Restricted Subsidiary within 60 days after the guarantee of such Indebtedness executes and delivers a supplemental indenture to this Indenture providing for a Note Guarantee by such Restricted Subsidiary, except that with respect to a guarantee of Indebtedness of the Issuer or any Guarantor, if such Indebtedness is by its express terms subordinated in right of payment to the Notes or such Guarantor’s Note Guarantee, any such Guarantee by such Restricted Subsidiary with respect to such Indebtedness shall be subordinated in right of payment to such Note Guarantee substantially to the same extent as such Indebtedness is subordinated to the Notes; and
(2) such Restricted Subsidiary waives and will not in any manner whatsoever claim or take the benefit or advantage of, any rights of reimbursement, indemnity or subrogation or any other applicable rights against the Issuer or any other Restricted Subsidiary as a result of any payment by such Restricted Subsidiary under its Note Guarantee;
provided that this covenant shall not be applicable to any guarantee of any Restricted Subsidiary that existed at the time such Person became a Restricted Subsidiary and was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary. The Issuer may elect, in its sole discretion, to cause any Subsidiary that is not otherwise required to be a Guarantor to become a Guarantor, in which case such Subsidiary shall not be required to comply with the 60 day period described in clause (1) above. No Opinion of Counsel shall be required to be delivered to the Trustee in connection with the execution of a supplemental indenture solely to add Guarantors in connection with this Section 4.10.
Section 4.11. Repurchase of Notes Upon a Change of Control.
(a) Not later than 30 days following a Change of Control, unless the Issuer has exercised its right to redeem all of the Notes as described in Section 3.01, either (i) the Issuer will make an offer (a “Change of Control Offer”) to purchase all outstanding Notes at a purchase price equal to 101% of the principal amount plus accrued interest to the date of purchase (the “change of control payment”) or (ii) Holders of not less than 90% in aggregate principal amount of the outstanding Notes validly tender and do not withdraw such Notes in such tender offer and any third party purchases all of the Notes validly tendered and not withdrawn by such holders.
(b) If Noteholders of not less than 90% in aggregate principal amount of the outstanding Notes properly tender such notes pursuant to Section 4.11(a)(ii) and the Issuer, or any third party making a Change of Control Offer, in lieu of the Issuer as described above, elects to purchase all of the notes properly tendered by such noteholders,
the Issuer or such third party will have the right upon notice given not more than 60 days following such tendering of notes pursuant to the Change of Control Offer (and not less than 10 days prior to the date fixed for such redemption pursuant to the Change of Control Offer), to redeem on the date of redemption pursuant to the Change of Control Offer, any and all notes that would remain outstanding following such Change of Control Offer, at a price in cash equal to the change of control payment.
Section 4.12. Limitation on Asset Sales. (a) The Issuer will not, and will not permit any Restricted Subsidiary to, make any Asset Sale unless the following conditions are met:
(1) the Asset Sale is for fair market value, as determined as of the date of contractually agreeing to such Asset Sale in good faith by the Board of Managers;
(2) at least 75% of the consideration consists of cash received at closing (for purposes of this clause (2), (a) the assumption by the purchaser of Debt or other obligations (other than Subordinated Debt) of the Issuer or a Restricted Subsidiary pursuant to a customary novation agreement that releases the Issuer and all Restricted Subsidiaries from further liability, (b) instruments or securities received by the Issuer or any Restricted Subsidiary in such Asset Sale that are promptly, but in any event within 270 days of the closing, converted by the Issuer to cash, to the extent of the cash actually so received and (c) any Designated Non-cash Consideration received by the Issuer or any Restricted Subsidiary in such Asset Sale having an aggregate fair market value (as determined in good faith by the Issuer), taken together with all other Designated Non-cash Consideration received pursuant to this clause (2)(c) that is at that time outstanding, not to exceed the greater of (x) $110.0 million and (y) 3.0% of Net Consolidated Total Assets at the time of the receipt of such Designated Non-cash Consideration (with the fair market value of each item of Designated Non-cash Consideration being measured at the time received and without giving effect to subsequent changes in value), shall be considered cash received at closing);
(3) Within 365 days from the later of the date of consummation of an Asset Sale or the receipt of any Net Cash Proceeds from an Asset Sale, the Net Cash Proceeds may be used:
(A) to permanently repay (1) any secured Debt (other than Funding Indebtedness or Non-Recourse Debt) of the Issuer or any Restricted Subsidiary or (2) solely to the extent such Asset Sale included assets of a Restricted Subsidiary that is not a Guarantor, Debt (other than Funding Indebtedness or Non-Recourse Debt) of any Restricted Subsidiary that is not a Guarantor (and in the case of a revolving credit, permanently reduce the commitment thereunder by such amount) in an amount not to exceed the Net Cash Proceeds in respect of the assets of such Restricted Subsidiary that is not a Guarantor, and in each case owing to a Person other than the Issuer or any Restricted Subsidiary;
(B) to permanently reduce obligations under any other Debt of the Issuer that is pari passu with the Notes (other than any Disqualified Stock or Subordinated Obligations) or Debt of a Restricted Subsidiary (other than any Disqualified Stock or Subordinated Obligations of a Guarantor) (in each case other than Debt owed to the Issuer or an Affiliate of the Issuer); provided that the Issuer shall equally and ratably reduce obligations, under the notes as provided under Section 3.01 through open market purchases (to the extent such purchases are at or above 100% of the principal amount thereof) or by making an offer (in accordance with the procedures set forth in Section 3.04 for an Asset Sale Offer) to all Holders to purchase their Notes at 100% of the principal amount thereof, plus the amount of accrued but unpaid interest, if any, on the amount of Notes that would otherwise be prepaid;
(C) to acquire all or substantially all of the assets of a Permitted Business, or a majority of the Voting Stock of another Person that thereupon becomes a Restricted Subsidiary engaged in a Permitted Business (provided that such Restricted Subsidiary is not a Securitization Entity), or to make capital expenditures or to otherwise acquire assets, including Financeable Assets and Servicing Advances, that are to be used in a Permitted Business; provided that this requirement shall be deemed satisfied if a binding commitment or an agreement is entered into within such 365 day period and the acquisition or investment is consummated within 90 days thereafter;
(D) to make an investment in any one or more businesses, properties or assets that replace the properties or assets that are the subject of such Asset Sale provided that this requirement shall be deemed satisfied if a binding commitment or an agreement is entered into within such 365- day period and the acquisition or investment is consummated within 90 days thereafter; or
(E) any combination of the foregoing;
provided that pending the final application of any such Net Cash Proceeds in accordance with clause (A), (B), (C), (D) or (E) above, the Issuer and its Restricted Subsidiaries may temporarily reduce Debt or otherwise invest such Net Cash Proceeds in any manner not prohibited by this Indenture; and
(4) The Net Cash Proceeds of an Asset Sale not applied or committed to be applied pursuant to clause (3) within 365 days of the Asset Sale constitute “Excess Proceeds”. Excess Proceeds of less than $40.0 million will be carried forward and accumulated. When accumulated Excess Proceeds equals or exceeds such amount, the Issuer must, within 30 days, make an offer (an “Asset Sale Offer”) to purchase Notes having a principal amount equal to:
(A) accumulated Excess Proceeds; multiplied by
(B) a fraction (x) the numerator of which is equal to the outstanding principal amount of the Notes and (y) the denominator of which is equal to the outstanding principal amount of the Notes and all pari passu Debt similarly required to be repaid, redeemed or tendered for in connection with the Asset Sale, rounded down to the nearest $1,000. The purchase price for the notes will be 100% of the principal amount plus accrued interest to the date of purchase. If the Asset Sale Offer is for less than all of the outstanding notes, and notes in an aggregate principal amount in excess of the purchase amount are tendered and not withdrawn pursuant to the offer, the Issuer will purchase notes having an aggregate principal amount equal to the purchase amount on a pro rata basis, by lot or such other manner in the case of global notes, as may be required by the applicable procedures of DTC; provided that only notes in minimum denominations of $2,000 principal amount or integral multiples of $1,000 in excess thereof will be purchased. Upon completion of the Asset Sale Offer, Excess Proceeds will be reset at zero, and any Excess Proceeds remaining after consummation of the Asset Sale Offer may be used for any purpose not otherwise prohibited by this Indenture.
(b) Notwithstanding the foregoing, the 75% limitation referred to in Section 4.12(a)(2) shall be deemed satisfied with respect to any Asset Sale in which the cash or Cash Equivalents portion of the consideration received therefrom, determined in accordance with the foregoing provision on an after-tax basis, if the proceeds before tax would have complied with the 75% limitation referred to in Section 4.12(a)(2).
Section 4.13. Limitation on Transactions with Affiliates. (a) The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, renew or extend any transaction or arrangement including, but not limited to, the purchase, sale, lease or exchange of property or assets, or the rendering of any service with any Affiliate of the Issuer or any Restricted Subsidiary (a “Related Party Transaction”), involving an aggregate payment or consideration in excess of $15.0 million, except (i) upon terms taken as a whole that, in the good faith judgment of the Issuer or the applicable Restricted Subsidiary, are not materially less favorable to the Issuer or the Restricted Subsidiary than could be obtained at the time in a comparable arm’s-length transaction with a Person that is not an Affiliate of the Issuer (or, in the event that there are no comparable transaction involving Persons who are not Affiliates to apply for comparative purposes, is otherwise on terms that, taken as a whole, the Issuer has determined to be fair to the Issuer and its Restricted Subsidiaries, taken as a whole), (ii) with respect to any Related Party Transaction or series of Related Party Transactions involving an aggregate payment or consideration in excess of $30.0 million, the Issuer delivers to the Trustee an Officers’ Certificate certifying that such Related Party Transaction complies with Section 4.13(a)(i) above and (iii) with respect to any Related Party Transaction or series of Related Party Transactions involving an aggregate payment or consideration in excess of $50.0 million, the Issuer delivers to the Trustee a resolution adopted in good faith by the majority of the Board of Managers of the Issuer, approving such Related Party Transaction and set forth in an Officer’s Certificate certifying that such Related Party Transaction complies with Section 4.13(a)(i).
(b) The foregoing paragraphs do not apply to:
(1) any transaction between the Issuer and any of its Restricted Subsidiaries or between Restricted Subsidiaries of the Issuer;
(2) the payment of reasonable and customary regular fees to directors of the Issuer who are not employees of the Issuer and the provision of customary indemnities to directors, officers or employees of the Issuer and its Restricted Subsidiaries in their capacities as such;
(3) any Restricted Payments under Section 4.07 if permitted by that covenant or any Permitted Investment (other than pursuant to clauses (1) or (3) of the definition thereof);
(4) transactions, agreements, plans, arrangements, or payments to, and indemnities and reimbursements and employment and severance arrangements provided to or on behalf of, or for the benefit of, former, current or future officers, directors, managers, employees or consultants of the Issuer, any Restricted Subsidiary of the Issuer or any Parent Entity ;
(5) transactions in connection with any Securitization or Funding Indebtedness;
(6) transactions pursuant to any contract, agreement or Investment (including Guarantee) in effect on the date of this Indenture, as amended, modified or replaced from time to time so long as the amended, modified or new agreements, taken as a whole, are no more disadvantageous to the Holders in any material respect than those in effect on the date of this Indenture (as determined by the Issuer in good faith);
(7) services provided to Affiliates in the ordinary course of business and consistent with past practice;
(8) the provision of mortgage servicing, mortgage loan origination, real estate logistics, brokerage and management and similar services to Affiliates in the ordinary course of business and consistent with past practice and otherwise not prohibited by this Indenture which are fair to the Issuer and its Restricted Subsidiaries (as determined by the Issuer in good faith), or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party (as determined by the Issuer in good faith);
(9) mortgage loans provided to officers, directors or employees on terms consistent with past practice;
(10) licensing of intellectual property rights (whether as licensor or licensee);
(11) transactions (including pursuant to joint venture agreements) with (i) customers, clients, suppliers, any Person in which the Issuer or any Restricted Subsidiary has made an Investment or holds an interest as a joint venture partner (and such Person is an Affiliate solely because of such Investment or interest) or (ii) others that are Affiliates of the Issuer, in each case in the ordinary course of business and consistent with past practice and otherwise not prohibited by this Indenture which are fair to the Issuer and its Restricted Subsidiaries (as determined by the Issuer in good faith), or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party (as determined by the Issuer in good faith);
(12) leases of real property entered into in the ordinary course of business on terms not materially less favorable to the Issuer and its Restricted Subsidiaries than could be obtained at the time in an arm’s length transaction with a Person who was not an Affiliate (as determined in good faith by management of the Issuer);
(13) any Co-Investment Transaction;
(14) sales or issuances of Qualified Equity Interests by the Issuer or any Restricted Subsidiary to any Affiliate and capital contributions to the Issuer from Affiliates or the granting and performing of customary registration rights to any Parent Entity or to any Permitted Holder or to any former, current or future director, manager, officer, employee or consultant (or any Affiliate or Immediate Family Members of any of the foregoing, or any permitted transferee thereof) of the Issuer or any of its Subsidiaries or any Parent Entity and directors’ qualifying shares and shares issued to foreign nationals as required by applicable law;
(15) any transaction in which the Issuer or any Restricted Subsidiary delivers to the Trustee a written opinion from a nationally or regionally recognized investment banking, accounting or appraisal firm as to (i) the fairness of the transaction to the Issuer and its Restricted Subsidiaries from a financial point of view or (ii) that such transaction is not materially less favorable to the Issuer and its Restricted Subsidiaries than could be obtained at the time in an arm’s length transaction with a Person who was not an Affiliate; provided that with respect to the modification, amendment or replacement of any Related Party Transaction in existence as of the Issue Date on substantially comparable terms, such threshold shall be calculated only with respect to the amount of any net increase in the value of such Related Party Transaction as a result of such modification, amendment or replacement rather than the aggregate value;
(16) any agreement between a Person and an Affiliate of such Person existing at the time such Person is acquired by, or merged into, the Issuer or a Restricted Subsidiary, as such agreement may be amended, modified, supplemented, extended or renewed from time to time; provided that such agreement was not entered into contemplation of such acquisition, merger or consolidation, and so long as any such amendment, modification, supplement,
extension or renewal, when taken as a whole, is not materially more disadvantageous to the Holders, in the reasonable determination of an Officer of the Issuer, than the applicable agreement as in effect on the date of such acquisition, merger or consolidation and not entered into in contemplation of such acquisition or merger;
(17) loans or advances (or cancellation of loans) to future, current or former officers, directors, employees or consultants of the Issuer or any Restricted Subsidiary or Parent Entity in an aggregate not to exceed $10.0 million outstanding at any time;
(18) transaction complying with the covenant described under Section 5.01;
(19) the IPO Transactions;
(20) Permitted Payments to Parent;
(21) (A) investments by Permitted Holders in securities or loans of the Issuer or any of its Restricted Subsidiaries (and any payment of out-of-pocket expenses incurred by such Permitted Holders in connection therewith) so long as the investment is being offered generally to other investors on the same or more favorable terms, and (B) payments to Permitted Holders in respect of securities or loans of the Issuer or any of its Restricted Subsidiaries contemplated in the foregoing subclause (A) or that were acquired from Persons other than the Issuer and its Restricted Subsidiaries, in each case, in accordance with the terms of such securities or loans;
(22) transactions between the Issuer or any Restricted Subsidiary and any other Person that would constitute a Related Party Transaction solely because a director of such other Person is also a director of the Issuer or any Parent Entity; provided, however, that such director abstains from voting as a director of the Issuer or such Parent Entity, as the case may be, on any matter including such other Person;
(23) the sale, conveyance or other disposition of mortgages or other loans, customer receivables, mortgage related securities or derivatives or other assets (or any interests in any of the foregoing) to Affiliates in the ordinary course of business and consistent with past practice and otherwise not prohibited by this Indenture which are fair to the Issuer and its Restricted Subsidiaries (as determined by the Issuer in good faith), or are on terms at least as favorable as might reasonably have been obtained at such time from an unaffiliated party (as determined by the Issuer in good faith);
(24) [reserved];
(25) the payment of tax distributions and the entering into of any tax sharing agreement or arrangement or any tax receivable agreement with any
Parent Entity and the making of any payments or taking of any action, thereunder; and
(26) transactions between the Issuer and its Restricted Subsidiaries or any Affiliates thereof in connection with the lease of the Issuer’s principal place of business, and related leasehold improvements provided, that with respect to any related leasehold improvements, such leasehold improvements (i) are in furtherance of real property improvements already commenced prior to the Issue Date or (ii) annually do not exceed an aggregate amount of $10.0 million; provided, that if any amounts under clause (ii) are not utilized during any twelve-month period they may be carried forward and utilized in any subsequent twelve-month period.
Section 4.14. [Reserved.]
Section 4.15. Designation of Restricted and Unrestricted Subsidiaries. (a) The Board of Managers may designate any Subsidiary, including a newly acquired or created Subsidiary, to be an Unrestricted Subsidiary if it meets the following qualifications and the designation would not cause a Default:
(1) such Subsidiary does not own any Capital Stock of the Issuer or any Restricted Subsidiary or hold any Debt of, or any Lien on any property of, the Issuer or any Restricted Subsidiary;
(2) at the time of the designation, the designation would be permitted under Section 4.07;
(3) any Guarantee or other credit support of any Debt of the Subsidiary by the Issuer or any Restricted Subsidiary is permitted under Section 4.06 and Section 4.07;
(4) the Subsidiary is not party to any transaction or arrangement with the Issuer or any Restricted Subsidiary that would not be permitted under Section 4.13; and
(5) neither the Issuer nor any Restricted Subsidiary has any obligation to subscribe for additional Equity Interests of the Subsidiary or to maintain or preserve its financial condition or cause it to achieve specified levels of operating results, except to the extent permitted by Section 4.06 and Section 4.07.
Once so designated the Subsidiary will remain an Unrestricted Subsidiary, subject to paragraph (b).
(b) (1) A Subsidiary previously designated an Unrestricted Subsidiary which fails to meet the qualifications set forth in paragraph (a) will be deemed to become at that time a Restricted Subsidiary, subject to the consequences set forth in paragraph (d).
(2) The Board of Managers may designate an Unrestricted Subsidiary to be a Restricted Subsidiary if the designation would not cause a Default.
(c) Upon a Restricted Subsidiary becoming an Unrestricted Subsidiary:
(1) all existing Investments of the Issuer and its Restricted Subsidiaries therein (valued at the Issuer’s proportional share of the fair market value of its assets less liabilities as determined in good faith by the Board of Managers) will be deemed made at that time;
(2) all existing Capital Stock or Debt of the Issuer or a Restricted Subsidiary held by it will be deemed Incurred at that time, and all Liens on property of the Issuer or a Restricted Subsidiary held by it will be deemed incurred at that time;
(3) all existing transactions between it and the Issuer or any Restricted Subsidiary will be deemed entered into at that time; and
(4) it will cease to be subject to the provisions of this Indenture as a Restricted Subsidiary and its Guarantee of the Notes, if any, will be released.
(d) Upon an Unrestricted Subsidiary becoming, or being deemed to become, a Restricted Subsidiary:
(1) all of its Debt and Disqualified or Preferred Stock will be deemed Incurred at that time for purposes of Section 4.06, but will not be considered the sale or issuance of Equity Interests for purposes of Section 4.12;
(2) Investments therein previously charged under Section 4.07 will be credited thereunder;
(3) it may be required to issue a Note Guarantee pursuant to Section 4.10; and
(4) it will thenceforth be subject to the provisions of this Indenture as a Restricted Subsidiary.
(e) Any designation by the Board of Managers of a Subsidiary as a Restricted Subsidiary or Unrestricted Subsidiary will be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to the designation and an Officers’ Certificate certifying that the designation complied with the foregoing provisions.
Section 4.16. Financial Reports. (a) So long as any Notes remain outstanding:
(1) the Issuer shall provide the Trustee and Noteholders with annual consolidated financial statements audited by the Issuer’s independent public accountants within 90 days after the end of the Issuer’s fiscal year (120 days for
the first fiscal year ended after the Issue Date), and unaudited quarterly consolidated financial statements (including a balance sheet, income statement and cash flow statement for the fiscal quarter or quarters then ended and the corresponding fiscal quarter or quarters from the prior year) within 60 days of the end of each of the first three fiscal quarters of each fiscal year (90 days for the first two fiscal quarters ended after the Issue Date). Such annual and quarterly financial statements will be prepared in accordance with GAAP and be accompanied by a management’s discussion and analysis of the results of operations and liquidity and capital resources of the Issuer and its Restricted Subsidiaries for the periods presented in a level of detail comparable to the management’s discussion and analysis of financial condition and results of operations of the Issuer and its Restricted Subsidiaries contained in the Offering Memorandum; and
(2) the Issuer shall disclose in writing to the Trustee and noteholders the occurrence of any event concerning the Issuer or its Restricted Subsidiaries that would be required to be reported on Form 8-K if the Issuer were required to file such reports pursuant to Items 1.01, 1.02 (it being understood that the Issuer and its Restricted Subsidiaries shall only be required to disclose events under Items 1.01 and 1.02 of Form 8-K to the extent that such events relate to the entry into, or termination or amendment of, any material definitive agreement in respect of a financing other than any Funding Indebtedness including Securitization Indebtedness, Warehousing Indebtedness or MSR Indebtedness, or acquisition or disposition of a business, and that the exhibits to such form need not be filed and that any filing relating to Non-Funding Indebtedness or other Debt can exclude any pricing information), 1.03, 2.01, 4.01, 4.02, and 5.01, in each case, within 10 days of the occurrence of such event.
Notwithstanding the foregoing, with respect to the information provided in clause (a)(1) and (a)(2), (A) such information shall not be required to include (1) as an exhibit, or to include a summary of the terms of, any employment or compensatory arrangement, agreement, plan or understanding between the Issuer and any director, manager or officer, of the Issuer, (2) any information regarding the occurrence of any of the events set forth in clause (a)(2) if the Issuer determines in its good faith judgment that the event that would otherwise be required to be disclosed is not material to the holders of the notes or the business, assets, operations, financial positions or prospects of the Issuer and its Restricted Subsidiaries taken as a whole, (B) no such report shall be required to comply with the Exchange Act, (C) no such report shall be required to comply with Regulation S-K or Regulation S-X including, without limitation, Rules 3-05, 3-09, 3-10, 3-16 or Article 11 thereof, (D) no such report shall be required to provide any information that is not otherwise similar to information currently included in the Offering Memorandum, (E) in no event shall such reports be required to include as an exhibit copies of any agreements, financial statements or other items that would be required to be filed as exhibits under the SEC rules; (F) trade secrets and other information that could cause competitive harm to the Issuer and its Restricted Subsidiaries may be excluded from any disclosures; (G) such financial statements or information shall not be required to contain any “segment reporting”; (H) the Issuer may elect to change its fiscal year end, (I) no acquired business
financial statements or pro forma financial statements shall be required to be disclosed; and (J) the Issuer may include any information of the information required above in the quarterly report for the quarter in which the event occurred as permitted by the “safe-harbor” provisions of Form 8-K. The reports required pursuant to clause (a)(1) and (a)(2) above will not be required to reflect any accounting standards or guidance, including those issued by the Financial Standards Accounting Board, applicable only to “public business entities.”
The financial statements and related discussion referred to in clause (1) and the current reports referred to in clause (2) shall be made available to Noteholders and prospective investors in the Notes by posting on a password-protected or otherwise secured confidential website maintained by the Issuer. Disclosure of any current reports shall be accompanied by a notice of posting released on Bloomberg or a similar news service reasonably accessible to investors in securities such as the Notes.
Notwithstanding the foregoing, the Issuer will be deemed to have furnished such reports referred to above to the Trustee and the holders of the Notes if the Issuer has filed such reports with the SEC via the EDGAR filing system (or any successor system) and such reports are publicly available; provided, however, that the Trustee shall have no responsibility whatsoever to determine if such filing has occurred.
In addition, the Issuer will make the information and reports available to prospective investors upon request (which prospective investors shall be limited to “qualified institutional buyers” within the meaning of Rule 144A of the Securities Act or non-U.S. persons (as defined in Regulation S under the Securities Act) that certify their status as such to the reasonable satisfaction of the Issuer).
(b) The Issuer will schedule a conference call to be held not more than 15 Business Days following the release of each report containing the financial information referred to in clause (a)(1) of this Section 4.16, at which the Issuer will make available its senior management to discuss the information contained in such report on such conference call; provided that such conference calls shall be permitted to be held jointly with conference calls the Issuer holds for holders of their other Indebtedness. The Issuer will notify Holders of Notes about such calls and provide them and prospective investors in the Notes with call-in information concurrently with and in the same manner as each delivery of financial statements pursuant to the preceding paragraph (a).
Notwithstanding the foregoing, if the Issuer (or a Parent Entity, to the extent permitted by this covenant) holds a quarterly conference call for its equity holders within 15 Business Days of filing a report on EDGAR (or any successor thereto), the Issuer or such Parent Entity, as applicable, will no longer be required to hold a separate conference call in respect of such report for the Holders.
(c) For so long as any of the Notes remain outstanding and constitute “restricted securities” under Rule 144, to the extent neither the Issuer nor any Parent Entity is subject to Section 13(a) or 15(d) under the Exchange Act, the Issuer will furnish
to the Holders of the Notes and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(d) The disclosure of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer’s and the Guarantors’ compliance with any of its covenants under this Indenture (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates). The Trustee shall have no obligation whatsoever to determine whether or not such information, documents or reports have been so made available to the Trustee or the Noteholders.
(e) If, at any time, the Issuer has designated any of its Subsidiaries as Unrestricted Subsidiaries, then either on the face of, or in the footnotes to, the financial statements or in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” or other comparable section, the Issuer shall provide an analysis and discussion of the material differences, if any, with respect to the financial condition and results of operations of the Issuer and its Restricted Subsidiaries as compared to the Issuer and its Subsidiaries (including such Unrestricted Subsidiaries).
In addition, the Issuer may satisfy its reporting obligations described in this Section with respect to financial information relating to the Issuer by furnishing financial information relating to any Parent Entity; provided that if and so long as such Parent Entity has material assets (other than Cash, Cash Equivalents and Equity Interests of the Issuer or any Parent Entity), the same is accompanied by consolidating information (which need not be audited) that explains in reasonable detail the differences between the information relating to such Parent Entity, on the one hand, and the information relating to the Issuer and its Restricted Subsidiaries on a stand-alone basis, on the other hand and would otherwise comply with the requirements of Rule 3-10 of Regulation S-X promulgated by the SEC (or any successor provision). The Issuer will be deemed to have furnished the reports referred to in this Section if the Issuer or any Parent Entity has filed the corresponding reports containing such information relating to the Issuer or such Parent Entity with the SEC via the EDGAR filing system (or any successor system).
Any subsequent restatement of financial statements shall not have any retroactive effect for purposes of calculations previously made pursuant to the covenants contained in this Indenture. The subsequent posting or making available of any materials or conference call required by this covenant shall be deemed automatically to cure any Default resulting from the failure to post or make available such materials or conference call within the required timeframe.
Any and all Defaults or Events of Default arising from a failure to furnish or file in a timely manner a report or other information required by this Section 4.16 shall be deemed cured (and the Issuer shall be deemed to be in compliance with this Section 4.16) upon furnishing or filing such report or other information as contemplated by this covenant (but without regard to the date on which such report or other information is so furnished or filed); provided that such cure shall not otherwise affect the rights of the
Holders under Section 6.01 if payment of the Notes has been accelerated in accordance with the terms of this Indenture and such acceleration has not been rescinded or cancelled prior to such cure.
Notwithstanding the foregoing, if at any time the Issuer or any Parent Entity has made a good faith determination to file a registration statement with the SEC with respect to such entity’s Capital Stock, the Issuer will not be required to disclose any information or take any actions that, in the good faith view of the Issuer, would violate applicable securities laws or the SEC’s “gun jumping” rules.
Section 4.17. Reports to Trustee. (a) The Issuer will deliver to the Trustee, concurrently with the delivery of the annual consolidated audited financial statements described in Section 4.16(a)(1), an Officers’ Certificate stating that there is no Default or, if there has been a Default, specifying the Default and its nature and status.
(b) The Issuer will deliver to the Trustee, as soon as possible and in any event within 30 days after the Issuer becomes aware of a Default, an Officers’ Certificate setting forth the details of the Default, and the action which the Issuer proposes to take with respect thereto.
Section 4.18. Suspension of Certain Covenants. If on any day after the Issue Date (i) the Notes are rated Investment Grade and (ii) no Default has occurred and is continuing hereunder, then beginning on that date (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a “Covenant Suspension Event” and the date thereof being referred to as the “Suspension Date”), then the Issuer and its Restricted Subsidiaries will not be subject to the covenants in Sections 4.06, 4.07, 4.09, 4.10, 4.12, 4.13, 5.01(a)(iii)(3) and 5.01(a)(iii)(4) (the “Suspended Covenants”).
However, during such time as the above referenced covenants are suspended (a “Suspension Period”), the Issuer will not be permitted to designate any Restricted Subsidiary as an Unrestricted Subsidiary.
In the event that the Issuer and its Restricted Subsidiaries are not subject to the Suspended Covenants for any period of time as a result of the foregoing, and on any subsequent date (the “Reversion Date”) the condition set forth in clause (i) of the first paragraph of this section is no longer satisfied, then the Issuer and its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants with respect to future events unless and until a subsequent Suspension Date occurs (in which event the Suspended Covenants shall no longer be in effect until a subsequent Reversion Date occurs).
For the avoidance of doubt, notwithstanding the reinstatement of the Suspended Covenants upon a Reversion Date, no Default, Event of Default or breach of any kind shall be deemed to exist under this Indenture, the Notes or the Note Guarantee with respect to the Suspended Covenants based on, and none of the Issuer or any of its Subsidiaries shall bear any liability for, any actions taken or events occurring during the
Suspension Period, or any actions taken at any time pursuant to any contractual obligation arising prior to the Reversion Date, regardless of whether such actions or events would have been permitted if the applicable Suspended Covenants remained in effect during such period.
On each Reversion Date, all Non-Funding Indebtedness Incurred during the Suspension Period prior to such Reversion Date will be deemed to be Debt incurred pursuant to clause (b)(8) of Section 4.06. For purposes of calculating the amount available to be made as Restricted Payments under Section 4.07(a)(3), calculations under such covenant shall be made as though such covenant had been in effect during the entire period of time after the Issue Date (including the Suspension Period). Restricted Payments made during the Suspension Period not otherwise permitted under Section 4.07(b) will reduce the amount available to be made as Restricted Payments under Section 4.07(a)(3) of such covenant. For purposes of Section 4.09, on the Reversion Date, any consensual encumbrances or restrictions of the type specified in clause (a)(1), (2) or (3) of Section 4.09 entered into during the Suspension Period will be deemed to have been in effect on the Issue Date, so that they are permitted by clause (b)(1) of Section 4.09. For purposes of Section 4.12, on the Reversion Date, the amount of Excess Proceeds will be reset to zero. For purposes of Section 4.13, any transaction or Investment entered into after the Reversion Date pursuant to a contract, agreement, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Issuer entered into during the Suspension Period will be deemed to have been in effect as of the Issue Date for purposes of clause (b)(6) of Section 4.13.
The Trustee shall have no duty to (i) monitor the ratings of the Notes, (ii) ascertain whether a Covenant Suspension Event or Reversion Date have occurred, or (iii) notify the Holders of any of the foregoing.
Article 5
Consolidation, Merger or Sale of Assets
Section 5.01. Consolidation, Merger or Sale of Assets by the Issuer; No Lease of All or Substantially All Assets. (a) The Issuer will not:
(i) consolidate with or merge with or into any Person; or
(ii) sell, convey, transfer, or otherwise dispose of all or substantially all of its assets as an entirety or substantially an entirety, in one transaction or a series of related transactions, to any Person; or
(iii) permit any Person to merge with or into the Issuer, unless:
(1) either (x) the Issuer is the continuing Person or (y) the resulting, surviving or transferee Person is a corporation organized and validly existing under the laws of the United States of America or any state thereof (or, if a limited liability company, then an entity organized as a corporation is added as a
co-issuer of the Notes) and expressly assumes by supplemental indenture all of the obligations of the Issuer under this Indenture and the Notes;
(2) immediately after giving effect to the transaction, no Default has occurred and is continuing;
(3) immediately after giving effect to the transaction on a pro forma basis, the Issuer or the resulting, surviving or transferee Person has a Total Shareholders’ Equity equal to or greater than the Total Shareholders’ Equity of the Issuer immediately prior to such transaction;
(4) immediately after giving effect to the transaction on a pro forma basis, the Issuer or the resulting surviving or transferee Person (i) could Incur at least $1.00 of additional Debt under Section 4.06(a), or (ii) has a Debt-to-Equity Ratio equal to or better than the Debt-to-Equity Ratio of the Issuer immediately prior to such transaction or (iii) has a Fixed Charge Coverage Ratio no less than the Fixed Charge Coverage Ratio of the Issuer immediately prior to such transaction; and
(5) the Issuer delivers to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that the consolidation, merger or transfer and the supplemental indenture (if any) comply with this Indenture;
provided that clauses (2) through (4) do not apply (i) to the consolidation or merger of the Issuer with or into a Restricted Subsidiary or the consolidation or merger of a Restricted Subsidiary with or into the Issuer or (ii) if, in the good faith judgment of the Board of Managers of the Issuer, whose determination is evidenced by a Board Resolution, the sole purpose of the transaction is to change the jurisdiction of incorporation of the Issuer (provided that such jurisdiction remains within the United States of America); provided further, that for the avoidance of doubt, this clause (a) does not apply to the IPO Transactions.
(b) The Issuer shall not lease all or substantially all of its assets, whether in one transaction or a series of transactions, to one or more other Persons.
(c) Upon the consummation of any transaction effected in accordance with these provisions, if the Issuer is not the continuing Person, the resulting, surviving or transferee Person will succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture and the Notes with the same effect as if such successor Person had been named as the Issuer in this Indenture. Upon such substitution, except in the case of a sale, conveyance, transfer or disposition of less than substantially all of its assets, the Issuer will be released from its obligations under this Indenture and the Notes.
(d) Notwithstanding the foregoing, the Issuer shall not be required to comply with clauses (3) or (4) of Section 5.01(a) if the Person merging with or into the Issuer, or to which all or substantially all of the assets of the Issuer are being transferred has, or is the wholly-owned subsidiary of a Person that has, in each case upon consummation of
such transaction, a corporate credit rating that is Investment Grade (the person so rated, the “Investment Grade Buyer”) and the Investment Grade Buyer assumes by supplemental indenture the obligations of the Issuer under this Indenture and the Notes or fully and unconditionally guarantees such obligations.
Section 5.02. Consolidation, Merger or Sale of Assets by a Guarantor. (a) No Guarantor will:
(i) consolidate with or merge with or into any Person; or
(ii) sell, convey, transfer, or otherwise dispose of all or substantially all of its assets as an entirety or substantially an entirety, in one transaction or a series of related transactions, to any Person; or
(iii) permit any Person to merge with or into the Guarantor;
unless:
(A) the other Person is the Issuer or any Restricted Subsidiary that is a Guarantor or becomes a Guarantor concurrently with the transaction; or
(B) (i) either (x) the Guarantor is the continuing Person or (y) the resulting, surviving or transferee Person expressly assumes by supplemental indenture all of the obligations of the Guarantor under its Guarantee; and
(ii) immediately after giving effect to the transaction, no Default has occurred and is continuing; or
(C) the transaction constitutes a sale or other disposition (including by way of consolidation or merger) of the Guarantor or the sale or disposition of all or substantially all the assets of the Guarantor (in each case other than to the Issuer or a Restricted Subsidiary) otherwise permitted by this Indenture.
Article 6
Default and Remedies
Section 6.01. Events of Default. An “Event of Default” with respect to the Notes occurs if:
(1) the Issuer defaults in the payment of the principal of any Note when the same becomes due and payable at maturity, upon acceleration or redemption, or otherwise (other than pursuant to a Change of Control Offer or an Asset Sale Offer);
(2) the Issuer defaults in the payment of interest on any Note when the same becomes due and payable, and the default continues for a period of 30 days;
(3) [reserved];
(4) the Issuer defaults in the performance of or breaches any other covenant or agreement of the Issuer in this Indenture or the Notes and the default or breach continues for a period of 60 consecutive days (or in the case of Section 4.16, 90 consecutive days) after written notice to the Issuer by the Trustee or to the Issuer and the Trustee by the Holders of 25% or more in aggregate principal amount of the Notes;
(5) there occurs with respect to any Non-Funding Indebtedness of the Issuer or any of its Restricted Subsidiaries having an outstanding principal amount of $150.0 million for the most recently ended fiscal quarter for which financial statements were delivered to the Trustee or more in the aggregate for all such Debt of all such Persons (i) an event of default that results in such Debt being accelerated prior to its scheduled maturity or (ii) failure to make a principal payment, interest or premium, if any, when due and such defaulted payment is not made, waived or extended within the applicable grace period;
(6) one or more final judgments or orders for the payment of money in the aggregate for all such Persons are rendered against the Issuer or any of its Restricted Subsidiaries and are not paid, bonded or discharged when due, and there is a period of 60 consecutive days following entry of the final judgment or order by a court of competent jurisdiction that causes the aggregate amount for all such final judgments or orders outstanding and not paid, bonded or discharged when due against all such Persons to exceed $150.0 million for the most recently ended fiscal quarter for which financial statements were delivered to the Trustee (in excess of amounts covered by valid and binding insurance policies which the Issuer’s insurance carriers have not declined to pay) during which a stay of enforcement, by reason of a pending appeal or otherwise, is not in effect; provided, however, that any such judgment or order for the payment of money shall not result in an Event of Default if such judgment or order would not be material to the Issuer and its Restricted Subsidiaries and would not reasonably be expected to affect their ability to make principal or interest payments on the Notes; or
(7) an involuntary case or other proceeding is commenced against the Issuer or any Restricted Subsidiary that is a Significant Subsidiary with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding remains undismissed and unstayed for a period of 60 days; or an order for relief is entered against the Issuer or any such Restricted Subsidiary that is a Significant Subsidiary under the federal bankruptcy laws as now or hereafter in effect; provided, that it shall not be an Event of
Default under this Section 6.01(7) if the Issuer engages in a solvent reconstruction or reorganization not otherwise prohibited by this Indenture;
(8) the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary (i) commences a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consents to the entry of an order for relief in an involuntary case under any such law, (ii) consents to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or any of its Restricted Subsidiaries that is a Significant Subsidiary or for all or substantially all of the property and assets of the Issuer or of such Restricted Subsidiary that is a Significant Subsidiary or (iii) effects any general assignment for the benefit of creditors (an event of default specified in clause (7) or (8) a “bankruptcy default”); provided, that it shall not be an Event of Default under this Section 6.01(8) if the Issuer engages in a solvent reconstruction or reorganization not otherwise prohibited by this Indenture; or
(9) any Note Guarantee by a Significant Subsidiary ceases to be in full force and effect, other than in accordance with the terms of this Indenture, or a Guarantor that is a Significant Subsidiary denies or disaffirms is obligations under its Note Guarantee.
Section 6.02. Acceleration. (a) If an Event of Default, other than a bankruptcy default with respect to the Issuer, occurs and is continuing under this Indenture, the Trustee or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written notice to the Issuer (and to the Trustee if the notice is given by the Holders), may, and the Trustee at the written request of such Holders shall, declare the principal of and accrued interest on the Notes to be immediately due and payable. Upon a declaration of acceleration, such principal and interest will become immediately due and payable. If a bankruptcy default occurs with respect to the Issuer, the principal of and accrued interest on the Notes then outstanding will become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder of Notes.
(b) The Holders of a majority in principal amount of the outstanding Notes by written notice to the Issuer and to the Trustee may waive all past defaults and rescind and annul a declaration of acceleration and its consequences if:
(1) all existing Events of Default, other than the nonpayment of the principal of, premium, if any, and interest on the Notes that have become due solely by the declaration of acceleration, have been cured or waived; and
(2) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction.
(c) In the event of any Event of Default specified in Section 6.01(5), such Event of Default and all consequences thereof shall be annulled, waived and rescinded,
automatically and without any action by the Trustee or the Holders, if within 60 days after the Issuer or such Restricted Subsidiary received notice of such acceleration or failed to make a principal payment:
(x) the Debt that is the basis for such Event of Default has been discharged; or
(y) the Holders thereof have rescinded, annulled or waived the acceleration, notice or action (as the case may be) giving rise to such Event of Default; or
(z) the default that is the basis for such Event of Default has been cured.
Section 6.03. Other Remedies. If an Event of Default occurs and is continuing, the Trustee may pursue, in its own name or as trustee of an express trust, any available remedy by proceeding at law or in equity to collect the payment of principal of and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding.
Section 6.04. Waiver of Past Defaults. Except as otherwise provided in Sections 6.02, 6.07 and 9.02, the Holders of a majority in principal amount of the outstanding Notes may, by written notice to the Trustee, waive an existing Default and its consequences. Upon such waiver, the Default will cease to exist with respect to the Notes, and any Event of Default arising therefrom will be deemed to have been cured, but no such waiver will extend to any subsequent or other Default or impair any right consequent thereon.
Section 6.05. Control by Majority. The Holders of a majority in aggregate principal amount of the outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that the Trustee may require indemnity and/or security satisfactory to it to be furnished prior to taking such action. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture, that may involve the Trustee in personal liability, or that the Trustee determines in good faith may be unduly prejudicial to the rights of Holders of Notes not joining in the giving of such direction (it being understood that the Trustee does not have an affirmative duty to ascertain whether or not any such directions are unduly prejudicial to such Holders), and may take any other action it deems proper that is not inconsistent with any such direction received from Holders of Notes.
Section 6.06. Limitation on Suits. A Holder may not institute any proceeding, judicial or otherwise, with respect to this Indenture or the Notes, or for the appointment of a receiver or trustee, or for any other remedy under this Indenture or the Notes, unless:
(1) the Holder has previously given to the Trustee written notice of a continuing Event of Default;
(2) Holders of at least 25% in aggregate principal amount of outstanding Notes have made written request to the Trustee to institute proceedings in respect of the Event of Default in its own name as Trustee under this Indenture;
(3) Holders have offered to the Trustee indemnity and/or security satisfactory to the Trustee against any costs, liabilities or expenses to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity and/or security has failed to institute any such proceeding; and
(5) during such 60-day period, the Holders of a majority in aggregate principal amount of the outstanding Notes have not given the Trustee a written direction that is inconsistent with such written request.
Section 6.07. Rights of Holders to Receive Payment. Notwithstanding anything to the contrary, the right of a Holder of a Note to receive payment of principal of or interest on its Note on or after the Stated Maturities thereof, or to bring suit for the enforcement of any such payment on or after such respective dates, may not be impaired or affected without the consent of that Holder.
Section 6.08. Collection Suit by Trustee. If an Event of Default in payment of principal or interest specified in clause (1) or (2) of Section 6.01 occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust for the whole amount of principal and accrued interest remaining unpaid, together with interest on overdue principal and overdue installments of interest, in each case at the rate specified in the Notes, and such further amount as is sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due to the Trustee hereunder.
Section 6.09. Trustee May File Proofs of Claim. The Trustee may file proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due to the Trustee hereunder) and the Holders allowed in any judicial proceedings relating to the Issuer or any Guarantor or their respective creditors or property, and is entitled and empowered to collect, receive and distribute any money, securities or other property payable or deliverable upon conversion or exchange of the Notes or upon any such claims. Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee and, if the Trustee consents to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due to the Trustee hereunder. To the extent that the payment of any such compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due to the Trustee under Section 6.09 hereof out of the estate in any such proceeding, shall be denied for any reason, payment of the same shall be secured by a Lien on, and shall be paid out of, any and all distributions, dividends, money, securities and other properties that the Holders may be entitled to receive in such proceeding whether in liquidation or under any plan of reorganization or arrangement or otherwise. Nothing in this Indenture will be deemed to empower the Trustee to authorize or consent to, or accept or adopt on behalf of any Holder, any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities. If the Trustee or the Agents collects any money pursuant to this Article, it shall pay out the money in the following order:
First: to the Trustee, the Agents and their respective agents for all amounts due hereunder;
Second: to Holders for amounts then due and unpaid for principal of and interest on the Notes, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest; and
Third: to the Issuer or as a court of competent jurisdiction may direct.
