-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NAQwj2ImO2id+yQrSZYLjJMdIPFiNNAmsmKTXpDX80TR4o8HmlYusS3vIc8Mh/b/ jnExqpmccuBt7fE6OcDo5Q== 0000891618-99-001094.txt : 19990325 0000891618-99-001094.hdr.sgml : 19990325 ACCESSION NUMBER: 0000891618-99-001094 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 50 FILED AS OF DATE: 19990324 FILER: COMPANY DATA: COMPANY CONFORMED NAME: E LOAN INC CENTRAL INDEX KEY: 0001082337 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 770460084 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-74945 FILM NUMBER: 99571381 BUSINESS ADDRESS: STREET 1: 5875 ARNOLD RD., SUITE 100 CITY: DUBLIN STATE: CA ZIP: 94568 BUSINESS PHONE: 9252412402 S-1 1 FORM S-1 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1999 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ E-LOAN, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------------------------ DELAWARE 6162 77-0460084 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
5875 ARNOLD ROAD, SUITE 100 DUBLIN, CA 94568 (925) 241-2400 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ CHRIS LARSEN, CHIEF EXECUTIVE OFFICER JANINA PAWLOWSKI, PRESIDENT E-LOAN, INC. 5875 ARNOLD ROAD, SUITE 100 DUBLIN, CA 94568 (925) 241-2400 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) ------------------------ PLEASE SEND COPIES OF ALL COMMUNICATIONS TO: MARIO M. ROSATI, ESQ. DONALD M. KELLER, JR., ESQ. ISSAC J. VAUGHN, ESQ. JON E. GAVENMAN, ESQ. WILSON SONSINI GOODRICH & ROSATI, P.C. VENTURE LAW GROUP 650 PAGE MILL ROAD A PROFESSIONAL CORPORATION PALO ALTO, CA 94304 2800 SAND HILL ROAD (650) 493-9300 MENLO PARK, CA 94025 (650) 854-4488
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. ------------------------ If the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), please check the following box. [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ] ------------------------ CALCULATION OF REGISTRATION FEE - ---------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------- TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT OF OF SECURITIES TO AGGREGATE OFFERING REGISTRATION BE REGISTERED PRICE(1) FEE - ---------------------------------------------------------------------------------------------------------------- Common stock, $0.001 par value............................ $55,200,000 $15,346.00 - ---------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(c) under the Securities Act of 1933. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. Subject to Completion. Dated March 24, 1999. Shares [E-LOAN LOGO] E-LOAN, INC. Common Stock ---------------------- This is an initial public offering of shares of common stock of E-LOAN. All of the shares of common stock are being sold by E-LOAN, Inc. Prior to the offering, there has been no market for the common stock. It is currently estimated that the initial public offering price per share will be between $ and $ per share. E-LOAN has applied for quotation of the common stock on the Nasdaq National Market under the symbol "EELN". See "Risk Factors" beginning on page 5 to read about certain factors you should consider before buying shares of the common stock. ---------------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ----------------------
Per Share Total -------- -------- Initial public offering price............................... $ $ Underwriting discount....................................... $ $ Proceeds, before expenses, to E-LOAN........................ $ $
The underwriters may, under certain circumstances, purchase up to an additional shares from E-LOAN at the initial public offering price less the underwriting discount. ---------------------- The underwriters expect to deliver the shares against payment in New York, New York on , 1999. ---------------------- GOLDMAN, SACHS & CO. DONALDSON, LUFKIN & JENRETTE HAMBRECHT & QUIST ---------------------- E*TRADE GROUP, INC. DLJDIRECT INC. Facilitators of Internet distribution ---------------------- Prospectus dated , 1999. 3 [INSIDE FRONT COVER] ------------------------ E-LOAN(R) is a registered trademark of E-LOAN. All other brand names or trademarks appearing in this prospectus are the property of their respective holders. 4 PROSPECTUS SUMMARY This summary may not contain all of the information that you should consider before investing in our common stock. You should read the following summary together with the more detailed information regarding E-LOAN and the common stock being sold in this offering and our financial statements and notes to those statements appearing elsewhere in this prospectus. E-LOAN, INC. E-LOAN is a leading online provider of mortgages, offering consumers the ability to obtain the most suitable mortgages from a wide array of lenders at substantial savings. E-LOAN's easy-to-use website enables borrowers to search through over 50,000 products provided by more than 70 lending sources to find the most competitively priced loans that match the borrowers' criteria. Borrowers can analyze and compare loans online as well as receive unbiased loan recommendations based on their personal criteria and financial characteristics. E-LOAN offers transaction cost savings of over 50% compared to obtaining a mortgage through traditional mortgage brokers or single source lenders. E-LOAN provides complete transaction fulfillment and a high level of service through customer service representatives assigned to each borrower and the proprietary E-Track loan monitoring service. E-LOAN is the exclusive mortgage provider for co-branded loan centers that E-LOAN has established with leading websites including Yahoo!, E*Trade, DLJdirect,Telebank, CBS MarketWatch and Motley Fool. In 1998, E-LOAN was the leader in the online mortgage market with approximately $1 billion in closed loans originated. THE E-LOAN MARKET OPPORTUNITY E-LOAN believes that the traditional mortgage origination process is highly inefficient, which is the result of a fragmented, broker-dominated industry, paper-intensive processes and a baffling array of mortgage products. This inefficient process has made obtaining a mortgage a time-consuming, expensive, inconvenient and unpleasant experience for many consumers. E-LOAN believes an Internet-based distribution model reduces or eliminates many of these shortcomings and provides a significant opportunity for an open, centralized and easy-to-use service with a compelling consumer value proposition. Forrester Research projects the market for online mortgage originations will grow from $18.7 billion in 1999 to over $91.2 billion in 2003, representing an increase in online penetration of the existing market from 1.5% in 1999 to 9.6% in 2003. THE E-LOAN SOLUTION E-LOAN's website enables consumers to efficiently search, analyze and compare mortgage products offered by multiple lenders and apply for, qualify for and obtain the mortgage product that is most compatible with their individual financial characteristics and borrowing requirements. Key advantages of the E-LOAN solution include: - LARGE SELECTION OF MORTGAGE PRODUCTS. E-LOAN offers mortgages from more than 70 lending sources and searches through over 50,000 products in response to each customer inquiry. - SIGNIFICANT CUSTOMER SAVINGS. E-LOAN offers transaction cost savings of over 50% compared to obtaining a mortgage through traditional mortgage brokers or single source lenders. - UNBIASED LOAN RECOMMENDATIONS. E-LOAN offers unbiased recommendations based on comparative analytical tools that use only borrower-provided information and criteria to identify the most suitable loan product. 1 5 - EASY-TO-USE SERVICE WITH VALUE-ADDED FEATURES. E-LOAN's website enables borrowers to easily and efficiently search, analyze and compare mortgages in complete privacy, on their own time and free from the sales pressure typically experienced offline. - HIGH LEVEL OF CUSTOMER SERVICE. E-LOAN is committed to delivering a high level of customer service designed to make the mortgage origination process easier to understand, more responsive and more open to the consumer. E-LOAN offers its services through customer service representatives assigned to each borrower and the proprietary E-Track loan monitoring service. - ONGOING MORTGAGE MONITORING. E-LOAN enables customers to optimize refinancing decisions by continuously comparing their existing loan to new products as they become available and alerting them to opportunities to save money over the life of their loan. THE E-LOAN STRATEGY E-LOAN's strategy is to be the leading Internet-based provider of mortgages and debt management services for consumers. Key elements of the strategy include: - GROW CORE CONSUMER MORTGAGE BUSINESS. E-LOAN intends to become the leading originator of single family mortgage loans by delivering significant cost savings, unparalleled product choice and unbiased advice and assistance to its customers. - EXPAND MULTI-SOURCE LENDING CAPABILITIES. E-LOAN intends to continue to broaden the number and variety of its mortgage products and lending sources. - USE TECHNOLOGY TO BRING BORROWERS AND CAPITAL MARKETS CLOSER TOGETHER. E-LOAN intends to continue to streamline and automate mortgage origination and underwriting processes in order to enable borrowers to more directly benefit from the cost, speed and convenience of highly efficient secondary mortgage markets. - ENHANCE BRAND AWARENESS AND CUSTOMER LOYALTY. E-LOAN intends to become the first national multi-source lender with a widely recognized consumer brand name. - HELP CUSTOMERS BETTER MONITOR AND MANAGE THEIR DEBT. E-LOAN intends to transform what has traditionally been a single origination transaction into a long-term, mutually beneficial relationship by assisting customers in monitoring and managing their mortgages. 2 6 CORPORATE INFORMATION We were incorporated in California in August 1996 and we reincorporated in Delaware in March 1999. References in this prospectus to "E-LOAN", "we", "our", and "us" refer to E-LOAN, Inc., a Delaware corporation, and its predecessor, E-LOAN, Inc., a California corporation. Our principal executive offices are located at 5875 Arnold Road, Suite 100, Dublin, California 94568 and our phone number is (925) 241-2400. Our Internet address is www.eloan.com. The information on our website is not part of this prospectus. E-LOAN and the E-LOAN logo are registered trademarks of E-LOAN. Each trademark, trade name or service mark of any other company appearing in this prospectus belongs to its holder. THE OFFERING Information in this prospectus assumes that the Underwriters do not exercise the option granted by E-LOAN to purchase additional shares in this offering, and unless otherwise noted, this prospectus assumes the conversion of all outstanding shares of preferred stock into common stock. See "Underwriting". Common stock offered by E-LOAN.......... shares Common stock to be outstanding after this offering......................... shares Use of proceeds......................... Working capital and general corporate purposes, including capital expenditures. See "Use of Proceeds". Proposed Nasdaq National Market symbol................................ "EELN"
These share numbers are based on shares outstanding as of December 31, 1998. The share numbers include 200,000 shares issued upon exercise of a warrant to purchase Series C preferred stock and exclude: - 1,181,998 shares of common stock issuable upon exercise of options outstanding under E-LOAN's 1997 Stock Option Plan with a weighted average exercise price of $1.56 per share; - 15,000 shares of common stock issuable upon conversion of 15,000 shares of Series C preferred stock issuable upon exercise of a warrant to purchase Series C preferred stock at an exercise price of $2.00 per share; and - 318,002 shares of common stock available for issuance under E-LOAN's 1997 Stock Option Plan as of December 31, 1998 (excluding future annual automatic increases to the number of shares reserved under the plan). Subsequent to December 31, 1998, E-LOAN granted additional options to purchase 833,760 shares of common stock with a weighted average exercise price of $6.00 per share. 3 7 SUMMARY FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED (UNAUDITED) ----------------------- -------------------------------------------------- MAR. 31, JUNE 30, SEPT. 30, DEC. 31, 1997 1998 1998 1998 1998 1998 ---------- ---------- ---------- ---------- ---------- ----------- Revenues.................... $ 1,043 $ 6,832 $ 527 $ 1,233 $ 2,051 $ 3,021 Operating expenses: Operations................ 1,319 7,626 779 1,077 2,127 3,643 Sales and marketing....... 470 5,642 513 874 2,174 2,081 Technology................ 102 1,248 163 371 284 430 General and administrative.......... 524 2,410 379 436 711 884 Amortization of unearned compensation............ -- 1,251 44 211 296 700 ---------- ---------- ---------- ---------- ---------- ----------- Total operating expenses.............. 2,415 18,177 1,878 2,969 5,592 7,738 ---------- ---------- ---------- ---------- ---------- ----------- Operating loss.............. (1,372) (11,345) (1,351) (1,736) (3,541) (4,717) ---------- ---------- ---------- ---------- ---------- ----------- Other income, net........... (2) 173 20 29 26 98 Net loss.................... $ (1,374) $ (11,172) $ (1,331) $ (1,707) $ (3,515) $ (4,619) ========== ========== ========== ========== ========== =========== Net loss per share(1): Basic and diluted......... $ (0.35) $ (2.95) $ (0.34) $ (0.43) $ (0.91) $ (1.23) ========== ========== ========== ========== ========== =========== Weighted average number of shares outstanding -- basic and diluted......... 4,087,344 4,133,428 4,107,753 4,122,624 4,140,600 4,161,866 ========== ========== ========== ========== ========== =========== Pro forma net loss per share(2).................. $ (1.26) $ (0.18) $ (0.22) $ (0.37) $ (0.43) Pro forma weighted average number of shares outstanding(2)............ 8,894,392 7,556,554 7,571,425 9,478,497 10,807,169 OPERATING DATA(3): Closed loan volume (dollars)................. 892,780 125,598 215,097 218,325 333,758 Closed loan volume (loans).. 4,186 552 997 1,003 1,634
DECEMBER 31, 1998 ----------------------------------------- PRO FORMA ACTUAL PRO FORMA(4) AS ADJUSTED(5) ------- ------------ -------------- BALANCE SHEET DATA: Mortgage loans held-for-sale (pledged)................. $42,154 $ 42,154 $ Cash and cash equivalents.............................. 9,141 9,641 Total assets........................................... 55,523 56,023 Warehouse lines payable................................ 41,046 41,046 Mandatorily redeemable preferred stock................. 21,393 -- Long term obligations.................................. 1,290 1,290 Total stockholders' equity (deficit)................... (11,184) 10,709
- --------------- (1) Net loss per share includes the accretion for the Series C and Series D mandatorily redeemable convertible preferred stock. (2) Pro forma net loss per share has been computed by dividing net loss by the pro forma weighted average number of shares outstanding. The pro forma weighted average number of shares outstanding includes the pro forma effects of the automatic conversion on a weighted average basis of E-LOAN's preferred stock and Series D warrants as if such conversion occurred on January 1, 1998 or at date of issuance, if later. (3) Excludes closed loan referral volume which totaled an estimated $75.0 million on 500 loans for the year ended December 31, 1998. (4) Pro forma after giving effect to the conversion of all outstanding shares of convertible preferred stock and the Series D warrants into 6,645,303 shares of common stock upon the closing of this offering. (5) As adjusted to give effect to the sale of shares of common stock in this offering at the initial public offering price of $ per share, less underwriting discounts and commissions and estimated offering expenses payable by E-LOAN. 4 8 RISK FACTORS You should carefully consider the risks described below before making a decision to buy our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial condition or results of operations could be adversely affected. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should also refer to the other information set forth in this prospectus, including our financial statements and the related notes. WE HAVE A LIMITED OPERATING HISTORY, HAVE ONLY OPERATED DURING PERIODS OF GROWTH IN THE HOME MORTGAGE MARKET AND CONSEQUENTLY FACE SIGNIFICANT RISKS AND UNCERTAINTIES We were incorporated in August 1996 and initiated our online mortgage operations in June 1997. We have a limited operating history and all of our operations have occurred during a period in which the home mortgage market has experienced rapid growth. Since we began our online mortgage operations, we have never operated during a downturn in the mortgage business and we cannot assure you that we will be able to operate successfully during such times. We have generated limited revenues and have never operated profitably. An investor in our common stock must consider the risks and difficulties frequently encountered by early stage companies in new and rapidly evolving markets. These risks are especially pronounced in the mortgage industry where we will face major challenges from other online multi-lender origination companies such as QuickenMortgage (Intuit Inc.) and HomeAdvisor (Microsoft Corp.) and single source lenders such as Countrywide HomeLoans, Inc. and Norwest Mortgage, Inc. As a result of our limited operating history and our recent growth, it will be necessary to implement new and expanded operational, financial and administrative systems and control procedures to enable us to expand, train and manage our employees and coordinate the efforts of our underwriting, accounting, finance, marketing, and operations departments. For example, we intend to implement both a new financial reporting system and a loan production system by the end of 1999. Historically, our efforts were focused primarily on developing and scaling our online mortgage operations and less on implementing internal accounting controls, financial and operational reporting systems and expanding the size and capabilities of our financial staff. Our auditors noted at December 31, 1998 that as a result of these shortcomings we had significant difficulties summarizing and preparing accurate financial information on a timely basis. If these difficulties persist, we may be unable to produce accurate and timely financial statements, which could limit our ability to conduct loan origination and sale operations and adversely affect the liquidity and price of our common stock. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Overview". We have a limited history of addressing other material risks in our business. These risks include our potential inability to: - mitigate the risks of interest rate fluctuations, fluctuations in the value of residential mortgage loans in the secondary market and home buying cyclicality; - offer competitive loan products; - increase the number of purchase loans, as opposed to refinance loans, sold to customers; - attract a larger number of customers to our website; - increase the number of closed loans; - continue to develop and upgrade our technology and website; - strengthen customer loyalty and satisfaction; - continue to diversify our customer base geographically; - maintain and develop warehouse lending relationships; 5 9 - expand our capability of selling loans into the secondary market; - add additional strategic partners to increase traffic to our website; - increase E-LOAN brand awareness; - address consumer privacy concerns; - increase the scale and efficiency of our operations; - respond effectively to competitive pressures, both online and offline; - satisfy legal and regulatory requirements; and - attract, retain and motivate qualified personnel. We also depend on the growing use of the Internet for commerce and on the continuation of favorable general economic conditions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for detailed information on our limited operating history. WE HAVE A HISTORY OF LOSSES, WE EXPECT FUTURE LOSSES AND WE MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY We have not achieved profitability and expect to continue to incur operating losses for the foreseeable future. We incurred net losses of $11.2 million for the year ended December 31, 1998. As of December 31, 1998, our accumulated deficit was $12.6 million. Given that we expect to continue to incur significant sales and marketing expenses, we will need to generate significant revenues to achieve and maintain profitability. Although our revenues have grown in recent quarters, we may not achieve sufficient revenues for profitability. Even if we achieve profitability, we may not sustain or increase profitability on a quarterly or annual basis in the future. If revenues grow slower than we anticipate, or if operating expenses exceed our expectations or cannot be adjusted accordingly, our business, results of operations and financial condition will be adversely affected. See "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND SEASONALITY BECAUSE OF MANY FACTORS, ANY OF WHICH COULD ADVERSELY AFFECT OUR STOCK PRICE We believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. It is possible that in some future periods our operating results may be below the expectations of public market analysts and investors. In this event, the price of our common stock may fall. Our revenues and operating results may vary significantly from quarter to quarter due to a number of factors, many of which are not in our control. These factors include: - interest rate fluctuations; - seasonality or other economic factors impacting the overall demand for mortgage credit; - the volume of mortgage loan originations; - our ability to offer competitive rates; - changes in market rates for origination and processing fees; - the mix of refinanced mortgages versus purchase money mortgages; - new sites, services or products introduced by us or our competitors; - the level of Internet usage for financial services; - our ability to upgrade and develop our systems and infrastructure and attract new personnel in a timely and effective manner; - the size and timing of loan sales; and - economic conditions specific to the Internet as well as general economic conditions. 6 10 We anticipate that as the online mortgage origination industry matures, our business will be increasingly susceptible to the same seasonal and cyclical factors that affect the mortgage industry as a whole. The volume of loans that we originate and sell in any given period is difficult to predict because the market for online mortgage lending is at an early stage of development. A reduction in the volume of loan originations and sales would reduce our revenues, which would adversely affect our quarterly financial performance. We believe that a significant portion of our future revenues will be derived from our mortgage origination and sale operations, which generate revenues from origination and processing fees as well as gains on the sale of loans. Because we identify for prospective borrowers the most suitable products available on our website, regardless of whether such products are funded internally or through other lenders, it is difficult to predict the percentage of our total revenue that will be derived from our loan origination and sale operations versus our mortgage brokerage operations. We may not succeed in increasing our loan origination and sale revenues as a percentage of our total revenues. We plan to significantly increase our sales and marketing expenses to increase E-LOAN brand awareness and the number of loan applications that we receive. We may be unable to adjust spending quickly enough to offset any unexpected revenue shortfall. If we have a shortfall in revenues in relation to our expenses, or if our expenses do not lead to increased revenues, then our operating results would be adversely affected. Please see "Management's Discussion and Analysis of Financial Condition and Results of Operations" for detailed information on our quarterly operating results. INTEREST RATE FLUCTUATIONS COULD ADVERSELY AFFECT OUR BUSINESS A high percentage of our customers use our services to refinance existing mortgages and are motivated to do so primarily when interest rates fall below the rates of their existing mortgages. In the event interest rates significantly increase, consumers' incentive to refinance will be greatly reduced and the number of loans that we originate could significantly decline. Our failure to successfully reduce this dependence on refinancings and increase the volume of our business derived from home purchases could have an adverse affect on our business. Our ability to engage in profitable secondary sales of loans may also be adversely affected by increases in interest rates. We typically establish the interest rates on the mortgage loans that we originate at the same time we obtain best-efforts commitments from the anticipated purchasers of such loans. The mortgage loan purchase commitments we obtain are contingent upon our delivery of the relevant loans to the purchasers within specified periods. To the extent that we are unable to deliver the loans that are subject to these best-efforts commitments within the specified periods and interest rates increase, we may experience no gain or even a loss on the sale of these loans. In addition, any increase in interest rates will increase the cost of maintaining our warehouse and repurchase lines of credit which we depend on to fund the loans we originate. We currently do not use derivative financial instruments to hedge these risks and are therefore exposed to losses caused by fluctuations in interest rates. In addition, a sharp decrease in interest rates over a short period may cause customers who have interest rates on mortgages committed through E-LOAN to either delay closing their loans or refinance with another lender. If this occurs in significant numbers, it may have an adverse effect on our business or quarterly results of operations. In addition, if the percentage of committed loans that convert into closed loans declines substantially, the purchasers of these loans may raise the rates they charge us or decide not to buy loans from us. 7 11 UNCERTAINTY WITH RESPECT TO THE TIME IT TAKES TO CLOSE LOANS CAN LEAD TO UNPREDICTABLE REVENUE AND PROFITABILITY The time between the date an application is received from a customer on our website and the date the loan closes has typically been lengthy and unpredictable. In past periods, the length of time it has taken us to close a loan has exceeded the period within which we are obligated to close and deliver the loan to the committed purchaser at the rate guaranteed. The loan application and approval process is often subject to delays over which we have little or no control, including the timing of the customer's decision to commit to an available interest rate, the timeliness of appraisals and the adequacy of the customer's own disclosure documentation. This uncertain timetable can have a direct impact on our revenue and profitability for any given period. Furthermore, we may expend substantial funds and management resources supporting the loan completion process and never generate revenue from closed loans. Therefore, our results of operations for a particular period may be adversely affected if the loans applied for during that period do not close in a timely manner or at all. Furthermore, if we are required to extend the closing of loans beyond the associated interest rate commitment periods, we may incur additional costs. WE HAVE EXPERIENCED SIGNIFICANT GROWTH IN OUR BUSINESS IN RECENT PERIODS, AND IF WE ARE UNABLE TO MANAGE THIS GROWTH, OUR BUSINESS WILL BE ADVERSELY AFFECTED Our ability to successfully offer financial products and services and implement our business plan in a rapidly evolving market requires an effective planning and management process. We have experienced periods of significant growth, which have placed a significant strain on our resources and will continue to do so in the future. If we do not manage this growth effectively, it could adversely affect our business. We may not be successful in managing or expanding our operations or maintaining adequate management, financial and operating systems and controls. Our headcount has grown substantially. At December 31, 1997, we had a total of 40 employees and at December 31, 1998, we had a total of 224 employees. Several members of our senior management joined us within the last six months, including Frank Siskowski, Chief Financial Officer; Harold "Pete" Bonnikson, Senior Vice President of Operations; and Joseph Kennedy, Senior Vice President of Marketing and Business Development. These individuals have not previously worked together and they may not work together effectively. IF ONLINE MORTGAGES OR OUR SERVICE OFFERINGS DO NOT ACHIEVE WIDESPREAD CONSUMER ACCEPTANCE, OUR BUSINESS WILL BE ADVERSELY AFFECTED Our success will depend in large part on widespread consumer acceptance of purchasing mortgages online. The development of an online market for mortgage loans has only recently begun, is rapidly evolving and likely will be characterized by an increasing number of market entrants. Therefore, there is significant uncertainty with respect to the viability and growth potential of this market. Our future growth, if any, will depend on the following critical factors: - the growth of the Internet as a commerce medium generally, and as a market for consumer financial products and services specifically; - our ability to successfully and cost-effectively market our services to a sufficiently large number of customers; and - our ability to overcome a perception among many real estate market participants that obtaining mortgages online is risky for consumers. There can be no assurance that the market for our services will develop, that our services will be adopted or that consumers will significantly increase their use of the Internet for obtaining mortgage loans. If the online market for mortgage loans fails to develop, or develops more slowly 8 12 than expected, or if our services do not achieve widespread market acceptance, our business, results of operations and financial condition would be adversely affected. In addition, in order to be successful in this emerging market, we must differentiate ourselves from our competition through our service offerings and brand name recognition. We may not succeed in differentiating ourselves from our competition or achieving widespread market acceptance of our services, and we may experience difficulties that could delay or prevent the successful development, introduction or marketing of these services. In addition, if we are unable, for technical or other reasons, to develop and introduce new services or enhancements of existing services in a timely manner, or if these new services and enhancements do not achieve widespread market acceptance, our business, results of operations and financial condition would be adversely affected. BECAUSE A HIGH CONCENTRATION OF OUR BUSINESS IS IN CALIFORNIA, WE ARE PARTICULARLY VULNERABLE TO ECONOMIC AND OTHER FACTORS AFFECTING CALIFORNIA Approximately 83% of the loans we have closed in the year ended December 31, 1998 were from borrowers located in California. No other state generated more than 10% of our closed loans during such periods. Because a high concentration of our business is in California, we are particularly vulnerable to economic factors affecting California. We are likely to originate a significant amount of our loans in California for the foreseeable future. There have been times in the past, most recently in 1991 - 1992, when the California economy has suffered a recession disproportionate with the rest of the country. Should such a recession happen again in California, our business would be adversely affected. In addition, California historically has been vulnerable to certain natural disasters, such as earthquakes and mudslides, which are not typically covered by standard hazard insurance policies maintained by borrowers. Uninsured disasters may adversely impact borrowers' ability to repay mortgage loans we originate and any sustained period of increased delinquencies or defaults could adversely affect the pricing of our future secondary loan sales and our overall ability to sell loans. The occurrence of such natural disasters in California could have an adverse effect on our business, results of operations and financial condition. THE LOSS OF ONE OR MORE OF OUR SIGNIFICANT DISTRIBUTION PARTNERS WOULD ADVERSELY AFFECT OUR BUSINESS We rely on Internet distribution partners to direct a significant number of our prospective customers to our website. We maintain co-branded loan centers on the websites of a number of these partners. If we lose any of our significant distribution partners, we will likely fail to meet our growth objectives, both in terms of additional borrowers and increased brand awareness. We consider our distribution partnerships with Yahoo!, E*Trade and DLJdirect to be the most critical to our success. During the year ended December 1998, approximately 13% of our closed loans were derived from the Yahoo! co-branded website and during the first two months of 1999, approximately 2% and 1% of our closed loans were derived from the co-branded websites of E*Trade and DLJdirect, respectively. In the aggregate, approximately 17% of our closed loans were derived from the websites of our distribution partners in 1998. Our agreements with our distribution partners are typically short-term, from one to three years in length, and can be terminated for any reason upon 30 to 60 days prior written notice. We cannot assure you that any or all of these agreements will not be terminated or will be renewed or extended past their current expiration dates. If any of these agreements were to be terminated or were to lapse without extension, we could lose a considerable number of loan applications and our business would be adversely affected. 9 13 WE ARE SUBSTANTIALLY DEPENDENT ON OUR FUNDING PARTNERS AND THE TERMINATION OF ONE OR MORE OF THESE RELATIONSHIPS WOULD ADVERSELY AFFECT OUR BUSINESS We are dependent on GE Capital Mortgage Services, Inc. and Bank United to finance our internal loan funding activities through the warehouse credit facilities provided by each of these lenders. We are also dependent on Greenwich Capital Financial Products, Inc. to finance portions of our mortgage loan inventory pending ultimate sale to mortgage loan purchasers. If either of our warehouse credit facilities becomes unavailable or our relationship with Greenwich Capital is terminated, our business would be adversely affected. Under our agreements with each of these partners we make extensive representations and warranties. A material breach of these representations and warranties could result in the termination of our agreements and an obligation to repay all amounts outstanding at the time of termination. Our agreements with GE Capital and Bank United require us to comply with various operating and financial covenants. These covenants restrict our ability to: - sell any of our material assets or merge or consolidate with another company; - issue additional shares of common stock without their consent; - pay dividends on our outstanding shares of common stock; and - amend our Certificate of Incorporation or Bylaws. These covenants also require us to: - maintain a minimum tangible net worth; - limit the amount of debt we incur relative to our net worth; and - ensure that our current assets are equal to or greater than our current liabilities. Our agreements with Greenwich Capital and GE Capital contain various non-financial negative and affirmative covenants. A failure to satisfy these covenants could result in the termination of our agreements. In the past, we have had to obtain waivers from Greenwich Capital and GE Capital as a result of our failure to comply with certain of these covenants. Our agreement with Greenwich Capital expires in April 2000, our agreement with GE Capital expires in June 1999 and our agreement with Bank United expires in February 2000. Although we are currently negotiating an extension of our agreement with GE Capital, it can be terminated at any time on 120 days prior written notice. We are continually seeking to obtain additional warehouse lending resources, but we may not be successful in this regard. A DELAY IN THE RECEIPT OF SERVICES FROM CERTAIN THIRD PARTIES WOULD ADVERSELY AFFECT OUR BUSINESS We rely on other companies to perform certain aspects of the loan underwriting process, including appraisals, credit reporting and title searches. Any interruptions or delays in the provision of these ancillary services may cause delays in the processing and closing of loans for our customers. The value of the service we offer and the ultimate success of our business are dependent on our ability to manage the timely provision of these ancillary services by the third parties with whom we have business relationships. If we are unsuccessful in managing the timely delivery of these ancillary services we will likely experience increased customer dissatisfaction and our business could be adversely affected. E-LOAN licenses its mortgage loan origination systems and proprietary marks to NetB@nk to enable NetB@nk to fund mortgage loans under the E-LOAN brand in ten of the 16 states where E-LOAN is not licensed as a mortgage banker. E-LOAN also has agreements with PHH Mortgage Services Corporation and Prism Mortgage Company relating to the fulfillment of all aspects of loan transaction processing following origination in the other six states in which E-LOAN is not licensed as a mortgage banker. Each of these agreements may be terminated by 10 14 either party upon 30 days prior written notice. Given that we intend to increase our activities in the states where we rely on the funding and transaction processing services provided by our business partners, the termination of any or all of these agreements could have a material adverse effect on our business. WE EXPECT TO BE DEPENDENT UPON AUTOMATED UNDERWRITING, AND THE LOSS OF OUR RELATIONSHIP WITH FANNIE MAE OR ANY OTHER SIGNIFICANT PROVIDER OF AUTOMATED UNDERWRITING WOULD HAVE AN ADVERSE AFFECT ON OUR BUSINESS We expect to be dependent on automated underwriting and other services offered by government sponsored and other mortgage investors, such as Fannie Mae and Freddie Mac, to help ensure that our mortgage services can be offered efficiently and on a timely basis. Automated underwriting will permit us to streamline mortgage origination by moving underwriting to the initial stages of the loan process. We currently have an agreement with Fannie Mae that authorizes our use of their automated underwriting services and enables us to sell qualified first mortgages to Fannie Mae. We cannot assure you that we will remain in good standing with Fannie Mae or that Fannie Mae will not terminate our relationship. We expect to process a significant portion of our conforming loans using the Fannie Mae system until we are able to obtain automated underwriting services from other providers. Our agreement with Fannie Mae can be terminated by either party immediately upon the delivery of a written termination notice. The termination of our agreement with Fannie Mae would adversely impact our business by reducing our ability to streamline the mortgage origination process. Furthermore, we may not be able to successfully implement the automated underwriting services of Fannie Mae or other automated underwriting providers in a manner that will lead to substantial processing efficiencies. WE MAY INCUR LOSSES ON LOANS IF WE BREACH REPRESENTATIONS OR WARRANTIES TO MORTGAGE LOAN PURCHASERS In connection with the sale and exchange of loans, we make customary representations and warranties to mortgage loan purchasers relating to, among other things, compliance with laws and origination practices. In the event we breach any of these representations and warranties, we may be required to repurchase or substitute certain mortgage loans and bear any subsequent losses on the repurchased loans. We may also be required to indemnify mortgage loan purchasers for certain losses and claims with respect to mortgage loans for which there was a breach of representations and warranties. In addition, certain of our agreements with mortgage loan purchasers prohibit our solicitation of borrowers with respect to the refinancing of loans we originate and sell. The mortgage loan purchasers under these agreements may construe our Mortgage Monitor service, which enables borrowers to compare their mortgages to other products on the market to identify favorable refinancing opportunities, as violating these non-solicitation provisions, in which case they may elect to terminate their agreements with us or may seek recovery from us for damages sustained by them. Furthermore, certain of our agreements with mortgage loan purchasers prohibit us from refinancing mortgage loans for certain time periods, even without our solicitation, unless we pay penalties to the mortgage loan purchasers or obtain their consent. These agreements also require us to return any premiums paid by a mortgage loan purchaser if the mortgage loans purchased are prepaid in full during periods of up to 12 months following the date the mortgage loan is purchased. 11 15 THE MORTGAGE LENDING INDUSTRY IS INTENSELY COMPETITIVE, AND IF WE FAIL TO SUCCESSFULLY COMPETE IN THIS INDUSTRY, OUR MARKET SHARE AND BUSINESS WILL BE ADVERSELY AFFECTED In each of the geographic markets in which we operate, we face competition from established mortgage providers, including commercial banks and thrifts. Competition can take place on various levels, including convenience in obtaining mortgage loans, service, marketing, pricing and brand awareness. There can be no assurance that we will be able to successfully compete with these mortgage providers on any or all of these levels. In addition, we face increasing direct competition from other companies offering mortgage loans or other home buying services over the Internet. Principal among these competitors are Microsoft HomeAdvisor, Intuit QuickenMortgage, HomeShark Inc., Keystroke Financial, Inc. and Mortgage.com. Traditional lenders, such as Countrywide, Norwest, Wells Fargo and BankAmerica, also offer access to their mortgage products over the Internet. Furthermore, competition is likely to increase significantly as new companies enter the market and current competitors expand their services. Many of these current and potential competitors enjoy substantial competitive advantages, including: - longer operating histories; - greater name recognition; - larger, established customer bases; and - substantially greater financial, marketing, technical and other resources. These competitors are able to undertake more extensive marketing campaigns for their brands and services, adopt more aggressive advertising pricing policies and make more attractive offers to potential employees, distribution partners, commerce companies, and third-party service providers. Accordingly, we may not be able to grow our customer base at historical levels, our competitors may experience greater growth than we do or our strategic partners may terminate their agreements with us. We may not be able to compete successfully against our current or future competitors and competitive pressures we face may have a material adverse effect on our business, results of operations and financial condition. To compete successfully, we must respond promptly and effectively to the challenges of technological change, evolving standards and our competitors' innovations by continuing to enhance and expand our services, as well as our sales and marketing channels. Increased competition, particularly online competition, could result in price reductions, reduced margins or loss of market share, any of which could adversely affect our business. We may not be able to compete successfully in our market environment and our failure to do so could have an adverse effect on our business, results of operations and financial condition. IF WE FAIL TO COMPLY WITH THE NUMEROUS LAWS AND REGULATIONS THAT GOVERN OUR INDUSTRY, OUR BUSINESS COULD BE ADVERSELY AFFECTED The residential mortgage financing industry is highly regulated. Our business is subject to extensive and complex rules and regulations of, and licensing and examination by, various federal, state and local government authorities. These rules impose obligations and restrictions on our residential loan brokering and lending activities. In particular, these rules limit the broker fees, interest rates, finance charges and other fees we may assess, require extensive disclosure to our customers, prohibit discrimination and impose on us multiple qualification and licensing obligations. We may not always have been and may not always be in compliance with these requirements. Failure to comply with these requirements may result in, among other things, revocation of required licenses or registrations, loss of approved status, voiding of loan contracts or security interests, indemnification liability or the obligation to repurchase mortgage loans sold to mortgage loan purchasers, rescission of mortgage loans, class action lawsuits, administrative enforcement actions and civil and criminal liability. 12 16 As a mortgage company doing business exclusively through the Internet, we face an additional level of regulatory risk given that the statutes and regulations governing mortgage transactions have not been substantially revised or updated to fully accommodate e-commerce. Most of the federal and state laws, rules and regulations governing mortgage loans contemplate or assume paper-based transactions and do not currently address the delivery of required disclosures and other documents through electronic communications. Until such laws, rules and regulations are revised to clarify their applicability to transactions through e-commerce, any company offering mortgage loans through the Internet or other means of e-commerce will face uncertainty as to compliance. Our policies and procedures may not be deemed acceptable by any regulatory body examining our activities. Any adverse regulatory actions could seriously damage our business. In addition, revisions to the laws, rules and regulations applicable to e-commerce may not be adopted and, if adopted, may not be timely or adequate to eliminate such uncertainty. At the state level, we are subject to licensing and regulation in most of the states where we act as a mortgage broker or lender. In addition, any person who acquires 10% or more of our stock may be subject to certain state licensing regulations, which require the periodic filing of certain financial information and other personal and business information. If any person holding 10% or more of our stock refuses or fails to comply with such filing requirements, our existing licensing arrangements could be jeopardized. The loss of required licenses could have an adverse effect on our business, results of operations and financial condition. State laws limit the broker fees, interest rates, finance charges and other fees we may assess, including late charges, insufficient funds charges for returned checks and prepayment penalties, and may require payment of interest on escrow balances. State laws also require extensive disclosure to our customers concerning such matters as fees and charges, brokerage agreements, lock-in agreements and commitments, alternative mortgage transactions, such as adjustable rate loans, escrows for taxes and insurance, choosing settlement attorneys and insurance agents and private mortgage insurance, among others. These laws regulate both the content and timing of disclosures. In addition, many state laws regulate advertising claims in connection with the solicitation of mortgage loan applications. State and federal laws also prohibit unfair and deceptive trade practices in the mortgage finance business. We cannot assure you that we will always be in compliance with all of these laws and regulations. Non-compliance with applicable state laws or regulations could have an adverse effect on our business and may result in our being prohibited from continuing to broker and fund mortgage loans in one or more states. At the federal level, our mortgage brokering and funding activities are regulated under a variety of laws, including, but not limited to, the Truth in Lending Act and Regulation Z, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Fair Credit Reporting Act, the Real Estate Settlement Procedures Act and Regulation X, and the Home Mortgage Disclosure Act of 1975 and Regulation C. These statutes generally require detailed disclosure of information concerning mortgage loans, and they regulate the manner in which such loans are made, including advertising, disclosure of consumer information, servicing (and transfer of servicing) of mortgage loans, payments for settlement services and reporting of consumer data. These laws regulate both the content and timing of disclosures. Any non-compliance with applicable federal laws or regulations could have an adverse effect on our business and may result in our being prohibited from continuing to sell mortgage loans or subject us to fines or other penalties, including criminal sanctions. The laws, rules and regulations applicable to our business are subject to periodic modification. There are currently proposed various laws, rules and regulations which, if adopted, could impact our business by making compliance much more difficult or expensive, restricting our ability to originate, broker, purchase or sell loans, further limiting or restricting the amount of 13 17 commissions, interest and other charges earned on loans we originate, broker, purchase or sell, or otherwise adversely affecting our business or prospects. These proposed laws, rules and regulations, or other such laws, rules or regulations, may not be adopted in the future. ANY ACQUISITIONS THAT WE UNDERTAKE COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS, DILUTE STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS We may acquire or make investments in complementary businesses, technologies, services or products if appropriate opportunities arise. These acquisitions and investments could disrupt our ongoing business, distract our management and employees and increase our expenses. From time to time we have had discussions with companies regarding our acquiring, or investing in, their businesses, products, services or technologies. We have no contracts or letters of intent relating to any such acquisition or investment. We may not be able to identify suitable acquisition or investment candidates. Even if we do identify suitable candidates, we may not be able to make such acquisitions or investments on commercially acceptable terms. If we acquire a company, we could have difficulty in assimilating that company's personnel, operations, technology and software. In addition, the key personnel of the acquired company may decide not to work for us. If we make other types of acquisitions, we could have difficulty in integrating the acquired products, services or technologies into our operations. These difficulties could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations. Furthermore, we may incur indebtedness or issue equity securities to pay for any future acquisitions. The issuance of equity securities could be dilutive to our existing stockholders. OUR EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS, AND THE LOSS OF ANY OF THESE OFFICERS OR KEY PERSONNEL WOULD LIKELY HAVE AN ADVERSE AFFECT ON OUR BUSINESS Our future success depends to a significant extent on the continued services of our senior management and other key personnel, particularly co-founders Chris Larsen, Chief Executive Officer, and Janina Pawlowski, President. Ms. Pawlowski, a licensed real estate broker, is responsible for all of our activities in California and several other states. If Ms. Pawlowski were to terminate her relationship with us for any reason we would not be able to conduct business in these states until a replacement with adequate education and experience is found. The loss of the services of Mr. Larsen, Ms. Pawlowski or certain other key employees, would also likely have an adverse effect on our business, results of operations and financial condition. We have not entered into employment agreements with any of our executives, except Joseph Kennedy, Senior Vice President, Marketing and Business Development, and do not maintain "key person" life insurance for any of our personnel. Please see "Management" for detailed information on our key personnel. WE MAY NOT BE ABLE TO RECRUIT AND RETAIN THE PERSONNEL WE NEED TO SUCCEED Our future success depends on our continuing to attract, retain and motivate highly skilled employees, particularly with respect to our loan processing functions. Competition for personnel throughout our industry is intense. We may be unable to retain our key employees or attract, assimilate or retain other highly qualified employees in the future. We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining employees with appropriate qualifications. If we do not succeed in attracting new personnel or retaining and motivating our current personnel, our business will be adversely affected. OUR BUSINESS WILL BE IMPAIRED IF CONSUMERS DO NOT CONTINUE TO USE THE INTERNET Our business would be adversely affected if Internet usage does not continue to grow, particularly by homebuyers. A number of factors may inhibit Internet usage by consumers, including inadequate network infrastructure, security concerns, inconsistent quality of service, 14 18 and lack of availability of cost-effective, high-speed service. If Internet usage grows, the Internet infrastructure may not be able to support the demands placed on it by this growth and its performance and reliability may decline. In addition, many websites have experienced service interruptions as a result of outages and other delays occurring throughout the Internet infrastructure. If these outages or delays frequently occur in the future, Internet usage, as well as the usage of our website, could grow more slowly or decline. OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO EXPAND AND PROMOTE OUR BRAND RECOGNITION There are a growing number of Internet websites which offer services that are similar to and competitive with the services offered by us. Therefore, we believe that brand recognition will become an increasingly important competitive advantage. Establishing and maintaining our brand is critical to attracting and expanding our customer base, solidifying our business relationships and successfully implementing our business strategy. We cannot assure you that our brand will continue to be positively accepted by the market or that our reputation will remain strong. In order to attract and retain customers and business partners and to promote and maintain our brand in response to competitive pressures, we intend to increase substantially our financial commitment to creating and maintaining prominent brand awareness. The programs we have in place include: - online advertising and marketing; - print advertising campaigns; - radio advertisements in key markets; and - selected television advertising. Promotion and enhancement of our brand will also depend, in part, on our success in providing a high-quality customer experience. We cannot assure you that we will be successful in achieving this goal. To date we are aware of numerous customer complaints regarding the quality of our service. If these complaints persist they may significantly damage our reputation and offset the efforts we make in promoting and enhancing our brand and could have an adverse effect on our business, results of operations and financial condition. In addition, we may need to expend additional resources to build our brand. If we do not generate a corresponding increase in revenues as a result of our marketing efforts or we otherwise fail to promote our brand successfully, or if these efforts lead to our incurring excessive expenses, our business, results of operations and financial condition will be adversely affected. If visitors to our website do not perceive our existing services to be of high quality or if we alter or modify our brand image, introduce new services or enter into new business ventures that are not favorably received, the value of our brand could be diluted, thereby decreasing the attractiveness of our service to potential customers. OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO ADAPT TO THE RAPID TECHNOLOGICAL CHANGE THAT CHARACTERIZES OUR INDUSTRY Our market is characterized by rapidly changing technologies, frequent new product and service introductions and evolving industry standards. The recent growth of the Internet and e-commerce, and the intense competition in our industry magnify these market characteristics. Our future success will depend on our ability to adapt to rapidly changing technologies by continually improving the performance features and reliability of our services. To operate our website and provide our mortgage services, we utilize software packages from a variety of third parties which are customized and integrated with code that we have developed ourselves. In particular, we rely on third party software products and services related to automated underwriting functions which will enable us to realize processing efficiencies that are central to our operations. If we are unable to integrate this software in a fully functional manner, we may experience difficulties that could delay or prevent the successful development, introduction or marketing of new products and services. In addition, enhancements of our products and services 15 19 must meet the requirements of our current and prospective customers and must achieve significant market acceptance. We could also incur substantial costs if we need to modify our services or infrastructure to adapt to these changes. REGULATION OF THE INTERNET IS UNSETTLED, AND FUTURE REGULATIONS COULD HAVE AN ADVERSE AFFECT ON OUR BUSINESS Laws and regulations directly applicable to the Internet and e-commerce may become more prevalent in the future. Such legislation could dampen the growth in Internet usage generally and decrease the acceptance of the Internet as a commercial medium. Although our business is based in California, the governments of other states or foreign countries might attempt to regulate our activities or levy sales or other taxes on us. The laws governing the Internet remain largely unsettled, even in areas where there has been some legislative action. It may take years to determine whether and how existing laws such as those governing intellectual property, privacy and taxation apply to the Internet. In addition, the growth and development of the market for e-commerce may prompt calls for more stringent consumer protection laws, both in the United States and abroad, that may impose additional burdens on companies conducting business over the Internet. In the event the Federal Trade Commission or other governmental authorities adopt or modify laws or regulations relating to the Internet, our business, results of operations and financial condition could be adversely affected. ANY FAILURES OF, OR CAPACITY CONSTRAINTS IN, OUR SYSTEMS OR THE SYSTEMS OF THIRD PARTIES ON WHICH WE RELY COULD ADVERSELY AFFECT OUR BUSINESS Our communications hardware and certain of our other computer hardware operations are located at the facilities of Exodus Communications, Inc. in Santa Clara, California and Jersey City, New Jersey. The hardware for our internal loan and product database, as well as our loan processing operations is maintained in our Dublin, California facility. Fires, floods, earthquakes, power losses, telecommunications failures, break-ins and similar events could damage these systems. Computer viruses, electronic break-ins or other similar disruptive problems could also adversely affect our website. Our business could be adversely affected if our systems were affected by any of these occurrences. Our insurance policies may not adequately compensate us for any losses that may occur due to any failures or interruptions in our systems. Our website must accommodate a high volume of traffic and deliver frequently updated information, the accuracy and timeliness of which is critical to our business. Our website has in the past and may in the future experience slower response times or decreased traffic for a variety of reasons. In addition, our users depend on Internet service providers, online service providers and other website operators for access to our websites. Many of them have experienced significant outages in the past, and could experience outages, delays and other difficulties due to system failures unrelated to our systems. Moreover, the Internet infrastructure may not be able to support continued growth in its use. Any of these problems could adversely affect our business. OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO SAFEGUARD THE SECURITY AND PRIVACY OF OUR CUSTOMERS' FINANCIAL DATA A significant barrier to e-commerce and online communications has been the need for secure transmission of confidential information over the Internet. Internet usage could decline if any well-publicized compromise of security occurred. We may incur significant costs to protect against the threat of security breaches or to alleviate problems caused by such breaches. We also retain on our premises personal financial documents that we receive from prospective borrowers in connection with their loan applications. These documents are highly sensitive and if a third party were to misappropriate our users' personal information, users could possibly bring legal claims against us. We cannot assure you that our privacy policy will be deemed sufficient by our 16 20 prospective customers or any federal or state laws governing privacy which may be adopted in the future. OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS FROM THIRD PARTY CHALLENGES OR IF WE ARE SUBJECT TO LITIGATION Trademarks and other proprietary rights are important to our success and our competitive position. Although we seek to protect our trademarks and other proprietary rights through a variety of means, we cannot assure you that the actions we have taken are adequate to protect these rights. We may also license content from third parties in the future and it is possible that we could become subject to infringement actions based upon the content licensed from these third parties. Any claims brought against us, regardless of their merit, could result in costly litigation and the diversion of our financial resources and technical and management personnel. Further, if such claims are proved valid, through litigation or otherwise, we may be required to change our trademarks and pay financial damages, which could adversely affect our business. We typically enter into confidentiality or license agreements with our employees, consultants and corporate partners, and generally control access to and distribution of our technologies, documentation and other proprietary information. Despite our efforts to protect our proprietary rights from unauthorized use or disclosure, parties may attempt to disclose, obtain or use our rights. The steps we have taken may not prevent misappropriation of our proprietary rights, particularly in foreign countries where laws or law enforcement practices may not protect our proprietary rights as fully as in the United States. We expect that we may be subject to legal proceedings and claims from time to time in the ordinary course of our business, including claims of alleged infringement of the trademarks and other intellectual property rights of third parties by us and our licensees. Such claims, even if without merit, could result in the expenditure of significant financial and managerial resources. Further, if such claims are successful, we may be required to change our trademarks, alter our content and pay financial damages, which could adversely affect our business. We may be required to obtain licenses from others to refine, develop, market and deliver new services. There can be no assurance that we will be able to obtain any such license on commercially reasonable terms or at all, or that rights granted pursuant to licenses will be valid and enforceable. IF OUR INTERNAL SYSTEMS, OR THE INTERNAL SYSTEMS OF OUR SUPPLIERS, ARE NOT YEAR 2000 COMPLIANT, OUR BUSINESS COULD BE SERIOUSLY DISRUPTED Many currently installed computer systems and software products only accept two digits to identify the year in any date. Thus, the year 2000 will appear as "00", which the system might consider to be the year 1900 rather than the year 2000. This could result in system failures, delays or miscalculations. Computer systems and software that have not been developed or enhanced recently may need to be upgraded or replaced to comply with Year 2000 requirements. We believe that each of our software systems on a stand-alone basis is currently Year 2000 compliant. However, we rely on software components acquired from third parties which may not be Year 2000 compliant. Furthermore, the Internet operations of many of our customers and suppliers may be affected by Year 2000 complications. The failure of our customers or suppliers to ensure that their systems are Year 2000 compliant could have an adverse effect on our customers and suppliers, resulting in decreased Internet usage or our inability to obtain necessary data communication and telecommunication capacity, which in turn could have an adverse effect on our business, results of operations and financial condition. 17 21 The potential worst case scenario includes: - slowdown in online applications due to a general failure of the Internet; - corruption of data in our internal information systems; - delays in our processing capabilities that depend on third-party systems; - financial losses associated with delays in closing loans; and - failure of infrastructure services provided by third parties, including public utilities and Internet service providers. We have not incurred significant costs to date complying with Year 2000 requirements, and we do not believe that we will incur significant costs for such purposes in the foreseeable future. If we discover any Year 2000 errors or defects in our internal systems, we could incur substantial costs in making repairs. The resulting disruption of our operations could seriously damage our business. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Year 2000". THERE HAS BEEN NO PRIOR MARKET FOR OUR COMMON STOCK AND AN ACTIVE TRADING MARKET MAY NOT DEVELOP FOLLOWING THIS OFFERING Before this offering, there has not been a public market for our common stock and the trading market price for our common stock may decline below the initial public offering price. We cannot predict the extent to which a market will develop or how liquid that market might become. The initial public offering price for the shares of our common stock will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the trading market. See "Underwriting" for a discussion of the factors considered in determining the initial public offering price. OUR STOCK PRICE COULD BE VOLATILE AND COULD DECLINE FOLLOWING THIS OFFERING The stock market has experienced significant price and volume fluctuations, and the market prices of technology companies, particularly Internet-related companies, have been highly volatile. Investors may not be able to resell their shares at or above the initial public offering price. See "Underwriting". In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of their securities. Such litigation could result in substantial costs and a diversion of management's attention and resources. PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS WILL RETAIN SUBSTANTIAL CONTROL OVER OUR BUSINESS AFTER THE OFFERING AND MAY MAKE DECISIONS THAT ARE NOT IN THE BEST INTEREST OF ALL STOCKHOLDERS Upon completion of this offering, our executive officers, directors and greater than 5% stockholders, and their affiliates, will, in the aggregate, own approximately % of our outstanding common stock. As a result, such persons, acting together, will have the ability to substantially influence all matters submitted to the stockholders for approval, including the election and removal of directors and any merger, consolidation or sale of all or substantially all of our assets, and to control our management and affairs. Accordingly, such concentration of ownership may have the effect of delaying, deferring or preventing a change in control, impeding a merger, consolidation, takeover or other business combination involving us or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our business, even if such a transaction would be beneficial to other stockholders. See "Principal Stockholders". 18 22 FUTURE SALES OF OUR COMMON STOCK MAY CAUSE OUR STOCK PRICE TO DECLINE Sales of significant amounts of our common stock in the public market after this offering or the perception that such sales will occur could adversely affect the market price of our common stock or our future ability to raise capital through an offering of our equity securities. Of the shares of common stock to be outstanding upon the closing of this offering, the shares offered hereby will be eligible for immediate sale in the public market without restriction, unless the shares are purchased by our "affiliates" within the meaning of Rule 144 under the Securities Act of 1933. The remaining 11,031,320 shares of our common stock held by existing stockholders upon the closing of this offering will be "restricted securities", as that term is defined in Rule 144. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144, 144(k) or 701 under the Act. All of the holders of these restricted securities, including our officers and directors, have entered into lock-up agreements providing that, subject to certain limited exceptions, they will not sell, directly or indirectly, any common stock without the prior consent of Goldman, Sachs & Co. for a period of 180 days from the date of this prospectus. Subject to the provisions of Rules 144, 144(k) and 701, 10,791,320 shares of common stock will be available for sale in the public market, subject to compliance with certain volume restrictions in the case of shares held by affiliates, upon expiration of this 180-day period. In addition, as of March 19, 1999, there were outstanding options to purchase 1,971,206 shares of common stock which will be eligible for sale in the public market from time to time subject to vesting and the expiration of lock-up agreements. In addition, certain stockholders, representing approximately 5,947,465 shares of common stock, including shares issuable upon the exercise of certain warrants to purchase common stock, will be entitled to certain demand and piggy-back registration rights, subject to certain conditions. As of March 19, 1999, there was outstanding a warrant to purchase 15,000 shares of Series C preferred stock, convertible into 15,000 shares of common stock after this offering, and a warrant to purchase 53,996 shares of Series D preferred stock, convertible into 53,996 shares of common stock after this offering. The 68,996 shares of common stock that will be issuable upon exercise of these warrants will be eligible for sale in the public market from time to time subject to the expiration of lock-up agreements and Rule 144. See "Management -- Stock Plans", "Description of Capital Stock -- Registration Rights", "Shares Available for Future Sale" and "Underwriting". YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY UNCERTAIN This prospectus contains forward-looking statements that involve risks and uncertainties. You should not rely on these forward-looking statements. We use words such as "anticipates," "believes," "plans," "expects," "future," "intends" and similar expressions to identify such forward-looking statements. This prospectus also contains forward-looking statements attributed to certain third parties relating to their estimates regarding the growth of e-commerce and mortgage loan markets. You should not place undue reliance on those forward-looking statements, which apply only as of the date of this prospectus. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the risks faced by us described in "Risk Factors" and elsewhere in this prospectus. 19 23 USE OF PROCEEDS The net proceeds to us from the sale of the shares of common stock offered by us are estimated to be $ after deducting the underwriting discount, estimated offering expenses and assuming no exercise of the underwriters' over-allotment option to purchase additional shares of common stock from us. We expect to use the majority of such proceeds for working capital and general corporate purposes. It is our intent to focus our operating efforts on increasing client satisfaction with the E-LOAN experience by further streamlining the mortgage process. This focused effort will include expenditures on technology and system upgrades, corporate training, and recruitment of key management and personnel to improve our operating and customer service practices. In addition, we may use a portion of the net proceeds to acquire complementary products, technologies or businesses; however, we currently have no commitments or agreements and are not involved in any negotiations to do so. We intend to invest the net proceeds of this offering in interest-bearing, investment-grade securities pending their use. DIVIDEND POLICY We have never declared or paid any dividends on our capital stock. We currently expect to retain future earnings, if any, for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. The covenants made by us under our existing line of credit prohibit the payment of dividends. 20 24 CAPITALIZATION The following table sets forth the following information: - the actual capitalization of E-LOAN as of December 31, 1998; - the pro forma capitalization of E-LOAN after giving effect to the conversion of all outstanding shares of convertible preferred stock and 53,996 warrants to purchase Series D preferred stock at $9.26 per share into 6,645,303 shares of common stock upon the closing of this offering; and - the pro forma as adjusted capitalization after giving effect to the sale of shares of common stock in this offering at the initial public offering price of $ per share, less underwriting discounts and commissions and estimated offering expenses payable by E-LOAN.
