Document:

Exhibit 10.3

 

	

    	
Security Agreement
    

 

	
 
    	
 
    

 

As of April 24, 2014, for value received, the undersigned (“Debtor”) pledges, assigns and grants to Comerica Bank (“Bank”), whose address is 39200 Six Mile Road, Livonia, Michigan 48152, Attention: Commercial Loan Documentation, Mail Code 7578, a continuing security interest and lien (any pledge, assignment, security interest or other lien arising hereunder is sometimes referred to herein as a “security interest”) in the Collateral (as defined below) to secure payment when due, whether by stated maturity, demand, acceleration or otherwise, of all existing and future indebtedness (“Indebtedness”) to the Bank of RMC MORTGAGE CORPORATION, a California corporation (“Borrower”) and/or Debtor. Indebtedness includes without limit any and all obligations or liabilities of the Borrower and/or Debtor to the Bank, whether absolute or contingent, direct or indirect, voluntary or involuntary, liquidated or unliquidated, joint or several, known or unknown; any and all obligations or liabilities for which the Borrower and/or Debtor would otherwise be liable to the Bank were it not for the invalidity or unenforceability of them by reason of any bankruptcy, insolvency or other law, or for any other reason; any and all amendments, modifications, renewals and/or extensions of any of the above; all costs incurred by Bank in establishing, determining, continuing, or defending the validity or priority of its security interest, or in pursuing its rights and remedies under this Agreement or under any other agreement between Bank and Borrower and/or Debtor or in connection with any proceeding involving Bank as a result of any financial accommodation to Borrower and/or Debtor; and all other costs of collecting Indebtedness, including without limit attorneys fees. Debtor agrees to pay Bank all such costs incurred by the Bank, immediately upon demand, and until paid all costs shall bear interest at the highest per annum rate applicable to any of the Indebtedness, but not in excess of the maximum rate permitted by law.  Any reference in this Agreement to attorneys fees shall be deemed a reference to reasonable fees, costs, and expenses of both in-house and outside counsel and paralegals, whether inside or outside counsel is used, whether or not a suit or action is instituted, and to court costs if a suit or action is instituted, and whether attorneys fees or court costs are incurred at the trial court level, on appeal, in a bankruptcy, administrative or probate proceeding or otherwise.  Debtor further covenants, agrees, represents and warrants as follows:

 

1.            Collateral shall mean all of the following property Debtor now or later owns or has an interest in, wherever located:

 

·              all Pledged Mortgage Loans, including without limitation, all promissory notes or other instruments or agreements evidencing the indebtedness of obligors thereon, all mortgages, deeds to secure debt, deeds of trust and/or security agreements securing, guaranteeing or otherwise relating thereto, all rights to payment thereunder, all rights in the real property, improvements and other tangible and intangible property and rights securing payment of the indebtedness of the obligors thereon, or that are the subject of such Mortgage Loans, all rights under documents related thereto, such as guaranties and insurance policies (issued by governmental agencies or otherwise), including, without limitation, mortgage and title insurance policies, binders and commitments, fire and extended coverage insurance policies (including the right to any return premiums) and, if applicable, flood and earthquake insurance policies, participation certificates or agreements, FHA insurance and VA guaranties, and all rights in cash deposits consisting of impounds, insurance premiums or other funds held on account thereof;

 

·              all financing statements perfecting the security interest of any Pledged Mortgage Loans or in the property securing any Pledged Mortgage Loans;

 

·              all rights of Debtor under all commitments from investors or purchasers, covering any part of the foregoing Collateral, all rights to deliver Pledged Mortgage Loans to investors and other purchasers pursuant thereto and all proceeds resulting from the disposition of such Collateral pursuant thereto;

 

·              all rights to service, administer and/or collect any of the Pledged Mortgage Loans at any date, and all rights to the payment of money on account of such servicing, administration or collection activities;

 

·              all rights of Debtor in, to and under any agreements or other arrangements (including without limitation, an interest rate swap agreement, an interest cap agreement, and a forward sale agreement) entered into by Debtor to protect itself against changes in interest rates or the market value of any of the Collateral, including without limitation, all rights to payment arising under such agreements or arrangements;

 

 

·              all files, documents, instruments, surveys, appraisals, bonds, certificates, correspondence, computer programs, tapes, discs, cards, accounting records and other books, records, agreements, information and data of Debtor relating to any of the foregoing Collateral;

 

·              all Accounts Receivable (for purposes of this Agreement, “Accounts Receivable” consists of all accounts, general intangibles, chattel paper (including without limit electronic chattel paper and tangible chattel paper), contract rights, deposit accounts, documents, instruments and rights to payment evidenced by chattel paper, documents or instruments, health care insurance receivables, commercial tort claims, letters of credit, letter of credit rights, supporting obligations, and rights to payment for money or funds advanced or sold) constituting or relating to any of the foregoing Collateral;

 

·              all investment property (including, without limit, securities, securities entitlements, and financial assets), constituting, relating to, or secured by any of the foregoing Collateral;

 

·              all goods, instruments (including, without limit, promissory notes), documents (including, without limit, negotiable documents), policies and certificates of insurance, deposit accounts, and money or other property (except real property which is not a fixture) which are now or later in possession of Bank, or as to which Bank now or later controls possession by documents or otherwise; and

 

·              all additions, attachments, accessions, parts, replacements, substitutions, renewals, interest, dividends, distributions, rights of any kind (including but not limited to stock splits, stock rights, voting and preferential rights), products, and proceeds of or pertaining to any of the foregoing Collateral including, without limit, cash or other property which were proceeds and are recovered by a bankruptcy trustee or otherwise as a preferential transfer by Debtor.

 

In the definition of Collateral, a reference to a type of collateral shall not be limited by a separate reference to a more specific or narrower type of that collateral.

 

As used herein, the following terms shall have the following meanings:

 

“FHA” shall mean the Federal Housing Administration and any successor thereto.

 

“Mortgage Loan” shall mean a one-to-four family, residential real estate loan secured by a mortgage, deed to secure debt, deed of trust or other security agreement, including (a) the promissory note or other instrument or agreement evidencing the indebtedness of the obligor thereon, (b) the mortgage, deed to secure debt, deed of trust and/or security agreements securing, guaranteeing or otherwise related thereto, (c) all rights to payment thereunder, (d) all rights in the real property, improvements and other tangible and intangible property and rights securing payment of the indebtedness of the obligor thereon, or that are the subject of such Mortgage Loan, (e) all rights under documents related thereto, such as guaranties and insurance policies (issued by governmental agencies or otherwise), including, without limitation, mortgage and title insurance policies, binders and commitments, fire and extended coverage insurance policies (including the right to any return premiums) and, if applicable, flood and earthquake insurance policies, participation certificates or agreements, FHA insurance and VA guaranties, and (f) all rights in cash deposits consisting of impounds, insurance premiums or other funds held on account thereof.

 

“Pledged Mortgage Loan” shall mean any Mortgage Loan (a) which is from time to time delivered or caused to be delivered to Bank (including delivery to a third party on behalf of Bank), or comes into the possession, custody or control of Bank, or is identified to Bank as collateral by any other means or method, whether or not Bank has possession of the related promissory note, for the purpose of assignment or pledge in connection with the making of any advance of the Indebtedness or otherwise, or (b) with respect to which Bank has made an advance of the Indebtedness, or (c) with respect to which Debtor has requested an advance of the Indebtedness, or (d) which is now or at any time pledged, hypothecated, assigned, transferred, or conveyed, or a security interest therein granted, to Bank.

 

“VA” shall mean the Veterans Administration and any successor thereto.

 

2.            Warranties, Covenants and Agreements. Debtor warrants, covenants and agrees as follows:

 

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2.1          Debtor shall furnish to Bank, in form and at intervals as Bank may request, any information Bank may reasonably request and allow Bank to examine, inspect, and copy any of Debtor’s books and records.  Debtor shall, at the request of Bank, mark its records and the Collateral to clearly indicate the security interest of Bank under this Agreement.

 

2.2          At the time any Collateral becomes, or is represented to be, subject to a security interest in favor of Bank, Debtor shall be deemed to have warranted that (a) Debtor is the lawful owner of the Collateral and has the right and authority to subject it to a security interest granted to Bank; (b) none of the Collateral is subject to any security interest other than that in favor of Bank; (c) there are no financing statements on file with respect to any of the Collateral, other than in favor of Bank; (d) no person, other than Bank, has possession or control (as defined in the Uniform Commercial Code) of any Collateral of such nature that perfection of a security interest may be accomplished by control; and (e) Debtor acquired its rights in the Collateral in the ordinary course of its business.