The Trustee, upon written notice to the Issuer, may fix a record date and payment date for any payment to Holders pursuant to this Section.
Section 6.11. Restoration of Rights and Remedies. If the Trustee or any Holder has instituted a proceeding to enforce any right or remedy under this Indenture and the proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to the Holder, then, subject to any determination in the proceeding, the Issuer, any Guarantors, the Trustee and the Holders will be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Issuer, any Guarantors, the Trustee and the Holders will continue as though no such proceeding had been instituted.
Section 6.12. Undertaking for Costs. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court may require any party litigant in such suit (other than the Trustee) to file an undertaking to pay the costs of the suit, and the court may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant (other than the Trustee) in the suit having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by a Holder to enforce payment of principal of or interest on any Note on the respective due dates, or a suit by Holders of more than 10% in principal amount of the outstanding Notes.
Section 6.13. Rights and Remedies Cumulative. No right or remedy conferred or reserved to the Trustee or to the Holders under this Indenture is intended to be exclusive of any other right or remedy, and all such rights and remedies are, to the extent permitted by law, cumulative and in addition to every other right and remedy hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or exercise of any right or remedy hereunder, or otherwise, will not prevent the concurrent assertion or exercise of any other right or remedy.
Section 6.14. Delay or Omission Not Waiver. No delay or omission of the Trustee or of any Holder to exercise any right or remedy accruing upon any Event of Default will impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.
Section 6.15. Waiver of Stay, Extension or Usury Laws. The Issuer and each Guarantor covenants, to the extent that it may lawfully do so, that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Issuer or the Guarantor from paying all or any portion of the principal of, or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture. The Issuer and each Guarantor hereby expressly waives, to the extent that it may lawfully do so, all benefit or advantage of any such law and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.
Article 7
The Trustee
Section 7.01. General. (a) The duties and responsibilities of the Trustee are as set forth herein. Whether or not expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee is subject to this Article. If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in its exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs. Except during the continuance of an Event of Default, the default of the Trustee shall be determined solely by the express provisions of this Indenture and the Trustee need perform only those duties that are specifically set forth in this Indenture and no others, and no implied covenants, duties or obligations shall be read into this Indenture against the Trustee.
(b) The Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture and in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall not be under any duty to examine the same to
determine whether or not they conform to the requirements of this Indenture and need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein.
(c) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own gross negligence or willful misconduct, except that:
(1) the Trustee will not be liable for any error of judgment made in good faith by a Responsible Officer; and
(2) the Trustee will not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers or for any action it takes or omits to take in accordance with the direction of the Holders in accordance with Section 6.05 relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture.
(d) The Trustee shall be under no obligation to exercise any of its rights or powers under this Indenture at the request or direction of any of the Holders unless the Holders have offered and if requested, provided to the Trustee indemnity and/or security satisfactory to the Trustee against any loss, liability or expense.
Section 7.02. Certain Rights of Trustee.
(1) In the absence of its own gross negligence or willful misconduct, the Trustee may rely, and will be protected in acting or refraining from acting, upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper Person. The Trustee need not investigate any fact or matter stated in the document, but, in the case of any document which is specifically required to be furnished to the Trustee pursuant to any provision hereof, the Trustee shall examine the document to determine whether it conforms to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). The Trustee, in its discretion, may make or require further inquiry or investigation into such facts or matters as it sees fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer and its Restricted Subsidiaries, personally or by agent or attorney at the sole cost of the Issuer and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.
(2) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel, both conforming to Section 11.05 and the Trustee will not be liable for any action it takes or omits to take in good faith in reliance on the certificate or opinion.
(3) The Trustee may act through its attorneys and agents and will not be responsible for the negligence or willful misconduct of any attorney or agent appointed with due care.
(4) The Trustee will be under no obligation to expend or risk its own funds, incur any liability, financial or otherwise, or exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders, unless such Holders have offered to the Trustee security and/or indemnity against the risks or the costs, expenses and liabilities that might be incurred by it.
(5) The Trustee may consult with counsel of its selection, and the written advice of such counsel or any Opinion of Counsel will be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.
(6) The Trustee shall have no duty to inquire as to the performance of the Issuer’s covenants in Article 4 hereof.
(7) The permissive right of the Trustee to act hereunder shall not be construed as a duty.
(8) The rights, privileges, protections, immunities and benefits given to the Trustee, including, but not limited to, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each Agent, custodian and other Person employed to act hereunder.
(9) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder, or expend any of its own funds in the performance of its duties thereunder.
(10) The Trustee may at any time request that the Issuer a deliver an Officers’ Certificate setting forth the specimen signatures and the names of individuals and/or titles of Officers authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate may be signed by any Person authorized to sign an Officers’ Certificate, including any Person specified as so authorized in any such certificate previously delivered and not superseded.
(11) The Trustee is not to be charged with knowledge of any Default or Event of Default or knowledge of any cure of any Default or Event of Default with respect to the Notes unless written notice of such Default or Event of Default or such cure has been received by a Responsible Officer of the Trustee at the Corporate Trust Office, and such notice references the Notes, the Issuer and this Indenture.
(12) The Trustee shall not incur any liability for not performing any act or fulfilling any duty, obligation or responsibility hereunder by reason of any
occurrence beyond the control of the Trustee (including but not limited to any act or provision of any present or future law or regulation or governmental authority, any act of God or war, civil unrest, local or national disturbance or disaster, any act of terrorism, or the unavailability of the Federal Reserve Bank wire or facsimile or other wire or communication facility).
(13) The Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within the rights or powers conferred upon it by this Indenture.
(14) Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuer shall be sufficient if signed by an Officer of the Issuer.
Section 7.03. The Trustee may retain professional advisors to assist it in performing its duties under this Indenture. The Trustee may consult with such professional advisors or with counsel, and the advice or opinion of such professional advisors or counsel with respect to legal or other matters relating to this Indenture and the Notes shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel.Individual Rights of Trustee. The Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not the Trustee. Any Agent may do the same with like rights.
Section 7.04. Trustee’s Disclaimer. The Trustee (i) makes no representation as to the validity or adequacy of this Indenture, any offering materials relating to the Notes, or the Notes, (ii) is not accountable for the Issuer’s use or application of the proceeds from the Notes, or any money paid to the Issuer or upon the Issuer’s direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee, and (iii) is not responsible for any statement in the Notes or any money paid to the Issuer or upon the Issuer’s direction under any provision of this Indenture, it shall not be responsible for the use or application of any money received by any Paying Agent other than the Trustee other than its certificate of authentication.
The Trustee does not assume any responsibility for any failure or delay in performance or any breach by the Issuer or any Guarantor under this Indenture. The Trustee shall not be responsible to the Holders or any other Person for any recitals, statements, information, representations or warranties contained in this Indenture or in any certificate, report, statement, or other document referred to or provided for in, or received by the Trustee under or in connection with, this Indenture; the validity, enforceability or collectability of any Obligations; the assets, liabilities, financial condition, results of operations, business, creditworthiness or legal status of any obligor; or for any failure of any obligor to perform its Obligations under this Indenture.
Section 7.05. Notice of Default. If any Default occurs and is continuing and is known to the Trustee, the Trustee will send notice of the Default to each Holder within ninety (90) days after it occurs, unless the Default has been cured; provided that, except in the case of a default in the payment of the principal of or interest on any Note, the Trustee may withhold the notice if and so long as the Board of Managers, the executive committee or a trust committee of directors of the Trustee in good faith determine that withholding the notice is in the interest of the Holders (it being understood that the Trustee does not have an affirmative duty to determine whether withholding the notice is in the interest of the Holders).
Any notice of Default, notice of acceleration or instruction to the Trustee to provide a notice of Default, notice of acceleration or take any other action (a “Noteholder Direction”) provided by any one or more Holders (other than a Regulated Bank) (each a “Directing Holder”) must be accompanied by a written representation from each such Holder delivered to the Issuer and the Trustee that such Holder is not (or, in the case such Holder is DTC or its nominee, that such Holder is being instructed solely by beneficial owners that are not) Net Short (a “Position Representation”),which representation, in the case of a Noteholder Direction relating to the delivery of a notice of Default shall be deemed a continuing representation until the resulting Event of Default is cured or otherwise ceases to exist or the notes are accelerated. In addition, each Directing Holder is deemed, at the time of providing a Noteholder Direction, to covenant to provide the Issuer with such other information as the Issuer may reasonably request from time to time in order to verify the accuracy of such Noteholder’s Position Representation within five Business Days of request therefor (a “Verification Covenant”). In any case in which the noteholder is DTC or its nominee, any Position Representation or Verification Covenant required hereunder shall be provided by the beneficial owner of the notes in lieu of DTC or its nominee, and DTC shall be entitled to conclusively rely on such Position Representation and Verification Covenant in delivering its direction to the Trustee.
If, following the delivery of a Noteholder Direction, but prior to acceleration of the notes, the Issuer determines in good faith that there is a reasonable basis to believe a Directing Holder was, at any relevant time, in breach of its Position Representation and provides to the Trustee an Officers’ Certificate certifying that the Issuer has (i) a good faith reasonable basis to believe that one or more Directing Holder were at any relevant time in breach of their Position Representation or their Verification Covenant and (ii) initiated litigation in a court of competent jurisdiction seeking a determination that such Directing Holder was, at such time, in breach of its Position Representation, and seeking to invalidate any Event of Default that resulted from the applicable Noteholder Direction, the cure period with respect to such Default shall be automatically stayed and the cure period with respect to such Event of Default shall be automatically reinstituted and any remedy stayed pending a final and non-appealable determination of a court of competent jurisdiction on such matter. If such Officers’ Certificate has been delivered to the Trustee, the Trustee shall refrain from acting in accordance with such Noteholder Direction until such time as the Issuer provides to the Trustee such Officers’ Certificate stating that (i) such Directing Holders have satisfied their Verification Covenant, or (ii) such Directing Holders have failed to satisfy its Verification Covenant, and during such time the cure
period with respect to such Default shall be automatically stayed and the cure period with respect to any Event of Default that resulted from the applicable Noteholder Direction shall be automatically reinstituted and any remedy stayed pending satisfaction of such Verification Covenant. Any breach of the Position Representation shall result in the Directing Holder’s participation in such Noteholder Direction being disregarded; and, if, without the participation of the Directing Holder, the percentage of notes held by the remaining noteholders that provided such Noteholder Direction would have been insufficient to validly provide such Noteholder Direction, such Noteholder Direction shall be void ab initio, with the effect that such Event of Default shall be deemed never to have occurred, acceleration voided and the Trustee shall be deemed not to have received such Noteholder Direction or any notice of such Default or Event of Default, shall not be permitted to act thereon and shall be restricted from accepting and acting on any future Noteholder Direction in relation to such Event of Default. If the Directing Holder has satisfied the Verification Covenant, then the Trustee shall be permitted to act in accordance with such Noteholder Direction. Notwithstanding the above, if such Directing Holder’s participation is not required to achieve the requisite level of consent of Holders required under this Indenture to give such Noteholder Direction, the Trustee shall be permitted to act in accordance with such Noteholder Direction notwithstanding any action taken or to be taken by the Issuer (as described above). The Trustee shall be entitled to conclusively rely on any Noteholder Direction or Officers’ Certificate delivered to it in accordance with this Indenture without verification, investigation or otherwise as to the statements made therein.
Notwithstanding anything in the preceding two paragraphs to the contrary, any Noteholder Direction delivered to the Trustee during the pendency of an Event of Default as the result of a bankruptcy or similar proceeding shall not require compliance with the foregoing paragraphs. In addition, for the avoidance of doubt, the foregoing paragraphs shall not apply to any noteholder that is a Regulated Bank.
For the avoidance of doubt, the Trustee shall be entitled to conclusively rely on any Noteholder Direction delivered to it in accordance with this Indenture, shall have no duty to inquire as to or investigate the accuracy of any Position Representation, enforce compliance with any Verification Covenant, verify any statements in any Officers’ Certificate delivered to it, or otherwise make calculations, investigations or determinations with respect to Derivative Instruments, Net Shorts, Long Derivative Instruments, Short Derivative Instruments or otherwise. The Trustee shall have no liability to the Issuer, any noteholder or any other Person in acting in good faith on a Noteholder Direction.
Each Holder by accepting a Note acknowledges and agrees that the Trustee (and any agent) shall not be liable to any party for acting or refraining to act in accordance with (i) the foregoing provisions, (ii) any Noteholder direction, (iii) any Officers’ Certificate or (iv) its duties under this Indenture. The Trustee shall have no obligation (i) to monitor, investigation, verify or otherwise determine if a Holder has a Net Short position, (ii) investigate the accuracy or authenticity of any Position Representation, (iii) inquire if the Issuer will seek action to determine if a Directing Holder has breached its Position Representation, (iv) enforce any Verification Covenant, (v) monitor any court proceedings undertaken in connection therewith, (vi) monitor or investigate whether any
Default or Event of Default has been publicly reported or (vii) otherwise make any calculations, investigations or determinations with respect to any Derivative Instruments, Net Short position, Long Derivative Instrument, Short Derivative Instrument or otherwise.
Section 7.06. [Reserved].
Section 7.07. Compensation and Indemnity. (a) The Issuer and the Guarantors, jointly and severally, will pay the Trustee and the Agents compensation as agreed upon in writing for their respective services. The compensation of the Trustee and the Agents are not limited by any law on compensation of a Trustee of an express trust. The Issuer and the Guarantors, jointly and severally, will reimburse the Trustee and the Agents promptly upon request for all reasonable out-of-pocket expenses, disbursements and advances incurred or made by the Trustee and the Agents, including the reasonable compensation and expenses of the Trustee’s and the Agents’ agents and counsel.
(b) The Issuer and the Guarantors, jointly and severally, will indemnify the Trustee and the Agents and their respective officers, directors, employees, agents and any predecessor trustee and its officers, directors, employees and agents (collectively, the “Indemnified Parties”), for, and hold the Indemnified Parties harmless against, any and all claim, loss or liability or expense (including, but not limited to, the reasonable fees and expenses of its legal counsel) of any kind incurred by it without gross negligence or willful misconduct on its part (as adjudicated by a court of competent jurisdiction in a final non-appealable decision) arising out of or in connection with the acceptance or administration of this Indenture and its duties under this Indenture and the Notes and the exercise of its rights hereunder, including the costs and expenses (legal or otherwise) of defending itself against any claim or liability and of complying with any process served upon it or any of its officers in connection with the acceptance, exercise or performance of any of its powers, rights or duties under this Indenture and the Notes. The provisions of this Section 7.07(b) shall survive the satisfaction and termination of this Indenture or the earlier resignation or removal of the Trustee or an Agent.
(c) To secure the Issuer’s payment obligations in this Section, the Trustee will have a lien prior to the Notes on all money or property held or collected by the Trustee, in its capacity as Trustee, except money or property held in trust to pay principal of, and interest on particular Notes. Such lien will survive the satisfaction and discharge of this Indenture or the resignation or removal of the Trustee.
(d) If the Trustee incurs expenses or renders services in connection with an Event of Default as specified herein, the expenses (including, but not limited to, the reasonable and documented charges and expenses of its legal counsel in each applicable jurisdiction) and the compensation for the services are intended to constitute expenses of administration under any applicable bankruptcy, reorganization, insolvency or similar law now or hereafter in effect.
(e) The obligations of the Issuer to make any payment to the Trustee or an Agent in respect of compensation, reimbursement, and/or indemnification shall be an obligation guaranteed by each Guarantor under the applicable Note Guarantee.
Section 7.08. Replacement of Trustee. (a) (1) The Trustee may resign at any time by written notice to the Issuer.
(2) The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by written notice to the Trustee.
(3) If the Trustee is no longer eligible under Section 7.10, any Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
(4) The Issuer may remove the Trustee if: (i) the Trustee is no longer eligible under Section 7.10; (ii) the Trustee is adjudged a bankrupt or an insolvent; (iii) a receiver or other public officer takes charge of the Trustee or its property; or (iv) the Trustee becomes incapable of acting.
A resignation or removal of the Trustee and appointment of a successor Trustee will become effective only upon the successor Trustee’s acceptance of appointment as provided in this Section.
(b) If the Trustee has been removed by the Holders, Holders of a majority in principal amount of the Notes may appoint a successor Trustee with the consent of the Issuer. Otherwise, if the Trustee resigns or is removed, or if a vacancy exists in the office of Trustee for any reason, the Issuer will promptly appoint a successor Trustee. If the successor Trustee does not deliver its written acceptance within 30 days after the retiring Trustee resigns or is removed, the retiring/removed Trustee, the Issuer or the Holders of a majority in principal amount of the outstanding Notes may at the cost of the Issuer petition any court of competent jurisdiction for the appointment of a successor Trustee.
(c) Upon delivery by the successor Trustee of a written acceptance of its appointment to the retiring Trustee and to the Issuer, (i) the retiring Trustee will, upon payment of all amounts owed to it under this Indenture, transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07, (ii) the resignation or removal of the retiring Trustee will become effective, and (iii) the successor Trustee will have all the rights, powers and duties of the Trustee under this Indenture. Upon request of any successor Trustee, the Issuer will execute any and all instruments for fully and vesting in and confirming to the successor Trustee all such rights, powers and trusts. The Issuer will give notice of any resignation and any removal of the Trustee and each appointment of a successor Trustee to all Holders, and include in the notice the name of the successor Trustee and the address of its Corporate Trust Office.
(d) Notwithstanding replacement of the Trustee pursuant to this Section, the Issuer’s obligations under Section 7.07 will continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act will be the
successor Trustee with the same effect as if the successor Trustee had been named as the Trustee in this Indenture.
Section 7.10. Eligibility. This Indenture must always have a Trustee that has a combined capital and surplus of at least $25,000,000 as set forth in its most recent published annual report of condition.
Section 7.11. Money Held in Trust. The Trustee will not be liable for interest on any money received by it except as it may agree with the Issuer. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law and except for money held in trust under Article 8.
Article 8
Defeasance and Discharge
Section 8.01. Discharge of Issuer’s Obligations. (a) Subject to paragraph (b), the Issuer’s obligations under the Notes and this Indenture, and each Guarantor’s obligations under its Note Guarantee, will terminate if:
(1) all Notes previously authenticated and delivered (other than (i) destroyed, lost or stolen Notes that have been replaced, (ii) Notes that are paid pursuant to Section 4.01 or (iii) Notes for whose payment money or U.S. Government Obligations have been held in trust and then repaid to the Issuer pursuant to Section 8.05) have been delivered to the Trustee for cancellation and the Issuer has paid all sums payable by it hereunder; or
(2) (A) the Notes mature within sixty (60) days, or all of them are to be called for redemption within sixty days under arrangements satisfactory to the Trustee for giving the notice of redemption;
(B) the Issuer irrevocably deposits in trust with the Trustee, as trust funds solely for the benefit of the Holders, money or U.S. Government Obligations or a combination thereof sufficient (in the case of U.S. Government Obligations, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants expressed in a written certificate delivered to the Trustee) without consideration of any reinvestment, to pay principal of and interest on the Notes to maturity or redemption, as the case may be, and to pay all other sums payable by it hereunder;
(C) no Default has occurred and is continuing on the date of the deposit;
(D) the deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Issuer is a party or by which it is bound; and
(E) the Issuer delivers to the Trustee an Officers, Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the satisfaction and discharge of this Indenture have been complied with.
(b) After satisfying the conditions in clause (1), only the Issuer’s obligations under Section 7.07 will survive. After satisfying the conditions in clause (2), only the Issuer’s obligations in Article 2 and Sections 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06 will survive. In either case, the Trustee upon written request will acknowledge in writing the discharge of the Issuer’s obligations under the Notes and this Indenture other than the surviving obligations.
Section 8.02. Legal Defeasance. After the deposit referred to in clause (1), the Issuer will be deemed to have paid and will be discharged from its obligations in respect of the Notes and this Indenture, other than its obligations in Article 2 and Sections 4.01, 4.02, 7.07, 7.08, 8.05 and 8.06, and each Guarantor’s obligations under its Note Guarantee will terminate, provided the following conditions have been satisfied:
(1) The Issuer has irrevocably deposited in trust with the Trustee, as trust funds solely for the benefit of the Holders, money or U.S. Government Obligations or a combination thereof sufficient ( on the case of U.S. Government Obligations, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants expressed in a written certificate delivered to the Trustee) without consideration of any reinvestment, to pay principal of and interest on the Notes to maturity or redemption, as the case may be, provided that any redemption before maturity has been irrevocably provided for under arrangements satisfactory to the Trustee.
(2) No Default has occurred and is continuing on the date of the deposit.
(3) The deposit will not result in a breach or violation of, or constitute a default under, this Indenture or any other agreement or instrument to which the Issuer is a party or by which it is bound.
(4) The Issuer has delivered to the Trustee:
(A) either (x) a ruling received from the Internal Revenue Service to the effect that the beneficial owners of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would otherwise have been the case or (y) an Opinion of Counsel, based on a change in law after the date of this Indenture, to the same effect as the ruling described in clause (x); and
(B) an Opinion of Counsel to the effect that (i) the creation of the defeasance trust does not violate the Investment Issuer Act of 1940,
(ii) the Holders have a valid first priority Note interest in the trust funds (subject to customary exceptions), and (iii) the trust funds will not be subject to the effect of Section 547 of the United States Bankruptcy Code or Section 15 of the New York Debtor and Creditor Law.
(5) If the Notes are listed on a national securities exchange, the Issuer has delivered to the Trustee an Opinion of Counsel to the effect that the deposit and defeasance will not cause the Notes to be delisted.
(6) The Issuer has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, in each case stating that all conditions precedent provided for herein relating to the defeasance have been complied with.
Prior to the deposit, none of the Issuer’s obligations under this Indenture will be discharged. Thereafter, the Trustee upon request will acknowledge in writing the discharge of the Issuer’s obligations under the Notes and this Indenture except for the surviving obligations specified above.
Section 8.03. Covenant Defeasance. After the deposit referred to in clause (1) of Section 8.02, the Issuer’s obligations set forth in Sections 4.06 through 4.15, inclusive and clauses (3) and (4) of Section 5.01(a)(iii), and each Guarantor’s obligations under its Note Guarantee, will terminate, and clauses (3), (4), (5), (6) and (9) of Section 6.01 will no longer constitute Events of Default, provided the following conditions have been satisfied:
(1) The Issuer has complied with clauses (1), (2), (3), 4(B), (5) and (6) of Section 8.02; and
(2) the Issuer has delivered to the Trustee an Opinion of Counsel to the effect that the beneficial owners of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of the defeasance and will be subject to federal income tax on the same amount and in the same manner and at the same times as would otherwise have been the case.
Except as specifically stated above, none of the Issuer’s obligations under this Indenture will be discharged.
Section 8.04. Application of Trust Money. Subject to Section 8.05, the Trustee will hold in trust the money or U.S. Government Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03, and apply the deposited money and the proceeds from deposited U.S. Government Obligations to the payment of principal of and interest on the Notes in accordance with the Notes and this Indenture. Such money and U.S. Government Obligations need not be segregated from other funds except to the extent required by law.
Section 8.05. Repayment to Issuer. Subject to Sections 7.07, 8.01, 8.02 and 8.03, the Trustee will promptly pay to the Issuer upon written request any excess money held by the Trustee at any time and thereupon be relieved from all liability with respect to
such money. The Trustee will pay to the Issuer upon written request any money held for payment with respect to the Notes that remains unclaimed for two years, provided that before making such payment the Trustee may at the expense of the Issuer publish once in a newspaper of general circulation in New York City, or send to each Holder entitled to such money, notice that the money remains unclaimed and that after a date specified in the notice (at least 30 days after the date of the publication or notice) any remaining unclaimed balance of money will be repaid to the Issuer. After payment to the Issuer, Holders entitled to such money must look solely to the Issuer for payment, unless applicable law designates another Person, and all liability of the Trustee with respect to such money will cease.
Section 8.06. Reinstatement. If and for so long as the Trustee is unable to apply any money or U.S. Government Obligations held in trust pursuant to Section 8.01, 8.02 or 8.03 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer’s obligations under this Indenture and the Notes will be reinstated as though no such deposit in trust had been made. If the Issuer makes any payment of principal of or interest on any Notes because of the reinstatement of its obligations, it will be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held in trust.
Article 9
Amendments, Supplements and Waivers
Section 9.01. Amendments Without Consent of Holders. The Issuer and the Trustee may amend or supplement this Indenture or the Notes without notice to or the consent of any Noteholder:
(1) to cure any ambiguity, defect or inconsistency in this Indenture or the Notes;
(2) to comply with Article 5;
(3) to comply with any requirements of the SEC in connection with the qualification of this Indenture under the Trust Indenture Act;
(4) to evidence and provide for the acceptance of an appointment hereunder by a successor Trustee;
(5) to provide for uncertificated Notes in addition to or in place of certificated Notes;
(6) to provide for any Guarantee of the Notes, to secure the Notes or to confirm and evidence the release, termination or discharge of any Guarantee of or Lien securing the Notes when such release, termination or discharge is permitted by this Indenture;
(7) to provide for or confirm the issuance of Additional Notes;
(8) to make any other change that does not materially and adversely affect the rights of any Holder; or
(9) to conform any provision of this Indenture or the Notes to the “Description of Notes” in the Offering Memorandum, as set forth in an Officers, Certificate.
Section 9.02. Amendments with Consent of Holders. (a) Except as otherwise provided in Sections 6.02, 6.04 and 6.07 or paragraph (b), the Issuer and the Trustee may amend this Indenture and the Notes with the written consent of the Holders of a majority in principal amount of the outstanding Notes, and the Holders of a majority in principal amount of the outstanding Notes by written notice to the Trustee may waive future compliance by the Issuer with any provision of this Indenture or the Notes.
(b) Notwithstanding the provisions of paragraph (a), without the consent of each Holder affected, an amendment or waiver may not:
(1) reduce the principal amount of or change the Stated Maturity of any installment of principal of any Note;
(2) reduce the rate of or change the Stated Maturity of any interest payment on any Note;
(3) reduce the amount payable upon the redemption of any Note or, in respect of an optional redemption, the times at which any Note may be redeemed or, once notice of redemption has been given, the time at which such Note must thereupon be redeemed (except as otherwise permitted by this Indenture);
(4) after the time a Change of Control Offer or an Asset Sale Offer is required to have been made, reduce the purchase amount or purchase price, or extend the latest expiration date or purchase date thereunder;
(5) make any Note payable in money other than that stated in the Note;
(6) impair the right of any Holder of Notes to receive any principal
payment or interest payment on such Holder’s Notes, on or after the Stated Maturity thereof, or to institute suit for the enforcement of any such payment;
(7) make any change in the percentage of the principal amount of the Notes required for amendments or waivers; or
(8) modify or change any provision of this Indenture affecting the ranking of the Notes or any Note Guarantee in a manner adverse to the Holders of the Notes.
(c) It is not necessary for Noteholders to approve the particular form of any proposed amendment, supplement or waiver, but is sufficient if their consent approves the substance thereof.
(d) An amendment, supplement or waiver under this Section will become effective on receipt by the Trustee of written consents from the Holders of the requisite percentage in principal amount of the outstanding Notes. After an amendment, supplement or waiver under this Section becomes effective, the Issuer will send to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. The Issuer will send supplemental indentures to Holders upon request. Any failure of the Issuer to send such notice, or any defect therein, will not, however, in any way impair or affect the validity of any such supplemental indenture or waiver.
Section 9.03. Effect of Consent. (a) After an amendment, supplement or waiver becomes effective, it will bind every Holder unless it is of the type requiring the consent of each Holder affected. If the amendment, supplement or waiver is of the type requiring the consent of each Holder affected, the amendment, supplement or waiver will bind each Holder that has consented to it and every subsequent Holder of a Note that evidences the same debt as the Note of the consenting Holder.
(b) If an amendment, supplement or waiver changes the terms of a Note, the Trustee may require the Holder to deliver it to the Trustee so that the Trustee may place an appropriate notation of the changed terms on the Note and return it to the Holder, or exchange it for a new Note that reflects the changed terms. The Trustee may also place an appropriate notation on any Note thereafter authenticated. However, the effectiveness of the amendment, supplement or waiver is not affected by any failure to annotate or exchange Notes in this fashion.
Section 9.04. Trustee’s Rights and Obligations. The Trustee is entitled to receive, and will be fully protected in relying upon, in addition to the documents required by Section 11.04 hereof, an Officer’s Certificate and/or Opinion of Counsel each stating that the execution of any amendment, supplement or waiver in accordance with the terms of this Article is authorized or permitted by this Indenture and that such amendment, supplement or waiver is the legal, valid and binding obligation of the Issuers and any Guarantor party thereto, enforceable against them in accordance with its terms, subject to customary exception, and complies with the provisions hereof. If the Trustee has received such an Officer’s Certificate and/or Opinion of Counsel, it shall sign the amendment, supplement or waiver so long as the same does not adversely affect the rights of the Trustee. The Trustee may, but is not obligated to, execute any amendment, supplement or waiver that affects the Trustee’s own rights, duties, indemnities or immunities under this Indenture.
Article 10
Note Guarantees
Section 10.01. The Note Guarantees. Subject to the provisions of this Article, each Guarantor hereby irrevocably and unconditionally guarantees, jointly and severally,
on an unsecured basis, the full and punctual payment (whether at Stated Maturity, upon redemption, purchase pursuant to an Offer to Purchase or acceleration, or otherwise) of the principal of, premium, if any, and interest on, and all other amounts payable under, each Note, and the full and punctual payment of all other amounts payable by the Issuer under this Indenture. Upon failure by the Issuer to pay punctually any such amount, each Guarantor shall forthwith on demand pay the amount not so paid at the place and in the manner specified in this Indenture.
Section 10.02. Note Guarantee Unconditional. The obligations of each Guarantor hereunder are unconditional and absolute and, without limiting the generality of the foregoing, will not be released, discharged or otherwise affected by:
(1) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Issuer under this Indenture or any Note, by operation of law or otherwise;
(2) any modification or amendment of or supplement to this Indenture or any Note;
(3) any change in the corporate existence, structure or ownership of the Issuer, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Issuer or its assets or any resulting release or discharge of any obligation of the Issuer contained in this Indenture or any Note;
(4) the existence of any claim, set-off or other rights which the Guarantor may have at any time against the Issuer, the Trustee or any other Person, whether in connection with this Indenture or any unrelated transactions, provided that nothing herein prevents the assertion of any such claim by separate suit or compulsory counterclaim;
(5) any invalidity or unenforceability relating to or against the Issuer for any reason of this Indenture or any Note, or any provision of applicable law or regulation purporting to prohibit the payment by the Issuer of the principal of or interest on any Note or any other amount payable by the Issuer under this Indenture; or
(6) any other act or omission to act or delay of any kind by the Issuer, the Trustee or any other Person or any other circumstance whatsoever which might, but for the provisions of this paragraph, constitute a legal or equitable discharge of or defense to such Guarantor’s obligations hereunder.
Section 10.03. Discharge; Reinstatement. Each Guarantor’s obligations hereunder will remain in full force and effect until the principal of, premium, if any, and interest on the Notes and all other amounts payable by the Issuer under this Indenture have been paid in full. If at any time any payment of the principal of, premium, if any, or interest on any Note or any other amount payable by the Issuer under this Indenture is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Issuer or otherwise, each Guarantor’s obligations hereunder with
respect to such payment will be reinstated as though such payment had been due but not made at such time.
Section 10.04. Waiver by the Guarantors. Each Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against the Issuer or any other Person.
Section 10.05. Subrogation and Contribution. Upon making any payment with respect to any obligation of the Issuer under this Article, the Guarantor making such payment will be subrogated to the rights of the payee against the Issuer with respect to such obligation, provided that the Guarantor may not enforce either any right of subrogation, or any right to receive payment in the nature of contribution, or otherwise, from any other Guarantor, with respect to such payment so long as any amount payable by the Issuer hereunder or under the Notes remains unpaid.
Section 10.06. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Issuer under this Indenture or the Notes is stayed upon the insolvency, bankruptcy or reorganization of the Issuer, all such amounts otherwise subject to acceleration under the terms of this Indenture are nonetheless payable by the Guarantors hereunder forthwith on demand by the Trustee or the Holders.
Section 10.07. Limitation on Amount of Note Guarantee. Notwithstanding anything to the contrary in this Article, each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent conveyance under applicable fraudulent conveyance provisions of the United States Bankruptcy Code or any comparable provision of state law. To effectuate that intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of each Guarantor under its Note Guarantee are limited to the maximum amount that would not render the Guarantor’s obligations subject to avoidance under applicable fraudulent conveyance provisions of the United States Bankruptcy Code or any comparable provision of state law.
Section 10.08. Execution and Delivery of Note Guarantee. The execution by each Guarantor of this Indenture (or a supplemental indenture in the form of Exhibit B) evidences the Note Guarantee of such Guarantor, whether or not the person signing as an officer of the Guarantor still holds that office at the time of authentication of any Note. The delivery of any Note by the Trustee after authentication constitutes due delivery of the Note Guarantee set forth in this Indenture on behalf of each Guarantor.
Section 10.09. Release of Note Guarantee. The Note Guarantee of a Guarantor will terminate upon:
(1) a sale, distribution, transfer or other disposition (including by way of consolidation or merger) of the Capital Stock of a Guarantor or the sale or disposition of all or substantially all the assets of a Guarantor (in each case, other
than, either before or after giving effect to the transaction, to the Issuer or a Restricted Subsidiary) in compliance with or in a manner not prohibited by the applicable provisions by this Indenture;
(2) the release or discharge of such other guarantee or direct obligation that resulted in the creation of such Note Guarantee, except a discharge or release by or as a result of payment under such guarantee or direct obligation (it being understood that a release subject to a contingent reinstatement will constitute a release for the purposes of this provision, and that if any such guarantee is so reinstated, such Note Guarantee shall also be reinstated to the extent that such Guarantor would then be required to provide a Guarantee pursuant to Section 4.10);
(3) the designation in accordance with this Indenture of the Guarantor as an Unrestricted Subsidiary;
(4) the occurrence of a Covenant Suspension Event;
(5) as described under Article 9; or
(6) defeasance or discharge of the Notes, as provided in Article 8.
Notwithstanding clause (4) above, if, after any Covenant Suspension Event, a Reversion Date shall occur, then the Suspension Period with respect to such Covenant Suspension Event shall terminate and all actions reasonably necessary to provide that the notes shall have been unconditionally guaranteed by each Guarantor (to the extent such guarantee is required by Section 4.10) shall be taken within 90 days after such Reversion Date or as soon as reasonably practicable thereafter.
Upon delivery by the Issuer to the Trustee of an Officers’ Certificate and an Opinion of Counsel to the foregoing effect, the Trustee will execute any documents reasonably requested by the Issuer in writing in order to evidence the release of the Guarantor from its obligations under its Note Guarantee.
Article 11
Miscellaneous
Section 11.01. [Reserved].
Section 11.02. Noteholder Communications; Noteholder Actions.
(a) (1) Any request, demand, authorization, direction, notice, consent to amendment, supplement or waiver or other action provided by this Indenture to be given or taken by a Holder (an “act”) may be evidenced by an instrument signed by the Holder delivered to the Trustee. The fact and date of the execution of the instrument, or the authority of the person executing it, may be proved in any manner that the Trustee deems sufficient.
(2) The Trustee may make reasonable rules for action by or at a meeting of Holders, which will be binding on all the Holders.
(b) Any act by the Holder of any Note binds that Holder and every subsequent Holder of a Note that evidences the same debt as the Note of the acting Holder, even if no notation thereof appears on the Note. Subject to Section 11.02(a)(2), a Holder may revoke an act as to its Notes, but only if the Trustee receives the notice of revocation before the date the amendment or waiver or other consequence of the act becomes effective.
(c) The Issuer may, but is not obligated to, fix a record date for the purpose of determining the Holders entitled to act with respect to any amendment or waiver or in any other regard, except that during the continuance of an Event of Default, only the Trustee may set a record date as to notices of default, any declaration or acceleration or any other remedies or other consequences of the Event of Default. If a record date is fixed, those Persons that were Holders at such record date and only those Persons will be entitled to act, or to revoke any previous act, whether or not those Persons continue to be Holders after the record date. No act will be valid or effective for more than 90 days after the record date.
Section 11.03. Notices. (a) Any notice or communication to the Issuer will be deemed given if in writing (i) when delivered in person or (ii) five days after mailing when mailed by first class mail, or (iii) when sent electronically or by facsimile transmission, with transmission confirmed. Notices or communications to a Guarantor will be deemed given if given to the Issuer. Any notice to the Trustee will be effective only upon receipt by a Responsible Officer. In each case the notice or communication should be addressed as follows:
if to the Issuer:
Home Point Capital Inc.
2211 Old Earhart Road
Ann Arbor, Michigan 48105
Email: legal@hpfc.com
if to the Trustee:
U.S. Bank National Association
Global Corporate Trust
1 Federal Street, 10th Floor
Boston, Massachusetts 02110
The Issuer or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.
(b) Except as otherwise expressly provided with respect to published notices, any notice or communication to a Holder will be deemed given when mailed to the
Holder at its address as it appears on the Register by first class mail or, as to any Global Note registered in the name of DTC or its nominee, as agreed by the Issuer, the Trustee and DTC. Copies of any notice or communication to a Holder, if given by the Issuer, will be mailed to the Trustee at the same time. Defect in mailing a notice or communication to any particular Holder will not affect its sufficiency with respect to other Holders.
(c) Where this Indenture provides for notice, the notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and the waiver will be the equivalent of the notice. Waivers of notice by Holders must be filed with the Trustee, but such filing is not a condition precedent to the validity of any action taken in reliance upon such waivers.
(d) In respect of this Indenture, none of the Trustee nor any Agent shall have any duty or obligation to verify or confirm that the Person sending instructions, directions, reports, notices or other communications or information by electronic transmission (including by e-mail, facsimile transmission, web portal or other electronic methods) is, in fact, a Person authorized to give such instructions, directions, reports, notices or other communications or information on behalf of the party purporting to send such electronic transmission; and none of the Trustee nor any Agent shall have any liability for any losses, liabilities, costs or expenses incurred or sustained by any party as a result of such reliance upon or compliance with such instructions, directions, reports, notices or other communications or information, unless such reliance or compliance was based on gross negligence or willful misconduct on the part of the Trustee or the Agent (as finally adjudicated by a court of competent jurisdiction in a final non-appealable decision), respectively. Each other party agrees to assume all risks arising out of the use of electronic methods to submit instructions, directions, reports, notices or other communications or information to the Trustee and/or any Agent, including without limitation the risk of the Trustee and/or any Agent acting on unauthorized instructions, notices, reports or other communications or information, to the extent such action was not based on gross negligence or willful misconduct of the Trustee or such Agent (as finally adjudicated by a court of competent jurisdiction in a final non-appealable decision), and the risk of interception and misuse by third parties.
Trustee shall not have any duty to confirm that the person sending any notice, instruction or other communication by electronic transmission (including by e-mail, facsimile transmission, web portal or other electronic methods) is, in fact, a person authorized to do so. Electronic signatures believed by the Trustee to comply with the ESIGN Act of 2000 or other applicable law (including electronic images of handwritten signatures and digital signatures provided by DocuSign, Orbit, Adobe Sign or any other digital signature provider acceptable to the Trustee) shall be deemed original signatures for all purposes and the Trustee shall be entitled to indemnification for its reliance on any signatures provided in this manner, as provided in this Agreement. Notwithstanding the foregoing, the Trustee may in any instance and in its sole discretion require that an original document bearing a manual signature be delivered to the Trustee in lieu of, or in addition to, any such electronic notice.
Section 11.04. Certificate and Opinion as to Conditions Precedent. Upon any request or application by the Issuer to the Trustee to take any action under this Indenture, the Issuer will furnish to the Trustee:
(1) an Officers’ Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that all such conditions precedent have been complied with.
Section 11.05. Statements Required in Certificate or Opinion. Each certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture must include:
(1) a statement that each person signing the certificate or opinion has read the covenant or condition and the related definitions;
(2) a brief statement as to the nature and scope of the examination or investigation upon which the statement or opinion contained in the certificate or opinion is based;
(3) a statement that, in the opinion of each such person, that person has made such examination or investigation as is necessary to enable the person to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such person, such condition or covenant has been complied with, provided that an Opinion of Counsel may rely on an Officers’ Certificate or certificates of public officials with respect to matters of fact.
Section 11.06. Payment Date Other Than a Business Day. If any payment with respect to a payment of any principal of, premium, if any, or interest on any Note (including any payment to be made on any date fixed for redemption or purchase of any Note) is due on a day which is not a Business Day, then the payment need not be made on such date, but may be made on the next Business Day with the same force and effect as if made on such date, and no interest will accrue for the intervening period.
Section 11.07. Governing Law. This Indenture (including any Note Guarantees), and the Notes, and any claim controversy or dispute arising under or related to this Indenture (including any Note Guarantees) or the Notes, shall be governed by, and construed in accordance with, the laws of the State of New York.
Section 11.08. No Adverse Interpretation of Other Agreements. This Indenture may not be used to interpret another indenture or loan or debt agreement of the Issuer or any Subsidiary of the Issuer, and no such indenture or loan or debt agreement may be used to interpret this Indenture.
Section 11.09. Successors. All agreements of the Issuer or any Guarantor in this Indenture and the Notes will bind its successors. All agreements of the Trustee in this Indenture will bind its successor.
Section 11.10. Duplicate Originals. The parties may sign any number of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement.
Section 11.11. Separability. In case any provision in this Indenture or in the Notes is invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.
Section 11.12. Table of Contents and Headings. The Table of Contents, Cross-Reference Table and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part of this Indenture and in no way modify or restrict any of the terms and provisions of this Indenture.
Section 11.13. No Liability of Directors, Officers, Employees, Incorporators, Members and Shareholders. No director, officer, employee, incorporator, manager, member or shareholder of the Issuer or any Guarantor, as such, will have any liability for any obligations of the Issuer or such Guarantor under the Notes, any Note Guarantee or this Indenture or for any claim based on, in respect of, or by reason of, such obligations. Each Holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes.
Section 11.14. Patriot Act. In order to comply with the laws, rules, regulations and executive orders in effect from time to time applicable to banking institutions, including, but not limited to, those relating to the funding of terrorist activities and money laundering, including Section 326 of the USA PATRIOT Act of the United States (“Applicable Law”),the Trustee is required to obtain, verify, record and update certain information relating to individuals and entities which maintain a business relationship with the Trustee. Accordingly, each of the parties agree to provide to the Trustee, upon its request from time to time such identifying information and documentation as may be available for such party in order to enable the Trustee to comply with Applicable Law.
Section 11.15. Waiver of Jury Trial. EACH OF THE ISSUER, THE GUARANTORS, THE HOLDERS AND THE TRUSTEE 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 INDENTURE, THE NOTES OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 11.16. Special, Consequential and Indirect Damages. In no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective
of whether such Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.
Execution Version
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above.
HOME POINT CAPITAL INC. as Issuer | |||
By: | /s/ Mark Elbaum | ||
Name: Mark Elbaum | |||
Title: Chief Financial Officer | |||
HOME POINT FINANCIAL CORPORATION, as | |||
a Guarantor | |||
By: | /s/ Mark Elbaum | ||
Name: Mark Elbaum | |||
Title: Acting Chief Financial Officer | |||
HPC INSURANCE AGENCY, LLC, as a | |||
Guarantor | |||
By: | /s/ Mark Elbaum | ||
Name: Mark Elbaum | |||
Title: Chief Financial Officer |
U.S. BANK NATIONAL ASSOCIATION | ||
as Trustee | ||
By: | /s/ Karen R. Beard | |
Name: Karen R. Beard | ||
Title: Vice President |
[Signature page to the Indenture]
EXHIBIT A
[FACE OF NOTE]
HOME POINT CAPITAL INC.
5.000 % Senior Note Due 2026
CUSIP ________
ISIN ________
No. _____ | $______________ |
HOME POINT CAPITAL INC., a Delaware corporation (the “Issuer”, which term includes any successor under the Indenture hereinafter referred to), for value received, promises to pay to , or its registered assigns, the principal sum of DOLLARS ($___________) [or such other amount as indicated on the Schedule of Exchange of Notes attached hereto] on February 1, 2026.
Interest Rate: 5.000% per annum.
Interest Payment Dates: February 1 and August 1, commencing August 1, 2021.