AS OF DECEMBER 31, 1998 -------------------------------------- PRO FORMA ACTUAL PRO FORMA AS ADJUSTED ------------ --------- ----------- (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Lease obligations, long-term portion........................ $ 719 $ 719 $ Notes payable, long-term.................................... 570 570 Mandatorily redeemable convertible preferred stock: Series C, 4,467,912 shares authorized; 4,069,936 shares issued and outstanding, actual (aggregate liquidation preference $4,999,998); no shares issued and outstanding, pro forma as adjusted...................... $ 5,526 $ -- Series C-1, 4,467,912 shares authorized; no shares issued and outstanding, actual (liquidation preference $1.22852 per share); no shares issued and outstanding, pro forma as adjusted............................................. -- -- Series D, 1,950,000 shares authorized; 1,662,529 shares issued and outstanding, actual (aggregate liquidation preference $15,400,006); no shares issued and outstanding, pro forma as adjusted...................... 15,867 -- ------------ -------- Stockholders' deficit: Convertible preferred stock; Series A, 428,635 shares authorized; 428,635 shares issued and outstanding, actual (aggregate liquidation preference $94,300) no shares issued and outstanding, pro forma and as adjusted............................. 91 -- Series B, 450,708 shares authorized; 430,207 shares issued and outstanding, actual (aggregate liquidation preference $412,999); no shares issued and outstanding, pro forma as adjusted.................... 411 -- Preferred stock; no shares authorized, actual; 5,000,000 shares authorized, pro forma as adjusted, no shares issued and outstanding, actual, pro forma as adjusted... Common stock; 20,000,000 shares authorized and 4,174,951 shares issued and outstanding, actual; 70,000,000 authorized, 10,820,254 shares issued and outstanding, pro forma, shares issued and outstanding, pro forma as adjusted....................................... 27 22,422 Less: subscription receivable............................. (4) (4) Additional paid-in capital................................ 5,367 5,367 Unearned compensation..................................... (4,477) (4,477) Accumulated deficit....................................... (12,599) (12,599) ------------ -------- Total stockholders' deficit........................ $ (11,184) $ 10,709 ------------ -------- Total mandatorily redeemable convertible stock and stockholders' equity (deficit)................... $ 10,209 $ 10,709 ------------ -------- Total capitalization........................................ $ 11,498 $ 11,998 $ -- ============ ======== ========
21 25 This table excludes the following shares: - 1,181,998 shares of common stock issuable upon exercise of options outstanding under E-LOAN's 1997 Stock Option Plan with a weighted average exercise price of $1.56 per share; - 15,000 shares of common stock issuable upon conversion of 15,000 shares of Series C preferred stock issuable upon exercise of a warrant to purchase Series C preferred stock at an exercise price of $2.00 per share; and - 318,002 shares of common stock available for issuance under E-LOAN's 1997 Stock Option Plan as of December 31, 1998 (excluding future annual automatic increases to the number of shares reserved under the plan). See "Management -- Stock Plans", "Description of Capital Stock" and Notes 11, 12 and 16 of Notes to Financial Statements. 22 26 DILUTION The pro forma net tangible book value of our common stock on December 31, 1998 was $10.7 million, or approximately $0.99 per share. Pro forma net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the 10,820,254 pro forma number of shares of common stock outstanding (assuming the conversion of all outstanding convertible preferred stock and 53,996 warrants to purchase Series D preferred stock into shares of common stock at $9.26 per share). Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of our common stock in this offering and the net tangible book value per share of our common stock immediately after the offering. After giving effect to our sale of the shares of common stock offered hereby and after deducting the underwriting discounts and commissions and estimated offering expenses payable by E-LOAN, E-LOAN's net tangible book value would have been $ or $ per share. This represents an immediate increase in net tangible book value of $ per share to existing stockholders and an immediate dilution in net tangible book value of $ per share to new investors. The following table illustrates this per share dilution. Assumed initial public offering price per share............. $ -------- Pro forma net tangible book value per share as of December 31, 1998............................................... $ 0.99 -------- Increase per share attributable to new investors.......... $ -------- Pro forma net tangible book value per share after the offering.................................................. $ -------- Dilution in pro forma net tangible book value per share to new investors............................................. $ ========
The following table sets forth, as of December 31, 1998, the number of shares of common stock purchased from E-LOAN by existing stockholders and by the new investors together with the total price and average price per share paid by each of these groups. The information presented is based upon an assumed initial public offering price of $ per share, before deducting underwriting discounts and commissions and estimated offering expenses payable by E-LOAN.
SHARES PURCHASED TOTAL CONSIDERATION -------------------- ------------------- AVERAGE PRICE NUMBER PERCENT AMOUNT PERCENT PER SHARE ---------- ------- -------- -------- ------------- Existing stockholders........... 10,820,254 % $ % $ New investors................... Total......................... % $ % $ ========== ===== ======= =====
The information set forth above is based upon the number of shares of common stock outstanding on December 31, 1998 and gives effect to the conversion of all outstanding shares of E-LOAN's preferred stock and 53,996 warrants to purchase Series D preferred stock into shares of common stock upon the closing of this offering. This information excludes: - 1,181,998 shares of common stock issuable upon exercise of options outstanding under E-LOAN's 1997 Stock Option Plan with a weighted average exercise price of $1.56 per share; - 15,000 shares of common stock issuable upon conversion of 15,000 shares of Series C preferred stock issuable upon exercise of a warrant to purchase Series C preferred stock at an exercise price of $2.00 per share; and - 318,002 shares of common stock available for issuance under E-LOAN's 1997 Stock Option Plan as of December 31, 1998 (excluding future annual automatic increases to the number of shares reserved under the plan). See "Management -- Stock Plans", "Description of Capital Stock" and Notes 11, 12 and 16 of Notes to Financial Statements. 23 27 SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) The selected financial data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and is qualified by reference to the Financial Statements and Notes thereto appearing elsewhere in this prospectus. The balance sheet data set forth below as of December 31, 1997 and 1998 and the income statement data for each of the three years in the period ended December 31, 1998 are derived from, and are qualified by reference to, the audited financial statements of E-LOAN included elsewhere in this prospectus. The selected balance sheet financial data set forth below as of December 31, 1995 and 1996 and the income statement data for the year ended December 31, 1995 are derived from the unaudited financial statements of E-LOAN not included herein. The historical results are not necessarily indicative of results to be expected for any future period. See "Management's Discussion and Analysis of Financial Condition and Results of Operations".
YEAR ENDED DECEMBER 31, ------------------------------------------- 1995 1996 1997 1998 -------- -------- ------- -------- INCOME STATEMENT DATA: Revenues.................................................... $ 1,603 $ 893 $ 1,043 $ 6,832 Operating expenses: Operations................................................ 1,368 903 1,319 7,626 Sales and marketing....................................... -- -- 470 5,642 Technology................................................ -- -- 102 1,248 General and administrative................................ 152 97 524 2,410 Amortization of unearned compensation..................... -- -- -- 1,251 -------- -------- ------- -------- Total operating expenses................................ 1,520 1,000 2,415 18,177 -------- -------- ------- -------- Loss from operations.................................. 83 (107) (1,372) (11,345) Other income, net........................................... -- (3) (2) 173 -------- -------- ------- -------- Net income (loss)........................................... $ 83 $ (110) $(1,374) $(11,172) ======== ======== ======= ======== Net loss per share: Basic and diluted....................................... $ .02(1) $ (0.03) $ (0.35) $ (2.95) ======== ======== ======= ======== BALANCE SHEET DATA(2) (AT END OF PERIOD): Mortgage loans held-for-sale (pledged).................... -- -- -- $ 42,154 Cash and cash equivalents................................. $ 47 $ 2 $ 4,218 9,141 Total assets.............................................. 81 40 4,680 55,523 Warehouse lines payable................................... -- -- -- 41,046 Long term obligations..................................... -- -- -- 1,290 Mandatorily redeemable preferred stock.................... -- -- 3,208 21,393 Total stockholders' equity (deficit)...................... 58 (52) (966) (11,184)
- --------------- (1) The balance sheet amounts for December 31, 1994 related to PAFG, the predecessor company, are de minimis and the income statement amounts for the year ended December 31, 1994 are not available. (2) Does not give effect to the sale of shares of common stock in this offering. See "Use of Proceeds", "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". 24 28 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with E-LOAN's Consolidated Financial Statements and Notes thereto and the other financial information appearing elsewhere in this prospectus. In addition to historical information, the following discussion and other parts of this prospectus contain forward-looking information that involves risks and uncertainties. E-LOAN's actual results could differ materially from those anticipated by such forward-looking information due to competitive factors, risks associated with E-LOAN's expansion plans and other factors discussed under "Risk Factors" and elsewhere in this prospectus. OVERVIEW E-LOAN is a leading provider of mortgage services online and is engaged in the brokerage, origination and sale of mortgage loans secured by residential real estate. E-LOAN was incorporated in August 1996 and began marketing its services and initiated online mortgage brokerage operations in June 1997. E-LOAN first derived revenues from the origination and sale of mortgage loans in June 1998. In December 1997, E-LOAN merged with Palo Alto Funding Group (PAFG), a traditional mortgage brokerage firm established in 1992, and suspended PAFG's operations. In compliance with applicable reporting requirements, the results of PAFG have been included in E-LOAN's financial statements as a predecessor company beginning in 1995. However, E-LOAN believes that reported results prior to 1998, which are primarily composed of PAFG results, are not indicative of E-LOAN's current business operations. E-LOAN's revenues are derived from the brokering of loans and the origination and sale of loans. Brokered loans are funded through lending partners and E-LOAN never takes title to the mortgage. Brokerage revenues are comprised of the mark-up to the lending partner's loan price, and processing and credit reporting fees. These revenues are recognized at the time a loan is closed. Originated and sold loans are loans that are funded through E-LOAN's own warehouse lines of credit and sold to mortgage loan purchasers. Loan origination and sale revenues are comprised of proceeds in excess of the carrying value of the loan, origination fees less certain direct origination costs, other processing fees and interest paid by borrowers on loans that E-LOAN holds for sale. These revenues are recognized at the time the loan is sold or, for interest income, as earned during the period from funding to sale. E-LOAN earns additional revenue from its loan origination and sale operations as compared to brokered loan operations because the sale of loans includes a service release premium. E-LOAN's loan origination and sale operations were initiated in June 1998 and represented 32% of total revenues for the year ended December 31, 1998. E-LOAN expects revenues derived from its loan origination and sale operations to continue to increase as a percentage of total revenues. In generating revenues, E-LOAN relies on a number of strategic Internet distribution partners to direct a significant number of prospective customers to its website. E-LOAN considers its distribution partnerships with Yahoo!, E*Trade and DLJdirect to be the most critical to its ability to generate revenues. Both Yahoo! and E*Trade have made equity investments in E-LOAN. See "Certain Transactions" and "Risk Factors -- The loss of one or more of our significant distribution partners would adversely affect our business". As a result of our limited operating history and our recent growth, it will be necessary to implement new and expanded operational, financial and administrative systems and control procedures to enable us to expand, train and manage our employees and coordinate the efforts of our underwriting, accounting, finance, marketing, and operations departments. For example, 25 29 we intend to implement both a new financial reporting system and a loan production system by the end of 1999. Historically, our efforts were focused primarily on developing and scaling our online mortgage operations and less on implementing internal accounting controls, financial and operational reporting systems and expanding the size and capabilities of our financial staff. Our auditors noted at December 31, 1998 that as a result of these shortcomings we had significant difficulties summarizing and preparing accurate financial information on a timely basis. In the fourth quarter of 1998, we hired a Chief Financial Officer and in 1999, we hired a Director of Finance and two other accounting managers as well as additional full time and temporary financial personnel. We have also documented and are in the process of enhancing our procedures and controls to address the deficiencies in our financial reporting and loan production system. See "Risk Factors -- We have a limited operating history, have only operated during periods of growth in the home mortgage market and consequently face significant risks and uncertainties". AMORTIZATION OF UNEARNED COMPENSATION In connection with the offering of shares of our common stock, certain options granted in the years ended December 1997 and 1998 have been considered to be compensatory. Deferred compensation associated with such options for the year ended December 31, 1998 and for the period from January 1, 1999 to March 23, 1999 amounted to $5.7 million and $35.0 million, respectively. Of this amount, $1.25 million was charged to operations for the year ended December 31, 1998 and the remainder will be amortized over the 48 month vesting period of the applicable options. 26 30 COMPARISON OF QUARTERS ENDED MARCH 31, 1998 THROUGH DECEMBER 31, 1998 The following table sets forth the results of operations for E-LOAN on a quarterly basis and expressed as a percentage of total revenues:
THREE MONTHS ENDED ------------------------------------------ MAR. 31, JUNE 30, SEPT. 30, DEC. 31, 1998 1998 1998 1998 -------- -------- --------- -------- REVENUES............................................ $ 527 $ 1,233 $ 2,051 $ 3,021 Operating expenses: Operations........................................ 779 1,077 2,127 3,643 Sales and marketing............................... 513 874 2,174 2,081 Technology........................................ 163 371 284 430 General and administrative........................ 379 436 711 884 Amortization of unearned compensation............. 44 211 296 700 Total operating expenses....................... 1,878 2,969 5,592 7,378 Loss from operations................................ (1,351) (1,736) (3,541) (4,717) Other income, net................................... 20 29 26 98 Net loss............................................ $(1,331) $(1,707) $(3,515) $(4,619) ======= ======= ======= ======= AS A PERCENTAGE OF NET REVENUES: Revenues............................................ 100.0% 100.0% 100.0% 100.0% Operating expenses: Operations........................................ 148 87 103 120 Sales and marketing............................... 97 71 106 69 Technology........................................ 31 30 14 14 General and administrative........................ 72 35 35 29 Amortization of unearned compensation............. 8 17 14 23 ------- ------- ------- ------- Total operating expenses....................... 376 241 273 244 ------- ------- ------- ------- Loss from operations................................ (256) (141) (173) (156) Other income, net................................... 4 2 1 3 ------- ------- ------- ------- Net loss............................................ (253) (139) (171) (153) ======= ======= ======= =======
REVENUES Revenues increased sequentially each quarter throughout 1998 from $0.5 million to $3.0 million. Substantially all of these increases resulted from growth in the number of loans closed and the initiation of E-LOAN's loan origination and sale operations in June 1998. E-LOAN did not significantly change its pricing during 1998. E-LOAN expects that the rate of its revenue growth in future periods will decline from the rates of revenue growth experienced in recent quarters. E-LOAN expects revenues derived from its loan origination and sale operations to continue to increase as a percentage of its total revenues. OPERATING EXPENSES OPERATIONS. Operations expense is comprised of both fixed and variable expenses, including salaries, benefits and expenses associated with the brokering, and the origination and sale of mortgage loans, and interest expense paid by E-LOAN under the warehouse facilities it uses to fund loans held for sale. Operations expense increased sequentially from the first quarter to the fourth quarter of 1998 from $0.8 million to $3.6 million and decreased as a percentage of revenues from 148% to 120%. This increase in absolute dollars was primarily attributable to an operations headcount increase necessary to support the growth in E-LOAN's total closed loan volume. In addition, E-LOAN established its loan origination and sale business in the last two 27 31 quarters, which resulted in additional headcount and an increase in interest expense due to an increase in the number of loans held for sale. The decrease in operations expense as a percentage of total revenue between the first and second quarter is due to revenue growth exceeding growth in operations expense with an increase in the third and fourth quarter from the establishment of the loan origination and sale business. E-LOAN expects operations expense to increase in absolute dollars over the next two years and intends to increase operations capacity in anticipation of an increase in the number of loans funded. SALES AND MARKETING. Sales and marketing expense is primarily comprised of salaries, benefits and other expenses related to advertising, promotion and distribution partnerships. Sales and marketing expense increased from the first quarter to the fourth quarter of 1998 from $0.5 million to $2.1 million and decreased as a percentage of revenues from 97% to 69%. Sales and marketing expense increased in absolute dollars due to increases in compensation associated with additional headcount and, in the third and fourth quarters, a substantial increase in expenses for advertising, promotion and distribution partnerships. Sales and marketing decreased between the first and second quarter as a percentage of revenues due to revenue growth exceeding growth in sales and marketing expense, with an increase in the third and fourth quarters due to the initiation of a major advertising campaign. E-LOAN intends to significantly increase absolute dollar spending in sales and marketing activities over the next two years in an effort to drive origination volume and increase overall brand awareness. TECHNOLOGY. Technology expense includes salary, benefits and consulting fees related to website development, the introduction of new technologies and the support of E-LOAN's existing technological infrastructure. Technology expense increased from the first quarter to the fourth quarter of 1998 from $0.2 million to $0.4 million and decreased as a percentage of revenues from 31% to 14%. Aside from a decrease from the second to third quarters of 1998 as a result of higher recruitment costs in the second quarter 1998, technology expense increased in absolute dollars sequentially in each quarter throughout 1998. The absolute dollar increases were primarily the result of the growth in engineering and management information systems personnel to support the expansion of online operations. Technology expense decreased sequentially as a percentage of revenues due to revenue growth exceeding growth in technology expense. E-LOAN intends to significantly increase absolute dollar spending on technology over the next two years in an effort to further improve the online mortgage origination process. GENERAL AND ADMINISTRATIVE. General and administrative expense is primarily comprised of salary, benefits, rent and depreciation and amortization. General and administrative expense increased sequentially from the first quarter to the fourth quarter of 1998 from $0.4 million to $0.9 million and decreased as a percentage of revenues from 72% to 29%. On an absolute dollar basis, general and administrative expense increased sequentially throughout 1998 primarily as a result of: - the addition of general and administrative headcount; - increase in professional services fees; - increase in rent and building expense resulting from the fourth quarter move into a new facility; and - growth in depreciation and amortization expense on computer equipment and leasehold improvements. General and administrative expense as a percentage of revenues decreased between the first and second quarters of 1998 due to revenue growth excluding growth in general and administrative expenses, but remained relatively flat during the remaining quarters of 1998 due to the above mentioned factors offsetting revenue growth. General and administrative expenses are expected to increase in absolute dollars over the next two years. 28 32 AMORTIZATION OF UNEARNED COMPENSATION. Amortization of unearned compensation increased sequentially from $44,000 to $0.7 million from the first to the fourth quarter of 1998. OTHER INCOME, NET Other income, net, is comprised of interest income on non-warehouse facility borrowings. Other income, net, increased sequentially from $20,000 to $0.1 million from the first to the fourth quarter of 1998 primarily due to an increase of cash from the sale of equity securities. COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1998 The following table sets forth the results of operations for E-LOAN expressed as a percentage of total revenues:
YEAR ENDED DECEMBER 31, -------------------- 1997 1998 ------- -------- Revenues.................................... $ 1,043 $ 6,832 Operating expenses: Operations................................ 1,319 7,626 Sales & marketing......................... 470 5,642 Technology................................ 102 1,248 General & administrative.................. 524 2,410 Amortization of unearned compensation..... -- 1,251 ------- -------- Total Operating expenses............... 2,415 18,177 Operating loss.............................. (1,372) (11,345) Other income, net......................... (2) 173 ------- -------- Net loss.................................... $(1,374) $(11,172) ======= ========
YEAR ENDED DECEMBER 31, ------------- 1997 1998 ---- ---- AS A PERCENTAGE OF TOTAL REVENUES: Operating expenses: Operations....................................... 126% 112% Sales & marketing................................ 45% 83% Technology....................................... 10% 18% General & administrative......................... 50% 35% Amortization of unearned compensation............ 0% 18% ---- ---- Total Operating expenses...................... 232% 266% Operating loss..................................... (132)% (166)% Other income, net................................ 0% 3% Net loss........................................... (132)% (164)% ==== ====
REVENUES Revenues for the year ended December 31, 1998 increased $5.8 million to $6.8 million as compared to $1.0 million for the same period in 1997. This increase resulted primarily from 29 33 growth in the number of loans closed and the initiation of E-LOAN's loan origination and sale operations in June 1998. E-LOAN expects that the rate of its revenue growth in future periods will decline from the rates of revenue growth experienced in recent quarters. OPERATING EXPENSES OPERATIONS. Operations expense increased $6.3 million to $7.6 million for the year ended December 31, 1998 as compared to $1.3 million in 1997 and decreased as a percentage of revenues from 112% to 128% for the same period. The absolute dollar increase was attributable to an operations headcount increase to 187 as of December 31, 1998 from 27 as of December 31, 1997. This increase was primarily necessary to support the growth in E-LOAN's origination volume and to establish its loan origination and sale operations. The decrease as a percentage of revenues was primarily due to revenues growing much faster than operations expense. SALES AND MARKETING. Sales and marketing expense increased $5.2 million to $5.6 million for 1998, as compared to $0.5 million for 1997 and increased as a percentage of revenues from 45% to 83% for the same period. These increases were primarily attributable to: - the initiation of a major advertising campaign in 1998; - increased costs related to third party distribution partnership agreements; and - the addition of sales and marketing personnel. Sales and marketing headcount increased to six as of December 31, 1998 from three as of December 31, 1997. TECHNOLOGY. Technology expense increased $1.1 million to $1.2 million for 1998, as compared to $0.1 million for 1997 and increased as a percentage of revenues from 10% to 18% for the same period. These increases were primarily the result of the growth in engineering and management information systems personnel to 14 as of December 31, 1998 from two as of December 31, 1997 to support the initiation of online operations in June 1997. GENERAL AND ADMINISTRATIVE. General and administrative expense increased $1.9 million to $2.4 million for 1998, as compared to $0.5 million for 1997 and decreased as a percentage of revenues from 49% to 35% for the same period. The absolute dollar increase is primarily attributable to: - the addition of general and administrative headcount; - increase in rent and building expense resulting from the move into a new facility; and - growth in depreciation and amortization expense on computer equipment and leasehold improvements. General and administrative headcount increased to 15 as of December 31, 1998 from eight as of December 31, 1997. The decrease as a percentage of revenues was primarily due to revenues growing much faster than general and administrative expense. AMORTIZATION OF UNEARNED COMPENSATION. Amortization of unearned compensation increased from zero to $1.3 million for the year ended December 31, 1998. OTHER INCOME, NET Other income, net, increased from an expense of $2,000 in 1997 to income of $0.2 million for the year ended December 31, 1998. The increase is attributable to interest income on cash proceeds from sale of equity partially offset by interest expense on non-warehouse facility borrowings. 30 34 INCOME TAXES As of December 31, 1998, E-LOAN had approximately $10 million of federal net operating loss carryforwards for tax reporting purposes available to offset future taxable income. E-LOAN's federal net operating loss carryforwards begin to expire in 2011. Certain future changes in share ownership of E-LOAN, as defined in the Tax Reform Act of 1986, may restrict the utilization of carryforwards. A valuation allowance has been recorded for the entire deferred tax asset as a result of uncertainties regarding the realization of the asset due to the lack of E-LOAN's earnings history. LIQUIDITY AND CAPITAL RESOURCES Since inception, E-LOAN has financed its operations primarily through private placements of convertible preferred stock and borrowings under warehouse lines of credit and other credit facilities. As of December 31, 1998, E-LOAN had approximately $9.1 million in cash and cash equivalents. E-LOAN's sources of cash flow include cash from the sale of mortgage loans, borrowings under warehouse lines of credit and other credit facilities, brokerage fees, interest income, and the sale of equity securities. E-LOAN's uses of cash include the funding of mortgage loans, repayment of amounts borrowed under warehouse lines of credit, operating expenses, payment of interest, and capital expenditures primarily comprised of furniture, fixtures, computer equipment, software and leasehold improvements. Net cash from operating activities was ($52.3) million in 1998 and $0.7 million in 1997. Net cash used in operating activities was primarily due to an increase in net losses and increase in mortgage loans held for sale. Net cash used in investing activities was $1.6 million in 1998 and $0.2 million in 1997. Net cash from operating activities during these periods was primarily for the purchase of furniture and equipment. Net cash provided by financing activities was $58.8 million in 1998 and $3.7 million in 1997. Net cash provided in these periods was primarily from the sale of preferred stock and borrowings under E-LOAN's warehouse lines of credit and other credit facilities, partially offset by repayments of warehouse lines of credit. At December 31, 1998, E-LOAN had a warehouse line of credit for borrowings up to approximately $18.8 million, including a temporary overdraft limit of approximately $3.8 million for interim financing of mortgage loans. The interest rate charged on borrowings against the warehouse line of credit was 2.0% over the 30 day commercial paper rate of the lender. Borrowings are collateralized by the mortgage loans held for sale. The warehouse line of credit expires on June 30, 1999. Upon expiration, management believes that it will either renew its existing line or obtain sufficient additional lines. At December 31, 1998, approximately $15.0 million was outstanding under this warehouse line of credit. At December 31, 1998, E-LOAN had a commitment from a third party to finance up to $35 million of E-LOAN's mortgage loan inventory. The funds borrowed pursuant to this commitment are secured by the related mortgage loans and accrue interest at LIBOR plus 1.25%. This agreement includes various non-financial negative and affirmative covenants. Either E-LOAN or the lender can terminate the agreement at any time. At December 31, 1998, approximately $26.1 million was outstanding under this financing commitment. As of December 31, 1998 the principal source of liquidity for E-LOAN was $9.1 million in cash and cash equivalents and $4.4 million in unused credit facilities. In December 1998, E-LOAN entered into two credit facilities for working capital and equipment financing in the aggregate amount of $5.0 million. The first credit facility in the amount of $1.5 million has an interest rate of prime plus 0.5%. This facility expires in one year. The second credit facility is a $3.5 million term 31 35 loan with an interest rate of prime plus 0.5%. As of December 31, 1998, $642,000 was outstanding under these two credit facilities. E-LOAN has entered into several marketing service agreements with third parties. Under these agreements, the third parties display E-LOAN's logo and loan information on their websites and provide related marketing services. E-LOAN pays for these services in minimum monthly and quarterly installments plus, in some cases, a per view charge for each time the information is displayed. Future minimum payments under these agreements are $5.5 million in 1999, $2.3 million in 2000 and $212,000 in 2001. E-LOAN believes that its existing cash and cash equivalents, the net proceeds from this offering and existing and available credit facilities will be sufficient to fund its operating activities, capital expenditures and other obligations for the foreseeable future. However, if during that period or thereafter E-LOAN is not successful in generating sufficient cash flow from operations, or in raising additional capital when required in sufficient amounts and on terms acceptable to E-LOAN, these failures could have a material adverse affect on E-LOAN's business, results of operations and financial condition. If additional funds are raised through the issuance of equity securities, the percentage ownership of its then-current stockholders would be reduced. DISCLOSURE ABOUT MARKET RISK Interest rate movements significantly impact E-LOAN's volume of closed loans. As such, interest rate movements represent the primary component of market risk to E-LOAN. In a higher interest rate environment, consumer demand for mortgage loans, particularly refinancing of existing mortgages, declines. Interest rate movements affect the interest income earned on loans held for sale, interest expense on the warehouse lines payable, the value of mortgage loans held for sale and ultimately the gain on sale of mortgage loans. In addition, in an increasing interest rate environment, E-LOAN's mortgage loan brokerage volume is adversely affected. E-LOAN originates mortgage loans and manages the market risk related to these loans by pre-selling them on a best efforts basis to the anticipated purchaser at the same time that E-LOAN establishes the borrowers' interest rates. If E-LOAN can process loans within the applicable purchasers' commitment timeframes E-LOAN has no interest rate risk exposure on such loans. However, if E-LOAN cannot process the loan within this timeframe and interest rates increase, E-LOAN may experience a reduced gain or may even incur a loss on the sale of the loan. See "Risk Factors -- The uncertainty of the time it takes to close loans can lead to unpredictable revenue and profitability". With the exception of pre-selling loans through best-efforts commitments, E-LOAN currently does not engage in any hedging activities. E-LOAN currently does not maintain a trading portfolio. As a result, E-LOAN is not exposed to market risk as it relates to trading activities. The majority of E-LOAN's portfolio is held for sale which requires E-LOAN to perform market valuations of its pipeline, its mortgage portfolio held for sale and related forward sale commitments in order to properly record the portfolio and the pipeline at the lower of cost or market. Therefore, E-LOAN monitors the interest rates of its loan portfolio as compared to prevailing interest rates in the market. Because E-LOAN pre-sells its mortgage loan commitments forward, E-LOAN believes that a 100 basis point increase or decrease in long-term rates would not have a significant adverse effect on E-LOAN's earnings from its interest rate sensitive assets. E-LOAN pays off the warehouse lines payable when the loan is sold and as such would not be expected to incur significant losses from an increase in interest rates on the line due to the short timeframe that the line is drawn down. However, since a high percentage of E-LOAN's closed loan volume is from refinancings, E-LOAN's future operating results are more sensitive to interest rate movements than a mortgage lender who has a lower proportion of refinancings. 32 36 In the future, if E-LOAN does not pre-sell the mortgage commitments, its market risk could change significantly. RECENT ACCOUNTING PRONOUNCEMENTS On June 15, 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999 (January 1, 2000 for E-LOAN). SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. E-LOAN is in the process of evaluating the impact of SFAS No. 133 on its financial statements. In October 1998, the Financial Accounting Standards Board issued SFAS No. 134, Accounting for Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans Held for Sale by a Mortgage Banking Enterprise. SFAS No. 134 amends SFAS No. 65, Accounting for Certain Mortgage Backed Securities, to require that after an entity that is engaged in mortgage banking activities has securitized mortgage loans that are held for sale, it must classify the resulting retained mortgage-backed securities or other retained interests based on its ability and intent to sell or hold those investments. This statement is effective for the first fiscal quarter beginning after December 15, 1998, with earlier application encouraged. At this time, E-LOAN does not anticipate any impact from the adoption of this standard. The American Institute of Certified Public Accountants issued Statement of Position ("SOP") No. 98-1, "Software for Internal Use," which provides guidance on accounting for the cost of computer software developed or obtained for internal use. SOP No. 98-1 is effective for financial statements for fiscal years beginning after December 15, 1998. E-LOAN is in the process of evaluating the impact of SOP No. 98-1 on its financial statements. YEAR 2000 Many currently installed computer systems and software products only accept two digits to identify the year in any date. Thus, the year 2000 will appear as "00", which the system might consider to be the year 1900 rather than the year 2000. This could result in system failures, delays or miscalculations. Computer systems and software that have not been developed or enhanced recently may need to be upgraded or replaced to comply with Year 2000 requirements. We believe that each of our software systems on a stand-alone basis is currently Year 2000 compliant. We have internally developed a variety of software programs that run our website, including E-Track. Although we designed such software to be Year 2000 compliant, we have not completed our testing of the software for compliance. We anticipate that we will complete this testing by the end of April 1999. We also use multiple software systems and products developed by third party vendors, including systems and products used in operations and finance, and systems that operate our facilities. We are currently in the process of requesting compliance certificates from these vendors to certify their Year 2000 readiness. We have received compliance certificates from substantially all of these vendors and expect to receive the balance of these certificates by the end of April 1999. The Internet operations of many of our customers and suppliers may be affected by Year 2000 complications. The failure of our customers or suppliers to ensure that their systems are Year 2000 compliant could have an adverse effect on our customers and suppliers, resulting in decreased Internet usage or our inability to obtain necessary data communication and telecommunication capacity, which in turn could have an adverse effect on our business, results of operations and financial condition. 33 37 The potential worst case scenario includes: - slowdown in online applications due to a general failure of the Internet; - corruption of data in our internal information systems; - delays in our processing capabilities that depend on third-party systems; - financial losses associated with delays in closing loans; and - failure of infrastructure services provided by third parties, including public utilities and Internet service providers. We have not incurred significant costs to date complying with Year 2000 requirements, and we do not believe that we will incur significant costs for such purposes in the foreseeable future. If we discover any Year 2000 errors or defects in our internal systems, we could incur substantial costs in making repairs. The resulting disruption of our operations could seriously damage our business. 34 38 BUSINESS E-LOAN is a leading online provider of mortgages, offering consumers the ability to obtain the most suitable mortgages from a wide array of lenders at substantial savings. E-LOAN's easy-to-use website enables borrowers to search through over 50,000 products provided by more than 70 lending sources to find the most competitively priced loans that match the borrowers' criteria. Borrowers can analyze and compare loans online as well as receive unbiased loan recommendations based on their personal criteria and financial characteristics. E-LOAN offers transaction cost savings of over 50% compared to obtaining a mortgage through traditional mortgage brokers or single source lenders. E-LOAN provides complete transaction fulfillment and a high level of service through customer service representatives assigned to each borrower and the proprietary E-Track loan monitoring service. E-LOAN is the exclusive mortgage provider for co-branded loan centers that E-LOAN has established with leading websites, including Yahoo!, E*Trade, DLJdirect, Telebank, CBS MarketWatch and Motley Fool. In 1998, E-LOAN was the leader in the online mortgage market with approximately $1 billion in closed loans originated. INDUSTRY BACKGROUND ELECTRONIC COMMERCE The Internet has emerged as a global medium for communication, information and commerce. International Data Corporation estimates that there were 97 million Internet users worldwide at the end of 1998 and anticipates this number will grow to approximately 320 million users by the end of 2002. The Internet possesses a number of unique characteristics that differentiate it from traditional media and methods of commerce, including: - users communicate or access information without geographic or temporal limitations; - companies can reach and serve a large and global group of customers electronically from a central location; - companies can provide personalized, low-cost and real-time customer interaction; - users enjoy greater privacy and face less sales pressure; and - users have an enormous diversity of easily accessible content and commerce offerings. As a result of these unique characteristics and the Internet's growing adoption rate, businesses have an enormous opportunity to conduct commerce over the Internet. International Data Corporation estimates that commerce over the Internet will increase from approximately $32 billion worldwide in 1998 to approximately $130 billion worldwide in 2000. While many companies initially focused on facilitating and conducting transactions between businesses over the Internet, more recently there has been a proliferation of companies focused on a wide variety of consumer transactions. These companies have typically offered products and services that do not necessarily require the customer's physical presence to purchase, such as books, CDs, videocassettes, automobiles, mortgages, airline tickets and online banking and stock trading. The Internet gives these companies the opportunity to develop one-to-one relationships with customers worldwide without having to make the significant investments to build and manage a local market presence or develop the printing and mailing capabilities associated with traditional direct marketing activities. TRADITIONAL UNITED STATES MORTGAGE MARKET The Mortgage Bankers Association estimates the United States mortgage market to total over $4.3 trillion in terms of loans outstanding and projects mortgage originations to be $1.2 trillion in 1999. 35 39 The mortgage industry is divided broadly into four major segments today: - mortgage origination -- sourcing, verification and documentation of mortgage loans, typically done by mortgage brokers and single-source lenders; - mortgage funding -- underwriting, funding and selling closed loans to mortgage loan purchasers; - securitization -- aggregating loans for sale into the secondary market; and - servicing -- ongoing billing, collection and foreclosure/collateral management. Over the past two decades, the mortgage industry has evolved dramatically. Until the late 1970s, the mortgage market was primarily a captive banking market where retail banks and savings and loan institutions originated loans through their branches, underwrote and closed loans internally, funded loans from their own customer deposits and then serviced the loans themselves. This internal chain of production was broken by the emergence of the pure mortgage bank that could buy mortgages from mortgage brokers and sell to government sponsored mortgage investors, such as Fannie Mae and Freddie Mac, and the development of a large, liquid secondary funding and trading market for mortgage debt. This efficient new market for mortgage funding made it viable for the first time to uncouple from the large retail banks both the front-end functions of mortgage origination and mortgage funding and the back-end function of servicing. A significant transformation of the mortgage origination, banking and servicing businesses into specialized functions conducted primarily by independent companies has also occurred during the last two decades. This transformation has created both a large, concentrated and efficient secondary mortgage market and a large, fragmented and inefficient mortgage origination and banking market. There are over 20,000 mortgage brokerage operations in the United States, according to the National Association of Mortgage Brokers. However, there is no multi-lender originator that operates nationally and enjoys a widely recognized consumer brand. In 1998, no mortgage originator had over 7% market share. While increased competition at all levels of the industry has resulted in tremendous innovation in the mortgage choices available to consumers, the level of complexity associated with these loans has also increased. In addition, the underwriting and lending processes remain paper and time-intensive, with little visibility into the process for consumers. As a result, we believe that the traditional mortgage lending process causes many consumers to feel: - uncertain that their single source lenders and brokers are providing unbiased advice and recommending the most suitable mortgage products; - skeptical that rates initially quoted will ultimately be available; - intimidated by the number and variety of mortgage products available; - pressured to commit to a particular product before they have researched and compared products to their satisfaction; - frustrated with the amount and types of fees they are required to pay; and - overwhelmed by the substantial time and effort that it takes to get a mortgage loan. Furthermore, many borrowers receive little ongoing assistance in managing their debt after the loan is closed. Many direct lenders who also engage in mortgage servicing are not committed to proactive monitoring of their customers' loans because they risk losing servicing fees if customers refinance with other lenders. Multi-lender brokers have the incentive to pursue refinancing opportunities, but typically lack the technological capability to proactively monitor for large customer bases the market changes of thousands of loan products in real time. MARKET OPPORTUNITY FOR ONLINE MORTGAGE ORIGINATION According to Forrester Research, the market for online mortgage originations is expected to grow from an estimated $18.7 billion in 1999 to over $91.2 billion in 2003, representing an 36 40 increase in online penetration of the existing market from 1.5% in 1999 to 9.6% in 2003. Mortgage origination is well suited to an Internet-based distribution model for a number of reasons, including: - mortgages are information products that need no physical delivery or warehousing; - complex mortgage products can be made more understandable through the use of graphical and dynamic real-time presentations, including explanation of terminology and ready access to detailed supporting information; - borrower data can be efficiently captured through a website, allowing real time automated underwriting and streamlined overall processing; and - costly local offices or brokers and the expensive fee structure associated with the traditional distribution model are not required. Many companies have attempted to address this significant market opportunity. Existing mortgage banks have created websites to sell their loans directly online as an alternative front end to the traditional process. These sources, however, do not offer the consumer a multi-lender selection or comparison of products and may be reluctant to reduce fees due to the risk of cannibalizing their traditional distribution channels. A number of websites have been created that act as multi-lender distribution channels for mortgage banks. While many of these referral sites offer a selection of lenders, they do not offer complete transaction fulfillment for the consumer and, therefore, do not control the entire mortgage process. Furthermore, because these websites do not eliminate the services of commissioned loan agents, they are unable to substantially reduce the cost to the consumer of securing a mortgage. As a result of the shortcomings inherent in these and other online approaches to mortgage origination, we believe there exists a significant market opportunity for a centralized, globally accessible and easy-to-use online service with a broad selection of lenders, a compelling value proposition based upon saving borrowers money, time and effort, and an open, integrated service that provides complete transaction fulfillment. THE E-LOAN SOLUTION E-LOAN is a leading online provider of mortgages offering consumers the ability to obtain the most suitable mortgage from a wide array of lenders at substantial savings. Utilizing E-LOAN's website, borrowers can efficiently search, analyze and compare mortgage products offered by multiple lenders and apply for, qualify for and obtain the mortgage product that is most compatible with their individual financial characteristics and borrowing requirements. E-LOAN also enables borrowers to track online the status of their mortgage applications from submission through closing and to monitor their mortgages on an ongoing basis after closing. E-LOAN recognizes the importance to borrowers of selecting the right mortgage product and performing ongoing debt management given that mortgages typically represent the single largest debt component of an individual's financial portfolio. To assist borrowers in this regard, E-LOAN provides unbiased recommendations as well as an array of online analytical and product comparison tools. E-LOAN also provides a high level of customer service designed to make the mortgage process significantly more streamlined, transparent to the borrower and efficient. In 1998, E-LOAN was the leader in the online mortgage market with approximately $1 billion in closed loans originated. The E-LOAN solution provides the following key advantages to its customers: LARGE SELECTION OF MORTGAGE PRODUCTS. E-LOAN offers mortgages from more than 70 lending sources, including nationally-recognized institutions. Each customer inquiry triggers a proprietary rate search algorithm that sorts through over 50,000 products updated in real time. 37 41 The result, delivered in seconds, is a set of the most competitively priced loans that best match the customer's criteria. E-LOAN believes this large selection of lenders and loans available in a single destination saves borrowers time and effort in searching for and obtaining the most suitable mortgage. SIGNIFICANT CUSTOMER SAVINGS. E-LOAN offers savings of over 50% as compared to the transaction costs of obtaining mortgages from traditional mortgage brokers or single source lenders. These savings are possible because of the elimination of the commissioned loan agent and the inherent cost benefits of online mortgage origination. For a $200,000 loan, borrowers who originate their loans through E-LOAN typically realize approximately $1,500 in upfront savings. UNBIASED LOAN RECOMMENDATIONS. E-LOAN provides the borrower with unbiased recommendations regarding available loan products. E-LOAN formulates its recommendations by using powerful, comparative and analytical tools designed to assist the borrower in determining the most suitable mortgage. These recommendations are based solely upon borrower-provided information and criteria. This approach differs substantially from that of traditional brokers, who often recommend and promote mortgage products based on associated commissions, which can vary by lender. By contrast, E-LOAN charges the same brokerage fee regardless of whether the loans are funded internally or through other lenders. EASY-TO-USE SERVICE WITH VALUE-ADDED FEATURES. E-LOAN's website enables borrowers to easily and efficiently search, analyze and compare mortgage products offered by multiple lenders in complete privacy, on their own time and free from the sales pressures typically experienced offline. Prospective borrowers can also determine online which mortgage products they qualify for based on their individual financial characteristics and borrowing requirements and ultimately apply for and obtain the selected mortgage product. E-LOAN offers a number of value-added features designed to further promote a more open and borrower-oriented loan process. For example, E-LOAN's unique E-Track service enables borrowers to monitor the status of their loans at every stage of the lending process in real time, removing much of the uncertainty and inconvenience that has tended to reduce borrowers' comfort in obtaining a loan. HIGH LEVEL OF CUSTOMER SERVICE. E-LOAN is committed to providing a high level of customer service, as evidenced by referrals received from satisfied customers. Because customer service is a strategic priority, E-LOAN bases the compensation of its loan production personnel in part on their contribution to improving customer satisfaction. E-LOAN implements its customer service objectives by: - providing consumer resources through its information rich website, which includes a comprehensive guide to every aspect of the mortgage process; - working with the customer throughout the entire transaction process, in contrast to many online websites which refer customers to third party lenders; - assigning a personal customer service representative to each borrower to serve as a single point of contact and support throughout the entire loan process; - providing borrowers with a real time window into every stage of the lending process through its proprietary E-Track service; and - maintaining a call center to respond promptly to phone and e-mail inquiries. ONGOING MORTGAGE MONITORING. E-LOAN enables customers to optimize refinance decisions by continuously comparing their existing loan to new products available in the market and alerting them to opportunities to save money over the life of their loan. E-LOAN's monitoring algorithm takes into account the borrower's investment objectives, prospective hold period, risk profile and marginal tax rate. E-LOAN's monitoring capability promotes long-term relationships with its customers. 