 

2.3          Debtor will keep the Collateral free at all times from all claims, liens, security interests and encumbrances other than those in favor of Bank. Debtor will not, without the prior written consent of Bank, sell, transfer or lease, or permit to be sold, transferred or leased, any or all of the Collateral. Bank or its representatives may at all reasonable times inspect the Collateral and may enter upon all premises where the Collateral is kept or might be located.

 

2.4          Debtor will do all acts and will execute or cause to be executed all writings requested by Bank to establish, maintain and continue an exclusive, perfected and first security interest of Bank in the Collateral.  Debtor agrees that Bank has no obligation to acquire or perfect any lien on or security interest in any asset(s), whether realty or personalty, to secure payment of the Indebtedness, and Debtor is not relying upon assets in which the Bank may have a lien or security interest for payment of the Indebtedness.

 

2.5          Debtor will pay within the time that they can be paid without interest or penalty all taxes, assessments and similar charges which at any time are or may become a lien, charge, or encumbrance upon any Collateral, except to the extent contested in good faith and bonded in a manner satisfactory to Bank. If Debtor fails to pay any of these taxes, assessments, or other charges in the time provided above, Bank has the option (but not the obligation) to do so and Debtor agrees to repay all amounts so expended by Bank immediately upon demand, together with interest at the highest lawful default rate which could be charged by Bank on any Indebtedness.

 

2.6          Debtor will keep the Collateral in good condition and will protect it from loss, damage, or deterioration from any cause. Debtor has and will maintain at all times (a) with respect to the Collateral, insurance under an “all risk” policy against fire and other risks customarily insured against, and (b) public liability insurance and other insurance as may be required by law or reasonably required by Bank, all of which insurance shall be in amount, form and content, and written by companies as may be satisfactory to Bank, containing a lender’s loss payable endorsement acceptable to Bank. Debtor will deliver to Bank immediately upon demand evidence satisfactory to Bank that the required insurance has been procured. If Debtor fails to maintain satisfactory insurance, Bank has the option (but not the obligation) to do so and Debtor agrees to repay all amounts so expended by Bank immediately upon demand, together with interest at the highest lawful default rate which could be charged by Bank on any Indebtedness.

 

2.7          On each occasion on which Debtor evidences to Bank the account balances on and the nature and extent of the Accounts Receivable, Debtor shall be deemed to have warranted that except as otherwise indicated (a) each of those Accounts Receivable is valid and enforceable without performance by Debtor of any act; (b) each of those account balances are in fact owing, (c) there are no setoffs, recoupments, credits, contra accounts, counterclaims or defenses against any of those Accounts Receivable, (d) as to any Accounts Receivable represented by a note, trade acceptance, draft or other instrument or by any chattel paper or document, the same have been endorsed and/or delivered by Debtor to Bank, (e) Debtor has not received with respect to any Account Receivable, any notice of the death of the related account debtor, nor of the dissolution, liquidation, termination of existence, insolvency, business failure, appointment of a receiver for, assignment for the benefit of creditors by, or filing of a petition in bankruptcy by or against, the account debtor, and (f) as to each Account Receivable, except as may be expressly permitted by Bank to the contrary in another document,  the account debtor is not an affiliate of Debtor, the United States of America or any department, agency or instrumentality of it, or a citizen or

 

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resident of any jurisdiction outside of the United States.  Debtor will do all acts and will execute all writings requested by Bank to perform, enforce performance of, and collect all Accounts Receivable.  Debtor shall neither make nor permit any modification, compromise or substitution for any Account Receivable without the prior written consent of Bank.  Bank may at any time and from time to time verify Accounts Receivable directly with account debtors or by other methods acceptable to Bank without notifying Debtor. Debtor agrees, at Bank’s request, to arrange or cooperate with Bank in arranging for verification of Accounts Receivable.

 

2.8          Debtor at all times shall be in strict compliance with all applicable laws, including without limit any laws, ordinances, directives, orders, statutes, or regulations an object of which is to regulate or improve health, safety, or the environment (“Environmental Laws”).

 

2.9          If Bank, acting in its sole discretion, redelivers Collateral to Debtor or Debtor’s designee for the purpose of (a) the ultimate sale or exchange thereof; or (b) presentation, collection, renewal, or registration of transfer thereof; or (c) loading, unloading, storing, shipping, transshipping, manufacturing, processing or otherwise dealing with it preliminary to sale or exchange; such redelivery shall be in trust for the benefit of Bank and shall not constitute a release of Bank’s security interest in it or in the proceeds or products of it unless Bank specifically so agrees in writing. If Debtor requests any such redelivery, Debtor will deliver with such request a duly executed financing statement in form and substance satisfactory to Bank. Any proceeds of Collateral coming into Debtor’s possession as a result of any such redelivery shall be held in trust for Bank and immediately delivered to Bank for application on the Indebtedness. Bank may (in its sole discretion) deliver any or all of the Collateral to Debtor, and such delivery by Bank shall discharge Bank from all liability or responsibility for such Collateral.  Bank, at its option, may require delivery of any Collateral to Bank at any time with such endorsements or assignments of the Collateral as Bank may request.

 

2.10        At any time and without notice, Bank may, as to Collateral; (a) cause any or all of such Collateral to be transferred to its name or to the name of its nominees; (b) receive or collect by legal proceedings or otherwise all dividends, interest, principal payments and other sums and all other distributions at any time payable or receivable on account of such Collateral, and hold the same as Collateral, or apply the same to the Indebtedness, the manner and distribution of the application to be in the sole discretion of Bank; (c) enter into any extension, subordination, reorganization, deposit, merger or consolidation agreement or any other agreement relating to or affecting such Collateral, and deposit or surrender control of such Collateral, and accept other property in exchange for such Collateral and hold or apply the property or money so received pursuant to this Agreement; and (d) take such actions in its own name or in Debtor’s name as Bank, in its sole discretion, deems necessary or appropriate to establish exclusive control (as defined in the Uniform Commercial Code) over any Collateral of such nature that perfection of the Bank’s security interest may be accomplished by control.

 

2.11        Bank may assign any of the Indebtedness and deliver any or all of the Collateral to its assignee, who then shall have with respect to Collateral so delivered all the rights and powers of Bank under this Agreement, and after that Bank shall be fully discharged from all liability and responsibility with respect to Collateral so delivered.

 

2.12        Debtor delivers this Agreement based solely on Debtor’s independent investigation of (or decision not to investigate) the financial condition of Borrower and is not relying on any information furnished by Bank. Debtor assumes full responsibility for obtaining any further information concerning the Borrower’s financial condition, the status of the Indebtedness or any other matter which the undersigned may deem necessary or appropriate now or later. Debtor waives any duty on the part of Bank, and agrees that Debtor is not relying upon nor expecting Bank to disclose to Debtor any fact now or later known by Bank, whether relating to the operations or condition of Borrower, the existence, liabilities or financial condition of any guarantor of the Indebtedness, the occurrence of any default with respect to the Indebtedness, or otherwise, notwithstanding any effect such fact may have upon Debtor’s risk or Debtor’s rights against Borrower.  Debtor knowingly accepts the full range of risk encompassed in this Agreement, which risk includes without limit the possibility that Borrower may incur Indebtedness to Bank after the financial condition of Borrower, or Borrower’s ability to pay debts as they mature, has deteriorated.

 

2.13        Debtor shall defend, indemnify and hold harmless Bank, its employees, agents, shareholders, affiliates, officers, and directors from and against any and all claims, damages, fines, expenses, liabilities or causes

 

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of action of whatever kind, including without limit consultant fees, legal expenses, and attorneys fees, suffered by any of them as a direct or indirect result of any actual or asserted violation of any law, arising from or related to any Collateral or Indebtedness, including, without limit, Environmental Laws, or of any remediation relating to any property required by any law, including without limit Environmental Laws, INCLUDING ANY CLAIMS, DAMAGES, FINES, EXPENSES, LIABILITIES OR CAUSES OF ACTION OF WHATEVER KIND RESULTING FROM BANK’S OWN NEGLIGENCE, except and to the extent (but only to the extent) caused by Bank’s gross negligence or willful misconduct.