Regular Record Dates: January 15 and July 15.
Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which will for all purposes have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually or by facsimile by its duly authorized officers.
HOME POINT CAPITAL INC. | ||
By: | ||
Name: | ||
Title: |
This is one of the 5.000% Senior Notes Due 2026 described in the Indenture referred to in this Note.
Date: | ||
U.S. BANK NATIONAL ASSOCIATION | ||
as Trustee | ||
By: | ||
Authorized Signatory |
[REVERSE SIDE OF NOTE]
HOME POINT CAPITAL INC.
5.000% Senior Note Due 2026
1. | Principal and Interest. |
The Issuer promises to pay the principal of this Note on February 1, 2026.
The Issuer promises to pay interest on the principal amount of this Note on each interest payment date, as set forth on the face of this Note, at the rate of 5.000% per annum.
Interest will be payable semiannually (to the holders of record of the Notes at the close of business on the February 1 and August 1 immediately preceding the interest payment date) on each interest payment date, commencing August 1, 2021.
Interest on this Note will accrue from the most recent date to which interest has been paid on this Note (or, if there is no existing default in the payment of interest and if this Note is authenticated between a regular record date and the next interest payment date, from such interest payment date) or, if no interest has been paid, from [the Issue Date].1 Interest will be computed in the basis of a 360-day year of twelve 30-day months.
Interest not paid when due and any interest on principal, premium or interest not paid when due will be paid to the Persons that are Holders on a special record date, which will be the 15th day preceding the date fixed by the Issuer for the payment of such interest, whether or not such day is a Business Day. At least 15 days before a special record date, the Issuer will send to each Holder and to the Trustee a notice that sets forth the special record date, the payment date and the amount of interest to be paid.
2. | Indentures; Note Guarantee. |
This is one of the Notes issued under an Indenture dated as of January 19, 2021 (as amended from time to time, the “Indenture”), between the Issuer and U.S. Bank National Association, as Trustee. Capitalized terms used herein are used as defined in the Indenture unless otherwise indicated. The terms of the Notes include those stated in the Indenture. The Notes are subject to all such terms, and Holders are referred to the Indenture for a statement of all such terms. To the extent permitted by applicable law, in the event of any inconsistency between the terms of this Note and the terms of the Indenture, the terms of the Indenture will control.
The Notes are general unsecured obligations of the Issuer. The Indenture limits the original aggregate principal amount of the Notes to $550,000,000, but Additional Notes may be issued pursuant to the Indenture, and the originally issued Notes and all
1 | Revise as appropriate for any Additional Notes |
such Additional Notes will be treated as a single class for all purposes under the Indenture and will vote together as a single class on all matters with respect to the Notes; provided, however, that if any such Additional Notes are not fungible with the Initial Notes for U.S. federal income tax purposes, such Additional Notes will have a separate CUSIP number. This Note is guaranteed, as set forth in the Indenture.
3. | Redemption and Repurchase; Discharge Prior to Redemption or Maturity. |
This Note is subject to optional redemption, and may be the subject of an Offer to Purchase, as further described in the Indenture. There is no sinking fund or mandatory redemption applicable to this Note.
If the Issuer deposits with the Trustee money or U.S. Government Obligations sufficient (in the case of U.S. Government Obligations, in the opinion of a nationally recognized investment bank, appraisal firm or firm of independent public accountants expressed in a written certificate delivered to the Trustee) without consideration of any reinvestment, to pay the then outstanding principal of, premium, if any, and accrued and unpaid interest on the Notes to redemption or maturity, the Issuer may in certain circumstances be discharged from the Indenture and the Notes or may be discharged from certain of its obligations under certain provisions of the Indenture.
4. | Registered Form; Denominations; Transfer; Exchange. |
The Notes are in registered form without coupons in denominations of $2,000 principal amount and any integral multiple of $1,000 in excess thereof. A Holder may register the transfer or exchange of Notes in accordance with the Indenture. The Trustee may require a Holder to furnish appropriate endorsements and transfer documents and to pay any taxes and fees required by law or permitted by the Indenture. Pursuant to the Indenture, there are certain periods during which the Trustee will not be required to issue, register the transfer of or exchange any Note or certain portions of a Note.
5. | Defaults and Remedies. |
If an Event of Default, as defined in the Indenture, occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Notes may declare all the Notes to be due and payable. If a bankruptcy or insolvency default with respect to the Issuer occurs and is continuing, the Notes automatically become due and payable. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity and/or security satisfactory to it to be furnished before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the Notes then outstanding may direct the Trustee in its exercise of remedies.
6. | Amendment and Waiver. |
Subject to certain exceptions, the Indenture and the Notes may be amended, or default may be waived, with the consent of the Holders of a majority in principal amount of the outstanding Notes. Without notice to or the consent of any Holder, the Issuer and
the Trustee may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency.
7. Authentication.
This Note is not valid until the Trustee (or Authenticating Agent) signs the certificate of authentication on the other side of this Note.
8. Governing Law.
This Note, and any claim, controversy or dispute arising under or related to this Note, shall be governed by, and construed in accordance with, the laws of the State of New York.
9. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).
The Issuer will furnish a copy of the Indenture to any Holder upon written request and without charge.
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
Please print or typewrite name and address including zip code of assignee
the within Note and all rights thereunder, hereby irrevocably constituting and appointing
attorney to transfer said Note on the books of the Issuer with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES BEARING A RESTRICTED LEGEND]
In connection with any transfer of this Note, the undersigned confirms that such transfer is made without utilizing any general solicitation or general advertising and further as follows:
Check One
☐ (1) This Note is being transferred to a “qualified institutional buyer” in compliance with Rule 144A under the Securities Act of 1933, as amended and certification in the form of Exhibit F to the Indenture is being furnished herewith.
☐ (2) This Note is being transferred to a Non-U.S. Person in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Regulation S thereunder, and certification in the form of Exhibit E to the Indenture is being furnished herewith.
or
☐ (3) This Note is being transferred other than in accordance with (1) or (2) above and documents are being furnished which comply with the conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee is not obligated to register this Note in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in the Indenture have been satisfied.
Date: ____________________
_________________________
Seller
By ______________________
NOTICE: The signature to this assignment must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. |
Signature Guarantee1 | |||
By | |||
To be executed by an executive officer |
1 Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Trustee, which requirements include membership or participation in the Securities Transfer Association Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Trustee in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.
Execution Version
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have all of this Note purchased by the Issuer pursuant to Section 4.11 or Section 4.12 of the Indenture, check the box:
☐ Section 4.11 (Repurchase of Notes Upon a Change of Control)
☐ Section 4.12 (Asset Sales)
If you wish to have a portion of this Note purchased by the Issuer pursuant to Section 4.11 or Section 4.12 of the Indenture, state the amount (in original principal amount) below:
$________________
Date: ____________________
Your Signature: _____________________________________
(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:1 ______________________________________
Execution Version
SCHEDULE OF EXCHANGES OF NOTES
The following exchanges of a part of this Global Note for Certificated Notes or a part of another Global Note have been made:
Date of Exchange |
Amount of decrease in principal amount of this Global Note |
Amount of increase in principal amount of this Global Note |
Principal amount of this Global Note following such decrease (or increase) |
Signature of authorized officer of Trustee |
EXHIBIT B
SUPPLEMENTAL INDENTURE
dated as of ,
among
HOME POINT CAPITAL INC.,
The Guarantor(s) Party Hereto
and
U.S. BANK NATIONAL ASSOCIATION
As Trustee
5.000% Senior Notes due 2026
THIS SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), entered into as of , , among HOME POINT CAPITAL INC., a Delaware corporation (the “Issuer”),[insert each Guarantor executing this Supplemental Indenture and its jurisdiction of incorporation] (each an “Undersigned”) and U.S. Bank National Association, as trustee (the “Trustee”).
RECITALS
WHEREAS, the Issuer and the Trustee entered into the Indenture, dated as of January 19, 2021 (the “Indenture”), relating to the Issuer’s 5.000% Senior Notes due 2026 (the “Notes”);
WHEREAS, as a condition to the Trustee entering into the Indenture and the purchase of the Notes by the Holders, the Issuer agreed pursuant to the Indenture to cause any newly acquired or created Domestic Restricted Subsidiaries (other than Securitization Entities) to provide Note Guarantees.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained and intending to be legally bound, the parties to this Supplemental Indenture hereby agree as follows:
Section 1. Capitalized terms used herein and not otherwise defined herein are used as defined in the Indenture.
Section 2. Each Undersigned, by its execution of this Supplemental Indenture, agrees to be a Guarantor under the Indenture and to be bound by the terms of the Indenture applicable to Guarantors, including, but not limited to, Article 10 thereof.
Section 3. The Trustee, by execution of this Supplemental Indenture, accepts the amendments to the Indenture effected by this Supplemental Indenture, subject to the terms and conditions set forth in the Indenture, including the terms and conditions defining and limiting the liabilities and responsibilities of the Trustee and Agents. Without limiting the generality of the foregoing, neither the Trustee nor any Agent shall be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained in this Supplemental Indenture, which recitals or statements are made solely by the Issuer and each Undersigned, or for or with respect to (i) the validity or sufficiency of this Supplemental Indenture or any of the terms or provisions hereof, (ii) the proper authorization hereof by the Issuer and each Undersigned by action or otherwise, (iii) the due execution hereof by the Issuer and each Undersigned or (iv) the consequences of any amendment herein provided for, and neither the Trustee nor any Agent makes any representation with respect to any such matters.
Section 4. Each of the Issuer and each Undersigned hereby represents and warrants that this Supplemental Indenture is its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.
Section 5. This Supplemental Indenture, and any claim, controversy, or dispute arising under or related to this Supplemental Indenture, shall be governed by and construed in accordance with the laws of the State of New York.
Section 6. This Supplemental Indenture may be signed in various counterparts which together will constitute one and the same instrument.
Section 7. This Supplemental Indenture is an amendment supplemental to the Indenture and the Indenture and this Supplemental Indenture will henceforth be read together.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.
HOME POINT CAPITAL INC. | ||
as Issuer | ||
By: | ||
Name: | ||
Title: | ||
[GUARANTORS] | ||
As Guarantors | ||
By: | ||
Name: | ||
Title: | ||
U.S. BANK NATIONAL ASSOCIATION | ||
as Trustee | ||
By: | ||
Name: | ||
Title: |
EXHIBIT C
RESTRICTED LEGEND
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE ACQUIRER (1) REPRESENTS THAT (A) IT AND ANY ACCOUNT FOR WHICH IT IS ACTING IS A ‘‘QUALIFIED INSTITUTIONAL BUYER’’ (WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT) AND THAT IT EXERCISES SOLE INVESTMENT DISCRETION WITH RESPECT TO EACH SUCH ACCOUNT, (B) IT IS AN INSTITUTIONAL ‘‘ACCREDITED INVESTOR’’ (WITHIN THE MEANING OF RULE 501(a) (1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN ‘‘INSTITUTIONAL ACCREDITED INVESTOR’’) OR (C) IT IS NOT A U.S. PERSON (WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT) AND (2) AGREES FOR THE BENEFIT OF THE ISSUER THAT IT WILL NOT OFFER, SELL, PLEDGE OR OTHERWISE TRANSFER THIS NOTE OR ANY BENEFICIAL INTEREST HEREIN, EXCEPT IN ACCORDANCE WITH THE SECURITIES ACT AND ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND ONLY (A) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BECOME EFFECTIVE UNDER THE SECURITIES ACT, (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D) IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (E) IN A PRINCIPAL AMOUNT OF NOT LESS THAN $100,000, TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, DELIVERS TO THE TRUSTEE A DULY COMPLETED AND SIGNED CERTIFICATE (THE FORM OF WHICH MAY BE OBTAINED FROM THE TRUSTEE) RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE, OR (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (2)(C) ABOVE OR (2)(D) ABOVE, A DULY COMPLETED AND SIGNED CERTIFICATE (THE FORM OF WHICH MAY BE OBTAINED FROM THE TRUSTEE) MUST BE DELIVERED TO THE TRUSTEE. PRIOR TO THE REGISTRATION OF ANY TRANSFER IN ACCORDANCE WITH (2)(E) OR (F) ABOVE, THE ISSUER RESERVES THE RIGHT TO REQUIRE THE DELIVERY OF SUCH LEGAL OPINIONS, CERTIFICATIONS OR OTHER EVIDENCE AS MAY REASONABLY BE REQUIRED IN ORDER TO DETERMINE THAT THE PROPOSED TRANSFER IS BEING MADE IN COMPLIANCE WITH THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. NO REPRESENTATION IS MADE AS
TO THE AVAILABILITY OF ANY RULE 144 EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
BY ITS ACQUISITION OF THIS SECURITY, THE HOLDER HEREOF
WILL BE DEEMED TO HAVE REPRESENTED AND WARRANTED THAT EITHER (1) NO PORTION OF THE ASSETS USED BY SUCH HOLDER TO ACQUIRE OR HOLD THIS SECURITY CONSTITUTES THE ASSETS OF AN EMPLOYEE BENEFIT PLAN THAT IS SUBJECT TO TITLE I OF THE U.S. EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1975, AS AMENDED (‘‘ERISA’’), OF A PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER ARRANGEMENT THAT IS SUBJECT TO SECTION 4975 OF THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE ‘‘CODE’’) OR PROVISIONS UNDER ANY
OTHER U.S. FEDERAL, STATE, LOCAL, NON-U.S. OR OTHER LAWS OR REGULATIONS THAT ARE SIMILAR TO SUCH PROVISIONS OF ERISA OR THE CODE (‘‘SIMILAR LAWS’’), OR OF AN ENTITY WHOSE UNDERLYING ASSETS ARE CONSIDERED TO INCLUDE ‘‘PLAN ASSETS’’ OF ANY SUCH PLAN,
ACCOUNT OR ARRANGEMENT, OR (2) THE ACQUISITION, HOLDING AND SUBSEQUENT DISPOSITION OF THIS SECURITY WILL NOT CONSTITUTE A NON-EXEMPT PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR A SIMILAR VIOLATION UNDER ANY
APPLICABLE SIMILAR LAWS.
EXHIBIT D
DTC LEGEND
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST ISSUER, A NEW YORK CORPORATION (“DTC”), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS A BENEFICIAL INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE ARE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE TRANSFER PROVISIONS OF THE INDENTURE.
EXHIBIT E
Regulation S Certificate
U.S. Bank National Association
Global Corporate Trust
1 Federal Street, 10th Floor
Boston, MA 02110
Re: Home Point Capital Inc. 5.000% Senior Notes due 2026 (the “Notes”) Issued under the Indenture (the “Indenture”) dated as of January 19, 2021 relating to the Notes |
Ladies and Gentlemen:
Terms are used in this Certificate as used in Regulation S (“Regulation S”)under the Securities Act of 1933, as amended (the “Securities Act”), except as otherwise stated herein.
[CHECK A OR B AS APPLICABLE.]
□ A. This Certificate relates to our proposed transfer of $________ principal amount of Notes issued under the Indenture. We hereby certify as follows:
1. | The offer and sale of the Notes was not and will not be made to a person in the United States (unless such person is excluded from the definition of “U.S. person” pursuant to Rule 902(k)(2)(vi) or the account held by it for which it is acting is excluded from the definition of “U.S. person” pursuant to Rule 902(k)(2)(i) under the circumstances described in Rule 902(h)(3)) and such offer and sale was not and will not be specifically targeted at an identifiable group of U.S. citizens abroad. |
2. | Unless the circumstances described in the parenthetical in paragraph 1 above are applicable, either (a) at the time the buy order was originated, the buyer was outside the United States or we and any person acting on our behalf reasonably believed that the buyer was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market, and neither we nor any person acting on our behalf knows that the transaction was pre-arranged with a buyer in the United States. |
3. | Neither we, any of our affiliates, nor any person acting on our or their behalf has made any directed selling efforts in the United States with respect to the Notes. |
4. | The proposed transfer of Notes is not part of a plan or scheme to evade the registration requirements of the Securities Act. |
5. | If we are a dealer or a person receiving a selling concession, fee or other remuneration in respect of the Notes, and the proposed transfer takes place during the Restricted Period (as defined in the Indenture), or we are an officer or director of the Issuer or an Initial Purchaser (as defined in the Indenture), we certify that the proposed transfer is being made in accordance with the provisions of Rule 904(b) of Regulation S. |
□ B. This Certificate relates to our proposed exchange of $________ principal amount of Notes issued under the Indenture for an equal principal amount of Notes to be held by us. We hereby certify as follows:
1. | At the time the offer and sale of the Notes was made to us, either (i) we were not in the United States or (ii) we were excluded from the definition of “U.S. person” pursuant to Rule 902(k)(2)(vi) or the account held by us for which we were acting was excluded from the definition of “U.S. person” pursuant to Rule 902(k)(2)(i) under the circumstances described in Rule 902(h)(3); and we were not a member of an identifiable group of U.S. citizens abroad. |
2. | Unless the circumstances described in paragraph 1(ii) above are applicable, either (a) at the time our buy order was originated, we were outside the United States or (b) the transaction was executed in, on or through the facilities of a designated offshore securities market and we did not pre-arrange the transaction in the United States. |
3. | The proposed exchange of Notes is not part of a plan or scheme to evade the registration requirements of the Securities Act. |
You and the Issuer are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours, |
[NAME OF SELLER (FOR TRANSFERS) |
OR OWNER (FOR EXCHANGES)] |
By: | ||
Name: |
Title: | ||
Address: | ||
Date: |
EXHIBIT F
Rule 144A Certificate
U.S. Bank National Association
Global Corporate Trust
1 Federal Street, 10th Floor
Boston, MA 02110
Re: Home Point Capital Inc. 5.000% Senior Notes due 2026 (the “Notes”) Issued under the Indenture (the “Indenture”) dated as of January 19, 2021 relating to the Notes |
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
□ A. Our proposed purchase of $_____ principal amount of Notes issued under the Indenture.
□ B. Our proposed exchange of $_____ principal amount of Notes issued under the Indenture for an equal principal amount of Notes to be held by us.
We and, if applicable, each account for which we are acting in the aggregate owned and invested more than $100,000,000 in securities of issuers that are not affiliated with us (or such accounts, if applicable), as of , 20__, which is a date on or since close of our most recent fiscal year. We and, if applicable, each account for which we are acting, are a qualified institutional buyer within the meaning of Rule 144A (“Rule 144A”)under the Securities Act of 1933, as amended (the “Securities Act”). If we are acting on behalf of an account, we exercise sole investment discretion with respect to such account. We are aware that the transfer of Notes to us, or such exchange, as applicable, is being made in reliance upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. Prior to the date of this Certificate we have received such information regarding the Issuer as we have requested pursuant to Rule 144A(d)(4) or have determined not to request such information.
You and the Issuer are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any
administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours, | |||
[NAME OF PURCHASER (FOR TRANSFERS) OR OWNER (FOR EXCHANGES)] | |||
By: | |||
Name: | |||
Title: | |||
Address: | |||
Date: |
EXHIBIT G
Institutional Accredited Investor Certificate
U.S. Bank National Association
Global Corporate Trust
1 Federal Street, 10th Floor
Boston, MA 02110
Re: Home Point Capital Inc.
5.000% Senior Notes due 2026 (the “Notes”)
Issued under the Indenture (the “Indenture”) dated as
of January 19, 2021 relating to the Notes |
Ladies and Gentlemen:
This Certificate relates to:
[CHECK A OR B AS APPLICABLE.]
☐ | A. Our proposed purchase of $ _____ principal amount of Notes issued under the Indenture. |
☐ | B. Our proposed exchange of $____ principal amount of Notes issued under the Indenture for an equal principal amount of Notes to be held by us. |
We hereby confirm that:
1. | We are an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the “Securities Act”) (an “Institutional Accredited Investor”). |
2. | Any acquisition of Notes by us will be for our own account or for the account of one or more other Institutional Accredited Investors as to which we exercise sole investment discretion. |
3. | We have such knowledge and experience in financial and business matters that we are capable of evaluating the merits and risks of an investment in the Notes and we and any accounts for which we are acting are able to bear the economic risks of and an entire loss of our or their investment in the Notes. |
4. | We are not acquiring the Notes with a view to any distribution thereof in a transaction that would violate the Securities Act or the securities laws of |
any state of the United States or any other applicable jurisdiction; provided that the disposition of our property and the property of any accounts for which we are acting as fiduciary will remain at all times within our and their control.
5. | We acknowledge that the Notes have not been registered under the Securities Act and that the Notes may not be offered or sold within the United States or to or for the benefit of U.S. persons except as set forth below. |
6. | The principal amount of Notes to which this Certificate relates is at least equal to $250,000. |
We agree for the benefit of the Issuer, on our own behalf and on behalf of each account for which we are acting, that such Notes may be offered, sold, pledged or otherwise transferred only in accordance with the Securities Act and any applicable securities laws of any state of the United States and only (a) to the Issuer or any of its Subsidiaries, (b) pursuant to a registration statement which has become effective under the Securities Act, (c) to a qualified institutional buyer in compliance with Rule 144A under the Securities Act, (d) in an offshore transaction in compliance with Rule 904 of Regulation S under the Securities Act, (e) in a principal amount of not less than $250,000, to an Institutional Accredited Investor that, prior to such transfer, delivers to the Trustee a duly completed and signed certificate (the form of which may be obtained from the Trustee) relating to the restrictions on transfer of the Notes or (f) pursuant to an exemption from registration provided by Rule 144 under the Securities Act or any other available exemption from the registration requirements of the Securities Act.
Prior to the registration of any transfer in accordance with (c) or (d) above, we acknowledge that a duly completed and signed certificate (the form of which may be obtained from the Trustee) must be delivered to the Trustee. Prior to the registration of any transfer in accordance with (e) or (f) above, we acknowledge that the Issuer reserves the right to require the delivery of such legal opinions, certifications or other evidence as may reasonably be required in order to determine that the proposed transfer is being made in compliance with the Securities Act and applicable state securities laws. We acknowledge that no representation is made as to the availability of any Rule 144 exemption from the registration requirements of the Securities Act.
We understand that the Trustee will not be required to accept for registration of transfer any Notes acquired by us, except upon presentation of evidence satisfactory to the Issuer and the Trustee that the foregoing restrictions on transfer have been complied with. We further understand that the Notes acquired by us will be in the form of definitive physical certificates and that such certificates will bear a legend reflecting the substance of the preceding paragraph. We further agree to provide to any person acquiring any of the Notes from us a notice advising such person that resales of the Notes are restricted as stated herein and that certificates representing the Notes will bear a legend to that effect.
We agree to notify you promptly in writing if any of our acknowledgments, representations or agreements herein ceases to be accurate and complete.
We represent to you that we have full power to make the foregoing acknowledgments, representations and agreements on our own behalf and on behalf of any account for which we are acting.
You and the Issuer are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours, | |||
[NAME OF PURCHASER (FOR TRANSFERS) OR OWNER (FOR EXCHANGES)] |
|||
By: | |||
Name: | |||
Title: | |||
Address: |
Date: |
Upon transfer, the Notes would be registered in the name of the new beneficial owner as follows:
By: |
Date: |
Taxpayer ID number: |
EXHIBIT H
[COMPLETE FORM I OR FORM II AS APPLICABLE.]
[FORM I]
Certificate of Beneficial Ownership
U.S. Bank National Association
Global Corporate Trust
1 Federal Street, 10th Floor
Boston, MA 02110
Re: | Home Point Capital Inc. | |
5.000% Senior Notes due 2026 (the “Notes”) | ||
Issued under the Indenture (the “Indenture”) dated as of January 19, 2021 relating to the Notes |
Ladies and Gentlemen:
We are the beneficial owner of $_____ principal amount of Notes issued under the Indenture and represented by a Temporary Offshore Global Note (as defined in the Indenture).
We hereby certify as follows:
[CHECK A OR B AS APPLICABLE.]
☐ | A. | We are a Non-U.S. person (within the meaning of Regulation S under the Securities Act of 1933, as amended). |
☐ | B. | We are a U.S. person (within the meaning of Regulation S under the Securities Act of 1933, as amended) that purchased the Notes in a transaction that did not require registration under the Securities Act of 1933, as amended. |
You and the Issuer are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
Very truly yours, | |||
[NAME OF BENEFICIAL OWNER] | |||
By: | |||
Name: | |||
Title: | |||
Address: |
Date: |
[FORM II]
Certificate of Beneficial Ownership
To: | U.S. Bank National Association |
Global Corporate Trust
1 Federal Street, 10th Floor
Boston, MA 02110
Re: | Home Point Capital Inc. |
5.000% Senior Notes due 2026 (the “Notes”)
Issued under the Indenture (the “Indenture”) dated as
of January 19, 2021 relating to the Notes
Ladies and Gentlemen:
This is to certify that based solely on certifications we have received in writing, by tested telex or by electronic transmission from Institutions appearing in our records as persons being entitled to a portion of the principal amount of Notes represented by a Temporary Offshore Global Note issued under the above-referenced Indenture, that as of the date hereof, $__ principal amount of Notes represented by the Temporary Offshore
Global Note being submitted herewith for exchange is beneficially owned by persons that are either (i) Non-U.S. persons (within the meaning of Regulation S under the Securities Act of 1933, as amended) or (ii) U.S. persons that purchased the Notes in a transaction that did not require registration under the Securities Act of 1933, as amended.
We further certify that (i) we are not submitting herewith for exchange any portion of such Temporary Offshore Global Note excepted in such certifications and (ii) as of the date hereof we have not received any notification from any Institution to the effect that the statements made by such Institution with respect to any portion of such Temporary Offshore Global Note submitted herewith for exchange are no longer true and cannot be relied upon as of the date hereof.
You and the Issuer are entitled to rely upon this Certificate and are irrevocably authorized to produce this Certificate or a copy hereof to any interested party in any administrative or legal proceeding or official inquiry with respect to the matters covered hereby.
Yours faithfully, | |||
[Name of DTC Participant] | |||
By: | |||
Name: | |||
Title: | |||
Address: |
Date: |
EXHIBIT I
THIS NOTE IS A TEMPORARY GLOBAL NOTE. PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD APPLICABLE HERETO, BENEFICIAL INTERESTS HEREIN MAY NOT BE HELD BY ANY PERSON OTHER THAN (1) A NON-U.S. PERSON OR (2) A U.S. PERSON THAT PURCHASED SUCH INTEREST IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). BENEFICIAL INTERESTS HEREIN ARE NOT EXCHANGEABLE FOR CERTIFICATED NOTES OTHER THAN A PERMANENT GLOBAL NOTE IN ACCORDANCE WITH THE TERMS OF THE INDENTURE. TERMS IN THIS LEGEND ARE USED AS USED IN REGULATION S UNDER THE SECURITIES ACT.
NO BENEFICIAL OWNERS OF THIS TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE PAYMENT OF PRINCIPAL OR INTEREST HEREON UNTIL SUCH BENEFICIAL INTEREST IS EXCHANGED OR TRANSFERRED FOR AN INTEREST IN ANOTHER NOTE.
EXHIBIT J
[FORM OF NET SHORT REPRESENTATION]
[●], 20[●]
Home Point Capital Inc.
2211 Old Earhart Road
Ann Arbor, Michigan 48105
U.S. Bank National Association
Global Corporate Trust
1 Federal Street, 10th Floor
Boston, MA 02110
Home Point Capital Inc. and U.S. Bank National Association, a national banking association, as trustee (the “Trustee”) have heretofore executed an indenture, dated as of January 19, 2021 (as amended, supplemented or otherwise modified, the “Indenture”), providing for the issuance of the Company’s 5.000% Senior Notes due 2026 (the “Notes”). All terms used herein and not otherwise defined shall have the meaning ascribed to such term under the Indenture.
This letter constitutes a Position Representation in connection with a Noteholder Direction delivered pursuant to Section 7.05 of the Indenture, whereby the undersigned, as Directing Holder, represents to each of the Company and the Trustee that [it is] [its beneficial owners are] not Net Short.
By: | |||
Name: [Holder] | |||
Title: |
Simpson Thacher & Bartlett llp
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425 lexington avenue
new york, ny 10017-3954
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telephone: +1-212-455-2000
facsimile: +1-212-455-2502
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Direct Dial Number
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E-mail Address
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Simpson Thacher & Bartlett LLP
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Home Point Capital Inc.
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-2-
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January 22, 2021
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Very truly yours, |
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/s/ Simpson Thacher & Bartlett LLP |
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SIMPSON THACHER & BARTLETT LLP |
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
Exhibit 10.5.2
TIAA BANK
Warehouse Finance
301 W. Bay Street
Jacksonville, FL 32202
Home Point Financial Corporation
2211 Old Earhart Road, Suite 250
Ann Arbor MI 48105
Attention: [***]
Email: [***]
Re: | Second Amendment to the Amended and Restated Master Repurchase Agreement and Amended and Restated Pricing Letter (“Second Amendment”). |
Ladies and Gentlemen:
This Second Amendment, effective as of January 13, 2021 (the “Amendment Effective Date”), amends that certain Amended and Restated Pricing Letter dated September 18, 2020, as amended, (the “Pricing Letter”), and that Amended and Restated Master Repurchase Agreement dated September 18, 2020, as amended (the “Repurchase Agreement”) by and between Home Point Financial Corporation (the “Seller), TIAA, FSB, formerly known as EverBank (as Administrative Agent for the Buyers and as “Buyer”) and Capital One, National Association (as “Buyer”). The Repurchase Agreement and Pricing Letter are sometimes collectively referred to herein as the, “Agreement”.
WHEREAS, Seller and Buyer have agreed to amend the Agreement as set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Amendments.
(a) The following definition contained in the Repurchase Agreement is hereby amended and restated in their entirety as follows:
““Indebtedness” shall mean, with respect to any Person, total liabilities, as reported on that Person’s balance sheet and calculated in accordance with GAAP including any liabilities of others guaranteed by such Person, but excluding liabilities associated with Mortgage Loans serviced by Seller that are eligible for repurchase pursuant to Chapter 18 of the Ginnie Mae MBS Guide.”
(b) Section 12(bb) of the Repurchase Agreement is hereby amended and restated in its entirety as follows:
“(bb) Indebtedness. Seller shall provide the Administrative Agent notice of any new credit facility, Warehouse Facility, servicing rights financing facility or similar facility (however structured) under which the maximum outstanding amount constituting Indebtedness may exceed [***]”
SECTION 2. Defined Terms. Any terms capitalized but not otherwise defined herein should have the respective meanings set forth in the Agreement.
SECTION 3. Limited Effect. Except as amended hereby, the Agreement shall continue in full force and effect in accordance with its terms. Reference to this Second 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 4. Representations. In order to induce Buyers to execute and deliver this Second Amendment, Seller hereby represents and warrants to Buyers that as of the date hereof, except as otherwise expressly waived by Buyers in writing, Seller is in full compliance with all of the terms and conditions of the Facility Documents, including without limitation all of the representations and warranties and all of the affirmative and negative covenants, and no Default or Event of Default has occurred and is continuing under the Agreement.
SECTION 5. Governing Law. This Second Amendment and any claim, controversy or dispute arising under or related to or in connection with this Second Amendment, the relationship of the parties, and/or the interpretation and enforcement of the rights and duties of the parties will be governed by the laws of the State of New York without regard to any conflicts of law principles other than Sections 5-1401 and 5-1402 of the New York General Obligations Law, which shall govern.
SECTION 6. Counterparts. This Second Amendment may be executed in two (2) or more counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same agreement. This Second Amendment, to the extent signed and delivered by facsimile or other electronic means, shall be treated in all manner and respects as an original agreement and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No signatory to this Second Amendment shall raise the use of a facsimile machine or other electronic means to deliver a signature or the fact that any signature or agreement was transmitted or communicated through the use of a facsimile machine or other electronic means as a defense to the formation or enforceability of a contract and each such Person forever waives any such defense.
SECTION 7. Fees. There are no transaction, document or modification fees due and owing as a result of this Second Amendment.
THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK
IN WITNESS WHEREOF, Seller and Buyer have caused this Second Amendment to be executed and delivered by their duly authorized officers as of the Amendment Effective Date.
HOME POINT FINANCIAL CORPORATION
as Seller
By: | /s/ Joseph Ruhlin | |
Name: Joseph Ruhlin | ||
Title: Treasurer |
TIAA, FSB, f/k/a EVERBANK
as Buyer
By: | /s/ Mark Bucior | |
Name: Mark Bucior | ||
Title: Vice President |
CAPITAL ONE, NATIONAL ASSOCIATION
as Buyer
By: | /s/ Paul Spiridigliozzi | |
Name: Paul Spiridigliozzi | ||
Title: Managing Director |
Signature Page to the Second Amendment to the Pricing Letter–Home Point Financial Corporation
Page
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Article I Definitions
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1
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SECTION 1.1.
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Definitions
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1
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SECTION 1.2.
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Construction
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5
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Article II Corporate Governance
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5
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SECTION 2.1.
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Board of Directors
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5
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SECTION 2.2.
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Committees
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7
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SECTION 2.3.
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Consent Rights
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7
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SECTION 2.4.
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Controlled Company.
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8
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SECTION 2.5.
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Permitted Disclosure
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8
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Article III Information
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8
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SECTION 3.1.
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Books and Records; Access; Certain Reports
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8
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Article IV Miscellaneous
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9
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SECTION 4.1.
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Termination
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9
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SECTION 4.2.
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Indemnification.
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9
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SECTION 4.3.
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Amendments and Waivers
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11
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SECTION 4.4.
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Successors, Assigns and Transferees
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11
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SECTION 4.5.
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Third Parties
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11
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SECTION 4.6.
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Notices
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11
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SECTION 4.7.
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Further Assurances
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12
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SECTION 4.8.
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Entire Agreement
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12
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SECTION 4.9.
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Restrictions on Other Agreements; Bylaws.
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12
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SECTION 4.10.
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Delays or Omissions
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12
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SECTION 4.11.
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Governing Law; Jurisdiction; Waiver of Jury Trial
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13
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SECTION 4.12.
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Severability
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13
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SECTION 4.13.
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Enforcement
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13
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SECTION 4.14.
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Titles and Subtitles
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13
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SECTION 4.15.
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No Recourse
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13
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SECTION 4.16.
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Counterparts; Facsimile Signatures
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14
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SECTION 4.17.
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Effectiveness
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14
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HOME POINT CAPITAL INC.
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TRIDENT VI, L.P.
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By: Stone Point Capital LLC, its manager
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TRIDENT VI PARALLEL FUND, L.P.
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By: Stone Point Capital LLC, its manager
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By:
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Name:
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Title:
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TRIDENT VI DE PARALLEL FUND, L.P.
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By: Stone Point Capital LLC, its manager
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By:
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Name:
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TRIDENT VI PROFESSIONALS FUND, L.P.
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By: Stone Point Capital LLC, its manager
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By:
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Name:
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Title:
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[NAME OF TRANSFEROR]
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Name:
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Title:
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[NAME OF TRANSFEREE]
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Name:
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Title:
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By:
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PARTICIPANT
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HOME POINT CAPITAL INC.
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(a)
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(b)
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(c)
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(d) = (Common Unit FMV / IPO Price)
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(e) = (b) * (d)
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(f) = (c) / (d)
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(g) = 10th anniversary of (a)
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Date of Option Grant Agreement of Original Options
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Number of Common Units Subject to Original Options
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Exercise Price Per Common Unit of Original Option
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Exchange Ratio
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Number of Substitute Options Granted Hereunder
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Exercise Price of Substitute Options
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Expiration Date of Option Period of Substitute Option
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EXECUTION VERSION
Exhibit 10.18
MASTER REPURCHASE AGREEMENT AND SECURITIES CONTRACT
between
BANK OF MONTREAL,
as Buyer
and
HOME POINT FINANCIAL CORPORATION,
as Seller
Dated as of January 8, 2021
TABLE OF CONTENTS
Page(s) | |||
Section 1. | Applicability; Transaction Overview | 1 | |
Section 2. | Definitions | 1 | |
Section 3. | No Commitment; Initiation; Termination | 24 | |
Section 4. | Repurchases | 30 | |
Section 5. | Income Payments; Price Differential | 31 | |
Section 6. | Requirements Of Law | 32 | |
Section 7. | Margin Maintenance | 34 | |
Section 8. | Taxes | 34 | |
Section 9. | Security Interest; Buyer’s Appointment as Attorney-in-Fact | 38 | |
Section 10. | Payment, Transfer and Remittance | 41 | |
Section 11. | Hypothecation or Pledge of Purchased Mortgage Loans | 42 | |
Section 12. | [Reserved] | 42 | |
Section 13. | Representations | 42 | |
Section 14. | Covenants Of Seller | 47 | |
Section 15. | Events Of Default | 55 | |
Section 16. | Remedies | 58 | |
Section 17. | Indemnification and Expenses | 61 | |
Section 18. | Servicing | 62 | |
Section 19. | Recording of Communications | 64 | |
Section 20. | Due Diligence | 64 | |
Section 21. | Assignability | 64 | |
Section 22. | Transfer and Maintenance of Register | 65 | |
Section 23. | Tax Treatment | 66 |
Section 24. | Set-Off | 66 | |
Section 25. | Terminability | 67 | |
Section 26. | Notices And Other Communications | 67 | |
Section 27. | Entire Agreement; Severability; Single Agreement | 67 | |
Section 28. | GOVERNING LAW | 68 | |
Section 29. | SUBMISSION TO JURISDICTION; WAIVERS | 68 | |
Section 30. | No Waivers, etc. | 69 | |
Section 31. | Netting | 69 | |
Section 32. | Confidentiality | 69 | |
Section 33. | Intent | 71 | |
Section 34. | Conflicts | 72 | |
Section 35. | Authorizations | 72 | |
Section 36. | Miscellaneous | 72 | |
Section 37. | Recognition of the U.S. Special Resolution Regimes | 73 | |
Section 38. | Effect of Benchmark Transition Event | 73 | |
Section 39. | General Interpretive Principles | 74 |
SCHEDULE 1-A | REPRESENTATIONS AND WARRANTIES RE: MORTGAGE LOANS |
SCHEDULE 1-B | REPRESENTATIONS AND WARRANTIES RE: POOLED MORTGAGE LOANS |
SCHEDULE 2 | AUTHORIZED REPRESENTATIVES |
SCHEDULE 3 | INDEBTEDNESS OF SELLER |
EXHIBIT A | [RESERVED] |
EXHIBIT B | [RESERVED] |
EXHIBIT C | EVIDENCE OF BUYER LISTED AS LOSS PAYEE OF FIDELITY INSURANCE POLICY, ERRORS AND OMISSIONS INSURANCE POLICY, AND PROFESSIONAL LIABILITY INSURANCE POLICY |
EXHIBIT D | FORM OF SECTION 8 CERTIFICATE |
EXHIBIT E | ASSET SCHEDULE FIELDS |
EXHIBIT F | FORM OF POWER OF ATTORNEY |
EXHIBIT G | FORM OF OFFICER’S COMPLIANCE CERTIFICATE |
MASTER REPURCHASE AGREEMENT AND SECURITIES CONTRACT
This is a MASTER REPURCHASE AGREEMENT AND SECURITIES CONTRACT, dated as of January 8, 2021, between Home Point Financial Corporation, a New Jersey corporation (“Seller”), and BANK OF MONTREAL, a Canadian Chartered bank acting through its Chicago Branch (“Buyer”).
Section 1. Applicability; Transaction Overview. From time to time, upon the terms and conditions set forth herein, the parties hereto may enter into transactions, on an uncommitted basis, in which Seller agrees to transfer to Buyer certain Mortgage Loans and all right, title and interest (including the Servicing Rights (as hereinafter defined)) in and to the Mortgage Loans against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Mortgage Loans against the transfer of funds by Seller. Each such transaction involving the transfer of Mortgage Loans shall be referred to herein as a “Transaction” and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in any annexes identified herein, as applicable hereunder. This Agreement is not a commitment by Buyer to engage in the Transactions, but sets forth the requirements under which Buyer would consider entering into Transactions set forth herein.
Section 2. Definitions. As used herein, the following terms shall have the following meanings.
“Accelerated Repurchase Date” shall have the meaning set forth in Section 16(a)(i) hereof.
“Acceptable State” shall mean any state acceptable pursuant to the Underwriting Guidelines in which Seller is licensed to originate Mortgage Loans.
“Accepted Servicing Practices” shall mean, with respect to any Mortgage Loan, those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans (a) of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located, (b) serviced in accordance with Fannie Mae, Freddie Mac, or Government Agency servicing practices and procedures, as applicable, (c) in accordance with the terms of the related Mortgage Note and Mortgage, and (d) in accordance with applicable law and regulations, including the servicing standards promulgated by the Consumer Financial Protection Bureau.
“Adjusted Tangible Net Worth” shall mean, for any Person, Net Worth of such Person plus Subordinated Debt (if approved for purposes of this calculation by Buyer in its sole discretion), minus all intangible assets, goodwill, patents, tradenames, trademarks, copyrights, franchises, any organizational expenses, receivables from shareholders, Affiliates or employees, any other asset as shown as an intangible asset on the balance sheet of such Person on a consolidated basis as determined at a particular date in accordance with GAAP.
“Affiliate” shall mean with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person; provided that other than the Seller and its Subsidiaries, no other portfolio company of Stone Point Capital LLC or its affiliates shall be deemed an Affiliate of Seller. For the purposes of this definition, “control”
means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise and the terms “controlling,” “controlled by” and “under common control with” have meanings correlative to the meaning of “control.”
“Agency” means Freddie Mac, Fannie Mae or Ginnie Mae, as applicable.
“Agency Approvals” shall have the meaning set forth in Section 13(ff) hereof.
“Agency Eligible Mortgage Loan” means a Mortgage Loan that is in compliance with the eligibility requirements for swap or purchase by an Agency, under the applicable Agency guidelines and/or Agency Program.
“Agency Program” means the specific mortgage backed securities swap program under the applicable Agency guidelines or as otherwise approved by an Agency pursuant to which the Agency Security is to be issued.
“Agency Security” means a mortgage-backed security issued by an Agency.
“Aggregate Facility Purchase Price” shall mean, as of any date of determination, the sum of the Purchase Prices (as of such date of determination) of all Purchased Mortgage Loans then subject to a Transaction.
“Agreement” shall mean this Master Repurchase Agreement and Securities Contract between Buyer and Seller, dated as of the date hereof as the same may be amended, restated, supplemented or otherwise modified in accordance with the terms hereof.
“Anti-Corruption Laws” shall have the meaning set forth in Section 13(cc) hereof.
“Anti-Money Laundering Laws” shall have the meaning set forth in Section 13(aa) hereof.
“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.
“Asset Schedule” shall mean with respect to any Transaction as of any date, an asset schedule in the form of a computer tape or other electronic medium (including an Excel spreadsheet) generated by Seller and delivered to Buyer and the Custodian, which provides information (including, without limitation, the information set forth on Exhibit E attached hereto) relating to the Purchased Mortgage Loans in a format reasonably acceptable to Buyer.
“Asset Value” means with respect to any Purchased Mortgage Loan that is a Government Mortgage Loan, as of any date of determination, an amount equal to the product of (i) the Purchase Price Percentage for the applicable Purchased Mortgage Loan and (ii) the lesser of (a) the outstanding principal balance of such Purchased Mortgage Loan or (b) the Market Value of such Purchased Mortgage Loan. Without limiting the generality of the foregoing, Seller acknowledges that the Asset Value of a Purchased Mortgage Loan may be reduced to zero by Buyer if:
(i) a Purchased Mortgage Loan Issue has occurred and such Purchased Mortgage Loan has not been repurchased by Seller;
(ii) the related Mortgage File has been released from the possession of the Custodian under the Custodial and Disbursement Agreement for a period in excess of the time permitted therefor under the Custodial and Disbursement Agreement;
(iii) such Purchased Mortgage Loan has been subject to a Transaction hereunder for a period of greater than the Maximum Transaction Duration identified on the Pricing Side Letter for such Purchased Mortgage Loan;
(iv) Buyer has determined in its good faith discretion that such Purchased Mortgage Loan is not eligible for whole loan sale or securitization in a transaction consistent with the prevailing sale and securitization industry;
(v) such Purchased Mortgage Loan is a Wet-Ink Mortgage Loan for which the Mortgage File has not been delivered to the Custodian on or prior to the Wet-Ink Mortgage Loan Document Receipt Date;
(vi) when the Purchase Price for such Purchased Mortgage Loan is added to the Purchase Price for all Purchased Mortgage Loans, the aggregate Purchase Price of all Wet-Ink Mortgage Loans exceeds the Wet-Ink Mortgage Loan Limit; or
(vii) when the Purchase Price of such Purchased Mortgage Loan is added to other Purchased Mortgage Loans, the aggregate Purchase Price of all Purchased Mortgage Loans exceeds the Maximum Aggregate Purchase Price.