38 42 THE E-LOAN STRATEGY The E-LOAN strategy is to be the leading Internet-based provider of mortgages and debt management services for consumers worldwide. Key elements of the E-LOAN strategy include: GROW CORE CONSUMER MORTGAGE BUSINESS. E-LOAN intends to become a leading originator of single family mortgage loans, capturing market share from traditional funding sources by delivering to its customers significant cost savings, unparalleled product choice and unbiased advice and assistance. E-LOAN believes that its Internet-based business model will continue to reduce the costs and inefficiencies in mortgage origination and increase the productivity of its mortgage operation through reduced brokerage commissions and ongoing process improvements. In addition, E-LOAN's ability to control the entire loan fulfillment process will provide a more efficient and consistent customer experience. Over time, E-LOAN expects to enhance its product offerings, capitalizing on its customer base, brand name and fulfillment capabilities by expanding into additional activities customers may need as part of their ongoing debt management efforts. As part of an alliance with Stater BV, E-LOAN has established an online mortgage origination subsidiary to serve the European market. E-LOAN intends to continue to expand into other key international markets in the future. EXPAND MULTI-SOURCE LENDING CAPABILITIES. E-LOAN believes that its ability to satisfy customers' specific borrowing requirements by offering the most comprehensive selection of mortgages available nationwide is one of its greatest competitive advantages. Accordingly, E-LOAN intends to continue to broaden the number and variety of its mortgage products and lending sources. USE TECHNOLOGY TO BRING BORROWERS AND CAPITAL MARKETS CLOSER TOGETHER. E-LOAN intends to continue to streamline and automate mortgage origination and underwriting processes in order to enable borrowers to more directly benefit from the cost, speed and convenience of highly efficient secondary mortgage markets. By continually incorporating and upgrading automated underwriting techniques and technologies into our service, E-LOAN will increase its ability to match borrowers with lenders earlier in the process, resulting in reduced documentation requirements, faster approval and lower pricing. E-LOAN believes these techniques and technologies will enable it to provide the most cost-effective and tailored mortgage solutions for its customers. ENHANCE BRAND AWARENESS AND CUSTOMER LOYALTY. E-LOAN intends to become the first national multi-source lender with a widely recognized consumer brand name. E-LOAN uses both traditional and online marketing strategies to maximize customer awareness and enhance brand recognition. Through its advertising and promotional activities, E-LOAN targets prospective homebuyers, homeowners and Realtors interested in efficient, easy and economical mortgage origination. Traditional advertising efforts include a mix of radio, television, outdoor and print campaigns aimed at building brand awareness nationwide. E-LOAN also partners with many leading financial services-related online companies, including Yahoo!, E*Trade, DLJdirect, Telebank, CBS MarketWatch and Motley Fool. Online partnering arrangements include placing a co-branded mortgage center on partners' websites, placing links and banner advertisements on those sites and establishing monitoring services for those partners. In addition, E-LOAN will continue to focus on promoting customer loyalty and maximizing the lifetime value of its customer relationships through the implementation of superior personalization features and the continuous enhancement of its customer service offerings. E-LOAN also intends to extend its traditional and online marketing strategies to international markets to develop brand recognition abroad as it expands into foreign markets. HELP CONSUMERS MONITOR AND MANAGE THEIR DEBT. By assisting consumers in monitoring and managing their mortgages, E-LOAN intends to transform what have traditionally been single origination transactions into long-term, mutually beneficial relationships. Since mortgages typically comprise the single largest consumer liability, E-LOAN has a unique opportunity to build valuable 39 43 ongoing relationships with its customers. E-LOAN's services include continuous loan monitoring that provide customers with unbiased assistance in refinancing decisions and promotes long-term customer relationships. Recognizing that mortgage and mortgage-related financing represent the lowest cost, most tax efficient capital for consumers, E-LOAN intends to further develop its services and product offerings to assist customers in managing their overall debt portfolio, with the objective of maintaining the lowest overall cost of debt. PRODUCTS AND SERVICES E-LOAN is an online service that offers first mortgages to homebuyers and homeowners seeking to refinance, along with second mortgages and home equity lines of credit. E-LOAN handles all aspects of loan origination, including quoting rates, collecting and verifying borrower data, locking the rate, pre-underwriting the loan package, communicating with the lender and arranging for appraisal and settlement services for the borrower. In addition, E-LOAN can provide complete transaction fulfillment, including underwriting, funding and packaging loans for sale to the secondary markets. Through its easy to use website, E-LOAN offers: LOAN PRODUCTS. E-LOAN has relationships with over 70 lending sources who are eligible to quote product rates on E-LOAN's website. E-LOAN's website currently offers a wide array of loan products, including 30-year and 15-year fixed rate loans, a variety of adjustable rate mortgages (ARMs), fixed/adjustable products, products with balloon payments, second mortgages and home equity lines of credit. RATE SEARCH. E-LOAN's database contains rates for over 50,000 loan products at any given time and is updated multiple times daily. Prospective borrowers can quickly obtain customized rate quotes for multiple loan types and amounts in a single search by completing a brief questionnaire. E-LOAN's search function features an algorithm that identifies the most competitive products available based on individual borrower information and the total costs of the various products, including applicable interest rates, points and fees. Borrowers can click on a link to see even more loans of those types if they so choose. LOAN COMPARISON. Borrowers can compare loans returned from a rate search. A basic comparison shows how any two loans differ on rate, points, prepayment penalties, interest rate costs over time, and, for ARMs, life cap, index type, margin and periodic adjustments. An advanced comparison allows borrowers to forecast how the loans would perform based on various interest rate scenarios and taking into account debt objectives, hold periods, return on other investments and marginal tax rates. LOAN RECOMMENDATIONS. To help borrowers find the most suitable loan among the broad array of available products, E-LOAN provides a recommendation feature. This feature consists of a brief questionnaire that enables borrowers to describe their investment objectives and prospective hold period, select an interest rate scenario and indicate the loan amount sought. E-LOAN's proprietary algorithm uses this information to deliver a set of suitable loan products. Borrowers can then adjust various parameters, such as the hold period or interest-rate scenario, to see how that recommendation might change. E-TRACK. E-LOAN has developed a proprietary online tracking system, E-Track, in order to make the mortgage process more open and convenient for consumers. E-Track allows borrowers to track the progress of their loan application as well as the amount of anticipated closing costs from preliminary estimate to final settlement. E-LOAN establishes an E-Track account for each borrower at the time an application is completed online. Each E-Track account is personalized and password-protected, and contains: - a timeline of the loan application and approval process; - an updated list of estimated closing costs, including explanations of all disclosure terms; - a product details page explaining all of the terms of the loan; 40 44 - a list of the documents required by the lender in order to approve the application; - an area where a borrower can request an interest rate commitment online; - contact information, status and results of appraisal; and - contact information for designated customer service representatives. All of these items are updated in real time as the loan application is processed, thereby enabling borrowers to keep close track of their progress anytime. RATE WATCH. The Rate Watch service allows prospective borrowers to input a target interest rate for the desired loan type. E-LOAN searches its database of approximately 50,000 loan products on a daily basis to determine if a product has become available that meets the borrower's criteria. If a suitable product is found, the borrower receives an e-mail alert inviting them to visit E-LOAN's website and apply for the loan. MORTGAGE MONITOR. The Mortgage Monitor service allows the prospective borrower to input the terms for an existing mortgage and immediately compare that loan to all other suitable products available through E-LOAN. In addition, the prospective borrower can choose to receive an e-mail alert whenever a product becomes available that can beat that rate. All E-LOAN customers are automatically enrolled in the Mortgage Monitor service once their loan closes. PRE-QUALIFICATION/PRE-APPROVAL SERVICES. E-LOAN assists prospective borrowers in making their home buying decisions by enabling them to determine the exact amount of the loan they are qualified to obtain through its online pre-qualification and pre-approval services. INFORMATION FOR BORROWERS. E-LOAN's website hosts a rich array of information on the home buying and refinancing processes, including articles about how to evaluate loan products, maximizing your home buying power, timing a refinance and a glossary of mortgage terms. Detailed explanations of the overall process of obtaining a loan is also available. REALTOR INFORMATION AND SERVICES. Realtors can use the E-LOAN website to help their clients calculate the loan amount they can afford, generate a pre-qualification letter or obtain a pre-approval before selecting a property, search for rates and educate them on the mortgage process and terms. In addition, E-LOAN's website offers Realtors a free service allowing them to generate custom flyers to advertise their listings. INTERNATIONAL MORTGAGES. Under E-LOAN's alliance with Stater BV, E-LOAN and Stater BV will cooperate to support E-LOAN's online mortgage origination subsidiary in establishing and operating a service that offers residential mortgage loans through the Internet directly to consumers in the European Union, other than the United Kingdom. The initial term of the alliance is five years. E-LOAN expects to begin launching European services in the third quarter of 1999. E-LOAN intends to continue to expand into other key international markets in the future. MORTGAGE OPERATIONS E-LOAN is engaged in the mortgage loan origination business as a multi-source lender. As such, E-LOAN originates, underwrites, funds and sells mortgage loans. Originations are funded either through lending partners or through E-LOAN's own warehouse lines of credit. E-LOAN's loan originations are principally prime credit quality first-lien mortgage loans secured by single family residences. E-LOAN also offers second mortgages and home equity lines of credit in many states. All loans are underwritten pursuant to standards established by E-LOAN and conform to the underwriting standards of the ultimate purchasers of the loans. Principal sources of income are loan origination fees, gains from the sale of loans, if any, and interest earned on mortgage loans during the period that they are held pending sale, net of interest paid on borrowed funds. Since E-LOAN's policy is to sell all loans that it originates, 41 45 E-LOAN does not perform loan servicing functions and therefore does not generate ongoing servicing revenues that are customarily earned by traditional mortgage lenders. E-LOAN accepts online applications from customers in 50 states and the District of Columbia. In 34 states and the District of Columbia, E-LOAN is licensed as a mortgage broker and mortgage banker and can fund all of the loans that it originates. E-LOAN licenses its mortgage loan origination systems and proprietary marks to NetB@nk to enable NetB@nk to fund mortgage loans under the E-LOAN brand in ten of the 16 states in which E-LOAN is not licensed as a mortgage banker. E-LOAN also has agreements with PHH Mortgage Services Corporation and Prism Mortgage Company relating to the fulfillment of all aspects of loan transaction processing following origination in the other six states in which E-LOAN is not licensed as a mortgage banker. OBTAINING AN E-LOAN LOAN. The loan origination process begins when the customer completes a loan application online through the E-LOAN website. Once the application is submitted, E-LOAN initiates a series of steps to efficiently underwrite and process the loan while providing a consistent level of customer service. Within two days of submitting an application, customers receive a welcome package from E-LOAN in the mail which is designed to further brand the E-LOAN experience and contains the necessary disclosure documents mandated by governmental authorities. An E-Track account is created at the time a loan application is received and serves as the customer's primary communication system with E-LOAN throughout the loan process. Customers are invited to visit their E-Track account frequently to review key steps in the loan process, receive updated information regarding their loan product, closing costs, and interest rate lock, and view the progress of their loan approval. Although the E-Track account is available 24x7, E-LOAN believes that a more personalized touch from a customer service perspective is necessary to truly brand the E-LOAN experience and build customer loyalty. Therefore, assigned customer service representatives maintain telephone contact with borrowers throughout the loan process to communicate major events and answer questions. Customer service contact begins once the online application has been received, continues through approval and funding, and is available until loan monitoring account preferences have been established. Loan packages are pre-underwritten upon E-LOAN's receipt of completed paperwork along with a nominal check to cover the cost of obtaining credit reports and utilizing automated underwriting systems, if applicable. All conforming loans are underwritten utilizing an automated system such as Fannie Mae's Desktop Underwriter (DU). Loans that do not immediately qualify for automated underwriting are underwritten using standard manual processes. As additional loan documentation is received, data provided by the customer at the time of initial origination is validated. Appraisals, credit reports, and title and survey documents are ordered and reviewed by the designated underwriting teams. Once the underwriting process is completed, customers are invited to request interest rate commitments for their selected loan through their E-Track accounts. E-LOAN then confirms that this request can be obtained from mortgage loan purchasers or lending sources. Once the requested rate has been confirmed, customers are notified and provided with all relevant product and execution conditions. Final loan approval is secured once all critical data elements have been validated and have been confirmed to satisfy the guidelines of the lending program sought by the borrower. If a borrower's loan does not satisfy lender guidelines, the designated service team will research additional lenders for the customer. For more complex situations, customers will be referred to an E-LOAN loan specialist for special assistance. If a product cannot be secured for the 42 46 customer, the customer will receive a denial letter stating the reasons that a loan could not be obtained. After loans have been approved and all relevant conditions have been met, E-LOAN will either prepare or request preparation of loan documents to be signed by the borrower. The assigned customer service representative will work with the borrower to obtain the necessary signatures for funding and schedule the closing of the loan. Once the borrower has signed all documentation, the loan file is reviewed to identify any missing requirements. The loan is then funded and recorded as closed. A quality control review of E-LOAN sourced and funded loans is performed prior to forwarding the loan documentation to the final mortgage loan purchaser or its designated custodian. An accounting audit is also performed to reconcile settlement information provided by escrow/attorney settlement agents with E-LOAN's internal information. Loan documentation relating to closed loans is then shipped to the mortgage loan purchaser or its designated custodian, and documentation is maintained to satisfy regulatory and company record retention requirements. E-LOAN then establishes ongoing loan monitoring accounts for all closed loans to ensure that its customers remain in the most suitable loan products based on their specified personal financial requirements. E-LOAN also solicits customer feedback regarding the loan process to measure overall E-LOAN customer loyalty and to utilize in developing future product and service enhancements that are responsive to customer concerns. LOAN PRODUCTION. E-LOAN originates conventional mortgage loans (conforming and jumbo loans) and home equity lines of credit, a high percentage of which were refinancings of existing mortgages in 1998. A majority of the conventional loans originated are conforming loans, which are eligible for sale in programs sponsored by Fannie Mae or Freddie Mac. While E-LOAN does not currently sell directly to Fannie Mae or Freddie Mac, the conforming loans E-LOAN originates are ultimately eligible for sale in the secondary markets supported by these organizations. The remainder of the conventional loans are non-conforming loans. These include loans with an original balance in excess of $240,000 that otherwise meet all other Fannie Mae or Freddie Mac guidelines (jumbo loans), and other loans that do not meet those guidelines. As part of E-LOAN's multi-source lending activities, E-LOAN originates loans with original balances of up to $2 million. E-LOAN offers the following categories of loan products: - long term adjustable rate mortgages; - intermediate term adjustable rate mortgages; - fixed rate mortgages; - balloons; - home equity lines of credit; and - no cost loans. 43 47 The following table sets forth the number and dollar amount of the various types of loan products sold to customers for the periods indicated. TOTAL NUMBER OF CLOSED LOANS BY PRODUCT
1998 ------------------------------------------------------------------------------------------ Q1 Q2 Q3 ---------------------------- ---------------------------- ---------------------------- LOAN % OF LOAN % OF LOAN % OF DOLLAR TOTAL DOLLAR TOTAL DOLLAR TOTAL NUMBER VOLUME DOLLAR NUMBER VOLUME DOLLAR NUMBER VOLUME DOLLAR TYPE OF LOAN OF LOANS ($ MILL) VOLUME OF LOANS ($ MILL) VOLUME OF LOANS ($ MILL) VOLUME ------------ -------- -------- ------ -------- -------- ------ -------- -------- ------ 30 Year Fixed................ 333 $ 74.7 60% 617 $129.7 60% 683 $147.9 68% 15 Year Fixed................ 117 $ 23.8 19% 203 $ 39.1 18% 238 $ 47.3 24% 30 Year ARM.................. 100 $ 26.7 21% 173 $ 46.2 22% 77 $ 22.3 7% Other Products............... 2 $ 0.4 --% 4 $ 0.1 --% 5 $ 8 1% --- ------ --- ----- ------ --- ----- ------ --- Total..................... 552 $125.6 100% 997 $215.1 100% 1,003 $218.3 100% 1998 ---------------------------- Q4 ---------------------------- LOAN % OF DOLLAR TOTAL NUMBER VOLUME DOLLAR TYPE OF LOAN OF LOANS ($ MILL) VOLUME ------------ -------- -------- ------ 30 Year Fixed................ 1,043 $211.7 63% 15 Year Fixed................ 384 $ 65.2 20% 30 Year ARM.................. 176 $ 54.7 16% Other Products............... 31 $ 2.2 1% ----- ------ --- Total..................... 1,634 $333.8 100%
AUTOMATED UNDERWRITING. Automated underwriting is expected to contribute significantly to E-LOAN's goal of increasing the efficiency of multi-source lending by providing customers faster, more cost-efficient credit reviews and decisions. AU may further offer efficiency enhancements through reduced costs in property appraisals. In addition, E-LOAN believes customers will also value the less onerous and time-consuming nature of AU relative to more traditional underwriting processes. E-LOAN will continue to seek to enhance its AU capabilities and incorporate as many techniques and technologies as are warranted by its business needs and the needs of its major business partners. E-LOAN has recently been approved by Fannie Mae to be an originator under Fannie Mae's Desktop Originator and Desktop Underwriter system (DU). DU is expected to help automate the lending process for all conforming loans and loans aimed at low-and moderate-income borrowers. The goal of DU is to reduce the time and expense of property appraisals. The DU system is expected to enable E-LOAN to implement a comprehensive, integrated point-of-sale solution providing expedited loan decisions. E-LOAN is the largest exclusive online originator approved to use the DU system. E-LOAN also expects to implement additional AU systems, including Freddie Mac's Loan Prospector and GECMC's Good Decisions. LOAN UNDERWRITING. E-LOAN's guidelines for underwriting conventional conforming loans comply with the underwriting criteria employed by Fannie Mae and/or Freddie Mac. E-LOAN's underwriting guidelines and property standards for all other conventional non-conforming loans are based on the underwriting standards employed by the secondary mortgage loan purchasers of such loans. E-LOAN considers the following general underwriting criteria in determining whether to approve a loan application: - employment and income; - credit history; - property value and characteristics; - borrower characteristics; and - available assets. 44 48 GEOGRAPHIC DISTRIBUTION. The following table sets forth the geographic distribution by state of E-LOAN's loan originations for the year ended December 31, 1998. DISTRIBUTION BY STATE OF E-LOAN'S LOAN ORIGINATIONS
1998 ----------------------------------- NUMBER OF CLOSED PERCENT OF TOTAL STATE LOANS CLOSED LOANS ----- ---------------- ---------------- California........... 3,483 83% Washington........... 246 6% Texas................ 104 2% Colorado............. 78 2% All Others........... 275 7% ----- ---- Total...... 4,186 100%
The following table sets forth the distribution by county of E-LOAN's California loan originations for the year ended December 31, 1998. DISTRIBUTION BY COUNTY OF E-LOAN'S CALIFORNIA LOAN ORIGINATIONS
1998 ----------------------------------- NUMBER OF CLOSED PERCENT OF TOTAL STATE LOANS CLOSED LOANS ----- ---------------- ---------------- Santa Clara.......... 823 24% Alameda.............. 530 15% San Mateo............ 341 10% Contra Costa......... 317 9% Los Angeles.......... 283 8% Orange............... 238 7% San Francisco........ 145 4% Other................ 806 23% ----- --- Total...... 3,483 100%
SALE OF LOANS. E-LOAN sells all loans that it originates, on a loan by loan basis, along with the loan servicing rights. Substantially all prime credit quality first mortgage loans sold by E-LOAN are sold without recourse. Generally, E-LOAN sells its non-conforming conventional loan production to large buyers in the secondary market. E-LOAN minimizes its credit exposure on loans funded through its warehouse credit facilities by selling such loans within 14 days of funding on average. To facilitate the rapid sale of each loan, E-LOAN enters into a best-efforts commitment with the mortgage loan purchaser at the same time the customer's interest rate commitment is obtained. E-LOAN sells its loans on a best efforts basis, as opposed to a mandatory basis, in order to avoid the potential financial penalties associated with failing to deliver a loan to the mortgage loan purchaser under a mandatory commitment. With the interest rate risk limited by the commitments to sell originated loans, E-LOAN does not enter into any hedging transactions in order to offset the risk that a change in interest rates will result in a decrease in the value of E-LOAN's current mortgage loan inventory or its commitments to purchase or originate mortgage loans. FINANCING OF INTERNAL MORTGAGE FUNDING OPERATIONS. E-LOAN's principal financing requirements are associated with its internal loan funding activities. To satisfy these requirements, E-LOAN currently draws on warehouse credit facilities it has established with Bank United and 45 49 E-LOAN has also secured an additional credit facility with Greenwich Capital. E-LOAN had committed and uncommitted funds available through its warehouse credit facilities and its agreement with Greenwich Capital aggregating approximately $50 million as of December 31, 1998. E-LOAN is negotiating with Greenwich Capital to increase its commitment to finance E-LOAN's mortgage loan inventory to $200 million effective upon the closing of this offering. Pending the successful completion of the negotiations, the funding sources available to E-LOAN under each of its current warehouse credit facilities and its agreement with Greenwich Capital would be as follows: Greenwich Capital...................... $100 million Bank United............................ $ 40 million GE Capital............................. $ 15 million
If E-LOAN continues to achieve its historical 14-day average turnover of mortgage loans funded internally, the existing warehouse credit facilities together with an increase in the Greenwich Capital commitment would enable E-LOAN to internally fund approximately $310 million in mortgage loans during each 30-day period, increasing to approximately $510 million upon the closing of this offering. E-LOAN intends to increase and diversify further its short-term funding capabilities and continue to identify and pursue alternative and supplementary methods to finance its operations through the public and private capital markets. CUSTOMER SERVICE E-LOAN devotes significant resources to providing personalized, timely customer service and support to minimize the potential uncertainty, anxiety and inconvenience of the loan process. By combining high-tech communications with highly personalized attention, E-LOAN believes it provides a level of customer service superior to that experienced in the traditional loan application process. To help prospective customers understand the mortgage process, E-LOAN's website provides a rich assortment of information on how to choose the most suitable mortgage, descriptions of the various types of loan products, articles about buying and refinancing a home, a glossary of mortgage terms, and answers to frequently asked questions. Prospective customers may call E-LOAN toll-free with general questions or click on one of the many "contact us" links throughout its website to send questions via e-mail. Call center staff respond to both phone calls and e-mail requests within 24 hours, and are available from 6 AM to 6 PM California time Monday through Saturday. To respond promptly to questions from Realtors, E-LOAN also maintains a toll-free Realtor hotline staffed during the same hours. Once a loan application is submitted online, E-LOAN assigns the customer a personal customer service representative (CSR). The CSR becomes the customer's primary point of contact with E-LOAN, ensuring prompt and personalized attention. The CSR maintains regular e-mail and phone communication with the borrower to answer questions, address any problems and generally facilitate closing the loan by coordinating with E-LOAN's underwriting and processing staff. After closing, E-LOAN asks each borrower to rate the level of customer service received from the CSR, as well as from appraisal and settlement personnel. The survey results are factored into the CSR's compensation, ensuring a strong commitment to continually improving the quality of customer service. Every online application also triggers the opening of a password-protected E-Track account. Using E-Track, customers can track the process of their loan applications online at any time. Each event that occurs throughout the various stages of the loan process, such as the receipt of appraisal details or a lender's request for documentation from the borrower, generates an automated e-mail alert to the borrower. The information is also logged in E-Track so the 46 50 borrower has a continuously updated record of all loan application developments. With a customer's permission, Realtors may also access the E-Track account to keep abreast of the progress of a loan. TECHNOLOGY E-LOAN's technology systems use a combination of its own proprietary technologies and commercially available, licensed technologies from such industry leading providers as Sun Microsystems, Cisco Systems and Oracle. E-LOAN's systems were designed around industry standard architecture to reduce downtime in the event of outages or catastrophic occurrences. Our systems provide 24x7 availability, and have capacity for a tenfold increase in activity before requiring additional hardware or support. The system architecture and user interface were designed by E-LOAN's co-founders and 15 person engineering staff. USER INTERFACE. The E-LOAN website is designed for fast downloads and compatibility with the most basic browsers. Pages are built with minimal graphics and do not require client-side plug-ins or Java to view. RATE SEARCHES AND COMPARISONS. Many of the mortgage services that E-LOAN offers its customers are facilitated through its proprietary database. The database features a rate-loading mechanism that enables electronic data feeds from E-LOAN's lenders to be received and added to the database multiple times per day. This mechanism provides prospective borrowers searching E-LOAN's database with timely access to rates as the market changes. The database currently contains rates and other details for about 50,000 products on an average day and is designed to support a virtually limitless number of products or search parameters. The database supports the dynamic comparison of loans according to such characteristics as rate, term and points, and in the case of adjustable-rate mortgages, margin, index and life cap. The rate-loading and search capabilities of our database are the focus of significant development resources and we plan to continuously improve and enhance these features. LOAN APPLICATION AND TRACKING. When a customer applies for a loan online, the application data is stored in a file server. As additional information, such as credit reports, appraisal details and financial documentation, is obtained throughout the loan process and added to the borrower's file, e-mails are automatically sent to the borrower and Realtor to inform them of the current status of the loan application. At the same time, the borrower's E-Track account is updated. Each day, E-LOAN sends thousands of automated e-mails and updates hundreds of E-Track accounts. SECURITY. In order to safeguard borrowers' sensitive financial data, E-LOAN's systems provide the most secure online transaction capability available. Customer information sent via the website is encrypted using a Secure Socket Layer. The server is protected with industry-leading firewall software. The website itself is locked down, with only two people authorized to change the content on the production server. E-Track is password-protected so that only the borrower may access the account. For an extra measure of protection, none of the borrower's credit or financial information is contained in the E-Track account. The file server containing borrower data is accessible only to authorized users within E-LOAN. There is no external access to this internal server via modem, even by E-LOAN employees. PARTNER TEMPLATES. E-LOAN's ability to develop and support co-branded loan centers in partnership with websites such as Yahoo!, E*Trade and DLJdirect is critical to driving applications and expanding the E-LOAN brand. E-LOAN has developed a unique template system that allows for the rapid development and deployment of co-branded loan centers within several hours of signing a distribution agreement. In addition, our partners' websites contain customized data and retain unique appearances. E-LOAN currently maintains over 40 co-branded loan centers. 47 51 SERVER HOSTING AND BACK-UP. E-LOAN's website system hardware is hosted at the Exodus facilities in Santa Clara, California and Jersey City, New Jersey, providing redundant communication lines and emergency power back-up. We have implemented load balancing systems and our own redundant servers to provide for fault tolerance. Scheduled maintenance takes place without taking the website offline. MARKETING E-LOAN's marketing strategy is to attract loan applicants to its website by promoting the E-LOAN brand as a byword for choice, selection, competitive pricing and service in the mortgage industry. E-LOAN relies on a variety of methods to promote its brand. By providing superior customer service, E-LOAN promotes online referrals from satisfied borrowers. Strategic partnerships with online financial websites, including Yahoo!, E*Trade, DLJdirect, Telebank, CBS MarketWatch, and Motley Fool, drive applications through co-branded mortgage loan centers on those websites. Offline marketing campaigns featuring radio, TV, print and outdoor advertising in key markets and nationwide target the demographic segments with the highest propensity to utilize an online mortgage provider. E-LOAN also engages in a number of marketing activities at trade shows and other events in the real estate industry in order to encourage Realtors to refer homebuyers directly to our website. E-LOAN entered into an agreement with Yahoo!, Inc. in September 1998, which was extended in March 1999 to run through February 2001. Pursuant to this agreement, E-LOAN is the exclusive provider of mortgage related information on the "Yahoo! Loan Center" website. REGULATION OF MORTGAGE BROKERS AND LENDERS The residential mortgage financing industry is highly regulated. E-LOAN's business is subject to extensive and complex rules and regulations of, and licensing and examination by, various federal, state and local government authorities. These rules impose obligations and restrictions on E-LOAN's residential loan brokering and lending activities. In particular, these rules limit the broker fees, interest rates, finance charges and other fees E-LOAN may assess, require extensive disclosure to E-LOAN's customers, prohibit discrimination and impose multiple qualification and licensing obligations on E-LOAN. Failure to comply with these requirements may result in, among other things, revocation of required licenses or registrations, loss of approved status, voiding of the loan contracts or security interests, indemnification liability or the obligation to repurchase mortgage loans sold to mortgage loan purchasers, rescission of mortgage loans, class action lawsuits, administrative enforcement actions and civil and criminal liability. E-LOAN believes it is in substantial compliance with these rules and regulations. As a mortgage company doing business exclusively through the Internet, E-LOAN faces an additional level of regulatory risk given the fact that the statutes and regulations governing mortgage transactions have not been substantially revised or updated to fully accommodate electronic commerce. Most of the federal and state laws, rules and regulations governing mortgage loans contemplate or assume paper-based transactions and do not currently address the delivery of required disclosures and other documents through electronic communications. Until such laws, rules and regulations are revised to clarify their applicability to transactions through e-commerce, any company offering mortgage loans through the Internet or other means of e-commerce will face uncertainty as to compliance. In addition, there is no assurance that revisions to the laws, rules and regulations will be adopted and, if adopted, will be timely or adequate to eliminate such uncertainty. Nonetheless, E-LOAN believes that it has taken prudent steps to mitigate these risks in offering its mortgage loan services through the Internet. At the state level, E-LOAN is subject to licensing and regulation in most of the states where it acts as a mortgage broker or lender. In addition, any person who acquires 10% or more of E-LOAN's stock may become subject to certain state licensing regulations requiring such person 48 52 to periodically file certain financial information and other personal and business information. If any person holding 10% or more of E-LOAN's stock refuses or fails to comply with such filing requirements, E-LOAN's existing licensing arrangements could be jeopardized. The loss of required licenses could have a material adverse effect on E-LOAN's results of operations and financial condition. State laws limit the broker fees, interest rates, finance charges and other fees E-LOAN may assess, including late charges, insufficient funds charges for returned checks and prepayment penalties, and may require payment of interest on escrow balances. State laws also require extensive disclosure to E-LOAN's customers concerning such matters as fees and charges, brokerage agreements, lock-in agreements and commitments, alternative mortgage transactions, such as adjustable rate loans, escrows for taxes and insurance, choosing settlement attorneys and insurance agents and private mortgage insurance, among others. These laws regulate both the content and timing of disclosures. In addition, many state laws regulate advertising claims in connection with the solicitation of mortgage loan applications. State and federal laws also prohibit unfair and deceptive trade practices in the mortgage finance business. E-LOAN believes that it has obtained all licenses material to our business in the jurisdictions where it conducts business, and is operating substantially in compliance with the laws of such jurisdictions. At the federal level, E-LOAN's mortgage brokering and lending activities are regulated under a variety of laws, including, but not limited to, the Truth in Lending Act and Regulation Z (TILA), the Equal Credit Opportunity Act and Regulation B (ECOA), the Fair Housing Act, the Fair Credit Reporting Act (FCRA), the Real Estate Settlement Procedures Act and Regulation X (RESPA) and the Home Mortgage Disclosure Act of 1975 and Regulation C (HMDA). These statutes generally require detailed disclosure of information concerning mortgage loans, and they regulate the manner in which such loans are made, including advertising, disclosure of consumer information, servicing (and transfer of servicing) of mortgage loans, payments for settlement services and reporting of consumer data. These laws regulate both the content and timing of disclosures. E-LOAN believes that it is operating substantially in compliance with such laws as they apply to E-LOAN's business. Under TILA, lenders are required to provide consumers with uniform, understandable information concerning certain terms and conditions of their loan and credit transactions. Such disclosures include providing the annual percentage rate, monthly payment amount and total amount financed, plus certain disclosures concerning alternative mortgage transactions. In addition, TILA gives borrowers, among other things, the right to rescind loan transactions in certain circumstances if the lender fails to provide the requisite disclosure. Under ECOA, creditors are prohibited from discriminating against applicants on the basis of race, color, sex, age, religion, national origin or marital status. The regulations under ECOA also restrict creditors from requesting certain types of information from loan applicants. FCRA requires lenders to supply applicants with certain information (called an "adverse action notice") when the lender denies its applicants credit. The Fair Housing Act prohibits discrimination in mortgage lending on the basis of race, color, religion, sex, handicap, familial status or national origin. Finally, E-LOAN, when acting as a mortgage lender, must also file annual reports with HUD pursuant to HMDA, which requires the collection and reporting of statistical data concerning loan transactions. RESPA requires certain disclosures, including a good faith estimate of closing costs and fees, as well as mortgage servicing transfer practices. RESPA also prohibits the payment or receipt of kickbacks or referral fees, fee shares or splits, or unearned fees in connection with the provision of real estate settlement services. It is a common practice for online mortgage companies to enter into advertising, marketing and distribution arrangements with other Internet companies and websites whereby the mortgage companies pay the Internet companies fees for such advertising, marketing and distribution services and other goods and facilities based on the 49 53 number of click-throughs, completed loan applications or closed loans derived from such arrangements. The applicability of RESPA's referral fee prohibitions to the compensation provisions of these arrangements is unclear and the Department of Housing and Urban Development has provided no guidance to date on the subject. Although E-LOAN believes that it has structured its relationships with Internet advertisers to ensure compliance with RESPA, some level of risk is inherent absent amendments to the law or regulations, or clarification from regulators. The laws, rules and regulations applicable to E-LOAN are subject to periodic modification and change. There are currently proposed various laws, rules and regulations which, if adopted, could impact E-LOAN. There can be no assurance that these proposed laws, rules and regulations, or other such laws, rules or regulations, will not be adopted in the future which could make compliance much more difficult or expensive, restrict E-LOAN's ability to originate, broker, purchase or sell loans, further limit or restrict the amount of commissions, interest and other charges earned on loans originated, brokered, purchased or sold by E-LOAN, or otherwise adversely affect the business or prospects of E-LOAN. COMPETITION The market for the origination of mortgage loans is rapidly evolving, both online and through traditional channels, and competition for borrowers is intense and is expected to increase significantly in the future. E-LOAN faces competition from companies directly competing with us by offering mortgage loans or other home buying services over the Internet. Principal among these competitors are Microsoft HomeAdvisor, Intuit QuickenMortgage, HomeShark, Keystroke and Mortgage.com. Traditional lenders, such as Countrywide, Norwest, Wells Fargo and Bank America, also provide access to their mortgage loan offerings over the Internet. Increased competition, particularly online competition, could result in price reductions, reduced margins or loss of market share, any of which could adversely affect our business. Further, there can be no assurance that E-LOAN's competitors and potential competitors will not develop services and products that are equal or superior to those of E-LOAN or that achieve greater market acceptance than its products and services. E-LOAN believes that the primary competitive factors in creating a financial services resource on the Internet are functionality, brand recognition, customer loyalty, ease-of-use, quality of service, reliability and critical mass. Competition is likely to increase significantly as new companies enter the market and current competitors expand their services. Many of these potential competitors are likely to enjoy substantial competitive advantages, including: - longer operating histories; - greater name recognition; - larger, established customer bases; and - substantially greater financial, marketing, technical and other resources. LEGAL PROCEEDINGS E-LOAN is not currently subject to any material legal proceedings. E-LOAN may from time to time become a party to various legal proceedings arising in the ordinary course of its business. INTELLECTUAL PROPERTY Trademarks and other proprietary rights are important to our success and our competitive position. E-LOAN currently has a number of trademarks and copyrights; however, it does not hold any patents. Although E-LOAN seeks to protect its trademarks and other proprietary rights through a variety of means, E-LOAN may not have taken adequate steps to protect these rights. E-LOAN may also license content from third parties in the future and it is possible that it could 50 54 be subjected to infringement actions based upon the content licensed from these third parties. Any claims brought against E-LOAN, regardless of their merit, could result in costly litigation and the diversion of its financial resources and technical and management personnel. Further, if such claims are proved valid, through litigation or otherwise, E-LOAN may be required to change its trademarks and pay financial damages, which could adversely affect its business. E-LOAN typically enters into confidentiality or license agreements with its employees, consultants and corporate partners, and generally controls access to and distribution of its technologies, documentation and other proprietary information. Despite its efforts to protect its proprietary rights from unauthorized use or disclosure, parties may attempt to disclose, obtain or use E-LOAN's rights. The steps E-LOAN has taken may not prevent misappropriation of its proprietary rights, particularly in foreign countries where laws or law enforcement practices may not protect E-LOAN's proprietary rights as fully as in the United States. EMPLOYEES As of February 24, 1999, E-LOAN employed 228 full-time employees, of whom 181 were in operations, 22 were in administration, 12 were in marketing and business development and 13 were in engineering. As E-LOAN continues to grow and introduce more products, it expects to hire more personnel, particularly in the areas of mortgage operations and marketing. None of E-LOAN's current employees is represented by a labor union or is the subject of a collective bargaining agreement. E-LOAN believes that relations with its employees are good. FACILITIES E-LOAN is headquartered in Dublin, California, where it leases approximately 43,000 square feet of space primarily in a single building. E-LOAN also occupies approximately 2,000 square feet of space in Palo Alto, California. The lease for E-LOAN's office space in Dublin expires in October 2003, and the lease for E-LOAN's office space in Palo Alto is month to month. E-LOAN currently anticipates that it will require additional space as more personnel are hired. 51 55 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth certain information regarding the directors and executive officers of E-LOAN as of March 19, 1999:
NAME AGE POSITION ---- --- -------- Chris Larsen............................ 38 Chief Executive Officer and Director Janina Pawlowski........................ 38 President and Director Frank Siskowski......................... 51 Chief Financial Officer Harold "Pete" Bonnikson................. 44 Senior Vice President, Operations William Crane........................... 37 Vice President, Engineering Doug Galen.............................. 37 Vice President, Business Development & Sales Janet Hammond........................... 41 Vice President, Underwriting Joseph Kennedy.......................... 39 Senior Vice President, Marketing and Business Development Steve Majerus........................... 35 Vice President, Secondary Markets Sharon Ruwart........................... 35 Vice President, Marketing Ira M. Ehrenpreis(1)(2)................. 30 Director Robert C. Kagle(1)(2)................... 43 Director Tim Koogle(1)(2)........................ 47 Director Wade Randlett........................... 34 Director
- --------------- (1) Member of Audit Committee (2) Member of Compensation Committee CHRIS LARSEN co-founded E-LOAN in August 1996 and has served as its Chief Executive Officer since June 1998. From August 1996 to June 1998, Mr. Larsen served as the President of E-LOAN. Mr. Larsen has been a Director of E-LOAN since its incorporation in August 1996. From October 1992 to August 1996, Mr. Larsen was the President of the Palo Alto Funding Group, the mortgage brokerage he co-founded in 1992 and E-LOAN's predecessor company. Mr. Larsen holds an M.B.A. degree from Stanford University and a B.S. degree from San Francisco State University. JANINA PAWLOWSKI co-founded E-LOAN in August 1996 and has served as its President since June 1998. From August 1996 to June 1998, Ms. Pawlowski served as the Chief Executive Officer of E-LOAN. Ms. Pawlowski has been a Director of E-LOAN since its incorporation in August 1996. From October 1992 to August 1996, Ms. Pawlowski was the Chief Executive Officer of the Palo Alto Funding Group, the mortgage brokerage she co-founded in 1992 and E-LOAN's predecessor company. Ms. Pawlowski holds an M.B.A. degree from the University of Rochester and a B.S. degree from Cornell University. FRANK SISKOWSKI has served as the Chief Financial Officer of E-LOAN since October 1998. Prior to joining the Company, Mr. Siskowski was the Senior Vice President and Chief Financial Officer of The Indus Group, Inc. from September 1996 to August 1998. From July 1991 to September 1996, Mr. Siskowski served as Senior Vice President and Controller of VISA International. From January 1985 to July 1991, Mr. Siskowski served as the Vice President and Chief Financial Officer of the MCI Pacific Division of MCI Communications Corporation. Mr. Siskowski holds an M.B.A. degree from Fordham University and a B.A. degree from Manhattan College. HAROLD "PETE" BONNIKSON has served as the Senior Vice President of Operations of E-LOAN since January 1999. Prior to joining E-LOAN, Mr. Bonnikson was with North American Mortgage 52 56 and its predecessor companies since 1981. Mr. Bonnikson was the Executive Vice President of North American Mortgage from 1993 to 1999. Mr. Bonnikson holds a B.S. degree from California State University at Sacramento. WILLIAM CRANE has served as the Vice President of Engineering of E-LOAN since April 1998. Prior to joining E-LOAN, Mr. Crane was the Vice President of Engineering of FrontOffice Technologies from January 1996 to April 1998. From November 1992 to January 1996, Mr. Crane was the Vice President of Engineering of Network Computing Devices. Mr. Crane holds a B.S. degree from Texas A&M University. DOUG GALEN has served as the Vice President of Business Development of E-LOAN since September 1997. Prior to joining E-LOAN, Mr. Galen was the Vice President of Business Development of Owners.com from August 1996 to August 1997. From January 1996 to August 1996, Mr. Galen was the Vice President of Limar Realty. From June 1988 to January 1996, Mr. Galen was the Vice President of The Shilder Group. Mr. Galen holds an M.B.A. degree and a B.A. degree from the University of California, Berkeley. JANET HAMMOND has served as the Vice President of Underwriting of E-LOAN since March 1999. From June 1998 to March 1999, Ms. Hammond served as the Director of Operations of E-LOAN. From December 1997 to June 1998, Ms. Hammond served as a manager of Customer Service and then as the Director of Customer Service of E-LOAN. Prior to joining E-LOAN, from May 1997 to December 1997, Ms. Hammond was a project manager with PMI Mortgage Insurance, Inc. From September 1990 to May 1997, Ms. Hammond was a Loan Manager for Rockwell Federal Credit Union. Ms. Hammond holds a B.A. degree from California State University, Fresno. JOSEPH KENNEDY has served as the Senior Vice President of Marketing and Business Development of E-LOAN since February 1999. Mr. Kennedy was the Vice President of Sales, Service and Marketing of Saturn Corporation from October 1995 to February 1999. From December 1993 to September 1995, Mr. Kennedy was the General Director of Marketing and Product Planning for the Cadillac Motor Car Division of General Motors Corporation. From September 1992 to December 1993, Mr. Kennedy was the Director of Product Portfolio Planning for the North American Operations of General Motors Corporation. Mr. Kennedy holds an M.B.A. degree from Harvard Business School and a B.S. degree from Princeton University. STEVE MAJERUS has served as the Vice President of Secondary Markets of E-LOAN since January 1999. From April 1998 to January 1999, Mr. Majerus served as the Director of Mortgage Banking of E-LOAN. Prior to joining E-LOAN, Mr. Majerus was the Director of Mortgage Lending for of CMG Mortgage from January 1996 to March 1998. From February 1993 to November 1995, Mr. Majerus was the President of Trans Capital Mortgage, a company which he co-founded. SHARON RUWART has served as the Vice President of Marketing of E-LOAN since December 1998. From April 1998 to December 1998, Ms. Ruwart served as Director of Marketing of E-LOAN. Prior to joining E-LOAN, Ms. Ruwart held a variety of positions at the San Jose Mercury News, a division of Knight-Ridder, Inc., including Brand Group Manager and Recruitment Advertising Manager from January 1995 to April 1998. Ms. Ruwart holds an M.B.A. degree from Stanford University and a B.A. degree from Yale University. IRA M. EHRENPREIS has served as a Director of E-LOAN since January 1998. Since 1996 Mr. Ehrenpreis has been a General Partner of TPW Management V, L.P. the general partner of Technology Partners Fund VI, L.P. Mr. Ehrenpreis holds J.D. and M.B.A. degrees from Stanford University and a B.A. degree from the University of California, Los Angeles. ROBERT C. KAGLE has served as a Director of E-LOAN since January 1998. Mr. Kagle has been a member of Benchmark Capital Management Co., L.L.C., since its founding in May 1995. Mr. Kagle also has been a General Partner of Technology Venture Investors since January 1984. Mr. Kagle is also a director of eBay Inc., a leading online trading community. Mr. Kagle holds a 53 57 B.S. degree from the General Motors Institute (renamed Kettering University in January 1998) and an M.B.A. degree from Stanford University. TIM KOOGLE has served as a Director of E-LOAN since September 1998. Mr. Koogle has been the Chief Executive Officer of Yahoo!, Inc. and a member of Yahoo!'s Board of Directors since August 1995. He has also been Yahoo!'s Chairman since January 1999 and was its President from August 1995 until January 1999. Prior to joining Yahoo!, Mr. Koogle was President of Intermec Corporation, a manufacturer of data collection and data communication products, from 1992 to 1995. During that time, he also served as a corporate Vice President of Intermec's parent company, Western Atlas. Mr. Koogle holds a B.S. degree from the University of Virginia and an M.S. degree from Stanford University. WADE RANDLETT has served as a Director of E-LOAN since June 1997. Mr. Randlett has been the Political Director of TechNet since February 1997. From November 1992 until February 1997, Mr. Randlett was self-employed as a Policy Consultant. Mr. Randlett holds a B.S. degree from Princeton University. BOARD COMPOSITION E-LOAN currently has authorized six directors. E-LOAN's Restated Certificate of Incorporation will provide that, effective upon the closing of this offering, the terms of office of the members of the Board of Directors will be divided into three classes: Class I, whose term will expire at the annual meeting of stockholders to be held in 2000, Class II, whose term will expire at the annual meeting of stockholders to be held in 2001, and Class III, whose term will expire at the annual meeting of stockholders to be held in 2002. The Class I directors are Messrs. Ehrenpreis and Randlett, the Class II directors are Messrs. Kagle and Koogle and the Class III directors are Mr. Larsen and Ms. Pawlowski. At each annual meeting of stockholders after the initial classification, the successors to directors whose term will then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. In addition, E-LOAN's Bylaws will provide that the authorized number of directors may be changed only by resolution of the Board of Directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors. This classification of the Board of Directors may have the effect of delaying or preventing changes in control or management of E-LOAN. Each officer is elected by, and serves at the discretion of, the Board of Directors. Each of E-LOAN's officers and directors, other than nonemployee directors, devotes full time to the affairs of E-LOAN. E-LOAN's nonemployee directors devote such time to the affairs of E-LOAN as is necessary to discharge their duties. There are no family relationships among any of the directors, officers or key employees of E-LOAN. BOARD COMMITTEES The Audit Committee of the Board of Directors reviews the internal accounting procedures of E-LOAN and consults with and reviews the services provided by E-LOAN's independent accountants. The Audit Committee currently consists of Messrs. Ehrenpreis, Kagle and Koogle. The Compensation Committee of the Board of Directors reviews and recommends to the Board the compensation and benefits of all executive officers of E-LOAN, administers E-LOAN's stock option plan and establishes and reviews general policies relating to compensation and benefits of employees of E-LOAN. The Compensation Committee currently consists of Messrs. Ehrenpreis, Kagle and Koogle. No interlocking relationships exist between E-LOAN's Board of Directors or Compensation Committee and the board of directors or compensation committee of any other company, nor has any such interlocking relationship existed in the past. 54 58 DIRECTOR COMPENSATION Our directors do not currently receive cash compensation from E-LOAN for their service as members of the Board of Directors, although they are reimbursed for certain expenses in connection with attendance at Board and Committee meetings. E-LOAN does not provide additional compensation for committee participation or special assignments of the Board of Directors. From time to time, certain directors of E-LOAN have received grants of options to purchase shares of E-LOAN's common stock pursuant to the 1997 Stock Option Plan. See "-- Stock Plans" and "-- Certain Transactions". EXECUTIVE COMPENSATION The following table sets forth the total compensation received for services rendered to E-LOAN during the fiscal year ended December 31, 1998 by our Chief Executive Officer and certain other executive officers who received salary and bonus for such fiscal year in excess of $100,000. The executive officers listed in the table below are sometimes referred to as Named Executive Officers.