 

3.            Collection of Proceeds.

 

3.1          So long as no Event of Default or condition or event which, with the giving of notice or passage of time, or both, would constitute an Event of Default (a “Default”), exists and thereafter until Bank shall direct Debtor to the contrary by notice to Debtor (an “Enforcement Notice”), Debtor shall collect and enforce payment of all Collateral, including servicing and receiving and collecting directly all sums payable in respect of the Collateral, except that regardless of whether any Event of Default or Default exists, the proceeds of any sale or other disposition of the Collateral (“Mortgage Loan Sale Proceeds”), including without limitation, the proceeds of any “Take-Out Commitment” as defined in the Loan Agreement, as later defined (“Take-Out Commitment”), shall be paid directly to the Cash Collateral Account (as later defined) if made by electronic funds transfer, or, if not made by electronic funds transfer, to the Lock Box or as Bank shall otherwise direct, for application as provided in this Agreement. Debtor agrees to fully and promptly cooperate and assist Bank in the collection and enforcement of all Mortgage Loan Sale Proceeds and to hold in trust for Bank all payments of Mortgage Loan Sale Proceeds received in connection with Collateral. Debtor agrees to endorse to Bank and immediately deliver to Bank all payments of Mortgage Loan Sale Proceeds, in the form received by Debtor without commingling with any other funds.  Debtor irrevocably authorizes Bank or any Bank employee or agent to endorse the name of Debtor upon any checks or other items which are received consisting in whole or in part of Mortgage Loan Sale Proceeds, and to do any and all things necessary in order to reduce these items to money.  Bank shall have no duty as to the collection or protection of Mortgage Loan Sale Proceeds, nor as to the preservation of any related rights, beyond the use of reasonable care in the custody and preservation of Mortgage Loan Sale Proceeds in the possession of Bank. Debtor agrees to take all steps necessary to preserve rights against prior parties with respect to the Mortgage Loan Sale Proceeds.  Nothing in this Section 3.1 shall be deemed a consent by Bank to any sale, lease or other disposition of any Collateral.

 

3.2          Immediately upon and at all times after an Enforcement Notice is given, Debtor agrees to fully and promptly cooperate and assist Bank in the collection and enforcement of all Collateral (including, without limitation, Mortgage Loan Sale Proceeds) and to hold in trust for Bank all payments received in connection with Collateral and from the sale, lease or other disposition of any Collateral, all rights by way of suretyship or guaranty and all rights in the nature of a lien or security interest which Debtor now or later has regarding Collateral. Immediately upon and after such notice, Debtor agrees to (a) endorse to Bank and immediately deliver to Bank all payments received on Collateral or from the sale, lease or other disposition of any Collateral or arising from any other rights or interests of Debtor in the Collateral, in the form received by Debtor without commingling with any other funds, and (b) immediately deliver to Bank all property in Debtor’s possession or later coming into Debtor’s possession through enforcement of Debtor’s rights or interests in the Collateral. Debtor irrevocably authorizes Bank or any Bank employee or agent, immediately upon and after such Enforcement Notice, to endorse the name of Debtor upon any checks or other items which are received in payment for any Collateral, and to do any and all things necessary in order to reduce these items to money. Bank shall have no duty as to the collection or protection of Collateral or the proceeds of it, nor as to the preservation of any related rights, beyond the use of reasonable care in the custody and preservation of Collateral in the possession of Bank. Debtor agrees to take all steps necessary to preserve rights against prior parties with respect to the Collateral.  Nothing in this Section 3.2 shall be deemed a consent by Bank to any sale, lease or other disposition of any Collateral.

 

3.3          Debtor agrees that the Indebtedness shall be on a “remittance basis” on the terms and subject to the conditions of this Agreement.  Debtor shall at its sole expense establish and maintain (and Bank, at Bank’s option may establish and maintain at Debtor’s expense), a non-interest bearing deposit account with Bank which shall be titled as designated by Bank (the “Cash Collateral Account”) to which Bank shall have exclusive access and control. If any purchasers of Pledged Mortgage Loans will remit payments of Mortgage Loan Sale Proceeds in a manner other than by electronic funds transfer, then Debtor shall at its

 

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expense also establish and maintain (and Bank, as Bank’s option may establish and maintain at Debtor’s expense), a United States Post Office lock box (the “Lock Box”), to which Bank shall have exclusive access and control. Debtor expressly authorizes Bank, from time to time, to remove contents from the Lock Box, for disposition in accordance with this Agreement.

 

Debtor shall execute all documents and authorizations as required by Bank to establish and maintain the Cash Collateral Account and, if applicable, the Lock Box.

 

Prior to the occurrence of an Event of Default or Default, and thereafter until Bank shall give Debtor an Enforcement Notice, (i) Debtor agrees to notify all purchasers of Pledged Mortgage Loans that all payments made to Debtor of Mortgage Loan Sale Proceeds (other than payments by electronic funds transfer) shall be remitted, for the credit of Debtor, to the Lock Box; and (ii) Debtor agrees to notify all purchasers of Pledged Mortgage Loans that all payments made to Debtor of Mortgage Loan Sale Proceeds by electronic funds transfer shall be remitted to the Cash Collateral Account.

 

Immediately upon and at all times after an Enforcement Notice is given, (i) Debtor agrees to notify all account debtors and other parties obligated to Debtor, including without limitation, purchasers of Pledged Mortgage Loans, that all payments made to Debtor on account of the Collateral, including without limitation, Mortgage Loan Sale Proceeds (other than payments by electronic funds transfer), shall be remitted, for the credit of Debtor, to the Lock Box, and Debtor shall include a like statement on all invoices sent by Debtor to account debtors and other parties obligated to Debtor, including without limitation, purchasers of Pledged Mortgage Loans; and (ii) Debtor agrees to notify all account debtors and other parties obligated to Debtor, including without limitation, purchasers of Pledged Mortgage Loans, that all payments made to Debtor on account of the Collateral, including without limitation, Mortgage Loan Sale Proceeds, by electronic funds transfer shall be remitted to the Cash Collateral Account, and Debtor, at Bank’s request, shall include a like statement on all invoices sent by Debtor to account debtors and other parties obligated to Debtor, including without limitation, purchasers of Pledged Mortgage Loans.

 

3.4          Prior to the occurrence of an Event of Default or Default, all items or amounts which are remitted to the Lock Box, to the Cash Collateral Account, or otherwise delivered by or for the benefit of Debtor to Bank on account of partial or full payment of, or with respect to, any Mortgage Loan Sale Proceeds shall be applied to the payment of all advances made by Bank to Debtor with respect to the Pledged Mortgage Loans that pertain thereto, whether or not such advances are then due, and without taking into account any repayments of such advances, and any surplus shall be deposited in the Debtor’s operating account with Bank. After the occurrence of an Event of Default or Default, all items or amounts which are remitted to the Lock Box, to the Cash Collateral Account, or otherwise delivered by or for the benefit of Debtor to Bank on account of partial or full payment of, or with respect to, any Collateral (including, without limitation, any Mortgage Loan Sale Proceeds) shall, at Bank’s option, (i) be applied to the payment of the Indebtedness, whether then due or not, in such order or at such time of application as Bank may determine in its sole discretion, or, (ii) be deposited to the Cash Collateral Account.  Debtor agrees that Bank shall not be liable for any loss or damage which Debtor may suffer as a result of Bank’s processing of items or its exercise of any other rights or remedies under this Agreement, including without limitation indirect, special or consequential damages, loss of revenues or profits, or any claim, demand or action by any third party arising out of or in connection with the processing of items or the exercise of any other rights or remedies under this Agreement. Debtor agrees to indemnify and hold Bank harmless from and against all such third party claims, demands or actions, and all related expenses or liabilities, including, without limitation, attorneys fees and INCLUDING ANY CLAIMS, DAMAGES, FINES, EXPENSES, LIABILITIES OR CAUSES OF ACTION OF WHATEVER KIND RESULTING FROM BANK’S OWN NEGLIGENCE, except and to the extent (but only to the extent) caused by Bank’s gross negligence or willful misconduct.

 

3.5          Provided no Event of Default or Default exists or would result therefrom, Bank agrees from time to time at the request of Debtor to deliver Pledged Mortgage Loans to investors approved by Bank for sale under bailee letters in form and substance satisfactory to Bank. Without limiting the foregoing, a bailee letter shall provide for the release of Bank’s security interest in and lien on the applicable Pledged Mortgage Loan in exchange for receipt by the Bank in immediately available funds of (a) if a Take-Out Commitment for such Pledged Mortgage Loan exists, a principal prepayment of the Indebtedness in the amount of the greater of (i) the purchase price for such Pledged Mortgage Loan pursuant to the applicable Take-Out Commitment for such Pledged Mortgage Loan, or (ii) the amount of all Indebtedness advanced by the Bank with respect to such Pledged Mortgage Loan, whether or not such advances are then due, and

 

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without taking into account any repayments of such advances, or (b) if no such Take-Out Commitment exists, a principal prepayment of the Indebtedness in the amount of all Indebtedness advanced by the Bank with respect to such Pledged Mortgage Loan, whether or not such advances are then due, and without taking into account any repayments of such advances. The proceeds from the sale of any Pledged Mortgage Loan under this Section 3.5 shall be paid and applied as provided in Sections 3.1-3.4 hereof.