“Assignment and Acceptance” shall have the meaning set forth in Section 21 hereof.
“Assignment of Mortgage” shall mean 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 sale of the Mortgage.
“Authorized Representative” shall mean, for the purposes of this Agreement only, an agent or Responsible Officer of Seller and Buyer listed on Schedule 2 hereto, as such Schedule 2 may be amended from time to time.
“Bailee Letter” shall mean a bailee letter substantially in the form prescribed by the Custodial and Disbursement Agreement or otherwise approved in writing by Buyer in its sole discretion.
“Bankruptcy Code” shall mean the United States Bankruptcy Code of 1978, as amended from time to time.
“Benchmark Replacement” shall mean the sum of: (a) the alternate benchmark rate (which may include Term SOFR) that has been selected by Buyer giving due consideration to (i) any selection or recommendation of a replacement rate or the mechanism for determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market
convention for determining a rate of interest as a replacement to the LIBOR Rate for U.S. dollar-denominated syndicated or bilateral credit facilities and (b) the Benchmark Replacement Adjustment; provided that, if the Benchmark Replacement as so determined would be less than zero, the Benchmark Replacement will be deemed to be zero for the purposes of this Agreement.
“Benchmark Replacement Adjustment” shall mean, with respect to any replacement of the LIBOR Rate with an Unadjusted Benchmark Replacement for each applicable Price Differential Collection Period, the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected by Buyer giving due consideration to (i) any selection or recommendation of a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the LIBOR Rate with the applicable Unadjusted Benchmark Replacement by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the LIBOR Rate with the applicable Unadjusted Benchmark Replacement for U.S. dollar-denominated syndicated or bilateral credit facilities at such time.
“Benchmark Replacement Conforming Changes” shall mean, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to timing and frequency of determining rates and making payments of Price Differential, prepayment provisions, and other administrative matters) that Buyer decides may be appropriate to reflect the adoption and implementation of such Benchmark Replacement and to permit the administration thereof by Buyer in a manner substantially consistent with market practice (or, if Buyer decides that adoption of any portion of such market practice is not administratively feasible or if Buyer determines that no market practice for the administration of the Benchmark Replacement exists, in such other manner of administration as Buyer decides is reasonably necessary in connection with the administration of this Agreement).
“Benchmark Replacement Date” shall mean the earlier to occur of the following events with respect to the LIBOR Rate:
(a) in the case of clause (1) or (2) of the definition of “Benchmark Transition Event,” the later of the date of the public statement or publication of information referenced therein and (b) the date on which the administrator of the LIBOR Rate permanently or indefinitely ceases to provide the LIBOR Rate; or
(b) in the case of clause (3) of the definition of “Benchmark Transition Event,” the date of the public statement or publication of information referenced therein.
“Benchmark Transition Event” shall mean the occurrence of one or more of the following events with respect to LIBOR:
(1) a public statement or publication of information by or on behalf of the administrator of the LIBOR Rate announcing that such administrator has ceased or will cease to provide the LIBOR Rate, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the LIBOR Rate;
(2) a public statement or publication of information by the regulatory supervisor for the administrator of the LIBOR Rate, the U.S. Federal Reserve System, an insolvency official with jurisdiction over the administrator for LIBOR, a resolution authority with jurisdiction over the administrator for the LIBOR Rate or a court or an entity with similar insolvency or resolution authority over the administrator for the LIBOR Rate, which states that the administrator of the LIBOR Rate has ceased or will cease to provide the LIBOR Rate permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the LIBOR Rate; or
(3) a public statement or publication of information by the regulatory supervisor for the administrator of the LIBOR Rate announcing that the LIBOR Rate is no longer representative.
“Benchmark Transition Start Date” shall mean (a) in the case of a Benchmark Transition Event, the earlier of (i) the applicable Benchmark Replacement Date and (ii) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the [***] day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective event is fewer than [***] after such statement or publication, the date of such statement or publication) and (b) in the case of an Early Opt-in Election, the date specified by notice to a Responsible Officer of Seller.
“Benchmark Unavailability Period” shall mean, if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to LIBOR and solely to the extent that LIBOR has not been replaced with a Benchmark Replacement, the period (x) beginning at the time that such Benchmark Replacement Date has occurred if, at such time, no Benchmark Replacement has replaced LIBOR for all purposes hereunder in accordance with this Agreement and (y) ending at the time that a Benchmark Replacement has replaced LIBOR for all purposes hereunder pursuant to this Agreement.
“Business Day” shall mean any day other than (i) a Saturday or Sunday, (ii) a day upon which the Federal Reserve Bank of New York is closed or banking and savings and loan institutions in the States of New York, Minnesota, Michigan, Texas, California, Illinois or the City of New York are closed, or (iii) with respect to any day on which the parties hereto have obligations to Custodian or on which Custodian has obligations to any party hereto, a day upon which Custodian’s offices are closed.
“Buyer” shall mean Bank of Montreal, its successors in interest and permitted assigns, and with respect to Section 8, its participants.
“Capital Lease” shall mean, with respect to any Person, any lease of, or other arrangement conveying the right to use, any Property by such Person as lessee that has been or should be accounted for as a capital lease on a balance sheet of such Person prepared in accordance with GAAP.
“Capital Lease Obligations” shall mean, at any time, with respect to any Capital Lease, any lease entered into as part of any sale leaseback transaction of any Person or any synthetic
lease, the amount of all obligations of such Person that is (or that would be, if such synthetic lease or other lease were accounted for as a Capital Lease) capitalized on a balance sheet of such Person prepared in accordance with GAAP.
“Cash Equivalents” shall mean (a) any readily-marketable securities (i) issued by, or directly, unconditionally and fully guaranteed or insured by the United States federal government or (ii) issued by any agency of the United States federal government the obligations of which are fully backed by the full faith and credit of the United States federal government, (b) any readily-marketable direct obligations issued by any other agency of the United States federal government, any state of the United States or any political subdivision of any such state or any public instrumentality thereof, in each case having a rating of at least “A-1” from S&P or at least “P-1” from Moody’s, (c) any commercial paper rated at least “A-1” by S&P or “P-1” by Moody’s and issued by any Person organized under the laws of any state of the United States, (d) any Dollar-denominated time deposit, insured certificate of deposit, overnight bank deposit or bankers’ acceptance issued or accepted by (i) Buyer or (ii) any commercial bank that is (A) organized under the laws of the United States, any state thereof or the District of Columbia, (B) “adequately capitalized” (as defined in the regulations of its primary federal banking regulators) and (C) has Tier 1 capital (as defined in such regulations) in excess of [***] and (e) shares of any United States money market fund that (i) has substantially all of its assets invested continuously in the types of investments referred to in clause (a), (b), (c) or (d) above with maturities as set forth in the proviso below, (ii) has net assets in excess of [***] and (iii) has obtained from either S&P or Moody’s the highest rating obtainable for money market funds in the United States; provided, however, that the maturities of all obligations specified in any of clauses (a), (b), (c) or (d) above shall not exceed [***].
“Change in Control” shall mean with respect to Seller, (a) Home Point Capital Inc. ceasing to own directly or indirectly more than [***] of the Equity Interests in and to Seller or (b) the sale, transfer, or other disposition (each, a “Disposition”) of all or substantially all of Seller’s assets (other than any Disposition permitted under this Agreement). For purposes of this definition, “Equity Interests” means, with respect to the Seller, all shares, interests, participations or other equivalents in the equity of the Seller, including common stock, preferred stock, warrants, membership interests, partnership interests, limited partnership interests, convertible debentures, other debt securities which include voting rights in the Seller referred to, and any and all agreements, instruments and documents convertible, in whole or in part, into any one or more of the foregoing.
“Closing Agent” shall mean, with respect to any Wet-Ink Transaction, an entity deemed satisfactory to Buyer (which may be a title company, escrow company or attorney in accordance with local law and practice in the jurisdiction where the related Wet-Ink Mortgage Loan is being originated) to which the proceeds of such Wet-Ink Transaction are to be wired pursuant to the instructions of Seller. Unless Buyer notifies Seller (electronically or in writing) that a Closing Agent is unsatisfactory, each Closing Agent utilized by Seller shall be deemed satisfactory.
“Closing Date” shall mean January 8, 2021.
“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
“Committed Mortgage Loan” means a Purchased Mortgage Loan which is the subject of a Take-out Commitment with a Take-out Investor.
“Confidential Information” shall have the meaning set forth in Section 32(a) hereof.
“Contractual Obligations” shall mean, as to any Person, any provision of any security (whether in the nature of stock or other equity interests, or otherwise) issued by such Person or of any agreement, undertaking, contract, indenture, mortgage, deed of trust or other instrument, document or agreement (other than a Facility Document) to which such Person is a party or by which it or any of its Property is bound or to which any of its Property is subject.
“Correspondent Mortgage Loan” means a Mortgage Loan which is (i) originated by a Correspondent Seller and underwritten in accordance with the Underwriting Guidelines and (ii) acquired by the Seller from a Correspondent Seller in the ordinary course of business, for sale to the Buyer pursuant to this Agreement.
“Correspondent Seller” means a mortgage loan originator that sells Mortgage Loans originated by it to Seller as a “correspondent” client.
“Costs” shall have the meaning set forth in Section 17(a) hereof.
“Custodial and Disbursement Agreement” shall mean, that certain Custodial and Disbursement Agreement dated as of the date hereof, among Seller, Buyer and Custodian, as may be amended from time to time.
“Custodian” shall mean U.S. Bank National Association and any successor thereto under the Custodial and Disbursement Agreement, or, prior to the occurrence and continuance of an Event of Default, such other entity as mutually agreed upon by Seller and Buyer; provided, however, that following the occurrence and continuance of an Event of Default, such other entity as may be determined by Buyer in its sole discretion.
“Cut- off Date” means, with respect to Pooled Mortgage Loans, the first calendar day of the month in which the related Settlement Date is to occur.
“Cut -off Date Principal Balance” means, with respect to Pooled Mortgage Loans, the outstanding principal balance of such Pooled Mortgage Loans on the Cut- off Date after giving effect to payments of principal and interest due on or prior to the Cut-off Date whether or not such payments are received.
“DE Compare Ratio” means the Two Year FHA Direct Endorsement Lender Compare Ratio, excluding streamline FHA refinancings, as made publicly available by HUD.
“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.
“Default Right” shall have the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
“Defaulting Party” shall have the meaning set forth in Section 31(b) hereof.
“Disbursement Account” shall have the meaning set forth in the Custodial and Disbursement Agreement.
“Disbursement Agent” shall mean U.S. Bank National Association, and any successor thereto under the Custodial and Disbursement Agreement, or, prior to the occurrence and continuance of an Event of Default, such other entity as mutually agreed upon by Seller and Buyer; provided, however, that following the occurrence and continuance of an Event of Default, such other entity as may be determined by Buyer in its sole discretion.
“Dollars” and “$” shall mean lawful money of the United States of America.
“DU Refi Plus” shall mean the Fannie Mae DU Refi Plus program.
“Due Date” shall mean the day of the month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.
“Due Diligence Documents” shall have the meaning set forth in Section 20 hereof.
“Early Opt-in Election” shall mean the occurrence of:
(1) a determination by Buyer that at least [***] currently outstanding U.S. dollar-denominated syndicated or bilateral credit facilities at such time contain (as a result of amendment or as originally executed) as a benchmark interest rate, in lieu of the LIBOR Rate, a new benchmark interest rate to replace the LIBOR Rate, and
(2) the election by Buyer to declare that an Early Opt-in Election has occurred and the provision by Buyer of written notice of such election to Seller;
Provided, that in either case Buyer is making a similar early opt-in election with respect to similarly situated counterparties with similar U.S. dollar-denominated bilateral repurchase facilities secured by residential mortgage loan collateral similar to that in connection with this Agreement.
“Effective Date” shall mean the date upon which the conditions precedent set forth in Section 3(a) shall have been satisfied.
“Electronic Tracking Agreement” shall mean an Electronic Tracking Agreement that is entered into among Buyer, Seller, MERS and MERSCORP Holdings, Inc., to the extent applicable as the same may be amended, restated, supplemented or otherwise modified from time to time.
“Eligible Mortgage Loan” shall mean a Mortgage Loan which:
(a) has been approved by Buyer in its sole and absolute discretion on the related Purchase Date;
(b) complies with the representations and warranties set forth on Schedule 1-A; and
(c) with respect to each Pooled Mortgage Loan, complies with the representations and warranties set forth on Schedule 1-B.
“Environmental Issue” shall mean any environmental issue with respect to any Mortgaged Property, as determined by Buyer in its sole discretion, including without limitation, the violation of any Environmental Laws.
“Environmental Laws” shall mean all Requirements of Law and Permits imposing liability or standards of conduct for or relating to the regulation and protection of human health, safety, the workplace, the environment and natural resources, and including public notification requirements and environmental transfer of ownership, notification or approval statutes.
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor thereto, and the regulations promulgated and rulings issued thereunder.
“ERISA Affiliate” shall mean any Person, whether or not incorporated, that is a member of any group of organizations described in Section 414(b), (c), (m) or (o) of the Code of which the Seller is a member.
“Errors and Omissions Insurance Policy” means an errors and omissions insurance policy to be maintained by the Seller.
“Escrow Payments” shall mean, 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 set forth in Section 15 hereof.
“Event of ERISA Termination” shall mean (i) with respect to any Plan, a Reportable Event, or (ii) the withdrawal of Seller or any ERISA Affiliate thereof from a Plan during a plan year in which it is a substantial employer, as defined in Section 4001(a)(2) of ERISA, or (iii) the failure by Seller or any ERISA Affiliate thereof to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA with respect to any Plan, including, without limitation, the failure to make on or before its due date a required installment under Section 430(j) of the Code or Section 303(j) of ERISA, or (iv) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by Seller or any ERISA Affiliate thereof to terminate any Plan, or (v) the determination that any Plan is or is expected to be in “at-risk” status, within the meaning of Section 430 of the Code or Section 303 of ERISA or (vi) the failure to meet the requirements of Section 436 of the Code resulting in the loss of qualified status under Section 401(a)(29) of the Code, or (vii) the institution by the PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (viii) the receipt by Seller or any ERISA
Affiliate thereof of a notice from a Multiemployer Plan that action of the type described in the previous clause (vii) has been taken by the PBGC with respect to such Multiemployer Plan, or a determination that a Multiemployer Plan is, or is expected to be “insolvent” (within the meaning of Section 4245 of ERISA) or in “endangered” or “critical status” (within the meaning of Section 432 of the Code or Section 305 of ERISA); or (ix) the imposition of any Lien in favor of the PBGC or a Plan shall arise on the assets of Seller or any ERISA Affiliate thereof or (x) any event or circumstance exists which may reasonably be expected to constitute grounds for Seller to incur liability under Title IV of ERISA or under Sections 412(b) or 430 (k) of the Code with respect to any Plan.
“Exception Report” shall have the meaning set forth in the Custodial and Disbursement Agreement.
“Excluded Taxes” shall have the meaning set forth in Section 8(a) hereof.
“Executive Order” shall mean the Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (66 Fed. Reg. 49079).
“Facility Documents” shall mean this Agreement, the Pricing Side Letter, the Custodial and Disbursement Agreement, any Electronic Tracking Agreement, the Reserve Account Control Agreement, the Joint Securities Account Control Agreement, the Intercreditor Agreement, each Power of Attorney and any and all other documents and agreements executed and delivered by Seller in connection with this Agreement or any Transactions hereunder, as the same may be amended, restated or otherwise modified from time to time.
“Fannie Mae” shall mean the Federal National Mortgage Association or any successor thereto.
“Federal Reserve Bank of New York’s Website” shall mean the website of the Federal Reserve Bank of New York at http://www.newyorkfed.org, or any successor source.
“FHA” means the Federal Housing Administration, an agency within the United States Department of Housing and Urban Development, or any successor thereto, and including the Federal Housing Commissioner and the Secretary of Housing and Urban Development where appropriate under the FHA Regulations.
“FHA Approved Mortgagee” means a corporation or institution approved as a mortgagee by the FHA under the National Housing Act, as amended from time to time, and applicable FHA Regulations, and eligible to own and service mortgage loans such as the FHA Loans.
“FHA Loan” means a Mortgage Loan which is the subject of an FHA Mortgage Insurance Contract.
“FHA Mortgage Insurance” means, mortgage insurance authorized under the National Housing Act, as amended from time to time, and provided by the FHA.
“FHA Mortgage Insurance Contract” means the contractual obligation of the FHA respecting the insurance of a Mortgage Loan.
“FHA Regulations” means the regulations promulgated by the Department of Housing and Urban Development under the National Housing Act, as amended from time to time and codified in 24 Code of Federal Regulations, and other Department of Housing and Urban Development issuances relating to FHA Loans, including the related handbooks, circulars, notices and mortgagee letters.
“FICO” shall mean Fair Isaac & Co., or any successor thereto.
“Fidelity Insurance Policy” shall mean insurance coverage with respect to employee errors, omissions, dishonesty, forgery, theft, disappearance and destruction, robbery and safe burglary, property (other than money and securities) and computer fraud.
“Freddie Mac” shall mean the Federal Home Loan Mortgage Corporation or any successor thereto.
“GAAP” shall mean generally accepted accounting principles in the United States of America, applied on a consistent basis and applied to both classification of items and amounts, and shall include, without limitation, the official interpretations thereof by the Financial Accounting Standards Board, its predecessors and successors.
“Ginnie Mae” means the Government National Mortgage Association and any successor thereto.
“GLB Act” shall have the meaning set forth in Section 32(b) hereof.
“Government Agency” shall mean Ginnie Mae, Fannie Mae, Freddie Mac, USDA, FHA, VA or other Governmental Authority governing such Government Mortgage Loan.
“Government Mortgage Loan” means a first lien Mortgage Loan originated in accordance with the criteria of Ginnie Mae, Fannie Mae, Freddie Mac, USDA, FHA, VA or other Government Agency for purchase of Mortgage Loans.
“Governmental Authority” shall mean any nation, sovereign or government, any state or other political subdivision thereof, any agency, authority or instrumentality thereof and any entity or authority exercising executive, legislative, taxing, judicial, regulatory or administrative functions of or pertaining to government, including any central bank, stock exchange, regulatory body, arbitrator, public sector entity, supra-national entity (including the European Union and the European Central Bank) and any self-regulatory organization (including the National Association of Insurance Commissioners).
“Gross Margin” shall mean, 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 endorsements for collection or deposit in the ordinary course of business. 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.
“High Cost Mortgage Loan” shall mean a mortgage loan classified as (a) a “high cost” loan under the Home Ownership and Equity Protection Act of 1994; or (b) a “high cost,” “threshold,” “covered,” or “predatory” loan under any other applicable state, federal or local law (or a similarly classified loan using different terminology under a law, regulation or ordinance imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees).
“HUD” shall mean the United States Department of Housing and Urban Development.
“Income” shall mean, with respect to any Purchased Mortgage Loan, without duplication, all principal and income or dividends or distributions or other amounts received with respect to such Purchased Mortgage Loan, including any insurance proceeds or interest payable thereon or any fees or payments of any kind, or other amounts received, but excluding any Escrow Payments and any and all fees, reimbursement and income entitled to be retained by a Servicer pursuant to the related Servicing Agreement.
“Indebtedness” shall mean, with respect to 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 [***] 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 the account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements, sale/buy-back 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; and (i) Indebtedness of general partnerships (if applicable) of which such Person is a general partner; provided, however, that the foregoing shall exclude non-recourse debt.
“Indemnified Party” shall have the meaning set forth in Section 17(a) hereof.
“Index” means, with respect to any adjustable rate Mortgage Loan, the index identified on the Asset Schedule and set forth in the related Mortgage Note for the purpose of calculating the applicable Mortgage Interest Rate.
“Insolvency Event” shall mean, for any Person:
(a) that such Person shall discontinue or abandon operation of its business; or
(b) that such Person shall fail generally to, or admit in writing its inability to, pay its debts as they become due; or
(c) a proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency, liquidation, reorganization or other similar law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Person, or for any substantial part of its property, or for the winding-up or liquidation of its affairs, and any such proceeding is not dismissed within [***] of filing; or
(d) the commencement by such Person of a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or such Person’s consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Person, or for any substantial part of its property, or any general assignment for the benefit of creditors; or
(e) that such Person shall become insolvent; or
(f) such Person, or any of its Subsidiaries, shall take any corporate action in furtherance of, or the action of which would result in any of the actions set forth in the preceding clauses (a), (b), (c), (d) or (e).
“Intellectual Property” shall mean all rights, title and interests in or relating to intellectual property and industrial property arising under any Requirement of Law.
“Intercreditor Agreement” means that certain Amended and Restated Intercreditor Agreement, dated as of February 27, 2015, by and among Seller, Buyer and the other parties thereto, as may be amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof.
“Interest Rate Adjustment Date” shall mean the date on which an adjustment to the Mortgage Interest Rate with respect to each Mortgage Loan becomes effective.
“Interest Rate Protection Agreement” means, with respect to any or all of the Purchased Mortgage Loans, any short sale of a US Treasury Security, or futures contract, or mortgage related security, or Eurodollar futures contract, or options related contract, or interest rate swap, cap or collar agreement, or similar arrangement providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by Seller.
“Investment Company Act” shall mean the Investment Company Act of 1940, as amended from time to time.
“Joint Securities Account Control Agreement” means that certain Amended and Restated Joint Securities Account Control Agreement, dated as of February 27, 2015, by and among Seller, Buyer and the other parties thereto, as amended, restated, supplemented or otherwise modified from time to time in accordance with the terms thereof.
“LIBOR Rate” shall mean, the rate determined by Buyer on each Business Day a Transaction is outstanding equal to the higher of (a) [***] per annum, and (b) the offered rate per annum for one-month deposits of Dollars that appears on Bloomberg Screen US0001M Page, as of 11:00 A.M. (New York time) on such date. If no such offered rate exists, such rate will be the rate of interest per annum, as determined by Buyer in its sole discretion at which deposits of Dollars in immediately available funds are offered at 11:00 A.M. (New York time) on such date by major financial institutions reasonably satisfactory to Buyer in the London interbank market for a period of one month and in an amount comparable to the amount of the Aggregate Facility Purchase Price on such date of determination.
“Lien” shall mean any lien, claim, charge, restriction, pledge, security interest, mortgage, deed of trust or other encumbrance.
“Loan Program Authority” shall mean, with respect to Government Mortgage Loans, the applicable Government Agency.
“Manufactured Home” shall mean any dwelling unit built on a permanent chassis and attached to a permanent foundation system.
“Margin Call” shall have the meaning assigned thereto in Section 7(a) hereof.
“Margin Deficit” shall have the meaning assigned thereto in Section 7(a) hereof.
“Margin Payment” shall have the meaning assigned thereto in Section 7(a) hereof.
“Market Value” shall mean, as of any date of determination, for each Purchased Mortgage Loan, the whole-loan servicing released fair market value of such Purchased Mortgage Loan as may be reasonably determined by Buyer (or an Affiliate thereof) (which determination may be performed on a daily basis, at Buyer’s reasonable discretion and may take into account such factors as Buyer deems appropriate); provided, however, that the methodology for such determination is consistent with Buyer’s determination with respect to those similar mortgage loans it has purchased from unaffiliated sellers pursuant to similar warehousing facilities.
“Material Adverse Effect” means (a) a material adverse change in, or a material adverse effect upon, when taken as a whole, the Property, business or financial operations of Seller, (b) a material impairment of the ability of Seller to perform its obligations under any of the Facility Documents to which it is a party and to avoid any Event of Default or (c) a material adverse effect upon the validity or enforceability of any of the Facility Documents.
“Maximum Aggregate Purchase Price” shall have the meaning assigned thereto in the Pricing Side Letter.
“Maximum Transaction Duration” means the number of days that a Purchased Mortgage Loan can be subject to a Transaction as set forth on Exhibit A to the Pricing Side Letter.
“MERS” shall mean Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.
“MERS Designated Mortgage Loan” shall mean any Mortgage Loan registered with MERS on the MERS System.
“MERS System” shall mean the system of recording transfers of mortgages electronically maintained by MERS.
“Minimum Margin Threshold” shall mean [***].
“MOM Mortgage Loan” shall mean any Mortgage Loan as to which MERS is acting as mortgagee, solely as nominee for the originator of such Mortgage Loan and its successors and assigns.
“Monthly Payment” shall mean the scheduled monthly payment of principal and interest on a Mortgage Loan.
“Moody’s” shall mean Moody’s Investors Service, Inc. or any successors thereto.
“Mortgage” shall mean each mortgage, or deed of trust, security agreement and fixture filing, deed to secure debt, or similar instrument creating and evidencing a first Lien on real property and other property and rights incidental thereto.
“Mortgage File” shall have the meaning set forth in the Custodial and Disbursement Agreement.
“Mortgage Interest Rate” shall mean the rate of interest borne on a Mortgage Loan from time to time in accordance with the terms of the related Mortgage Note.
“Mortgage Interest Rate Cap” shall mean, 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 any Government Mortgage Loan, which is a fixed or floating-rate, one-to-four-family residential loan evidenced by a Mortgage Note and secured by a Mortgage.
“Mortgage Note” shall mean the promissory note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage.
“Mortgaged Property” shall mean the real property securing repayment of the debt evidenced by a Mortgage Note.
“Mortgagor” shall mean the obligor or obligors on a Mortgage Note, including any Person who has assumed or guaranteed the obligations of the obligor thereunder.
“Multiemployer Plan” shall mean a “multiemployer plan” as defined in Section 3(37) of ERISA as to which Seller or any ERISA Affiliate thereof has made contributions during the current year or the immediately preceding five (5) years or is required to make contributions or has any actual liability.
“Negative Amortization” shall mean the portion of interest accrued at the Mortgage Interest Rate in any month which exceeds the Monthly Payment on the related Mortgage Loan for such month and which, pursuant to the terms of the Mortgage Note, is added to the principal balance of the Mortgage Loan.
“Net Income” shall mean, for any period and any Person, the net income of such Person for such period determined in accordance with GAAP, but excluding extraordinary gains.
“Net Operating Income” shall mean, with respect to any Person, such Person’s Net Income before tax plus depreciation.
“Net Worth” shall mean, with respect to any Person, an amount equal to, on a consolidated basis, such Person’s owner equity (determined in accordance with GAAP).
“Nondefaulting Party” shall have the meaning set forth in Section 31(b) hereof.
“Non-Excluded Taxes” shall have the meaning set forth in Section 8(a) hereof.
“Non-Exempt Buyer” shall have the meaning set forth in Section 8(e) hereof.
“Obligations” shall mean any amounts due and payable by Seller to Buyer in connection with any or all Transactions hereunder, together with interest thereon (including interest which would be payable as post-petition interest in connection with any bankruptcy or similar proceeding) and all other fees or expenses which are due and payable to Buyer hereunder or under any of the Facility Documents.
“OFAC” shall have the meaning set forth in Section 13(bb) hereof.
“Officer’s Compliance Certificate” shall mean a certificate of a Responsible Officer of Seller in the form of Exhibit G hereto.
“Other Taxes” shall have the meaning set forth in Section 8(b) hereof.
“PBGC” shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
“Permits” shall mean, with respect to any Person, any permit, approval, authorization, license, registration, certificate, concession, grant, franchise, variance or permission from, and any other Contractual Obligations with, any Governmental Authority, in each case whether or not having the force of law and applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
“Person” shall mean any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, trust, unincorporated association or government (or any agency, instrumentality or political subdivision thereof.)
“Plan” shall mean an employee benefit plan as defined in Section 3(3) of ERISA (other than a Multiemployer Plan) that is subject to the provisions of Title IV of ERISA or Section 412 of the Code that is or was at any time during the current year or immediately preceding five (5) years established, maintained or contributed to by Seller or any ERISA Affiliate thereof or with respect to which Seller or any ERISA Affiliate thereof has any actual liability.
“Pooled Mortgage Loan” means any Mortgage Loan that is subject to a Transaction hereunder and is part of a pool of Mortgage Loans certified by the Custodian to an Agency for the purpose of being swapped for an Agency Security backed by such pool, in each case, in accordance with the terms of guidelines issued by such Agency.
“Post-Default Rate” shall have the meaning assigned thereto in the Pricing Side Letter.
“Power of Attorney” shall mean a power of attorney in the form of Exhibit F hereto delivered by Seller.
“Price Differential” shall mean, with respect to any Purchased Mortgage Loan as of any date, the aggregate amount obtained by daily application of the applicable Pricing Rate (or, during the continuation of an Event of Default, by daily application of the Post-Default Rate) for the related Purchased Mortgage Loan to the Purchase Price for such Purchased Mortgage Loan on a 360 day per year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Purchased Mortgage Loan and ending on (but excluding) the Repurchase Date for such Purchased Mortgage Loan.
“Price Differential Collection Period” shall mean, with respect to each Purchased Mortgage Loan and Price Differential Payment Date (except for the initial Price Differential Payment Date for such Purchased Mortgage Loan), the period that commences on the first (1st) day of the preceding month and ends on the last day of such month. The Price Differential Collection Period with respect to the initial Price Differential Payment Date for a Purchased Mortgage Loan shall be the period that commences on the applicable Purchase Date and ends on the last day of such month.
“Price Differential Payment Date” shall mean (i) the fifth (5th) calendar day of the month, or the next succeeding Business Day, if such calendar day shall not be a Business Day and (ii) the Termination Date.
“Pricing Rate” shall have the meaning assigned thereto in the Pricing Side Letter.
“Pricing Side Letter” shall mean that certain letter agreement between Buyer and Seller, dated as of the date hereof, as the same may be amended, restated, supplemented or otherwise modified from time to time.
“Professional Liability Insurance Policy” shall mean a professional liability insurance policy to be maintained by the Seller.
“Property” shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.
“Purchase Date” shall mean the date on which Purchased Mortgage Loans are transferred by Seller to Buyer or its designee.
“Purchase Price” means, with respect to each Purchased Mortgage Loan, the price at which such Purchased Mortgage Loan is transferred by Seller to Buyer, which shall equal:
(a) on the Purchase Date, the Asset Value of such Purchased Mortgage Loan as of the Purchase Date;
(b) on any day after the related Purchase Date, the amount determined under the immediately preceding clause (a) decreased by the amount of any cash previously transferred by the Seller to Buyer and applied to reduce the Purchase Price of such Purchased Mortgage Loan.
“Purchase Price Percentage” shall have the meaning assigned thereto in the Pricing Side Letter.
“Purchased Mortgage Loan Issue” shall mean, with respect to any Purchased Mortgage Loan as determined in Buyer’s good faith discretion, (i) the related Mortgage Note, Mortgage or related guarantee, if any, are determined to be unenforceable; (ii) there has occurred and is continuing a Representation Issue; (iii) the underlying Mortgaged Property is found to have an Environmental Issue, for which Seller or the related Mortgagor does not promptly set up an escrowed reserve in an amount acceptable to Buyer; (iv) federal, state or local law enforcement agencies have seized the underlying Mortgaged Property or (v) such Purchased Mortgage Loan is either in active forbearance or has been more than thirty (30) days contractually past due.
“Purchased Mortgage Loans” shall mean the collective reference to the Eligible Mortgage Loans that are purchased by Buyer and listed on the Asset Schedule attached to the related Transaction Notice (as Appendix I or otherwise), including the related Mortgage Files for which the Custodian has been instructed to hold pursuant to the Custodial and Disbursement Agreement, to the extent such Mortgage Loans have not been repurchased in accordance with the terms of this Agreement.
“Qualified Originator” shall mean an originator of Mortgage Loans which is acceptable under the Underwriting Guidelines.
“Rating Agency” shall mean, each of Fitch, Inc., Moody’s and S&P, as applicable.
“Records” shall mean all instruments, agreements and other books, records, and reports and data generated by other media for the storage of information maintained by Seller or any other Person or entity with respect to a Mortgage Loan. Records shall include the Mortgage Notes, any Mortgages, the Mortgage Files, the credit files related to the Mortgage Loan and any other instruments necessary to document or service a Mortgage Loan.
“Register” shall have the meaning set forth in Section 22(b) hereof.
“Regulations T, U and X” shall mean Regulations 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.
“Relevant Governmental Body” shall mean the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.
“Reportable Event” shall mean any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under PBGC Reg. § 4043.
“Reporting Period” means the thirtieth (30th) calendar day after the end of each calendar month.
“Representation Issue” shall mean Buyer’s determination that there is a breach of a representation and warranty with respect to a Purchased Mortgage Loan (including a breach of any representation set forth on Schedule 1-A or Schedule 1-B hereof, as applicable), which breach adversely affects the value of such Mortgage Loan or Buyer’s interest therein, as determined by Buyer in its sole discretion.
“Repurchase Assets” shall have the meaning provided in Section 9(a) hereof.
“Repurchase Date” shall mean the earliest of (x) the Termination Date, (y) any date determined by application of the respective Maximum Transaction Duration, (z) the date on which Seller is to repurchase the Purchased Mortgage Loans subject to a Transaction from Buyer on a date requested pursuant to Section 4 hereof, including any date determined by application of the provisions of Sections 3 or 4 or 15 hereof.
“Repurchase Notice” shall have the meaning provided in Section 4(c) hereof.
“Repurchase Price” shall mean, with respect to any Purchased Mortgage Loan as of any date of determination, an amount equal to the applicable Purchase Price minus (A) any payments made by or on behalf of Seller in reduction of the outstanding Repurchase Price in each case before or as of such determination date with respect to such Purchased Mortgage Loan, plus (B) the sum of (i) any accrued and unpaid Price Differential, (ii) any increased costs, indemnification amounts, taxes and breakage fees allocable to the repurchase of such Purchased Mortgage Loan, and (iii) any other amounts due and payable under this Agreement with respect to such Purchased Mortgage Loan, pursuant to the Pricing Side Letter.
“Required Insurance Policy” shall mean any Fidelity Insurance Policy, Errors and Omissions Insurance Policy or Professional Liability Insurance Policy.
“Requirement of Law” shall mean with respect to any Person, the common law and any federal, state, local, foreign, multinational or international laws, statutes, codes, treaties, standards, rules and regulations, guidelines, ordinances, orders, judgments, writs, injunctions, decrees (including administrative or judicial precedents or authorities) and the interpretation or administration thereof by, and other determinations, directives, requirements or requests of, any Governmental Authority, in each case whether or not having the force of law and that are applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.
“Reserve Account” shall mean a segregated account established at the Reserve Account Bank, in the name of Seller and subject to a Reserve Account Control Agreement with Buyer which shall at all times contain a balance in an amount equal or greater than the Reserve Account Threshold, as such amount may be subject to set off by Buyer, following the occurrence and continuance of an Event of Default, with respect to any Obligations.
“Reserve Account Bank” shall mean BMO Harris Bank N.A., and any successor thereto under the Reserve Account Control Agreement.
“Reserve Account Control Agreement” shall mean a blocked account control agreement providing the Buyer with control at all times over the Reserve Account.
“Reserve Account Threshold” shall have the meaning set forth in the Pricing Side Letter.
“Responsible Officer” shall mean (i) as to any Person, the Chief Executive Officer or, with respect to financial matters, the Chief Financial Officer or Chief Accounting Officer or any other officer of such Person whose responsibilities are substantially consistent with those of any of the foregoing or are tasked with acting on behalf of any of the foregoing and (ii) as to Seller, President, Chief Administrative Officer, Treasurer, Senior Managing Counsel or any other executive managing member.
“S&P” shall mean Standard & Poor’s Ratings Services, or any successor thereto.
“Sanctioned Country” shall have the meaning set forth in Section 13(bb) hereof.
“Sanctions” shall have the meaning set forth in Section 13(bb) hereof.
“SDN List” shall have the meaning set forth in Section 13(bb) hereof.
“Section 4402” shall have the meaning set forth in Section 31 hereof.
“Section 8 Certificate” shall have the meaning set forth in Section 8(e)(ii) hereof.
“Securities Issuance Failure” the failure of a pool of Pooled Mortgage Loans to back the issuance of an Agency Security.
“Seller” shall mean Home Point Financial Corporation.
“Seller Employees” shall have the meaning set forth in Section 14(m) hereof.
“Servicer” shall mean any servicer or subservicer appointed by Seller and approved by Buyer in its good faith discretion, which may be Seller.
“Servicer Side Letter” shall have the meaning set forth in Section 18(c) hereof.
“Servicer Termination Event” shall mean (i) an Event of Default hereunder or (ii) with respect to any Servicer (1) an event of default under the related Servicing Agreement, (2) such Servicer shall become the subject of an Insolvency Event, (3) such Servicer shall admit its inability to, or its intention not to, perform any of its obligations under the Facility Documents, or (4) the failure of such Servicer to perform its obligations under any of the Facility Documents to which it is a party or the related Servicing Agreement, including, without limitation, the failure of such Servicer to (A) remit funds in accordance with Section 5(a)(i) hereof, or (B) deliver reports to Seller when required.
“Servicing Agreement” shall mean any servicing agreement entered into between Seller and a third party servicer, which form and substance has been approved by Buyer, as the same may be amended from time to time of which Buyer shall be an intended third party beneficiary.
“Servicing Rights” shall mean rights of Seller or any other Person to administer, manage, service or subservice, the Purchased Mortgage Loans or to possess related Records.
“Settlement Date” means, with respect to Pooled Mortgage Loans subject to a Transaction, that date specified as the contractual delivery and settlement date in the related Take-out Commitment pursuant to which Buyer or its designee under the Joint Securities Account Control Agreement has the right to deliver Agency Securities to the Take-out Investor.
“SOFR” shall mean, with respect to any day, the secured overnight financing rate published for such day by the Federal Reserve Bank of New York, as the administrator of the benchmark, (or a successor administrator) on the Federal Reserve Bank of New York’s Website.
“Subordinated Debt” means, for any Person, Indebtedness of such Person which is (a) unsecured, (b) no part of the principal of such Indebtedness is required to be paid (whether by way of mandatory sinking fund, mandatory redemption, mandatory prepayment or otherwise) prior to the date which is one year following the Termination Date and (c) the payment of the principal of and interest on such Indebtedness and other obligations of such Person in respect of such Indebtedness are subordinated to the prior payment in full of the principal of and interest (including post-petition obligations) on the Transactions and all other obligations and liabilities of such Person to Buyer hereunder, in each case, on terms and conditions approved in writing by Buyer and all other terms and conditions of which are satisfactory in form and substance to Buyer.
“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.
“Take-out Commitment” shall mean a commitment of Seller to sell one or more Purchased Mortgage Loans to a Take-out Investor in an arms-length, all cash transaction, and the corresponding Take-out Investor’s commitment back to Seller to effectuate the foregoing.
“Take-out Investor” shall mean any Person (other than an Affiliate of Seller) that has entered into a Take-out Commitment; provided that to the extent Purchased Mortgage Loans are sent pursuant to a Bailee Letter with a third party bailee that is not a nationally known bank prior to purchase, such third party bailee must be approved by Buyer in its good faith discretion.
“Taxes” shall have the meaning set forth in Section 8(a) hereof.
“Term SOFR” shall mean the forward-looking term rate based on SOFR that has been selected or recommended by the Relevant Governmental Body.
“Termination Date” shall have the meaning assigned thereto in the Pricing Side Letter.
“Transaction” shall have the meaning set forth in Section 1 hereof.
“Transaction Notice” shall mean a request from Seller to Buyer, which may be by electronic means (including e-mail), to enter into a Transaction.
“Trust Receipt” shall have the meaning set forth in the Custodial and Disbursement Agreement.
“Unadjusted Benchmark Replacement” shall mean the Benchmark Replacement excluding the Benchmark Replacement Adjustment.
“Underwriting Guidelines” means the standards, procedures and guidelines of Seller for underwriting and acquiring Mortgage Loans, which are set forth in the written policies and procedures of Seller, which have previously been provided and such other guidelines as are identified and provided to Buyer.
“Underwriting Package” shall mean with respect to any proposed Purchased Mortgage Loan, the Asset Schedule listing such proposed Purchased Mortgage Loan and such other computer readable file or other information requested by Buyer during the course of its due diligence and delivered prior to the date of a Transaction for such proposed Purchased Mortgage Loan containing, with respect to the related proposed Purchased Mortgage Loan, information in form and substance acceptable to Buyer in its reasonable discretion, together with a certification that Seller has no actual knowledge of any information concerning such proposed Purchased Mortgage Loan which is not reflected in such file or otherwise disclosed to Buyer in writing.
“Uniform Commercial Code” or “UCC” shall mean the Uniform Commercial Code as in effect from time to time 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 Repurchase Assets or the continuation, renewal or enforcement thereof 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.
“U.S. Special Resolution Regime” shall mean each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
“USA Patriot Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended.
“USDA” means the United States Department of Agriculture.
“USDA Mortgage Loan” means a first lien Mortgage Loan originated in accordance with the criteria established by and guaranteed by the USDA.
“VA” shall mean the U.S. Department of Veterans Affairs, an agency of the United States of America, or any successor thereto including the Secretary of Veterans Affairs.
“VA Approved Lender” means a lender which is approved by the VA to act as a lender in connection with the origination of VA Loans.
“VA Loan” shall mean a Mortgage Loan which is subject of a VA Loan Guaranty Agreement as evidenced by a loan guaranty certificate.
“VA Loan Guaranty Agreement” shall mean the obligation of the United States to pay a specific percentage of a Mortgage Loan (subject to a maximum amount) upon default of the Mortgagor pursuant to the Servicemen’s Readjustment Act, as amended.
“Wet-Ink Mortgage Loan Document Receipt Date” shall mean the [***] Business Day following the applicable Purchase Date.
“Wet-Ink Mortgage Loan” shall mean a Mortgage Loan originated by Seller in a transaction table-funded by Buyer, which origination or table funding is financed in part or in whole with proceeds of Transactions and as to which the Custodian has not yet received the related Mortgage File. A Mortgage Loan shall cease to be a Wet-Ink Mortgage Loan on the date on which Buyer has received a Trust Receipt and Exception Report from the Custodian with respect to such Mortgage Loan confirming that the Custodian has physical possession of the related Mortgage File (as defined in the Custodial and Disbursement Agreement) and that there are no Exceptions (as defined in the Custodial and Disbursement Agreement) with respect to such Mortgage Loan.
“Wet-Ink Transaction” shall mean a Transaction in which a Wet-Ink Mortgage Loan is the Purchased Mortgage Loan. A Wet-Ink Transaction shall cease to be a Wet-Ink Transaction on the date that the underlying Wet-Ink Mortgage Loan ceases to be a Wet-Ink Mortgage Loan (in accordance with the definition thereof).
Section 3. No Commitment; Initiation; Termination.
Prior to the occurrence and continuation of an Event of Default and subject to the terms and conditions set forth herein, Buyer agrees that it may, in its sole discretion, enter into Transactions with Seller from time to time in an aggregate principal amount that will not result in the Aggregate Facility Purchase Price for all Purchased Mortgage Loans subject to then outstanding Transactions under this Agreement, together with any Eligible Mortgage Loans that are being offered by Seller for purchase under such Transaction to exceed, as of any date determination, the Maximum Aggregate Purchase Price. Within the foregoing limits and subject to the terms and conditions set forth herein, Seller and Buyer may enter into Transactions. This Agreement is not a commitment by Buyer to enter into Transactions with Seller but sets forth the requirements under which Buyer would consider entering into Transactions as set forth herein. For the sake of clarity, Seller hereby acknowledges that Buyer is under no obligation to agree to enter into, or to enter into, any Transaction pursuant to this Agreement.