LONG-TERM COMPENSATION --------------------- ANNUAL COMPENSATION NUMBER OF ---------------------- SECURITIES UNDERLYING NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS --------------------------- ---------- --------- --------------------- Chris Larsen Chief Executive Officer.................... $129,807 $ -- -- Janina Pawlowski President.................................. 129,808 -- -- Doug Galen Vice President, Business Development & Sales................................... 114,496 -- 50,000 Steve Majerus Vice President, Secondary Marketing........ 115,773 47,336 75,000
Mr. Bonnikson joined E-LOAN in January 1999 as its Senior Vice President of Operations and will be compensated at an annual base salary of $150,000 during the fiscal year ended December 31, 1999. Mr. Crane joined E-LOAN in April 1998 as its Vice President of Engineering and will be compensated at an annual base salary of $130,000 during the fiscal year ended December 31, 1999. Mr. Kennedy joined E-LOAN in February 1999 as its Senior Vice President of Marketing and Business Development will be compensated at an annual base salary of $200,000 during the fiscal year ended December 31, 1999. Mr. Siskowski joined E-LOAN in October 1998 as its Chief Financial Officer and will be compensated at an annual base salary of $170,000 during the fiscal year ended December 31, 1999. 55 59 OPTION GRANTS IN LAST FISCAL YEAR The following table sets forth certain summary information concerning grants of stock options to each of the Named Executive Officers for the year ended December 31, 1998. E-LOAN has never granted any stock appreciation rights.
POTENTIAL REALIZABLE INDIVIDUAL GRANTS VALUE AT ASSUMED --------------------------------------------------------- ANNUAL RATES OF NUMBER OF PERCENT OF STOCK PRICE SECURITIES TOTAL OPTIONS APPRECIATION FOR UNDERLYING GRANTED TO OPTION TERM(3) OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION -------------------- NAME(1) GRANTED FISCAL YEAR(2) ($/SH) DATE 5% 10% ------- ---------- -------------- -------------- ---------- -------- -------- Chris Larsen................... -- -- -- -- -- -- Janina Pawlowski............... -- -- -- -- -- -- Doug Galen..................... 40,000 03.9% $0.65 03/12/08 $16,351 $41,437 10,000 01.0% $3.00 08/11/08 $18,867 $47,812 Steve Majerus.................. 75,000 07.4% $0.65 05/07/08 $30,659 $77,695
- --------------- (1) In January 1999, E-LOAN granted to Mr. Bonnikson an option to purchase 218,087 shares of common stock at an exercise price of $6.00 per share, which expires on January 13, 2009. In May 1998, E-LOAN granted to Mr. Crane an option to purchase 165,000 shares of common stock at an exercise price of $0.65 per share, which expires on May 7, 2008. In February 1999, E-LOAN granted to Mr. Kennedy an option to purchase 249,173 shares of common stock at an exercise price of $6.00 per share, which expires on February 22, 2009. In November 1998, E-LOAN granted to Mr. Siskowski an option to purchase 128,459 shares of common stock at an exercise price of $4.00 per share, which expires November 25, 2008. (2) In 1998, E-LOAN granted options to purchase an aggregate of 1,027,209 shares of common stock, of which 1,017,959 were granted to employees and 9,250 were granted to consultants. (3) The 5% and 10% assumed annual rates of stock price appreciation are mandated by the rules of the Securities and Exchange Commission and do not represent E-LOAN's estimate or projection of future common stock prices. The potential realizable value is calculated by assuming that the stock price on the date of grant appreciates at the indicated rate for the entire term of the option and that the option is exercised at the exercise price and sold on the last day at the appreciated price. FISCAL YEAR END OPTION VALUES The following table provides certain summary information concerning stock options held as of December 31, 1998 by each of the Named Executive Officers. None of the Named Executive Officers exercised options in fiscal 1998.
NUMBER OF SECURITIES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT AT DECEMBER 31, 1998 DECEMBER 31, 1998 --------------------------- --------------------------- NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- ------------- ----------- ------------- Chris Larsen...................................... -- -- Janina Pawlowski.................................. -- -- Doug Galen........................................ 30,000 110,000 Steve Majerus..................................... -- 75,000
56 60 There was no public trading market for E-LOANS's common stock as of December 31, 1998. Accordingly, the value of unexercised in-the-money options as of such date was calculated on the basis of an assumed initial public offering price of $ per share. STOCK PLANS 1997 Stock Plan E-LOAN's 1997 Stock Plan (1997 Plan) provides for the granting to employees of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (Code), and for the granting to employees, directors and consultants of nonstatutory stock options and stock purchase rights (SPRs). The 1997 Plan was approved by the Board of Directors in August 1997 and by the stockholders in November 1997. The Board approved amendments to the 1997 Plan to increase the number of shares reserved under the 1997 Plan in May 1998 and January 1999, and the stockholders also approved these amendments to the 1997 Plan in May 1998 and January 1999. Unless terminated sooner, the 1997 Plan will terminate automatically in 2007. A total of 2,500,000 shares of common stock is currently reserved for issuance pursuant to the 1997 Plan, plus annual increases equal to the lesser of 1,500,000 shares, 4% of the outstanding shares on such date, or a lesser amount determined by the Board. The 1997 Plan may be administered by the board of directors or a committee of the board (as applicable, the "Administrator"), which committee shall, in the case of options intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, consist of two or more "outside directors" within the meaning of Section 162(m) of the Code. The Administrator has the power to determine the terms of the options or SPRs granted, including the exercise price, the number of shares subject to each option or SPR, the exercisability thereof, and the form of consideration payable upon such exercise. The board has the authority to amend, suspend or terminate the 1997 Plan, provided that no such action may adversely affect any share of common stock previously issued and sold or any option previously granted under the 1997 Plan. Options and SPRs granted under the 1997 Plan are not generally transferable by the optionee, and each option and SPR is exercisable during the lifetime of the optionee only by such optionee. Options granted under the 1997 Plan must generally be exercised within three months of the Optionee's separation of service from E-LOAN, or within 12 months after such optionee's termination by death or disability, but in no event later than the expiration of the option's ten year term. In the case of SPRs, unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant E-LOAN a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's service for E-LOAN for any reason, including death or disability. The purchase price for Shares repurchased pursuant to the Restricted Stock Purchase Agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to E-LOAN. The repurchase option shall lapse at a rate determined by the Administrator. The exercise price of all incentive stock options granted under the 1997 Plan must be at least equal to the fair market value of the common stock on the date of grant. The exercise price of nonstatutory stock options and SPRs granted under the 1997 Plan is determined by the Administrator and in all cases must be at least equal to 85% of the fair market value of the common stock on the date of grant. With respect to nonstatutory stock options intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, the exercise price must at least be equal to the fair market value of the common stock on the date of grant. With respect to any participant who owns stock possessing more than 10% of the voting power of all classes of E-LOAN's outstanding capital stock, the exercise price of any stock option granted must equal at least 110% of the fair market value on the grant date and the term of any incentive stock option must not exceed five years. The term of all other options granted under the 1997 Plan may not exceed ten years. 57 61 The 1997 Plan provides that in the event of a merger of E-LOAN with or into another corporation or a sale of substantially all of E-LOAN's assets, each option or SPR shall be assumed or an equivalent option or SPR substituted by the successor corporation. If each outstanding option or SPR is not assumed or substituted as described in the preceding sentence, the Administrator shall notify the Optionees that each such option or SPR shall be fully vested and exercisable, including shares as to which it would not otherwise be exercisable, for a period of 15 days from the date of such notice, and the option or SPR will terminate upon the expiration of such period. 1999 Employee Stock Purchase Plan E-LOAN's 1999 Employee Stock Purchase Plan (1999 Purchase Plan) was adopted by the Board of Directors in March 1999 subject to stockholder approval. A total of 500,000 shares of common stock has been reserved for issuance under the 1999 Purchase Plan, plus annual increases on the first day of E-LOAN's fiscal year beginning in or after 2000 equal to the lesser of 500,000 shares, 2% of the outstanding shares on such date or a lesser amount determined by the Board. As of the date of this Prospectus, no shares have been issued under the 1999 Purchase Plan. The 1999 Purchase Plan, which is intended to qualify under Section 423 of the Internal Revenue Code of 1986, as amended, contains successive six-month offering periods. The offering periods generally start on the first trading day on or after May 1 and November 1 of each year, except for the first such offering period which commences on the first trading day on or after the effective date of this Offering and ends on the last trading day on or before October 31. Employees are eligible to participate if they are customarily employed by E-LOAN or any participating subsidiary for at least 20 hours per week and more than five months in any calendar year. However, to the extent any employee (a) immediately after a grant would own stock or hold options to purchase stock possessing 5% or more of the total combined voting power or value of all classes of the capital stock of E-LOAN or (b) would have rights to purchase stock under all employee stock purchase plans of E-LOAN which exceed $25,000 worth of stock for each calendar year in which such options are outstanding, such employee may be not be granted an option to purchase stock under the 1999 Purchase Plan. The 1999 Purchase Plan permits participants to purchase common stock through payroll deductions of up to 15% of the participant's "compensation". Compensation is defined as the participant's base straight time gross earnings, commissions, cash incentive payments and bonuses, but exclusive of payments for overtime, profit sharing payments, shift premium payments, non-cash compensation and other compensation. The maximum number of shares a participant may purchase during a single offering period is 1,250 shares. Amounts deducted and accumulated by the participant are used to purchase shares of common stock at the end of each offering period. The price of stock purchased under the 1999 Purchase Plan is 85% of the lower of the fair market value of the common stock at the beginning or end of the offering period. Participants may end their participation at any time during an offering period, and they will be paid their payroll deductions to date. Participation ends automatically upon termination of employment with E-Loan. Rights granted under the 1999 Purchase Plan are not transferable by a participant other than by will, the laws of descent and distribution, or as otherwise provided under the 1999 Purchase Plan. The 1999 Purchase Plan provides that, in the event of a merger of E-Loan with or into another corporation or a sale of substantially all of E-Loan's assets, each outstanding option may be assumed or substituted for by the successor corporation. If the successor corporation refuses to assume or substitute for the outstanding options, the offering period then in progress will be shortened and a new exercise date will be set. After shares have been purchased on the New 58 62 Exercise Date, the 1999 Purchase Plan will terminate. Unless terminated earlier, the 1999 Purchase Plan will terminate in 2009. The Board of Directors has the authority to amend or terminate the 1999 Purchase Plan, except that no such action may adversely affect any outstanding rights to purchase stock under the 1999 Purchase Plan. 401(K) PLAN E-LOAN maintains an employee savings and retirement plan (401(k) Plan) which covers all eligible employees of E-LOAN (Participants). Pursuant to the 401(k) Plan, Participants may elect to reduce their current compensation, on a pre-tax basis, up to 15%, or the statutorily prescribed annual limit, whichever is lower, and have the amount of such reduction contributed to the 401(k) Plan. Participants' salary reduction contributions are fully vested at all times. E-LOAN, in its sole discretion, may make discretionary employer contributions, qualified discretionary employer contributions and matching contributions to the 401(k) Plan. Each Participants' interest in their employer discretionary contributions and matching contributions generally vest in accordance with a four-year graduated vesting schedule. Participants may receive loans and hardship distributions while in service and are eligible for a distribution from the 401(k) Plan upon separation from service with E-LOAN. The 401(k) Plan is intended to qualify under Section 401(a) of the Code, and its accompanying trust is intended to be a tax-exempt trust under Section 501(a) of the Code. Contributions made on behalf of Participants, on a pre-tax basis, to the 401(k) Plan, and income earned on such contributions, are not currently taxable to Participants until distributed to them. All such contributions are tax deductible by E-LOAN. The trustee under the 401(k) Plan, at the direction of Participants, invests the assets of the 401(k) Plan in any of seven designated investment options. EMPLOYMENT AGREEMENT AND CHANGE OF CONTROL ARRANGEMENTS Under the terms of E-LOAN's offer of employment to Mr. Kennedy, if Mr. Kennedy's employment is terminated by E-LOAN or a successor company to E-LOAN within six months prior to or 12 months following a change of control, E-LOAN has agreed to pay Mr. Kennedy three years of salary, accelerate vesting of all shares under Mr. Kennedy's option and pay a gross-up for any taxation Mr. Kennedy incurs in connection with such payment and acceleration above standard individual taxes for ordinary income. Alternatively, if Mr. Kennedy's employment is terminated by E-LOAN at any time, E-LOAN has agreed to give Mr. Kennedy three months notice of termination, pay Mr. Kennedy 12 months of salary and accelerate vesting of that number of shares under Mr. Kennedy's option that would have been exercisable on the date 12 months following the date of termination. E-LOAN is not required to perform any of these obligations if Mr. Kennedy's termination from E-LOAN is due to a criminal act or gross violation of E-LOAN policy. E-LOAN has also agreed to reimburse Mr. Kennedy for relocation expenses he incurred in relocating to the Bay Area. In accordance with the terms of their option agreements under E-LOAN's 1997 Stock Plan, whether or not the options are assumed or substituted in a merger, acquisition or asset sale, each Named Executive Officer's outstanding options vest and become exercisable as to an additional 50% of the unvested shares at the time of such merger, acquisition or sale of assets. LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS E-LOAN's Restated Certificate of Incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for: - breach of their duty of loyalty to the corporation or its stockholders; 59 63 - acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; - unlawful payments of dividends or unlawful stock repurchases or redemptions; or - any transaction from which the director derived an improper personal benefit. Such limitation of liability does not apply to liabilities arising under the federal or state securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission. E-LOAN's Bylaws provide that E-LOAN shall indemnify its directors, officers, employees and other agents to the fullest extent permitted by law. E-LOAN believes that indemnification under its Bylaws covers at least negligence and gross negligence on the part of indemnified parties. E-LOAN's Bylaws also permit it to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether the Bylaws permit such indemnification. E-LOAN has entered into agreements to indemnify its directors and executive officers, in addition to the indemnification provided for in its Bylaws. These agreements, among other things, indemnify E-LOAN's directors and executive officers for certain expenses (including attorneys' fees), judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of E-LOAN arising out of such person's services as a director, officer, employee, agent or fiduciary of E-LOAN, any subsidiary of E-LOAN or any other company or enterprise to which the person provides services at the request of E-LOAN. E-LOAN believes that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers. At present, there is no pending litigation or proceeding involving a director or officer of E-LOAN in which indemnification is required or permitted, and E-LOAN is not aware of any threatened litigation or proceeding that may result in a claim for such indemnification. 60 64 CERTAIN TRANSACTIONS In December 1997, E-LOAN issued shares of Series B preferred stock to certain investors at a purchase price of $0.96 per share, which shares will automatically convert into 430,207 shares of common stock upon the completion of this offering. Also in December 1997, E-LOAN issued shares of Series C preferred stock to certain investors at a purchase price of $1.23 per share, which shares will automatically convert into 4,269,936 shares of common stock upon completion of this offering. In September 1998 and February 1999, E-LOAN issued shares of Series D preferred stock to certain investors at a purchase price of $9.26 per share, which shares will automatically convert into 1,702,529 shares of common stock upon the completion of this offering. The investors in the Series B preferred stock, Series C preferred stock and Series D preferred stock include the following affiliates of E-LOAN:
SHARES OF SHARES OF SHARES OF SERIES B SERIES C SERIES D PREFERRED PREFERRED PREFERRED INVESTOR STOCK STOCK STOCK -------- --------- --------- --------- Doug Galen.............................................. 15,625 -- -- Benchmark Capital Partners II L.P.(1)................... -- 2,589,959 97,161 Entities Affiliated with Technology Partners(2)......... -- 1,479,977 75,570 Entities Affiliated With STV IV, LLC(3)................. -- -- 777,286 Yahoo!, Inc.(4)......................................... -- -- 323,869 Harold "Pete" Bonnikson................................. -- -- 40,000
- ------------------------- (1) Mr. Kagle, a director of E-LOAN, is a member of Benchmark Capital Management Co., L.L.C., the general partner of Benchmark Capital Partners II L.P. (2) Technology Partners Fund V, L.P. holds 739,989 shares of Series C preferred stock and 16,361 shares of Series D preferred stock. Technology Partners Fund VI, L.P. holds 739,988 shares of Series C preferred stock and 59,209 shares of Series D preferred stock. Mr. Ehrenpreis, a director of E-LOAN, is a general partner of TPW Management V, L.P., the general partner of Technology Partners Fund V, L.P. and is a managing member of TP Management VI, L.L.C., the general partner of Technology Partners Fund VI, L.P. (3) Softbank Holdings, Inc., L.P. holds 388,643 shares of Series D preferred stock, Softbank Technology Advisors Fund, L.P. holds 7,306 shares of Series D preferred stock, and Softbank Technology Ventures IV, L.P. holds 381,337 shares of Series D preferred stock. (4) Mr. Koogle, a director of E-LOAN, is the Chief Executive Officer of Yahoo! In December 1997, E-LOAN entered into an agreement with Yahoo!, Inc., under which E-LOAN became the exclusive provider of mortgage related information on the "Yahoo! Loan Center" website and E-LOAN and Yahoo! will conduct joint marketing activities. In September 1998, E-LOAN entered into a subsequent agreement with Yahoo!, which became effective in March 1999 upon the expiration of the December 1997 agreement, under which E-LOAN would continue to be the exclusive provider of mortgage related information on the "Yahoo! Loan Center" website and E-LOAN and Yahoo! would continue to conduct joint marketing activities through February 2000. In March 1999, the parties extended this agreement through February 2001. Pursuant to the agreement, E-LOAN is required to pay a slotting fee plus click-through fees to Yahoo! Tim Koogle, a director of E-LOAN, is the Chief Executive Officer of Yahoo! In October 1997, March 1998 and August 1998, E-LOAN granted to Doug Galen, its Vice President of Business and Sales, options to purchase 90,000, 40,000 and 10,000 shares of common stock, respectively, at $0.15, $0.65 and $3.00 per share, respectively. These options vest according to the following schedules: 1/4(th) of the total number of shares subject to each 61 65 option vests on August 26, 1998, March 12, 1999 and August 11, 1999, respectively, and 1/48(th) of the total number of shares subject to each option vests at the end of each full month thereafter. In December 1997 and August 1998, E-LOAN granted to Janet Hammond, its Vice President of Underwriting, an option to purchase 15,000 shares and two separate options to purchase 10,000 shares of common stock each, respectively, at $0.65 and $3.00 per share, respectively. These options vest according to the following schedules: 1/4(th) of the total number of shares subject to each option vests on December 10, 1998, May 1, 1999 and August 11, 1999, respectively, and 1/48(th) of the total number of shares subject to each option vests at the end of each full month thereafter. In May 1998, E-LOAN granted to Bill Crane, its Vice President of Engineering, an option to purchase 165,000 shares of common stock at $0.65 per share. This option vests according to the following schedule: 1/4(th) of the total number of shares vests on April 20, 1999 and 1/48(th) of the total number of shares vests at the end of each full month thereafter. In May 1998, January 1999 and February 1999, E-LOAN granted to Sharon Ruwart, its Vice President of Marketing, options to purchase 60,000, 10,000 and 5,000 shares of common stock, respectively, at $0.65, $6.00 and $6.00 per share, respectively. These options vest according to the following schedules: 1/4(th) of the total number of shares subject to each option vests on May 1, 1999, January 1, 2000 and February 22, 2000, respectively, and 1/48(th) of the total number of shares subject to each option vests at the end of each full month thereafter. In May 1998 and February 1999, E-LOAN granted to Steve Majerus, its Vice President of Secondary Marketing, options to purchase 75,000 and 25,000 shares of common stock, respectively, at $0.65 and $6.00 per share, respectively. These options vest according to the following schedules: 1/4(th) of the total number of shares subject to each option vests on April 27, 1999 and February 22, 2000, respectively, and 1/48(th) of the total number of shares subject to each option vests at the end of each full month thereafter. In November 1998, E-LOAN granted to Frank Siskowski, its Chief Financial Officer, an option to purchase 128,459 shares of common stock at $4.00 per share. This option vests according to the following schedule: 1/4(th) of the total number of shares vests on October 26, 1999 and 1/48(th) of the total number of shares vests at the end of each full month thereafter. In January 1999, E-LOAN granted to Harold "Pete" Bonnikson, its Senior Vice President of Operations, an option to purchase 218,087 shares of common stock at $6.00 per share. This option vests according to the following schedule: 1/4(th) of the total number of shares vests on January 13, 2000 and 1/48(th) of the total number of shares vests at the end of each full month thereafter. In February, 1999, E-LOAN granted to Joseph Kennedy, its Senior Vice President of Marketing, an option to purchase 249,173 shares of common stock at $6.00 per share. This option vests according to the following schedule: 1/4(th) of the total number of shares vests on February 22, 2000 and 1/48(th) of the total number of shares vests at the end of each full month thereafter. For a description of the terms of the employment arrangement between E-LOAN and Mr. Kennedy, see "Management -- Employment Agreement and Change of Control Arrangements". E-LOAN has entered into indemnification agreements with its officers and directors containing provisions that require E-LOAN, among other things, to indemnify its officers and directors against certain liabilities that may arise by reason of their status or service as officers or directors, other than liabilities arising from willful misconduct of a culpable nature, and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. 62 66 PRINCIPAL STOCKHOLDERS The following table sets forth information with respect to beneficial ownership of E-LOAN's common stock as of March 19, 1999 and as adjusted to reflect the sale of common stock offered by this prospectus and the automatic conversion of all outstanding shares of preferred stock into shares of common stock, in each case reflecting the common stock beneficially held by the following individuals or groups: - each person known by E-LOAN to beneficially own more than 5% of its outstanding common stock; - each director of E-LOAN; - each Named Executive Officer listed in the Summary Compensation Table; and - all directors and executive officers of E-LOAN as a group. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting or investment power with respect to the securities. The address for each listed director and officer is c/o E-LOAN, Inc., 5875 Arnold Road, Suite 100, Dublin, California 94568. Except as indicated by footnote, and subject to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them. The number of shares of common stock outstanding used in calculating the percentage for each listed person includes the shares of common stock underlying options or warrants held by such person that are exercisable within 60 days of March 19, 1999, but excludes shares of common stock underlying options or warrants held by any other person. Percentage of beneficial ownership is based on 11,031,320 shares of common stock outstanding as of March 19, 1999, after giving effect to the conversion of the outstanding preferred stock, and shares of common stock outstanding after completion of this offering.
PERCENTAGE OF SHARES BENEFICIALLY OWNED SHARES -------------------- BENEFICIALLY PRIOR TO AFTER NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING ------------------------ ------------ -------- -------- Benchmark Capital Partners II L.P.(1).................. 2,687,120 24.4% Robert C. Kagle Entities affiliated with Technology Partners(2)........ 1,555,547 14.1% Ira M. Ehrenpreis Entities affiliated with STV IV, LLC(3)................ 1,101,530 9.99% Chris Larsen(4)........................................ 1,851,707 16.8% Janina Pawlowski(5).................................... 1,837,309 16.7% Doug Galen(6).......................................... 56,458 * Steve Majerus(7)....................................... 18,750 * Tim Koogle(8).......................................... 323,869 2.9% Wade Randlett.......................................... 500 * All directors and executive officers as a group (14 persons)(9).......................................... 9,515,040 85.4%
- ------------------------- * Represents beneficial ownership of less than one percent of E-LOAN's common stock. (1) Mr. Kagle, a director of E-LOAN, is a member of Benchmark Capital Management Co., L.L.C., the general partner of Benchmark Capital Partners II, L.P. and disclaims beneficial ownership of the shares held by Benchmark Capital Partners II, L.P. except to the extent of his proportionate partnership interest therein. 63 67 (2) Consists of 799,197 shares held of record by Technology Partners Fund VI, L.P. and 756,350 shares held of record by Technology Partners Fund V, L.P. Excludes 79,311 and 19,224 shares beneficially owned by Chris Larsen and pledged to Technology Partners Fund V, L.P. and Technology Partners Fund VI, L.P., respectively, pursuant to Loan and Pledge Agreements between such entities and Mr. Larsen. Also excludes 79,311 and 19,224 shares beneficially owned by Janina Pawlowski and pledged to Technology Partners Fund V, L.P. and Technology Partners Fund VI, L.P., respectively, pursuant to Loan and Pledge Agreements dated between such entities and Ms. Pawlowski. Mr. Ehrenpreis, a director of E-LOAN, is a general partner of TPW Management V, L.P., the general partner of Technology Partners Fund V, L.P. and is a managing member of TP Management VI, L.L.C., the general partner of Technology Partners Fund VI, L.P. and disclaims beneficial ownership of the shares held by Technology Partners Fund VI, L.P. and Technology Partners Fund V, L.P. except to the extent of his proportionate partnership interest therein. (3) Consists of 388,643 shares held of record by Softbank Holdings, Inc. L.P., 381,337 shares held of record by Softbank Technology Ventures IV, L.P., 7,306 shares held of record by Softbank Technology Advisors Fund, L.P., and 324,244 shares held of record by Softbank America Inc. Excludes 126,183, 123,509, 2,675 and 115,577 shares beneficially owned by Chris Larsen and pledged to Softbank Holdings, Inc., Softbank Technology Ventures IV, L.P., Softbank Technology Advisors Fund, L.P., and Softbank America Inc., respectively, pursuant to Loan and Pledge Agreements between such entities and Mr. Larsen. Also excludes 126,183, 123,509, 2,675 and 101,129 shares beneficially owned by Janina Pawlowski and pledged to Softbank Holdings, Inc., Softbank Technology Ventures IV, L.P., Softbank Technology Advisors Fund, L.P., and Softbank America Inc., respectively, pursuant to Loan and Pledge Agreements between such entities and Ms. Pawlowski. (4) Included 50,000 shares held of record by the Larsen Trust. Also includes 858,859 shares that are pledged to certain investors to secure $10.8 million in full recourse loans made to Mr. Larsen by these investors. All of Mr. Larsen's pledged shares are also subject to put and call options pursuant to agreements between Mr. Larsen and these investors. See "Description of Capital Stock -- Put/Call Options on Common Stock". (5) Includes 50,000 shares held of record by the Pawlowski Trust. Also includes 844,411 shares that are pledged to certain investors to secure $10.1 million in full recourse loans made to Ms. Pawlowski by these investors. All of Ms. Pawlowski's pledged shares are also subject to put and call options pursuant to agreements between Ms. Pawlowski and these investors. See "Description of Capital Stock -- Put/Call Options on Common Stock". (6) Includes 48,333 shares subject to stock options that are exercisable within 60 days of March 19, 1999. (7) Includes 109,333 shares subject to stock options that are exercisable within 60 days of March 19, 1999. (8) Consists of 323,869 shares held of record by Yahoo!, Inc. Mr. Koogle, a director of E-LOAN, is Chief Executive Officer of Yahoo! and disclaims beneficial ownership of the shares held by Yahoo! (9) Includes 109,333 shares subject to stock options that are exercisable within 60 days of March 19, 1999. 64 68 DESCRIPTION OF CAPITAL STOCK GENERAL E-LOAN's Restated Certificate of Incorporation, which will become effective upon the closing of this offering, authorizes the issuance of up to 70 million shares of common stock, par value $0.001 per share, and 5 million shares of preferred stock, par value $0.001 per share, the rights and preferences of which may be established from time to time by E-LOAN's Board of Directors. As of March 19, 1999, 4,200,013 shares of common stock were issued and outstanding and 6,831,307 shares of preferred stock convertible into 6,831,307 shares of common stock upon the completion of this offering were issued and outstanding. As of March 19, 1999, E-LOAN had 68 stockholders. COMMON STOCK Each holder of common stock is entitled to one vote for each share on all matters to be voted upon by the stockholders and there are no cumulative voting rights. Subject to preferences to which holders of preferred stock issued after the sale of the common stock offered hereby may be entitled, holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available therefor. See "Dividend Policy". In the event of a liquidation, dissolution or winding up of E-LOAN, holders of common stock would be entitled to share in E-LOAN's assets remaining after the payment of liabilities and the satisfaction of any liquidation preference granted the holders of any outstanding shares of preferred stock. Holders of common stock have no preemptive or conversion rights or other subscription rights and there are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are, and the shares of common stock offered by E-LOAN in this offering, when issued and paid for, will be, fully paid and nonassessable. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which E-LOAN may designate in the future. PREFERRED STOCK Upon the closing of this offering, the Board of Directors will be authorized, subject to any limitations prescribed by law, without stockholder approval, from time to time to issue up to an aggregate of 5 million shares of preferred stock, in one or more series, each of such series to have such rights and preferences, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences as shall be determined by the Board of Directors. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of holders of any preferred stock that may be issued in the future. Issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, a majority of the outstanding voting stock of E-LOAN. E-LOAN has no present plans to issue any shares of preferred stock. WARRANTS As of March 19, 1999, E-LOAN had outstanding a warrant to purchase 15,000 shares of Series C preferred stock at an exercise price of $2.00 per share, convertible into 15,000 shares of common stock upon the effectiveness of this offering, and a warrant to purchase 53,996 shares of Series D preferred stock at an exercise price of $9.26 per share, convertible into 53,996 shares of common stock upon the effectiveness of this offering. Each warrant has a net exercise provision under which the holder may, in lieu of payment of the exercise price in cash, surrender the warrant and receive a net amount of shares, based on the fair market value of 65 69 E-LOAN's stock at the time of the exercise of the warrant, after deducting the aggregate exercise price. The warrant for 53,996 shares of Series D preferred stock will expire upon the closing of this offering. The warrant for 15,000 shares of Series C Preferred Stock shall expire three years from the effective date of this offering. REGISTRATION RIGHTS Pursuant to the terms of an Investor Rights Agreement among E-LOAN and certain holders of E-LOAN's securities, after the closing of this offering, the holders of 5,947,465 shares of the outstanding common stock or their permitted transferees, including shares issuable upon the exercise of certain warrants to purchase common stock, are entitled to certain rights with respect to the registration of such shares under the Securities Act. The holders of at least 66 2/3% of the shares entitled to registration rights may require E-LOAN, subject to certain limitations, to file a registration statement covering shares entitled to registration rights with an aggregate gross offering price of at least $1.5 million. E-LOAN is not required to effect (i) more than two such registrations pursuant to such demand registration rights; (ii) a registration within 60 days following the determination by the Board of Directors of E-LOAN to file a registration statement; (iii) a registration during the period in which any other registration statement has been filed or has been declared effective within the prior 120 days; or (iv) a registration for a period not to exceed 120 days, if the Board of Directors of E-LOAN has made a good faith determination that such registration would be seriously detrimental to E-LOAN or to its stockholders. Furthermore, pursuant to the terms of the Investor Rights Agreement, the holders of the shares entitled to registration rights are entitled to certain piggyback registration rights in connection with any registration by E-LOAN of its securities for its own account or the account of other security holders. In the event that E-LOAN proposes to register any shares of common stock under the Securities Act, the holders of such piggyback registration rights are entitled to receive notice of such registration and are entitled to include their shares therein, subject to certain limitations. At any time after E-LOAN becomes eligible to file a registration statement on Form S-3, holders of 20% or more of the Registrable Securities may require E-LOAN to file an unlimited number of registration statements on Form S-3 under the Securities Act with respect to their shares of common stock. Each of the foregoing registration rights is subject to certain conditions and limitations, including the right of the underwriters in any underwritten offering to limit the number of shares to be included in such registration. The registration rights with respect to any holder thereof terminate upon the earlier of (i) 7 years from the effective date of this offering or (ii) when the shares held by such holder may be sold under Rule 144 during any three-month period. E-LOAN is generally required to bear all of the expenses of all such registrations, except underwriting discounts and commissions. Registration of any of the shares entitled to registration rights would result in such shares becoming freely tradable without restriction under the Securities Act immediately upon effectiveness of such registration. The Investor Rights Agreement also contains a commitment of E-LOAN to indemnify the holders of registration rights, subject to certain limitations. PUT/CALL OPTIONS ON COMMON STOCK In December 1997, Chris Larsen, E-LOAN's Chief Executive Officer, and Janina Pawlowski, E-LOAN's President, each entered into a separate Loan and Pledge Agreement with certain investors under which each of these officers were loaned $250,000 on a full recourse basis. Each officer secured his or her loan with a pledge of 203,497 shares of common stock and a security interest in such officer's rights under a Put Option Agreement and Call Option Agreement among certain investors and each officer. The loans are due December 19, 2002 and bear interest, compounded annually, at a rate of 7% per annum. Under the Call Option Agreements, each officer granted certain investors an option to call the 203,497 shares covered by the option at any 66 70 time from the date of the agreement up to December 19, 2001 at an exercise price equal to an aggregate of $500,000. Under the Put Option Agreements, certain investors granted to each officer an option to put the 203,497 shares covered by the option to the investors at an exercise price equal to an aggregate of $500,000 together with interest at the rate of 7% per annum, compounded annually, at any time during the eleven-month period beginning January 20, 2002 and ending November 19, 2002. In August 1998, each of these officers entered into a separate Loan and Pledge Agreement with certain investors under which each officer was loaned $5.0 million on a full recourse basis. Each officer secured his or her loan with a pledge of 539,785 shares of common stock and a security interest in such officer's rights under a Put Option Agreement and Call Option Agreement among certain investors and each officer. The loans are due August 31, 2003 and bear interest, compounded annually, at a rate of 6% per annum. Under the Call Option Agreement, each officer granted certain investors an option to call the 539,785 shares covered by the option at any time from the date of the agreement up to August 31, 2002 at an exercise price equal to an aggregate of $10.0 million. Under the Put Option Agreements, certain investors granted to each officer an option to put the 539,785 shares covered by the option to the investors at an exercise price equal to an aggregate $10.0 million together with interest of the rate of 6% per annum, compounded annually, at any time during the eleven-month period beginning January 1, 2003 and ending November 30, 2003. Softbank Stock Purchase and Related Transactions In March 1999, Softbank America Inc. purchased an aggregate of 324,244 shares of common stock and preferred stock from certain stockholders of E-LOAN, including 84,423 and 73,871 shares of common stock from Mr. Larsen and Ms. Pawlowski, respectively, at a purchase price of $48.00 per share. The stockholders agreement with Softbank America provides that Softbank America will not dispose of the acquired shares prior to March 23, 2000. Concurrently with these purchases, Mr. Larsen and Ms. Pawlowski each entered into a separate Loan and Pledge Agreement with Softbank America under which Mr. Larsen was loaned $5.5 million on a full recourse basis and Ms. Pawlowski was loaned $4.8 million on a full recourse basis. Mr. Larsen secured his loan with a pledge of 115,577 shares of common stock and Ms. Pawlowski secured her loan with a pledge of 101,129 shares of common stock and both granted Softbank America a security interest in such officer's rights under a Put Option Agreement and a Call Option Agreement. The loans are due March 23, 2004 and bear interest, compounded annually, at a rate of 7% per annum. Under the Call Option Agreements, both Mr. Larsen and Ms. Pawlowski granted certain investors an option to call all of the shares covered by the option at any time from the date of the agreement up to March 23, 2003 at an exercise price equal to $5.5 million and $4.8 million, respectively. Under the Put Option Agreements, Softbank America granted to both Mr. Larsen and Ms. Pawlowski an option to put all of the shares covered by the option at an exercise price equal to an aggregate of $5.5 million and $4.8 million, respectively, together with interest at the rate of 7% per annum, compounded annually, at any time during the eleven-month period beginning in March 2003 and ending February 2004. EFFECT OF CERTAIN PROVISIONS OF E-LOAN'S RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS, AND THE DELAWARE ANTITAKEOVER STATUE Certain provisions of E-LOAN's Restated Certificate of Incorporation and Bylaws, which will become effective upon the closing of this offering, may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of E-LOAN. Such provisions could limit the price that certain investors might be willing to pay in the future for shares of E-LOAN's common stock. Certain of these provisions allow E-LOAN to issue preferred stock without any vote or further action by the stockholders, eliminate the right of 67 71 stockholders to act by written consent without a meeting and eliminate cumulative voting in the election of directors. These provisions may make it more difficult for stockholders to take certain corporate actions and could have the effect of delaying or preventing a change in control of E-LOAN. In addition, E-LOAN is subject to Section 203 of the Delaware General Corporation Law which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any business combination with any interested stockholder, unless: - prior to such date, the Board of Directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; - 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 of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers, and (b) shares owned by 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 - on or subsequent to such date, 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 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. E-LOAN's Restated Certificate of Incorporation provides that, upon the closing of this offering, the Board of Directors will be divided into three classes of directors with each class serving a staggered three-year term. The classification system of electing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of E-LOAN and may maintain the incumbency of the Board of Directors, as the classification of the Board of Directors generally increases the difficulty of replacing a majority of the directors. E-LOAN's Bylaws eliminate the right of stockholders to call special meetings of stockholders. The authorization of undesignated preferred stock makes it possible for the Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of E-LOAN. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of E-LOAN. The amendment of any of these provisions would require approval by holders of at least 66 2/3% of the outstanding common stock. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for the common stock is Chase Mellon Shareholder Services. 68 72 SHARES AVAILABLE FOR FUTURE SALE Prior to this offering there has been no public market for E-LOAN's common stock. Future sales of substantial amounts of E-LOAN's common stock in the public market or the availability of such shares for sale, could adversely affect the prevailing market price and the ability of E-LOAN to raise equity capital in the future. Upon the closing of this offering, E-LOAN will have an aggregate of shares of common stock outstanding, assuming no exercise of the underwriters' over-allotment option and no exercise of outstanding options to purchase common stock. Of the shares of common stock to be outstanding upon the closing of this offering, the shares offered hereby will be eligible for immediate sale in the public market without restriction, unless the shares are purchased by "affiliates" of E-LOAN within the meaning of Rule 144 promulgated under the Securities Act of 1933. The remaining 11,031,320 shares of common stock held by existing stockholders upon the closing of this offering will be "restricted securities", as that term is defined in Rule 144. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144, 144(k) or 701 under the Securities Act. All of the holders of these "restricted securities," including officers and directors of E-Loan, have entered into "lock-up agreements" providing that they will not sell, directly or indirectly, any common stock without the prior consent of the representatives of Goldman, Sachs & Co. for a period of 180 days from the date of this prospectus. Subject to the provisions of Rules 144, 144(k) and 701, 10,791,320 shares will be available for sale in the public market, subject in the case of shares held by affiliates to compliance with certain volume restrictions, upon expiration of this 180-day period. In general, under Rule 144, a person or persons whose shares are aggregated, including an affiliate who has beneficially owned shares for at least one year, is entitled to sell within any three-month period a number of shares that does not exceed the greater of 1% of the outstanding shares of common stock, or the average weekly trading volume of the common stock during the four calendar weeks preceding the date on which notice of such sale is filed, subject to certain restrictions. In addition, a person who is not deemed to have been an affiliate of E-LOAN at any time during the three months preceding a sale, and who has beneficially owned the shares proposed to be sold for at least two years would be entitled to sell such shares under Rule 144(k) without regard to the requirements described above. To the extent that shares were purchased from an affiliate of E-LOAN, the purchasers' holding period for the purpose of effecting a sale under Rule 144 commences on the date of purchase from the affiliate. As of March 19, 1999, there were outstanding options to purchase 1,965,206 shares of common stock which will be eligible for sale in the public market from time to time subject to vesting and the expiration of lock-up agreements. As of March 19, 1999, there was outstanding a warrant to purchase 15,000 shares of Series C preferred stock convertible into 15,000 shares of common stock upon the effectiveness of this offering and a warrant to purchase 53,996 shares of Series D Preferred Stock, convertible into 53,996 shares of common stock upon the effectiveness of this offering. The 68,996 shares of common stock that will be issuable upon exercise of this warrant after this offering will be eligible for sale in the public market from time to time subject to the expiration of lock-up agreements and Rule 144. The possible sale of a significant number of shares by the holders thereof may have an adverse effect on the price of the common stock. E-LOAN is unable to estimate the number of shares that will be sold under Rule 144, as this will depend on the market price for the common stock of E-LOAN, the personal circumstances of the sellers and other factors. Prior to this offering, there has been no public market for the common stock, and there can be no assurance that a significant public market for the common stock will develop or be sustained after this offering. Any future sale of substantial amounts of 69 73 common stock in the open market may adversely affect the market price of the common stock offered hereby. E-LOAN will file a registration statement on Form S-8 under the Securities Act to register the shares of common stock reserved for issuance under its 1997 Stock Option Plan and 1999 Employee Stock Purchase Plan. As a result, shares issued upon exercise of stock options granted under the Stock Option Plan will be available, subject to special rules for affiliates, for resale in the public market after the effective date of such registration statement. See "Management -- Stock Plans". Pursuant to an Investor Rights Agreement among E-Loan and certain holders of E-Loan's securities, after the closing of this offering, subject to certain conditions, the holders of 5,947,465 shares of outstanding common stock, including shares issuable upon the exercise of certain warrants to purchase common stock, will be entitled to certain demand and piggyback registration rights. Registration of such shares under the Securities Act would result in such shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by Affiliates. Please see "Description of Capital Stock -- Registration Rights". LEGAL MATTERS The validity of the common stock offered hereby will be passed upon for E-LOAN by Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto, California. Certain legal matters will be passed upon for the Underwriters by Venture Law Group, A Professional Corporation, Menlo Park, California. As of the date of this prospectus, WS Investment Company 96B and WS Investment Company 97B, investment partnerships composed of certain current and former members of and persons associated with Wilson Sonsini Goodrich & Rosati, P.C., and a certain member of Wilson Sonsini Goodrich & Rosati, P.C., beneficially own an aggregate of 55,626 shares of E-LOAN's common stock. EXPERTS The financial statements of E-LOAN as of December 31, 1997 and 1998 and for each of the three years in the period ended December 31, 1998 included in this Prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in accounting and auditing. AVAILABLE INFORMATION E-LOAN has filed with the Securities and Exchange Commission, a Registration Statement on Form S-1, including the exhibits and schedules thereto, under the Securities Act with respect to the shares to be sold in this offering. This prospectus does not contain all the information set forth in the Registration Statement. For further information with respect to E-LOAN and the shares to be sold in this offering, reference is made to the Registration Statement. Statements contained in this prospectus as to the contents of any contract, agreement or other document referred to, are not necessarily complete, and in each instance reference is made to the copy of such contract, agreement or other document filed as an exhibit to the Registration Statement, each statement being qualified in all respects by such reference. You may read and copy all or any portion of the Registration Statement or any reports, statements or other information E-LOAN files with the Commission at the Commission's public reference room at Room 1024, Judiciary Plaza, 450 Fifth Street, N.C., Washington, D.C. 20549 and at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, New York, New York 10048 and the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of these documents upon payment of 70 74 a duplicating fee, by writing to the Commission. Please call the Commission at 1-800-SEC-0330 for further information on the operation of the public reference rooms. E-LOAN's Commission filings, including the Registration Statement will also be available to you on the Commission's Internet site. The address of this site is http://www.sec.gov. E-LOAN intends to send to its stockholders annual reports containing audited consolidated financial statements for each fiscal year and quarterly reports containing unaudited consolidated financial statements for the first three quarters of each fiscal year. 71 75 INDEX TO FINANCIAL STATEMENTS CONTENTS
PAGE ---- Report of Independent Accountants......................... F-2 Balance Sheet at December 31, 1997 and 1998............... F-3 Statement of Operations for the years ended December 31, 1996, 1997 and 1998.................................... F-4 Statement of Stockholders' Deficit for the years ended December 31, 1996, 1997 and 1998....................... F-5 Statement of Cash Flows for the years ended December 31, 1996, 1997 and 1998.................................... F-6 Notes to Financial Statements............................. F-7
F-1 76 REPORT OF INDEPENDENT ACCOUNTANTS March 24, 1999 To the Stockholders and Board of Directors of E-Loan, Inc. In our opinion, the accompanying balance sheets and the related statements of operations, stockholders' equity (deficit) and cash flows present fairly, in all material respects, the financial position of E-Loan, Inc. (the Company) at December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP San Francisco, California F-2 77 E-LOAN, INC. BALANCE SHEETS DECEMBER 31, 1997 AND 1998
PRO FORMA STOCKHOLDERS' EQUITY AT DEC. 31, 1998 1997 1998 (UNAUDITED) ASSETS ----------- ------------ ------------- CURRENT ASSETS: Cash and cash equivalents.............................. $ 4,217,687 $ 9,141,367 $ 9,641,367 Mortgage loans held-for-sale........................... -- 42,153,648 Accounts receivable, net............................... 33,924 411,058 Prepaids and other current assets...................... 168,577 720,681 ----------- ------------ ------------ Total current assets............................. 4,420,188 52,426,754 $ 52,926,754 Furniture and equipment, net........................... 146,207 2,365,564 Deposits and other assets.............................. 113,480 730,938 ----------- ------------ ------------ Total assets..................................... $ 4,679,875 $ 55,523,256 $ 56,023,256 =========== ============ ============ LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Warehouse lines payable................................ $ -- $ 41,046,122 Accounts payable, accrued expenses and other........... 518,186 2,654,623 Capital lease obligation............................... -- 252,475 Notes payable.......................................... 78,868 71,299 Advances payable....................................... 1,840,996 -- ----------- ------------ Total current liabilities........................ 2,438,050 44,024,519 Capital lease obligations.............................. -- 719,294 Notes payable.......................................... -- 570,393 ----------- ------------ 2,438,050 45,314,206 ----------- ------------ MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK: Series C, 4,467,912 shares authorized; 2,589,959 and 4,069,936 shares issued and outstanding at December 31, 1997 and 1998 (aggregate liquidation preference $4,999,998)........................................ 3,207,720 5,525,904 $ -- Series C-1, 4,467,912 shares authorized; 0 shares issued and outstanding (liquidation preference $1.22852 per share)................................ -- -- Series D, 1,950,000 shares authorized; 1,662,529 shares issued and outstanding (aggregate liquidation preference $15,400,006)................ -- 15,867,098 -- ----------- ------------ ------------ COMMITMENTS AND CONTINGENCIES (NOTE 10) STOCKHOLDERS' DEFICIT: Convertible preferred stock: Series A, 428,635 shares authorized; 428,635 shares issued and outstanding (aggregate liquidation preference $94,300)................................ 90,901 90,901 -- Series B, 450,708 shares authorized; 430,207 shares issued and outstanding (aggregate liquidation preference $412,999)............................... 411,482 411,482 -- Common stock, 20,000,000 shares authorized; 4,085,000 and 4,174,951 shares issued and outstanding at December 31, 1997 and 1998; 70,000,000 shares authorized; 10,820,254 shares issued and outstanding on a pro forma basis (unaudited)..................... 4,085 26,867 22,422,252 Less: subscription receivable.......................... (4,085) (4,085) (4,085) Unearned compensation.................................. -- (4,477,000) (4,477,000) Additional paid-in capital............................. (41,667) 5,366,548 5,366,548 Accumulated deficit.................................... (1,426,611) (12,598,665) (12,598,665) ----------- ------------ ------------ Total stockholders' equity (deficit)............. (965,895) (11,183,952) $ 10,709,050 ----------- ------------ ------------ Total liabilities, mandatorily redeemable convertible preferred stock and stockholders' deficit....................................... $ 4,679,875 $ 55,523,256 $ 56,023,256 =========== ============ ============