 

4.            Defaults, Enforcement and Application of Proceeds.

 

4.1          Upon the occurrence of any of the following events (each an “Event of Default”), Debtor shall be in default under this Agreement:

 

(a)           Any failure to pay the Indebtedness or any other indebtedness when due, or such portion of it as may be due, by acceleration or otherwise; or

 

(b)           Any failure or neglect to comply with, or breach of or default under, any term of this Agreement, or any other agreement or commitment between Borrower, Debtor, or any guarantor of any of the Indebtedness (“Guarantor”) and Bank; or

 

(c)           Any warranty, representation, financial statement, or other information made, given or furnished to Bank by or on behalf of Borrower, Debtor, or any Guarantor shall be, or shall prove to have been, false or materially misleading when made, given, or furnished; or

 

(d)           Any loss, theft, substantial damage or destruction to or of any Collateral, or the issuance or filing of any attachment, levy, garnishment or the commencement of any proceeding in connection with any Collateral or of any other judicial process of, upon or in respect of Borrower, Debtor, any Guarantor, or any Collateral; or

 

(e)           Sale or other disposition by Borrower, Debtor, or any Guarantor of any substantial portion of its assets or property or voluntary suspension of the transaction of business by Borrower, Debtor, or any Guarantor, or death, dissolution, termination of existence, merger, consolidation, insolvency, business failure, or assignment for the benefit of creditors of or by Borrower, Debtor, or any Guarantor; or commencement of any proceedings under any state or federal bankruptcy or insolvency laws or laws for the relief of debtors by or against Borrower, Debtor, or any Guarantor; or the appointment of a receiver, trustee, court appointee, sequestrator or otherwise, for all or any part of the property of Borrower, Debtor, or any Guarantor; or

 

(f)            Bank deems the margin of Collateral insufficient or itself insecure, in good faith believing that the prospect of payment of the Indebtedness or performance of this Agreement is impaired or shall fear deterioration, removal, or waste of Collateral; or

 

(g)           An event of default shall occur under any instrument, agreement or other document evidencing, securing or otherwise relating to any of the Indebtedness; or

 

(h)           An “Event of Default” as defined in the Loan Agreement.

 

4.2          Upon the occurrence of any Event of Default, Bank may at its discretion and without prior notice to Debtor declare any or all of the Indebtedness to be immediately due and payable, and shall have and may exercise any right or remedy available to it including, without limitation, any one or more of the following rights and remedies:

 

(a)          Exercise all the rights and remedies upon default, in foreclosure and otherwise, available to secured parties under the provisions of the Uniform Commercial Code and other applicable law;

 

(b)          Institute legal proceedings to foreclose upon the lien and security interest granted by this Agreement, to recover judgment for all amounts then due and owing as Indebtedness, and to collect the same out of any Collateral or the proceeds of any sale of it;

 

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(c)                               Institute legal proceedings for the sale, under the judgment or decree of any court of competent jurisdiction, of any or all Collateral; and/or

 

(d)                                Personally or by agents, attorneys, or appointment of a receiver, enter upon any premises where Collateral may then be located, and take possession of all or any of it and/or render it unusable; and without being responsible for loss or damage to such Collateral, hold, operate, sell, lease, or dispose of all or any Collateral at one or more public or private sales, leasings or other dispositions, at places and times and on terms and conditions as Bank may deem fit, without any previous demand or advertisement; and except as provided in this Agreement, all notice of sale, lease or other disposition, and advertisement, and other notice or demand, any right or equity of redemption, and any obligation of a prospective purchaser or lessee to inquire as to the power and authority of Bank to sell, lease, or otherwise dispose of the Collateral or as to the application by Bank of the proceeds of sale or otherwise, which would otherwise be required by, or available to Debtor under, applicable law are expressly waived by Debtor to the fullest extent permitted.

 

At any sale pursuant to this Section 4.2, whether under the power of sale, by virtue of judicial proceedings or otherwise, it shall not be necessary for Bank or a public officer under order of a court to have present physical or constructive possession of Collateral to be sold. The recitals contained in any conveyances and receipts made and given by Bank or the public officer to any purchaser at any sale made pursuant to this Agreement shall, to the extent permitted by applicable law, conclusively establish the truth and accuracy of the matters stated (including, without limit, as to the amounts of the principal of and interest on the Indebtedness, the accrual and nonpayment of it and advertisement and conduct of the sale); and all prerequisites to the sale shall be presumed to have been satisfied and performed. Upon any sale of any Collateral, the receipt of the officer making the sale under judicial proceedings or of Bank shall be sufficient discharge to the purchaser for the purchase money, and the purchaser shall not be obligated to see to the application of the money. Any sale of any Collateral under this Agreement shall be a perpetual bar against Debtor with respect to that Collateral.  At any sale or other disposition of the Collateral pursuant to this Section 4.2, Bank disclaims all warranties which would otherwise be given under the Uniform Commercial Code, including without limit a disclaimer of any warranty relating to title, possession, quiet enjoyment or the like, and Bank may communicate these disclaimers to a purchaser at such disposition.  This disclaimer of warranties will not render the sale commercially unreasonable.

 

4.3                            Debtor shall at the request of Bank, notify the account debtors or obligors of Bank’s security interest in the Collateral and direct payment of it to Bank. Bank may, itself, upon the occurrence of any Event of Default so notify and direct any account debtor or obligor.  At the request of Bank, whether or not an Event of Default shall have occurred, Debtor shall immediately take such actions as the Bank shall request to establish exclusive control (as defined in the Uniform Commercial Code) by Bank over any Collateral which is of such a nature that perfection of a security interest may be accomplished by control.

 

4.4                              The proceeds of any sale or other disposition of Collateral authorized by this Agreement shall be applied by Bank first upon all expenses authorized by the Uniform Commercial Code and all reasonable attorneys fees and legal expenses incurred by Bank; the balance of the proceeds of the sale or other disposition shall be applied in the payment of the Indebtedness, first to interest, then to principal, then to remaining Indebtedness and the surplus, if any, shall be paid over to Debtor or to such other person(s) as may be entitled to it under applicable law. Debtor shall remain liable for any deficiency, which it shall pay to Bank immediately upon demand.  Debtor agrees that Bank shall be under no obligation to accept any noncash proceeds in connection with any sale or disposition of Collateral unless failure to do so would be commercially unreasonable.  If Bank agrees in its sole discretion to accept noncash proceeds (unless the failure to do so would be commercially unreasonable), Bank may ascribe any commercially reasonable value to such proceeds.  Without limiting the foregoing, Bank may apply any discount factor in determining the present value of proceeds to be received in the future or may elect to apply proceeds to be received in the future only as and when such proceeds are actually received in cash by Bank.

 

4.5                              Nothing in this Agreement is intended, nor shall it be construed, to preclude Bank from pursuing any other remedy provided by law or in equity for the collection of the Indebtedness or for the recovery of any other sum to which Bank may be entitled for the breach of this Agreement by Debtor. Nothing in this Agreement

 

8

 

shall reduce or release in any way any rights or security interests of Bank contained in any existing agreement between Borrower, Debtor, or any Guarantor and Bank.

 

4.6                              No waiver of default or consent to any act by Debtor shall be effective unless in writing and signed by an authorized officer of Bank. No waiver of any default or forbearance on the part of Bank in enforcing any of its rights under this Agreement shall operate as a waiver of any other default or of the same default on a future occasion or of any rights.

 

4.7                            Debtor (a) irrevocably appoints Bank or any agent of Bank (which appointment is coupled with an interest) the true and lawful attorney of Debtor (with full power of substitution) to act in the name, place and stead of, and at the expense of, Debtor and (b) authorizes Bank or any agent of Bank, in its own name, at Debtor’s expense, to do any of the following, as Bank, in its sole discretion, deems appropriate:

 

(i)                                     to demand, receive, sue for, and give receipts or acquittances for any moneys due or to become due on any Collateral and to endorse any item representing any payment on or proceeds of the Collateral;

 

(ii)                                  to execute and file in the name of and on behalf of Debtor all financing statements or other filings deemed necessary or desirable by Bank to evidence, perfect, or continue the security interests granted in this Agreement; and

 

(iii)                               to do and perform any act on behalf of Debtor permitted or required under this Agreement.

 

4.8                              Upon the occurrence of an Event of Default, Debtor also agrees, upon request of Bank, to assemble the Collateral and make it available to Bank at any place designated by Bank which is reasonably convenient to Bank and Debtor.