(a) Conditions Precedent to Initial Transaction. Buyer’s agreement (if any) to enter into the initial Transaction hereunder is subject to the satisfaction, immediately prior to or concurrently with the making of such Transaction, of the condition precedent that Buyer shall have received from Seller any fees and expenses due and payable hereunder, and all of the following documents, each of which shall be satisfactory to Buyer and its counsel in form and substance:
(i) Facility Documents. The Facility Documents, duly executed by the parties thereto;
(ii) Opinions of Counsel. (A) A security interest creation and perfection, general corporate, Investment Company Act and enforceability opinion or opinions of counsel to Seller and (B) a Bankruptcy Code opinion of outside counsel to Seller with respect to matters outlined in Section 33, each of which shall be in a form acceptable to Buyer in its reasonable discretion;
(iii) Organizational Documents. A certified copy of the articles of incorporation of Seller from the jurisdiction of organization of Seller delivered to Buyer prior to the Effective Date and copies of the organizational documents of Seller and evidence of all corporate or other authority for Seller with respect to the execution, delivery and performance of the Facility Documents to which it is a party and each other document to be delivered by Seller from time to time in connection herewith;
(iv) Good Standing Certificates. A certified copy of a good standing certificate from the jurisdiction of organization of Seller, dated as of no earlier than the date that is fifteen (15) Business Days prior to the date hereof;
(v) Incumbency Certificates. An incumbency certificate of the manager, member, director or other similar officer of Seller certifying the names, true signatures and titles of the representatives duly authorized to request transactions hereunder and to execute the Facility Documents to which it is a party;
(vi) Security Interest. Evidence that all other actions necessary to perfect and protect the sale, transfer, conveyance and assignment by Seller to Buyer or its designee, subject to the terms of this Agreement, of all of Seller’s right, title and interest it may have in and to the Purchased Mortgage Loans, the Repurchase Assets, and other items pledged under Section 9(a) together with all right, title and interest in and to the proceeds of any related Repurchase Assets have been taken, including in each case performing UCC searches and duly authorized and filing Uniform Commercial Code financing statements on Form UCC-1;
(vii) Insurance. Evidence that the Seller has added Buyer as an additional loss payee under the Seller’s Fidelity Insurance Policy and as a direct loss payee with right of action under the Errors and Omissions Insurance Policy or Professional Liability Insurance Policy, copies of which are attached hereto as Exhibit C;
(viii) [Reserved];
(ix) Reserve Account. Evidence that the Reserve Account has been established, per the terms of this Agreement, and contains at least the Reserve Account Threshold; and
(x) Other Documents. Such other documents as Buyer may request, in form and substance acceptable to Buyer.
(b) Conditions Precedent to all Transactions. Upon satisfaction of the conditions set forth in Section 3(a) hereof, and subject to the limitations set forth in the first paragraph of Section 3, Buyer may, in its sole discretion, enter into a Transaction with Seller. Buyer’s entering into each Transaction (including the initial Transaction) is subject to the satisfaction of the following further conditions precedent, both immediately prior to entering into such Transaction and also after giving effect thereto to the intended use thereof:
(i) Due Diligence Review. Without limiting the generality of Section 20 hereof, Buyer shall have completed, to its satisfaction, its due diligence review of the related Mortgage Loans and Seller;
(ii) No Default. No Default or Event of Default shall have occurred and be continuing under the Facility Documents;
(iii) Representations and Warranties; Eligible Mortgage Loans. Both immediately prior to the Transaction and also after giving effect thereto and to the
intended use thereof, the representations and warranties made by Seller in Section 13 hereof and on Schedule 1-A and Schedule 1- B hereto, as applicable, in respect of the related Purchased Mortgage Loan, shall be true, correct and complete on and as of such Purchase Date in all respects 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);
(iv) Maximum Purchase Price. After giving effect to the requested Transaction, the Aggregate Facility Purchase Price subject to then outstanding Transactions under this Agreement shall not exceed the Maximum Aggregate Purchase Price;
(v) No Purchased Mortgage Loan Issue; No Margin Deficit. As of the related Purchase Date, (A) Seller shall not have failed to repurchase any Purchased Mortgage Loan pursuant to a repurchase request by Buyer pursuant to Section 4 hereof following the occurrence of a Purchased Mortgage Loan Issue with respect to such Purchased Mortgage Loan, and (B) no Margin Deficit shall have occurred and be continuing with respect to any Purchased Mortgage Loans. Additionally, after giving effect to the requested Transaction, no Purchased Mortgage Loan Issue or Margin Deficit shall have occurred or be continuing with respect to the related Purchased Mortgage Loans;
(vi) Transaction Notice. Seller shall have delivered to Buyer (a) a Transaction Notice and (b) an Asset Schedule;
(vii) Delivery of Mortgage File. Seller shall have delivered to the Custodian the Mortgage File with respect to each Mortgage Loan that is not a Wet-Ink Mortgage Loan and that is subject to the proposed Transaction, and the Custodian shall have issued a Trust Receipt showing no exceptions with respect to each such Mortgage Loan to Buyer as of the related Purchase Date all subject to and in accordance with the Custodial and Disbursement Agreement;
(viii) [Reserved].
(ix) Approval of Servicing Agreement. To the extent not previously delivered and approved, Buyer shall have, in its sole reasonable discretion, approved each Servicing Agreement pursuant to which any Mortgage Loan that is subject to such Transaction is to be serviced during the term of such Transaction;
(x) Servicer Side Letter. To the extent the related Purchased Mortgage Loans are to be serviced or sub-serviced by a Servicer other than Seller, Buyer shall have received (a) a Servicer Side Letter with respect to Purchased Mortgage Loans serviced by each Servicer and (b) if Buyer so requests in its sole reasonable discretion, an opinion of Seller’s counsel as to the enforceability of such Servicer Side Letter, in form and substance acceptable to Buyer;
(xi) [Reserved.]
(xii) Requirements of Law. Buyer shall not have determined in good faith that the introduction of or a change in any Requirement of Law or in the interpretation or administration of any Requirement of Law applicable to Buyer has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Buyer to enter into Transactions hereunder, and Buyer shall have made a similar determination with respect to similarly situated counterparties with similar collateral;
(xiii) No Material Adverse Change. None of the following shall have occurred and/or be continuing:
(A) an event or events shall have occurred in the good faith determination of Buyer resulting in the effective absence of a “repo market” or comparable “lending market” for financing debt obligations secured by securities or an event or events shall have occurred resulting in Buyer not being able to finance Mortgage Loans through the “repo market” or “lending market” with traditional counterparties at rates which would have been reasonable prior to the occurrence of such event or events; or
(B) an event or events shall have occurred resulting in the effective absence of a “securities market” for securities backed by Mortgage Loans or an event or events shall have occurred resulting in Buyer not being able to sell securities backed by Mortgage Loans at prices which would have been reasonable prior to such event or events; or
(C) there shall have occurred a material adverse change in the financial condition of Buyer which affects (or can reasonably be expected to affect) materially and adversely the ability of Buyer to fund its obligations under this Agreement; or
(D) there shall have occurred (i) a material change in financial markets, a material outbreak or escalation of hostilities or a material change in national or international political, financial or economic conditions; (ii) a general suspension of trading on major stock exchanges; or (iii) a disruption in or moratorium on commercial banking activities or securities settlement services;
(xiv) Certification. Each Transaction Notice delivered by Seller hereunder shall constitute a certification by Seller that all the conditions set forth in this Section 3(b) have been, or will be on the related Purchase Date, satisfied (both as of the date of such notice or request and as of Purchase Date);
(xv) Repurchase Date. The Repurchase Date for each Transaction shall not be later than the then current Termination Date;
(xvi) Reserve Account. Evidence that the Reserve Account contains at least the Reserve Account Threshold;
(xvii) [Reserved].
(xviii) Correspondent Seller. With respect to each Correspondent Mortgage Loan, Seller shall not have received notice from Buyer that the related Correspondent Seller is not approved;
(xix) Pooled Mortgage Loans. Prior to giving effect to any Transaction with respect to any Pooled Mortgage Loan, Buyer shall be added as a party to (i) the Intercreditor Agreement and (ii) the Joint Securities Account Control Agreement, in each case, duly executed and delivered by the parties thereto;
(xx) Other Documents. Such other documents as Buyer may request, consistent with market practices, in form and substance reasonably acceptable to Buyer; and
(xxi) Security Release Certification. With respect to each Purchased Mortgage Loan that is subject to a security interest (including any precautionary security interest) immediately prior to the Purchase Date, Seller shall have received adequate documentation necessary to release the related secured party’s security interest in such Purchased Mortgage Loan and upon request shall provide such documentation to Buyer. If necessary, such secured party shall have filed UCC termination statements in respect of any UCC filings made in respect of such Purchased Mortgage Loan, and each such release and UCC termination statement has been delivered to Buyer prior to each Transaction and to the Custodian as part of the Mortgage File.
(c) Initiation (Transactions other than Wet-Ink Transactions).
(i) Unless otherwise agreed, Seller may request that Buyer enter into a Transaction with respect to any Eligible Mortgage Loans on any Business Day during the period from the Effective Date to and excluding the Termination Date, by delivering to Buyer, with a copy to the Custodian, a (i) Transaction Notice, which must be received no later than [***] (New York City time) on the Business Day prior to the requested Purchase Date, and (ii) an Asset Schedule, which must be received no later than [***] (New York City time) on the requested Purchase Date. The delivery of such Transaction Notice shall be deemed a representation and warranty that Seller has no actual knowledge of any material information concerning such Eligible Mortgage Loan which is not reflected in such Asset Schedule or Transaction Notice or other information or otherwise disclosed to Buyer in writing. Buyer shall have the right to review the information set forth on the Transaction Notice and accompanying Asset Schedule, the Underwriting Package and the Eligible Mortgage Loans proposed to be subject to a Transaction as Buyer determines during normal business hours. In the event the Asset Schedule provided by Seller contains erroneous computer data, is not formatted properly or the computer fields are otherwise improperly aligned, Buyer shall provide written or electronic notice to a Responsible Officer of Seller describing such error and Seller may either (a) give Buyer written or
electronic authority to correct the computer data, reformat the Asset Schedule or properly align the computer fields or (b) correct the computer data, reformat or properly align the computer fields itself and resubmit the Asset Schedule as required herein. In the event that Seller gives Buyer authority to correct the computer data, reformat the Asset Schedule or properly align the computer fields, Seller shall hold Buyer harmless for such correction, reformatting or realigning, as applicable, except as otherwise expressly provided herein.
(ii) Upon Seller’s request to enter into a Transaction pursuant to Section 3(c)(i) and assuming all conditions precedent set forth in this Section 3 and have been met, on the requested Purchase Date, Buyer may, in its sole discretion purchase the Eligible Mortgage Loans included in the related Transaction Notice pursuant to the terms of this Agreement.
(iii) Each Transaction Notice together with this Agreement, shall be conclusive evidence of the terms of the Transaction(s) covered thereby.
(iv) Subject to the terms and conditions of this Agreement, during such period Seller may sell to, repurchase from and resell to Buyer Eligible Mortgage Loans hereunder.
(v) Seller shall deliver to the Custodian, in accordance with the terms of the Custodial and Disbursement Agreement, the Mortgage File pertaining to each Mortgage Loan to be sold to Buyer hereunder on the requested Purchase Date. Upon Buyer’s receipt of the Trust Receipt in accordance with the Custodial and Disbursement Agreement and subject to the provisions of this Section 3, to the extent that Buyer agrees in its sole discretion to fund the related Purchase Price on the Purchase Date, such aggregate Purchase Price for the related Transaction shall then be made available to Seller by Buyer transferring, via wire transfer, in the aggregate amount of such Purchase Prices in funds immediately available in accordance with Section 10(b).
(d) Initiation (Wet-Ink Transactions).
(i) Seller may request a Wet-Ink Transaction hereunder, on any Business Day during the period from the Effective Date to and excluding the Termination Date, by delivering to Buyer, with a copy to the Custodian, a transmission or transmissions which shall attach (i) a Transaction Notice with respect to the related Mortgage Loans, which shall be received no later than [***] (New York City time) on the Business Day prior to the requested Purchase Date and (ii) an Asset Schedule with respect to the related Mortgage Loans, the latest transmission of which must be received by the Buyer and Custodian no later than [***] (New York City time) on such Purchase Date. Such Transaction Notice shall specify the requested Purchase Date. In the event the Asset Schedule provided by Seller contains erroneous computer data, is not formatted properly or the computer fields are otherwise improperly aligned, Buyer shall provide written or electronic notice to a Responsible Officer of Seller describing such error and
Seller may either (a) give Buyer written or electronic authority to correct the computer data, reformat the Asset Schedule or properly align the computer fields or (b) correct the computer data, reformat or properly align the computer fields itself and resubmit the Asset Schedule as required herein. In the event that Seller gives Buyer authority to correct the computer data, reformat the Asset Schedule or properly align the computer fields, Seller shall hold Buyer harmless for such correction, reformatting or realigning, as applicable, except as otherwise expressly provided herein.
(ii) Seller shall deliver (or cause to be delivered) and release to the Custodian the Mortgage File pertaining to such Wet-Ink Mortgage Loans no later than the Wet-Ink Mortgage Loan Document Receipt Date in accordance with the terms and conditions of the Custodial and Disbursement Agreement.
(iii) Upon the Seller’s request for a Transaction pursuant to Section 3(d)(i), the Buyer may, upon satisfaction of all conditions precedent set forth in Sections 3(a) and 3(b) hereof, and provided that no Default or Event of Default shall have occurred and be continuing, enter into a Transaction with Seller on the requested Purchase Date, in the amount so requested.
(iv) Upon notice from the Closing Agent to Seller that a Wet-Ink Mortgage Loan was not originated, such Wet-Ink Mortgage Loan shall be removed from the list of Eligible Mortgage Loans. The Seller shall notify Buyer in writing if a Wet-Ink Mortgage Loan was not originated and has been removed from the list of Eligible Mortgage Loans.
Section 4. Repurchases.
(a) Seller shall repurchase the related Purchased Mortgage Loans from Buyer without penalty or premium on each related Repurchase Date. On the Repurchase Date for any Transaction, termination of such Transaction will be effected by reassignment to Seller or its designee of the Purchased Mortgage Loans subject to such Transaction against the simultaneous transfer of the Repurchase Price (excluding the amounts identified in clause (B) of the definition of Repurchase Price, which, for the avoidance of doubt, shall be paid on the next succeeding Price Differential Payment Date) to the account of the Buyer that is referenced in Section 10(a) of this Agreement. Buyer shall instruct the Custodian to release the Mortgage Files with respect to each repurchased Purchased Mortgage Loan to Seller or its designee at Seller’s expense on the related Repurchase Date.
(b) So long as no Default or Event of Default has occurred or is continuing, Seller may effect a repurchase in connection with the sale or disposition of Purchased Mortgage Loans to a Take-out Investor or other applicable buyer; provided, that Seller shall be permitted to effect such a repurchase if a Default has occurred and is continuing only if such repurchase would cure such Default; provided, further, that Seller shall not be permitted to repurchase any Purchased Mortgage Loan if the release of such Purchased Mortgage Loans would result in a Margin Deficit unless such Margin Deficit
is simultaneously cured by Seller in connection with such repurchase by payment by Seller. If Seller intends to make such a repurchase, by no later than [***] (New York City time) on the desired Repurchase Date, Seller shall or shall cause the Take-out Investor or other applicable buyer to (i) provide Buyer with a purchase advice notice identifying the Purchased Mortgage Loan(s) being repurchased and the related take-out price(s), and (ii) make payment directly to the account of the Buyer that is referenced in Section 10(a) of this Agreement in an amount equal to the aggregate net proceeds to be received by Seller in connection with the related sale. Buyer shall, on the same Business Day of receipt of such funds, apply such funds to the Repurchase Price of the related Mortgage Loans and shall, on the same Business Day of receipt of such funds, remit any excess to Seller; provided, that Buyer shall have no obligation to apply payments in the event that it is unable to identify the Purchased Mortgage Loans to which such payments correspond. Upon repurchase of the related Purchased Assets, Buyer will be deemed to have released its interests hereunder in such Purchased Assets, and Buyer shall represent to Seller, to the extent that good title was transferred and assigned by Seller to Buyer hereunder on the related Purchase Date, that Buyer is the sole owner of such Purchased Asset, free and clear of any other interests or liens caused by the Buyer’s actions or inactions.
(c) Without limiting Buyer’s rights and remedies under Section 7 hereof or otherwise, if at any time there has occurred a Purchased Mortgage Loan Issue with respect to any Purchased Mortgage Loan, Buyer may, at its option, by notice to a Responsible Officer of Seller (as such notice is more particularly set forth below, a “Repurchase Notice”), require Seller or its designee to repurchase such Purchased Mortgage Loan by remitting the related Repurchase Price (excluding the amounts identified in clause (B) of the definition of Repurchase Price, which, for the avoidance of doubt, shall be paid on the next succeeding Price Differential Payment Date) to the Disbursement Account of Buyer as soon as is practicable but, in any case, not more than two (2) Business Days after Buyer has delivered such Repurchase Notice to a Responsible Officer of Seller.
(d) Buyer’s election, in its sole and absolute discretion, not to send a Repurchase Notice at any time a Purchased Mortgage Loan is no longer an Eligible Mortgage Loan shall not in any way limit or impair its right to send a Repurchase Notice at a later time.
(e) The fact that Buyer has conducted or has failed to conduct any partial or complete due diligence investigation in connection with its purchase of any Purchased Mortgage Loan shall not affect Buyer’s right to demand repurchase or any other remedy as permitted under this Agreement.
Section 5. Income Payments; Price Differential.
(a) Income Payments.
(i) If Income is paid in respect of any Purchased Mortgage Loans during the term of a Transaction, such Income shall be the property of Buyer.
Upon the occurrence and during the continuance of an Event of Default, within two (2) Business Days of receipt and identification thereof, Seller shall, and shall cause Servicer to, deposit all Income into the account set forth in Section 10(a) hereof.
(ii) Notwithstanding any provision to the contrary in this Section 5, within three (3) Business Days of receipt by Seller or Servicer of any prepayment of principal in full, with respect to a Purchased Mortgage Loan, Seller shall or shall cause Servicer to remit such amount directly to the Disbursement Account of Buyer and Buyer shall immediately apply any such amount received to reduce the amount of the Repurchase Price due upon termination of the related Transaction and shall promptly remit any excess to Seller; provided, that Buyer shall have no obligation to apply payments in the event that it is unable to identify the Purchased Mortgage Loans to which such payments correspond.
(iii) Notwithstanding the preceding provisions, if an Event of Default has occurred and is continuing, all funds received by Buyer pursuant to this Section 5 shall be applied to reduce the Obligations as determined by Buyer in its sole discretion.
(b) Price Differential.
(i) On each Business Day that a Transaction is outstanding, the Pricing Rate shall be reset and, unless otherwise agreed, the accrued and unpaid Price Differential for each Price Differential Collection Period shall be settled in cash on the following Price Differential Payment Date. Two (2) Business Days prior to the Price Differential Payment Date, Buyer shall give Seller written or electronic notice of the amount of the Price Differential due on such Price Differential Payment Date. On the Price Differential Payment Date, Seller shall pay to Buyer the Price Differential for such Price Differential Payment Date (along with any other amounts due from Seller under this Agreement or any other Facility Document), by wire transfer in immediately available funds.
(ii) If Seller fails to pay all or part of the Price Differential by [***] (New York City time) on the related Price Differential Payment Date, with respect to any Purchased Mortgage Loans, Seller shall be obligated to pay to Buyer (in addition to, and together with, the amount of such Price Differential) interest on the unpaid Repurchase Price at a rate per annum equal to the Post-Default Rate until the Price Differential is received in full by Buyer. For the avoidance of doubt, Seller’s obligation to pay any Price Differential to Buyer shall not be deemed to be satisfied (and such Price Differential shall not deemed to be paid to Buyer) until the amount of such Price Differential is actually received by Buyer in the account of Buyer that is referenced in Section 10(a) of this Agreement (and not the Disbursement Account or any other account).
Section 6. Requirements Of Law.
(a) If any Requirement of Law or any change in the interpretation or application thereof or compliance by Buyer 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 Buyer to any Tax or increased Tax of any kind whatsoever (other than Excluded Taxes) with respect to this Agreement or any Transaction or change the basis of taxation of payments to Buyer in respect thereof;
(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan 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 Buyer which is not otherwise included in the determination of the LIBOR Rate hereunder; or
(iii) shall impose on Buyer any other material condition;
and the result of any of the foregoing is to increase the cost to Buyer, by an amount which Buyer deems to be material, of entering, continuing or maintaining any Transaction or to reduce any amount due or owing hereunder in respect thereof, then, in any such case, (A) Buyer shall give Seller prompt notice thereof and (B) Seller shall, at its option, either (1) promptly repurchase all Purchased Mortgage Loans then subject to a Transaction or (2) promptly pay Buyer such additional amount or amounts as calculated by Buyer in good faith as will compensate Buyer for such increased cost or reduced amount receivable; provided that in making a determination of increased cost pursuant to this Section 6(a), Buyer shall treat Seller in substantially the same manner Buyer treats similarly situated counterparties for similar collateral; provided, further, that Seller shall not be responsible for any amounts under this Section 6(a) if such increased costs or reduced amount receivables are incurred by Buyer prior to the date that is ninety (90) days prior to Buyer’s notice to a Responsible Officer of Seller of such costs.
(b) If Buyer shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by Buyer or any corporation controlling Buyer 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 Buyer’s or such corporation’s capital as a consequence of its obligations hereunder to a level below that which Buyer or such corporation could have achieved but for such adoption, change or compliance (taking into consideration Buyer’s or such corporation’s policies with respect to capital adequacy) by an amount deemed by Buyer to be material, then from time to time, Seller shall, at its option, either (1) promptly repurchase all Purchased Mortgage Loans then subject to a Transaction or (2) promptly pay Buyer such additional amount or amounts as calculated by Buyer in good faith as will compensate Buyer for such increased cost or reduced amount receivable; provided that in making a determination of increased cost pursuant to this Section 6(b), Buyer shall treat Seller in substantially the same manner Buyer treats
similarly situated counterparties for similar collateral; provided, further, that Seller shall not be responsible for any amounts under this Section 6(b) if such increased costs or reduced amount receivables are incurred by Buyer prior to the date that is ninety (90) days prior to Buyer’s notice to a Responsible Officer of Seller of such costs.
(c) If Buyer becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify Seller of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this Section submitted by Buyer to Seller shall be conclusive in the absence of manifest error.
Section 7. Margin Maintenance.
(a) If at any time the aggregate outstanding Purchase Price of all Purchased Mortgage Loans subject to Transactions is greater than the aggregate Asset Value of such Purchased Mortgage Loans subject to Transactions (a “Margin Deficit”), and such Margin Deficit is greater than the Minimum Margin Threshold, then Buyer may by notice to a Responsible Officer of Seller (as such notice is more particularly set forth below, a “Margin Call”), require Seller to transfer to Buyer cash in an amount at least equal to the Margin Deficit (such amount, a “Margin Payment”).
(b) If Buyer delivers a Margin Call to Seller on or prior to [***] (New York City time) on any Business Day, then Seller shall transfer the Margin Payment to Buyer or its designee no later than [***] (New York City time) on such Business Day. In the event Buyer delivers a Margin Call to Seller after [***] (New York City time) on any Business Day, Seller shall be required to transfer the Margin Payment no later than [***] (New York City time) on the following Business Day.
(c) Seller shall transfer any Margin Payment to the account of Buyer that is referenced in Section 10(a) of this Agreement.
(d) In the event that a Margin Deficit exists with respect to any Purchased Mortgage Loans, Buyer may retain any funds received by it to which the Seller would otherwise be entitled hereunder, which funds (i) shall be held by Buyer against the related Margin Deficit and (ii) may be applied by Buyer against the Repurchase Price of any Purchased Mortgage Loan for which the related Margin Deficit remains otherwise unsatisfied. Notwithstanding the foregoing, Buyer retains the right, in its sole discretion, to make a Margin Call in accordance with the provisions of this Section 7.
(e) The failure of Buyer, on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions of this Agreement or limit the right of Buyer to do so at a later date. Seller and Buyer each agree that a failure or delay by Buyer to exercise its rights hereunder shall not limit or waive Buyer’s rights under this Agreement or otherwise existing by law or in any way create additional rights for Seller.
Section 8. Taxes.
(a) Any and all payments by Seller under or in respect of this Agreement or any other Facility Documents to which Seller is a party shall be made free and clear of, and without deduction or withholding for or on account of, any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities (including penalties, interest and additions to tax) with respect thereto, whether now or hereafter imposed, levied, collected, withheld or assessed by any taxation authority or other Governmental Authority (collectively, “Taxes”), unless required by law. If Seller shall be required under any applicable Requirement of Law to deduct or withhold any Taxes from or in respect of any sum payable under or in respect of this Agreement or any of the other Facility Documents to Buyer, (i) Seller shall make all such deductions and withholdings in respect of Taxes, (ii) Seller shall pay the full amount deducted or withheld in respect of Taxes to the relevant taxation authority or other Governmental Authority in accordance with any applicable Requirement of Law, and (iii) the sum payable by Seller shall be increased as may be necessary so that after Seller has made all required deductions and withholdings (including deductions and withholdings applicable to additional amounts payable under this Section 8) Buyer receives an amount equal to the sum it would have received had no such deductions or withholdings been made in respect of Non-Excluded Taxes. For purposes of this Agreement the term “Non-Excluded Taxes” are Taxes other than, in the case of Buyer (including for avoidance of doubt any assignee, successor or participant), (i) Taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the jurisdiction under the laws of which Buyer is organized or of its applicable lending office, or any political subdivision thereof, (ii) any other Taxes imposed as a result of a present or former connection (other than a connection arising from Buyer or Buyer’s assignor having executed, delivered, or performed its obligations or received payments under, or enforced, this Agreement or any other Facility Documents) between Buyer or Buyer-transferor, as applicable, and the jurisdiction imposing the Tax, (iii) Taxes as a result of Buyer or Buyer-transferor, as applicable, changing its lending office after the Effective Date, (iv) Taxes attributable to Buyer or Buyer-transferor, as applicable, failing to comply with Section 8(e), and (v) any withholding Taxes imposed under FATCA (such Taxes that are expressly excluded from Non-Excluded Taxes, “Excluded Taxes”).
(b) In addition, Seller hereby agrees to pay any present or future stamp, recording, documentary, excise, property or value-added taxes, or similar taxes, charges or levies that arise from any payment made under or in respect of this Agreement or any other Facility Document or from the execution, delivery or registration of, any performance under, or otherwise with respect to, this Agreement or any other Facility Document, except any Taxes imposed as a result of a present or former connection between the Buyer and the jurisdiction imposing the Tax (collectively, “Other Taxes”).
(c) Seller hereby agrees to indemnify Buyer for, and to hold it harmless against, the full amount of Non-Excluded Taxes and Other Taxes, and the full amount of Non-Excluded Taxes or Other Taxes imposed on amounts payable by Seller under this Section 8 imposed on or paid by Buyer and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. The indemnity by Seller provided for in this Section 8(c) shall apply and be made whether or not the Non-Excluded Taxes or Other Taxes for which indemnification hereunder is sought have been
correctly or legally imposed or asserted. Amounts payable by Seller under the indemnity set forth in this Section 8(c) shall be paid within ten (10) days from the date on which Buyer makes written demand therefor.
(d) Within thirty (30) days after the date of any payment of Taxes, Seller (or any Person making such payment on behalf of Seller) shall furnish to Buyer for its own account a certified copy of the original official receipt evidencing payment thereof.
(e) For purposes of subsection (e) of this Section 8, the terms “United States” and “United States person” shall have the meanings specified in section 7701 of the Code. Each Buyer (including for avoidance of doubt any assignee, successor or participant) that either (i) is not incorporated under the laws of the United States, any State thereof, or the District of Columbia or (ii) whose name does not include “Incorporated,” “Inc.,” “Corporation,” “Corp.,” “P.C.,” “N.A.,” “National Association,” “insurance company,” or “assurance company” (a “Non-Exempt Buyer”) shall deliver or cause to be delivered to Seller the following properly completed and duly executed documents:
(i) in the case of a Non-Exempt Buyer that is not a United States person, or is a foreign disregarded entity for U.S. federal income tax purposes that is entitled to provide such form, a complete and executed (x) U.S. Internal Revenue Form W-8BEN or U.S. Internal Revenue Form W-8BEN-E in which Buyer claims the benefits of a tax treaty with the United States, if applicable, providing for a zero or reduced rate of withholding (or any successor forms thereto), including all appropriate attachments or (y) a U.S. Internal Revenue Service Form W-8ECI (or any successor forms thereto); or
(ii) in the case of an individual, (x) a complete and executed U.S. Internal Revenue Service Form W-8BEN (or any successor forms thereto) and, if applicable, a certificate substantially in the form of Exhibit D (a “Section 8 Certificate”) or (y) a complete and executed U.S. Internal Revenue Service Form W-9 (or any successor forms thereto); or
(iii) in the case of a Non-Exempt Buyer that is organized under the laws of the United States, any State thereof, or the District of Columbia, a complete and executed U.S. Internal Revenue Service Form W-9 (or any successor forms thereto), including all appropriate attachments; or
(iv) in the case of a Non-Exempt Buyer that (x) is not organized under the laws of the United States, any State thereof, or the District of Columbia and (y) is treated as a corporation for U.S. federal income tax purposes, a complete and executed U.S. Internal Revenue Service Form W-8BEN-E (or any successor forms thereto) and, if applicable, a Section 8 Certificate; or
(v) in the case of a Non-Exempt Buyer that (A) is treated as a partnership or other non-corporate entity, and (B) is not organized under the laws of the United States, any State thereof, or the District of Columbia, (x)(i) a
complete and executed U.S. Internal Revenue Service Form W-8IMY (or any successor forms thereto) (including all required documents and attachments) and (ii) if applicable, a Section 8 Certificate, and (y) without duplication, with respect to each of its beneficial owners and the beneficial owners of such beneficial owners looking through chains of owners to individuals or entities that are treated as corporations for U.S. federal income tax purposes (all such owners, “beneficial owners”), the documents that would be provided by each such beneficial owner pursuant to this Section if such beneficial owner were Buyer; provided, however, that no such documents will be required with respect to a beneficial owner to the extent the actual Buyer is determined to be in compliance with the requirements for certification on behalf of its beneficial owner as may be provided in applicable U.S. Treasury regulations, or the requirements of this clause (v) are otherwise determined to be unnecessary; or
(vi) in the case of a Non-Exempt Buyer that is disregarded for U.S. federal income tax purposes, the document that would be provided by its beneficial owner pursuant to this Section if such beneficial owner were Buyer; or
(vii) in the case of a Non-Exempt Buyer that (A) is not a United States person and (B) is acting in the capacity as an “intermediary” (as defined in U.S. Treasury Regulations), (x)(i) a U.S. Internal Revenue Service Form W-8IMY (or any successor form thereto) (including all required documents and attachments) and (ii) if applicable, a Section 8 Certificate, and (y) if the intermediary is a “non-qualified intermediary” (as defined in U.S. Treasury Regulations), from each person upon whose behalf the “non-qualified intermediary” is acting the documents that would be provided by each such person pursuant to this Section if each such person were Buyer.
Buyer agrees that if any form provided pursuant to clause (e)(i)-(vii) above it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Seller in writing of its legal inability to do so. If Buyer has provided a form pursuant to clause (e)(i)-(vii) above and the form provided by Buyer either at the time Buyer first becomes a party to this Agreement or, with respect to a grant of a participation, at the effective date of such participation, indicates a United States interest withholding tax rate in excess of zero, withholding tax at such rate shall be treated as Excluded Taxes and shall not cease to be Excluded Taxes, and qualify as Non-Excluded Taxes, unless and until Buyer provides the appropriate form, if any as required by Section 8(e), certifying that a lesser rate applies, whereupon withholding tax at such lesser rate shall be considered Excluded Taxes solely for the periods governed by such form. If, however, on the date (after the Effective Date) a Person becomes an assignee, successor or participant to this Agreement, Buyer-transferor was entitled to indemnification or additional amounts under this Section 8, then Buyer assignee, successor or participant shall be entitled to indemnification or additional amounts to the extent (and only to the extent), that Buyer transferor was entitled to such indemnification or additional amounts for Non-Excluded Taxes, and Buyer assignee, successor or participant shall be entitled to additional indemnification or additional amounts for any other or additional Non-Excluded Taxes.
(f) For any period with respect to which Buyer has failed to provide Seller with the appropriate form, certificate or other document described in subsection (e) of this Section 8, Buyer shall not be entitled to indemnification or additional amounts under subsection (a) or (c) of this Section 8 with respect to Non-Excluded Taxes imposed by the United States by reason of such failure; provided, however, that should a Buyer become subject to Non-Excluded Taxes because of its failure to deliver a form, certificate or other document required hereunder, Seller shall take such steps at Buyer’s expense as Buyer shall reasonably request, to assist Buyer in recovering such Non-Excluded Taxes.
(g) If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section (including by the payment of additional amounts pursuant to this Section), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this paragraph (h) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this subsection (g), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this subsection (g) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This subsection shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.
(h) Without prejudice to the survival of any other agreement of Seller hereunder, the agreements and obligations of Seller contained in this Section 8 shall survive the termination of this Agreement. Nothing contained in this Section 8 shall require Buyer to make available any of its tax returns or any other information that it deems to be confidential or proprietary.
Section 9. Security Interest; Buyer’s Appointment as Attorney-in-Fact.
(a) Security Interest. On each Purchase Date, Seller hereby sells, assigns and conveys to Buyer all right, title and interest in the Purchased Mortgage Loans listed on the related Asset Schedule to the extent of its rights therein, although the parties intend that all Transactions hereunder be sales and purchases and not loans (in each case, other than for accounting and tax purposes), in the event any such Transactions are deemed to be loans, and in any event, Seller, to the extent of its rights therein, hereby pledges to Buyer as security for the performance of the Obligations and hereby grants, assigns and pledges to Buyer a first priority security interest in Seller’s rights, title and interest in:
(i) the Purchased Mortgage Loans, the Records related to the Purchased Mortgage Loans, all Servicing Rights related to the Purchased Mortgage Loans, all Agency Securities related to Pooled Mortgage Loans that are Purchased Mortgage Loans or right to receive any such Agency Security when issued to the extent backed by any of the Purchased Mortgage Loans, the Facility Documents (to the extent such Facility Documents and Seller’s rights thereunder relate to the Purchased Mortgage Loans), any related Take-out Commitments related to such Purchased Mortgage Loans, any Property relating to any Purchased Mortgage Loan or the related Mortgaged Property, all insurance policies and insurance proceeds relating to any Purchased Mortgage Loan or any related Mortgaged Property, including but not limited to any payments or proceeds under any related primary insurance, hazard insurance and FHA Mortgage Insurance Contracts (if any) and VA Loan Guaranty Agreements (if any), any Income relating to any Purchased Mortgage Loan, Interest Rate Protection Agreements related to such Purchased Mortgage Loans, the Reserve Account, and any other accounts (including any interest of Seller in escrow accounts) and any other payments, rights to payment (including payments of interest or finance charges) and general intangibles to the extent that the foregoing relates solely to any Purchased Mortgage Loans and any other assets to the extent relating solely to the Purchased Mortgage Loans (including, without limitation, any other accounts) or any interest in the Purchased Mortgage Loans and any proceeds and distributions and any other property, rights, title or interests as are specified on a Trust Receipt and Exception Report with respect to any of the foregoing, in all instances, whether now owned or hereafter acquired, now existing or hereafter created in each case excluding any Take-out Commitments, insurance policies and Interest Rate Protection Agreements to the extent Seller may not, pursuant to the provisions thereof, assign or transfer, or pledge or grant a security interest in, such Take-out Commitments, insurance policies or Interest Rate Protection Agreements without the consent of, or without violating its obligations to, the related Take-out Investor, insurance provider or counterparty to such Interest Rate Protection Agreement, to such but only to the extent such provisions are not rendered ineffective against the Buyer under Article 9, Part 4 of the Uniform Commercial Code (collectively, the “Repurchase Assets”).
(ii) The foregoing paragraph (i) is intended to constitute a security agreement or other arrangement or other credit enhancement related to the Agreement and transactions hereunder as defined under Section 101(47)(v) and 741(7)(xi) of the Bankruptcy Code.
(b) Servicing Rights. Without limiting the generality of the foregoing and in the event that Seller is deemed to retain any residual Servicing Rights, and for the avoidance of doubt, Seller grants, assigns and pledges to Buyer a first priority security interest in the Servicing Rights and proceeds related thereto and all of its contractual rights under the Servicing Agreement in respect of the servicing thereunder and in all instances, whether now owned or hereafter acquired, now existing or hereafter created, including all of Servicing Rights related to the Purchased Mortgage Loans, exclusive of any Purchased Mortgage Loan or contractual rights for the Purchased Mortgage Loan
that, in either case, is repurchased in full by Seller in accordance with the provisions of this Agreement and therefore is no longer subject to a Transaction. The foregoing provision is intended to constitute a security agreement or other arrangement or other credit enhancement related to this Agreement and Transactions hereunder as defined under Sections 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.
(c) Financing Statements. Seller hereby authorizes Buyer to file such financing statement or statements relating to the Repurchase Assets as Buyer, at its option, may deem reasonable and appropriate to protect Buyer’s interest therein. Seller shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 9.
(d) Buyer’s Appointment as Attorney in Fact. Seller hereby irrevocably constitutes and appoints Buyer and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Seller and in the name of Seller or in its own name, from time to time in Buyer’s discretion, for the purpose, following the occurrence and continuation of an Event of Default, of carrying out the terms of this Agreement and 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 Agreement, in each case, subject to the terms of this Agreement. Without limiting the generality of the foregoing, Seller hereby gives Buyer the power and right, on behalf of Seller without assent by, Seller if an Event of Default shall have occurred and be continuing, to do the following:
(i) in the name of Seller or in 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 with respect to any Repurchase Assets 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 Buyer for the purpose of collecting any and all such moneys due with respect to any Repurchase Assets whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on or threatened in writing against the Repurchase Assets; and
(iii) (A) to direct any party liable for any payment under any Repurchase Assets to make payment of any and all moneys due or to become due thereunder directly to Buyer or as Buyer shall direct, including, without limitation, any payment agent with respect to any Repurchase Asset; (B) to send “goodbye” letters on behalf of Seller and Servicer and Section 404 Notices; (C) 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 Repurchase Assets; (D) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Repurchase Assets; (E) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect
the Repurchase Assets or any proceeds thereof and to enforce any other right in respect of any Repurchase Assets; (F) to defend any suit, action or proceeding brought against Seller with respect to any Repurchase Assets; (G) to settle, compromise or adjust any suit, action or proceeding described in clause (F) above and, in connection therewith, to give such discharges or releases as Buyer may deem appropriate and (H) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Repurchase Assets as fully and completely as though Buyer were the absolute owner thereof for all purposes, and to do, at Buyer’s option and Seller’s expense, at any time, and from time to time, all acts and things which Buyer deems necessary to protect, preserve or realize upon the Repurchase Assets and Buyer’s Liens thereon and to effect the intent of this Agreement, all as fully and effectively as Seller might do.
Seller 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. In addition to the foregoing, Seller agrees to execute a Power of Attorney, the form of Exhibit F hereto, to be delivered on the date hereof. Seller and Buyer acknowledge that the Power of Attorney shall terminate on the Termination Date and satisfaction in full of the Obligations.
Seller also authorizes Buyer, if an Event of Default shall have occurred, from time to time, to execute, in connection with any sale provided for in Section 16 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Repurchase Assets.
The powers conferred on Buyer hereunder are solely to protect Buyer’s interests in the Repurchase Assets and shall not impose any duty upon it to exercise any such powers. Buyer 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 Seller for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.
Section 10. Payment, Transfer and Remittance.
(a) Payments and Transfers of Funds. Unless otherwise mutually agreed in writing, all transfers of funds to be made by Seller hereunder shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to Buyer at the following account maintained by Buyer: [***], not later than [***] New York City time, on the date on which such payment shall become due (and each such payment made after such time shall be deemed to have been made on the next succeeding Business Day). Seller acknowledges that it has no rights of withdrawal from the foregoing account.
(b) Remittance of Purchase Price. On the Purchase Date for each Transaction, ownership of the Purchased Mortgage Loans shall be transferred to Buyer or its designee against the simultaneous transfer of the Purchase Price to the account (or accounts)
designated by Seller to Buyer simultaneously with the delivery to Buyer of the Purchased Mortgage Loans relating to such Transaction.
Section 11. Hypothecation or Pledge of Purchased Mortgage Loans. Title to all Purchased Mortgage Loans and Repurchase Assets shall pass to Buyer and Buyer shall have free and unrestricted use of all Purchased Mortgage Loans and Repurchase Assets, subject to the terms of this Agreement. Buyer may engage in repurchase transactions with the Purchased Mortgage Loans or Repurchase Assets or otherwise engage in pledging, repledging, transferring, hypothecating, or rehypothecating the Purchased Mortgage Loans or Repurchase Assets. Nothing contained in this Agreement shall obligate Buyer to segregate any Purchased Mortgage Loans or Repurchase Assets delivered to Buyer by Seller.
Section 12. [Reserved].
Section 13. Representations. Seller represents and warrants to Buyer that as of the Purchase Date of any Purchased Mortgage Loans by Buyer from Seller and as of the date of this Agreement and any Transaction hereunder and at all times while this Agreement and any Transaction hereunder is in full force and effect:
(a) Acting as Principal. Seller will engage in such Transactions as principal (or, if agreed in writing in advance of any Transaction by the other party hereto, as agent for a disclosed principal).
(b) Intellectual Property. Seller and its Subsidiaries owns, or is licensed to use, all Intellectual Property necessary to conduct its business as currently conducted except for such Intellectual Property the failure of which to own or license would not be expected to have, either individually or in the aggregate, a Material Adverse Effect.
(c) Solvency. Neither the Facility Documents nor any Transaction thereunder are entered into in contemplation of insolvency or with intent to hinder, delay or defraud any of Seller’s creditors. The transfer of the Purchased Mortgage Loans subject hereto is not undertaken with the intent to hinder, delay or defraud any of Seller’s creditors. Seller is not insolvent within the meaning of 11 U.S.C. Section 101(32) and the transfer and sale of the Purchased Mortgage Loans pursuant hereto (i) will not cause Seller to become insolvent, (ii) will not result in any property remaining with Seller to be unreasonably small capital with which to engage in its business, and (iii) will not result in debts that would be beyond Seller’s ability to pay as same mature. Seller received reasonably equivalent value in exchange for the transfer and sale of the Purchased Mortgage Loans subject hereto.
(d) No Broker. Seller has not dealt with any broker, investment banker, agent, or other person, except for Buyer, who may be entitled to any commission or compensation in connection with the sale of Purchased Mortgage Loans pursuant to this Agreement or such other Person who has received such commission or compensation.
(e) Ability to Perform. Seller has the ability to perform each and every covenant contained in the Facility Documents to which it is a party on its part to be performed.
(f) Existence. Seller and each of its Subsidiaries: (a) is a corporation, limited liability company or limited partnership, as applicable, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, organization or formation, as applicable; (b) has the power and authority and all governmental licenses, authorizations, permits, consents and approvals to (i) own its assets and carry on its business as now being or as proposed to be conducted and (ii) execute, deliver, and perform its obligations under the Facility Documents to which it is a party; (c) is duly qualified as a foreign corporation, limited liability company or limited partnership, as applicable, and licensed and in good standing, under the laws of each jurisdiction in which the nature of the business conducted by it makes such qualification necessary; and (d) is in compliance with all Requirements of Law, in each case of clauses (a)-(d), except as would not be reasonably likely to have a Material Adverse Effect.
(g) Environmental Matters. Seller and each of its Subsidiaries is and has been in compliance with all applicable Environmental Laws, including obtaining and maintaining all Permits required by any applicable Environmental Law.
(h) No Breach. Neither (a) the execution and delivery of the Facility Documents nor (b) the consummation of the transactions therein contemplated to be entered into by Seller in compliance with the terms and provisions thereof will conflict with or result in (i) a breach of the organizational documents of Seller, or (ii) a breach of any applicable law, rule or regulation, or (iii) a breach of any order, writ, injunction or decree of any Governmental Authority, or (iv) a breach of or default under other agreement or instrument to which Seller is a party or by which Seller or any of its Property is bound or to which Seller is subject, or (v) the creation or imposition of any Lien (except for the Liens created pursuant to the Facility Documents) upon any Property of Seller pursuant to the terms of any such agreement or instrument.
(i) Action. Seller has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Facility Documents to which it is a party; the execution, delivery and performance by Seller of each of the Facility Documents to which it is a party have been duly authorized by all necessary corporate or other action on its part; and each Facility Document to which it is a party has been duly and validly executed and delivered by Seller.