The accompanying notes are an integral part of these financial statements. F-3 78 E-LOAN, INC. STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
1996 1997 1998 ---------- ----------- ------------ Revenues (Note 13).............................. $ 892,995 $ 1,042,729 $ 6,831,546 Operating expenses: Operations.................................... 902,736 1,318,342 7,626,413 Sales and marketing........................... -- 470,323 5,642,394 Technology.................................... -- 102,074 1,247,528 General and administrative.................... 96,865 524,076 2,409,591 Amortization of unearned compensation......... -- -- 1,251,000 ---------- ----------- ------------ Total operating expenses.............. 999,601 2,414,815 18,176,926 ---------- ----------- ------------ Loss from operations....................... (106,606) (1,372,086) (11,345,380) Other income, net............................... (3,438) (2,407) 173,326 ---------- ----------- ------------ Net loss.............................. $ (110,044) $(1,374,493) $(11,172,054) ========== =========== ============ Net loss per share: Basic and diluted............................. $ (0.03) $ (0.35) $ (2.95) ========== =========== ============ Weighted-average shares -- basic.............. 4,085,000 4,087,344 4,133,428 ========== =========== ============ Pro forma net loss per share (unaudited): Basic and diluted............................. $ (1.26) ============ Weighted-average shares -- basic.............. 8,894,392 ============
The accompanying notes are an integral part of these financial statements. F-4 79 E-LOAN, INC. STATEMENTS OF STOCKHOLDERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
SERIES A SERIES B PREFERRED STOCK PREFERRED STOCK COMMON STOCK ----------------- ------------------ ------------------- SUBSCRIPTION UNEARNED SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT RECEIVABLE COMPENSATION ------- ------- ------- -------- --------- ------- ------------ ------------ Balance at December 31, 1995.......... -- -- -- -- 4,085,000 $ 4,085 $(4,085) -- Net loss.............................. ------- ------- ------- -------- --------- ------- ------- ----------- Balance at December 31, 1996.......... -- -- -- -- 4,085,000 4,085 (4,085) -- Series A preferred stock issued for cash, net of issuance costs of $3,399 at $0.22 per share in June 1997................................ 428,635 $90,901 Series B preferred stock issued for cash, net of issuance costs of $15,763 at $0.96 per share in December 1997....................... 430,207 $411,482 Accretion for preferred stock Series C................................... Net loss.............................. ------- ------- ------- -------- --------- ------- ------- ----------- Balance at December 31, 1997.......... 428,635 90,901 430,287 411,482 4,085,000 4,085 (4,085) Common Stock issued for cash.......... 45,496 20,027 Common Stock issued for cash upon exercise of stock options........... 44,455 2,755 Accretion for preferred stock Series C................................... Accretion for preferred stock Series D................................... Issuance of warrants for capital lease............................... Issuance of warrants in relation to marketing agreements................ Issuance of stock options for services rendered............................ Unearned Compensation................. $(4,477,000) Net Loss.............................. ------- ------- ------- -------- --------- ------- ------- ----------- Balance at December 31, 1998.......... 428,635 $90,901 430,207 $411,482 4,174,951 $26,867 $(4,085) $(4,477,000) ADDITIONAL TOTAL PAID ACCUMULATED STOCKHOLDERS' IN CAPITAL DEFICIT DEFICIT ---------- ------------ ------------- Balance at December 31, 1995.......... -- $ 57,926 $ 57,926 Net loss.............................. (110,044) (110,044) ---------- ------------ ------------ Balance at December 31, 1996.......... -- (52,118) (52,118) Series A preferred stock issued for cash, net of issuance costs of $3,399 at $0.22 per share in June 1997................................ 90,901 Series B preferred stock issued for cash, net of issuance costs of $15,763 at $0.96 per share in December 1997....................... 411,482 Accretion for preferred stock Series C................................... $ (41,667) (41,667) Net loss.............................. (1,374,493) (1,374,493) ---------- ------------ ------------ Balance at December 31, 1997.......... (41,667) (1,426,611) (965,895) Common Stock issued for cash.......... 20,027 Common Stock issued for cash upon exercise of stock options........... 2,755 Accretion for preferred stock Series C................................... (500,000) (500,000) Accretion for preferred stock Series D................................... (513,352) (513,352) Issuance of warrants for capital lease............................... 29,575 29,575 Issuance of warrants in relation to marketing agreements................ 640,150 640,150 Issuance of stock options for services rendered............................ 23,842 23,842 Unearned Compensation................. 5,728,000 1,251,000 Net Loss.............................. (11,172,054) (11,172,054) ---------- ------------ ------------ Balance at December 31, 1998.......... $5,366,548 $(12,598,665) $(11,183,952)
The accompanying notes are an integral part of these financial statements. F-5 80 E-LOAN, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
1996 1997 1998 --------- ----------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss......................................... $(110,044) $(1,374,493) $ (11,172,054) Adjustments to reconcile net loss to cash used in operating activities: Amortization of unearned compensation.......... -- -- 1,251,000 Depreciation and amortization.................. -- 6,860 512,998 Loss on disposal of furniture and equipment.... -- 37,361 41,092 Changes in operating assets and liabilities: Accounts receivable......................... (3,300) (30,624) (377,134) Net change in mortgage loans held-for-sale............................. -- -- (42,153,648) Prepaids, deposits and other assets......... 2,862 (276,960) (641,899) Accounts payable, accrued expenses, advances payable and other......................... 33,668 2,315,579 295,441 Notes payable, short term................... 33,565 32,303 (7,569) --------- ----------- ------------- Net cash provided by (used in) operating activities................. (43,249) 710,026 (52,251,773) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of furniture and equipment........... (4,557) (160,775) (1,608,899) --------- ----------- ------------- Net cash used in investing activities........................... (4,557) (160,775) (1,608,899) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock......... -- -- 22,782 Payments on obligations under capital leases... -- -- (26,875) Proceeds from long term notes payable.......... -- -- 570,393 Proceeds from warehouse lines payable.......... -- -- 241,242,483 Repayments of warehouse lines payable.......... -- -- (200,196,361) Proceeds from issuance of preferred stock, net......................................... -- 3,668,436 17,171,930 --------- ----------- ------------- Net cash provided by financing activities........................... 0 3,668,436 58,784,352 --------- ----------- ------------- Net increase (decrease) in cash................ (47,806) 4,217,687 4,923,680 Cash and cash equivalents at beginning of year........................................ 47,806 0 4,217,687 --------- ----------- ------------- Cash and cash equivalents at end of year....... $ 0 $ 4,217,687 $ 9,141,367 ========= =========== ============= SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest...................... $ 1,124 $ 7,036 $ 588,987 ========= =========== ============= NONCASH INVESTING AND FINANCING ACTIVITIES: Furniture and equipment under capital leases.................................... $ 0 $ 0 $ 998,642 ========= =========== =============
The accompanying notes are an integral part of these financial statements. F-6 81 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS 1. THE COMPANY E-Loan, Inc. (the Company) was incorporated on August 26, 1996 and began marketing its services in June 1997. Prior to that date, the Company conducted business through a predecessor company, Palo Alto Funding Group (PAFG) which was established in 1992 as a mortgage broker. The stockholders of PAFG and the Company were the same and on December 18, 1997 PAFG merged with the Company. The transaction was accounted for in a manner similar to a pooling of interests and, as a result, the accompanying financial statements represent the combined balance sheets and results of operations of the Company and PAFG. The Company is a provider of mortgage offerings online and is engaged in the brokerage, origination, and sale of mortgage loans secured by residential real estate. The Company serves U.S. consumers in the first and second home mortgage loan market over the internet. 2. BASIS OF PRESENTATION The Company has sustained net losses and negative cash flows from operations since its inception. The Company's ability to meet its obligations in the ordinary course of business is dependent upon its ability to establish profitable operations or raise additional financing through public or private equity financings, collaborative or other arrangements with corporate sources, or other sources of financing to fund operations. However, there can be no assurance that the Company will be able to achieve profitable operations. Management believes that its current funds and available lines of credit will be sufficient to enable the Company to meet its planned expenditures through at least December 31, 1999. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RISKS AND UNCERTAINTIES The Company has a limited operating history and its prospects are subject to the risks, expenses and uncertainties frequently encountered by companies in the new and rapidly evolving markets for internet products and services. These risks include the failure to develop and extend the Company's online service brands, the rejection of the Company's services by consumers, vendors and/or advertisers, the inability of the Company to maintain and increase the levels of traffic on its online services, as well as other risks and uncertainties. Additionally, in the normal course of business, companies in the mortgage banking industry encounter certain economic and regulatory risks. Economic risks include interest rate risk, credit risk and market risk. The Company is subject to interest rate risk to the extent that in a rising interest rate environment, the Company will generally experience a decrease in loan production which may negatively impact the Company's operations. Credit risk is the risk of default, primarily in the Company's mortgage loan portfolio that result from the mortgagors' inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of mortgage loans held-for-sale and in commitments to originate loans. F-7 82 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) The Company sells loans to mortgage loan purchasers on a servicing released basis without recourse. As such, the risk of loss or default by the borrower has been assumed by these purchasers. However, the Company is usually required by these purchasers to make certain representations relating to credit information, loan documentation and collateral. To the extent that the Company does not comply with such representations, or there are early payment defaults, the Company may be required to repurchase the loans and indemnify these purchasers for any losses from borrower defaults. For the year ended December 31, 1998, the Company had not repurchased any loans. CASH AND CASH EQUIVALENTS The Company considers all highly liquid monetary instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. MORTGAGE LOANS HELD-FOR-SALE Mortgage loans held-for-sale consist of residential property mortgages having maturities up to 30 years. Pursuant to the mortgage terms, the borrowers have pledged the underlying real estate as collateral for the loans. It is the Company's practice to sell these loans to mortgage loan purchasers shortly after they are funded. Mortgage loans held-for-sale are recorded at the lower of cost or aggregate market value. Cost generally consists of loan principal balance adjusted for net deferred fees and costs. No valuation adjustment was required at December 31, 1998. FURNITURE AND EQUIPMENT Furniture and equipment, including furniture and equipment under capital leases, are recorded at cost and depreciated using the straight-line method over their useful lives, which is generally three years for computers and five years for furniture and fixtures. Assets under capital leases are depreciated over the shorter of the useful life of the asset or the term of the lease. Leasehold improvements are amortized over the remaining life of the lease. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in operations in the period realized. BROKERAGE FEES Brokerage fees represent compensation earned for the processing of mortgage loan applications for third party lenders. The Company does not take title to the mortgages and the funding for these customers is provided by third party lenders. The fees for providing these services are recognized at such time as the loans are funded by the lender. GAIN ON SALE OF LOANS Gain on sale of loans includes gains or losses determined by loan sales proceeds less the carrying value of the loans sold. Origination fees, net of certain direct origination costs, are deferred and recognized when the loan is sold. The carrying value of the loan is adjusted for the deferred origination fees and costs. Gain on sale of loans are recognized at the time of settlement with the mortgage loan purchaser. F-8 83 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) INTEREST INCOME ON LOANS Interest income is accrued as earned. Loans are placed on non-accrual status when any portion of principal or interest is ninety days past due or earlier when concern exists as to the ultimate collectibility of principal or interest. Loans return to accrual status when principal and interest become current and are anticipated to be fully collectible. ADVERTISING COSTS Advertising costs related to various media content advertising such as television, radio, and print are charged to other operating expenses as incurred. These costs include the cost of production as well as the cost of any airtime. INCOME TAXES The Company accounts for income taxes using the liability method in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized. The provision for income tax expense represents taxes payable for the current period, plus the net change in deferred tax assets and liabilities. STOCK-BASED COMPENSATION The Company accounts for stock-based employee compensation arrangements in accordance with provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and complies with the disclosure provision of SFAS No. 123, Accounting for Stock-Based Compensation. Under APB No. 25, compensation expense is based on the excess of the estimated fair value of the Company's stock over the exercise price, if any, on the date of the grant. NET INCOME (LOSS) PER SHARE The Company computes net loss per share in accordance with SFAS No. 128, Earnings per Share. Under the provisions of SFAS No. 128 basic net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted average number of common and common equivalent shares outstanding during the period, to the extent such common equivalent shares are dilutive. Common equivalent shares are composed of incremental common shares issuable upon the exercise of stock options and warrants and upon conversion of Series A, B, C and Series D convertible preferred stock. F-9 84 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) The following table sets forth the computation of basic and diluted net loss per share for the years ended December 31:
1996 1997 1998 ----------- ----------- ------------ Numerator: Net loss............................. (110,044) $(1,374,493) $(11,172,054) Accretion of Series C and D mandatorily redeemable convertible preferred stock to redemption value............................. -- (41,667) (1,013,352) ----------- ----------- ------------ Net loss available to common shareholders............... (110,044) $(1,416,160) $(12,185,406) =========== =========== ============ Denominator: Weighted average common shares -- basic and diluted................. 4,085,000 4,087,334 4,133,428 ----------- ----------- ------------ Net loss per share: Basic and diluted.................... $ (0.03) $ (0.35) $ (2.95) =========== =========== ============
PRO FORMA NET LOSS PER SHARE (UNAUDITED) Pro forma net loss per share for the year ended December 31, 1998 is computed using the weighted average number of common shares outstanding, including the pro forma effects of the automatic conversion of the Company's Series A and Series B convertible preferred stock, Series C and Series D mandatorily redeemable preferred stock and 53,996 warrants to purchase Series D preferred stock at $9.26 per share into shares of the Company's Common Stock effective upon the closing of the Company's initial public offering as if such conversion occurred on January 1, 1998, or at date of original issuance, if later. The resulting pro forma adjustment includes an increase of 4,760,964 in the weighted average shares used to compute basic net loss per share for the year ended December 31, 1998. Pro forma diluted net loss per share is computed only using the pro forma weighted average number of common shares as common stock equivalents are antidilutive. Effective upon the closing of the Company's proposed initial public offering, the outstanding shares of Series A and Series B convertible preferred stock, Series C and D mandatorily redeemable preferred stock and warrants to purchase Series D preferred stock will automatically convert into 428,635, 430,207, 4,069,936, 1,662,529 shares and 53,996, respectively, of Common Stock (for a total of 6,645,303 shares). The pro forma effects of these transactions are unaudited and have been reflected in the accompanying pro forma consolidated balance sheet at December 31, 1998. COMPREHENSIVE INCOME The Company adopted SFAS No. 130, Reporting Comprehensive Income, during 1998. The Company classifies items of "other comprehensive income" by their nature in a financial statement and displays the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. To date the Company has not had any transactions that are required to be reported in comprehensive income. F-10 85 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) SEGMENT REPORTING The FASB issued SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information. SFAS No. 131 establishes standards for the way public business enterprises are to report information about operating segments in annual financial statements and requires those enterprises to report selected information about operating segments in interim financial reports. The Company has determined that it does not have any separately reportable business segments. 4. SIGNIFICANT CUSTOMERS AND CONCENTRATIONS OF CREDIT RISK All cash deposits are held by two financial institutions and exceed existing federal deposit insurance coverage limits at each institution. Additionally, approximately 67% of all loans sold during the year ended December 31, 1998 were sold to one mortgage loan purchaser. 5. MORTGAGE LOANS HELD-FOR-SALE The inventory of mortgage loans consists primarily of first trust deed mortgages on residential properties located throughout the United States, primarily concentrated in California. As of December 31, 1998, the Company has net mortgage loans held-for-sale of $42,153,648, all of which are on accrual basis. All mortgage loans held-for-sale are pledged as collateral for borrowings at December 31, 1998 (see Note 8). There were no mortgage loans held-for-sale at December 31, 1997. 6. FURNITURE AND EQUIPMENT Furniture and equipment at December 31, 1997 and 1998 are recorded at cost and consist of the following:
1997 1998 -------- ---------- Computer equipment................................. $133,295 $ 929,486 Furniture and fixtures............................. 19,772 646,847 Equipment under capital leases..................... -- 998,642 Leasehold improvements............................. -- 144,541 -------- ---------- 153,067 2,719,516 Accumulated depreciation and amortization.......... (6,860) (353,952) -------- ---------- $146,207 $2,365,564 ======== ==========
Depreciation and amortization expense for the years ended December 31, 1997 and 1998 was $6,860 and $347,092, respectively. As of December 31, 1998, accumulated amortization for equipment under capital leases was $203,447. There was no amortization for equipment under capital leases as of December 31, 1997. All equipment under capital leases serves as collateral for the related lease obligation (see Note 10). F-11 86 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 7. INCOME TAXES There was no benefit for income taxes for the years ended December 31, 1996, 1997 and 1998 due to the Company's inability to recognize the benefit of net operating losses. At December 31, 1998, the Company had net operating loss carryforwards of approximately $10.0 million for both federal and state income tax purposes. The federal carryforwards expire in the years 2011 through 2018. For federal and state tax purposes, a portion of the Company's net operating loss may be subject to certain limitations on annual utilization in case of changes in ownership, as defined by federal and state tax laws. The primary components of temporary differences, which give rise to deferred taxes are as follows:
1997 1998 --------- ----------- Deferred tax assets: Net operating loss carryforwards.......................... $ 466,197 $ 4,017,567 Other..................................................... 78,951 227,984 --------- ----------- Total deferred tax assets......................... 545,148 4,245,551 Valuation allowance......................................... (545,148) (4,245,551) --------- ----------- $ -- $ -- ========= ===========
Management evaluates the recoverability of the deferred tax asset and the level of the valuation allowance. Due to the uncertainty surrounding the realization of the favorable tax attributes in future tax returns, the Company has recorded a valuation allowance against its net deferred tax asset at both December 31, 1997 and 1998. At such time as it is determined that it is more likely than not that the deferred tax asset will be realizable, the valuation allowance will be reduced. 8. WAREHOUSE LINES PAYABLE As of December 31, 1998, the Company had a warehouse line of credit for borrowings up to $15.0 million, with a temporary overdraft limit of $3.75 million, for interim financing of mortgage loans. The interest rate charged on borrowings against the warehouse line of credit is variable based on the commercial paper rate of the lender plus various percentage rates. Borrowings are collateralized by the mortgage loans held-for-sale. The line of credit which is uncommitted expires on June 30, 1999. Upon expiration, management believes it will either renew its existing line or obtain sufficient additional lines. At December 31, 1998, approximately $15.0 million was outstanding under this line. Either the Company or the Lender can terminate the agreement at any time. This line of credit agreement generally requires the Company to comply with various financial and non-financial covenants. The Company was not in compliance with certain covenants contained in the credit agreement and has obtained a waiver from the lender. Two of the Company's founding stockholders have provided guarantees for the Company's obligations under this line of credit. Additionally, the Company has a commitment to finance up to $35.0 million of mortgage loan inventory pending sale of these loans to the ultimate mortgage loan purchasers. This additional loan inventory financing is secured by the related mortgage loans. The interest rate charged is LIBOR plus 1.25%. Either the Company or the lender can terminate the agreement at any time. At December 31, 1998, approximately $26.1 million was outstanding under this financial commit- F-12 87 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) ment. This agreement includes various non-financial negative and affirmative covenants. The Company was not in compliance with a covenant contained in the agreement and has obtained a waiver from the lender. 9. NOTES PAYABLE In December 1998, the Company entered into two credit facilities in the aggregate principal amount of $5,000,000 for working capital and equipment financing. The first credit facility in the amount of $1,500,000 has an interest rate of prime plus 0.50% and expires in December 1999. The second credit facility is a $3,500,000 term loan with an interest rate of prime plus 0.50% and expires in September 2002. At December 31, 1998, $641,692 was outstanding under these two credit facilities. These credit facilities require the Company to meet various financial covenants. The Company was not in compliance with one of these covenants and has obtained a waiver from the lender. 10. COMMITMENTS AND CONTINGENCIES LEASES The Company leases office space under an operating lease which provides for renewal in October 2003. Rent expense under operating leases amounted to $77,037, $107,652 and $374,794 for the years ended December 31, 1996, 1997 and 1998, respectively. During April 1998, the Company entered into a 48-month capital lease for equipment (see Note 6). The Company's lease obligations under capital and operating leases are as follows:
YEAR ENDING DECEMBER 31, CAPITAL OPERATING ------------------------ ---------- ---------- 1999............................................ $ 300,408 $ 532,580 2000............................................ 332,068 665,797 2001............................................ 332,068 686,336 2002............................................ 162,424 706,874 2003............................................ -- 603,325 ---------- ---------- Total minimum lease payments.................... 1,126,968 $3,194,912 ========== Less amount representing interest....................... (155,199) ---------- Present value of minimum lease payments................. 971,769 Less current portion of capital lease obligations....... (252,475) ---------- Long-term portion....................................... $ 719,294 ==========
Under the terms of the office lease, the Company maintains a $900,000 stand-by letter of credit in favor of the lessor. The Company has deposited $255,000 as collateral for this letter of credit which is recorded as deposits and other assets in the accompanying balance sheet. FINANCIAL INSTRUMENT CONTINGENCIES At December 31, 1998, the Company was party to commitments to fund loans at interest rates previously agreed (locked) by both the lender and the borrower for specified periods of time. Prior to originating loans under these commitments, the Company evaluates each customer's credit and collateral worthiness. The Company uses its best efforts to fund these locked loans within the agreed-upon locked period. If the loan cannot be funded within this F-13 88 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) period, or if the Company is unable to secure a rate lock from the lender equal to or less than the rate lock extended to the borrower, the Company will earn less revenue than it anticipated at the time it locked with the borrower. At December 31, 1998, the Company has provided locks to originate loans amounting to approximately $99.1 million (the "locked pipeline"). In addition, the Company had commitments, in its capacity as a broker, amounting to approximately $45.0 million. At December 31, 1998, the Company has entered into non-mandatory forward loan sale agreements, including commitments with lenders for brokered loans, amounting to approximately $186.3 million (this includes the mortgage loans held-for-sale at December 31, 1998, of approximately $42.2 million). The forward loan sale agreements do not subject the Company to mandatory delivery and there is no penalty if the Company does not deliver into the commitment. The Company is exposed to the risk that these counterparties may be unable to meet the terms of these sale agreements. The investors are well-established U.S financial institutions; the Company does not require collateral to support these commitments, and there has been no failure on the part of the counterparties to these agreements to date. LEGAL In the normal course of business, the Company is at times subject to pending and threatened legal actions and proceedings. After reviewing pending and threatened actions and proceedings with counsel, management believes that the outcome of such actions or proceedings is not expected to have a material adverse effect on the financial position or results of operation of the Company. MORTGAGE BANKERS' BLANKET BOND At December 31, 1998, the Company carried a mortgage bankers' blanket bond for $300,000 and carried errors and omissions insurance coverage for $2,000,000. The premiums for the bond and insurance coverage are paid through May 27, 1999 and January 9, 1999, respectively. MARKETING SERVICE AGREEMENTS The Company has entered into several marketing service agreements with third parties. Under these agreements the third parties will display the Company's logo and loan information on their internet websites and provide related marketing services. The Company pays for these services in minimum monthly and quarterly installments plus, in some cases, a per view charge for each time the information is displayed. Future minimum payments under these agreements are as follows:
YEAR ENDING DECEMBER 31, ------------------------ 1999.......................................... $5,463,300 2000.......................................... 2,309,800 2001.......................................... 212,000 Thereafter.................................... -- ---------- $7,985,100 ==========
Two of these marketing agreements are with a stockholder of the Company. The Company has incurred approximately $1.04 million in marketing service expenses under these agreements with this stockholder during the year ended December 31, 1998. There were no such agreements as of December 31, 1996 and 1997. F-14 89 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 11. STOCKHOLDERS' (DEFICIT) AND MANDATORILY REDEEMABLE PREFERRED STOCK COMMON AND CONVERTIBLE PREFERRED STOCK At December 31, 1998, the Company was authorized to issue 20,000,000 shares of common stock and 11,765,167 shares of preferred stock. The Company has designated 428,635 shares of the authorized preferred stock as Series A preferred stock, 450,708 shares as Series B preferred stock, 4,467,912 shares as Series C preferred stock, 4,467,912 shares as Series C-1 preferred stock and 1,950,000 shares as Series D preferred stock. REDEMPTION Series A and B preferred stock are not redeemable. The Series C and C-1 preferred stock are redeemable at any time after December 17, 2001 at the request of no less than 66.67% of the then outstanding Series C and C-1 stockholders. The redemption price is equal to $1.22852 per share plus 10% per annum on the amount payable plus all declared but unpaid dividends. The redemption amounts are payable in three annual installments. The Series D preferred stock is redeemable at any time after September 4, 2002 at the request of no less than 66.67% of the then outstanding Series D stockholders and subject to the consent of a majority of the Series C and C-1 preferred stockholders. The redemption price is equal to $9.263 per share plus 10% per annum on the amount payable plus all declared but unpaid dividends. The redemption amounts are payable in three annual installments. LIQUIDATION PREFERENCE In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of preferred stock retain liquidation preference over common stockholders. The liquidation amounts are $0.22 per share of Series A, $0.96 per share of Series B, $1.22852 per share of Series C, $1.22852 per share of Series C-1, and $9.263 per share of Series D preferred stock. The remaining assets and funds of the Company available for distribution shall be distributed ratably among all holders of Series C, Series C-1, and Series D preferred stock and common stock pro rata based on the number of shares of common stock held by each holder (assuming conversion of all Series C, Series C-1, and Series D preferred stock) until, with respect to holders of Series C and Series C-1, such holders shall have received an aggregate of $3.6855 per share and the holders of Series D preferred stock have received an aggregate of $13.89 per share. Any remaining assets shall be distributed among the holders of common stock on a pro rata basis. In December 1997, the Company received approximately $1.8 million from a venture capital fund for which the Company issued Series C preferred stock in July 1998. This amount is reflected as advances payable in the 1997 balance sheet. VOTING RIGHTS Holders of preferred stock are entitled to vote together with holders of common stock. The number of votes granted to preferred shareholders is to equal the number of full shares of common stock into which each share of preferred stock could be converted as described in the Company's Articles of Incorporation. Special voting rights are provided to Series C, C-1, and D preferred stockholders for the election of Board of Director members. F-15 90 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) CONVERSION At the option of the holder, each share of preferred stock is convertible at any time into shares of common stock as determined by dividing the Issuance Price by the Conversion Price. The Issuance Price and Conversion Price for the preferred stock are as follows: $0.22 per share and $0.22 per share for Series A; $0.96 per share and $0.96 per share for Series B; $1.22852 per share and $1.22852 per share for Series C; $1.22852 per share and $1.22852 per share for Series C-1; and $9.26 per share and $9.26 per share for Series D, respectively. The Conversion Price for each series of preferred stock is subject to adjustment as described in the Company's articles of incorporation. Additionally, Series C preferred stock may be automatically converted to Series C-1 preferred stock in the event such holders of Series C preferred stock do not exercise their right of first refusal as set forth in the restated investors' rights agreement. All preferred shares will automatically be converted into shares of common stock upon the earlier of (i) a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933 at an offering price of not less than $13.89 per share (as adjusted to reflect any stock splits, stock dividends, or combinations), and an aggregate offering price of $15.0 million; or (ii) the date specified by written consent or agreement of (a) the holders of a majority of the then outstanding shares of Series C and Series C-1 preferred stock, (b) the holders of a majority of the then outstanding shares of Series D preferred stock and (c) the holders of a majority of the then outstanding shares of preferred stock. DIVIDENDS Holders of preferred stock are entitled to receive, when and if declared by the Board of Directors, dividends at the rate of $0.02 per share of Series A, $0.096 per share of Series B, $0.122852 per share of Series C, $0.122852 per share of Series C-1 and $0.926 per share of Series D, respectively, per year, payable in preference to any payment of any dividend on common stock. After such dividend payment, any additional dividends declared shall be payable entirely to the holders of Series C and Series C-1 preferred stock and common stock on a pro rata basis. The dividends are non-cumulative. WARRANTS In February 1998, the Company issued warrants to purchase up to 15,000 shares of Series C preferred stock at an exercise price of $1.225 per share to a lender in connection with a capital lease. In addition, in connection with two separate strategic alliance agreements, the Company issued warrants to purchase 200,000 shares of Series C preferred stock at an exercise price of $2.40 per share in May 1998 and 53,996 shares of Series D preferred stock at an exercise price of $9.26 per share in September 1998. As of December 31, 1998, no warrants had been exercised. 12. STOCK OPTION PLAN AND UNEARNED COMPENSATION The Company has reserved up to 1,500,000 shares of common stock issuable upon exercise of options issued to certain employees, directors, and consultants pursuant to the Company's 1997 Stock Option Plan. Such options are exercisable at prices established at the date of grant, and have a term of ten years. Each optionee has a vested interest in 25% of the option shares upon the optionee's completion of one year of service measured from the grant date. The balance will vest in equal successive monthly installments of 1/48 upon the optionee's completion F-16 91 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) of each of the next 36 months of service. If an option holder ceases to be employed by the Company, vested options held at the date of termination may be exercised within three months. As of December 31, 1997 and 1998, 611,883 and 1,027,209 options have been granted and 288,117 and 318,002 options were still available for grant under the Company's stock option plan. There were no options granted in 1996. Options granted during the years ended December 31, 1997 and 1998 resulted in unearned compensation of $0 and $5.5 million, respectively. The amounts recorded represent the difference between the exercise price and the deemed fair value of the Company's common stock for shares subject to the options granted. The amortization of deferred compensation is being charged to operations over the four-year vesting period of the options. For the year ended December 31, 1998, the amortization of unearned compensation was $1,251,000. Options under the plan may be either Incentive Stock Options, as defined under Section 422 of the Internal Revenue Code, or Nonstatutory Options. The following information concerning the Company's stock option plan is provided in accordance with Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123). As permitted by SFAS 123, the Company accounts for such plans in accordance with APB No. 25 and related interpretations. The fair value of each stock option is estimated on the date of grant using the minimum value option-pricing model with the following weighted average assumptions. Expected life............................................... 5 years Risk-free interest rate..................................... 5.00% Expected dividend rate...................................... 0.00% Estimated volatility........................................ 0.00%
As a result of the above assumptions, the weighted average fair value of options granted during the years ending December 31, 1997 and 1998 was $0.42 and $6.10, respectively. The following pro forma net loss information has been prepared as if the Company had followed the provisions of SFAS No. 123:
1997 1998 ----------- ------------ Net loss: As reported................................. $(1,374,493) $(11,172,054) Pro forma................................... $(1,389,583) $(11,228,315) Net loss per share: As reported................................. $ (0.35) $ (2.95) Pro-forma................................... $ (0.35) $ (2.96)
F-17 92 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) A summary of the status of the Company's stock option plan as of December 31, 1997 and 1998 and changes during the years ending on those dates is presented below:
1997 1998 -------------------------- -------------------------- EXERCISE NUMBER EXERCISE NUMBER OF PRICE PER OF PRICE PER SHARES SHARE SHARES SHARE --------- ------------- --------- ------------- Outstanding at beginning of year............................ -- -- 611,883 $0.15 - $1.00 Granted......................... 611,883 $0.15 - $1.00 1,027,209 $0.65 - $4.00 Exercised....................... -- -- (44,174) $0.15 - $0.65 Terminated/forfeited............ -- -- (412,920) $0.15 - $4.00 ------- ------------- --------- ------------- Outstanding at end of year........ 611,883 $0.15 - $1.00 1,181,998 $0.15 - $4.00 ======= ============= ========= ============= Options exercisable at end of year............................ 12,262 $ 0.15 81,457 $0.15 - $1.00 ======= ============= ========= =============
The following table summarizes information about stock options outstanding at December 31, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ----------------------------------------------- ---------------------------- WEIGHTED WEIGHTED AVERAGE WEIGHTED RANGE OF NUMBER AVERAGE REMAINING NUMBER AVERAGE EXERCISE PRICES OUTSTANDING EXERCISE PRICE CONTRACTUAL LIFE EXERCISABLE EXERCISE PRICE - --------------- ----------- -------------- ---------------- ----------- -------------- $0.15 196,894 $0.15 8.52 73,862 $0.15 $0.65 526,500 $0.65 9.19 6,504 $0.65 $1.00 77,645 $1.00 9.42 1,091 $1.00 $3.00 135,000 $3.00 9.57 -- $3.00 $4.00 245,959 $4.00 9.81 -- --------- ------ 1,181,998 81,457 ========= ======
13. REVENUES AND OTHER INCOME, NET The following table provides the components of revenues for the years ended December 31,
1996 1997 1998 -------- ---------- ---------- Brokerage fees..................... $892,995 $1,042,729 $4,456,070 Gain on sale of loans.............. -- -- 1,709,195 Interest income on loans........... -- -- 666,281 -------- ---------- ---------- Total revenues............. $892,995 $1,042,729 $6,831,546 ======== ========== ==========
The following table provides the components of other income, net for the years ended December 31,
1996 1997 1998 ------- ------- -------- Interest on short-term investments.................... -- $ 4,629 $237,187 Interest expense on non-warehouse facility borrowings.......................................... $(3,438) (7,036) (63,861) ------- ------- -------- $(3,438) $(2,407) $173,326 ======= ======= ========
F-18 93 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) 14. OPERATING EXPENSES The following table provides the detail of the Company's operating expenses classified by the following categories:
1996 1997 1998 -------- ---------- ----------- Compensation and benefits................... $378,149 $ 923,766 $ 7,387,104 Processing costs............................ 394,977 624,210 1,219,869 Advertising and marketing................... 11,430 360,524 5,118,727 Professional services....................... 11,201 125,010 307,854 Occupancy costs............................. 77,037 107,652 374,794 Computer and internet....................... 23,775 42,693 248,929 General and administrative.................. 103,032 230,960 1,510,618 Interest expense on warehouse borrowings.... -- -- 758,031 Amortization of unearned compensation....... -- -- 1,251,000 -------- ---------- ----------- Total operating expenses.......... $999,601 $2,414,815 $18,176,926 ======== ========== ===========
15. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of a financial instrument is the amount for which the instrument could be exchanged in a current transaction between willing parties, other than in a forced liquidation sale. Fair value estimates are subjective in nature and involve uncertainties and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. The fair value of mortgage loans held-for-sale including the related commitments to sell those mortgage loans exceeds the carrying value of the mortgage loans held-for-sale by approximately $300,000. The fair value of commitments to originate mortgage loans and the related commitments to sell those loans resulted in an unrecognized gain of approximately $500,000. The fair value of mortgage loans held-for-sale are estimated using quoted market prices for similar loans or prices for mortgage backed securities backed by similar loans and the fair value of the commitments to originate and commitments to sell mortgage loans are estimated using quoted market prices. The carrying value of the Company's other financial instruments, including cash and cash equivalents, accounts receivable and all other financial assets and liabilities approximate their fair value because of the short-term maturity of those instruments or because they carry interest rates which approximate market. 16. SUBSEQUENT EVENTS INITIAL PUBLIC OFFERING In March 1999, the Company's Board of Directors authorized the Company to file a registration statement with the Securities and Exchange Commission for the purpose of the initial public offering of the Company's common stock. Upon the completion of the offering, if requirements set forth in the Certificate of Incorporation are met, all of the Company's outstanding preferred stock will be converted into shares of common stock, and all such outstanding shares of preferred stock will be cancelled and retired. Upon the conversion of the preferred stock, all rights to accrued and unpaid dividends are waived. F-19 94 E-LOAN, INC. NOTES TO FINANCIAL STATEMENTS (CONTINUED) WAREHOUSE AND OTHER CREDIT LINES PAYABLE During January 1999, the Company entered into an agreement for an additional uncommitted warehouse line of credit for borrowings up to $40,000,000 for interim financing of mortgage loans. The interest rate charged on borrowings against the warehouse line of credit is LIBOR plus 1.85%. Borrowings are collateralized by the mortgage loans held-for-sale. This agreement includes various non-financial negative and affirmative covenants. Either the Company or the lender can terminate the agreement at any time. This line of credit expires in February 2000. During March 1999, the Company obtained a commitment of $5.0 million for a revolving line of credit capital facility. The interest rate will be based on the prime rate and the facility will expire at the earlier of March 2000 or the closing of the Company's initial public offering. Two of the Company's founding stockholders have provided guarantees for the Company's obligation under this line of credit. STOCK OPTION PLAN On January 13, 1999, the Board of Directors of the Company voted to increase the authorized number of common stock options available for grant under the 1997 Stock Option Plan from 1,500,000 to 2,500,000. During January and February of 1999, the Company issued 833,716 additional stock options to employees. These options were issued at exercise prices less than the fair value of the common stock at the date of the grant. As a result the Company expects to record unearned compensation amount of approximately $35.0 million. Approximately $4.2 million of this amount will be recognized as compensation expense for the quarter ending March 31, 1999. SERIES D PREFERRED STOCK PURCHASE During February 1999, the Company sold 40,000 shares of Series D convertible and manditorily redeemable preferred stock at a price of $9.26 per share for aggregate proceeds of $370,520 to an officer of the Company in connection with his employment by the Company. This price was below the fair value of the common stock and will result in a compensation charge equal to the difference between the fair value of the Series D preferred stock and the price paid for these shares. This charge will be recognized during 1999. F-20 95 UNDERWRITING E-LOAN and the Underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation and Hambrecht & Quist LLC are the representatives of the underwriters.
NUMBER OF UNDERWRITERS SHARES ------------ --------- Goldman, Sachs & Co......................................... Donaldson, Lufkin, & Jenrette Securities Corporation........ Hambrecht & Quist LLC....................................... Total.............................................
------------------------ If the underwriters sell more than the total number set forth in the table above, the underwriters have an option to buy up to an additional shares from E-LOAN to cover such sales. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above. The following tables show the per share and total underwriting discounts and commissions to be paid to the underwriters by E-LOAN. Such amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.
PAID BY E-LOAN ---------------------------- NO EXERCISE FULL EXERCISE ----------- ------------- Per Share............................. $ $ Total....................... $ $
Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. Any such securities dealers may resell any shares purchased from the underwriters to certain other brokers or dealers at a discount of up to $ per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other selling terms. E-LOAN has agreed with the underwriters not to dispose of or hedge any of its common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of the representatives. This agreement does not apply to any grants under E-LOAN's existing employee benefit plans. See "Shares Available for Future Sale" for a discussion of certain transfer restrictions. Prior to this offering, there has been no public market for the shares. The initial public offering price will be negotiated among E-LOAN and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be E-LOAN's historical performance, estimates of the business potential and earnings prospects of E-LOAN, an assessment of E-LOAN's management and the consideration of the above factors in relation to market valuation of companies in related businesses. U-1 96 Application has been made for the quotation of the common stock on the Nasdaq National Market under the symbol "EELN". In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in this offering. Stabilizing transactions consist of certain bids or purchases made for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions. These activities by the underwriters may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the underwriters at any time. These transactions may be effected on the Nasdaq National Market, in the over-the-counter market or otherwise. The underwriters do not expect sales to discretionary accounts to exceed five percent of the total number of shares offered. The underwriters have reserved for sale, at the initial public offering price, up to % of the common stock offered by this prospectus for certain individuals designated by E-LOAN who have expressed an interest in purchasing such shares of common stock in the offering. The number of shares available for sale to the general public will be reduced to the extent such persons purchase such reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same basis as other shares offered hereby. E-LOAN estimates that the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $ . E-LOAN has agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act of 1933. U-2 97 [INSIDE BACK COVER] 98 - ---------------------------------------------------------- - ---------------------------------------------------------- No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date. ---------------------- TABLE OF CONTENTS
PAGE ---- Prospectus Summary...................... 1 Risk Factors............................ 5 Use of Proceeds......................... 20 Dividend Policy......................... 20 Capitalization.......................... 21 Dilution................................ 23 Selected Consolidated Financial Data.... 24 Management's Discussion and Analysis of Financial Condition and Results of Operations............................ 25 Business................................ 35 Management.............................. 52 Certain Transactions.................... 61 Principal Stockholders.................. 63 Description of Capital Stock............ 65 Shares Available for Future Sale........ 69 Legal Matters........................... 70 Experts................................. 70 Available Information................... 70 Index to Financial Statements........... F-1 Underwriting............................ U-1
Through and including , 1999 (25 days after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as underwriter and with respect to an unsold allotment or subscription. - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- - ---------------------------------------------------------- Shares E-LOAN, INC. Common Stock ---------------------- [LOGO GOES HERE] ---------------------- GOLDMAN, SACHS & CO. DONALDSON, LUFKIN & JENRETTE HAMBRECHT & QUIST ---------------------- E*TRADE GROUP, INC. DLJDIRECT INC. Facilitators of Internet distribution - ---------------------------------------------------------- - ---------------------------------------------------------- 99 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following table sets forth the costs and expenses, other than the underwriting discounts, payable by the Registrant in connection with the sale of the securities being registered. All amounts are estimates except the SEC registration fee, the NASD filing fee and the Nasdaq/ NMS listing fee. SEC Registration Fee........................................ $ 15,346 NASD Filing Fee............................................. 6,020 Nasdaq National Market Listing Fee.......................... 50,000 Printing Costs.............................................. 150,000 Legal Fees and Expenses..................................... 400,000 Accounting Fees and Expenses................................ 200,000 Blue Sky Fees and Expenses.................................. 10,000 Transfer Agent and Registrar Fees........................... 10,000 Miscellaneous............................................... 158,634 ---------- Total..................................................... $1,000,000 ==========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation's Board of Directors to grant, indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities (including reimbursement for expenses incurred) arising under the Securities Act of 1933. Article VII of our current Certificate of Incorporation (Exhibit 3.1 hereto) and Article VI of our current Bylaws (Exhibit 3.3 hereto) provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by Delaware law. In addition, we have entered into Indemnification Agreements (Exhibit 10.1 hereto) with our officers and directors. The Underwriting Agreement (Exhibit 1.1) also provides for cross-indemnification among E-LOAN and the Underwriters with respect to certain matters, including matters arising under the Securities Act. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. Since our incorporation in August 1996, we have sold and issued the following securities: 1. On September 30, 1996 we issued 4,000,000 shares of common stock to two founders for an aggregate consideration of $4,000.00. On September 30, 1996 we also issued 85,000 shares of common stock to two investors for an aggregate consideration of $85.00 2. On June 10, 1997 we issued 428,635 shares of Series A preferred stock to nine investors for an aggregate consideration of $94,299.70. 3. On December 17, 1997 we issued 430,207 shares of Series B preferred stock to twenty-two investors for an aggregate consideration of $412,998.72. 4. On December 19, 1997 we issued 4,069,936 shares of Series C preferred stock to two accredited investors for an aggregate consideration of $4,999,997.77. 5. On March 4, 1998 we issued a warrant for 15,000 shares of Series C preferred stock to an equipment lessor in connection with a Master Lease Agreement. Such warrants have an exercise price of $2.00 per share. II-1 100 6. On March 20, 1998 we issued a warrant for 200,000 shares of Series C preferred stock to one of our marketing partners pursuant to a Marketing Agreement. Such warrants had an exercise price of $2.40 per share and were exercised on January 13, 1999 for aggregate consideration of $480,000.00 7. On April 16, 1998 we issued 500 shares of common stock to one of our directors for services rendered valued at $325.00. 8. On June 1, 1998 we issued 26,246 shares of common stock to one investor for an aggregate consideration of $19,684.50. 9. On September 4, 1998 we issued 1,662,529 shares of Series D preferred stock to twelve accredited investors for an aggregate consideration of $15,400,006.14. 10. On September 4, 1998, we issued a warrant for 53,938 shares of Series D preferred stock to one of our marketing partners pursuant to a Marketing Agreement. Such warrant has an exercise price of $9.27 per share. 11. On February 24, 1999, we issued 40,000 shares of Series D preferred stock to an employee for an aggregate consideration of $370,520 paid in cash. 12. Since our incorporation, we have issued an aggregate of 2,472,852 options to purchase our common stock to employees, directors, and consultants with exercise prices ranging from $0.15 to $6.00. The issuance of the above securities were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of such Securities Act as transactions by an issuer not involving any public offering. In addition, certain issuances described in Item 12 were deemed exempt from registration under the Securities Act in reliance upon Rule 701 promulgated under the Securities Act. The recipients of securities in each such transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates and warrants issued in such transactions. All recipients had adequate access, through their relationships with us, to information about us. ITEM 16. EXHIBITS. 1.1 Form of Underwriting Agreement. 3.1 Certificate of Incorporation of E-LOAN as currently in effect. 3.2 Form of Restated Certificate of Incorporation of E-LOAN to be filed immediately following the closing of the offering made under this Registration Statement. 3.3 Bylaws of E-LOAN. 3.4 Form of Bylaws of E-LOAN to be adopted immediately following the closing of the offering made under this Registration Statement. 4.1* Specimen Common Stock Certificate. 5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. 10.1 Form of Indemnification Agreement between the Registrant and each of its directors and officers. 10.2 1997 Stock Plan and form of agreements thereunder. 10.3 1999 Employee Stock Purchase Plan and form of agreements thereunder. 10.4 Restated Investor Rights Agreement dated September 4, 1998 among E-LOAN and certain investors. 10.5 Warrant Agreement to Purchase Shares of the Series C Preferred Stock of E-Loan, Inc. dated March 4, 1998. 10.6* Employment Agreement with Joseph Kennedy dated , 1999. 10.7+ Marketing Agreement with DLJdirect, Inc. dated September 4, 1998. 10.8+ Co-Marketing Agreement with E*Trade Group, Inc. dated March 26, 1998.