 

4.9                             The following shall be the basis for any finder of fact’s determination of the value of any Collateral which is the subject matter of a disposition giving rise to a calculation of any surplus or deficiency under Section 9-615 (f) of the Uniform Commercial Code (as in effect on or after July 1, 2001):  (a) the Collateral which is the subject matter of the disposition  shall be valued in an “as is” condition as of the date of the disposition, without any assumption or expectation that such Collateral will be repaired or improved in any manner; (b) the valuation shall be based upon an assumption that the transferee of such Collateral desires a resale of the Collateral for cash promptly (but no later than 30 days) following the disposition; (c) all reasonable closing costs customarily borne by the seller in commercial sales transactions relating to property similar to such Collateral shall be deducted including, without limitation, brokerage commissions, tax prorations, attorneys’ fees, whether inside or outside counsel is used, and marketing costs; (d) the value of the Collateral which is the subject matter of the disposition shall be further discounted to account for any estimated holding costs associated with maintaining such Collateral pending sale (to the extent not accounted for in (c) above), and other maintenance, operational and ownership expenses; and (e) any expert opinion testimony given or considered in connection with a determination of the value of such Collateral must be given by persons having at least 5 years experience in appraising property similar to the Collateral and who have conducted and prepared a complete written appraisal of such Collateral taking into consideration the factors set forth above.  The “value” of any such Collateral shall be a factor in determining the amount of proceeds which would have been realized in a disposition to a transferee other than a secured party, a person related to a secured party or a secondary obligor under Section 9-615(f) of the Uniform Commercial Code.

 

5.                                     Miscellaneous.

 

5.1                            Until Bank is advised in writing by Debtor to the contrary, all notices, requests and demands required under this Agreement or by law shall be given to, or made upon, Debtor at the following address:

 

	
8660   E. Hartford Drive, Suite 200A
    	
 
    	
 
    	
 
    	
 
    
	
STREET   ADDRESS
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Scottsdale
    	
Arizona
    	
85255
    	
 
    	
 
    
	
CITY
    	
STATE
    	
ZIP   CODE
    	
COUNTY
    

 

9

 

5.2                            Debtor will give Bank not less than 90 days prior written notice of all contemplated changes in Debtor’s name, location, chief executive office, principal place of business, and/or location of any Collateral, but the giving of this notice shall not cure any Event of Default caused by this change.

 

5.3                              Bank assumes no duty of performance or other responsibility under any contracts contained within the Collateral.

 

5.4                              Bank has the right to sell, assign, transfer, negotiate or grant participations or any interest in, any or all of the Indebtedness and any related obligations, including without limit this Agreement. In connection with the above, but without limiting its ability to make other disclosures to the full extent allowable, Bank may disclose all documents and information which Bank now or later has relating to Debtor, the Indebtedness or this Agreement, however obtained. Debtor further agrees that Bank may provide information relating to this Agreement or relating to Debtor or the Indebtedness to the Bank’s parent, affiliates, subsidiaries, and service providers.

 

5.5                              In addition to Bank’s other rights, any indebtedness owing from Bank to Debtor can be set off and applied by Bank on any Indebtedness at any time(s) either before or after maturity or demand without notice to anyone.  Any such action shall not constitute acceptance of collateral in discharge of any portion of the Indebtedness.

 

5.6                              Debtor, to the extent not expressly prohibited by applicable law, waives any right to require the Bank to: (a) proceed against any person or property; (b) give notice of the terms, time and place of any public or private sale of personal property security held from Borrower or Debtor or any other person, or otherwise comply with the provisions of Section 9-504 of the Uniform Commercial Code in effect prior to July 1, 2001 or its successor provisions thereafter; or (c) pursue any other remedy in the Bank’s power.  Debtor waives notice of acceptance of this Agreement and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment of any Indebtedness, any and all other notices to which the undersigned might otherwise be entitled, and diligence in collecting any Indebtedness, and agree(s) that the Bank may, once or any number of times, modify the terms of any Indebtedness, compromise, extend, increase, accelerate, renew or forbear to enforce payment of any or all Indebtedness, or permit Borrower to incur additional Indebtedness, all without notice to Debtor and without affecting in any manner the unconditional obligation of Debtor under this Agreement.  Debtor unconditionally and irrevocably waives each and every defense and setoff of any nature which, under principles of guaranty or otherwise, would operate to impair or diminish in any way the obligation of Debtor under this Agreement, and acknowledges that such waiver is by this reference incorporated into each security agreement, collateral assignment, pledge and/or other document from Debtor now or later securing the Indebtedness, and acknowledges that as of the date of this Agreement no such defense or setoff exists.

 

5.7                            Debtor waives any and all rights (whether by subrogation, indemnity, reimbursement, or otherwise) to recover from Borrower any amounts paid or the value of any Collateral given by Debtor pursuant to this Agreement until such times as all of the Indebtedness has been fully paid.

 

5.8                              In the event that applicable law shall obligate Bank to give prior notice to Debtor of any action to be taken under this Agreement, Debtor agrees that a written notice given to Debtor at least ten days before the date of the act shall be reasonable notice of the act and, specifically, reasonable notification of the time and place of any public sale or of the time after which any private sale, lease, or other disposition is to be made, unless a shorter notice period is reasonable under the circumstances. A notice shall be deemed to be given under this Agreement when delivered to Debtor or when placed in an envelope addressed to Debtor and deposited, with postage prepaid, in a post office or official depository under the exclusive care and custody of the United States Postal Service or delivered to an overnight courier. The mailing shall be by overnight courier, certified, or first class mail.

 

5.9                              Notwithstanding any prior revocation, termination, surrender, or discharge of this Agreement in whole or in part, the effectiveness of this Agreement shall automatically continue or be reinstated in the event that any payment received or credit given by Bank in respect of the Indebtedness is returned, disgorged, or rescinded under any applicable law, including, without limitation, bankruptcy or insolvency laws, in which case this Agreement, shall be enforceable against Debtor as if the returned, disgorged, or rescinded payment or credit had not been received or given by Bank, and whether or not Bank relied upon this

 

10

 

payment or credit or changed its position as a consequence of it.  In the event of continuation or reinstatement of this Agreement, Debtor agrees upon demand by Bank to execute and deliver to Bank those documents which Bank determines are appropriate to further evidence (in the public records or otherwise) this continuation or reinstatement, although the failure of Debtor to do so shall not affect in any way the reinstatement or continuation.

 

5.10                       This Agreement and all the rights and remedies of Bank under this Agreement shall inure to the benefit of Bank’s successors and assigns and to any other holder who derives from Bank title to or an interest in the Indebtedness or any portion of it, and shall bind Debtor and the heirs, legal representatives, successors, and assigns of Debtor.  Nothing in this Section 5.10 is deemed a consent by Bank to any assignment by Debtor.

 

5.11                     If there is more than one Debtor, all undertakings, warranties and covenants made by Debtor and all rights, powers and authorities given to or conferred upon Bank are made or given jointly and severally.

 

5.12                       Except as otherwise provided in this Agreement, all terms in this Agreement have the meanings assigned to them in Article 9 (or, absent definition in Article 9, in any other Article) of the Uniform Commercial Code, as those meanings may be amended, revised or replaced from time to time.  “Uniform Commercial Code” means Act No. 174 of the Michigan Public Acts of 1962, as amended, revised or replaced from time to time, including without limit as amended by Act No. 348 of the Michigan Public Acts of 2000.  Notwithstanding the foregoing, the parties intend that the terms used herein which are defined in the Uniform Commercial Code have, at all times, the broadest and most inclusive meanings possible.  Accordingly, if the Uniform Commercial Code shall in the future be amended or held by a court to define any term used herein more broadly or inclusively than the Uniform Commercial Code in effect on the date of this Agreement, then such term, as used herein, shall be given such broadened meaning.  If the Uniform Commercial Code shall in the future be amended or held by a court to define any term used herein more narrowly, or less inclusively, than the Uniform Commercial Code in effect on the date of this Agreement, such amendment or holding shall be disregarded in defining terms used in this Agreement.

 

5.13                       No single or partial exercise, or delay in the exercise, of any right or power under this Agreement, shall preclude other or further exercise of the rights and powers under this Agreement.  The unenforceability of any provision of this Agreement shall not affect the enforceability of the remainder of this Agreement.  This Agreement constitutes the entire agreement of Debtor and Bank with respect to the subject matter of this Agreement.  No amendment or modification of this Agreement shall be effective unless the same shall be in writing and signed by Debtor and an authorized officer of Bank.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

 

5.14                       To the extent that any of the Indebtedness is payable upon demand, nothing contained in this Agreement shall modify the terms and conditions of that Indebtedness nor shall anything contained in this Agreement prevent Bank from making demand, without notice and with or without reason, for immediate payment of any or all of that Indebtedness at any time(s), whether or not an Event of Default has occurred.

 

5.15                       Debtor represents and warrants that Debtor’s exact name is the name set forth in this Agreement.  Debtor further represents and warrants the following and agrees that Debtor is, and at all times shall be, located in the following place:

 

o                                    Debtor is an individual, and Debtor is located (as determined pursuant to the Uniform Commercial Code) at Debtor’s principal residence which is (street address, state and county or parish):                                                                                                             .