(j) Approvals. Except for those that have previously been obtained, no authorizations, approvals, exemptions or consents of, and no filings or registrations with, any Governmental Authority or any securities exchange are necessary for the execution, delivery or performance by Seller of the Facility 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 the Facility Documents.
(k) Enforceability. This Agreement and all of the other Facility Documents executed and delivered by Seller, as applicable, in connection herewith are legal, valid and binding obligations of Seller, as applicable, are enforceable against Seller, as applicable, in accordance with their terms except as such enforceability may be limited
by (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and (ii) general principles of equity.
(l) Indebtedness. As of the date of this Agreement, Seller’s Indebtedness is as set forth on Schedule 3.
(m) Labor Relations. There are no strikes, work stoppages, slowdowns or lockouts existing, pending (or, to the knowledge of Seller or its Subsidiaries, threatened in writing) against or involving Seller or its Subsidiaries, except for those that would not, in the aggregate, be expected to have a Material Adverse Effect.
(n) No Event of Default. No Event of Default has occurred and is continuing.
(o) Litigation. There are no actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are pending or threatened in writing) or other legal or arbitrable proceedings affecting the Seller or any of its Subsidiaries or affecting any of the Property of any of them before any federal or state court or before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Facility Documents or any action to be taken in connection with the transactions contemplated hereby, (ii) relates to any violation of the Home Ownership and Equity Protection Act or any state, city or district high cost home mortgage or predatory lending law, which, with respect to subsection (ii), individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect or constitute an Event of Default.
(p) Margin Regulations. The use of all funds acquired by Seller under this Agreement will not conflict with or contravene any of Regulations T, U or X promulgated by the Board of Governors of the Federal Reserve System as the same may from time to time be amended, supplemented or otherwise modified.
(q) Taxes. Seller has timely filed all tax returns that are required to be filed by it and has timely paid all Taxes, except for any such Taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided or to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect. There are no material Liens for Taxes, except for statutory Liens for Taxes not yet due and payable.
(r) Investment Company Act. Neither Seller 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.
(s) Purchased Mortgage Loans. The provisions of this Agreement are effective to either constitute a sale of the Repurchase Assets owned by Seller to Buyer or to create in favor of Buyer a valid security interest in all right, title and interest of Seller in, to and under any Repurchase Assets owned by Seller.
(t) Chief Executive Office/Jurisdiction of Organization. On the Effective Date, Seller’s chief executive office, is, and has been located at 2211 Old Earheart Road,
Suite 250, Ann Arbor, Michigan 48105. On the Effective Date, Seller’s jurisdiction of organization is New Jersey.
(u) Location of Books and Records. The location where Seller keeps its books and records, including all computer tapes and records related to the Repurchase Assets is its chief executive office.
(v) True and Complete Disclosure. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of Seller to Buyer in connection with the negotiation, preparation or delivery of this Agreement and the other Facility Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of fact or omit to state any fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by or on behalf of Seller to Buyer in connection with this Agreement and the other Facility Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every 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 of Seller, after due inquiry, that would reasonably be expected to have a Material Adverse Effect that has not been disclosed herein, in the other Facility Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to Buyer for use in connection with the transactions contemplated hereby or thereby.
(w) ERISA.
(i) Other than as would not reasonably be expected to have a Material Adverse Effect, during the immediately preceding [***] period, Seller and any ERISA Affiliate thereof has complied in all material respects with the applicable provisions of the Code and ERISA with respect to each Plan, Seller and any ERISA Affiliate thereof has complied with the minimum funding requirements with respect to each Plan and Multiemployer Plan, and no Event of ERISA Termination has occurred resulting in any liability to Seller or any ERISA Affiliate thereof.
(ii) Seller is not currently or reasonably expects to be subject to any liability for a complete or partial withdrawal from a Multiemployer Plan, other than as would not reasonably be expected to have a Material Adverse Effect.
(iii) Seller provides medical or health benefits to former employees as required by the Consolidated Omnibus Budget Reconciliation Act, as amended, or similar state or local law (collectively, “COBRA”) at no material cost to the employer.
(iv) None of Seller or any Subsidiaries or any ERISA Affiliate thereof has incurred a tax liability under Chapter 43 of the Code or a penalty under
Section 502(i) of ERISA which has not been paid in full, except where the incurrence of such tax or penalty would not result in a Material Adverse Effect.
(x) [Reserved].
(y) No Reliance. Seller has made its own independent decisions to enter into the Facility Documents and each Transaction and as to whether such Transaction is appropriate and proper for it based upon its own judgment and upon advice from such advisors (including without limitation, legal counsel and accountants) as it has deemed necessary. Seller is not relying upon any advice from Buyer as to any aspect of the Transactions, including without limitation, the legal, accounting or tax treatment of such Transactions.
(z) Plan Assets. Seller is not an employee benefit plan as defined in Section 3(3) of Title I of ERISA that is subject to Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code, or an entity deemed to hold “plan assets” within the meaning of 29 CFR §2510.3-101, as modified by Section 3(42) of ERISA, and Seller is not acting on behalf of any of the foregoing. Seller is not subject to any state or local statute that regulates investments of, or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA, that is similar to Section 406 of ERISA or Section 4975 of the Code and that would be violated by the transactions contemplated by this Agreement. The Purchased Mortgage Loans are not “plan assets” within the meaning of 29 CFR §2510.3-101, as modified by Section 3(42) of ERISA in the hands of Seller.
(aa) Anti-Money Laundering Laws. Seller and each Subsidiary of Seller is in compliance with all U.S. laws related to terrorism or money laundering (“Anti-Money Laundering Laws”) including: (i) all applicable requirements of the Currency and Foreign Transactions Reporting Act of 1970 (31 U.S.C. 5311 et. seq., (the Bank Secrecy Act)), as amended by Title III of the USA Patriot Act, (ii) the Trading with the Enemy Act, (iii) Executive Order, any other enabling legislation, executive order or regulations issued pursuant or relating thereto and (iv) other applicable federal or state laws relating to “know your customer” or anti-money laundering rules and regulations, in each case, except as could reasonably be expected to have a Material Adverse Effect. No action, suit or proceeding by or before any court or Governmental Authority with respect to compliance with such Anti-Money Laundering Laws is pending or threatened in writing to the knowledge of Seller and each Subsidiary of Seller.
(bb) Sanctions. Seller and each Subsidiary of Seller is in compliance in all respects with all U.S. economic sanctions laws, the Executive Order, any other executive orders and implementing regulations (“Sanctions”) as administered by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) and the U.S. State Department, except as could reasonably be expected to have a Material Adverse Effect. None of Seller nor any Subsidiary of Seller (i) is a Person on the list of the Specially Designated Nationals and Blocked Persons (the “SDN List”), (ii) is a person who is otherwise the target of U.S. economic sanctions laws such that a U.S. person cannot deal or otherwise engage in business transactions with such person, (iii) is a Person organized or resident in
a country or territory subject to comprehensive Sanctions (a “Sanctioned Country”), or (iv) is owned or controlled by (including by virtue of such Person owning voting shares or interests), or acts, directly or indirectly, for or on behalf of, any Person on the SDN List or a government of a Sanctioned Country such that the entry into, or performance under, this Agreement or any other Facility Document would be prohibited by U.S. law. Seller and each Subsidiary of Seller has instituted and will continue to maintain policies and procedures designed to promote compliance by Seller, its Subsidiaries and their respective directors, officers, employees and agents with Sanctions, Anti-Money Laundering Laws and Anti-Corruption Laws.
(cc) Seller, and each Subsidiary of Seller is in compliance in all respects with all applicable anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”), (“Anti-Corruption Laws”), except as could reasonably be expected to have a Material Adverse Effect. None of Seller nor any Subsidiary of Seller, nor to the knowledge of Seller, any director, officer, agent, employee, or other person acting on behalf of Seller or any Subsidiary of Seller, has taken any action, directly or indirectly, that would result in a violation of applicable Anti-Corruption Laws.
(dd) Brokers’ Fees; Transaction Fees. Except for fees payable to Buyer, neither Seller nor any of its Subsidiaries has any obligation to any Person in respect of any finder’s, broker’s or investment banker’s fee in connection with the transactions contemplated hereby.
(ee) [Reserved].
(ff) Agency Approvals. To the extent required by applicable law and/or necessary to issue an Agency Security, Seller and Servicer is (i) an FHA Approved Mortgagee, (ii) a VA Approved Lender and approved by Ginnie Mae as an approved issuer, (iii) approved by Fannie Mae as an approved lender, (iv) approved by Freddie Mac as an approved seller/servicer, and (v) to the extent necessary, approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act (collectively, the “Agency Approvals”). In each such case, Seller is in good standing.
Section 14. Covenants Of Seller. On and as of the date of this Agreement and each Purchase Date and on each day until this Agreement is no longer in force, Seller covenants as follows:
(a) Preservation of Existence; Compliance with Law.
(i) Seller shall preserve and maintain its legal existence;
(ii) Seller shall (A) comply with all Requirements of Law (including, without limitation, all Environmental Laws) and (B) shall not engage in any conduct or activity that could subject its assets to forfeiture or seizure, in each case, except as would not be reasonably likely to have a Material Adverse Effect;
(iii) Seller shall maintain in effect and enforce policies and procedures designed to ensure compliance by Seller, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws, Anti-Money Laundering Laws and applicable Sanctions;
(iv) Seller shall not permit any of its Subsidiaries to fail to comply with the laws, regulations and executive orders referred to in Section 13(bb). None of Seller nor any Subsidiary of Seller, nor to the knowledge of Seller, any director, officer, agent, employee, or other person acting on behalf of Seller or any Subsidiary of Seller, will request or use the proceeds of Transaction, directly or indirectly, (A) for any payments to any Person, including any government official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, or otherwise take any action, directly or indirectly, that would result in a violation of any Anti-Corruption Laws, (B) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Person on the SDN List or a government of a Sanctioned Country, to the extent such activities, business or transaction would be prohibited by Sanctions if conducted by a corporation incorporated in the United States or in a European Union member state, or (C) in any manner that would result in the violation of any Sanctions applicable to any party hereto. Furthermore, Seller will not, directly or indirectly, use the proceeds of the any Transaction, or lend, contribute or otherwise make available such proceeds to any Subsidiary, Affiliate, joint venture partner or other Person, to fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is the subject of Sanctions, or in any other manner that will result in a violation by any Person participating in the transaction of any Sanctions;
(v) Seller shall preserve and maintain all rights, privileges, licenses, franchises, permits or other approvals necessary for Seller to conduct its business and to perform its obligations under the Facility Documents and shall conduct its business in accordance with applicable law, except as would not be reasonably likely to have a Material Adverse Effect; and
(vi) Seller shall keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied.
(b) Taxes. Seller shall timely file all tax returns that are required to be filed by it and shall timely pay all Taxes, except for any such Taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided or to the extent that the failure to do so would not reasonably be expected to have a Material Adverse Effect.
(c) Notice of Proceedings or Adverse Change. Except to the extent otherwise prohibited by any Government Agency, Governmental Authority or Requirement of Law, Seller shall give prompt notice (or notice within the timeframe as otherwise specified below) to Buyer after a Responsible Officer of Seller has any knowledge of:
(i) the occurrence of any Default or Event of Default;
(ii) [Reserved];
(iii) [Reserved];
(iv) as soon as reasonably possible, notice of any of the following events:
(A) a material modification or termination in the insurance coverage of Seller as required to be maintained pursuant to Section 14(m) hereunder, with a copy of evidence of same attached;
(B) any material change in accounting policies or financial reporting practices of Seller;
(C) should Seller, for any reason, cease to possess all such applicable Agency Approvals as required herein;
(D) promptly upon receipt of notice or knowledge of any Lien or security interest (other than security interests created hereby or under any other Facility Document) on, or claim asserted against, any of the Repurchase Assets; provided, however, that a breach of this Section 14(c)(iv)(D) with respect to any Purchased Mortgage Loan shall only result in Seller’s obligation to repurchase such Purchased Mortgage Loan;
(E) as soon as practicable, but, in any case, no more than two (2) Business Days, after Seller has obtained knowledge of any fact that could reasonably be the basis of any Purchased Mortgage Loan Issue with respect to a Purchased Mortgage Loan, notice identifying the related Purchased Mortgage Loan with respect to which such Purchased Mortgage Loan Issue exists and detailing the cause of such potential Purchased Mortgage Loan Issue provided, however, that a breach of this Section 14(c)(iv)(E) with respect to any Purchased Mortgage Loan shall only result in Seller’s obligation to repurchase such Purchased Mortgage Loan;
(F) [Reserved];
(G) any other event, circumstance or condition that has resulted or would reasonably be expected to result in a Material Adverse Effect;
(v) promptly, but no later than [***] after Seller receives notice of, or has knowledge of, any actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are, to the best of Seller’s knowledge, pending or threatened in writing) or other legal or arbitrable proceedings, the existence of which is not required by law or regulation to remain confidential, affecting Seller or any of its Subsidiaries or affecting any of the Property of any of them before any federal or state court or before any
Governmental Authority that (A) questions or challenges the validity or enforceability of any of the Facility Documents or any action to be taken in connection with the transactions contemplated hereby, or (B) relates to any violation of the Home Ownership and Equity Protection Act or any state, city or district high cost home mortgage or predatory lending law, which, with respect to clause (B), individually or in the aggregate, would have a Material Adverse Effect or constitute an Event of Default; and
(vi) promptly, but no later than [***] after Seller receives notice of the same, any Purchased Mortgage Loan agreed to be the subject of a Take-out Commitment and delivered to a Take-out Investor (whole loan or securitization) under a Bailee Letter, and which was rejected for purchase by such Take-out Investor; provided, that upon written request from Buyer, Seller shall provide an explanation as to why such Purchased Mortgage Loan was rejected for purchase by such Take-out Investor.
(d) Reporting. Seller shall furnish to Buyer the following:
(i) within thirty (30) days after the end of each calendar month, other than the last calendar month of each fiscal quarter, the unaudited balance sheets of Seller as at the end of such calendar month, the related unaudited consolidated statements of income for the Seller, for such month and the portion of the fiscal year through the end of such month, accompanied by the Officer’s Compliance Certificate (including all specified schedules), executed by a Responsible Officer of Seller, which certificate shall state that said financial statements and schedules fairly present in all material respects the financial condition and results of operations of Seller, in accordance with GAAP, consistently applied, as at the end of, and for, such month (subject to normal year-end adjustments);
(ii) within forty-five (45) days after the end of the last calendar month of each fiscal quarter, the unaudited balance sheets of Seller as at the end of such calendar month, the related unaudited consolidated statements of income for such month and the portion of the fiscal year through the end of such month, the related unaudited consolidated statements of cash flows for the Seller, for such quarter and the portion of the fiscal year through the end of such quarter, accompanied by the Officer’s Compliance Certificate (including all specified Schedules), executed by a Responsible Officer of Seller, which certificate shall state that said financial statements and schedules fairly present in all material respects the financial condition and results of operations of Seller, in accordance with GAAP, consistently applied, as at the end of, and for, such month (subject to normal year-end adjustments);
(iii) as soon as available and in any event within one hundred twenty (120) days after the end of the Seller’s fiscal year, the audited balance sheets and the related statements of income for the Seller as at the end of such fiscal year, prepared by a certified public accountant in accordance with GAAP, setting forth in each 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 have no “going concern” qualification and shall state that said financial statements fairly present the financial condition and results of operations of Seller, if applicable, as at the end of, and for, such fiscal year in accordance with GAAP;
(iv) within [***] after any material amendment, modification or supplement has been entered into with respect to any Servicing Agreement affecting any Purchased Mortgage Loan, a fully executed copy thereof, certified by Seller to be true, correct and complete;
(v) within [***] following written request of Buyer, a monthly servicing and remittance report of each Servicer with respect to the Purchased Mortgage Loans, in form and substance acceptable to Buyer; and
(vi) except to the extent prohibited by any Government Agency, Governmental Authority or Requirement of Law, copies of relevant portions of all final written Fannie Mae, Freddie Mac, FHA, VA, Governmental Authority and investor audits, examinations, evaluations, monitoring reviews and reports of its operations (including those prepared on a contract basis) which provide for or relate to (A) corrective action required, (B) sanctions proposed, imposed or required, including, without limitation, notices of defaults, notices of termination of approved status, notices of imposition of supervisory agreements or interim servicing agreements, and notices of probation, suspension, or non-renewal, or (C) “report cards”, “grades”, or other classifications of the quality of Seller’s operations that in the case of any of clauses (A) through (C) would be expected to have a Material Adverse Effect on such operations.
(e) Visitation and Inspection Rights. Subject to Section 32 herein and to the extent not prohibited by a Government Agency, a Governmental Authority or Requirement of Law, Seller shall permit Buyer to inspect, and to discuss with Seller’s officers, the affairs, finances, and accounts of Seller, the Repurchase Assets, OFAC sanctions scanning policies and procedures, including information relating to the method and frequency of scanning and the results of specific scans conducted on borrowers, anti-money laundering policies and procedures, and Seller’s books and records, and to make abstracts or reproductions thereof and, to the extent not prohibited by Requirements of Law, to duplicate, reduce to hard copy or otherwise use any and all computer or electronically stored information or data, in each case, (i) during normal business hours, (ii) upon reasonable notice (provided, that upon the occurrence and continuation of an Event of Default, no notice shall be required), and (iii) at the expense of Seller to discuss with Seller’s officers, its affairs, finances, and accounts.
(f) Reimbursement of Expenses. Subject to Sections 17 and 20, on the date of execution of this Agreement, Seller shall reimburse Buyer for all expenses (including legal fees) incurred by Buyer on or prior to such date. From and after such date, Seller shall promptly reimburse Buyer for all expenses as the same are incurred by Buyer upon receipt of invoices therefor.
(g) | [Reserved.] |
(h) Further Assurances. Seller shall execute and deliver to Buyer all further documents, financing statements, agreements and instruments, and take all further reasonable action that may be required under applicable law, or that Buyer may reasonably request, in order to effectuate the transactions contemplated by this Agreement and the Facility Documents or, without limiting any of the foregoing, to grant, preserve, protect and perfect the validity and first-priority of the security interests created or intended to be created hereby. Seller shall do all things reasonably necessary to preserve the Repurchase Assets so that they remain subject to the first priority perfected security interest hereunder.
(i) True and Correct Information. All information, reports, exhibits, schedules, financial statements or certificates of Seller or any of its Affiliates thereof or any of their officers furnished to Buyer hereunder and during Buyer’s diligence of Seller are true and complete in all material respects and will not omit to disclose any facts necessary to make the statements therein or therein, in light of the circumstances in which they are made, not misleading. All required financial statements, information and reports delivered by Seller to Buyer pursuant to this Agreement shall be prepared in accordance with GAAP, or in connection with Securities and Exchange Commission filings, if any, the appropriate Securities and Exchange Commission accounting requirements.
(j) | ERISA Events. |
(i) Promptly upon becoming aware of the occurrence of any Event of ERISA Termination which together with all other Events of ERISA Termination occurring within the prior twelve (12) months involve a payment of money by or a potential aggregate liability of Seller or any ERISA Affiliate thereof or any combination of such entities in excess of [***], Seller shall give Buyer a written notice specifying the nature thereof, what action Seller or any ERISA Affiliate thereof has taken and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto.
(ii) Promptly upon receipt thereof, Seller shall furnish to Buyer copies of (i) all notices received by Seller or any ERISA Affiliate thereof of the PBGC’s intent to terminate any Plan or to have a trustee appointed to administer any Plan; (ii) all notices received by Seller or any ERISA Affiliate thereof from the sponsor of a Multiemployer Plan pursuant to Section 4202 of ERISA involving a withdrawal liability in excess of [***]; and (iii) all funding waiver requests filed by Seller or any ERISA Affiliate thereof with the Internal Revenue Service with respect to any Plan for which the amount of waived funding deficiency is reasonably expected to be more than [***], and all communications received by Seller or any ERISA Affiliate thereof from the Internal Revenue Service with respect to any such funding waiver request.
(k) Financial Covenants. Seller shall comply with the financial covenants set forth in Section 3 of the Pricing Side Letter.
(l) Investment Company Act. Neither Seller nor any of its Subsidiaries shall be an “investment company”, or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.
(m) Insurance. Seller shall obtain and maintain insurance with responsible companies in such amounts and against such risks as are customarily carried by business entities engaged in similar businesses similarly situated, including without limitation, the insurance required to be obtained and maintained by each Agency pursuant to the applicable Agency guidelines, and will furnish Buyer upon request full information as to all such insurance, and provide within [***] after receipt of such request the certificates or other documents evidencing renewal of each such policy. Seller shall continue to maintain coverage, for itself and its Subsidiaries, that encompasses employee dishonesty, forgery or alteration, theft, disappearance and destruction, robbery and safe burglary, Property (other than money and securities), and computer fraud in an aggregate amount of at least such amount as is required by each Agency.
(n) Books and Records. Seller shall, to the extent practicable, maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing the Repurchase Assets in the event of the destruction of the originals thereof), and keep and maintain or obtain, as and when required, all documents, books, records and other information reasonably necessary for the collection of all Repurchase Assets.
(o) Material Change in Business. Seller shall not make any material change in the nature of its business as carried on at the date hereof, it being understood that Seller may engage in business lines and transactions related to the mortgage banking and/or lending business or businesses ancillary to the mortgage banking and/or lending business and/or the servicing of Mortgage Loans.
(p) Limitation on Dividends and Distributions. Following the occurrence and during the continuation of an Event of Default or if an Event of Default would result therefrom, Seller shall not, without the prior written consent of Buyer, 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 equity interest of Seller, whether now or hereafter outstanding, or make any other distribution or dividend in respect of any of the foregoing or to any shareholder or equity owner of Seller, either directly or indirectly, whether in cash or property or in obligations of Seller or any of Seller’s consolidated Subsidiaries.
(q) Disposition of Assets; Liens. Seller shall not (i) cause any of the Repurchase Assets to be sold, pledged, assigned or transferred except in compliance with the applicable Facility Documents or (ii) create, incur, assume or suffer to exist any mortgage, pledge, Lien, charge or other encumbrance of any nature whatsoever on any of
the Repurchase Assets, whether real, personal or mixed, now or hereafter owned, other than Liens in favor of Buyer.
(r) Limitation on Accounting Changes. Seller shall not make any material change in the accounting policies or financial reporting practices of Seller or its Subsidiaries, except to the extent such change is required by GAAP, consistently applied, which would reasonably be expected to have a Material Adverse Effect.
(s) | ERISA Matters. |
(i) Seller shall not permit any event or condition which is described in any of clauses (i) through (x) of the definition of “Event of ERISA Termination” to occur or exist with respect to any Plan or Multiemployer Plan if such event or condition, together with all other events or conditions described in the definition of Event of ERISA Termination occurring within the prior twelve (12) months, involves the payment of money by or an incurrence of liability of Seller or any ERISA Affiliate thereof, or any combination of such entities in an amount in excess of [***].
(ii) Seller shall not be an employee benefit plan as defined in Section 3(3) of Title I of ERISA that is subject to Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code or an entity deemed to hold “plan assets” within the meaning of 29 CFR §2510.3-101, as modified by Section 3(42) of ERISA. Seller shall not use “plan assets” within the meaning of 29 CFR Section 2510.3-101, as modified by Section 3(42) of ERISA, to engage in this Agreement or the Transactions hereunder. The Transactions contemplated by this Agreement will not violate any state or local statute, applicable to Seller, that regulates investments of, or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA and that are similar to Section 406 of ERISA or Section 4975 of the Code.
(t) | [Reserved]; |
(u) Facility Documents. Seller shall not permit the amendment or modification of, the waiver of any event of default under, or the termination of any Facility Document without Buyer’s prior written consent. Seller shall not waive (or direct the waiver of) the performance by any party to any Facility Document of any action, if the failure to perform such action would adversely affect Seller or any Purchased Mortgage Loans in any respect, or waive (or direct the waiver of) any default resulting from any action or inaction by any party thereto.
(v) Illegal Activities. Seller shall not engage in any conduct or activity that would be reasonably likely to subject its assets to forfeiture or seizure.
(w) Transactions with Affiliates. Seller shall not enter into any new transaction, including, without limitation, the purchase, sale, lease or exchange of property or assets or the rendering or accepting of any service with any Affiliate, unless such transaction is (a) not otherwise prohibited in this Agreement, (b) in the ordinary
course of Seller’s business, and (c) upon fair and reasonable terms no less favorable to Seller, as the case may be, than it would obtain in a comparable arm’s length transaction with a Person which is not an Affiliate.
(x) | [Reserved]. |
(y) Reserve Account. The Reserve Account Threshold shall be maintained at all times and Seller shall grant to Buyer any online access Seller has to the Reserve Account.
(z) Hedging. Seller has entered into Interest Rate Protection Agreements or other arrangements, having terms with respect to protection against fluctuations in interest rates consistent with the terms of Seller’s hedging program.
(aa) | [Reserved.] |
(bb) | [Reserved.] |
(cc) | [Reserved.] |
(dd) Agency Approvals; Servicing. Seller shall maintain its status with Fannie Mae and Freddie Mac as an approved seller/servicer, in each case in good standing. Seller shall take all commercially reasonable actions to maintain all of its applicable Agency Approvals at all times during the term of this Agreement and each outstanding Transaction.
(ee) Additional Agreements. At all times during the term of this Agreement, Seller shall maintain at least one repurchase agreement, warehouse facility, guaranty or similar credit facility with an aggregate facility amount greater than or equal to the Aggregate Facility Purchase Price, with any Person covering similar assets in addition to this Agreement.
Section 15. Events Of Default. If any of the following events (each an “Event of Default”) occur, Seller and Buyer shall have the rights set forth in Section 16, as applicable:
(a) Payment Default. (i) Seller fails to make any payment of (A) Repurchase Price when due (other than Price Differential), whether by acceleration, mandatory repurchase (including following the occurrence of a Purchased Mortgage Loan Issue) or otherwise or (B) Price Differential or to cure any Margin Deficit when due, under the terms of the Facility Documents, or (ii) Seller fails to make any payment of any sum (other than Repurchase Price, Price Differential or Margin Deficit) when due under the terms of the Facility Documents within [***] of Seller’s receipt of notice; or
(b) Immediate Representation and Warranty Default. Any representation, warranty or certification made or deemed to be made by Seller contained in any of Sections 13(c) (Solvency); (f)(a) (Existence); (h) (No Breach); (i) (Action); (k) (Enforceability); (p) (Margin Regulations); (r) (Investment Company Act); (v) (True
and Complete Disclosure); (w) (ERISA); (y) (No Reliance ); (z) (Plan Assets); (bb) (Sanctions); or (ff) (Agency Approvals), in each case, of this Agreement shall be determined by Buyer to have been untrue or misleading in any respect as of the time made or furnished; or
(c) Additional Representation and Warranty Defaults. Any representation or warranty made or deemed made herein or in any other Facility Document (and not identified in clause (b) of Section 15) by Seller shall be determined by Buyer to have been untrue or misleading in any respect as of the time made or furnished (other than the representations and warranties set forth in Schedule 1-A and Schedule 1-B; unless (A) Seller shall have made any such representations and warranties with actual knowledge of a Responsible Officer of Seller that they were materially false or misleading at the time made or (B) any such representations and warranties have been determined in good faith by Buyer in its sole reasonable discretion to be materially false or misleading on a regular basis), and if such default shall be capable of being remedied, such failure shall continue unremedied for more than [***] or
(d) Immediate Covenant Default. The failure of Seller to perform, comply with or observe any term, covenant or agreement applicable to Seller contained in any of Sections 14(a)(i) and (ii) (Preservation of Existence; Compliance with Law); (i) (True and Correct Information); (k) (Financial Covenants); (o) (Material Change in Business); (p) (Limitation on Dividends and Distributions); (s)(ii) (ERISA Matters); (v) (Illegal Activities); (w) (Transactions with Affiliates); or (dd) (Agency Approvals; Servicing); in each case, of this Agreement; or
(e) Additional Covenant Defaults. The failure of Seller to observe or perform any other covenant or agreement contained in the Facility Documents (and not identified in clause (d) of this Section 15), and if such default shall be capable of being remedied, such failure to observe or perform continues unremedied for more than [***]; or
(f) Judgments. A judgment or judgments for the payment of money in excess of [***] in the aggregate is rendered against Seller, in each case by one or more courts, administrative tribunals or other bodies having jurisdiction and the same is not satisfied, discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof is not procured, within [***] from the date of entry thereof; or
(g) Cross-Default. Seller is in default beyond any applicable grace period (A) under any Indebtedness in excess of [***], which default involves the failure to pay a matured obligation or permits the acceleration of the maturity of obligations by any other party to or beneficiary with respect to such Indebtedness; or (B) in making any payment when due under, or performing any other material obligation under any Indebtedness or any other contract, between Seller, as applicable, on the one hand, and Buyer or any of its Affiliates on the other; or
(h) Insolvency Event. An Insolvency Event occurs with respect to Seller or any of its Subsidiaries; or
(i) Enforceability. For any reason (i) Seller (or an Affiliate thereof) contests the validity, enforceability, perfection or priority of any Lien granted pursuant to the Facility Documents, (ii) any Person (other than Buyer) contests the validity, enforceability, perfection or priority of any Lien granted pursuant thereto, (iii) Seller, or any Affiliate seeks to disaffirm, terminate, limit, repudiate or reduce its obligations under any Facility Document or (iv) any Facility Document at any time fails to be in full force and effect in all material respects in accordance with its terms or shall not be enforceable in all material respects in accordance with its terms; or
(j) | [Reserved.]; or |
(k) | [Reserved.]; or |
(l) Change in Control. A Change in Control occurs without the prior written consent of Buyer; or
(m) Inability to Perform. Seller admits its inability to, or its intention not to, perform any of its obligations under the Facility Documents; or
(n) Failure to Transfer. Seller fails to transfer the Purchased Mortgage Loans to Buyer on or prior to the applicable Purchase Date (provided that Buyer has tendered the related Purchase Price); or
(o) Government Action. Any Governmental Authority or any person, agency or entity acting or purporting to act under Governmental Authority takes any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of Seller, or takes any action to displace the management of Seller or to curtail its authority in the conduct of the business of Seller, or takes any action in the nature of enforcement to remove or materially limit or restrict the approval of Seller as an issuer, buyer or a seller of Mortgage Loans or securities backed thereby, and such action shall not have been discontinued or stayed within [***]; or
(p) Assignment. Any assignment by Seller of this Agreement or any other Facility Document or any rights hereunder or thereunder without first obtaining the specific written consent of Buyer; or
(q) | [Reserved.]; or |
(r) Financial Statements. Seller’s audited annual financial statements or the notes thereto or other opinions or conclusions stated therein are qualified or limited by reference to the status of Seller as a “going concern” or a reference of similar import; or
(s) Servicer Default. A Servicer Termination Event occurs with respect to a Servicer and Seller fails to transfer the servicing of the Purchased Mortgage Loans to a
successor servicer that is acceptable to Buyer within [***] of such Servicer Termination Event; or
(t) Failure to Repurchase. Seller fails to repurchase a Purchased Mortgage Loan that is no longer an Eligible Mortgage Loan within [***] of notice from Buyer.
(u) (I) Seller engages in any nonexempt “prohibited transaction” (as defined in Section 406 of ERISA or Section 4975 of the Code), (II) the occurrence of an Event of ERISA Termination or (III) any other event or condition occurs or exists with respect to a Plan or a Multiemployer Plan; and, such event or condition, together with all other such events or conditions, if any, would reasonably be expected to have a Material Adverse Effect
Section 16. Remedies.
(a) If an Event of Default occurs and is continuing, the following rights and remedies are available to Buyer; provided, that an Event of Default shall be deemed to be continuing unless expressly waived by Buyer in writing and shall be deemed to be not continuing once so waived:
(i) At the option of Buyer, exercised by written notice to a Responsible Officer of Seller (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Insolvency Event of Seller), the Repurchase Date for each Transaction hereunder, if it has not already occurred, shall be deemed immediately to occur (the date on which such option is exercised or deemed to have been exercised being referred to hereinafter as the “Accelerated Repurchase Date”).
(ii) If Buyer exercises or is deemed to have exercised the option referred to in subsection (a)(i) of this Section,
(A) Seller’s obligations in such Transactions to repurchase all Purchased Mortgage Loans, at the Repurchase Price therefor on the Repurchase Date determined in accordance with subsection (a)(i) of this Section, (1) shall thereupon become immediately due and payable, (2) all Income paid after such exercise or deemed exercise shall be retained by Buyer and applied to the aggregate unpaid Repurchase Price and any other amounts owed by Seller hereunder, and (3) Seller shall immediately deliver to Buyer any Purchased Mortgage Loans subject to such Transactions then in Seller’s or Servicer’s possession or control, including Purchased Mortgage Loans; and
(B) to the extent permitted by applicable law, the Repurchase Price with respect to each such Transaction (determined as of the Accelerated Repurchase Date) shall be increased by the aggregate amount obtained by daily application of, on a 360 day per year basis for the actual number of days during the period from and including the date of the
exercise or deemed exercise of such option to but excluding the date of payment of the Repurchase Price as so increased, (x) the Post-Default Rate in effect following an Event of Default to (y) the Repurchase Price for such Transaction as of the Repurchase Date as determined pursuant to subsection (a)(i) of this Section.
(iii) Upon the occurrence and during the continuance of one or more Events of Default, Buyer shall have the right to obtain physical possession of all files of Seller relating to the Purchased Mortgage Loans and the Repurchase Assets and all documents relating to the Purchased Mortgage Loans which are then or may thereafter come in to the possession of Seller or any third party acting for Seller and Seller shall deliver to Buyer such assignments as Buyer shall request. Buyer shall be entitled to specific performance of all agreements of Seller contained in Facility Documents.
(iv) Upon the occurrence and during the continuance of an Event of Default, Buyer, or Buyer through its Affiliates or designees, may (A) immediately sell, without demand or further notice of any kind, at a public or private sale at such price or prices as Buyer may deem satisfactory any or all of the Purchased Mortgage Loans and Repurchase Assets or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Mortgage Loans and Repurchase Assets, to retain such Purchased Mortgage Loans and Repurchase Assets, and give Seller credit for such Purchased Mortgage Loans in an amount equal to the market value of the related Mortgage Loans (as determined and adjusted by Buyer in its sole discretion, giving such weight to the Market Value or outstanding principal balance of such Mortgage Loan as Buyer deems appropriate) against the aggregate unpaid Repurchase Price for such Purchased Mortgage Loans and Repurchase Assets and any other amounts due and owing by Seller under the Facility Documents. The proceeds of any disposition of Purchased Mortgage Loans and Repurchase Assets effected pursuant to the foregoing shall be applied as determined by Buyer.
(v) Seller shall be liable to Buyer for (A) the amount of all reasonable and documented out-of-pocket expenses, including reasonable and documented legal fees and expenses, actually incurred by Buyer in connection with or as a consequence of an Event of Default, (B) all reasonable and documented out-of-pocket costs incurred in connection with covering transactions or hedging transactions, and (C) any other reasonable and documented out-of-pocket loss, damage, cost or expense arising or resulting from the occurrence and continuation of an Event of Default. In addition, Buyer shall have the right to satisfy any Obligations with funds remaining in the Reserve Account.
(vi) Buyer shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement or applicable law.
(b) Seller acknowledges and agrees that (A) in the absence of a generally recognized source for prices or bid or offer quotations for any Purchased Mortgage Loans and Repurchase Assets, Buyer may establish the source therefor in its sole discretion and (B) all prices, bids and offers shall be determined together with accrued Income. Seller recognizes that it may not be possible to purchase or sell all of the Purchased Mortgage Loans and Repurchase Assets on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Mortgage Loans and Repurchase Assets may not be liquid at such time. In view of the nature of the Purchased Mortgage Loans and Repurchase Assets, Seller agrees that liquidation of a Transaction or the Purchased Mortgage Loans and Repurchase Assets does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made. Accordingly, Buyer may elect, in its sole discretion, the time and manner of liquidating any Purchased Mortgage Loans and Repurchase Assets, and nothing contained herein shall (A) obligate Buyer to liquidate any Purchased Mortgage Loans or Repurchase Assets on the occurrence and continuation of an Event of Default or to liquidate all of the Purchased Mortgage Loans or Repurchase Assets in the same manner or on the same Business Day or (B) constitute a waiver of any right or remedy of Buyer. Buyer may exercise one or more of the remedies available hereunder immediately upon the occurrence and during the continuation of an Event of Default and at any time thereafter without notice to a Responsible Officer of Seller. All rights and remedies arising under this Agreement as amended from time to time hereunder are cumulative and not exclusive of any other rights or remedies which Buyer may have.
(c) Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives any defenses Seller might otherwise have to require Buyer to enforce its rights by judicial process. Seller also waives any defense (other than a defense of payment or performance) it might otherwise have arising from the use of nonjudicial process, enforcement and sale of all or any portion of the Repurchase Assets, or from any other election of remedies. Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm’s length.
(d) Without limiting the rights of Buyer hereto to pursue all other legal and equitable rights available to Buyer for Seller’s failure to perform its obligations under this Agreement, Seller acknowledges and agrees that the remedy at law for any failure to perform obligations hereunder would be inadequate and Buyer shall be entitled to specific performance, injunctive relief, or other equitable remedies in the event of any such failure. The availability of these remedies shall not prohibit Buyer from pursuing any other remedies for such breach, including the recovery of monetary damages.
(e) Buyer shall have, in addition to its rights and remedies under the Facility Documents, all of the rights and remedies provided by applicable federal, state, foreign, and local laws (including, without limitation, if the Transactions are recharacterized as secured financings, the rights and remedies of a secured party under the UCC of the State of New York, to the extent that the UCC is applicable, and the right to offset any mutual debt and claim), in equity, and under any other agreement between Buyer and Seller. Without limiting the generality of the foregoing, Buyer shall be entitled to set off the
proceeds of the liquidation of the Purchased Mortgage Loans and Repurchase Assets against all of Seller’s Obligations to Buyer, whether or not such Obligations are then due, without prejudice to Buyer’s right to recover any deficiency.
Section 17. Indemnification and Expenses.
(a) Except as expressly set forth herein to the contrary, Seller agrees to hold Buyer, and its Affiliates and their officers, directors, employees, agents and advisors (each an “Indemnified Party”) harmless from and indemnify any Indemnified Party against all liabilities, losses, damages, judgments, costs and expenses of any kind (including fees of counsel) which may be imposed on, incurred by or asserted against such Indemnified Party (collectively, “Costs”), relating to or arising out of this Agreement, any other Facility 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 Agreement, any other Facility Document or any transaction contemplated hereby or thereby (including without limitation any such liabilities, losses, damages, judgments, costs and expenses arising from any acts or omissions of a Servicer), that, in each case, results from anything other than the Indemnified Party’s gross negligence or willful misconduct (which gross negligence or willful misconduct is determined by a court of competent jurisdiction pursuant to a final judgment). Without limiting the generality of the foregoing, Seller agrees to hold any Indemnified Party harmless from and indemnify such Indemnified Party against all Costs with respect to all Purchased Mortgage Loans, that, in each case, results from anything other than the Indemnified Party’s gross negligence or willful misconduct (which gross negligence or willful misconduct is determined by a court of competent jurisdiction pursuant to a final judgment). In any suit, proceeding or action brought by an Indemnified Party in connection with any Purchased Mortgage Loans for any sum owing thereunder, or to enforce any provisions of any Purchased Mortgage Loans, Seller will save, indemnify and hold such Indemnified Party 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 Seller 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 Seller. Seller also agrees to reimburse an Indemnified Party within thirty (30) days following a receipt of an invoice therefor from such Indemnified Party for all the Indemnified Party’s costs and expenses incurred in connection with the enforcement or the preservation of Buyer’s rights under this Agreement, any other Facility Document or any transaction contemplated hereby or thereby, including without limitation the fees and disbursements of its counsel. Seller’s agreements in this Section 17 shall survive the payment in full of the Repurchase Price and the expiration or termination of this Agreement. Seller hereby acknowledges that its obligations hereunder are recourse obligations of Seller and are not limited to recoveries each Indemnified Party may have with respect to the Purchased Mortgage Loans. Seller also agrees not to assert any claim against Buyer or any of its Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the facility established hereunder, the actual or proposed use of the proceeds of the Transactions, this
Agreement or any of the transactions contemplated thereby. This Section 17(a) shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim. THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES.
(b) Seller agrees to pay within thirty (30) days following a receipt of an invoice therefor from Buyer all of the reasonable and documented out-of-pocket costs and expenses incurred by Buyer in connection with (i) the development, preparation and execution of this Agreement, any other Facility Document or any other documents prepared in connection herewith or therewith and (ii), any amendment, supplement or modification to or the enforcement of, this Agreement, any other Facility Document or any other documents prepared in connection herewith or therewith. Seller agrees to pay within thirty (30) days following a receipt of an invoice therefor from Buyer all of the costs and expenses incurred in connection with the consummation and administration of the transactions contemplated hereby and thereby including without limitation filing fees and all the fees, disbursements and expenses of counsel to Buyer which amount may be deducted from the Purchase Price paid for the first Transaction hereunder. Subject to the limitations set forth in Sections 20 and 31 hereof, Seller agrees to pay Buyer all the reasonable and documented out-of-pocket due diligence, inspection, testing and review costs and expenses incurred by Buyer with respect to Mortgage Loans submitted by Seller for purchase under this Agreement, including, but not limited to, those reasonable and documented out-of-pocket costs and expenses incurred by Buyer pursuant to Sections 16(b) and 20 hereof.
(c) The obligations of Seller from time to time to pay the Repurchase Price, the Price Differential, and all other amounts due under this Agreement shall be full recourse obligations of Seller.
Section 18. Servicing.
(a) Seller, on Buyer’s behalf, shall service or contract with a Servicer to interim service the Purchased Mortgage Loans consistent with the degree of skill and care that such Servicer customarily requires with respect to similar Mortgage Loans owned or managed by such Servicer and in accordance with Accepted Servicing Practices. The Servicer shall (i) comply with all applicable Requirements of Law, and (ii) maintain all state and federal licenses necessary for it to perform its servicing responsibilities under the Servicing Agreement.
(b) Seller shall cause the Servicer to hold or cause to be held all escrow funds collected by Seller with respect to any Purchased Mortgage Loans in trust accounts and shall apply the same for the purposes for which such funds were collected.
(c) Seller shall, or shall cause the Servicer and any interim servicer to, deposit all collections received by Seller or Servicer on account of the Purchased Mortgage Loans in accordance with the provisions of Section 5(a).
If any Mortgage Loan that is proposed to be sold on a Purchase Date is serviced or subserviced by a servicer other than a currently approved Servicer, or if the servicing of any Purchased Mortgage Loan is to be transferred from a currently approved Servicer to another servicer, Seller shall, prior to such Purchase Date or servicing transfer date, as applicable, (i) provide Buyer with the related Servicing Agreement pursuant to which such servicer shall service such Mortgage Loans, which Servicing Agreement shall be acceptable to Buyer in all respects, (ii) obtain Buyer’s prior written consent to the use of such servicer in the performance of such servicing duties and obligations, which consent may be withheld in Buyer’s sole discretion and (iii) provide Buyer with a fully executed servicer notice or letter agreement, executed by Buyer, Seller and such Servicer (each, a “Servicer Side Letter”), in form and substance acceptable to Buyer with respect to such Servicer. In no event shall Seller’s use of a Servicer relieve Seller of its obligations hereunder, and Seller shall remain liable under this Agreement as if Seller were servicing such Mortgage Loans directly. Seller hereby agrees and acknowledges, and shall cause any Servicer to agree and acknowledge, that Buyer or its designees shall have the right to conduct examinations and audits of the Servicer with respect to the servicing of the Purchased Mortgage Loans. Buyer shall also have the right to obtain copies of all Records relating to the Purchased Mortgage Loans, including all documents relating to the Purchased Mortgage Loans and the servicing thereof.
(d) Upon the occurrence and continuation of an Event of Default hereunder or a Servicer Termination Event, Buyer shall have the right to immediately terminate the Servicer’s right to service the Purchased Mortgage Loans under the Servicing Agreement (subject to the related servicing transfer period) without payment of any penalty or termination fee. Seller and the Servicer shall cooperate in transferring the servicing and all Records of the Purchased Mortgage Loans to a successor servicer appointed by Buyer in its discretion.