II-2 101 10.9+ Marketing Agreement with MarketWatch.com dated February 8, 1999. 10.10 Marketing Agreement with Prism Mortgage Company dated July 6, 1998. 10.11+ License Agreement with Yahoo!, Inc. dated September 1998 and amended in March 1999. 10.12 Warehousing Credit and Security Agreement with Bank United, a federal savings bank, dated February 3, 1999. 10.13 Broker Agreement with Citicorp Mortgage, Inc. dated September 23, 1997. 10.14+ Underwriting Review Agreement with CMAC Service Company dated September 3, 1998. 10.15 Warehouse Credit Agreement with Cooper River Funding, Inc. and GE Capital Mortgage Services, Inc. dated June 24, 1998. 10.16 Loan Purchase Agreement with Countrywide Home Loans, Inc. dated September 25, 1998. 10.17 Conventional Loan Purchase Agreement with Crestar Mortgage Corporation dated July 1, 1998. 10.18 GMAC Mortgage Corporation Seller's Agreement for Residential Mortgage Loans with GMAC Mortgage Corporation dated July 1, 1998. 10.19 Mortgage Loan Purchase and Sale Agreement with Greenwich Capital Financial Products, Inc. dated September 25, 1998. 10.20 License, Staffing, Purchase and Sale Agreement with NetB@nk dated October 1, 1998. 10.21 Mortgage Loan Processing Agreement with NetB@nk dated October 1, 1998. 10.22 Wholesale Mortgage Purchase Agreement with PHH Mortgage Services Corporation dated June 1, 1998. 10.23 Underwriting Services Agreement with PMI Mortgage Services Co. Dated June 12, 1998. 10.24 Mortgage Purchase Agreement with Resource Bancshares Mortgage Group, Inc. dated May 1, 1998. 10.25 Mortgage Selling and Servicing Contract with Federal National Mortgage Association dated February 12, 1999. 10.26 Multi-Tenant Office Triple Net Lease with Creekside South Trust dated August 19, 1998. 10.27 Alliance Agreement between E-Loan, Inc., E-Loan Europe BV and Stater BV dated March 19, 1999. 10.28 Lease Agreement between JTC and Palo Alto Funding Group, Inc. dated June 20, 1996. 10.29 Mortgage Loan Origination Agreement with Chase Home Mortgage Corporation dated November 30, 1992. 10.30 Correspondent Agreement with Citicorp Mortgage, Inc. dated June 15, 1998. 10.31 Conventional Wholesale Mortgage Purchase Agreement with Colonial Mortgage Company dated September 1, 1998. 10.32 Lender Associate Agreement with GreenPoint Mortgage dated November 9, 1998. 10.33 Correspondent Broker Agreement with New America Financial, Inc. 10.34 Correspondent Mortgage Services Agreement with PHH Mortgage Services Corporation dated May 20, 1998. 10.35 Correspondent Purchase Agreement with Prism Mortgage Company dated March 22, 1998. 10.36 Wholesale Lending Agreement with Union Federal Savings Bank of Indianapolis dated March 6, 1998. 10.37 Master Lease Agreement with Comdisco, Inc. dated March 4, 1998. 10.38 Loan and Security Agreement with Silicon Valley Bank dated December 9, 1998. 10.39 Internet Data Center Services Agreement with Exodus Communications, Inc. dated November 10, 1997.
II-3 102 10.40 Marketing Agreement with PHH Mortgage Services Corporation dated January 19, 1998. 11.1 Statement regarding computation of per share earnings. 21.1 List of Subsidiary of the Registrant. 23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants. 23.2 Consent of Counsel (included in Exhibit 5.1). 24.1 Power of Attorney (see page II-5). 27.1 Financial Data Schedule.
- --------------- * To be filed by amendment. + Confidential treatment requested. ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus 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. II-4 103 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Palo Alto, State of California on March 24, 1999. By: /s/ CHRIS LARSEN ------------------------------------ Chris Larsen Chief Executive Officer POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints, jointly and severally, Chris Larsen and Frank Siskowski, and each of them, as his or her attorney-in-fact, with full power of substitution, for him or her in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and any and all registration statements filed pursuant to Rule 462 under the Securities Act of 1933, as amended, in connection with or related to the offering contemplated by this registration statement and its amendments, if any, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorney to any and all amendments to said registration statement. PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE --------- ----- ---- /s/ CHRIS LARSEN Chief Executive Officer and Director March 24, 1999 - ------------------------------------ (Principal Executive Officer) Chris Larsen /s/ JANINA PAWLOWSKI President and Director March 24, 1999 - ------------------------------------ Janina Pawlowski /s/ FRANK SISKOWSKI Chief Financial Officer March 24, 1999 - ------------------------------------ (Principal Financial and Accounting Officer) Frank Siskowski /s/ IRA M. EHRENPREIS Director March 24, 1999 - ------------------------------------ Ira M. Ehrenpreis /s/ ROBERT C. KAGLE Director March 24, 1999 - ------------------------------------ Robert C. Kagle /s/ TIM KOOGLE Director March 24, 1999 - ------------------------------------ Tim Koogle /s/ WADE RANDLETT Director March 24, 1999 - ------------------------------------ Wade Randlett
II-5 104 EXHIBIT INDEX
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION OF DOCUMENT PAGE ------- ------------------------------------------------------------ ------------ 1.1 Form of Underwriting Agreement. 3.1 Certificate of Incorporation of E-LOAN as currently in effect. 3.2 Form of Restated Certificate of Incorporation of E-LOAN to be filed immediately following the closing of the offering made under this Registration Statement. 3.3 Bylaws of E-LOAN. 3.4 Form of Bylaws of E-LOAN to be adopted immediately following the closing of the offering made under this Registration Statement. 4.1* Specimen Common Stock Certificate. 5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation. 10.1 Form of Indemnification Agreement between the Registrant and each of its directors and officers. 10.2 1997 Stock Plan and form of agreements thereunder. 10.3 1999 Employee Stock Purchase Plan and form of agreements thereunder. 10.4 Restated Investor Rights Agreement dated September 4, 1998 among E-LOAN and certain investors. 10.5 Warrant Agreement to Purchase Shares of the Series C Preferred Stock of E-Loan, Inc. dated March 4, 1998. 10.6* Employment Agreement with Joseph Kennedy dated , 1999. 10.7+ Marketing Agreement with DLJdirect, Inc. dated September 4, 1998. 10.8+ Co-Marketing Agreement with E*Trade Group, Inc. dated March 26, 1998. 10.9+ Marketing Agreement with MarketWatch.com dated February 8, 1999. 10.10 Marketing Agreement with Prism Mortgage Company dated July 6, 1998. 10.11+ License Agreement with Yahoo!, Inc. dated September 1998 and amended in March 1999. 10.12 Warehousing Credit and Security Agreement with Bank United, a federal savings bank, dated February 3, 1999. 10.13 Broker Agreement with Citicorp Mortgage, Inc. dated September 23, 1997. 10.14+ Underwriting Review Agreement with CMAC Service Company dated September 3, 1998. 10.15 Warehouse Credit Agreement with Cooper River Funding, Inc. and GE Capital Mortgage Services, Inc. dated June 24, 1998. 10.16 Loan Purchase Agreement with Countrywide Home Loans, Inc. dated September 25, 1998. 10.17 Conventional Loan Purchase Agreement with Crestar Mortgage Corporation dated July 1, 1998. 10.18 GMAC Mortgage Corporation Seller's Agreement for Residential Mortgage Loans with GMAC Mortgage Corporation dated July 1, 1998. 10.19 Mortgage Loan Purchase and Sale Agreement with Greenwich Capital Financial Products, Inc. dated September 25, 1998. 10.20 License, Staffing, Purchase and Sale Agreement with NetB@nk dated October 1, 1998.
105
SEQUENTIALLY EXHIBIT NUMBERED NUMBER DESCRIPTION OF DOCUMENT PAGE ------- ------------------------------------------------------------ ------------ 10.21 Mortgage Loan Processing Agreement with NetB@nk dated October 1, 1998. 10.22 Wholesale Mortgage Purchase Agreement with PHH Mortgage Services Corporation dated June 1, 1998. 10.23 Underwriting Services Agreement with PMI Mortgage Services Co. Dated June 12, 1998. 10.24 Mortgage Purchase Agreement with Resource Bancshares Mortgage Group, Inc. dated May 1, 1998. 10.25 Mortgage Selling and Servicing Contract with Federal National Mortgage Association dated February 12, 1999. 10.26 Multi-Tenant Office Triple Net Lease with Creekside South Trust dated August 19, 1998. 10.27 Alliance Agreement between E-Loan, Inc., E-Loan Europe BV and Stater BV dated March 19, 1999. 10.28 Lease Agreement between JTC and Palo Alto Funding Group, Inc. dated June 20, 1996. 10.29 Mortgage Loan Origination Agreement with Chase Home Mortgage Corporation dated November 30, 1992. 10.30 Correspondent Agreement with Citicorp Mortgage, Inc. dated June 15, 1998. 10.31 Conventional Wholesale Mortgage Purchase Agreement with Colonial Mortgage Company dated September 1, 1998. 10.32 Lender Associate Agreement with GreenPoint Mortgage dated November 9, 1998. 10.33 Correspondent Broker Agreement with New America Financial, Inc. 10.34 Correspondent Mortgage Services Agreement with PHH Mortgage Services Corporation dated May 20, 1998. 10.35 Correspondent Purchase Agreement with Prism Mortgage Company dated March 22, 1998. 10.36 Wholesale Lending Agreement with Union Federal Savings Bank of Indianapolis dated March 6, 1998. 10.37 Master Lease Agreement with Comdisco, Inc. dated March 4, 1998. 10.38 Loan and Security Agreement with Silicon Valley Bank dated December 9, 1998. 10.39 Internet Data Center Services Agreement with Exodus Communications, Inc. dated November 10, 1997. 10.40 Marketing Agreement with PHH Mortgage Services Corporation dated January 19, 1998. 11.1 Statement regarding computation of per share earnings. 21.1 List of Subsidiary of the Registrant. 23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants. 23.2 Consent of Counsel (included in Exhibit 5.1). 24.1 Power of Attorney (see page II-5). 27.1 Financial Data Schedule.
- --------------- * To be filed by amendment. + Confidential treatment requested. EX-1.1 2 FORM OF UNDERWRITING AGREEMENT 1 EXHIBIT 1.1 E-LOAN, INC. COMMON STOCK ( PAR VALUE) ---------- UNDERWRITING AGREEMENT ___________ ,1999 Goldman, Sachs & Co., Donaldson, Lufkin, & Jenrette Securities Corporation Hambrecht & Quist LLC As representatives of the several Underwriters named in Schedule I hereto, c/o Goldman, Sachs & Co., 2765 Sand Hill Road, Menlo Park, California 94025 Ladies and Gentlemen: E-Loan, Inc. a Delaware corporation (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of _________ shares (the "Firm Shares") and, at the election of the Underwriters, up to _________ additional shares (the "Optional Shares") of Common Stock ("Stock") of the Company (the Firm Shares and the Optional Shares that the Underwriters elect to purchase pursuant to Section 2 hereof being collectively called the "Shares"). 1. The Company represents and warrants to, and agrees with, each of the Underwriters that: (a) A registration statement on Form S-1 (File No. 333-____________) (the "Initial Registration Statement") in respect of the Shares has been filed with the Securities and Exchange Commission (the "Commission"); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto, to you for each of the other Underwriters, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), which became effective upon filing, no other document with respect to the Initial Registration Statement has heretofore been filed with the Commission; and no stop order suspending the effectiveness of the Initial Registration Statement, any post-effective amendment thereto or the Rule 462(b) Registration Statement, if any, has been issued and no proceeding for that purpose has been initiated or threatened by the Commission (any preliminary prospectus included in the Initial Registration Statement or filed with the Commission pursuant to Rule 424(a) of the rules and regulations of the 2 Commission under the Act is hereinafter called a "Preliminary Prospectus"; the various parts of the Initial Registration Statement and the Rule 462(b) Registration Statement, if any, including all exhibits thereto and including the information contained in the form of final prospectus filed with the Commission pursuant to Rule 424(b) under the Act in accordance with Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be part of the Initial Registration Statement at the time it was declared effective, each as amended at the time such part of the Initial Registration Statement became effective or such part of the Rule 462(b) Registration Statement, if any, became or hereafter becomes effective, are hereinafter collectively called the "Registration Statement"; and such final prospectus, in the form first filed pursuant to Rule 424(b) under the Act, is hereinafter called the "Prospectus"). (b) No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus, at the time of filing thereof, conformed in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder, and did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein; (c) The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will conform, in all material respects to the requirements of the Act and the rules and regulations of the Commission thereunder and do not and will not, as of the applicable effective date as to the Registration Statement and any amendment thereto, and as of the applicable filing date as to the Prospectus and any amendment or supplement thereto, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with information furnished in writing to the Company by an Underwriter through Goldman, Sachs & Co. expressly for use therein; (d) Neither the Company nor any of its subsidiaries has sustained since the date of the latest audited financial statements included in the Prospectus any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus; (e) The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them, in each case free and clear of all liens, encumbrances and defects except such as are described in the Prospectus or such as do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and its subsidiaries; and any real property and buildings held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such -2- 3 exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its subsidiaries; (f) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus, and has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, or is subject to no material liability or disability by reason of the failure to be so qualified in any such jurisdiction; and each subsidiary of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation; (g) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and conform to the description of the Stock contained in the Prospectus; and all of the issued shares of capital stock of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and non-assessable and (except for directors' qualifying shares) are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, equities or claims; (h) The unissued Shares to be issued and sold by the Company to the Underwriters hereunder have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued and fully paid and non-assessable and will conform to the description of the Stock contained in the Prospectus; (i) The issue and sale of the Shares by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Company or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties; and no consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except (i) for consents in certain states where the Company is licensed as a broker, which consents have been obtained, (ii) the registration under the Act of the Shares and (iii) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters; (j) Neither the Company nor any of its subsidiaries is in violation of its Certificate of Incorporation or By-laws or in default in the performance or observance of any material obligation, agreement, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which it is a party or by which it or any of its properties may be bound; (k) The statements set forth in the Prospectus under the caption "Description of Capital Stock", insofar as they purport to constitute a summary of the terms of the Stock, and -3- 4 under the caption "Underwriting", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate and complete; (l) Other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property of the Company or any of its subsidiaries is the subject which, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a material adverse effect on the current or future consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries; and, to the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (m) The Company is not and, after giving effect to the offering and sale of the Shares, will not be an "investment company", as such term is defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"); (n) Neither the Company nor any of its affiliates does business with the government of Cuba or with any person or affiliate located in Cuba within the meaning of Section 517.075, Florida Statutes; (o) To the Company's knowledge, PricewaterhouseCoopers LLP, who have certified certain financial statements of the Company and its subsidiaries, are independent public accountants as required by the Act and the rules and regulations of the Commission thereunder; (p) The Company has reviewed its operations and that of its subsidiaries and any third parties with which the Company or any of its subsidiaries has a material relationship to evaluate the extent to which the business or operations of the Company or any of its subsidiaries will be affected by the Year 2000 Problem. As a result of such review, the Company has no reason to believe, and does not believe, that the Year 2000 Problem will have a material adverse effect on the general affairs, management, the current or future consolidated financial position, business prospects, stockholders' equity or results of operations of the Company and its subsidiaries, or result in any material loss or interference with the Company's business or operations. The "Year 2000 Problem" as used herein means any significant risk that computer hardware or software used in the receipt, transmission, processing, manipulation, storage, retrieval, retransmission or other utilization of data or in the operation of mechanical or electrical systems of any kind will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000; (q) Neither the Company nor any of its subsidiaries has violated any foreign, federal, state or local law or regulation relating to banking and mortgage banking, including any provisions of the Truth in Lending Act and Regulation Z, the Home Ownership and Equity Protection Act of 1994, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Fair Credit Reporting Act, the Real Estate Settlement Procedures Act and Regulation X, the Home Mortgage Disclosure Act of 1975 and Regulation C, or the rules and regulations promulgated thereunder, except for such violations which, singly or in the aggregate, would not have a material adverse effect on the business, prospects, financial condition or results of operation of the Company and its subsidiaries, taken as a whole. (r) The Company owns, or possesses adequate rights to use, all material trademarks, service marks, trade names, trademark registrations, service mark registrations, domain names and copyrights necessary for the conduct of its business and, except as set forth in the Prospectus, has no reason to believe that the conduct of its business will conflict with, and has -4- 5 not received any notice of any claim of conflict with any such rights of others except as would not have a material adverse effect on the business, financial condition, results of operations or prospects of the Company; and, to the Company's knowledge, neither the Company nor any of its subsidiaries have infringed or are infringing any trademarks, services marks, trade names, trademark registrations, service mark registrations, domain names or copyrights, which infringement could reasonably be expected to result in any material adverse change, or in any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries; (s) The Company owns, or possesses adequate rights to use, all material patents necessary for the conduct of its business; to the Company's knowledge, no valid Unites States patent is or would be infringed by the activities of the Company, except as would not have a material adverse effect on the business, financial condition, results of operations or prospects of the Company; there are no actions, suits or judicial proceedings pending relating to patents or proprietary information to which the Company is a party or of which any property of the Company is subject, and, to the knowledge of the Company, no actions, suits or judicial proceedings are threatened by governmental authorities or, except as set forth in the Prospectus, others, in each case except as would not result in any material adverse change, or in any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries; except as set forth or incorporated by reference in the Prospectus or as would not result in any material adverse change, or in any development involving a prospective material adverse change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, the Company is not aware of any claim by others that the Company is infringing or otherwise violating the patents or other intellectual property of others and is not aware of any rights of third parties to any of the Company's patent applications, licensed patents or licenses which could affect materially the use thereof by the Company; (t) The Company carries, or is covered by, insurance that, to the Company's knowledge, is customary for companies similarly situated and engaged in similar businesses in similar industries; (u) There are no contracts or other documents which are required to be described in the Prospectus or to be filed as exhibits to the Initial Registration Statement by the Act which are not so described or filed; (v) No labor disturbance by the employees of the Company exists or, to the knowledge of the Company, is imminent which might be expected to have a material adverse effect on the business, financial condition, results of operations or prospects of the Company; (w) The Company has no material subsidiaries; and (x) The Company has obtained and is operating in compliance with all authorizations, licenses, permits, consents and certificates of federal and state banking and mortgage banking regulatory agencies material to the conduct of its business, all of which are valid and in full force and effect, and the Company has not received any notice of proceedings relating to the revocation or modification of any such authorization, license, permit, consent or certificate. 2. Subject to the terms and conditions herein set forth, (a) the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at a purchase price per share of $______ , the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto -5- 6 and (b) in the event and to the extent that the Underwriters shall exercise the election to purchase Optional Shares as provided below, the Company agrees to issue and sell to each of the Underwriters, and each of the Underwriters agrees, severally and not jointly, to purchase from the Company, at the purchase price per share set forth in clause (a) of this Section 2, that portion of the number of Optional Shares as to which such election shall have been exercised (to be adjusted by you so as to eliminate fractional shares) determined by multiplying such number of Optional Shares by a fraction, the numerator of which is the maximum number of Optional Shares which such Underwriter is entitled to purchase as set forth opposite the name of such Underwriter in Schedule I hereto and the denominator of which is the maximum number of Optional Shares that all of the Underwriters are entitled to purchase hereunder. The Company hereby grants to the Underwriters the right to purchase at their election up to ____________ Optional Shares, at the purchase price per share set forth in the paragraph above, for the sole purpose of covering overallotments in the sale of the Firm Shares. Any such election to purchase Optional Shares may be exercised only by written notice from you to the Company, given within a period of 30 calendar days after the date of this Agreement, setting forth the aggregate number of Optional Shares to be purchased and the date on which such Optional Shares are to be delivered, as determined by you but in no event earlier than the First Time of Delivery (as defined in Section 4 hereof) or, unless you and the Company otherwise agree in writing, earlier than two or later than ten business days after the date of such notice. 3. Upon the authorization by you of the release of the Firm Shares, the several Underwriters propose to offer the Firm Shares for sale upon the terms and conditions set forth in the Prospectus. 4. (a) The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior notice to the Company shall be delivered by or on behalf of the Company to Goldman, Sachs & Co., through the facilities of the Depository Trust Company ("DTC") for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified by the Company to Goldman, Sachs & Co. at least forty-eight hours in advance. The Company will cause the certificates representing the Shares to be made available for checking and packaging at least twenty-four hours prior to the Time of Delivery (as defined below) with respect thereto at the office of DTC or its designated custodian (the "Designated Office"). The time and date of such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City time, on _______________ , 1999 or such other time and date as Goldman, Sachs & Co. and the Company may agree upon in writing, and, with respect to the Optional Shares, 9:30 a.m., New York time, on the date specified by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs & Co. of the Underwriters' election to purchase such Optional Shares, or such other time and date as Goldman, Sachs & Co. and the Company may agree upon in writing. Such time and date for delivery of the Firm Shares is herein called the "First Time of Delivery", such time and date for delivery of the Optional Shares, if not the First Time of Delivery, is herein called the "Second Time of Delivery", and each such time and date for delivery is herein called a "Time of Delivery". (b) The documents to be delivered at each Time of Delivery by or on behalf of the parties hereto pursuant to Section 7 hereof, including the cross receipt for the Shares and any additional documents requested by the Underwriters pursuant to Section 7(k) hereof, will be delivered at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page -6- 7 Mill Road, Palo Alto, California 94304 (the "Closing Location"), and the Shares will be delivered at the Designated Office, all at such Time of Delivery. A meeting will be held at the Closing Location at _____ p.m., New York City time, on the New York Business Day next preceding such Time of Delivery, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto. For the purposes of this Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York are generally authorized or obligated by law or executive order to close. 5. The Company agrees with each of the Underwriters: (a) To prepare the Prospectus in a form approved by you and to file such Prospectus pursuant to Rule 424(b) under the Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement, or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Act; to make no further amendment or any supplement to the Registration Statement or Prospectus which shall be disapproved by you promptly after reasonable notice thereof; to advise you, promptly after it receives notice thereof, of the time when any amendment to the Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish you with copies thereof; to advise you, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus, of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statement or Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or prospectus or suspending any such qualification, promptly to use its best efforts to obtain the withdrawal of such order; (b) Promptly from time to time to take such action as you may reasonably request to qualify the Shares for offering and sale under the securities laws of such jurisdictions as you may request and to comply with such laws so as to permit the continuance of sales and dealings therein in such jurisdictions for as long as may be necessary to complete the distribution of the Shares, provided that in connection therewith the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (c) Prior to 10:00 A.M., New York City time, on the New York Business Day next succeeding the date of this Agreement and from time to time, to furnish the Underwriters with copies of the Prospectus in New York City in such quantities as you may reasonably request, and, if the delivery of a prospectus is required at any time prior to the expiration of nine months after the time of issue of the Prospectus in connection with the offering or sale of the Shares and if at such time any event shall have occurred as a result of which the Prospectus as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such period to amend or supplement the Prospectus in order to comply with the Act, to notify you and upon your request to prepare and furnish without charge to each Underwriter and to any dealer in securities as many copies as -7- 8 you may from time to time reasonably request of an amended Prospectus or a supplement to the Prospectus which will correct such statement or omission or effect such compliance, and in case any Underwriter is required to deliver a prospectus in connection with sales of any of the Shares at any time nine months or more after the time of issue of the Prospectus, upon your request but at the expense of such Underwriter, to prepare and deliver to such Underwriter as many copies as you may request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Act; (d) To make generally available to its securityholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration Statement (as defined in Rule 158(c) under the Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Act and the rules and regulations thereunder (including, at the option of the Company, Rule 158); (e) During the period beginning from the date hereof and continuing to and including the date 180 days after the date of the Prospectus, not to offer, sell, contract to sell or otherwise dispose of, except as provided hereunder, any securities of the Company that are substantially similar to the Shares, including but not limited to any securities that are convertible into or exchangeable for, or that represent the right to receive, Stock or any such substantially similar securities (other than (i) pursuant to employee stock option plans existing on, or upon the conversion or exchange of convertible or exchangeable securities outstanding as of, the date of this Agreement[, or (ii) pursuant to an acquisition transaction, provided that any person who acquires securities of the Company in this manner agrees not to offer, sell, contract to sell or otherwise dispose of such securities for the period of time beginning from the date of acquisition of such securities and continuing to and including the date 180 days after the date of the Prospectus]), without your prior written consent; (f) To furnish to its stockholders as soon as practicable after the end of each fiscal year an annual report (including a balance sheet and statements of income, stockholders' equity and cash flows of the Company and its consolidated subsidiaries certified by independent public accountants) and, as soon as practicable after the end of each of the first three quarters of each fiscal year (beginning with the fiscal quarter ending after the effective date of the Registration Statement), to make available to its stockholders consolidated summary financial information of the Company and its subsidiaries for such quarter in reasonable detail; (g) During a period of three years from the effective date of the Registration Statement, to furnish to you copies of all reports or other communications (financial or other) furnished to stockholders, and to deliver to you (i) as soon as they are available, copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange on which any class of securities of the Company is listed; and (ii) such additional information concerning the business and financial condition of the Company as you may from time to time reasonably request (such financial statements to be on a consolidated basis to the extent the accounts of the Company and its subsidiaries are consolidated in reports furnished to its stockholders generally or to the Commission); (h) To use the net proceeds received by it from the sale of the Shares pursuant to this Agreement in the manner specified in the Prospectus under the caption "Use of Proceeds"; -8- 9 (i) To use its best efforts to list for quotation the Shares on the National Association of Securities Dealers Automated Quotations National Market System ("NASDAQ"); (j) To file with the Commission such information on Form 10-Q or Form 10-K as may be required by Rule 463 under the Act; and (k) If the Company elects to rely upon Rule 462(b), the Company shall file a Rule 462(b) Registration Statement with the Commission in compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and the Company shall at the time of filing either pay to the Commission the filing fee for the Rule 462(b) Registration Statement or give irrevocable instructions for the payment of such fee pursuant to Rule 111(b) under the Act. 6. The Company covenants and agrees with the several Underwriters that the Company will pay or cause to be paid the following: (i) the fees, disbursements and expenses of the Company's counsel and accountants in connection with the registration of the Shares under the Act and all other expenses in connection with the preparation, printing and filing of the Registration Statement, any Preliminary Prospectus and the Prospectus and amendments and supplements thereto and the mailing and delivering of copies thereof to the Underwriters and dealers; (ii) the cost of printing or producing any Agreement among Underwriters, this Agreement, the Blue Sky Memorandum, closing documents (including any compilations thereof) and any other documents in connection with the offering, purchase, sale and delivery of the Shares; (iii) all expenses in connection with the qualification of the Shares for offering and sale under state securities laws as provided in Section 5(b) hereof, including the fees and disbursements of counsel for the Underwriters in connection with such qualification and in connection with the Blue Sky survey (iv) all fees and expenses in connection with listing the Shares on the NASDAQ; (v) the filing fees incident to, and the fees and disbursements of counsel for the Underwriters in connection with, securing any required review by the National Association of Securities Dealers, Inc. of the terms of the sale of the Shares; (vi) the cost of preparing stock certificates; (vii) the cost and charges of any transfer agent or registrar; and (viii) all other costs and expenses incident to the performance of its obligations hereunder which are not otherwise specifically provided for in this Section. It is understood, however, that, except as provided in this Section, and Sections 8 and 11 hereof, the Underwriters will pay all of their own costs and expenses, including the fees of their counsel, stock transfer taxes on resale of any of the Shares by them, and any advertising expenses connected with any offers they may make. 7. The obligations of the Underwriters hereunder, as to the Shares to be delivered at each Time of Delivery, shall be subject, in their discretion, to the condition that all representations and warranties and other statements of the Company herein are, at and as of such Time of Delivery, true and correct, the condition that the Company shall have performed all of its obligations hereunder theretofore to be performed, and the following additional conditions: (a) The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) within the applicable time period prescribed for such filing by the rules and regulations under the Act and in accordance with Section 5(a) hereof; if the Company has elected to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall have become effective by 10:00 P.M., Washington, D.C. time, on the date of this Agreement; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission; and all requests for additional information on -9- 10 the part of the Commission shall have been complied with to your reasonable satisfaction; (b) Venture Law Group, A Professional Corporation, counsel for the Underwriters, shall have furnished to you such written opinion or opinions (a draft of each such opinion is attached as Annex II(a) hereto), dated such Time of Delivery, with respect to the matters covered in paragraphs (i), (ii), (vii), (xi) and (xiii) of subsection (c) below as well as such other related matters as you may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters; (c) Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel for the Company, shall have furnished to you their written opinion (a draft of such opinion is attached as Annex II(b) hereto), dated such Time of Delivery, in form and substance satisfactory to you, to the effect set forth in subsections (i) through (xvi) below (it being understood that with respect to the matters covered by subsections (xiv) and (xvi), such opinion shall only be given with respect to State of California and local mortgage banking laws, regulations and and regulatory agencies), and Negroni & Winston, PLLC, regulatory counsel for the Company, shall have furnished to you their written opinion (a draft of such opinion is attached as Annex II(c) hereto), dated such Time of Delivery, in form and substance satisfactory to you, to the effect set forth in subsections (xiv) through (xviii) below (it being understood that with respect to the matters covered by subsections (xiv) and (xvi), such opinion shall only be given with respect to federal, [State of Washington, State of Texas, State of Colorado] and local mortgage banking laws, regulations and and regulatory agencies): (i) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority (corporate and other) to own its properties and conduct its business as described in the Prospectus; (ii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company (including the Shares being delivered at such Time of Delivery) have been duly and validly authorized and issued and are fully paid and non-assessable; and the Shares conform to the description of the Stock contained in the Prospectus; (iii) The Company has been duly qualified as a foreign corporation for the transaction of business and is in good standing under the laws of each other jurisdiction in which it owns or leases properties or conducts any business so as to require such qualification, except where the failure to be so qualified would not have a material adverse effect on the Company (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and in respect of matters of fact upon certificates of officers of the Company, provided that such counsel shall state that they believe that both you and they are justified in relying upon such opinions and certificates); (iv) [intentionally omitted]. (v) Any real property and buildings held under lease by the Company are held by it under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company; -10- 11 (vi) To such counsel's knowledge and other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company is a party or of which any property of the Company is the subject which, if determined adversely to the Company, would individually or in the aggregate have a material adverse effect on the current consolidated financial position, stockholders' equity or results of operations of the Company and its subsidiaries; and, to such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others; (vii) This Agreement has been duly authorized, executed and delivered by the Company; (viii) The issue and sale of the Shares being delivered at such Time of Delivery by the Company and the compliance by the Company with all of the provisions of this Agreement and the consummation of the transactions herein contemplated will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any agreement included as an exhibit to the Registration Statement (a "Material Agreement"), nor will such action result in any violation of the provisions of the Certificate of Incorporation or By-laws of the Company or any statute or any order, rule or regulation known to such counsel of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties; (ix) No consent, approval, authorization, order, registration or qualification of or with any such court or governmental agency or body is required for the issue and sale of the Shares or the consummation by the Company of the transactions contemplated by this Agreement, except (i) in certain states where the Company is licensed as a broker dealer, (ii) the registration under the Act of the Shares, and (iii) such consents, approvals, authorizations, registrations or qualifications as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters; (x) Neither the Company nor any of its subsidiaries is in violation of its Certificate of Incorporation or By-laws or, [to such counsel's knowledge], in default in the performance or observance of any material obligation, covenant or condition contained in any Material Agreement; (xi) The statements set forth in the Prospectus under the caption "Description of Capital Stock", insofar as they purport to constitute a summary of the terms of the Stock and under the caption "Underwriting", insofar as they purport to describe the provisions of the laws and documents referred to therein, are accurate, complete and fair; (xii) The Company is not an "investment company", as such term is defined in the Investment Company Act; (xiii) The Registration Statement and the Prospectus and any further amendments and supplements thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules and financial data therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Act and the rules and regulations thereunder; although they do not assume any responsibility for the accuracy, completeness or fairness of the statements -11- 12 contained in the Registration Statement or the Prospectus, except for those referred to in the opinion in subsection (xi) of this section 7(c), they have no reason to believe that, as of its effective date, the Registration Statement or any further amendment thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules and financial data therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that, as of its date, the Prospectus or any further amendment or supplement thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules and financial data therein, as to which such counsel need express no opinion) contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading or that, as of such Time of Delivery, either the Registration Statement or the Prospectus or any further amendment or supplement thereto made by the Company prior to such Time of Delivery (other than the financial statements and related schedules and financial data therein, as to which such counsel need express no opinion) contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and they do not know of any amendment to the Registration Statement required to be filed or of any contracts or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be described in the Registration Statement or the Prospectus which are not filed or described as required; (xiv) To such counsel's knowledge, the Company is not in violation of any federal, State of California, State of Washington, State of Texas, State of Colorado or local law or regulation relating to mortgage banking, including any provisions of the Truth in Lending Act and Regulation Z, the Home Ownership and Equity Protection Act of 1994, the Equal Credit Opportunity Act and Regulation B, the Fair Housing Act, the Fair Credit Reporting Act, the Real Estate Settlement Procedures Act and Regulation X, the Home Mortgage Disclosure Act of 1975 and Regulation C, or the rules and regulations promulgated thereunder, except for such violations which, singly or in the aggregate, would not have a material adverse effect on the business, prospects, financial condition or results of operation of the Company and its subsidiaries, taken as a whole (such counsel being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and, except with respect to the California portion of the opinion, upon an examination of such laws, rules and regulations as are reported in standard unofficial compilations); (xv) [intentionally omitted]; (xvi) To such counsel's knowledge, the Company has obtained all authorizations, licenses, permits, consents and certificates of federal and [State of California, State of Washington, State of Texas and State of Colorado] mortgage banking regulatory agencies material to the conduct of its business as presently conducted or as proposed in the Prospectus to be conducted, all of which are valid and in full force and effect and, to the best of such counsel's knowledge, the Company has not received any notice of proceedings relating to the revocation or modification of any such authorization, license, permit, consent or certificate (such counsel -12- 13 being entitled to rely in respect of the opinion in this clause upon opinions of local counsel and, except with respect to the California portion of the opinion, upon an examination of such laws, rules and regulations as are reported in standard unofficial compilations); (xvii) To the best of such counsel's knowledge and other than as set forth in the Prospectus, neither the Company nor any of its officers, directors or employees is a party or subject to the provisions of any regulatory action, injunction, judgment, decree or order of any federal or state mortgage banking regulatory agency, nor is there any charge, action, suit, proceeding or investigation pending before or threatened by any federal or state mortgage banking regulatory agency; and (xviii) The statements set forth in the Prospectus under the captions "Risk Factors--If we fail to comply with the numerous laws and regulations that govern our industry, our business could be adversely affected" and "Business--Regulation of Mortgage Brokers and Lenders," to the extent such statements relate to regulatory or other legal matters, have been reviewed by such counsel and are accurate, complete and fair in all material respects. (d) On the date of the Prospectus at a time prior to the execution of this Agreement, at 9:30 a.m., New York City time, on the effective date of any post-effective amendment to the Registration Statement filed subsequent to the date of this Agreement and also at each Time of Delivery, PricewaterhouseCoopers LLP shall have furnished to you a letter or letters, dated the respective dates of delivery thereof, in form and substance satisfactory to you, to the effect set forth in Annex I hereto (the executed copy of the letter delivered prior to the execution of this Agreement is attached as Annex I(a) hereto and a draft of the form of letter to be delivered on the effective date of any post-effective amendment to the Registration Statement and as of each Time of Delivery is attached as Annex I(b) hereto); (e) (i) Neither the Company nor any of its subsidiaries shall have sustained since the date of the latest audited financial statements included in the Prospectus any loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus, and (ii) since the respective dates as of which information is given in the Prospectus there shall not have been any change in the capital stock or long-term debt of the Company or any of its subsidiaries (except for changes occurring as a result of the exercise of previously issued warrants or previously granted stock options) or any change, or any development involving a prospective change, in or affecting the general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries, otherwise than as set forth or contemplated in the Prospectus, the effect of which, in any such case described in Clause (i) or (ii), is in the judgment of the Representatives so material and adverse as to make it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus; (f) [intentionally omitted]; (g) On or after the date hereof there shall not have occurred any of the following: (i) a suspension or material limitation in trading in securities generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or material limitation in trading in the Company's securities on NASDAQ; (iii) a general moratorium on commercial banking -13- 14 activities declared by either Federal or New York or California State authorities; or (iv) the outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, if the effect of any such event specified in this Clause (iv) in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the public offering or the delivery of the Shares being delivered at such Time of Delivery on the terms and in the manner contemplated in the Prospectus; (h) The Shares to be sold at such Time of Delivery shall have been duly listed for quotation on NASDAQ; (i) The Company has obtained and delivered to the Underwriters executed copies of an agreement from all stockholders of the Company, substantially to the effect set forth in Subsection 5(e) hereof in form and substance satisfactory to you; (j) The Company shall have complied with the provisions of Section 5(c) hereof with respect to the furnishing of prospectuses on the New York Business Day next succeeding the date of this Agreement; and (k) The Company shall have furnished or caused to be furnished to you at such Time of Delivery certificates of officers of the Company satisfactory to you as to the accuracy of the representations and warranties of the Company herein at and as of such Time of Delivery, as to the performance by the Company of all of its obligations hereunder to be performed at or prior to such Time of Delivery, as to the matters set forth in subsections (a) and (e) of this Section and as to such other matters as you may reasonably request. 8. (a) The Company will indemnify and hold harmless each Underwriter against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by such Underwriter in connection with investigating or defending any such action or claim as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by any Underwriter through Goldman, Sachs & Co. expressly for use therein. (b) Each Underwriter will indemnify and hold harmless the Company against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus, the Registration Statement or the -14- 15 Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in any Preliminary Prospectus, the Registration Statement or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company by such Underwriter through Goldman, Sachs & Co. expressly for use therein; and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending any such action or claim as such expenses are incurred. (c) Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under such subsection. In case any such action shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and, after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal expenses of other counsel or any other expenses, in each case subsequently incurred by such indemnified party, in connection with the defense thereof other than reasonable costs of investigation. No indemnifying party shall, without the written consent of the indemnified party, effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened action or claim in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified party is an actual or potential party to such action or claim) unless such settlement, compromise or judgment (i) includes an unconditional release of the indemnified party from all liability arising out of such action or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under subsection (a) or (b) above in respect of any losses, claims, damages or liabilities (or actions in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law or if the indemnified party failed to give the notice required under subsection (c) above, then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to -15- 16 information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (d) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this subsection (d). The amount paid or payable by an indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to above in this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint. (e) The obligations of the Company under this Section 8 shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Underwriter within the meaning of the Act; and the obligations of the Underwriters under this Section 8 shall be in addition to any liability which the respective Underwriters may otherwise have and shall extend, upon the same terms and conditions, to each officer and director of the Company and to each person, if any, who controls the Company within the meaning of the Act. 9. (a) If any Underwriter shall default in its obligation to purchase the Shares which it has agreed to purchase hereunder at a Time of Delivery, you may in your discretion arrange for you or another party or other parties to purchase such Shares on the terms contained herein. If within thirty-six hours after such default by any Underwriter you do not arrange for the purchase of such Shares, then the Company shall be entitled to a further period of thirty-six hours within which to procure another party or other parties satisfactory to you to purchase such Shares on such terms. In the event that, within the respective prescribed periods, you notify the Company that you have so arranged for the purchase of such Shares, or the Company notifies you that it has so arranged for the purchase of such Shares, you or the Company shall have the right to postpone such Time of Delivery for a period of not more than seven days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus, or in any other documents or arrangements, and the Company agrees to file promptly any amendments to the Registration Statement or the Prospectus which in your opinion may thereby be made necessary. The term "Underwriter" as used in this Agreement shall include any person substituted under this Section with like effect as if such person had originally been a party to this Agreement with respect to such Shares. (b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased does not exceed one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, then the Company shall have the right to require each non-defaulting Underwriter to purchase -16- 17 the number of shares which such Underwriter agreed to purchase hereunder at such Time of Delivery and, in addition, to require each non-defaulting Underwriter to purchase its pro rata share (based on the number of Shares which such Underwriter agreed to purchase hereunder) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made; but nothing herein shall relieve a defaulting Underwriter from liability for its default. (c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by you and the Company as provided in subsection (a) above, the aggregate number of such Shares which remains unpurchased exceeds one-eleventh of the aggregate number of all the Shares to be purchased at such Time of Delivery, or if the Company shall not exercise the right described in subsection (b) above to require non-defaulting Underwriters to purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement (or, with respect to the Second Time of Delivery, the obligations of the Underwriters to purchase and of the Company to sell the Optional Shares) shall thereupon terminate, without liability on the part of any non-defaulting Underwriter or the Company, except for the expenses to be borne by the Company and the Underwriters as provided in Section 6 hereof and the indemnity and contribution agreements in Section 8 hereof; but nothing herein shall relieve a defaulting Underwriter from liability for its default. 10. The respective indemnities, agreements, representations, warranties and other statements of the Company and the several Underwriters, as set forth in this Agreement or made by or on behalf of them, respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation (or any statement as to the results thereof) made by or on behalf of any Underwriter or any controlling person of any Underwriter, or the Company, or any officer or director or controlling person of the Company, and shall survive delivery of and payment for the Shares. 11. If this Agreement shall be terminated pursuant to Section 9 hereof, the Company shall not then be under any liability to any Underwriter except as provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares are not delivered by or on behalf of the Company as provided herein, the Company will reimburse the Underwriters through you for all out-of-pocket expenses approved in writing by you, including fees and disbursements of counsel, reasonably incurred by the Underwriters in making preparations for the purchase, sale and delivery of the Shares not so delivered, but the Company shall then be under no further liability to any Underwriter except as provided in Sections 6 and 8 hereof. 12. In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request, notice or agreement on behalf of any Underwriter made or given by you jointly or by Goldman, Sachs & Co. on behalf of you as the representatives. All statements, requests, notices and agreements hereunder shall be in writing, and if to the Underwriters shall be delivered or sent by mail, telex or facsimile transmission to you as the representatives in care of Goldman, Sachs & Co., 32 Old Slip, 9th Floor, New York, New York 10005, Attention: Registration Department; and if to the Company shall be delivered or sent by mail to the address of the Company set forth in the Registration Statement, Attention: Secretary; provided, however, that any notice to an Underwriter pursuant to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission to such Underwriter at its address set forth in its Underwriters' Questionnaire, or telex constituting such Questionnaire, which address will be supplied to the Company by you upon request. Any such statements, requests, notices or agreements shall take effect upon receipt thereof. 13. This Agreement shall be binding upon, and inure solely to the benefit of, the Underwriters, the Company and, to the extent provided in Sections 8 and 10 hereof, the officers and directors of the Company and each person who controls the Company or any Underwriter, and their respective heirs, executors, administrators, successors and assigns, and no other -17- 18 person shall acquire or have any right under or by virtue of this Agreement. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign by reason merely of such purchase. 14. Time shall be of the essence of this Agreement. As used herein, the term "business day" shall mean any day when the Commission's office in Washington, D.C. is open for business. 15. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 16. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. -18- 19 If the foregoing is in accordance with your understanding, please sign and return to us one for the Company and each of the Representatives plus one for each counsel counterparts hereof, and upon the acceptance hereof by you, on behalf of each of the Underwriters, this letter and such acceptance hereof shall constitute a binding agreement between each of the Underwriters and the Company. It is understood that your acceptance of this letter on behalf of each of the Underwriters is pursuant to the authority set forth in a form of Agreement among Underwriters, the form of which shall be submitted to the Company for examination upon request, but without warranty on your part as to the authority of the signers thereof. Very truly yours, E-LOAN, INC. By:_________________________________ Name: Title: ACCEPTED AS OF THE DATE HEREOF: Goldman, Sachs & Co. Donaldson, Lufkin, & Jenrette Securities Corporation Hambrecht & Quist By:_______________________________ (Goldman, Sachs & Co.) Donaldson, Lufkin, & Jenrette Securities Corporation By:_______________________________ Name: Title: Hambrecht & Quist LLC By:_______________________________ Name: Title: SIGNATURE PAGE TO UNDERWRITING AGREEMENT 20 SCHEDULE I
NUMBER OF OPTIONAL SHARES TO BE TOTAL NUMBER OF PURCHASED IF FIRM SHARES MAXIMUM OPTION UNDERWRITER TO BE PURCHASED EXERCISED ----------- --------------- --------- Goldman, Sachs & Co..................................... Donaldson, Lufkin, & Jenrette Securities Corporation........................................... Hambrecht & Quist LLC................................... [OTHERS]................................................ Total............................................