 

x                               Debtor is a registered organization which is organized under the laws of one of the states comprising the United States (e.g. corporation, limited partnership, registered limited liability partnership or limited liability company), and Debtor is located (as determined pursuant to the Uniform Commercial Code)  in the state under the laws of which it was organized, which is state:  California.

 

o                                  Debtor is a domestic organization which is not a registered organization under the laws of the United States or any state thereof (e.g. general partnership, joint venture, trust, estate or

 

11

 

association), and Debtor is located (as determined pursuant to the Uniform Commercial Code) at its sole place of business or, if it has more than one place of business, at its chief executive office, which is (street address, state and county or parish):                                                        .

 

o                                    Debtor is a registered organization organized under the laws of the United States, and Debtor is located in the state that United States law designates as its location or, if United States law authorizes the Debtor to designate the state for its location, the state designated by Debtor, or if neither of the foregoing are applicable, at the District of Columbia.  Based on the foregoing, Debtor is located (as determined pursuant to the Uniform Commercial Code) at (state):                                                                                          .

 

o                                    Debtor is a foreign individual or foreign organization or a branch or agency of a bank that is not organized under the laws of the United States or a state thereof.  Debtor is located (as determined pursuant to the Uniform Commercial Code) at (street address, state and county or parish):                                               .

 

The Collateral is located at and shall be maintained at the following location(s):

 

	
8660   E. Hartford Drive, Suite 200A
    	
 
    	
 
    	
 
    
	
STREET   ADDRESS
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Scottsdale
    	
Arizona
    	
85255
    	
 
    
	
CITY
    	
STATE
    	
ZIP   CODE
    	
COUNTY
    

 

Collateral shall be maintained only at the locations identified in this Section 5.15.

 

5.16                    A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement under the Uniform Commercial Code and may be filed by Bank in any filing office.

 

5.17                    This Agreement shall be terminated only by the filing of a termination statement in accordance with the applicable provisions of the Uniform Commercial Code, but the obligations contained in Section 2.13 of this Agreement shall survive termination.

 

5.18                    Debtor agrees to reimburse the Bank upon demand for any and all costs and expenses (including, without limit, court costs, legal expenses and reasonable attorneys fees, whether inside or outside counsel is used, whether or not suit is instituted and, if suit is instituted, whether at the trial court level, appellate level, in a bankruptcy, probate or administrative proceeding or otherwise) incurred in enforcing or attempting to enforce this Agreement or in exercising or attempting to exercise any right or remedy under this Agreement or incurred in any other matter or proceeding relating to this Security Agreement.

 

6.                                     DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.

 

[remainder of page intentionally left blank]

 

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7.                                     Special Provisions Applicable to this Agreement.

 

This Agreement is made in connection with the letter/loan agreement between Debtor and Bank dated of even date herewith, as it may be amended from time to time (the “Loan Agreement”).

 

	
 
    	
Debtor:
    
	
 
    	
 
    
	
 
    	
RMC MORTGAGE CORPORATION, a California corporation
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Kimberly G. Nelson
    
	
 
    	
 
    	
SIGNATURE   OF
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Its:
    	
Treasurer
    
	
 
    	
 
    	
TITLE   (If applicable)
    

 

13Exhibit 10.4

 

	

    	
Pledge and Security   Agreement
    

 

	
 
    	
 
    

 

This Pledge and Security Agreement (the “Agreement”) is entered into and dated as of April 24, 2014, for value received, the undersigned (“Pledgor”) grants to Comerica Bank (“Bank”) a continuing security interest and lien (any pledge, assignment, security interest or other lien arising hereunder is sometimes referred to herein as a “security interest”) in the Collateral (as defined below) to secure payment when due, whether by stated maturity, demand, acceleration or otherwise, of all existing and future indebtedness (“Indebtedness”) to the Bank of RMC MORTGAGE CORPORATION, a California corporation (“Borrower”), and/or Pledgor. Indebtedness includes, without limit, any and all obligations or liabilities of the Borrower and/or Pledgor to the Bank, whether absolute or contingent, direct or indirect, voluntary or involuntary, liquidated or unliquidated, joint or several, known or unknown; any and all obligations or liabilities for which the Borrower and/or Pledgor would otherwise be liable to the Bank were it not for the invalidity or unenforceability of them by reason of any bankruptcy, insolvency or other law, or for any other reason; any and all amendments, modifications, renewals, extensions and/or replacements of any of the above; all costs incurred by Bank in establishing, determining, continuing, or defending the validity or priority of its security interest, or in pursuing its rights and remedies under this Agreement or under any other agreement between Bank and Borrower and/or Pledgor or in connection with any proceeding involving Bank as a result of any financial accommodation to Borrower and/or Pledgor; and all other costs of collecting Indebtedness, including, without limit, attorney fees. Pledgor agrees to pay Bank all such costs incurred by the Bank, immediately upon demand, and until paid all costs shall bear interest at the highest per annum rate applicable to any of the Indebtedness, but not in excess of the maximum rate permitted by law.  Any reference in this Agreement to attorney fees shall be deemed a reference to reasonable fees, costs, and expenses of both in-house and outside counsel and paralegals, whether or not a suit or action is instituted, and to court costs if a suit or action is instituted, and whether attorney fees or court costs are incurred at the trial court level, on appeal, in a bankruptcy, administrative or probate proceeding or otherwise.

 

Pledgor further covenants, agrees and represents as follows:

 

1.            Collateral.  “Collateral” shall mean all of the following property Pledgor now or later owns or has an interest in, wherever located:

 

(a)           Account No. 1894850682 maintained by Pledgor with Bank, and all cash and financial assets from time to time maintained in or credited to the such account,

 

(b)           all goods, instruments, (including, without limit, promissory notes), documents (including, without limit, negotiable documents), policies and certificates of insurance, deposit accounts, deposits, money, investment property or other property (except real property which is not a fixture) which are now or later in possession or control of Bank, or as to which Bank now or later controls possession by documents or otherwise, and

 

(c)           all additions, attachments, accessions, parts, replacements, substitutions, renewals, interest, dividends, distributions, rights of any kind (including, but not limited to, stock splits, stock rights, voting and preferential rights), products, and all cash and non-cash proceeds of or pertaining to the above, including, without limit, any Replacement Account (as defined below) or any Substitute Collateral (as defined below), insurance and condemnation proceeds, and cash or other property which were proceeds and are recovered by a bankruptcy trustee or otherwise as a preferential transfer by Pledgor.

 

In the definition of Collateral, a reference to a type of collateral shall not be limited by a separate reference to a more specific or narrower type of that collateral. Except as otherwise provided in this Agreement, all terms in this Agreement have the meanings assigned to them in the Uniform Commercial Code (as herein defined), as those meanings may be amended, supplemented, revised or replaced from time to time. Notwithstanding the foregoing, the parties intend that the terms used herein which are defined in the Uniform Commercial Code have, at all times, the broadest and most inclusive meanings possible. Accordingly, if the Uniform Commercial Code shall in the future be amended or held by a court to define any term used herein more broadly or inclusively than the Uniform Commercial Code in effect on the date of this Agreement, then such term, as used herein, shall be given such broadened meaning. If the Uniform Commercial Code shall in the future be amended or held by a court to define any term used herein more narrowly, or less inclusively, than the Uniform Commercial Code in effect on the date of this Agreement, such amendment or holding shall be disregarded in defining terms used in this Agreement

 

 

2.            Pledge of Collateral.

 

(a)           Pledgor hereby pledges to Bank and grants to Bank a security interest in the Collateral as security for the prompt payment and performance of all of the Indebtedness, whether now existing or hereafter arising.

 

(b)          Pledgor authorizes Bank to file such financing statements, and take such other actions as Bank determines from time to time may be necessary or appropriate to perfect and/or maintain the security interest granted hereunder.

 

(c)           If applicable, prior to the maturity (if any) of any Collateral held by Bank pursuant hereto, Pledgor may pledge a substitute security or instrument similar in form, quality, value and substance to the original Collateral (and which is satisfactory and acceptable to Bank in its sole discretion) (the “Substitute Collateral”) in which the proceeds of the Collateral can be reinvested on maturity. Upon maturity of the Collateral in accordance with its terms, or in the event the Collateral otherwise becomes payable during the term of this Agreement, such maturing Collateral may be presented for payment, exchange, or otherwise marketed by Bank on behalf of Pledgor and the proceeds therefrom used to purchase the Substitute Collateral.  If no Substitute Collateral is pledged to Bank in accordance with the foregoing, or in the event such other security or instrument is not otherwise acceptable to Bank, proceeds of the Collateral shall be placed into an interest bearing account offered by the Bank (such account is herein called the “Replacement Account”), until the earlier to occur of (i) the Collateral otherwise matures or becomes payable during the term of this Agreement, or (ii) as an agreement as to the Substitute Collateral can be reached by Pledgor and Bank. Bank may retain any such successor collateral and the proceeds therefrom as Collateral in accordance with the terms of this Agreement.