(e) If Seller should discover that, for any reason whatsoever, Seller or any entity responsible by contract to Seller for managing or servicing any such Purchased Mortgage Loan has failed to perform fully Seller’s obligations under the Facility Documents or any of the obligations of such entities with respect to the Purchased Mortgage Loans, Seller shall promptly notify Buyer and promptly remedy any non-compliance.
(f) The Servicer’s rights and obligations to interim service the Purchased Mortgage Loans shall terminate on the twentieth (20th) day of each calendar month (and if such day is not a Business Day, the next succeeding Business Day), unless otherwise directed in writing by the Buyer prior to such date. For purposes of this provision, notice provided by electronic mail shall constitute written notice. For the avoidance of doubt, this Subsection 18(f) shall no longer apply to any Purchased Mortgage Loan that is repurchased in full by Seller in accordance with the provisions of this Agreement and therefore is no longer subject to a Transaction. Upon termination in accordance with the first sentence of this Subsection 18(f), the Servicer shall transfer servicing, including, without limitation, delivery of all servicing files in Servicer’s possession to the designee of the Buyer. The Servicer’s delivery of servicing files shall be in accordance with Accepted Servicing Practices. The Seller and Servicer shall have no right to select a
subservicer or successor servicer. After the servicing terminates and until the date the servicing is transferred, the Servicer shall service the Purchased Mortgage Loans in accordance with the terms of this Agreement and for the benefit of the Buyer.
Section 19. Recording of Communications. Buyer and Seller shall have the right (but not the obligation) from time to time to make or cause to be made tape recordings of communications between its employees and those of the other party with respect to Transactions upon notice to the other party of such recording.
Section 20. Due Diligence. Seller acknowledges that Buyer has the right to perform continuing due diligence reviews with respect to the Purchased Mortgage Loans and Seller, including, without limitation, financial information, organization documents, business plans, purchase agreements and underwriting purchase models for each pool of Purchased Mortgage Loans, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, to review the servicing of the Purchased Mortgage Loans, or otherwise, and Seller agrees that upon reasonable prior written notice to a Responsible Officer of Seller, unless an Event of Default shall have occurred, in which case no notice is required, Buyer or its Authorized Representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of the Mortgage Files and any and all documents, records, agreements, instruments or information relating to such Purchased Mortgage Loans (the “Due Diligence Documents”) in the possession or under the control of Seller and/or the Custodian. Seller also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Mortgage Files and the Purchased Mortgage Loans. Without limiting the generality of the foregoing, Seller acknowledges that Buyer may purchase Purchased Mortgage Loans from Seller and enter into additional Transactions with respect to the Purchased Mortgage Loans based solely upon the information provided by Seller to Buyer in the Asset Schedule and the representations, warranties and covenants contained herein and that Buyer, at its option, has the right at any time to conduct a partial or complete due diligence review on a reasonable portion of the Purchased Mortgage Loans purchased in a Transaction, including, without limitation, ordering new credit reports and new appraisals on the related Mortgaged Properties with respect to the Mortgage Loans and otherwise re-generating the information used to originate such Mortgage Loan, which information may be used by Buyer to calculate Market Value. Buyer may underwrite such Purchased Mortgage Loans itself or engage a mutually agreed upon third party underwriter to perform such underwriting. Seller agrees to cooperate with Buyer or any third party underwriter in connection with such underwriting, including, but not limited to, providing Buyer with access to any documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession, or under the control, of Seller. Seller further agrees that Seller shall pay all out-of-pocket costs and expenses incurred by Buyer in connection with Buyer’s due diligence activities pursuant to this Section 20, in an amount not to exceed [***] per calendar year.
Section 21. Assignability.
(a) The rights and obligations of the parties under this Agreement and under any Transaction shall not be assigned by Seller without the prior written consent of Buyer. Subject to the foregoing, this Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and
assigns. Nothing in this Agreement express or implied, shall give to any Person, other than the parties to this Agreement and their successors hereunder, any benefit of any legal or equitable right, power, remedy or claim under this Agreement. Prior to the occurrence and continuation of an Event of Default, Buyer may from time to time assign all or a portion of its rights and obligations under this Agreement and the Facility Documents to any Person pursuant to an executed assignment and acceptance by Buyer and assignee (“Assignment and Acceptance”), specifying the percentage or portion of such rights and obligations assigned upon at least five (5) Business Days’ notice to a Responsible Officer of Seller and with the prior written consent of Seller (such consent not to be unreasonably withheld); provided, that with respect to any assignment to an Affiliate of Buyer or any assignment by Buyer during the continuation of an Event of Default, no such notice to or consent from Seller shall be required. Upon such assignment, (a) such assignee shall be a party hereto and to each Facility Document to the extent of the percentage or portion set forth in the Assignment and Acceptance, and shall succeed to the applicable rights and obligations of Buyer hereunder, and (b) Buyer shall, to the extent that such rights and obligations have been so assigned by it be released from its obligations hereunder and under the Facility Documents. Unless otherwise stated in the Assignment and Acceptance, Seller shall continue to take directions solely from Buyer unless otherwise notified by Buyer in writing. Buyer may distribute to any prospective assignee any document or other information delivered to Buyer by Seller solely to the extent such prospective assignee is subject to an agreement with Buyer similar in substance to what is set forth in Section 32.
(b) Buyer, upon at least five (5) Business Days’ notice to a Responsible Officer of Seller (provided that the failure to give such notice shall not affect the validity of such sale), may sell participations to one or more Persons in or to all or a portion of its rights and obligations under this Agreement to any Person; provided, however, that (i) Buyer’s obligations under this Agreement shall remain unchanged, (ii) Buyer shall remain solely responsible to the other parties hereto for the performance of such obligations; and (iii) Seller shall continue to deal solely and directly with Buyer in connection with Buyer’s rights and obligations under this Agreement and the other Facility Documents except as provided in Section 8; provided that no such restrictions shall apply with respect to any sale to any Affiliate of Buyer or if an Event of Default has occurred and is continuing; and provided further that Buyer shall act as agent for all purchasers, assignees and point of contact for Seller pursuant to agency provisions to be agreed upon by Buyer, its intended purchasers and/or assignees and Seller.
(c) Buyer may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 21, disclose to the assignee or participant or proposed assignee or participant, as the case may be, any information relating to Seller or any of its Subsidiaries or to any aspect of the Transactions that has been furnished to Buyer by or on behalf of Seller or any of its Subsidiaries.
Section 22. Transfer and Maintenance of Register.
(a) Subject to acceptance and recording thereof pursuant to paragraph (b) of this Section 22, from and after the effective date specified in each Assignment and
Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of Buyer under this Agreement.
(b) Seller shall maintain a register (the “Register”) on which it shall record Buyer’s rights hereunder, and each Assignment and Acceptance and participation. The Register shall include the names and addresses of Buyer (including all assignees, successors and participants) and the percentage or portion of such rights and obligations assigned or participated. The entries in the Register shall be conclusive absent manifest error, and the parties shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Buyer hereunder for all purposes of this Agreement. Failure to make any such recordation, or any error in such recordation shall not affect Seller’s obligations in respect of such rights. If Buyer sells a participation in its rights hereunder, it shall provide Seller, or maintain as agent of Seller, the information described in this paragraph and permit Seller to review such information as reasonably needed for Seller to comply with its obligations under this Agreement or under any applicable Requirement of Law.
Section 23. Tax Treatment. Each party to this Agreement acknowledges that notwithstanding anything in this Agreement to the contrary, it is its intent for purposes of U.S. federal taxes and all relevant state and local income and franchise taxes, to treat each Transaction as indebtedness of Seller that is secured by the Purchased Mortgage Loans and that the Purchased Mortgage Loans are owned by Seller in the absence of a Default by Seller. All parties to this Agreement agree to such treatment and agree to take no action inconsistent with this treatment, unless required by law.
Section 24. Set-Off.
(a) In addition to any rights and remedies of Buyer hereunder and by law, Buyer shall have the right during the continuation of an Event of Default, without prior notice to a Responsible Officer of Seller, any such notice being expressly waived by Seller to the extent permitted by applicable law to set-off and appropriate and apply against any obligation from Seller to Buyer or any Affiliate thereof any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other obligation (including to return excess margin), 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 or due from Buyer or any Affiliate thereof to or for the credit or the account of Seller. Buyer agrees promptly to notify Seller after any such set-off and application made by Buyer; provided that the failure to give such notice shall not affect the validity of such set-off and application.
(b) Buyer shall at any time have the right, in each case until such time as Buyer determines otherwise, to retain, to suspend payment or performance of, or to decline to remit, any amounts or deliver any property that Buyer would otherwise be obligated to pay, remit or deliver to Seller hereunder if an Event of Default has occurred and is continuing. For avoidance of doubt and not as a limitation, Buyer may set-off any amounts in the Reserve Account against any outstanding Obligations provided an Event
of Default has occurred and is continuing, but may not set-off, transfer or withdraw any amounts from the Reserve Account unless an Event of Default has occurred and is continuing.
Section 25. Terminability. Each representation and warranty made or deemed to be made by entering into a Transaction, herein or pursuant hereto shall survive the making of such representation and warranty, and Buyer shall not be deemed to have waived any Default that may arise because any such representation or warranty shall have proved to be false or misleading, notwithstanding that Buyer may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time the Transaction was made. The obligations of Seller under Section 17 hereof shall survive the termination of this Agreement.
Section 26. Notices And Other Communications. Except as otherwise expressly permitted by this Agreement, all notices, requests and other communications provided for herein (including without limitation any modifications of, or waivers, requests or consents under, this Agreement) shall be given or made in writing (including without limitation by email or facsimile) delivered to the intended recipient at the “Address for Notices” specified below its name on the signature pages hereof or thereof); 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 Agreement and except for notices given under Sections 3 and 4 (which shall be effective only on receipt), all such communications shall be deemed to have been duly given when transmitted by facsimile or electronic mail or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. In all cases, to the extent that the related individual set forth in the respective “Attention” line is no longer employed by the respective Person, such notice may be given to the attention of a Responsible Officer of the respective Person or to the attention of such individual or individuals as subsequently notified in writing by a Responsible Officer of the respective Person.
Section 27. Entire Agreement; Severability; Single Agreement.
(a) This Agreement and the Facility Documents collectively constitute the entire understanding between Buyer and Seller with respect to the subject matter they cover and shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions involving Purchased Mortgage Loans. By acceptance of this Agreement, Buyer and Seller acknowledge that they have not made, and are not relying upon, any statements, representations, promises or undertakings not contained in this Agreement. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
(b) Buyer and Seller acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and that each has been entered into in consideration of the other Transactions. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such
obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that payments, deliveries, and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries, and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries, and other transfers may be applied against each other and netted and (iii) to promptly provide notice to the other after any such set off or application.
Section 28. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF, OTHER THAN SECTION 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, WHICH SHALL GOVERN.
Section 29. SUBMISSION TO JURISDICTION; WAIVERS. BUYER AND SELLER EACH HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER FACILITY DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE EXCLUSIVE 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 OTHER PARTIES HERETO SHALL HAVE BEEN NOTIFIED;
(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; AND
(e) BUYER AND SELLER HEREBY IRREVOCABLY WAIVE, 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 AGREEMENT, ANY OTHER FACILITY DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 30. No Waivers, etc. No failure on the part of Buyer to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any Facility Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any Facility 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. An Event of Default hereunder shall be deemed to be not continuing once waived by the Buyer.
Section 31. Netting. If Buyer and Seller are “financial institutions” as now or hereinafter defined in Section 4402 of Title 12 of the United States Code (“Section 4402”) and any rules or regulations promulgated thereunder,
(a) All amounts to be paid or advanced by one party to or on behalf of the other under this Agreement or any Transaction hereunder shall be deemed to be “payment obligations” and all amounts to be received by or on behalf of one party from the other under this Agreement or any Transaction hereunder shall be deemed to be “payment entitlements” within the meaning of Section 4402, and this Agreement shall be deemed to be a “netting contract” as defined in Section 4402.
(b) The payment obligations and the payment entitlements of the parties hereto pursuant to this Agreement and any Transaction hereunder shall be netted as follows. In the event that either party shall fail to honor any payment obligation under this Agreement or any Transaction hereunder (the “Defaulting Party”), the other party (the “Nondefaulting Party”) shall be entitled to reduce the amount of any payment to be made by the Nondefaulting Party to the Defaulting Party by the amount of the payment obligation that the Defaulting Party failed to honor.
Section 32. Confidentiality.
(a) Buyer and Seller each hereby acknowledges and agrees that all written or computer-readable information provided by one party to any other regarding the terms set forth in any of the Facility Documents or the Transactions contemplated thereby or pursuant to the terms thereof, including, but not limited to, the name of, or identifying information with respect to Buyer or Seller, any pricing terms, or other nonpublic business or financial information (including, without limitation, any sub-limits, financial covenants, financial statements and performance data), the existence of this Agreement and the Transactions with Buyer (the “Confidential Information”) shall be kept confidential and shall not be divulged to any party without the prior written consent of such other party except to the extent that (i) it is necessary to disclose to its Affiliates and its and their employees, directors, officers, advisors (including legal counsel, accountants,
taxing authorities, equity holders, representatives, investors, lenders, agents or auditors), representatives and servicers, (ii) it is requested or required by governmental agencies, regulatory bodies or other legal, governmental or regulatory process, in which case the disclosing party shall provide prior written notice to the other party hereto to the extent not prohibited by any Government Agency, Governmental Authority or Applicable Law or regulation; provided, however, that Buyer and Seller shall not be required to provide each other with prior written notice of disclosure of Confidential Information in connection with routine examinations by accountants or regulatory authorities, (iii) any of the Confidential Information is in the public domain other than due to a breach of this covenant, (iv) disclosure to any approved hedge counterparty to the extent necessary to obtain any Interest Rate Protection Agreement or, (v) an Event of Default has occurred and is continuing and Buyer reasonably determines in good faith such information to be necessary or desirable to disclose in connection with the marketing and sales of the Purchased Mortgage Loans or otherwise to enforce or exercise Buyer’s rights hereunder. Seller and Buyer shall be responsible for any breach of the terms of this Section 32(a) by any Person that it discloses Confidential Information to pursuant to clause (i) above. Each party hereto agrees that it shall not, without the written consent of each other party hereto, make any communication, press release, public announcement or statement in any way connected to the existence or terms of this Agreement or the other Facility Documents or the Transactions contemplated hereby or thereby, except where such communication or announcement is required by law or regulation, in which event the disclosing party will consult and cooperate with each other party hereto with respect to the wording of any such announcement. Notwithstanding the foregoing or anything to the contrary contained herein or in any other Facility Document, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment or tax structure of the Transactions, any fact relevant to understanding the federal, state and local tax treatment or tax structure of the Transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment or tax structure; provided that the “tax treatment or “tax structure” shall be limited to any facts relevant to the U.S. federal, state or local tax treatment of any Transaction contemplated hereunder and specifically does not include any information relating to the identity of Buyer, Seller or any pricing terms hereunder. The provisions set forth in this Section 32(a) shall survive the termination of this Agreement for two years.
(b) Notwithstanding anything in this Agreement to the contrary, Seller and Buyer understand that Confidential Information disclosed hereunder may contain “nonpublic personal information”, as that term is defined in Section 509(4) of the Gramm-Leach-Bliley Act (the “GLB Act”), and each Party agrees to maintain such nonpublic personal information that it receives hereunder in accordance with the GLB Act and other applicable local, state and federal laws relating to privacy and data protection. Seller and Buyer shall implement administrative, technical and physical safeguards and other security measures to (a) ensure the security and confidentiality of the “nonpublic personal information” of the Mortgagors, (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Upon request, Seller will provide evidence reasonably satisfactory to allow Buyer to
confirm that Seller has satisfied its obligations as required under this Section 32(b). Without limitation, this may include Buyer’s review of audits, summaries of test results, and other equivalent evaluations of Seller. Each Party shall notify the other Party immediately following discovery of any breach or compromise of the security, confidentiality, or integrity of nonpublic personal information of the Mortgagors. Such notice shall be provided by personal delivery, by facsimile with confirmation of receipt, or by overnight courier with confirmation of receipt to the applicable requesting individual. The provisions set forth in this Section 32(b) shall survive the termination of this Agreement for as long as each Party retains any “nonpublic personal information” disclosed hereunder.
Section 33. Intent.
(a) The parties intend and recognize that this Agreement and each Transaction hereunder is a “repurchase agreement” as that term is defined in Section 101 of the Bankruptcy Code, a “securities contract” as that term is defined in Section 741 of the Bankruptcy Code, and a “master netting agreement” as that term is defined in Section 101(38A)(A) of the Bankruptcy Code, that all payments hereunder are deemed “margin payments” or “settlement payments” as defined in the Bankruptcy Code, that each Purchased Mortgage Loan constitutes either a “mortgage loan” or an “interest in a mortgage” as such terms are used in the Bankruptcy Code and that the pledge of the Repurchase Assets in Section 9 of this Agreement constitutes “a security agreement or other arrangement or other credit enhancement” that is “related to” the Agreement and Transactions hereunder within the meaning of Sections 101(38A)(A), 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code. Seller and Buyer further recognize and intend that this Agreement is an agreement to provide financial accommodations and is not subject to assumption pursuant to Bankruptcy Code Section 365(a).
(b) The parties further intend and recognize that (i)(1) for so long as Buyer is a “financial institution,” “financial participant” or another entity listed in Sections 555, 559, 561, 362(b)(6), 362(b)(7) or 362(b)(27) of the Bankruptcy Code, Buyer shall be entitled to, without limitation, the liquidation, termination, acceleration, netting, set-off, and non-avoidability rights afforded to parties such as Buyer to “repurchase agreements” pursuant to Sections 559, 362(b)(7) and 546(f) of the Bankruptcy Code, “securities contracts” pursuant to Sections 555, 362(b)(6) and 546(e) of the Bankruptcy Code and “master netting agreements” pursuant to Sections 561, 362(b)(27) and 546(j) of the Bankruptcy Code, and (2) Buyer’s right to liquidate the Purchased Mortgage Loans and other Repurchase Assets delivered to it in connection with the Transactions hereunder or to accelerate or terminate this Agreement or otherwise exercise any other remedies pursuant to Section 16 hereof is a contractual right to liquidate, accelerate or terminate such Transaction as described in Bankruptcy Code Sections 555, 559 and 561; (ii) Buyer’s right to set-off claims and appropriate and apply any and all deposits of money or property or any other indebtedness at any time held or owing by Buyer to or for the credit of the account of any Affiliate against and on account of the obligations and liabilities of Seller pursuant to Section 24 hereof is a contractual right as described in Bankruptcy Code Section 561; and (iii) any payments or transfers of property made with respect to this Agreement or any Transaction to satisfy a Margin Deficit shall be
considered a “margin payment” or “settlement payment” as such terms are defined in Bankruptcy Code Sections 741(5) and 741(8).
(c) | [Reserved]. |
(d) Each party agrees that this Agreement is intended to create mutuality of obligations among the parties, and as such, the Agreement constitutes a contract which (i) is between all of the parties and (ii) places each party in the same right and capacity.
(e) Each party agrees that it shall not challenge, and hereby waives to the fullest extent available under applicable law its right to challenge, the characterization of this Agreement or any Transaction as a repurchase agreement, securities contract and master netting agreement under the Bankruptcy Code.
(f) Each party agrees that this Agreement and the Facility Documents and the Transactions entered into hereunder are part of an integrated, simultaneously-closing suite of financial contracts.
Section 34. Conflicts. In the event of any conflict between the terms of this Agreement, any other Facility Document, the documents shall control in the following order of priority the terms of this Agreement shall prevail.
Section 35. Authorizations. Any of the persons whose signatures and titles appear on Schedule 2 are authorized, acting singly, to act for Seller or Buyer under this Agreement.
Section 36. Miscellaneous.
(a) Counterparts. This Agreement may be 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 Agreement by signing any such counterpart. Counterparts may be delivered electronically.
(b) Captions. The captions and headings appearing herein are for included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.
(c) | Acknowledgment. Seller hereby acknowledges that: |
(i) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Facility Documents;
(ii) Buyer has no fiduciary relationship to Seller in connection with the Facility Documents;
(iii) no joint venture exists between Buyer and Seller as a result of the Facility Documents; and
(iv) it has made its own independent decisions to enter into the Facility Documents and each Transaction and as to whether such Transaction is appropriate and proper for it based upon its own judgment and upon advice from such advisors (including without limitation, legal counsel and accountants) as it has deemed necessary and Seller is not relying upon any advice from Buyer as to any aspect of the Transactions, including without limitation, the legal, accounting or tax treatment of such Transactions.
(d) Documents Mutually Drafted. Seller and Buyer agree that this Agreement and each other Facility Document prepared in connection with the Transactions set forth herein have been mutually drafted and negotiated by each party, and consequently such documents shall not be construed against either party as the drafter thereof.
Section 37. Recognition of the U.S. Special Resolution Regimes. In the event that Buyer becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from Buyer of this Agreement and/or the Facility Documents, and any interest and obligation in or under this Agreement and/or the Facility Documents, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement and/or the Facility Documents, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
Section 38. Effect of Benchmark Transition Event.
(a) Benchmark Replacement. Notwithstanding anything to the contrary herein or in any other Facility Document, upon the occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, Buyer may amend this Agreement to replace the LIBOR Rate with a Benchmark Replacement. Any such amendment will become effective at 5:30 p.m. on the [***] after Buyer has provided such amendment to Seller without any further action or consent of Seller. No replacement of the LIBOR Rate with a Benchmark Replacement pursuant to this Section 38 will occur prior to the applicable Benchmark Transition Start Date.
(b) Benchmark Replacement Conforming Changes. In connection with a Benchmark Replacement, Buyer will have the right to make Benchmark Replacement Conforming Changes from time to time upon prior written notice to Seller and, notwithstanding anything to the contrary herein or in any other Repurchase Document, any amendments implementing such Benchmark Replacement Conforming Changes will become effective without any further action or consent of Seller.
(c) Notices; Standards for Decisions and Determinations. Buyer will promptly notify Seller of (i) any occurrence of a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date and Benchmark Transition Start Date, (ii) the implementation of any Benchmark Replacement, (iii) the effectiveness of any Benchmark Replacement Conforming Changes and (iv) the commencement or conclusion of any Benchmark Unavailability Period. Any determination, decision or election that may be made by Buyer pursuant to this Section 38 including any determination with respect to a tenor, rate or adjustment or
of the occurrence or non-occurrence of an event, circumstance or date and any decision to take or refrain from taking any action, will be conclusive and binding absent manifest error and may be made in Buyer’s sole discretion and without consent from Seller.
(d) Benchmark Unavailability Period. Upon Seller’s receipt of notice of the commencement of a Benchmark Unavailability Period, Seller may revoke any request for a proposed Transaction to be entered into during any Benchmark Unavailability Period.
Section 39. General Interpretive Principles. For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Agreement have the meanings assigned to them in this 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;
(b) accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP;
(c) 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;
(d) 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;
(e) the words “herein”, “hereof”, “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular provision;
(f) the term “include” or “including” shall mean without limitation by reason of enumeration;
(g) all times specified herein or in any other Facility Document (unless expressly specified otherwise) are local times in New York, New York unless otherwise stated; and
(h) all references herein or in any Facility Document to “good faith” means good faith as defined in Section 5-102(7) of the UCC as in effect in the State of New York.
[THIS SPACE INTENTIONALLY LEFT BLANK]
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date set forth above.
BUYER: | ||||
BANK OF MONTREAL | ||||
By: | /s/ Michael Pryluck | |||
Name: | Michael Pryluck | |||
Title: | Managing Director |
Address for Notices: | |
Bank of Montreal | |
c/o BMO Capital Markets Corp. | |
3 Times Square | |
New York, New York 10036 | |
Attn: [***] | |
Telephone: [***] | |
Email: [***] | |
With a copy to: | |
Bank of Montreal | |
c/o BMO Capital Markets Corp. | |
3 Times Square | |
New York, New York 10036 | |
Attn: [***] |
[Master Repurchase Agreement (BMO-Home Point) (2021)]
SELLER: | |
HOME POINT FINANCIAL CORPORATION |
By: | /s/ Joseph Ruhlin | |||
Name: | Joseph Ruhlin | |||
Title: | Senior Managing Director - Treasurer |
Address for Notices: | |
Home Point Financial Corporation 2211 Old Earhart Road, Suite 250 Ann Arbor, MI 48105 Attention: [***] Telephone: [***] E-mail: [***] |
|
With copies to: | |
Home Point Financial Corporation 2211 Old Earhart Road, Suite 250 Ann Arbor, MI 48105 Attention: [***] E-mail: [***] |
[Master Repurchase Agreement (BMO-Home Point) (2021)]
SCHEDULE 1-A
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO MORTGAGE LOANS
Seller makes the following representations and warranties to Buyer with respect to each Mortgage Loan, as of the Purchase Date for such Mortgage Loan and at all times while such Mortgage Loan is subject to a Transaction hereunder. Notwithstanding any qualifications herein as to Seller’s knowledge at the time a representation or warranty is made, Seller shall be required to repurchase any Mortgage Loan that Buyer has determined breaches a representation or warranty in this Schedule 1-A regardless of whether Seller had knowledge of such breach.
(a) Payments Current. All payments required to be made up to the Purchase Date for the Mortgage Loan under the terms of the Mortgage Note have been made and credited. No payment required under the Mortgage Loan is delinquent nor has any payment under the Mortgage Loan been delinquent at any time since the origination of the Mortgage Loan. The first Monthly Payment shall be made, or shall have been made, with respect to the Mortgage Loan on its Due Date or within thirty (30) days thereof, all in accordance with the terms of the related Mortgage Note. No payment required under the Mortgage Loan is or has ever been subject to forbearance for any reason.
(b) No Outstanding Charges. All taxes and governmental assessments or other similar charges, levies or 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 Seller nor the Qualified Originator from which Seller acquired the Mortgage Loan has advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required 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 earlier, to the day which precedes by one (1) month the Due Date of the first installment of principal and/or interest thereunder.
(c) 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 Buyer, and which has been delivered to the Custodian and the terms of which are reflected in the Asset Schedule. The substance of any such waiver, alteration or modification has been approved by the title insurer, to the extent required, and its terms are reflected on the Asset 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 Asset Schedule. The related Mortgage, Mortgage Note and each other document in the Mortgage File contain the entire agreement of the parties and all of the obligations of the Seller under the Purchased Mortgage Loans.
(d) No Defenses. The Mortgage Loan is 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 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. To the knowledge of Seller and its Subsidiaries, the Mortgagor in respect of the Mortgage Loan is not currently a debtor in any state or federal bankruptcy or insolvency proceeding.
(e) Hazard Insurance. The Mortgaged Property is insured by a fire and extended perils insurance policy, issued by a qualified insurer as defined by the applicable Loan Program Authority, and such other hazards as are customary in the area where the Mortgaged Property is located, and to the extent required by Seller as of the date of origination consistent with the applicable Loan Program Authority’s requirements, against earthquake and other risks insured against by Persons operating like properties in the locality of the Mortgaged Property, in an amount that would have been required as of the date of origination in accordance with the applicable Loan Program Authority’s requirements. 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 Emergency Management Agency 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 National Flood Insurance Act of 1968, as amended by the Flood Disaster Protection Act of 1974. All such insurance policies (collectively, the “hazard insurance policy”) contain a standard mortgagee clause naming Seller, its successors and assigns (including, without limitation, subsequent owners of the Mortgage Loan), as mortgagee, and may not be reduced, terminated or canceled without thirty (30) days’ prior written notice to the mortgagee. No such notice has been received by Seller. All premiums 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 carrier 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. Seller 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 Seller.
(f) Compliance with Applicable Laws. Any requirements of any federal, state or local law or regulation 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 Seller shall maintain or shall cause its agent to maintain in its possession, available for the inspection of Buyer, and shall deliver to Buyer, upon demand, evidence of compliance with all such requirements.
(g) 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 affect any such release, cancellation, subordination or rescission. 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 Seller waived any default resulting from any action or inaction by the Mortgagor.
(h) Location and Type of Mortgaged Property. The Mortgaged Property is located in an Acceptable State and consists of a single parcel of real property with a dwelling which is acceptable to the applicable Loan Program Authority pursuant to the applicable Loan Program Authority’s requirements. No residence or dwelling is a mobile home or manufactured housing unit (other than a Manufactured Home) not secured by real property.. No portion of the Mortgaged Property is used for commercial purposes; provided, that, Mortgaged Properties which contain a home office shall not be considered as being used for commercial purposes as long as the Mortgaged Property has not been altered for commercial purposes and is not storing any chemicals or raw materials other than those commonly used for homeowner repair, maintenance and/or household purposes, and provided further, that, the Mortgaged Property may be a mixed use property if such Mortgaged Property conforms to Underwriting Guidelines acceptable to Buyer in its discretion. With respect to each Manufactured Home, such unit is acceptable to the applicable Loan Program Authority pursuant to the applicable Loan Program Authority’s requirements.
(i) Valid First Lien. The Mortgage is a valid, subsisting, enforceable and perfected first priority lien and perfected first priority security interest 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. The lien of the Mortgage is subject only to:
a. the lien of current real property taxes and assessments not yet due and payable;
b. 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; and
c. 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.
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 first lien and first priority security interest on the property described therein and Seller has full right to pledge and assign the same to Buyer. 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.
(j) Validity of Mortgage Documents; Fraud. 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 place on the part of any Person, including, without limitation, the Mortgagor, any appraiser, any builder or developer, or any other party involved in the origination of the Mortgage Loan. Seller has reviewed all of the documents constituting the Mortgage File and has made such inquiries as it deems necessary to make and confirm the accuracy of the representations set forth herein. Except as disclosed to Buyer in writing, all tax identifications and property descriptions are legally sufficient; and tax segregation, where required, has been completed.
(k) Full Disbursement of Proceeds. Other than with respect to escrow holdback amounts for weather-related or seasonal improvement costs, fees or expenses, there is no further requirement for future advances under the Mortgage Loan, and any 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.
(l) Ownership. Seller has full right to sell the Mortgage Loan to Buyer 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 sell each Mortgage Loan pursuant to this Agreement and following the sale of each Mortgage Loan, Buyer will own 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 Agreement.
(m) 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 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.
(n) Title Insurance. The Mortgage Loan is covered by either (i) an irrevocable title commitment, or an attorney’s opinion of title and abstract of title, each of which must be in form and substance acceptable to prudent mortgage lending institutions making mortgage loans in the area 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 the applicable Loan Program Authority and each such title insurance policy is issued by a title insurer acceptable to the applicable Loan Program Authority and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring Seller, its successors and assigns, as to the first priority lien of the Mortgage in the original principal amount of the Mortgage Loan, subject only to the exceptions contained in clauses (1), (2) and (3) of paragraph (i) of this Schedule 1-A, 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. Seller, 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 Agreement. No claims have been made under such lender’s title insurance policy, and no prior holder or servicer of the related Mortgage, including Seller, has done, by act or omission, anything which would impair the coverage of such lender’s title insurance policy, 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 Seller.
(o) No Defaults. Other than Mortgage Loans which are no more than thirty (30) days past due, 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 Seller nor its predecessors have waived any default, breach, violation or event of acceleration.
(p) No Mechanics’ Liens. 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 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.
(q) 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.
(r) Payment Terms. Principal and/or interest payments on the Mortgage Loan commenced or will commence no more than [***] after funds were disbursed in connection with the Mortgage Loan. With respect to adjustable rate Mortgage Loans, the Mortgage Interest Rate is adjusted on each Interest Rate Adjustment Date to equal [***] plus [***]. The Mortgage Note is payable on the [***] of each month in equal monthly installments of principal and/or interest, which installments of interest with respect to adjustable rate Mortgage Loans are subject to change on the Interest Rate Adjustment Date due to adjustments to the Mortgage Interest Rate on each Interest Rate Adjustment Date. Interest is 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 [***] from commencement of amortization. The Mortgage Note does not permit Negative Amortization.
(s) 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 marketable 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. The Mortgage Note and Mortgage are on forms acceptable to the applicable Loan Program Authority.
(t) Occupancy of the Mortgaged Property. As of the Purchase Date the Mortgaged Property is lawfully permitted to be 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. Seller has not received 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. Seller has not received notice of any violation or failure to conform with any such law, ordinance, regulation, standard, license or certificate. With respect to any Mortgage Loan originated with an “owner-occupied” Mortgaged Property, 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.
(u) 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 (i) above. No Mortgage Loan is cross-collateralized or is subject to a cross-default provision with any mortgage loan that is not a Purchased Mortgage Loan.
(v) 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 Buyer to the trustee under the deed of trust, except in connection with a trustee’s sale after default by the Mortgagor.
(w) Transfer of Mortgage Loans. Except with respect to Mortgage Loans registered with MERS, 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. With respect to each MOM Mortgage Loan, the related Assignment of Mortgage to MERS, if applicable, has been duly and properly recorded, or has been delivered for recording to the applicable recording office.
(x) Due-On-Sale. Except as permitted by the applicable Loan Program Authority, 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.
(y) 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 Seller, 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.
(z) Consolidation of Future Advances. Any future advances made to the Mortgagor prior to the Purchase Date have been consolidated with the outstanding principal amount secured by the Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term. The lien of the Mortgage securing the consolidated principal amount is expressly insured as having first lien priority by a title insurance policy, an endorsement to the policy insuring the mortgagee’s consolidated interest or by other title evidence acceptable to the applicable Loan Program Authority. The consolidated principal amount does not exceed the original principal amount of the Mortgage Loan.
(aa) Mortgaged Property Undamaged. The related Mortgaged Property is free of damage and waste that would adversely affect the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended. There have not been any total or partial condemnation proceedings with respect to the Mortgage Property and, to the knowledge of the Seller, there is no proceeding pending for the total or partial condemnation of such Mortgaged Property.
(bb) Origination; Collection Practices; Escrow Deposits; Interest Rate Adjustments. The Mortgage Loan was originated by Seller or a Correspondent Seller. The origination and collection practices used by the originator, each servicer of the Mortgage Loan and Seller with respect to the Mortgage Loan have been in all 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, all such payments are in the possession of, or under the control of, Seller or Servicer 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 if an escrow deposit has been established, it 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 Seller 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.
(cc) Conversion to Fixed Interest Rate. Except as allowed by the applicable Loan Program Authority or otherwise as expressly approved in writing by Buyer, with respect to adjustable rate Mortgage Loans, the Mortgage Loan is not convertible to a fixed interest rate Mortgage Loan.
(dd) 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, private mortgage insurance 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 Seller or by any officer, director, or employee of Seller or any designee of Seller or any corporation in which Seller or any officer, director, or employee had a financial interest at the time of placement of such insurance.
(ee) Servicemembers Civil Relief Act. The Mortgagor has not notified Seller, and Seller has no knowledge, of any relief requested or allowed to the Mortgagor under the Servicemembers Civil Relief Act of 2003.
(ff) Appraisal. The Mortgage File with respect to such Mortgage Loan contains either an evaluation or appraisal of the related Mortgaged Property meeting the requirements set forth by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, unless such evaluation is not required by the applicable Loan Program Authority, or applicable regulatory or licensing body. Such evaluation or appraisal must have been made and signed, prior to the approval of the application for such Mortgage Loan, by a qualified appraiser (a) who, at the time of such appraisal, met the minimum qualifications of the applicable Loan Program Authority, and the requirements of the Seller’s appraisal policy and (b) who satisfied (and which appraisal was conducted in accordance with) all of the applicable requirements of the Uniform Standards of Professional Appraisal Practice and all applicable federal and state laws and regulations in effect at the time of such appraisal and procedures. Such appraiser had no interest, direct or indirect, in such Mortgaged Property or in any loan made on the security
thereof, and such appraiser’s compensation was not affected by the approval or disapproval of such Mortgage Loan.
(gg) 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 Seller maintains such statement in the Mortgage File.
(hh) 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.
(ii) 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 Purchase Date (whether or not known to Seller 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 Seller, 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.
(jj) Capitalization of Interest. The Mortgage Note does not by its terms provide for the capitalization or forbearance of interest.
(kk) 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 Seller has not financed nor does Seller own directly or indirectly, any equity of any form in the Mortgaged Property or the Mortgagor.
(ll) Proceeds of Mortgage Loan. The proceeds of the Mortgage Loan have not been and shall not be used to satisfy, in whole or in part, any debt owed or owing by the Mortgagor to Seller or any Affiliate or correspondent of Seller, except in connection with a refinanced Mortgage Loan.
(mm) Origination Date. The origination date of the Mortgage Loan is no earlier than ninety (90) days prior to the related Purchase Date.
(nn) No Exception. The Custodian has not noted any material exceptions on an Asset Schedule with respect to the Mortgage Loan which would materially adversely affect the Mortgage Loan or Buyer’s interest in the Mortgage Loan.
(oo) Mortgage Submitted for Recordation. The Mortgage either has been or will promptly be submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.
(pp) Documents Genuine. Such Purchased Mortgage Loan and all accompanying collateral documents are complete and authentic and all signatures thereon are genuine.
(qq) Bona Fide Loan. Such Purchased Mortgage Loan arose from a bona fide loan, complying with all applicable State and Federal laws and regulations, to persons having legal capacity to contract and is not subject to any defense, set-off or counterclaim.
(rr) Committed Mortgage Loans. Each Committed Mortgage Loan is covered by a Take-out Commitment, does not exceed the availability under such Take-out Commitment (taking into consideration mortgage loans which have been purchased by the respective Take-out Investor under the Take-out Commitment and mortgage loan which Seller has identified to Buyer as covered by such Take-out Commitment) and conforms to the requirements and the specifications set forth in such Take-out Commitment and the related regulations, rules, requirements and/or handbooks of the applicable Take-out Investor and is eligible for sale to and insurance or guaranty by, respectively the applicable Take-out Investor and applicable insurer. Each Take-out Commitment is a legal, valid and binding obligation of Seller enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
(ss) Credit Score and Reporting. As of the Purchase Date, the Mortgagor’s credit score as listed on the Asset Schedule is no more than one hundred twenty (120) days old, or as otherwise permitted by the applicable Loan Program Authority. Full, complete and accurate information with respect to the Mortgagor’s credit file was furnished to Equifax, Experian and Trans Union Credit Information in accordance with the Fair Credit Reporting Act and its implementing regulations.
(tt) Other Encumbrances. Any property subject to any security interest given in connection with such Purchased Mortgage Loan is not subject to any other encumbrances other than a stated first mortgage, if applicable, and encumbrances which may be allowed under the Underwriting Guidelines.
(uu) Description. Each Purchased Mortgage Loan conforms to the description thereof as set forth on the related Asset Schedule delivered to the Custodian and Buyer.
(vv) Located in U.S. No collateral (including, without limitation, the related real property and the dwellings thereon and otherwise) relating to a Purchased Mortgage Loan is located in any jurisdiction other than in one of the fifty (50) states of the United States of America or the District of Columbia.
(ww) Underwriting Guidelines. Each Purchased Mortgage Loan has been originated in accordance with the Underwriting Guidelines (including all supplements or
amendments thereto) in effect as of the date of the Transaction is entered into and as previously provided to Buyer.
(xx) Primary Mortgage Guaranty Insurance. If required by the applicable Loan Program Authority, after the funding of the Purchased Mortgage Loan and payment of any premium thereafter, each Mortgage Loan is insured as to payment defaults by a policy of primary mortgage guaranty insurance in the amount required where applicable, and by an insurer approved, by the applicable Take-out Investor, if applicable, and all provisions of such primary mortgage guaranty insurance have been and are being complied with, such policy is in full force and effect, and all premiums due thereunder have been paid. Each Mortgage Loan which is represented to Buyer to have, or to be eligible for, FHA insurance is insured, or eligible to be insured, pursuant to the National Housing Act. Each Mortgage Loan which is represented by Seller to be guaranteed, or to be eligible for guaranty, by the VA is guaranteed, or eligible to be guaranteed, under the provisions of Chapter 37 of Title 38 of the United States Code. As to each FHA insurance certificate or each VA guaranty certificate, Seller has complied with applicable provisions of the insurance for guaranty contract and federal statutes and regulations, all premiums or other charges due in connection with such insurance or guarantee have been paid, there has been no act or omission which would or may invalidate any such insurance or guaranty, and the insurance or guaranty is, or when issued, will be, in full force and effect with respect to each Mortgage Loan. There are no defenses, counterclaims, or rights of setoff affecting the Mortgage Loans or affecting the validity or enforceability of any private mortgage insurance or FHA insurance applicable to the Mortgage Loans or any VA guaranty with respect to the Mortgage Loans.
(yy) Predatory Lending Regulations; High Cost Loans. None of the Mortgage Loans are classified as High Cost Mortgage Loans.
(zz) FHA Mortgage Insurance; VA Loan Guaranty; USDA Mortgage Loan Guaranty. With respect to each Mortgage Loan to be insured or guaranteed by the FHA, the VA or the USDA, (i) all insurance or guaranty premiums or payments payable to the applicable Loan Program Authority in connection with such Mortgage Loan were paid within the timeframe required by such agency to avoid the imposition of any late fees or penalty fees, (ii) Seller has submitted all documents required by and in accordance with the timeframes established by the applicable Loan Program Authority to insure such Mortgage Loan (regardless of whether such documents are required to be contained in the related servicing file) (iii) there has been no notice, indication of ineligibility or rejection of the Mortgage Loan and there exists no impairment to full recovery without indemnity from the related Loan Program Authority, and (iv) the related insurance contract, guaranty agreement and each similar agreement, as applicable, (x) is in full force and effect, all necessary steps have been taken to keep such guaranty or insurance valid, binding and enforceable and each of such is the binding, valid and enforceable obligation of the related Loan Program Authority to the full extent thereof, without surcharge, set-off or defense, or, (y) is not yet in full force and effect, all required documentation has been successfully submitted to the appropriate agency within the time frame set forth in clause (ii) above and Seller has provided Buyer any evidence or information requested by Buyer necessary for Buyer to verify compliance with (ii) above and that the related insurance or guaranty premiums or payments have been made.
(aaa) LTV; CLTV. The LTV and CLTV, as applicable, of any Purchased Mortgage Loan at origination was in accordance with the applicable Loan Program Authority’s guidelines, or such other percentage approved by the Buyer in writing.
(bbb) No Adverse Selection. Such Mortgage Loan was not intentionally selected by the Seller in a manner intended to adversely affect the interest of the Buyer. The Seller used no selection procedures that identified such Mortgage Loan as being less desirable or valuable than other comparable Mortgage Loans originated by the Seller. Such Mortgage Loans, collectively with the other Mortgage Loans included on such Asset Schedule, is representative of the Seller’s portfolio of Mortgage Loans.
(ccc) Single Original Mortgage Note. There is only one originally executed Mortgage Note; provided, however, that if there is more than one signed note, then each page of such additional note will have “Duplicate,” “Copy” or similar language clearly stamped on it.
(ddd) [Reserved].
(eee) Environmental Matters. To the knowledge of Seller, 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. To the knowledge of Seller with respect to each of the following clauses, there is no pending action or proceeding directly involving any Mortgaged Property in which compliance with any environmental law, rule or regulation is an issue; and nothing further remains to be done to satisfy in full all requirements of each such law, rule or regulation existing as a prerequisite to use and enjoyment of said property.
(fff) Regarding the Mortgagor. The Mortgagor is one or more natural persons or a trustee under a “living trust” and such “living trust” is in compliance with the applicable Take-out Investor guidelines for such trusts.
(ggg) [Reserved].
(hhh) [Reserved].
(iii) Prepayment Fee. With respect to each Mortgage Loan that has a prepayment fee feature, each such prepayment fee is enforceable and was originated in compliance with all applicable federal, state and local laws and regulations.
(jjj) Flood Certification Contract. Seller shall have obtained a life of loan, transferable flood certification contract for each Mortgage Loan and such contract is assignable to Buyer.
(kkk) Endorsements. Each Mortgage Note has been endorsed by a duly authorized representative of Seller for its own account and not as a fiduciary, trustee, trustor or beneficiary under a trust agreement.
(lll) Accuracy of Information. All information provided to Buyer by Seller with respect to the Mortgage Loans, including but not limited to, any information contained in the Mortgage File, is accurate in all material respects.
(mmm) Single Premium Credit Insurance. No Mortgagor is offered or required to purchase single premium credit insurance in connection with the origination of the related Mortgage Loan.