21 ANNEX I Pursuant to Section 7(d) of the Underwriting Agreement, the accountants shall furnish letters to the Underwriters to the effect that: (i) They are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of the Act and the applicable published rules and regulations thereunder; (ii) In their opinion, the financial statements and any supplementary financial information and schedules (and, if applicable, financial forecasts and/or pro forma financial information) examined by them and included in the Prospectus or the Registration Statement comply as to form in all material respects with the applicable accounting requirements of the Act and the related published rules and regulations thereunder; and, if applicable, they have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited consolidated interim financial statements, selected financial data, pro forma financial information, financial forecasts and/or condensed financial statements derived from audited financial statements of the Company for the periods specified in such letter, as indicated in their reports thereon, copies of which have been separately furnished to the representatives of the Underwriters (the "Representatives"); (iii) They have made a review in accordance with standards established by the American Institute of Certified Public Accountants of the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus as indicated in their reports thereon copies of which have been separately furnished to the Representatives and on the basis of specified procedures including inquiries of officials of the Company who have responsibility for financial and accounting matters regarding whether the unaudited condensed consolidated financial statements referred to in paragraph (vi)(A)(i) below comply as to form in all material respects with the applicable accounting requirements of the Act and the related published rules and regulations, nothing came to their attention that cause them to believe that the unaudited condensed consolidated financial statements do not comply as to form in all material respects with the applicable accounting requirements of the Act and the related published rules and regulations; (iv) The unaudited selected financial information with respect to the consolidated results of operations and financial position of the Company for the five most recent fiscal years included in the Prospectus agrees with the corresponding amounts (after restatements where applicable) in the audited consolidated financial statements for such five fiscal years; (v) They have compared the information in the Prospectus under selected captions with the disclosure requirements of Regulation S-K and on the basis of limited procedures specified in such letter nothing came to their attention as a result of the foregoing procedures that caused them to believe that this information does not conform in all material respects with the disclosure requirements of Items 301, 302, 402 and 503(d), respectively, of Regulation S-K; (vi) On the basis of limited procedures, not constituting an examination in accordance with generally accepted auditing standards, consisting of a reading of the unaudited financial statements and other information referred to below, a reading of the latest available interim financial statements of the Company and its subsidiaries, inspection of the minute books of the Company and its subsidiaries since the date of the latest audited financial statements 22 included in the Prospectus, inquiries of officials of the Company and its subsidiaries responsible for financial and accounting matters and such other inquiries and procedures as may be specified in such letter, nothing came to their attention that caused them to believe that: (A) (i) the unaudited consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the related published rules and regulations, or (ii) any material modifications should be made to the unaudited condensed consolidated statements of income, consolidated balance sheets and consolidated statements of cash flows included in the Prospectus for them to be in conformity with generally accepted accounting principles; (B) any other unaudited income statement data and balance sheet items included in the Prospectus do not agree with the corresponding items in the unaudited consolidated financial statements from which such data and items were derived, and any such unaudited data and items were not determined on a basis substantially consistent with the basis for the corresponding amounts in the audited consolidated financial statements included in the Prospectus; (C) the unaudited financial statements which were not included in the Prospectus but from which were derived any unaudited condensed financial statements referred to in Clause (A) and any unaudited income statement data and balance sheet items included in the Prospectus and referred to in Clause (B) were not determined on a basis substantially consistent with the basis for the audited consolidated financial statements included in the Prospectus; (D) any unaudited pro forma consolidated condensed financial statements included in the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the published rules and regulations thereunder or the pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements; (E) as of a specified date not more than five days prior to the date of such letter, there have been any changes in the consolidated capital stock (other than issuances of capital stock upon exercise of options and stock appreciation rights, upon earn-outs of performance shares and upon conversions of convertible securities, in each case which were outstanding on the date of the latest financial statements included in the Prospectus) or any increase in the consolidated long-term debt of the Company and its subsidiaries, or any decreases in consolidated net current assets or stockholders' equity or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with amounts shown in the latest balance sheet included in the Prospectus, except in each case for changes, increases or decreases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (F) for the period from the date of the latest financial statements included in the Prospectus to the specified date referred to in Clause (E) there were any decreases in consolidated net revenues or operating profit or the total or per share amounts of -2- 23 consolidated net income or other items specified by the Representatives, or any increases in any items specified by the Representatives, in each case as compared with the comparable period of the preceding year and with any other period of corresponding length specified by the Representatives, except in each case for decreases or increases which the Prospectus discloses have occurred or may occur or which are described in such letter; and (vii) In addition to the examination referred to in their report(s) included in the Prospectus and the limited procedures, inspection of minute books, inquiries and other procedures referred to in paragraphs (iii) and (vi) above, they have carried out certain specified procedures, not constituting an examination in accordance with generally accepted auditing standards, with respect to certain amounts, percentages and financial information specified by the Representatives, which are derived from the general accounting records of the Company and its subsidiaries, which appear in the Prospectus, or in Part II of, or in exhibits and schedules to, the Registration Statement specified by the Representatives, and have compared certain of such amounts, percentages and financial information with the accounting records of the Company and its subsidiaries and have found them to be in agreement. -3- EX-3.1 3 CERTIFICATE OF INCORPORATION OF E-LOAN 1 EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF E LOAN, INC. ARTICLE I The name of this corporation is E-Loan, Inc. ARTICLE II The address of the corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Zip Code 19801. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. ARTICLE IV This corporation is authorized to issue two classes of stock to be designated, respectively, "Common Stock" and "Preferred Stock." The total number of shares which the corporation is authorized to issue is 31,765,167 shares. 20,000,000 shares shall be Common Stock with a par value of $0.001. 11,765,167 shares shall be Preferred Stock with a par value of $0.001, 428,635 of which shall be designated as Series A Preferred Stock, 450,708 of which shall be designated as Series B Preferred Stock, 4,467,912 of which shall be designated as Series C Preferred Stock, 4,467,912 of which shall be designated as Series C-1 Preferred Stock, and 1,950,000 of which shall be designated as Series D Preferred Stock. ARTICLE V The rights, preferences, privileges and restrictions granted to or imposed upon the Common Stock and Preferred Stock are as follows: 1. Dividend Provisions. When and as declared by the corporation's board of directors, the holders of Preferred Stock shall be entitled to receive, out of any funds legally available therefor, dividends at the rate of $0.02 per share of Series A Preferred Stock, $0.096 per share of Series B Preferred Stock, $0.122852 per share of Series C Preferred Stock, $0.122852 per share of Series C-1 Preferred Stock and $0.9263 per share of Series D Preferred Stock, respectively, per annum, payable in preference to any payment of any dividend on Common Stock. After payment of such dividends, any additional dividends declared shall be payable entirely to the holders of Series C and Series C-1 2 Preferred Stock and Common Stock on a pro rata basis (as determined on a per annum basis and on an as converted basis for the Series C and Series C-1 Preferred Stock). The right of the holders of Preferred Stock to receive dividends shall not be cumulative, and no right shall accrue to holders of Preferred Stock by reason of the fact that dividends on such shares are not declared or paid in any prior year. 2. Liquidation Preference. (a) Preferred Preference. In the event of any liquidation, dissolution or winding up of the corporation, either voluntary or involuntary, the holders of Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets or surplus funds of the corporation to the holders of Common Stock by reason of their ownership thereof, the amount of $0.22 per share for each share of Series A Preferred Stock, $0.96 per share for each share of Series B Preferred Stock, $1.22852 per share for each share of Series C Preferred Stock, $1.22852 per share for each share of Series C-1 Preferred Stock and $9.263 per share of Series D Preferred Stock, respectively, then held by them, and, in addition, an amount equal to all declared but unpaid dividends on the respective series of Preferred Stock. If the assets and funds thus distributed among the holders of the Preferred Stock are insufficient to permit the payment to such holders of their full preferential amount, then the entire assets and funds of the corporation legally available for distribution shall be distributed among the holders of Preferred Stock in proportion to the number of shares of Preferred Stock held by each such holder in proportion to the preferential amount each such holder is otherwise entitled to receive. (b) Remaining Assets. Upon the completion of the distribution required by subsection (a) of this Section 2, the remaining assets of this corporation available for distribution to stockholders shall be distributed among the holders of Series C, Series C-1 and Series D Preferred Stock and Common Stock pro rata based on the number of shares of Common Stock held by each (assuming full conversion of all such Series C, Series C-1 and Series D Preferred Stock) until with respect to the holders of Series C and Series C-1 Preferred Stock, such holders shall have received an aggregate of $3.6855 per share, and with respect to the holders of Series D Preferred, such holders shall have received an aggregate of $13.89 per share (as adjusted for any stock splits, stock dividends, recapitalizations or the like) (including amounts paid pursuant to subsection (a) of this Section 2); thereafter, if assets remain in this corporation, the holders of the Common Stock of this corporation shall receive all of the remaining assets of this corporation pro rata based on the number of shares of Common Stock held by each. (c) Reorganization or Merger. (i) A reorganization or merger of the corporation with or into any other corporation or entity, or a sale of all or substantially all of the assets of the corporation, in which transaction the corporation's stockholders immediately prior to such transaction own immediately after such transaction less than 50% of the equity securities of the surviving corporation or its parent, shall be deemed to be a liquidation within the meaning of this Section 2. -2- 3 (ii) In any of such events, if the consideration received by this corporation is other than cash, its value will be deemed its fair market value. Any securities shall be valued as follows: (A) Securities not subject to investment letter or other similar restrictions on free marketability covered by (B) below: (1) If traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or system over the thirty (30) day period ending three (3) days prior to the closing; (2) If actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day period ending three (3) days prior to the closing; and (3) If there is no active public market, the value shall be the fair market value thereof, as mutually determined by this corporation and the holders of at least a majority of the voting power of all then outstanding shares of Preferred Stock. (B) The method of valuation of securities subject to investment letter or other restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder's status as an affiliate or former affiliate) shall be to make an appropriate discount from the market value determined as above in (A) (1), (2) or (3) to reflect the approximate fair market value thereof, as mutually determined by this corporation and the holders of at least a majority of the voting power of all then outstanding shares of such Preferred Stock. 3. Conversion. The holders of Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Issuance Price (as defined below) by the Conversion Price (as defined below) in effect at the time of conversion. The Issuance Price for the Series A Preferred Stock shall be $0.22. The Conversion Price for the Series A Preferred Stock shall initially be $0.22, subject to adjustment as provided below. The Issuance Price for the Series B Preferred Stock shall be $0.96. The Conversion Price for the Series B Preferred Stock shall initially be $0.96, subject to adjustment as provided below. The Issuance Price for the Series C and Series C-1 Preferred Stock shall be $1.22852. The Conversion Price for the Series C and Series C-1 Preferred Stock shall initially be $1.22852, subject to adjustment as provided below. The Issuance Price for the Series D Preferred Stock shall be $9.263. The Conversion Price for the Series D Preferred Stock shall initially be $9.263, subject to adjustment as provided below. The number of shares of Common Stock into which a share of series of Preferred Stock is convertible is hereinafter referred to as the "Conversion Rate" of such series of Preferred Stock. -3- 4 (b) Automatic Conversion. Each share of Preferred Stock shall automatically be converted into shares of Common Stock at the then effective Conversion Rate immediately upon the earlier of (i) a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933 (the "Act") covering the offer and sale of Common Stock for the account of the corporation at a per share offering price of not less than $13.89 per share (as adjusted for stock splits, dividends or combinations) and an aggregate offering price of $15,000,000; or (ii) the date specified by written consent or agreement of (A) the holders of a majority of the then outstanding shares of Series C and Series C-1 Preferred Stock (voting together as a single class), (B) the holders of a majority of the then outstanding shares of Series D Preferred Stock (voting together as a single class) and (C) the holders of a majority of the then outstanding shares of Preferred Stock (voting together as a single class). (c) Mechanics of Conversion. Before any holder of Preferred Stock shall be entitled to convert the same into full shares of Common Stock and to receive certificates therefor, he shall surrender the certificate or certificates therefor, duly endorsed, at the office of the corporation or of any transfer agent for the Preferred Stock, and shall give written notice to the corporation at such office that such holder elects to convert the same; provided, however, that in the event of an automatic conversion pursuant to Section 3(b) above, the outstanding shares of Preferred Stock shall be converted automatically without any further action by the holders of such shares and whether or not the certificates representing such shares are surrendered to the corporation or its transfer agent, and provided further that the corporation shall not be obligated to issue certificates evidencing the shares of Common Stock issuable upon such automatic conversion unless the certificates evidencing such shares of Preferred Stock are either delivered to the corporation or its transfer agent as provided above, or the holder notifies the corporation or its transfer agent that such certificates have been lost, stolen or destroyed and executes an agreement satisfactory to the corporation to indemnify the corporation from any loss incurred by it in connection with such certificates. The corporation shall, as soon as practicable after such delivery, or such agreement and indemnification in the case of a lost certificate, issue and deliver at such office to such holder of Preferred Stock, a certificate or certificates for the number of shares of Common Stock to which the holder shall be entitled and a check payable to the holder in the amount of any cash amounts payable as the result of a conversion into fractional shares of Common Stock. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Preferred Stock to be converted, or in the case of automatic conversion, on the date of closing of the offering, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date. (d) Conversion Price Adjustments of Preferred Stock for Certain Dilutive Issuances, Splits and Combinations. The Conversion Price of the Series C Preferred Stock and Series D Preferred Stock shall be subject to adjustment from time to time as follows: (i) (A) If this corporation shall issue, after the date upon which any shares of Series C Preferred Stock and Series D Preferred Stock were first issued (the respective series "Purchase Date"), any Additional Stock (as defined below) without consideration or for a -4- 5 consideration per share less than the Conversion Price for such series in effect immediately prior to the issuance of such Additional Stock, the Conversion Price for such series in effect immediately prior to each such issuance shall forthwith (except as otherwise provided in this clause (i)) be adjusted to a price determined by multiplying such Conversion Price by a fraction, the numerator of which shall be the number of shares of the series of Preferred Stock being adjusted outstanding immediately prior to such issuance plus the number of shares of the series of Preferred Stock being adjusted that the aggregate consideration received by this corporation for such issuance would purchase at such Conversion Price; and the denominator of which shall be the number of shares of the series of Preferred Stock outstanding immediately prior to such issuance plus the number of shares of such Additional Stock. (B) No adjustment of the Conversion Price for any series of Preferred Stock shall be made in an amount less than one cent per share, provided that any adjustments that are not required to be made by reason of this sentence shall be carried forward and shall be either taken into account in any subsequent adjustment made prior to three (3) years from the date of the event giving rise to the adjustment being carried forward, or shall be made at the end of three (3) years from the date of the event giving rise to the adjustment being carried forward. Except to the limited extent provided for in subsections (E)(3) and (E)(4), no adjustment of such Conversion Price pursuant to this subsection 3(d)(i) shall have the effect of increasing the Conversion Price above the Conversion Price in effect immediately prior to such adjustment. (C) In the case of the issuance of Common Stock for cash, the consideration shall be deemed to be the amount of cash paid therefor before deducting any reasonable discounts, commissions or other expenses allowed, paid or incurred by this corporation for any underwriting or otherwise in connection with the issuance and sale thereof. (D) In the case of the issuance of the Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair value thereof as determined by the Board of Directors irrespective of any accounting treatment. (E) In the case of the issuance (whether before, on or after the applicable Purchase Date) of options to purchase or rights to subscribe for Common Stock, securities by their terms convertible into or exchangeable for Common Stock or options to purchase or rights to subscribe for such convertible or exchangeable securities, the following provisions shall apply for all purposes of this subsection 3(d)(i) and subsection 3(d)(ii): (1) The aggregate maximum number of shares of Common Stock deliverable upon exercise (to the extent then exercisable) of such options to purchase or rights to subscribe for Common Stock shall be deemed to have been issued at the time such options or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subsections 3(d)(i)(C) and (d)(i)(D)), if any, received by this corporation upon the issuance of such options or rights plus the minimum exercise price provided in such options or rights for the Common Stock covered thereby. -5- 6 (2) The aggregate maximum number of shares of Common Stock deliverable upon conversion of, or in exchange (to the extent then convertible or exchangeable) for, any such convertible or exchangeable securities or upon the exercise of options to purchase or rights to subscribe for such convertible or exchangeable securities and subsequent conversion or exchange thereof shall be deemed to have been issued at the time such securities were issued or such options or rights were issued and for a consideration equal to the consideration, if any, received by this corporation for any such securities and related options or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the minimum additional consideration, if any, to be received by this corporation upon the conversion or exchange of such securities or the exercise of any related options or rights (the consideration in each case to be determined in the manner provided in subsections 3(d)(i)(C) and (d)(i)(D)). (3) In the event of any change in the number of shares of Common Stock deliverable or in the consideration payable to this corporation upon exercise of such options or rights or upon conversion of or in exchange for such convertible or exchangeable securities, including, but not limited to, a change resulting from the antidilution provisions thereof (unless such options or rights or convertible or exchangeable securities were merely deemed to be included in the numerator and denominator for purposes of determining the number of shares of Common Stock outstanding for purposes of subsection 3(d)(i)(A)), the Conversion Price of the Series C Preferred Stock or Series D Preferred Stock to the extent in any way affected by or computed using such options, rights or securities, shall be recomputed to reflect such change, but no further adjustment shall be made for the actual issuance of Common Stock or any payment of such consideration upon the exercise of any such options or rights or the conversion or exchange of such securities. (4) Upon the expiration of any such options or rights, the termination of any such rights to convert or exchange or the expiration of any options or rights related to such convertible or exchangeable securities, the Conversion Price of the Series C Preferred Stock and Series D Preferred Stock, to the extent in any way affected by or computed using such options, rights or securities or options or rights related to such securities (unless such options or rights were merely deemed to be included in the numerator and denominator for purposes of determining the number of shares of Common Stock outstanding for purposes of subsection 3(d)(i)(A)), shall be recomputed to reflect the issuance of only the number of shares of Common Stock (and convertible or exchangeable securities that remain in effect) actually issued upon the exercise of such options or rights, upon the conversion or exchange of such securities or upon the exercise of the options or rights related to such securities. (5) The number of shares of Common Stock deemed issued and the consideration deemed paid therefor pursuant to subsections 3(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change, termination or expiration of the type described in either subsection 3(d)(i)(E)(3) or (4). -6- 7 (ii) "Additional Stock" shall mean any shares of Common Stock issued (or deemed to have been issued pursuant to subsection 3(d)(i)(E)) by this corporation after the Purchase Date other than: (A) Common Stock issued pursuant to a transaction described in subsection 3(f) hereof; (B) Common Stock issued or issuable upon conversion of the Preferred Stock; or (C) 1,500,000 Shares of Common Stock issuable or issued to employees, consultants, directors or vendors (if in transactions with primarily non-financing purposes) of this corporation directly or pursuant to a stock option plan or restricted stock plan approved by the Board of Directors of this corporation and any other shares issued in connection with transactions (including additions to the stock option plan) provided such issuances are unanimously approved by the Board of Directors of this corporation. (e) Fractional Shares. In lieu of any fractional shares to which the holder of Preferred Stock would otherwise be entitled, the corporation shall pay cash equal to such fraction multiplied by the fair market value of one share of Preferred Stock as determined by the board of directors of the corporation. Whether or not fractional shares are issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock of each holder at the time converting into Common Stock and the number of shares of Common Stock issuable upon such aggregate conversion. (f) Adjustment of Conversion Price. The Conversion Price of each series of Preferred Stock shall be subject to adjustment from time to time as follows: (1) If the number of shares of Common Stock outstanding at any time after the date hereof is increased by a stock dividend payable in shares of Common Stock or by a subdivision or split-up of shares of Common Stock, then, on the date such payment is made or such change is effective, the Conversion Price of the Preferred Stock shall be appropriately decreased so that the number of shares of Common Stock issuable on conversion of any shares of Preferred Stock shall be increased in proportion to such increase of outstanding shares. (2) If the number of shares of Common Stock outstanding at any time after the date hereof is decreased by a combination of the outstanding shares of Common Stock, then, on the effective date of such combination, the Conversion Price of the Preferred Stock shall be appropriately increased so that the number of shares of Common Stock issuable on conversion of any shares of Preferred Stock shall be decreased in proportion to such decrease in outstanding shares. (3) In case the corporation shall declare a cash dividend upon its Common Stock payable otherwise than out of retained earnings or shall distribute to holders of its Common Stock shares of its capital stock (other than Common Stock), stock or other securities of other persons, evidences of indebtedness issued by the corporation or other persons, assets (excluding cash -7- 8 dividends) or options or rights (excluding options to purchase and rights to subscribe for Common Stock or other securities of the corporation convertible into or exchangeable for Common Stock), then, in each such case, the holders of the Preferred Stock shall, concurrent with the distribution to holders of Common Stock, receive a like distribution based upon the number of shares of Common Stock into which such Preferred Stock is then convertible. (4) In case, at any time after the date hereof, of any capital reorganization, or any reclassification of the stock of the corporation (other than as a result of a stock dividend or subdivision, split-up or combination of shares), or the consolidation or merger of the corporation with or into another person (other than a consolidation or merger in which the corporation is the continuing entity and which does not result in any change in the Common Stock), the shares of Preferred Stock shall, after such reorganization, reclassification, consolidation, merger, sale or other disposition, be convertible into the kind and number of shares of stock or other securities or property of the corporation or otherwise to which such holder would have been entitled if immediately prior to such reorganization, reclassification, consolidation, merger, sale or other disposition such holder had converted its shares of Preferred Stock into Common Stock. The provisions of this clause (iv) shall similarly apply to successive reorganizations, reclassification, consolidations, mergers, sales or other dispositions. (5) All calculations under this Section 3 shall be made to the nearest cent or to the nearest one hundredth (1/100) of a share, as the case may be. (g) Minimal Adjustments. No adjustment in the Conversion Price for the Preferred Stock need be made if such adjustment would result in a change in the Conversion Price of less than $0.01. Any adjustment of less than $0.01 which is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in the Conversion Price. (h) No Impairment. The corporation will not through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 3 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of Preferred Stock against impairment. This provision shall not restrict the corporation's right to amend its Articles of Incorporation with the requisite stockholder consent. (i) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Rate for the Preferred Stock pursuant to this Section 3, the corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The corporation shall, upon written request at any time of any holder of Preferred Stock, furnish or cause to be furnished to such holder a like certificate setting forth (i) all -8- 9 such adjustments and readjustments, (ii) the Conversion Rate at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of such holder's shares of Preferred Stock. (j) Notices of Record Date. In the event of any taking by the corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend (other than a cash dividend) or other distribution, any right to subscribe for, purchase or otherwise acquire any shares of stock of any class or any other securities or property or to receive any other right, the corporation shall mail to each holder of Preferred Stock at least ten (10) days prior to such record date, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution or right, and the amount and character of such dividend, distribution or right. (k) Notices. Any notice required by the provisions of this Section 3 to be given to any holder of Preferred Stock shall be deemed given if deposited in the United States mail, postage prepaid, and addressed to each holder of record at such holder's address appearing on the corporation's books. (l) Pay-to-Play; Special Mandatory Conversion. (i) At any time following the Purchase Date, if (a) the holders of shares of Series C Preferred Stock are entitled to exercise the right of first offer (the "Preemptive Rights") set forth in Section 3 of the Restated Investors' Rights Agreement, dated September 4, 1998 by and among this corporation and certain investors, as amended from time to time (the "Rights Agreement"), with respect to an equity financing of this corporation to which Section 3(d) would be applicable (the "Equity Financing"), (b) this corporation has complied with its notice obligations, or such obligations have been waived, under the Right of First Offer with respect to such Equity Financing and this corporation thereafter proceeds to consummate the Equity Financing, and (c) such holder (a "Non-Participating Holder") does not by exercise of such holder's Right of First Offer acquire his, her or its Pro Rata Share (as defined in Section 3 of the Rights Agreement) offered in such Equity Financing (a "Mandatory Offering"), then all of such Non-Participating Holder's shares of Series C Preferred Stock shall automatically and without further action on the part of such holder be converted effective upon, subject to, and concurrently with, the consummation of the Mandatory Offering (the "Mandatory Offering Date") into an equivalent number of shares of Series C-1 Preferred Stock; provided, however, that no such conversion shall occur in connection with a particular Equity Financing if, pursuant to the written request of this corporation, such holder agrees in writing to waive his, her or its Right of First Offer with respect to such Equity Financing. Upon conversion pursuant to this subsection 3(l)(i), the shares of Series C Preferred Stock so converted shall be canceled and not subject to reissuance. (ii) The holder of any shares of Series C Preferred Stock converted pursuant to this subsection 3(l) shall deliver to this corporation during regular business hours at the office of any transfer agent of this corporation for the Series C Preferred Stock, or at such other place as may be designated by this corporation, the certificate or certificates for the shares so converted, -9- 10 duly endorsed or assigned in blank or to this corporation. As promptly as practicable thereafter, this corporation shall issue and deliver to such holder, at the place designated by such holder, a certificate or certificates for the number of full shares of the Series C-1 Preferred Stock to be issued and such holder shall be deemed to have become a stockholder of record of Series C-1 Preferred Stock on the Mandatory Offering Date unless the transfer books of this corporation are closed on that date, in which event he, she or it shall be deemed to have become a stockholder of record of Series C-1 Preferred Stock on the next succeeding date on which the transfer books are open. (iii) In the event that any Series C-1 Preferred Stock shares are issued, concurrently with such issuance, this corporation shall use its best efforts to take all such action as may be required, including amending its Articles of Incorporation, (a) to cancel all authorized shares of Series C-1 Preferred Stock that remain unissued after such issuance, (b) to create and reserve for issuance upon Special Mandatory Conversion of any Series C Preferred Stock a new series of Preferred Stock equal in number to the number of shares of Series C-1 Preferred Stock so canceled and designated Series C-2 Preferred Stock, with the designations, powers, preferences and rights and the qualifications, limitations and restrictions identical to those then applicable to the Series C-1 Preferred Stock, except that the Conversion Price for such shares of Series C-2 Preferred Stock once initially issued shall be the Series C Conversion Price in effect immediately prior to such issuance and (c) to amend the provisions of this subsection 3(l) to provide that any subsequent Special Mandatory Conversion will be into shares of Series C-2 Preferred Stock rather than Series C-1 Preferred Stock. This corporation shall take the same actions with respect to the Series C-2 Preferred Stock and each subsequently authorized series of Preferred Stock upon initial issuance of shares of the last such series to be authorized. The right to receive any dividend declared but unpaid at the time of conversion on any shares of Preferred Stock converted pursuant to the provisions of this subsection 4(l) shall accrue to the benefit of the new shares of Preferred Stock issued upon conversion thereof. 4. Redemption. (a) At any time after December 17, 2001, but within ninety (90) days after the receipt by this corporation of a written request from the holders of not less than sixty-six and two-thirds percent (66-2/3%) of the then outstanding Series C and Series C-1 Preferred Stock (voting together as a single class) that all or, if less than all, a specified percentage of such holders' shares of Series C and Series C-1 Preferred Stock be redeemed, and concurrently with surrender by such holders of the certificates representing such shares, this corporation shall, to the extent it may lawfully do so, redeem in three (3) annual installments (each payment date being referred to herein as a "Series C Redemption Date") the shares specified in such request by paying in cash therefor a sum per share equal to (i) $1.22852 per share of Series C and Series C-1 Preferred Stock (as adjusted for any stock splits, stock dividends, recapitalizations or the like, and with respect to the Series C Preferred Stock as adjusted in accordance with Section 3(d)) plus (ii) ten percent (10%) per annum on the amount payable under this Section 4(a) accruing from the date hereof, plus (iii) all declared but unpaid dividends on such share (the "Series C Redemption Price"). The number of shares of Series C and Series C-1 Preferred Stock that this corporation shall be required to redeem on any one Series C Redemption Date shall be equal to the amount determined by dividing (i) the aggregate -10- 11 number of shares of Series C and Series C-1 Preferred Stock outstanding immediately prior to such Series C Redemption Date that have been requested to be redeemed pursuant to this Section 4(a) by (ii) the number of remaining Series C Redemption Dates (including the Redemption Date to which such calculation applies). Any redemption of Series C and Series C-1 Preferred Stock effected pursuant to this subsection 4(a) shall be made on a pro rata basis among the holders of the Series C and Series C-1 Preferred Stock in proportion to the number of shares of Series C and Series C-1 Preferred Stock proposed to be redeemed by such holders. No other capital stock of the corporation is redeemable prior to the Series C or Series C-1 Preferred Stock without the prior written consent of the holders of a majority of the Series C and Series C-1 Preferred Stock (voting together as a single class). (b) At any time after September 4, 2002, but within ninety (90) days after the receipt by this corporation of a written request from the holders of not less than sixty-six and two-thirds percent (66-2/3%) of the then outstanding Series D Preferred Stock (voting together as a single class) that all or, if less than all, a specified percentage of such holders' shares of Series D Preferred Stock be redeemed, and concurrently with surrender by such holders of the certificates representing such shares, this corporation shall, to the extent it may lawfully do so, redeem in three (3) annual installments (each payment date being referred to herein as a "Series D Redemption Date") the shares specified in such request by paying in cash therefor a sum per share equal to (i) $9.263 per share of Series D Preferred Stock (as adjusted for any stock splits, stock dividends, recapitalizations or the like, and with respect to the Series D Preferred Stock as adjusted in accordance with Section 3(d)) plus (ii) ten percent (10%) per annum on the amount payable under this Section 4(a) accruing from the date hereof, plus (iii) all declared but unpaid dividends on such share (the "Series D Redemption Price"). The number of shares of Series D Preferred Stock that this corporation shall be required to redeem on any one Series D Redemption Date shall be equal to the amount determined by dividing (i) the aggregate number of shares of Series D Preferred Stock outstanding immediately prior to such Series D Redemption Date that have been requested to be redeemed pursuant to this Section 4(b) by (ii) the number of remaining Series D Redemption Dates (including the Redemption Date to which such calculation applies). Any redemption of Series D Preferred Stock effected pursuant to this subsection 4(b) shall be made on a pro rata basis among the holders of the Series D Preferred Stock in proportion to the number of shares of Series D Preferred Stock proposed to be redeemed by such holders. No other capital stock of the corporation is redeemable prior to the Series D Preferred Stock without the prior written consent of the holders of a majority of the Series D Preferred Stock (voting together as a single class). (c) At least fifteen (15) but no more than thirty (30) days prior to each Redemption Date, written notice shall be mailed, first class postage prepaid, to each holder of record (at the close of business on the business day next preceding the day on which notice is given) of the Series C, Series C-1 Preferred Stock or Series D Preferred Stock (collectively the Redeemable Preferred) to be redeemed, at the address last shown on the records of this corporation for such holder, notifying such holder of the redemption to be effected on the applicable Redemption Date, specifying the number of shares to be redeemed from such holder, the Redemption Date, the Redemption Price, the place at which payment may be obtained and calling upon such holder to surrender to this corporation, in the manner and at the place designated, his, her or its certificate or -11- 12 certificates representing the shares to be redeemed (the "Redemption Notice"). Except as provided in subsection (4)(d), on or after each Redemption Date, each holder of Redeemable Preferred Stock to be redeemed on such Redemption Date shall surrender to this corporation the certificate or certificates representing such shares, in the manner and at the place designated in the Redemption Notice, and thereupon the applicable Redemption Price of such shares shall be payable to the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In the event less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. (d) From and after each Redemption Date, unless there shall have been a default in payment of the Redemption Price, all rights of the holders of shares of Redeemable Preferred Stock designated for redemption on such Redemption Date in the Redemption Notice as holders of Redeemable Preferred Stock (except the right to receive the applicable Redemption Price without interest upon surrender of their certificate or certificates) shall cease with respect to such shares, and such shares shall not thereafter be transferred on the books of this corporation or be deemed to be outstanding for any purpose whatsoever. If the funds of this corporation legally available for redemption of shares of Redeemable Preferred Stock on a Redemption Date are insufficient to redeem the total number of shares of Redeemable Preferred Stock to be redeemed on such date, those funds that are legally available will be used to redeem the maximum possible number of such shares ratably among the holders of such shares to be redeemed such that each holder of a share of Redeemable Preferred Stock receives the same percentage of the applicable Redeemable Redemption Price. The shares of Redeemable Preferred Stock not redeemed shall remain outstanding and entitled to all the rights and preferences provided herein. At any time thereafter when additional funds of this corporation are legally available for the redemption of shares of Redeemable Preferred Stock, such funds will immediately be used to redeem the balance of the shares that this corporation has become obliged to redeem on any Redemption Date but that it has not redeemed. (e) On or prior to each Redemption Date, this corporation shall deposit the Redemption Price of all shares of Redeemable Preferred Stock designated for redemption on such Redemption Date in the Redemption Notice, and not yet redeemed or converted, with a bank or trust corporation having aggregate capital and surplus in excess of $100,000,000 as a trust fund for the benefit of the respective holders of the shares designated for redemption and not yet redeemed, with irrevocable instructions and authority to the bank or trust corporation to publish the notice of redemption thereof and pay the Redemption Price for such shares to their respective holders on or after the Redemption Date, upon receipt of notification from this corporation that such holder has surrendered his, her or its share certificate to this corporation pursuant to subsection (4)(c) above. As of the date of such deposit (even if prior to the Redemption Date), the deposit shall constitute full payment of the shares to their holders, and from and after the date of the deposit the shares so called for redemption shall be redeemed and shall be deemed to be no longer outstanding, and the holders thereof shall cease to be stockholders with respect to such shares and shall have no rights with respect thereto except the rights to receive from the bank or trust corporation payment of the Redemption Price of the shares, without interest, upon surrender of their certificates therefor, and the right to convert such shares as provided in Article IV(3) hereof. Such instructions shall also provide that any moneys deposited by this corporation pursuant to this subsection (4)(e) for the redemption -12- 13 of shares thereafter converted into shares of this corporation's Common Stock pursuant to Article IV(3) hereof prior to the Redemption Date shall be returned to this corporation forthwith upon such conversion. The balance of any moneys deposited by this corporation pursuant to this subsection (4)(e) remaining unclaimed at the expiration of two (2) years following the Redemption Date shall thereafter be returned to this corporation upon its request expressed in a resolution of its Board of Directors. 5. Voting Rights. (a) General Voting Rights. The holder of each share of Preferred Stock shall be entitled to notice of any stockholders' meeting in accordance with the bylaws of the corporation and shall vote with holders of the Common Stock upon the election of directors and upon any other matter submitted to a vote of stockholders, except those matters required by law to be submitted to a class vote and except as otherwise set forth herein. The holder of each share of Preferred Stock shall be entitled to that number of votes equal to the number of shares of Common Stock into which each share of Preferred Stock could be converted on the record date for the vote or consent of stockholders. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares of Preferred Stock held by each holder) shall be disregarded. (b) Voting for the Election of Directors. As long as at least a majority of the shares of Series C Preferred Stock originally issued remain outstanding (including shares subsequently converted into shares of Series C-1 Preferred Stock), the holders of such shares of Series C and Series C-1 Preferred Stock shall be entitled to elect two (2) directors of this corporation at each annual election of directors. As long as at least a majority of the shares of Series D Preferred Stock originally issued remain outstanding, the holders of Series D Preferred shall be entitled to elect one (1) director of this corporation at each annual election of directors. The holders of outstanding Common Stock shall be entitled to elect two (2) directors of this corporation at each annual election of directors. The holders of Preferred Stock and Common Stock (voting together as a single class and not as separate series, and on an as-converted basis) shall be entitled to elect the remaining directors. In the case of any vacancy (other than a vacancy caused by removal) in the office of a director occurring among the directors elected by the holders of a class or series of stock pursuant to this Section 5(b), the remaining directors so elected by that class or series may by affirmative vote of a majority thereof (or the remaining director so elected if there be but one, or if there are no such directors remaining, by the affirmative vote of the holders of a majority of the shares of that class or series), elect a successor or successors to hold office for the unexpired term of the director or directors whose place or places shall be vacant. Any director who shall have been elected by the holders of a class or series of stock or by any directors so elected as provided in the immediately preceding sentence hereof may be removed during the aforesaid term of office, either with or without cause, by, and only by, the affirmative vote of the holders of the shares of the class or series of stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders, and any vacancy thereby -13- 14 created may be filled by the holders of that class or series of stock represented at the meeting or pursuant to unanimous written consent. 6. Protective Provisions. (a) General. In addition to any other class vote that may be required by law, so long as any shares of Preferred Stock are outstanding, this corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Preferred Stock voting together as a single class: (i) adversely alter or change the powers, preferences or special rights of the Preferred Stock; or (ii) increase or decrease (other than by redemption or conversion) the aggregate number of authorized shares of Preferred Stock; or (iii) create, authorize or issue any new class or series of shares having any powers, preferences, or special rights superior to or on a parity with the Preferred Stock as to dividends, liquidation, conversion rights or voting rights; or (iv) redeem, purchase or otherwise acquire (or pay into or set aside for a sinking fund for such purpose) any share or shares of Preferred Stock or Common Stock; provided, however, that this restriction shall not apply to (i) the repurchase of shares of Common Stock from employees, officers, directors, consultants or other persons performing services for this corporation or any subsidiary pursuant to agreements under which this corporation has the option to repurchase such shares at cost or at cost upon the occurrence of certain events, such as the termination of employment or (ii) the redemption of any share or shares of Preferred Stock in accordance with Section 4; (v) sell, convey, or otherwise dispose of all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of this corporation is disposed of; (vi) declare or pay any dividend on any shares of Common Stock; or (vii) change the authorized number of directors of this corporation. (b) Series D Protective Provisions. So long as at least a majority of the shares of Series D Preferred Stock originally issued remain outstanding, this corporation shall not without first obtaining the approval (by vote or written consent, as provided by law) of the holders of at least a majority of the then outstanding shares of Series D Preferred Stock: (i) adversely alter or change the powers, preferences or special rights of the Series D Preferred Stock; -14- 15 (ii) increase or decrease (other than by redemption or conversion) the aggregate number of authorized shares of Series D Preferred Stock; (iii) create, authorize or issue any new class or series of shares having any powers, preferences, or special rights superior to or on a parity with the Series D Preferred Stock as to dividends, liquidation, conversion rights or voting rights; (iv) change the authorized number of directors of this corporation; or (v) sell, convey, or otherwise dispose of all or substantially all of its property or business or merge into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any transaction or series of related transactions in which more than fifty percent (50%) of the voting power of this corporation is disposed, provided that such transaction has an aggregate pre-money valuation of this corporation of less than or equal to $165,000,000 and such approval is not unreasonably withheld. 7. Residual Rights. All rights accruing to the outstanding shares of capital stock not expressly provided for to the contrary herein shall be vested in the Common Stock. ARTICLE VI The following is applicable to the Common Stock: 1. Dividend Rights. Subject to the prior rights of holders of all classes of stock at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive, when and as declared by the Board of Directors, out of any assets of the corporation legally available therefor, such dividends as may be declared from time to time by the Board of Directors. 2. Liquidation Rights. Upon the liquidation, dissolution or winding up of the corporation, the assets of the corporation shall be distributed as provided in Section 3 of Article Five hereof. 3. Redemption. The Common Stock is not redeemable. 4. Voting Rights. The holder of each share of Common Stock shall have the right to one vote, and shall be entitled to notice of any stockholders' meeting in accordance with the Bylaws of the corporation, and shall be entitled to vote upon such matters and in such manner as may be provided by law. ARTICLE VII The corporation is to have perpetual existence. -15- 16 ARTICLE VIII In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the Corporation. ARTICLE IX The election of directors need not be by written ballot unless the Bylaws of the corporation shall so provide. ARTICLE X To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. The corporation shall indemnify to the fullest extent permitted by the law, any person made or threatened to be made a party, to any action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact the he or she, or his or her testator or intestate, is or was a director or officer of the corporation or any predecessor of the corporation, or serves or served at any other enterprise as a director or officer at the request of the corporation or any predecessor to the corporation. Neither any amendment nor repeal of this Article, nor the adoption of any provision of this Certificate of Incorporation inconsistent with this Article, shall eliminate or reduce the effect of this Article in respect of any matter occurring, or any cause of action, suit or claim that, but for this Article, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. ARTICLE XI The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ARTICLE XII The name and mailing address of the incorporator are: Christian Larsen 5875 Arnold Road, Suite 100 Dublin, CA 94568 -16- 17 I, THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying, under penalties of perjury, that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 19th day of February, 1999. /s/ Chris Larsen ------------------------------ Christian Larsen, Incorporator EX-3.2 4 FORM OF CERTIFICATE OF INCORPORATION OF E-LOAN 1 EXHIBIT 3.2 RESTATED CERTIFICATE OF INCORPORATION OF E-LOAN, INC. E-Loan, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: A. The name of the corporation is E-Loan, Inc. The corporation was originally incorporated under the same name, and the original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on February 19, 1999. B. Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation restates and amends the provisions of the Certificate of Incorporation of the corporation. C. The text of the Certificate of Incorporation is hereby amended and restated in its entirety to read as follows: ARTICLE I The name of this corporation is E-Loan, Inc. ARTICLE II The address of the corporation's registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company. ARTICLE III The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. ARTICLE IV The corporation is authorized to issue two classes of shares of stock to be designated, respectively, Common Stock, $0.001 par value, and Preferred Stock, $0.001 par value. The total number of shares that the corporation is authorized to issue is 75,000,000 shares. The number of shares of Common Stock authorized is 70,000,000. The number of shares of Preferred authorized is 5,000,000. 2 The Preferred Stock may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the board of directors (authority to do so being hereby expressly vested in the board). The board of directors is further authorized to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and to fix the number of shares of any series of Preferred Stock and the designation of any such series of Preferred Stock. The board of directors, within the limits and restrictions stated in any resolution or resolutions of the board of directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares in any such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series. The authority of the board of directors with respect to each such class or series shall include, without limitation of the foregoing, the right to determine and fix: (a) the distinctive designation of such class or series and the number of shares to constitute such class or series; (b) the rate at which dividends on the shares of such class or series shall be declared and paid, or set aside for payment, whether dividends at the rate so determined shall be cumulative or accruing, and whether the shares of such class or series shall be entitled to any participating or other dividends in addition to dividends at the rate so determined, and if so, on what terms; (c) the right or obligation, if any, of the corporation to redeem shares of the particular class or series of Preferred Stock and, if redeemable, the price, terms and manner of such redemption; (d) the special and relative rights and preferences, if any, and the amount or amounts per share, which the shares of such class or series of Preferred Stock shall be entitled to receive upon any voluntary or involuntary liquidation, dissolution or winding up of the corporation; (e) the terms and conditions, if any, upon which shares of such class or series shall be convertible into, or exchangeable for, shares of capital stock of any other class or series, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any; (f) the obligation, if any, of the corporation to retire, redeem or purchase shares of such class or series pursuant to a sinking fund or fund of a similar nature or otherwise, and the terms and conditions of such obligation; (g) voting rights, if any, on the issuance of additional shares of such class or series or any shares of any other class or series of Preferred Stock; (h) limitations, if any, on the issuance of additional shares of such class or series or any shares of any other class or series of Preferred Stock; and -2- 3 (i) such other preferences, powers, qualifications, special or relative rights and privileges thereof as the board of directors of the corporation, acting in accordance with this Restated Certificate of Incorporation, may deem advisable and are not inconsistent with law and the provisions of this Restated Certificate of Incorporation. ARTICLE V The corporation reserves the right to amend, alter, change, or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to this right. ARTICLE VI The corporation is to have perpetual existence. ARTICLE VII 1. Limitation of Liability. To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or as may hereafter be amended, a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. 2. Indemnification. The corporation may indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or his or her testator or intestate is or was a director, officer or employee of the corporation, or any predecessor of the corporation, or serves or served at any other enterprise as a director, officer or employee at the request of the corporation or any predecessor to the corporation. 3. Amendments. Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of the corporation's Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent provision. ARTICLE VIII In the event any shares of Preferred Stock shall be redeemed or converted pursuant to the terms hereof, the shares so converted or redeemed shall not revert to the status of authorized but unissued shares, but instead shall be canceled and shall not be re-issuable by the corporation. -3- 4 ARTICLE IX Holders of stock of any class or series of the corporation shall not be entitled to cumulate their votes for the election of directors or any other matter submitted to a vote of the stockholders, unless such cumulative voting is required pursuant to Sections 2115 or 301.5 of the California General Corporation Law, in which event each such holder shall be entitled to as many votes as shall equal the number of votes which (except for this provision as to cumulative voting) such holder would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected by him, and the holder may cast all of such votes for a single director or may distribute them among the number of directors to be voted for, or for any two or more of them as such holder may see fit, so long as the name of the candidate for director shall have been placed in nomination prior to the voting and the stockholder, or any other holder of the same class or series of stock, has given notice at the meeting prior to the voting of the intention to cumulate votes. 1. Number of Directors. The number of directors which constitutes the whole Board of Directors of the corporation shall be designated in the Amended and Restated Bylaws of the corporation. The directors shall be divided into three classes with the term of office of the first class (Class I) to expire at the annual meeting of stockholders held in 2000; the term of office of the second class (Class II) to expire at the annual meeting of stockholders held in 2001; the term of office of the third class (Class III) to expire at the annual meeting of stockholders held in 2002; and thereafter for each such term to expire at each third succeeding annual meeting of stockholders after such election. 2. Election of Directors. Elections of directors need not be by written ballot unless the Amended and Restated Bylaws of the corporation shall so provide. ARTICLE X In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Amended and Restated Bylaws of the corporation. ARTICLE XI No action shall be taken by the stockholders of the corporation except at an annual or special meeting of the stockholders called in accordance with the Amended and Restated Bylaws and no action shall be taken by the stockholders by written consent. The affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the then outstanding voting securities of the corporation, voting together as a single class, shall be required for the amendment, repeal or modification of the provisions of Article IX, Article X or Article XII of this Restated Certificate of Incorporation or Sections 2.3 (Special Meeting), 2.4 (Notice of Stockholders' Meeting), 2.5 (Advanced Notice of Stockholder Nominees and Stockholder Business), 2.10 (Voting), or 2.12 (Stockholder Action by -4- 5 Written Consent Without a Meeting), or 3.2 (Number of Directors) of the corporation's Amended and Restated Bylaws. ARTICLE XII Meetings of stockholders may be held within or without the State of Delaware, as the Amended and Restated Bylaws may provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Amended and Restated Bylaws of the corporation. -5- 6 IN WITNESS WHEREOF, E-Loan, Inc. has caused this certificate to be signed by Chris Larsen, its Chief Executive Officer, this___________day of_____________, 1999. ------------------------------------------- Chris Larsen, Chief Executive Officer EX-3.3 5 BYLAWS OF E-LOAN 1 EXHIBIT 3.3 BYLAWS OF E-LOAN, INC. 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I CORPORATE OFFICES ................................................... 1 1.1 REGISTERED OFFICE 1 1.2 OTHER OFFICES ........................................................ 1 ARTICLE II MEETINGS OF STOCKHOLDERS ........................................... 1 2.1 PLACE OF MEETINGS 1 2.2 ANNUAL MEETING ....................................................... 1 2.3 SPECIAL MEETING ...................................................... 2 2.4 NOTICE OF STOCKHOLDERS' MEETINGS ..................................... 2 2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS ...... 2 2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE ......................... 3 2.7 QUORUM ............................................................... 4 2.8 ADJOURNED MEETING; NOTICE ............................................ 4 2.9 CONDUCT OF BUSINESS .................................................. 4 2.10 VOTING ............................................................... 4 2.11 WAIVER OF NOTICE ..................................................... 5 2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING .............. 5 2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS .......... 5 2.14 PROXIES .............................................................. 6 2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE ................................ 6 ARTICLE III DIRECTORS ......................................................... 7 3.1 POWERS ............................................................... 7 3.2 NUMBER OF DIRECTORS .................................................. 7 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS .............. 7 3.4 RESIGNATION AND VACANCIES ............................................ 7 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ............................. 8 3.6 REGULAR MEETINGS ..................................................... 8 3.7 SPECIAL MEETINGS; NOTICE ............................................. 9 3.8 QUORUM ............................................................... 9 3.9 WAIVER OF NOTICE ..................................................... 9 3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING .................... 10 3.11 FEES AND COMPENSATION OF DIRECTORS ................................... 10 3.12 APPROVAL OF LOANS TO OFFICERS ........................................ 10 3.13 REMOVAL OF DIRECTORS ................................................. 10 ARTICLE IV COMMITTEES ......................................................... 11 4.1 COMMITTEES OF DIRECTORS .............................................. 11