 

(d)           The pledge of a security interest in the Collateral hereunder remains in effect for the term of this Agreement, notwithstanding any release by Bank of any other collateral in connection with the Indebtedness or any other agreement in effect between the Bank, Borrower and/or the Pledgor, now or hereafter arising.

 

3.            Representations, Warranties and Covenants.  Pledgor represents and warrants to and covenants with Bank that:

 

(a)           The Collateral is owned by Pledgor free and clear of any security interests, liens, encumbrances, options or other restrictions created by Pledgor, except those to and in favor of Bank pursuant hereto.

 

(b)           Pledgor has full power and authority to create a first lien on the Collateral in favor of Bank and no disability or contractual obligation exists that would prohibit Pledgor from pledging the Collateral pursuant to this Agreement, and Pledgor will not assign, create or permit to exist any other claim to, lien or encumbrance upon, or security interest in any of the Collateral.

 

(c)           The Collateral is not the subject of any present or threatened suit, action, arbitration, administrative or other proceeding, and Pledgor knows of no reasonable grounds for the institution of any such proceedings.

 

(d)          Pledgor shall not transfer, encumber, dispose of, withdraw, or otherwise direct the payment of any proceeds, interest, or amounts payable with respect to the Collateral for so long as it is subject to this Agreement. In furtherance of the foregoing, Pledgor hereby acknowledges and agrees that Bank may place a “hold” on, and completely restrict Pledgor’s access to, any account of Pledgor at Bank that constitutes Collateral hereunder.

 

(e)           Pledgor delivers this Agreement based solely on Pledgor’s independent investigation of (or decision not to investigate) the financial condition of Borrower and is not relying on any information furnished by Bank. Pledgor assumes full responsibility for obtaining any further information concerning Borrower’s financial condition, the status of the Indebtedness or any other matter which Pledgor may deem necessary or appropriate now or later. Pledgor waives any duty on the part of Bank, and agrees that Pledgor is not relying upon nor expecting Bank to disclose to Pledgor any fact now or later known by Bank, whether relating to the operations or condition of Borrower, the existence, liabilities or financial condition of any guarantor of the Indebtedness, the occurrence of any default with respect to the Indebtedness, or otherwise, notwithstanding any effect such fact may have upon Pledgor’s risk or Pledgor’s rights against

 

2

 

Borrower. Pledgor knowingly accepts the full range of risk encompassed in this Agreement, which risk includes, without limit, the possibility that Borrower may incur Indebtedness to Bank after the financial condition of Borrower, or Borrower’s ability to pay debts as they mature, has deteriorated.

 

(f)            Pledgor will do all acts and will execute and/or deliver or cause to be executed and/or delivered all writings requested by Bank to establish, maintain and continue an exclusive, perfected and first priority security interest of Bank in the Collateral. Pledgor acknowledges and agrees that Bank has no obligation to acquire or perfect any lien on or security interest in any asset(s) to secure payment of the Indebtedness, and Pledgor is not relying upon assets in which the Bank has or may have a lien or security interest for payment of the Indebtedness.

 

(g)           Pledgor will give Bank not less than ninety (90) days’ prior written notice of all contemplated changes in Pledgor’s name, location, chief executive office, principal place of business, and/or location of any Collateral, but the giving of this notice shall not cure any Event of Default caused by this change.

 

All the above representations and warranties shall survive the making of this Agreement.

 

4.            Events of Default.  The existence or occurrence of any of the following shall constitute an “Event of Default” hereunder:

 

(a)           Failure to pay any of the Indebtedness when due, by acceleration or otherwise;

 

(b)           The breach of any provision of this Agreement by Pledgor or the failure by Pledgor to observe or perform any of the provisions of this Agreement;

 

(c)           Any representation or warranty made by Pledgor or Borrower to Bank shall be, or shall prove to have been, false or materially misleading when made or deemed made;

 

(d)           Sale or other disposition by Borrower, Pledgor or any guarantor of any of the Indebtedness (a “Guarantor”) of any substantial portion of its assets or property or voluntary suspension of the transaction of business by Borrower, Pledgor or any Guarantor, or death, dissolution, termination of existence, merger, consolidation, insolvency, business failure, or assignment for the benefit of creditors of or by Borrower, Pledgor or any Guarantor; or commencement of any proceedings under any state or federal bankruptcy or insolvency laws or laws for the relief of debtors by or against Borrower, Pledgor or any Guarantor; or the appointment of a receiver, trustee, court appointee, sequestrator or otherwise, for all or any part of the property of Borrower, Pledgor or any Guarantor;

 

(e)          The occurrence or existence of any default or event of default under any other present or future instrument, agreement or other document between Borrower, Pledgor and/or any Guarantor and Bank; or

 

(f)            If Bank deems itself insecure, in good faith believing that the prospect of payment of the Indebtedness or performance of this Agreement is impaired or shall fear deterioration, removal, or waste of Collateral.

 

5.            Bank’s Remedies Upon Default.  Upon the occurrence of any Event of Default, Bank may, at its discretion and without prior notice to Pledgor or Borrower, declare any or all of the Indebtedness to be immediately due and payable, and shall have the right to exercise any and all such rights and remedies available to it as a secured party under the Uniform Commercial Code and other applicable law as Bank, in its sole judgment, shall deem necessary or appropriate, including, without limitation, the right to institute legal proceedings to foreclose upon the lien and security interest granted by this Agreement, to recover judgment for all amounts then due and owing as Indebtedness, and to collect the same out of any Collateral or the proceeds of any sale of it. “Uniform Commercial Code” means the Act No. 174 of the Michigan Public Acts of 1962, as amended, revised or replaced from time to time, including, without limit, as amended by Act No. 348 of the Michigan Public Acts of 2000. After the disposal of any of the Collateral, Bank may deduct all reasonable legal and other expenses and attorneys’ fees for protecting its interests and enforcing its remedies under or in respect of the Indebtedness and this Agreement and shall apply the residue of the proceeds to, or hold as a reserve against, the Indebtedness in such manner as Bank in its sole discretion shall determine, and shall pay the balance, if any, to Pledgor or otherwise, in accordance with applicable law. Nothing in this Agreement is intended, nor shall it be construed, to preclude Bank from pursuing any other remedy provided by law for the collection of the Indebtedness or for the recovery of any other sum to which Bank may be entitled for the breach of this Agreement by Pledgor. Nothing in this Agreement shall reduce

 

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or release in any way any rights or security interests of Bank contained in any existing agreement between Borrower and/or Pledgor and Bank. Pledgor shall remain liable for any deficiency, which it shall pay to Bank immediately upon demand.  Pledgor agrees that Bank shall be under no obligation to accept any noncash proceeds in connection with any sale or disposition of Collateral unless failure to do so would be commercially unreasonable.  If Bank agrees in its sole discretion to accept noncash proceeds (unless the failure to do so would be commercially unreasonable), Bank may ascribe any commercially reasonable value to such proceeds.  Without limiting the foregoing, Bank may apply any discount factor in determining the present value of proceeds to be received in the future or may elect to apply proceeds to be received in the future only as and when such proceeds are actually received in cash by Bank. Bank shall have all of the rights to seek recourse against Pledgor to the fullest extent provided for herein. No remedy under this Agreement is intended to be exclusive of any other remedy, but each and every remedy shall be cumulative and in addition to any and every other remedy given hereunder, and those provided by law or in equity.  No delay or omission by Bank to exercise any right under this Agreement shall impair any such right nor be construed to be a waiver thereof.  No failure on the part of Bank to exercise, and no delay in exercising, any right hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.

 

6.            Waivers; Indemnification; Agreements.

 

(a)           Pledgor, to the extent not expressly prohibited by applicable law, waives any right to require the Bank to: (i) proceed against any person or property; (ii) give notice of the terms, time and place of any public or private sale of personal property security held from Pledgor, Borrower or any other person, or otherwise comply with the provisions of Section 9-611 or 9-621 of the Uniform Commercial Code, or (iii) pursue any other remedy in the Bank’s power.  Pledgor waives notice of acceptance of this Agreement and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment of any Indebtedness, notice of any loans or other financial accommodations made or extended to Borrower or the creation or existence of any Indebtedness, and any and all other notices to which Pledgor might otherwise be entitled, and diligence in collecting any Indebtedness.