(nnn) Patriot Act. Seller has complied with all applicable anti money laundering laws and regulations, including, without limitation, the Patriot Act. To the knowledge of the Seller, no Mortgage Loan is subject to nullification pursuant to the Executive Order or the regulations promulgated by OFAC (the “OFAC Regulations”) or in violation of the Executive Order or the OFAC Regulations, and, to the knowledge of the Seller, no Mortgagor is subject to the provisions of such Executive Order or the OFAC Regulations nor listed as a “blocked person” for purposes of the OFAC Regulations.
(ooo) MERS Designated Mortgage Loans. With respect to each MERS Designated Mortgage Loans, a mortgage identification number has been assigned by MERS and such mortgage identification number is accurately provided on the Asset Schedule. The related Assignment of Mortgage to MERS has been duly and properly recorded. With respect to each MERS Designated Mortgage Loan, Seller has not received any notice of liens or legal actions with respect to such Mortgage Loan and no such notices have been electronically posted by MERS.
(ppp) MOM Mortgage Loans. With respect to each MOM Mortgage Loan, Seller has not received any notice of liens or legal actions with respect to such Mortgage Loan and no such notices have been electronically posted by MERS.
(qqq) Authorized Funds Recipient. Any related settlement or closing agent has fully disbursed all proceeds received from Buyer in accordance with the related HUD-1 form or closing disclosure, as applicable.
(rrr) Ability to Repay. Before originating the Mortgage Loan, the originator made a reasonable and good faith determination that the borrower would have a reasonable ability to repay the loan according to its terms, in accordance with the “ability to repay” standards of the federal Truth in Lending Act, 15 U.S.C. 1639c(a), and Regulation Z, 12 C.F.R. 1026.43, as may be amended from time to time.
(sss) [Reserved].
(ttt) [Reserved].
(uuu) FICO Floor. With respect to Mortgage Loans (other than those originated in connection with any “streamline refinance” FHA or VA program) which are FHA Loans, VA Loans, or USDA Mortgage Loans, the applicable Mortgagor’s FICO score at the time of origination was in accordance with the applicable Loan Program Authority’s requirements.
(vvv) TRID Compliance. With respect to each Mortgage Loan where the Mortgagor’s loan application for the Mortgage Loan was taken on or after October 3, 2015, such Mortgage Loan was originated in compliance with the TILA-RESPA Integrated Disclosure Rule.
(www) Closing Protection Letter. With respect to each Mortgage Loan that is a Wet-Ink Mortgage Loan (other than any such Mortgage Loan originated in the State of New York), Seller has obtained an ALTA closing protection letter which provides indemnification for Buyer for losses arising from the related Closing Agent’s fraud, theft, dishonesty, negligence or failure to follow written closing instructions, in form and substance acceptable to Buyer. If such closing protection letter is not addressed to Buyer, such closing protection letter shall provide that Buyer and any assignee of Buyer are protected by such letter as if it were addressed directly to them.
(xxx) Wet-Ink Mortgage Loans. With respect to each Mortgage Loan that is a Wet-Ink Mortgage Loan, the Closing Agent has been instructed in writing by Seller to hold the related Mortgage File as agent and bailee for Buyer and to promptly forward such Mortgage File in accordance with the provisions of the Custodial and Disbursement Agreement and the escrow instruction letter, if any.
(yyy) No Encumbrances; Good Title. Seller has not assigned, pledged, or otherwise conveyed or encumbered any Mortgage Loan to any Person other than Buyer. Immediately prior to the sale of a Mortgage Loan to Buyer, Seller 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 sale to Buyer hereunder.
SCHEDULE 1-B
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO POOLED MORTGAGE LOANS
Seller makes the following representations and warranties to Buyer, to the best of Seller’s knowledge, with respect to each Pooled Mortgage Loan, as of the Purchase Date for such Pooled Mortgage Loan and at all times while such Pooled Mortgage Loan is subject to a Transaction hereunder.
(a) Agency Approvals. To the extent required by applicable law or necessary to issue and/or service, as applicable, an Agency Security, the Seller and Servicer possess all Agency Approvals and is in good standing with each Agency. No event has occurred, and neither Seller nor Servicer has any reason whatsoever to believe or suspect an event may occur, prior to the issuance of the Agency Security (including a change in insurance coverage), which would either make Seller or Servicer, as applicable, unable to comply with the eligibility requirements for maintaining all such Agency Approvals.
(b) Agency Eligibility. Each Pooled Mortgage Loan is an Agency Eligible Mortgage Loan.
(c) [Reserved].
(d) Aggregate Principal Balance. The Cut-off Date Principal Balance respecting each Pooled Mortgage Loan shall be at least equal to the original unpaid principal balance of the Agency Security for the Pooled Mortgage Loans designated to be issued.
(e) Committed Mortgage Loans. The Agency Security to be issued on account of the Pooled Mortgage Loans is covered by a Take-out Commitment, does not exceed the availability under such Take-out Commitment. Each Take-out Commitment is a legal, valid and binding obligation of Seller enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
(f) Certification. With respect to Pooled Mortgage Loans being placed in an Agency Security, the Custodian has certified such Pooled Mortgage Loans to the applicable Agency for the purpose of being swapped for an Agency Security backed by such pool, in each case, in accordance with the terms of the applicable Agency guidelines.
(g) Sole Subscriber. As to the Agency Security being issued with respect to Pooled Mortgage Loans, Buyer or the agent under the Joint Securities Account Control Agreement has been listed as the sole subscriber thereto.
(h) No Securities Issuance Failure. With respect to each Pooled Mortgage Loan being placed in an Agency Security, no Securities Issuance Failure shall have occurred.
(i) Agency Securities.
With respect to any Pooled Mortgage Loans, Seller has only designated Buyer or the agent under the Joint Securities Account Control Agreement as the party authorized to receive the related Agency Security and shall designate Buyer or the agent under
the Joint Securities Account Control Agreement accordingly on the applicable Form HUD 11705 (Schedule of Subscribers).
SCHEDULE 2
AUTHORIZED REPRESENTATIVES
SELLER
Home Point Financial Corporation
2211 Old Earhart Road, Suite 250
Ann Arbor, MI 48105
Attention: [***]
Telephone: [***]
E-mail: [***]
With copies to:
Home Point Financial Corporation
2211 Old Earhart Road, Suite 250
Ann Arbor, MI 48105
Attention: [***]
E-mail: [***]
SELLER
See Authorized Representatives of Seller attached.
[Authorized Representatives (BMO-Home Point) (2021)]
AUTHORIZED REPRESENTATIVES OF SELLER
Name | Title | Authorized Signature | ||
William A. Newman | President and Chief Executive Officer | /s/ [***] | ||
Maria Fregosi | Chief Investment Officer | /s/ [***] | ||
Brian Ludtke | Chief Administrative Officer and Corporate Secretary | /s/ [***] | ||
Phillip Miller | Chief Operating Officer | /s/ [***] | ||
William Fischer | Controller/ Chief Accounting Officer | /s/ [***] | ||
Joseph Ruhlin | Treasurer | /s/ [***] | ||
Mark Elbaum | Chief Financial Officer | /s/ [***] |
BUYER NOTICES
Bank of Montreal
c/o BMO Capital Markets Corp.
3 Times Square
New York, New York 10036
Attn: [***]
Telephone: [***]
Email: [***]
With a copy to:
Bank of Montreal
c/o BMO Capital Markets Corp.
3 Times Square
New York, New York 10036
Attn: [***]
BUYER AUTHORIZATIONS
Any of the persons whose signatures and titles appear below, including any other authorized officers, are authorized, acting singly, to act for Buyer under this Agreement:
Name | Title | Signature | ||
Michael Pryluck | Managing Director | /s/ [***] | ||
Eric Jacks | Managing Director | /s/ [***] | ||
Matt Peters | Managing Director | /s/ [***] |
SCHEDULE 3
INDEBTEDNESS OF SELLER
Lender | Type of Facility | Facility Amount |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
EXHIBIT A
[RESERVED]
EXHIBIT B
[RESERVED]
EXHIBIT C
EVIDENCE OF BUYER LISTED AS LOSS PAYEE
OF SELLER’S FIDELITY INSURANCE POLICY, ERRORS AND OMISSIONS
INSURANCE POLICY, AND PROFESSIONAL LIABILITY INSURANCE POLICY
(Attached)
Coverage: MORTGAGE BANKERS BOND | |
Assured: Home Point Financial Corporation | Endorsement No. 43 |
Policy Number: [***] | Effective Date: January 8, 2021 |
SPECIFIC WAREHOUSE LENDER LOSS PAYEE/RIGHT OF ACTION ENDORSEMENT
TO ADD A SPECIFICALLY APPROVED WAREHOUSE LENDER
UNDER INSURING CLAUSE B1[b]
It is hereby understood and agreed that, in the event of a loss affecting the interest of Bank of Montreal, c/o BMO Capital Markets Corp. 3 Times Square, New York, NY 10036 then Bank of Montreal shall be named on the loss payable draft as its interest may appear.
Further, it is understood and agreed that the above named Warehouse Lender is hereby provided access to coverage found under Insuring Clause B1[b], subject to all the terms, insuring clauses, agreements, definitions, exclusions, limitations, conditions and endorsements of the attached Bond.
All other terms, insuring clauses, agreements, definitions, exclusions, limitations, conditions and endorsements of the attached Bond remain unchanged.
Dated at Chicago, Illinois | BANKERS INSURANCE SERVICE | |
a division of Financial & Professional Risk Solutions, Inc.
(TX Lic # 15890) In CA dba: FPR Insurance Solutions, Inc.
Lic #0G83953
|
January 8, 2021 | BY: | /s/ illegible |
|
1 of 1 |
EXHIBIT D
FORM OF SECTION 8 CERTIFICATE
Reference is hereby made to the Master Repurchase Agreement and Securities Contract dated as of January 8, 2021 (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”), between Home Point Financial Corporation (the “Seller”) and Bank of Montreal (the “Buyer”). Pursuant to the provisions of Section 8 of the Agreement, the undersigned hereby certifies that:
1. It is __ a natural individual person, treated as a corporation for U.S. federal income tax purposes, disregarded for federal income tax purposes (in which case a copy of this Section 8 Certificate is attached in respect of its sole beneficial owner), or treated as a partnership for U.S. federal income tax purposes (one must be checked).
2. It is the beneficial owner of amounts received pursuant to the Agreement.
3. It is not a bank, as such term is used in section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the “Code”), or the Agreement is not, with respect to the undersigned, a loan agreement entered into in the ordinary course of its trade or business, within the meaning of such section.
4. It is not a 10-percent shareholder of Seller within the meaning of section 871(h)(3) or 881(c)(3)(B) of the Code.
5. It is not a controlled foreign corporation that is related to Seller within the meaning of section 881(c)(3)(C) of the Code.
6. Amounts paid to it under the Facility Documents are not effectively connected with its conduct of a trade or business in the United States.
[NAME OF UNDERSIGNED] | |||
By: |
Title: |
EXHIBIT E
ASSET SCHEDULE FIELDS
[***]
EXHIBIT F
FORM OF POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that Home Point Financial Corporation (“Seller”) hereby irrevocably constitutes and appoints Bank of Montreal (“Buyer”) and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Seller and in the name of Seller or in its own name, from time to time in Buyer’s discretion:
(a) in the name of Seller, or in 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 with respect to any assets purchased by Buyer under the Master Repurchase Agreement and Securities Contract (as amended, restated or modified) dated as of January 8, 2021 (the “Assets”), 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 Buyer for the purpose of collecting any and all such moneys due with respect to any other assets whenever payable;
(b) to pay or discharge taxes and liens levied or placed on or threatened against the Assets;
(c) (i) to direct any party liable for any payment under any Assets to make payment of any and all moneys due or to become due thereunder directly to Buyer or as Buyer shall direct; (ii) to send “goodbye” letters on behalf of Seller and Servicer; (iii) 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 Assets; (iv) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Assets; (v) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Assets or any proceeds thereof and to enforce any other right in respect of any Assets; (vi) to defend any suit, action or proceeding brought against Seller with respect to any Assets; (vii) to settle, compromise or adjust any suit, action or proceeding described in clause (vi) above and, in connection therewith, to give such discharges or releases as Buyer may deem appropriate; and (viii) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Assets as fully and completely as though Buyer were the absolute owner thereof for all purposes, and to do, at Buyer’s option and Seller’s expense, at any time, and from time to time, all acts and things which Buyer deems necessary to protect, preserve or realize upon the Assets and Buyer’s Liens thereon and to effect the intent of this Agreement, all as fully and effectively as Seller might do;
(d) for the purpose of carrying out the transfer of servicing with respect to the Assets from Seller to a successor servicer appointed by Buyer in its sole discretion and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such transfer of servicing, and, without limiting the generality of the foregoing, Seller hereby gives Buyer the power and right, on behalf of Seller, without assent by Seller, to, in the name of Seller or its own name, or otherwise, prepare and send or cause to be sent “good-bye” letters to all mortgagors under the Assets, transferring the servicing of the Assets to a successor servicer appointed by Buyer in its sole discretion;
(e) for the purpose of delivering any notices of sale to mortgagors or other third parties, including without limitation, those required by law.
Seller 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.
Seller also authorizes Buyer, from time to time, to execute, in connection with any sale, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Assets.
The powers conferred on Buyer hereunder are solely to protect Buyer’s interests in the Assets and shall not impose any duty upon it to exercise any such powers. Buyer 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 Seller for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND BUYER ON ITS OWN BEHALF AND ON BEHALF OF BUYER’S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
[REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURES FOLLOW.]
IN WITNESS WHEREOF Seller has caused this power of attorney to be executed this __ day of ___________, 2021.
HOME POINT FINANCIAL CORPORATION |
|||
By: |
Name: |
Title: |
Acknowledgment of Execution by Seller (Principal): |
STATE OF | ) |
) ss.: | |||
COUNTY OF |
_____________ | ) |
On the _____ day of_______________, 2021, before me, the undersigned, a Notary Public in and for said State, personally appeared ______________________, personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity as _________________________ for Home Point Financial Corporation and that by his signature on the instrument, the person upon behalf of which the individual acted, executed the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in this certificate first above written.
Notary Public | ||
My Commission expires | |
EXHIBIT G
FORM OF OFFICER’S COMPLIANCE CERTIFICATE
I, ___________________, do hereby certify that I am the [duly elected, qualified and authorized] [CFO/TREASURER/FINANCIAL OFFICER] of HOME POINT FINANCIAL CORPORATION (“Seller”). This certificate (“Certificate”) is delivered to you in connection with Section 14(d) of the Master Repurchase Agreement and Securities Contract, dated as of January 8, 2021 (as may be amended, restated, supplemented or otherwise modified from time to time, the “Agreement”), by and between Seller and Bank of Montreal (“Buyer”). Capitalized terms shall have the meaning set forth in the Agreement. I hereby certify that, as of the date of the financial statements attached hereto and as of the date hereof, Seller is and has been in compliance with all the terms of the Agreement and, without limiting the generality of the foregoing, I certify that:
(a) | Material Adverse Effect. Seller has promptly given to Buyer notice of any event, circumstance or condition that has resulted or would reasonably be expected to result in a Material Adverse Effect. |
(b) | Financial Covenants. Seller has complied with all the financial covenants set forth in Section 3 of the Pricing Side Letter. A detailed summary of the calculation of Adjusted Tangible Net Worth, liquidity, Indebtedness to Adjusted Tangible Net Worth ratio, and maintenance of profitability is provided in Schedule 1 hereto. |
(c) | Insurance. Seller has maintained, for Seller and its Subsidiaries, with responsible companies, at its own expense, insurance policies in accordance with its obligations under Section 14(m) the Agreement. |
(d) | Financial Statements. The financial statements and schedules attached hereto fairly present in all material respects the financial condition and results of operations of Seller, in accordance with GAAP, consistently applied, as of the date(s) thereof. |
(e) | Documentation. Seller has performed the documentation procedures required by its operational guidelines with respect to endorsements and assignments, including the recordation of assignments, or has verified that such documentation procedures have been performed by a prior holder of such Purchased Mortgage Loan. |
(f) | Compliance. Seller has observed, performed or satisfied in all material respects all of its covenants, other agreements and conditions contained in the Agreement and the other Facility Documents to be observed, performed and satisfied by it. [If a covenant or other agreement or condition has not been complied with, Seller shall describe such lack of compliance and provide the date of any related waiver thereof.] |
(g) | Regulatory Action. Seller has promptly provided Buyer with written notice of any actions, suits, arbitrations, investigations (including, without limitation, any of the |
foregoing which are, to the best of Seller’s knowledge, pending or threatened in writing) or other legal or arbitrable proceedings, the existence of which is not required by law or regulation to remain confidential, affecting Seller or any of its Subsidiaries or affecting any of the Property of any of them before any federal or state court or before any Governmental Authority that (A) questions or challenges the validity or enforceability of any of the Facility Documents or any action to be taken in connection with the transactions contemplated hereby, or (B) relates to any violation of the Home Ownership and Equity Protection Act or any state, city or district high cost home mortgage or predatory lending law, which, with respect to clause (B), individually or in the aggregate, if not cured and if adversely determined, would have a Material Adverse Effect or constitute an Event of Default.
(h) | No Default. No Default or Event of Default has occurred and is continuing. [If any Default or Event of Default has occurred and is continuing, Seller shall describe the same in reasonable detail and describe the action Seller has taken or proposes to take with respect thereto, and if such Default or Event of Default has been expressly waived by Buyer in writing, Seller shall describe the Default or Event of Default and provide the date of the related waiver.] |
(i) | Warehouse Lines. All warehouse lines of Seller (other than the warehouse line evidenced by the Agreement) of Seller existing on the date hereof are listed on Schedule 2 hereto, including related lender, facility size, total line amount, outstanding amount, and maturity or termination date. |
(j) | Distributions. Except as permitted by Buyer in writing, Seller has not made any distributions prohibited by the Agreement. |
(k) | Originations. Attached hereto as Schedule 3 is a true and correct summary of all Mortgage Loans originated by Seller for the calendar month ending [DATE] and for the year to date ending [DATE], stratified by loan category, loan purpose, and production channel. |
(l) |
Repurchases and Early Payment Default Requests. Attached hereto as Schedule 4 is a true and correct summary of repurchases due to fraud, early payment
defaults, or investor guidelines issues summarized on the basis of (i) pending repurchase demands and (ii) satisfied repurchase demands.
|
|
(m) | MSR Valuation. A detailed summary of the market value analysis for Seller’s valuation of its mortgage servicing rights as determined by a Third Party Evaluator as of the calendar month ending [DATE] is provided in Schedule 5 hereto. |
(n) | DE Compare Ratio. Seller’s most recent DE Compare Ratio is listed on Schedule 6 hereto. |
[Signature Page Follows]
IN WITNESS WHEREOF, I have set my hand this _____ day of ________, ________.
By: | ||||
Name: | ||||
Title: |
Schedule 1 [to Exhibit G]
Calculation of Financial Covenants
[ATTACHED]
Schedule 2 [to Exhibit G]
Warehouse Lines of Seller
Lender | Facility Size | Total Line | Outstanding | Maturity/Termination | |||
Amount | Amount | Date | |||||
Schedule 3 [to Exhibit G]
Originations
[ATTACHED]
Schedule 4 [to Exhibit G]
HPFC - EOM
October 2020
YTD | ||
Repurchases | YTD UPB | Count |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
[***] | [***] | [***] |
Total # of | ||
Indemnifications | Loans | Indemnifications ($) |
[***] | [***] | [***] |
Schedule 5 [to Exhibit G]
MSR Valuation
[ATTACHED]
Schedule 6 [to Exhibit G]
DE Compare Ratio
[Seller to provide]
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
Exhibit 10.19
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2211 Old Earhart Rd. Suite 250 ● Ann Arbor MI 48105 |
January 9, 2021
The Bon Salle Group, Inc.
1632 S. Bayshore Ct. #103
Miami, FL 33133
Attention: Mr. Andrew Bon Salle
Dear Andrew:
We are delighted that you have agreed to serve as a consultant to Home Point Financial Corporation (“Homepoint” or the “Company”). As you are aware, this is an exciting time for the Company, and we are sure you will be an integral part of the Homepoint story!
The purpose of this letter agreement is to set forth the terms of your service to Homepoint and its affiliates, which shall be provided via The Bon Salle Group, Inc. (“BSG”), a corporation that is controlled by Mr. Bon Salle. For purposes of this letter agreement, the terms “you,” “your” and similar descriptors shall be deemed to refer to BSG, provided that the covenants set forth in Annex I shall apply to both BSG and Mr. Bon Salle, individually.
Term, Title and Responsibilities
Homepoint has agreed to engage you as a consultant from January 9, 2021, through December 31, 2022 (the “Initial Term”), provided that following December 31, 2022, the Initial Term shall automatically be extended on a one-year rolling basis (collectively with the Initial Term, the “Term”) unless written notice of termination is provided by either you or Homepoint at least 30 days prior to the expiration of the then current Term. Either party may terminate this letter agreement and the herein described consulting arrangement at any time without cause upon 30 days written notice to the other party.
You shall serve throughout the Term as a consultant to Homepoint and shall devote such time as you reasonably deem appropriate to performing your responsibilities and services hereunder, up to a maximum of 20 hours per week. Mr. Bon Salle shall have no obligation to work from any of Homepoint’s offices and may work remotely with the exception of his in person attendance at mutually agreed upon scheduled meetings from time to time. Mr. Bon Salle’s title shall be “Executive Chairperson.” Mr. Bon Salle will be covered under the Company’s D&O Insurance policy, which shall provide coverages in such scope and with such limits as are customary for similarly situated companies in the mortgage industry.
Homepoint expects that your services will relate primarily to (i) involvement with any initial public offering by Home Point Capital Inc. (“HPC Inc.”), including participation in meetings with potential investors; (ii) advice regarding and management of key investor, agency and regulatory relationships; (iii) review and advice regarding the Company’s business plan, operations, processes and technology; (iv) assistance with the development (e.g., structure, strategy and fundraising) of the Company’s affiliate, Home Point Asset Management LLC; (v) review and advice regarding potential mergers,
homepoint.com
Home Point Financial Corporation d/b/a Homepoint. NMLS No.7706 (For licensing information, go to: www.nmlsconsumeraccess.org). Home Point Financial Corporation does not conduct business under the name, “Homepoint” in IL, KY, LA, MD, NY, or WY. In these states, the company conducts business under the full legal name, Home Point Financial Corporation. 2211 Old Earhart Road, Suite 250, Ann Arbor, MI 48105. Toll-Free Tel: 888-616-6866. For Licensing and Disclaimers visit www.homepointfinancial.com/licenses.
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2211 Old Earhart Rd. Suite 250 ● Ann Arbor MI 48105 |
acquisitions and similar corporate actions; (vi) review and advice regarding senior leadership and other personnel matters; and (vii) such other services as may be requested by the Company’s Chief Executive Officer and/or the Board of Managers of Home Point Capital GP LLC (“HPC GP”) (or, following any initial public offering, the Board of Directors of HPC Inc.). As Executive Chairperson, Mr. Bon Salle also will serve throughout the Term as the Chairperson of the governing board of Homepoint’s parent company (i.e., currently, as Chairperson of the Board of Managers of HPC GP and, following any initial public offering, as Chairperson of HPC Inc.), subject to the terms of the applicable organizational documents.
The advisory services to be performed by you hereunder shall be as an independent contractor, not as an employee of Homepoint. You and Mr. Bon Salle shall be free to use your time not dedicated to performing your responsibilities hereunder to pursue any other business endeavors of your choosing including, without limitation, as an employee, consultant, director, manager, owner, investor or in any other capacity; provided, that you and Mr. Bon Salle remain in compliance with the restrictive covenants set forth in Annex I attached hereto.
Consulting Fee and Other Compensation
As consideration for your services hereunder, Homepoint will pay you a consulting fee at an annual rate of $500,000. Such consulting fee shall be payable bi-weekly in accordance with the Company’s customary payroll practices and procedures and shall be prorated for any partial year during the Term.
You also will be eligible for an annual bonus from Homepoint based on your assistance and contribution to the Company, as well as the Company’s performance. You and the Company shall work together in good faith to establish mutually acceptable performance targets for the annual bonus. The target performance bonus will equal 150% of your annual consulting fee; provided, however, unless you have terminated this letter agreement and the consulting arrangement described herein for any reason or the Company has terminated this letter agreement and the consulting arrangement described herein for Cause1, in either case, prior to December 31, 2021 or December 31, 2022, as applicable, for each of calendar years 2021 and 2022, you will be entitled to receive a minimum annual bonus of $500,000, which amount shall be due and payable on or before March 15 of the year following the calendar year to which such annual bonus relates, irrespective of whether any performance targets are achieved.
1 For purposes of this letter agreement, the term “Cause” shall mean you (i) engage in intentionally dishonest or willful misconduct; (ii) perpetrate a fraud, theft, or embezzlement or misappropriation against or affecting the Company or any of its affiliates; (iii) are indicted on charges of, commit, or are convicted of, or enter a plea of guilty or nolo contendere to, a felony or a crime involving fraud, dishonesty or moral turpitude; or (iv) violate any law or other regulation applicable to the Company or any of its affiliates or breach any of your duties to the Company or any of its affiliates that in each case, for purposes of this clause (iv), materially and adversely affects (economically, reputationally or otherwise) the Company or any of its affiliates, unless such action or conduct is curable and is cured within fifteen (15) days following receipt of written notice from the Company or any such affiliate.
homepoint.com
Home Point Financial Corporation d/b/a Homepoint. NMLS No.7706 (For licensing information, go to: www.nmlsconsumeraccess.org). Home Point Financial Corporation does not conduct business under the name, “Homepoint” in IL, KY, LA, MD, NY, or WY. In these states, the company conducts business under the full legal name, Home Point Financial Corporation. 2211 Old Earhart Road, Suite 250, Ann Arbor, MI 48105. Toll-Free Tel: 888-616-6866. For Licensing and Disclaimers visit www.homepointfinancial.com/licenses.
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2211 Old Earhart Rd. Suite 250 ● Ann Arbor MI 48105 |
Further, you (or Mr. Bon Salle, as determined by HPC LP) are eligible to participate in the Company’s Equity Incentive Plan. Upon commencement of the Term, you (or Mr. Bon Salle) will be granted 500,000 options of the Company’s parent company, Home Point Capital LP (“HPC LP”). Your (or Mr. Bon Salle’s) option agreement will set forth the vesting provisions and the option exercise prices payable by you (or him) upon exercise of such options. In summary, but subject to the complete terms of the option agreement and HPC LP’s 2015 Option Plan (as amended, the “Plan”):
● | 50% of your (or Mr. Bon Salle’s) options (the “Time-Vesting Options”) will have an option exercise price of $56.54 per unit of HPC LP, which the Board of Managers of HPC GP has determined to be the fair market value of the options as of the date of grant. 20% of your (or Mr. Bon Salle’s) Time-Vesting Options will be vested upon grant and 20% of the Time-Vesting Options will vest on each of the first four anniversaries of the grant date, subject to Mr. Bon Salle’s and your continued service to the Company and its affiliates; and |
● | 50% of your (or Mr. Bon Salle’s) options (the “Performance-Vesting Options”) will vest in accordance with the liquidity provisions of the Plan, with (i) 25% of the Performance-Vesting Options having an option exercise price of $70.68; (ii) 25% of the Performance-Vesting Options having an option exercise price of $84.81; (iii) 25% of the Performance-Vesting Options having an option exercise price of $98.95; and (iv) 25% of the Performance-Vesting Options having an option exercise price of $113.08. |
Upon any initial public offering of HPC Inc., such options would be converted to options of HPC Inc. consistent with the options granted to members of the Company’s management team and to Homepoint employees (including giving effect to any stock split that may be effectuated in connection with such offering) and will be subject to the terms and conditions of HPC Inc’s 2021 Incentive Plan and a substitute option agreement.
In addition, following any initial public offering of HPC Inc., you (or Mr. Bon Salle, as determined by HPC Inc.) will be granted restricted stock units or other incentive compensation in an amount to be determined by the Compensation Committee of HPC Inc. to be appropriate for HPC Inc.’s Chairperson.
Expense Reimbursement; Benefits
You will be entitled to reimbursement for reasonable travel and other expenses incurred in connection with the performance of your services hereunder in accordance with Homepoint’s policies regarding travel and entertainment expenses upon your submission of reasonable documentation of such expenses. You and Mr. Bon Salle will not be eligible to participate in any benefit program of Homepoint.
Taxes
You are solely responsible for the payment of all income, social security, employment-related, or other taxes incurred as a result of the performance of the services hereunder and for all obligations, reports, and timely notifications relating to such taxes. No amount will be withheld from any payment made by to you hereunder for the payment of social security, federal, state, local or other taxes.
homepoint.com
Home Point Financial Corporation d/b/a Homepoint. NMLS No.7706 (For licensing information, go to: www.nmlsconsumeraccess.org). Home Point Financial Corporation does not conduct business under the name, “Homepoint” in IL, KY, LA, MD, NY, or WY. In these states, the company conducts business under the full legal name, Home Point Financial Corporation. 2211 Old Earhart Road, Suite 250, Ann Arbor, MI 48105. Toll-Free Tel: 888-616-6866. For Licensing and Disclaimers visit www.homepointfinancial.com/licenses.
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2211 Old Earhart Rd. Suite 250 ● Ann Arbor MI 48105 |
Covenants
You and Mr. Bon Salle acknowledge that as a consultant to Homepoint and as Executive Chairperson you and Mr. Bon Salle will have possession of and access to valuable business information and, in consideration of the consulting fee and other compensation offered hereby, you and Mr. Bon Salle agree to the covenants set forth on Annex I to this letter agreement.
* * * *
homepoint.com
Home Point Financial Corporation d/b/a Homepoint. NMLS No.7706 (For licensing information, go to: www.nmlsconsumeraccess.org). Home Point Financial Corporation does not conduct business under the name, “Homepoint” in IL, KY, LA, MD, NY, or WY. In these states, the company conducts business under the full legal name, Home Point Financial Corporation. 2211 Old Earhart Road, Suite 250, Ann Arbor, MI 48105. Toll-Free Tel: 888-616-6866. For Licensing and Disclaimers visit www.homepointfinancial.com/licenses.
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2211 Old Earhart Rd. Suite 250 ● Ann Arbor MI 48105 |
Andrew, we are excited to have you join the Homepoint team as our Executive Chairperson. If you are in agreement with these terms, please sign and return a copy to me at your earliest convenience.
Sincerely,
/s/ Willie Newman | |
Willie Newman | |
President and CEO |
Agreed and Accepted: | Date: | ||
The Bon Salle Group, Inc. | |||
By: | /s/ Andrew Bon Salle | January 9, 2021 | |
Andrew Bon Salle, President |
Agreed and Accepted | ||
with respect to the covenants | ||
set forth in Annex I: | Date: | |
/s/ Andrew Bon Salle | January 9, 2021 | |
Andrew Bon Salle |
homepoint.com
Home Point Financial Corporation d/b/a Homepoint. NMLS No.7706 (For licensing information, go to: www.nmlsconsumeraccess.org). Home Point Financial Corporation does not conduct business under the name, “Homepoint” in IL, KY, LA, MD, NY, or WY. In these states, the company conducts business under the full legal name, Home Point Financial Corporation. 2211 Old Earhart Road, Suite 250, Ann Arbor, MI 48105. Toll-Free Tel: 888-616-6866. For Licensing and Disclaimers visit www.homepointfinancial.com/licenses.
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2211 Old Earhart Rd. Suite 250 ● Ann Arbor MI 48105 |
Annex I
For purposes of this Annex I, the terms “you,” “your” and similar descriptors shall be deemed to refer to both BSG and Mr. Bon Salle, individually.
Confidentiality
Except as otherwise necessary or advisable in the performance of your duties under this letter agreement, you agree to:
a) | hold in the strictest confidence and not (x) use in any manner detrimental to the business of the Company and its affiliates, or (y) disclose, publish or divulge, directly or indirectly, to any Person, any Confidential Information regarding the Company, any of its affiliates or Stone Point Capital LLC (“SPC”) and investment funds managed by SPC (each a “Protected Person”); |
b) | use such Confidential Information only in relation to the Company and its affiliates and only for its and their valid business purposes; and |
c) | take such other protective measures as may be or become reasonably necessary to preserve the confidentiality of such Confidential Information. |
For the purpose of this letter agreement, the term “Confidential Information” shall include, with respect to each Protected Person, all data, information, reports, interpretations, forecasts and records, financial or otherwise, including information related to the financial performance and results of the business of the Company and its affiliates that is not available to the general public. The term “Confidential Information” does not include information that: (i) is or becomes generally available to the public other than as a result of a disclosure by you (or at your direction); (ii) was or becomes available to you on a non-confidential basis from a source other than the Protected Person; provided that such source is not bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to such Protected Person with respect to such information; (iii) is developed independently by you without the use of any Confidential Information (other than in your capacity as an officer, manager, director or consultant of the Company or any of its affiliates); (iv) is required to be disclosed by order of a court of competent jurisdiction, administrative agency or governmental body, or by any law, rule or regulation, or by subpoena, summons or any other administrative or legal process, or by applicable regulatory standards, after notice of such requirement has been given to the Protected Person, and the Protected Person has had a reasonable opportunity to oppose such disclosure; or (v) is disclosed with the written approval of (A) the Company with respect to Confidential Information related to the Company or its affiliates or (B) SPC with respect to Confidential Information related to SPC and investment funds managed by SPC. The term “Person” means and includes any individual, corporation, partnership, association, limited liability company, trust, estate or other entity.
Upon the Company’s request at any time following the termination of this letter agreement and the consulting arrangement described herein or any other time as requested by the Company, you shall deliver to the Company (or, if requested by the Company, destroy and certify in writing as to such destruction), and not retain for your or any other Person’s use, any and all records, electronic
homepoint.com
Home Point Financial Corporation d/b/a Homepoint. NMLS No.7706 (For licensing information, go to: www.nmlsconsumeraccess.org). Home Point Financial Corporation does not conduct business under the name, “Homepoint” in IL, KY, LA, MD, NY, or WY. In these states, the company conducts business under the full legal name, Home Point Financial Corporation. 2211 Old Earhart Road, Suite 250, Ann Arbor, MI 48105. Toll-Free Tel: 888-616-6866. For Licensing and Disclaimers visit www.homepointfinancial.com/licenses.
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2211 Old Earhart Rd. Suite 250 ● Ann Arbor MI 48105 |
data, files, memoranda, documents and materials of any type, and all copies, excerpts and notes thereof containing any Confidential Information or other information or material of or concerning any customers, prospective customers, brokers, consultants, funding sources, services, projects, programs or business of the Company or any of its affiliates, about which you obtain knowledge during the course of your service to the Company and its affiliates. Your confidentiality obligations hereunder shall survive for two years after the termination of this letter agreement and the consulting arrangement described herein.
Homepoint acknowledges that in connection with any non-Homepoint activities, you may possess or have access to material, non-public information regarding third parties and you agree that you will not knowingly share any of such information with the Company or any of its affiliates.
Nothing contained in this letter agreement restricts your ability to report matters to the SEC or to take any other action in conformance with the SEC’s Whistleblower Rules under Section 21F of the U.S. Securities and Exchange Act of 1934.
Anti-Money Laundering Policy
You are expected to adhere to Home Point’s Anti-Money Laundering Policy and supporting procedures. Failure to comply with such policy and procedures may result in a range of disciplinary actions, up to and including termination of this letter agreement and the consulting arrangement described herein.
Non-Competition
During the Term and for a period of six (6) months thereafter (the “Restricted Period”), without the prior written consent of the Company, you agree not to directly or indirectly, on your behalf or on behalf of any other Person (i) engage in any Competing Business in the United States or (ii) become interested in (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent or consultant) any Person engaged in a Competing Business, except that you may hold up to 1% of the outstanding securities of any class of any publicly traded securities of any company. The term “Competing Business” means (i) the business of originating and servicing residential mortgage loans, (ii) the business of raising and managing third-party capital to invest in mortgage servicing rights and issuing and investing in securities backed thereby, and (iii) any business that the Company or any of its affiliates is engaged in or actively developing, or planning to engage or actively develop during the Term, provided that with respect to this clause (iii) you are (or were) actively involved in the development of such business. Notwithstanding anything herein to the contrary, this non-competition covenant shall not prohibit you from serving on the boards of directors (or similar governing body) of, or holding an advisory or consulting position with, any of the entities Identified on Confidential Schedule A.
Non-Interference
During the Restricted Period, you agree not to directly or indirectly, on your behalf or on behalf of any other Person: (i) induce or attempt to induce any customer, broker, client, supplier, licensee, distributor, funding source or business relation of the Company or any of its affiliates to withdraw, decrease or cancel its business (or otherwise negatively interfere) with the Company or any of its
homepoint.com
Home Point Financial Corporation d/b/a Homepoint. NMLS No.7706 (For licensing information, go to: www.nmlsconsumeraccess.org). Home Point Financial Corporation does not conduct business under the name, “Homepoint” in IL, KY, LA, MD, NY, or WY. In these states, the company conducts business under the full legal name, Home Point Financial Corporation. 2211 Old Earhart Road, Suite 250, Ann Arbor, MI 48105. Toll-Free Tel: 888-616-6866. For Licensing and Disclaimers visit www.homepointfinancial.com/licenses.
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2211 Old Earhart Rd. Suite 250 ● Ann Arbor MI 48105 |
affiliates; or (ii) attempt to do any of the foregoing, or assist, entice, induce or encourage any other Person to do or attempt to do any activity which, were it done by you, would violate this covenant.
Non-Solicitation of Employees
You agree that you shall not, directly or indirectly, on your behalf or on behalf of any other Person, for a period of two (2) years after the termination of this letter agreement and the consulting arrangement described herein (i) solicit, induce, recruit or encourage any employee of the Company or any of its affiliates to leave such employee’s employment, or take away such employees, or (ii) attempt to solicit, induce, recruit, encourage or take away any such employees.
Non-Disparagement
You agree that you shall not, directly or indirectly, on your behalf or on behalf of any other Person, (i) take any action that is intended, or could reasonably be expected, to harm, disparage, defame, slander or lead to unwanted or unfavorable publicity for any Protected Person, or otherwise take any action that could reasonably be expected to detrimentally affect the reputation, image, relationships or public view of any Protected Person or (ii) attempt to do any of the foregoing, or assist, entice, induce or encourage any other Person to do or attempt to do any activity which, were it done by you, would violate this covenant; provided, however, that you shall not be prohibited by this covenant from (x) making truthful statements when required by order of a court or other body of competent jurisdiction or as required by law or (y) taking any good faith action to enforce legal or contractual rights, or pursuing in good faith claims relating thereto, against a Person.
Acknowledgement
You acknowledge that you have carefully read and considered all the terms and conditions of this letter agreement, including the restraints imposed upon you pursuant to this Annex I. You agree that each of the restraints contained herein are necessary for the protection of the goodwill, Confidential Information and other legitimate interests of the Company and its affiliates; that each and every one of these restraints is reasonable in respect to subject matter, length of time and geographic area; and that these restraints, individually or in the aggregate, will not prevent you from obtaining suitable employment and/or consulting engagements during the period in which you are bound by such restraints. You further acknowledge that, were you to breach any of the covenants contained in this Annex I, the damage to the Company and its affiliates would be irreparable. You therefore agree that the Company, in addition to any other remedies available to it, shall be entitled to seek injunctive relief against any breach or threatened breach by you of any such covenants, without having to post bond. You and the Company further agree that, in the event that any provision of this Annex I shall be determined by any court of competent jurisdiction to be unenforceable by reason of its being extended over too great a time, too large a geographic area or too great a range of activities, such provision shall be deemed to be modified to permit its enforcement to the maximum extent permitted by law. Notwithstanding anything contained herein to the contrary, the provisions of this Annex I shall survive the termination of this letter agreement and the consulting arrangement described herein in accordance with their express terms.
homepoint.com
Home Point Financial Corporation d/b/a Homepoint. NMLS No.7706 (For licensing information, go to: www.nmlsconsumeraccess.org). Home Point Financial Corporation does not conduct business under the name, “Homepoint” in IL, KY, LA, MD, NY, or WY. In these states, the company conducts business under the full legal name, Home Point Financial Corporation. 2211 Old Earhart Road, Suite 250, Ann Arbor, MI 48105. Toll-Free Tel: 888-616-6866. For Licensing and Disclaimers visit www.homepointfinancial.com/licenses.
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2211 Old Earhart Rd. Suite 250 ● Ann Arbor MI 48105 |
Confidential Schedule A
[***]
homepoint.com
Home Point Financial Corporation d/b/a Homepoint. NMLS No.7706 (For licensing information, go to: www.nmlsconsumeraccess.org). Home Point Financial Corporation does not conduct business under the name, “Homepoint” in IL, KY, LA, MD, NY, or WY. In these states, the company conducts business under the full legal name, Home Point Financial Corporation. 2211 Old Earhart Road, Suite 250, Ann Arbor, MI 48105. Toll-Free Tel: 888-616-6866. For Licensing and Disclaimers visit www.homepointfinancial.com/licenses.
1. |
Increase to Aggregate Number Available. The second sentence of Section
1.4(a) of the Plan is hereby deleted in its entirety and replaced with the following:
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2. |
Ratification. Except as expressly modified and amended herein, all of the
terms and conditions of the Plan remain unchanged and unmodified and in full force and effect.
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3. |
Governing Law. This Amendment shall be construed in accordance with and
governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.
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4. |
Counterparts. This Amendment may be executed in any number of counterparts
and it shall be sufficient that the signature of each party appears on one or more such counterparts. All counterparts shall collectively constitute a single agreement. Signatures to this Amendment transmitted by facsimile, .pdf, electronic
mail or other electronic transmission shall be treated as originals in all respects.
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MANAGERS:
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/s/ William Newman
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William Newman
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/s/ Agha Khan
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Agha Khan
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/s/ Stephen Levey
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Stephen Levey
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/s/ Eric Rosenzweig
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Eric Rosenzweig
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Participant:
|
[•]
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Date of Grant:
|
[•]
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Vesting Commencement Date:
|
[•]
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Number of
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Restricted Stock Units:
|
[•]
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Vesting Schedule:
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Provided the Participant has not undergone a Termination prior to the applicable vesting date (or event), 100% of the Restricted Stock Units will vest
on the first regularly scheduled annual meeting of the stockholders of the Company in fiscal year 2022; provided, however, that the Restricted Stock Units will, to the extent not vested, become fully vested if the Participant undergoes a Termination by the
Service Recipient in connection with or following a Change in Control.
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Dividend Equivalents:
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The Restricted Stock Units shall be credited with dividend equivalent payments, as provided in Section 13(c)(iii) of the Plan.
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HOME POINT CAPITAL INC.
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By:
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Title:
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1 |
To the extent that the Company has established, either itself or through a third-party plan administrator, the ability to accept this award electronically, such
acceptance shall constitute the Participant's signature hereto.
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Exhibit 24.2
Home Point Capital Inc.
POWER OF ATTORNEY
The undersigned Chairperson of Home Point Capital Inc. hereby constitutes and appoints William A. Newman, Mark E. Elbaum and Brian R. Ludtke and each of them, his true and lawful agent, proxy and attorney-in-fact, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to (i) act on, sign and file with the Securities and Exchange Commission any and all amendments (including post-effective amendments) to the company’s registration statement on Form S-1 (File No. 333-251963) together with all schedules and exhibits thereto and any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, together with all schedules and exhibits thereto, (ii) act on, sign and file such certificates, instruments, agreements and other documents as may be necessary or appropriate in connection therewith, (iii) act on and file any supplement to any prospectus included in this registration statement or any such amendment or any subsequent registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and (iv) take any and all actions which may be necessary or appropriate in connection therewith, granting unto such agents, proxies and attorneys-in-fact, and each of them, full power and authority to do and perform each and every act and thing necessary or appropriate to be done, as fully for all intents and purposes as he might or could do in person, hereby approving, ratifying and confirming all that such agents, proxies and attorneys-in-fact or any of their substitutes may lawfully do or cause to be done by virtue thereof.
IN WITNESS HEREOF, the undersigned has subscribed his name as of the 21st day of January, 2021.
/s/ Andrew J. Bon Salle | |
Andrew J. Bon Salle | |
Chairperson |
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