 

(b)           Pledgor agrees that Bank may, once or any number of times, (i) amend or modify, in any manner and at any time, the terms of any documents, instruments or agreements evidencing, governing, securing or otherwise relating to any of the Indebtedness, (ii) compromise, extend, increase, accelerate, renew or forbear to enforce payment of any or all Indebtedness, (iii) release Borrower or any other person or grant other indulgences to Borrower or any other person in respect thereof, (iv) release or substitute any Guarantor, if any, of the Indebtedness, (v) enforce, exchange, release, or waive any security for the Indebtedness or any guaranty of the Indebtedness, or any portion thereof, or (vi) permit Borrower to incur additional Indebtedness, all without notice to Pledgor and without affecting in any manner the unconditional obligation of Pledgor under this Agreement.

 

(c)           Pledgor unconditionally and irrevocably waives each and every defense and setoff of any nature which, under principles of guaranty or otherwise, would operate to impair or diminish in any way the obligation of Pledgor under this Agreement, and acknowledges that such waiver is by this reference incorporated into each security agreement, collateral assignment, pledge and/or other document from Pledgor now or later securing the Indebtedness, and acknowledges that as of the date of this Agreement no such defense or setoff exists.

 

(d)           Pledgor waives any and all rights (whether by subrogation, indemnity, reimbursement, or otherwise) to recover from Borrower any amounts paid or the value of any Collateral given by Pledgor pursuant to this Agreement.

 

(e)           Pledgor agrees to defend, indemnify and hold harmless Bank and its officers, employees, and affiliates against all losses or expenses in any way suffered, incurred, or paid by Bank as a result of or in any way arising out of, following, or consequential to transactions between Bank and Pledgor, under this Agreement (including, without limitation, reasonable attorneys’ fees and expenses), except for losses caused by Bank’s gross negligence or willful misconduct.

 

7.            Notices.  Until Bank is advised in writing by Pledgor to the contrary, all notices, requests and demands required under this Agreement or by law shall be given to, or made upon, Pledgor at the address set forth below Pledgor’s

 

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signature to this Agreement. In the event that applicable law shall obligate Bank to give prior notice to Pledgor of any action to be taken under this Agreement, Pledgor agrees that a written notice given to Pledgor at least ten (10) days before the date of the act shall be reasonable notice of the act and, specifically, reasonable notification of the time and place of any public sale or of the time after which any private sale, lease, or other disposition is to be made, unless a shorter notice period is reasonable under the circumstances.

 

8.            Continuation, Reinstatement of Agreement. Notwithstanding any prior revocation, termination, surrender, or discharge of this Agreement in whole or in part, the effectiveness of this Agreement shall automatically continue or be reinstated, as the case may be, in the event that any payment received or credit given by Bank in respect of the Indebtedness is returned, disgorged, or rescinded under any applicable law, including, without limitation, bankruptcy or insolvency laws, in which case, this Agreement, shall be enforceable against Pledgor as if the returned, disgorged, or rescinded payment or credit had not been received or given by Bank, and whether or not Bank relied upon this payment or credit or changed its position as a consequence of it.  In the event of continuation or reinstatement of this Agreement, Pledgor agrees upon demand by Bank to execute and deliver to Bank those documents which Bank determines are appropriate to further evidence (in the public records or otherwise) this continuation or reinstatement, although the failure of Pledgor to do so shall not affect in any way the reinstatement or continuation. All payments to be made hereunder by Pledgor shall be made in lawful money of the United States of America at the time of payment, shall be made in immediately available funds, and shall be made without deduction (whether for taxes or otherwise) or offset.

 

9.            Governing Law and Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.

 

10.          General Provisions.

 

(a)           Successors and Assigns.  This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each of the parties; provided, however, that neither this Agreement nor any rights hereunder may be assigned by Pledgor without Bank’s prior written consent, which consent may be granted or withheld in Bank’s sole discretion. Bank shall have the right without the consent of or notice to Pledgor to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights and benefits hereunder.

 

(b)          Time of Essence.  Time is of the essence for the performance of all obligations set forth in this Agreement.

 

(c)           Severability of Provisions.  Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

 

(d)           Amendments in Writing, Integration.  This Agreement cannot be amended or terminated orally.  All prior agreements, understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of this Agreement, if any, are merged into this Agreement and with any other written agreement concerning the Indebtedness previously entered into by the parties.

 

(e)           Counterparts.  This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same Agreement.

 

(f)            Survival.  All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Indebtedness remains outstanding.  The obligations of Pledgor to indemnify Bank with respect to the expenses, damages, losses, costs and liabilities described in Section 6(e) shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Bank have run.

 

(g)           Term. This Agreement shall remain in effect so long as any Indebtedness, whether or not contingent or unliquidated, now or hereafter arising, remains in existence.

 

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(h)           Setoff.  In addition to Bank’s other rights, any indebtedness owing from Bank to Pledgor can be set off and applied by Bank on any Indebtedness at any time(s) either before or after maturity or demand without notice to anyone.  Any such action shall not constitute acceptance of collateral in discharge of any portion of the Indebtedness.

 

(i)            No Effect on Indebtedness Payable Upon Demand.  To the extent that any of the Indebtedness is payable upon demand, nothing contained in this Agreement shall modify the terms and conditions of that Indebtedness nor shall anything contained in this Agreement prevent Bank from making demand, without notice and with or without reason, for immediate payment of any or all of that Indebtedness at any time(s), whether or not an Event of Default has occurred.

 

(j)            Reference to Borrower.  Pledgor hereby acknowledges and agrees that the references to Borrower set forth herein shall be applicable to the extent that Pledgor and Borrower are not the same person or entity.

 

(k)           Costs and Expenses.  Pledgor agrees to pay to or reimburse the Bank upon demand any and all costs and expenses (including, without limit, court costs, legal expenses and reasonable attorneys’ fees, whether inside or outside counsel is used, whether or not suit is instituted and, if suit is instituted, whether at the trial court level, appellate level, in a bankruptcy, probate or administrative proceeding or otherwise) incurred in connection with the preparation, execution, delivery, amendment, administration, and performance of this Agreement and the related documents, or incurred in enforcing or attempting to enforce this Agreement or any of the duties or obligations of Pledgor under this Agreement or in establishing, determining, continuing or defending the validity or priority of Bank’s security interest under this Agreement or in exercising or attempting to exercise any right or remedy under this Agreement or incurred in any other matter or proceeding relating to this Agreement.

 

(l)            Multiple Pledgor’s.  If there is more than one Pledgor, all undertakings, warranties and covenants made by Pledgor and all rights, powers and authorities given to or conferred upon Bank are made or given jointly and severally.

 

(m)         Attorney In Fact.  Pledgor (i) irrevocably appoints Bank or any agent of Bank (which appointment is coupled with an interest) the true and lawful attorney of Pledgor (with full power of substitution) in the name, place and stead of, and at the expense of, Pledgor and (ii) authorizes Bank or any agent of Bank, in its own name, at Pledgor’s expense, to do any of the following, as Bank, in its sole discretion, deems appropriate (A) to demand, receive, sue for, and give receipts or acquittances for any moneys due or to become due on any Collateral and to endorse any item representing any payment on or proceeds of the Collateral; (B) to execute and/or file in the name of and on behalf of Pledgor all financing statements or other filings deemed necessary or desirable by Bank to evidence, perfect, or continue the security interests granted in this Agreement; and (C) to do and perform any act on behalf of Pledgor permitted or required under this Agreement.

 

11.         WAIVER OF JURY TRIAL. PLEDGOR AND BANK (BY ACCEPTANCE OF THIS AGREEMENT) EACH ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER CERTAIN CIRCUMSTANCES. TO THE EXTENT PERMITTED BY LAW, EACH OF THEM, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY RELATE INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR PLEDGOR, EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.

 

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IN WITNESS WHEREOF, the Pledgor has executed this Agreement the day and year first above written.

 

	
 
    	
Pledgor:
    
	
 
    	
 
    
	
 
    	
RMC MORTGAGE CORPORATION, a   California corporation
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/ Kimberly G. Nelson
    
	
 
    	
 
    	
 
    
	
 
    	
Its:
    	
Kimberly G. Nelson, Treasurer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address:
    
	
 
    	
 
    
	
 
    	
8660 E. Hartford Drive,   Suite 200A
    
	
 
    	
Scottsdale, Arizona 85255
    
	
 
    	
 
    
	
 
    	
Address for Notices:
    
	
 
    	
 
    
	
 
    	
c/o The Ryland Group, Inc.
    
	
 
    	
3011 Townsgate Road, Suite 200
    
	
 
    	
Westlake Village, California 91361
    
	
 
    	
Attention: Kimberly G. Nelson
    

 

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