-i- 3 4.2 COMMITTEE MINUTES .................................................... 11 4.3 MEETINGS AND ACTION OF COMMITTEES .................................... 11 ARTICLE V OFFICERS ............................................................ 12 5.1 OFFICERS ............................................................. 12 5.2 APPOINTMENT OF OFFICERS .............................................. 12 5.3 SUBORDINATE OFFICERS ................................................. 12 5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES ............... 12 5.5 CHAIRMAN OF THE BOARD ................................................ 13 5.6 CHIEF EXECUTIVE OFFICER .............................................. 13 5.7 PRESIDENT ............................................................ 13 5.8 VICE PRESIDENTS ...................................................... 13 5.9 SECRETARY ............................................................ 13 5.10 CHIEF FINANCIAL OFFICER .............................................. 14 5.11 ASSISTANT SECRETARY .................................................. 14 5.12 ASSISTANT TREASURER .................................................. 15 5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS ....................... 15 5.14 AUTHORITY AND DUTIES OF OFFICERS ..................................... 15 ARTICLE VI INDEMNITY .......................................................... 15 6.1 THIRD PARTY ACTIONS .................................................. 15 6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION ........................ 16 6.3 SUCCESSFUL DEFENSE ................................................... 16 6.4 DETERMINATION OF CONDUCT ............................................. 16 6.5 PAYMENT OF EXPENSES IN ADVANCE ....................................... 17 6.6 INDEMNITY NOT EXCLUSIVE .............................................. 17 6.7 INSURANCE INDEMNIFICATION ............................................ 17 6.8 THE CORPORATION ...................................................... 17 6.9 EMPLOYEE BENEFIT PLANS ............................................... 18 6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES .......... 18 ARTICLE VII RECORDS AND REPORTS ............................................... 18 7.1 MAINTENANCE AND INSPECTION OF RECORDS ................................ 18 7.2 INSPECTION BY DIRECTORS .............................................. 19 7.3 ANNUAL STATEMENT TO STOCKHOLDERS ..................................... 19 ARTICLE VIII GENERAL MATTERS .................................................. 19 8.1 CHECKS ............................................................... 19 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS ..................... 20 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES ............................... 20 8.4 SPECIAL DESIGNATION ON CERTIFICATES .................................. 20 8.5 LOST CERTIFICATES .................................................... 21 8.6 CONSTRUCTION; DEFINITIONS ............................................ 21
-ii- 4 8.7 DIVIDENDS ............................................................ 21 8.8 FISCAL YEAR .......................................................... 21 8.9 SEAL ................................................................. 21 8.10 TRANSFER OF STOCK .................................................... 22 8.11 STOCK TRANSFER AGREEMENTS ............................................ 22 8.12 REGISTERED STOCKHOLDERS .............................................. 22 ARTICLE IX AMENDMENTS ......................................................... 22
-iii- 5 BYLAWS OF E-LOAN, INC. ARTICLE I CORPORATE OFFICES 1.1 REGISTERED OFFICE The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is The Corporation Trust Company. 1.2 OTHER OFFICES The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF STOCKHOLDERS 2.1 PLACE OF MEETINGS Meetings of stockholders shall be held at any place, either within or without the State of Delaware, as may be designated by the board of directors or in the manner provided in these bylaws. In the absence of any such designation, stockholders' meetings shall be held at the registered office of the corporation in the State of Delaware. 2.2 ANNUAL MEETING The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of stockholders shall be held on the second Tuesday of May of each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding 6 business day. At the meeting, directors shall be elected and any other proper business may be transacted. 2.3 SPECIAL MEETING A special meeting of the stockholders may be called at any time by the board of directors, or by the chairman of the board, or by the president, or by one or more stockholders holding shares in the aggregate entitled to cast not less than ten percent of the votes at that meeting. If a special meeting is called by any person or persons other than the board of directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than ten (10) nor more than sixty (60) days after the receipt of the request. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the board of directors may be held. 2.4 NOTICE OF STOCKHOLDERS' MEETINGS All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, (i) nominations for the election of directors, and (ii) business proposed to be brought before any stockholder meeting may be made by the board of directors or proxy committee appointed by the board of directors or by any stockholder entitled to vote in the election of directors generally if such nomination or business proposed is otherwise proper business before such meeting. However, any such stockholder may nominate one or more persons for election as directors at a meeting or propose business to be brought before a meeting, or both, only if such stockholder has given timely notice in proper written form of their intent to make such nomination or nominations or to propose such business. To be -2- 7 timely, such stockholder's notice must be delivered to or mailed and received at the principal executive offices of the corporation not less than one hundred twenty (120) calendar days in advance of the first anniversary date of mailing of the corporation's proxy statement released to stockholders in connection with the previous year's annual meeting of stockholders; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year's proxy statement, notice by the stockholder to be timely must be so received a reasonable time before the solicitation is made. To be in proper form, a stockholder's notice to the secretary shall set forth: (a) the name and address of the stockholder who intends to make the nominations or propose the business and, as the case may be, of the person or persons to be nominated or of the business to be proposed; (b) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and, if applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) if applicable, a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee or each matter of business to be proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, or the matter been proposed, or intended to be proposed by the board of directors; and (e) if applicable, the consent of each nominee to serve as director of the corporation if so elected. The chairman of the meeting shall refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure. 2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. -3- 8 2.7 QUORUM The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the Chairman of the meeting or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. 2.8 ADJOURNED MEETING; NOTICE When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.9 CONDUCT OF BUSINESS The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business. 2.10 VOTING The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.12 of these bylaws, subject to the provisions of Sections 217 and 218 of the Delaware General Corporation Law (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements). Except as provided in the last paragraph of this Section 2.10, or as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. At a stockholders' meeting at which directors are to be elected, each stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such stockholder normally is entitled to cast) if the candidates' names have been properly placed in nomination (in accordance with these bylaws) prior to commencement of the voting and the stockholder requesting cumulative voting or any other stockholder voting at the meeting in person or by proxy has given notice prior to commencement of the voting of the -4- 9 stockholder's intention to cumulate votes. If cumulative voting is properly requested, each holder of stock, or of any class or classes or of a series or series thereof, who elects to cumulate votes shall be entitled to as many votes as equals the number of votes which (absent this provision as to cumulative voting) such person would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected by such person, and that such person may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them, as such person may see fit. 2.11 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the Delaware General Corporation Law or of the certificate of incorporation or these bylaws, a written waiver, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. 2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of a corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a certificate under any section of the Delaware General Corporation Law if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the Delaware General Corporation Law. 2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, -5- 10 conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If the board of directors does not so fix a record date: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the first date on which a signed written consent is delivered to the corporation. (iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. 2.14 PROXIES Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by a written proxy, signed by such stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if such stockholder's name is placed on the proxy by any reasonable means including, but not limited to, by facsimile signature, manual signature, typewriting, telegraphic transmission or otherwise, by such stockholder or such stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the Delaware General Corporation Law. 2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at -6- 11 the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. ARTICLE III DIRECTORS 3.1 POWERS Subject to the provisions of the Delaware General Corporation Law and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. 3.2 NUMBER OF DIRECTORS The number of directors of the corporation shall be six (6) until changed by a bylaw amending this Section 3.2, duly adopted by the board of directors or by the stockholders. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS Except as provided in Section 3.4 of these bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Elections of directors need not be by written ballot. 3.4 RESIGNATION AND VACANCIES Any director may resign at any time upon written notice to the attention of the Secretary of the corporation. When one or more directors shall resign from the board of directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies. -7- 12 Unless otherwise provided in the certificate of incorporation or these bylaws: (i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. (ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the Delaware General Corporation Law. If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten (10) percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the Delaware General Corporation Law as far as applicable. 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware. Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of such board of directors, or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting pursuant to this section shall constitute presence in person at the meeting. 3.6 REGULAR MEETINGS Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. -8- 13 3.7 SPECIAL MEETINGS; NOTICE Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or any two (2) directors. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or by telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation. 3.8 QUORUM At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute, the certificate of incorporation, or these bylaws. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. 3.9 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the Delaware General Corporation Law, the certificate of incorporation, or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when such person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws. -9- 14 3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee. 3.11 FEES AND COMPENSATION OF DIRECTORS Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors. 3.12 APPROVAL OF LOANS TO OFFICERS The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing contained in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. 3.13 REMOVAL OF DIRECTORS Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; provided, however, that, so long as stockholders of the corporation are entitled to cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect such director if then cumulatively voted at an election of the entire board of directors or, if there be classes of directors, at an election of the class of directors of which such director is a part. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office. -10- 15 ARTICLE IV COMMITTEES 4.1 COMMITTEES OF DIRECTORS The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors, or in the bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority (i) approving or adopting or recommending to the stockholders, any action or matter expressly required by the Delaware General Corporation Law to be submitted to stockholders for approval or (ii) adopting, amending, or repealing any bylaws of the corporation; and, unless the board resolution establishing the committee, the bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law. 4.2 COMMITTEE MINUTES Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. 4.3 MEETINGS AND ACTION OF COMMITTEES Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors -11- 16 may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws. ARTICLE V OFFICERS 5.1 OFFICERS The officers of the corporation shall be a president, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more vice presidents, one or more assistant vice presidents, one or more assistant secretaries, one or more assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person. 5.2 APPOINTMENT OF OFFICERS The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall be appointed by the board of directors, subject to the rights, if any, of an officer under any contract of employment. 5.3 SUBORDINATE OFFICERS The board of directors may appoint, or empower the president to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine. 5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. -12- 17 Any vacancy occurring in any office of the corporation shall be filled by the board of directors. 5.5 CHAIRMAN OF THE BOARD The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to the chairman of the board by the board of directors or as may be prescribed by these bylaws. If there is no president and no one has been appointed chief executive officer, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.6 of these bylaws. 5.6 CHIEF EXECUTIVE OFFICER The board of directors shall select a chief executive officer of the corporation who shall be subject to the control of the board of directors and have general supervision, direction and control of the business and the officers of the corporation. The chief executive officer shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. 5.7 PRESIDENT The president shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws. In addition and subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if no one has been appointed chief executive officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have the powers and duties described in Section 5.6. 5.8 VICE PRESIDENTS In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the president or the chairman of the board. 5.9 SECRETARY The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized -13- 18 and the notice given), the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof. The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. The secretary shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws. 5.10 CHIEF FINANCIAL OFFICER The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director. The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors. The chief financial officer shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all his transactions as chief financial officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or these bylaws. The chief financial officer shall be the treasurer of the corporation. 5.11 ASSISTANT SECRETARY The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as may be prescribed by the board of directors or these bylaws. -14- 19 5.12 ASSISTANT TREASURER The assistant treasurer, or, if there is more than one, the assistant treasurers, in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the chief financial officer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the chief financial officer and shall perform such other duties and have such other powers as may be prescribed by the board of directors or these bylaws. 5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS The chairman of the board, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. 5.14 AUTHORITY AND DUTIES OF OFFICERS In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders. ARTICLE VI INDEMNITY 6.1 THIRD PARTY ACTIONS The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the corporation, which approval shall not be unreasonably withheld) actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to -15- 20 believe such person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person's conduct was unlawful. 6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) and amounts paid in settlement (if such settlement is approved in advance by the corporation, which approval shall not be unreasonably withheld) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Notwithstanding any other provision of this Article VI, no person shall be indemnified hereunder for any expenses or amounts paid in settlement with respect to any action to recover short-swing profits under Section 16(b) of the Securities Exchange Act of 1934, as amended. 6.3 SUCCESSFUL DEFENSE To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. 6.4 DETERMINATION OF CONDUCT Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that the indemnification of the director, officer, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall be made (1) by the Board of Directors or the Executive Committee by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding or (2) or if such quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by -16- 21 independent legal counsel in a written opinion, or (3) by the stockholders. Notwithstanding the foregoing, a director, officer, employee or agent of the Corporation shall be entitled to contest any determination that the director, officer, employee or agent has not met the applicable standard of conduct set forth in Sections 6.1 and 6.2 by petitioning a court of competent jurisdiction. 6.5 PAYMENT OF EXPENSES IN ADVANCE Expenses incurred in defending a civil or criminal action, suit or proceeding, by an individual who may be entitled to indemnification pursuant to Section 6.1 or 6.2, shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this Article VI. 6.6 INDEMNITY NOT EXCLUSIVE The indemnification and advancement of expenses provided by or granted pursuant to the other sections of this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. 6.7 INSURANCE INDEMNIFICATION The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity or arising out of such person's status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this Article VI. 6.8 THE CORPORATION For purposes of this Article VI, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under and subject to the provisions of this Article VI (including, without limitation the provisions of Section 6.4) with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. -17- 22 6.9 EMPLOYEE BENEFIT PLANS For purposes of this Article VI, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Article VI. 6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. ARTICLE VII RECORDS AND REPORTS 7.1 MAINTENANCE AND INSPECTION OF RECORDS The corporation shall, either at its principal executive officer or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business. -18- 23 The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. 7.2 INSPECTION BY DIRECTORS Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper. 7.3 ANNUAL STATEMENT TO STOCKHOLDERS The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. ARTICLE VIII GENERAL MATTERS 8.1 CHECKS From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments. -19- 24 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES The shares of the corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the chief financial officer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. 8.4 SPECIAL DESIGNATION ON CERTIFICATES If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock -20- 25 a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 8.5 LOST CERTIFICATES Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and canceled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. 8.6 CONSTRUCTION; DEFINITIONS Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. 8.7 DIVIDENDS The directors of the corporation, subject to any restrictions contained in (i) the Delaware General Corporation Law or (ii) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock. The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies. 8.8 FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors. 8.9 SEAL The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the board of directors, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. -21- 26 8.10 TRANSFER OF STOCK Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books. 8.11 STOCK TRANSFER AGREEMENTS The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the Delaware General Corporation Law. 8.12 REGISTERED STOCKHOLDERS The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE IX AMENDMENTS The bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws. -22- 27 CERTIFICATE OF ADOPTION OF BYLAWS OF E-LOAN, INC. Certificate by Secretary The undersigned hereby certifies that he is the duly elected, qualified, and acting Secretary of E-Loan, Inc. and that the foregoing Bylaws, comprising twenty-two (22) pages, were adopted as the Bylaws of the corporation on February 22, 1999 by the board of directors of the corporation. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed the corporate seal this 22nd day of February 1999. /s/ Mario M. Rosati ------------------------------------ Mario M. Rosati, Secretary -23- EX-3.4 6 FORM OF BYLAWS OF E-LOAN 1 EXHIBIT 3.4 AMENDED AND RESTATED BYLAWS OF E-LOAN, INC. 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I CORPORATE OFFICES ................................................... 1 1.1 REGISTERED OFFICE .................................................... 1 1.2 OTHER OFFICES ........................................................ 1 ARTICLE II MEETINGS OF STOCKHOLDERS ........................................... 1 2.1 PLACE OF MEETINGS .................................................... 1 2.2 ANNUAL MEETING ....................................................... 1 2.3 SPECIAL MEETING ...................................................... 2 2.4 NOTICE OF STOCKHOLDERS' MEETINGS ..................................... 2 2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS ...... 2 2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE ......................... 3 2.7 QUORUM ............................................................... 4 2.8 ADJOURNED MEETING; NOTICE ............................................ 4 2.9 CONDUCT OF BUSINESS .................................................. 4 2.10 VOTING ............................................................... 4 2.11 WAIVER OF NOTICE ..................................................... 5 2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING .............. 5 2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS .......... 5 2.14 PROXIES .............................................................. 6 2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE ................................ 6 ARTICLE III DIRECTORS ......................................................... 7 3.1 POWERS ............................................................... 7 3.2 NUMBER OF DIRECTORS .................................................. 7 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS .............. 7 3.4 RESIGNATION AND VACANCIES ............................................ 8 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ............................. 8 3.6 REGULAR MEETINGS ..................................................... 9 3.7 SPECIAL MEETINGS; NOTICE ............................................. 9 3.8 QUORUM ............................................................... 9 3.9 WAIVER OF NOTICE ..................................................... 9 3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING .................... 10 3.11 FEES AND COMPENSATION OF DIRECTORS ................................... 10 3.12 APPROVAL OF LOANS TO OFFICERS ........................................ 10 3.13 REMOVAL OF DIRECTORS ................................................. 10 ARTICLE IV COMMITTEES ......................................................... 11 4.1 COMMITTEES OF DIRECTORS .............................................. 11
-i- 3 4.2 COMMITTEE MINUTES .................................................... 11 4.3 MEETINGS AND ACTION OF COMMITTEES .................................... 11 ARTICLE V OFFICERS ............................................................ 12 5.1 OFFICERS ............................................................. 12 5.2 APPOINTMENT OF OFFICERS .............................................. 12 5.3 SUBORDINATE OFFICERS ................................................. 12 5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES ............... 12 5.5 CHAIRMAN OF THE BOARD ................................................ 13 5.6 CHIEF EXECUTIVE OFFICER .............................................. 13 5.7 PRESIDENT ............................................................ 13 5.8 VICE PRESIDENTS ...................................................... 13 5.9 SECRETARY ............................................................ 13 5.10 CHIEF FINANCIAL OFFICER .............................................. 14 5.11 ASSISTANT SECRETARY .................................................. 14 5.12 ASSISTANT TREASURER .................................................. 15 5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS ....................... 15 5.14 AUTHORITY AND DUTIES OF OFFICERS ..................................... 15 ARTICLE VI INDEMNITY .......................................................... 15 6.1 THIRD PARTY ACTIONS .................................................. 15 6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION ........................ 16 6.3 SUCCESSFUL DEFENSE ................................................... 16 6.4 DETERMINATION OF CONDUCT ............................................. 16 6.5 PAYMENT OF EXPENSES IN ADVANCE ....................................... 17 6.6 INDEMNITY NOT EXCLUSIVE .............................................. 17 6.7 INSURANCE INDEMNIFICATION ............................................ 17 6.8 THE CORPORATION ...................................................... 17 6.9 EMPLOYEE BENEFIT PLANS ............................................... 18 6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES .......... 18 ARTICLE VII RECORDS AND REPORTS ............................................... 18 7.1 MAINTENANCE AND INSPECTION OF RECORDS ................................ 18 7.2 INSPECTION BY DIRECTORS .............................................. 19 7.3 ANNUAL STATEMENT TO STOCKHOLDERS ..................................... 19 ARTICLE VIII GENERAL MATTERS .................................................. 19 8.1 CHECKS ............................................................... 19 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS ..................... 20 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES ............................... 20 8.4 SPECIAL DESIGNATION ON CERTIFICATES .................................. 20 8.5 LOST CERTIFICATES .................................................... 21 8.6 CONSTRUCTION; DEFINITIONS ............................................ 21
-ii- 4 8.7 DIVIDENDS ............................................................ 21 8.8 FISCAL YEAR .......................................................... 21 8.9 SEAL ................................................................. 21 8.10 TRANSFER OF STOCK .................................................... 22 8.11 STOCK TRANSFER AGREEMENTS ............................................ 22 8.12 REGISTERED STOCKHOLDERS .............................................. 22 ARTICLE IX AMENDMENTS ......................................................... 22
-iii= 5 AMENDED AND RESTATED BYLAWS OF E-LOAN, INC. ARTICLE I CORPORATE OFFICES 1.1 REGISTERED OFFICE The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is The Corporation Trust Company. 1.2 OTHER OFFICES The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF STOCKHOLDERS 2.1 PLACE OF MEETINGS Meetings of stockholders shall be held at any place, either within or without the State of Delaware, as may be designated by the board of directors or in the manner provided in these amended and restated bylaws. In the absence of any such designation, stockholders' meetings shall be held at the registered office of the corporation in the State of Delaware. 2.2 ANNUAL MEETING The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of stockholders shall be held on the second Tuesday of May of each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding 6 business day. At the meeting, directors shall be elected and any other proper business may be transacted. 2.3 SPECIAL MEETING A special meeting of the stockholders may be called at any time by the board of directors, or by the chairman of the board, or by the chief executive officer, or by the president. If a special meeting is called by any person or persons other than the board of directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the president or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than ten (10) nor more than sixty (60) days after the receipt of the request. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the board of directors may be held. 2.4 NOTICE OF STOCKHOLDERS' MEETINGS All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.6 of these amended and restated bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. 2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, (i) nominations for the election of directors, and (ii) business proposed to be brought before any stockholder meeting may be made by the board of directors or proxy committee appointed by the board of directors or by any stockholder entitled to vote in the election of directors generally if such nomination or business proposed is otherwise proper business before such meeting. However, any such stockholder may nominate one or more persons for election as directors at a meeting or propose business to be brought before a meeting, or both, only if such stockholder has given timely notice in proper written form of their intent to make such nomination or nominations or to propose such business. To be timely, such stockholder's notice must be delivered to or mailed and received at the principal -2- 7 executive offices of the corporation not less than one hundred twenty (120) calendar days in advance of the first anniversary date of mailing of the corporation's proxy statement released to stockholders in connection with the previous year's annual meeting of stockholders; provided, however, that in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year's proxy statement, notice by the stockholder to be timely must be so received a reasonable time before the solicitation is made. To be in proper form, a stockholder's notice to the secretary shall set forth: (a) the name and address of the stockholder who intends to make the nominations or propose the business and, as the case may be, of the person or persons to be nominated or of the business to be proposed; (b) a representation that the stockholder is a holder of record of stock of the corporation entitled to vote at such meeting and, if applicable, intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) if applicable, a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee or each matter of business to be proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission had the nominee been nominated, or intended to be nominated, or the matter been proposed, or intended to be proposed by the board of directors; and (e) if applicable, the consent of each nominee to serve as director of the corporation if so elected. The chairman of the meeting shall refuse to acknowledge the nomination of any person or the proposal of any business not made in compliance with the foregoing procedure. 2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. -3- 8 2.7 QUORUM The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the Chairman of the meeting or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed. 2.8 ADJOURNED MEETING; NOTICE When a meeting is adjourned to another time or place, unless these amended and restated bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. 2.9 CONDUCT OF BUSINESS The chairman of any meeting of stockholders shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of business. 2.10 VOTING The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.13 of these amended and restated bylaws, subject to the provisions of Sections 217 and 218 of the Delaware General Corporation Law (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements). Except as may be otherwise provided in the certificate of incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder. Notwithstanding the foregoing, if the stockholders of the corporation are entitled, pursuant to Sections 2115 and 301.5 of the California Corporations Code, to cumulate their votes in the election of directors, each such stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes that such stockholder normally is entitled to cast) only if the candidates' names have been properly placed in nomination (in accordance with these Amended and Restated Bylaws) prior to commencement of the voting, and the stockholder -4- 9 requesting cumulative voting has given notice prior to commencement of the voting of the stockholder's intention to cumulate votes. If cumulative voting is properly requested, each holder of stock, or of any class or classes or of a series or series thereof, who elects to cumulate votes shall be entitled to as many votes as equals the number of votes that (absent this provision as to cumulative voting) he or she would be entitled to cast for the election of directors with respect to his or her shares of stock multiplied by the number of directors to be elected by him, and he or she may cast all of such votes for single director or may distribute them among the number to be voted for, or for any two or more of them, as he or she may see fit. 2.11 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the Delaware General Corporation Law or of the certificate of incorporation or these amended and restated bylaws, a written waiver, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders, directors, or members of a committee of directors need be specified in any written waiver of notice unless so required by the certificate of incorporation or these amended and restated bylaws. 2.12 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of a corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a certificate under any section of the Delaware General Corporation Law if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the Delaware General Corporation Law. 2.13 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other -5- 10 distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. If the board of directors does not so fix a record date: (i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the first date on which a signed written consent is delivered to the corporation. (iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. 2.14 PROXIES Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by a written proxy, signed by such stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if such stockholder's name is placed on the proxy by any reasonable means including, but not limited to, by facsimile signature, manual signature, typewriting, telegraphic transmission or otherwise, by such stockholder or such stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the Delaware General Corporation Law. 2.15 LIST OF STOCKHOLDERS ENTITLED TO VOTE The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not -6- 11 so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. ARTICLE III DIRECTORS 3.1 POWERS Subject to the provisions of the Delaware General Corporation Law and any limitations in the certificate of incorporation or these amended and restated bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors. 3.2 NUMBER OF DIRECTORS The board of directors shall consist of six (6) members. The number of directors may be changed by an amendment to this bylaw, duly adopted by the board of directors or by the stockholders, or by a duly adopted amendment to the certificate of incorporation. Upon the closing of the first sale of the corporation's common stock pursuant to a firmly underwritten registered public offering (the "IPO"), the directors shall be divided into three classes, with the term of office of the first class, which class shall initially consist of two directors, to expire at the first annual meeting of stockholders held after the IPO; the term of office of the second class, which shall initially consist of two directors, to expire at the second annual meeting of stockholders held after the IPO; the term of office of the third class, which class shall initially consist of two directors, to expire at the third annual meeting of stockholders held after the IPO; and thereafter for each such term to expire at each third succeeding annual meeting of stockholders held after such election. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires. 3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS Except as provided in Section 3.4 of these amended and restated bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these amended and restated bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Elections of directors need not be by written ballot. -7- 12 3.4 RESIGNATION AND VACANCIES Any director may resign at any time upon written notice to the attention of the Secretary of the corporation. When one or more directors shall resign from the board of directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies. Unless otherwise provided in the certificate of incorporation or these amended and restated bylaws: (i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. (ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these amended and restated bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the Delaware General Corporation Law. If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten (10) percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the Delaware General Corporation Law as far as applicable. 3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware. -8- 13 Unless otherwise restricted by the certificate of incorporation or these amended and restated bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of such board of directors, or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting pursuant to this section shall constitute presence in person at the meeting. 3.6 REGULAR MEETINGS Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. 3.7 SPECIAL MEETINGS; NOTICE Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the president, any vice president, the secretary or any two (2) directors. Notice of the time and place of special meetings shall be delivered personally or by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or by telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation. 3.8 QUORUM At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute, the certificate of incorporation, or these amended and restated bylaws. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting. -9- 14 3.9 WAIVER OF NOTICE Whenever notice is required to be given under any provision of the Delaware General Corporation Law, the certificate of incorporation, or these amended and restated bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when such person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these amended and restated bylaws. 3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING Unless otherwise restricted by the certificate of incorporation or these amended and restated bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee. 3.11 FEES AND COMPENSATION OF DIRECTORS Unless otherwise restricted by the certificate of incorporation or these amended and restated bylaws, the board of directors shall have the authority to fix the compensation of directors. 3.12 APPROVAL OF LOANS TO OFFICERS The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing contained in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. 3.13 REMOVAL OF DIRECTORS Unless otherwise restricted by statute, by the certificate of incorporation or by these amended and restated bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; provided, however, that, so long as stockholders of the corporation are entitled to cumulative voting, if less than the entire board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect such director if then cumulatively voted at an election of the entire board of directors or, if there be classes of directors, at an election of the class of directors of which such director is a part. -10- 15 No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office. ARTICLE IV COMMITTEES 4.1 COMMITTEES OF DIRECTORS The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors, or in the amended and restated bylaws of the corporation, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority (i) approving or adopting or recommending to the stockholders, any action or matter expressly required by the Delaware General Corporation Law to be submitted to stockholders for approval or (ii) adopting, amending, or repealing any amended and restated bylaws of the corporation; and, unless the board resolution establishing the committee, the amended and restated bylaws or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the Delaware General Corporation Law. 4.2 COMMITTEE MINUTES Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. 4.3 MEETINGS AND ACTION OF COMMITTEES Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these amended and restated bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting), with such changes in the context of those amended and restated bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may -11- 16 also be called by resolution of the board of directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these amended and restated bylaws. ARTICLE V OFFICERS 5.1 OFFICERS The officers of the corporation shall be a president, a secretary, and a chief financial officer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more vice presidents, one or more assistant vice presidents, one or more assistant secretaries, one or more assistant treasurers, and any such other officers as may be appointed in accordance with the provisions of Section 5.3 of these amended and restated bylaws. Any number of offices may be held by the same person. 5.2 APPOINTMENT OF OFFICERS The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these amended and restated bylaws, shall be appointed by the board of directors, subject to the rights, if any, of an officer under any contract of employment. 5.3 SUBORDINATE OFFICERS The board of directors may appoint, or empower the president to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these amended and restated bylaws or as the board of directors may from time to time determine. 5.4 REMOVAL AND RESIGNATION OF OFFICERS; FILLING VACANCIES Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. -12- 17 Any vacancy occurring in any office of the corporation shall be filled by the board of directors. 5.5 CHAIRMAN OF THE BOARD The chairman of the board, if such an officer be elected, shall, if present, preside at meetings of the board of directors and exercise and perform such other powers and duties as may from time to time be assigned to the chairman of the board by the board of directors or as may be prescribed by these amended and restated bylaws. If there is no president and no one has been appointed chief executive officer, then the chairman of the board shall also be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 5.6 of these amended and restated bylaws. 5.6 CHIEF EXECUTIVE OFFICER The board of directors shall select a chief executive officer of the corporation who shall be subject to the control of the board of directors and have general supervision, direction and control of the business and the officers of the corporation. The chief executive officer shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. 5.7 PRESIDENT The president shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these amended and restated bylaws. In addition and subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if no one has been appointed chief executive officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have the powers and duties described in Section 5.6. 5.8 VICE PRESIDENTS In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these amended and restated bylaws, the president or the chairman of the board. 5.9 SECRETARY The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all -13- 18 meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof. The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these amended and restated bylaws. The secretary shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these amended and restated bylaws. 5.10 CHIEF FINANCIAL OFFICER The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director. The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositories as may be designated by the board of directors. The chief financial officer shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all his transactions as chief financial officer and of the financial condition of the corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or these amended and restated bylaws. The chief financial officer shall be the treasurer of the corporation. 5.11 ASSISTANT SECRETARY The assistant secretary, or, if there is more than one, the assistant secretaries in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election) shall, in the absence of the secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as may be prescribed by the board of directors or these amended and restated bylaws. -14- 19 5.12 ASSISTANT TREASURER The assistant treasurer, or, if there is more than one, the assistant treasurers, in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the chief financial officer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the chief financial officer and shall perform such other duties and have such other powers as may be prescribed by the board of directors or these amended and restated bylaws. 5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS The chairman of the board, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority. 5.14 AUTHORITY AND DUTIES OF OFFICERS In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders. ARTICLE VI INDEMNITY 6.1 THIRD PARTY ACTIONS The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the corporation, which approval shall not be unreasonably withheld) actually and reasonably incurred by such person in connection with such action, suit or proceeding if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to -15- 20 believe such person's conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person's conduct was unlawful. 6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) and amounts paid in settlement (if such settlement is approved in advance by the corporation, which approval shall not be unreasonably withheld) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Notwithstanding any other provision of this Article VI, no person shall be indemnified hereunder for any expenses or amounts paid in settlement with respect to any action to recover short-swing profits under Section 16(b) of the Securities Exchange Act of 1934, as amended. 6.3 SUCCESSFUL DEFENSE To the extent that a director, officer, employee or agent of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith. 6.4 DETERMINATION OF CONDUCT Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that the indemnification of the director, officer, employee or agent is proper in the circumstances because such person has met the applicable standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall be made (1) by the Board of Directors or the Executive Committee by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding or (2) or if such quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by -16- 21 independent legal counsel in a written opinion, or (3) by the stockholders. Notwithstanding the foregoing, a director, officer, employee or agent of the Corporation shall be entitled to contest any determination that the director, officer, employee or agent has not met the applicable standard of conduct set forth in Sections 6.1 and 6.2 by petitioning a court of competent jurisdiction. 6.5 PAYMENT OF EXPENSES IN ADVANCE Expenses incurred in defending a civil or criminal action, suit or proceeding, by an individual who may be entitled to indemnification pursuant to Section 6.1 or 6.2, shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this Article VI. 6.6 INDEMNITY NOT EXCLUSIVE The indemnification and advancement of expenses provided by or granted pursuant to the other sections of this Article VI shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. 6.7 INSURANCE INDEMNIFICATION The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity or arising out of such person's status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of this Article VI. 6.8 THE CORPORATION For purposes of this Article VI, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under and subject to the provisions of this Article VI (including, without limitation the provisions of Section 6.4) with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued. -17- 22 6.9 EMPLOYEE BENEFIT PLANS For purposes of this Article VI, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Article VI. 6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. ARTICLE VII RECORDS AND REPORTS 7.1 MAINTENANCE AND INSPECTION OF RECORDS The corporation shall, either at its principal executive officer or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these amended and restated bylaws as amended to date, accounting books, and other records. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent so to act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business. -18- 23 The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. 7.2 INSPECTION BY DIRECTORS Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper. 7.3 ANNUAL STATEMENT TO STOCKHOLDERS The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. ARTICLE VIII GENERAL MATTERS 8.1 CHECKS From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments. -19- 24 8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS The board of directors, except as otherwise provided in these amended and restated bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount. 8.3 STOCK CERTIFICATES; PARTLY PAID SHARES The shares of the corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the chief financial officer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon. 8.4 SPECIAL DESIGNATION ON CERTIFICATES If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock -20- 25 a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. 8.5 LOST CERTIFICATES Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and canceled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares. 8.6 CONSTRUCTION; DEFINITIONS Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these amended and restated bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person. 8.7 DIVIDENDS The directors of the corporation, subject to any restrictions contained in (i) the Delaware General Corporation Law or (ii) the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock. The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies. 8.8 FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors. -21- 26 8.9 SEAL The corporation may adopt a corporate seal, which shall be adopted and which may be altered by the board of directors, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 8.10 TRANSFER OF STOCK Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books. 8.11 STOCK TRANSFER AGREEMENTS The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the Delaware General Corporation Law. 8.12 REGISTERED STOCKHOLDERS The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE IX AMENDMENTS The amended and restated bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal amended and restated bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal amended and restated bylaws. -22- 27 CERTIFICATE OF ADOPTION OF AMENDED AND RESTATED BYLAWS OF E-LOAN, INC. Certificate by Secretary The undersigned hereby certifies that he is the duly elected, qualified, and acting Secretary of E-Loan, Inc. and that the foregoing Amended and Restated Bylaws, comprising twenty-two (22) pages, were adopted as the Amended and Restated Bylaws of the corporation on __________, 1999 by the board of directors of the corporation. IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed the corporate seal this ____ day of _________ 1999. --------------------------------------- Frank Siskowski, Secretary -23- EX-5.1 7 OPINION OF WILSON SONSINI GOODRICH & ROSATI 1 EXHIBIT 5.1 WILSON SONSINI GOODRICH & ROSATI Professional Corporation 650 PAGE MILL ROAD PALO ALTO, CALIFORNIA 94304-1050 TELEPHONE 650-493-9300 FACSIMILE 650-493-6811 WWW.WSGR.COM Palo Alto, California John Arnot Wilson Kirkland, Washington Retired Austin, Texas March 23, 1999 E-Loan, Inc. 5875 Arnold Road, Suite 100 Dublin, CA 94568 Re: Registration Statement on Form S-1 Ladies and Gentlemen: We have examined the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on March 23, 1999 (as such may be amended or supplemented, the "Registration Statement"), in connection with the registration under the Securities Act of 1933, as amended, of shares of Common Stock of E-Loan, Inc. (the "Shares"). The Shares, which include shares of Common Stock issuable pursuant to an over-allotment option granted to the underwriters, are to be sold to the underwriters as described in such Registration Statement for the sale to the public or issued to the Representatives of the underwriters. As your counsel in connection with this transaction, we have examined the proceedings proposed to be taken in connection with said sale and issuance of the Shares. It is our opinion that, upon approval by the pricing committee duly authorized by the Company's Board of Directors, the Shares when issued and sold in the manner referred to in the Registration Statement will be legally and validly issued, fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement, and further consent to the use of our name wherever appearing in the Registration Statement, including the prospectus constituting a part hereof, and any amendment thereto. Very truly yours, /s/ Wilson Sonsini Goodrich & Rosati WILSON SONSINI GOODRICH & ROSATI Professional Corporation EX-10.1 8 FORM OF INDEMNIFICATION AGREEMENT 1 EXHIBIT 10.1 E-LOAN, INC. FORM OF INDEMNIFICATION AGREEMENT This Indemnification Agreement ("Agreement") is effective as of March 19, 1999 by and between E-Loan, Inc., a Delaware corporation (the "Company"), and NAME~ ("Indemnitee"). WHEREAS, effective as of the date hereof, E-Loan, Inc., a California corporation, is reincorporating into Delaware; WHEREAS, the Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company and its related entities; WHEREAS, in order to induce Indemnitee to continue to provide services to the Company, the Company wishes to provide for the indemnification of, and the advancement of expenses to, Indemnitee to the maximum extent permitted by law; WHEREAS, the Company and Indemnitee recognize the continued difficulty in obtaining liability insurance for the Company's directors, officers, employees, agents and fiduciaries, the significant increases in the cost of such insurance and the general reductions in the coverage of such insurance; WHEREAS, the Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers, employees, agents and fiduciaries to expensive litigation risks at the same time as the availability and coverage of liability insurance has been severely limited; and WHEREAS, in connection with the Company's reincorporation, the Company and Indemnitee desire to continue to have in place the additional protection provided by an indemnification agreement, with such changes as are required to conform the existing agreement to Delaware law and to provide indemnification and advancement of expenses to the Indemnitee to the maximum extent permitted by Delaware law; WHEREAS, in view of the considerations set forth above, the Company desires that Indemnitee shall be indemnified and advanced expenses by the Company as set forth herein; NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below. 1. Certain Definitions. a. "Change in Control" shall mean, and shall be deemed to have occurred if, on or after the date of this Agreement, (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding 2 securities under an employee benefit plan of the Company acting in such capacity or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing more than 50% of the total voting power represented by the Company's then outstanding Voting Securities, (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof, (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 80% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of (in one transaction or a series of related transactions) all or substantially all of the Company's assets. b. "Claim" shall mean with respect to a Covered Event: any threatened, pending or completed action, suit, proceeding or alternative dispute resolution mechanism, or any hearing, inquiry or investigation that Indemnitee in good faith believes might lead to the institution of any such action, suit, proceeding or alternative dispute resolution mechanism, whether civil, criminal, administrative, investigative or other. c. References to the "Company" shall include, in addition to E-Loan, Inc., any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger to which E-Loan, Inc. (or any of its wholly owned subsidiaries) is a party which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, employees, agents or fiduciaries, so that if Indemnitee is or was a director, officer, employee, agent or fiduciary of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust or other enterprise, Indemnitee shall stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued. d. "Covered Event" shall mean any event or occurrence related to the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or any subsidiary of the Company, or is or was serving at the request of the Company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action or inaction on the part of Indemnitee while serving in such capacity. -2- 3 e. "Expenses" shall mean any and all expenses (including attorneys' fees and all other costs, expenses and obligations incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, to be a witness in or to participate in, any action, suit, proceeding, alternative dispute resolution mechanism, hearing, inquiry or investigation), judgments, fines, penalties and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) of any Claim and any federal, state, local or foreign taxes imposed on the Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement. f. "Expense Advance" shall mean a payment to Indemnitee pursuant to Section 3 of Expenses in advance of the settlement of or final judgement in any action, suit, proceeding or alternative dispute resolution mechanism, hearing, inquiry or investigation which constitutes a Claim. g. "Independent Legal Counsel" shall mean an attorney or firm of attorneys, selected in accordance with the provisions of Section 2(d) hereof, who shall not have otherwise performed services for the Company or Indemnitee within the last three years (other than with respect to matters concerning the rights of Indemnitee under this Agreement, or of other Indemnitees under similar indemnity agreements). h. References to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to "serving at the request of the Company" shall include any service as a director, officer, employee, agent or fiduciary of the Company which imposes duties on, or involves services by, such director, officer, employee, agent or fiduciary with respect to an employee benefit plan, its participants or its beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement. i. "Reviewing Party" shall mean, subject to the provisions of Section 2(d), any person or body appointed by the Board of Directors in accordance with applicable law to review the Company's obligations hereunder and under applicable law, which may include a member or members of the Company's Board of Directors, Independent Legal Counsel or any other person or body not a party to the particular Claim for which Indemnitee is seeking indemnification. j. "Section" refers to a section of this Agreement unless otherwise indicated. k. "Voting Securities" shall mean any securities of the Company that vote generally in the election of directors. 2. Indemnification. a. Indemnification of Expenses. Subject to the provisions of Section 2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest extent permitted by law if -3- 4 Indemnitee was or is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, any Claim (whether by reason of or arising in part out of a Covered Event), including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses. b. Review of Indemnification Obligations. Notwithstanding the foregoing, in the event any Reviewing Party shall have determined (in a written opinion, in any case in which Independent Legal Counsel is the Reviewing Party) that Indemnitee is not entitled to be indemnified hereunder under applicable law, (i) the Company shall have no further obligation under Section 2(a) to make any payments to Indemnitee not made prior to such determination by such Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the Company) for all Expenses theretofore paid to Indemnitee to which Indemnitee is not entitled hereunder under applicable law; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee is entitled to be indemnified hereunder under applicable law, any determination made by any Reviewing Party that Indemnitee is not entitled to be indemnified hereunder under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expenses theretofore paid in indemnifying Indemnitee until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Indemnitee's obligation to reimburse the Company for any Expenses shall be unsecured and no interest shall be charged thereon. c. Indemnitee Rights on Unfavorable Determination; Binding Effect. If any Reviewing Party determines that Indemnitee substantively is not entitled to be indemnified hereunder in whole or in part under applicable law, Indemnitee shall have the right to commence litigation seeking an initial determination by the court or challenging any such determination by such Reviewing Party or any aspect thereof, including the legal or factual bases therefor, and, subject to the provisions of Section 15, the Company hereby consents to service of process and to appear in any such proceeding. Absent such litigation, any determination by any Reviewing Party shall be conclusive and binding on the Company and Indemnitee. d. Selection of Reviewing Party; Change in Control. If there has not been a Change in Control, any Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), any Reviewing Party with respect to all matters thereafter arising concerning the rights of Indemnitee to indemnification of Expenses under this Agreement or any other agreement or under the Company's Certificate of Incorporation or Bylaws as now or hereafter in effect, or under any other applicable law, if desired by Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld). Such counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee would be entitled to be indemnified hereunder under applicable law and the Company agrees to abide by such opinion. The Company agrees to pay the reasonable fees of the Independent Legal Counsel referred to above and to indemnify fully such -4- 5 counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. Notwithstanding any other provision of this Agreement, the Company shall not be required to pay Expenses of more than one Independent Legal Counsel in connection with all matters concerning a single Indemnitee, and such Independent Legal Counsel shall be the Independent Legal Counsel for any or all other Indemnitees unless (i) the employment of separate counsel by one or more Indemnitees has been previously authorized by the Company in writing, or (ii) an Indemnitee shall have provided to the Company a written statement that such Indemnitee has reasonably concluded that there may be a conflict of interest between such Indemnitee and the other Indemnitees with respect to the matters arising under this Agreement. e. Mandatory Payment of Expenses. Notwithstanding any other provision of this Agreement other than Section 10 hereof, to the extent that Indemnitee has been successful on the merits or otherwise, including, without limitation, the dismissal of an action without prejudice, in defense of any Claim, Indemnitee shall be indemnified against all Expenses incurred by Indemnitee in connection therewith. 3. Expense Advances. a. Obligation to Make Expense Advances. Upon receipt of a written undertaking by or on behalf of the Indemnitee to repay such amounts if it shall ultimately be determined that the Indemnitee is not entitled to be indemnified therefore by the Company hereunder under applicable law, the Company shall make Expense Advances to Indemnitee. b. Form of Undertaking. Any obligation to repay any Expense Advances hereunder pursuant to a written undertaking by the Indemnitee shall be unsecured and no interest shall be charged thereon. c. Determination of Reasonable Expense Advances. The parties agree that for the purposes of any Expense Advance for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such Expense Advance that are certified by affidavit of Indemnitee's counsel as being reasonable shall be presumed conclusively to be reasonable. 4. Procedures for Indemnification and Expense Advances. a. Timing of Payments. All payments of Expenses (including without limitation Expense Advances) by the Company to the Indemnitee pursuant to this Agreement shall be made to the fullest extent permitted by law as soon as practicable after written demand by Indemnitee therefor is presented to the Company, but in no event later than thirty (30) business days after such written demand by Indemnitee is presented to the Company, except in the case of Expense Advances, which shall be made no later than ten (10) business days after such written demand by Indemnitee is presented to the Company. -5- 6 b. Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition precedent to Indemnitee's right to be indemnified or Indemnitee's right to receive Expense Advances under this Agreement, give the Company notice in writing as soon as practicable of any Claim made against Indemnitee for which indemnification will or could be sought under this Agreement. Notice to the Company shall be directed to the Chief Executive Officer of the Company at the address shown on the signature page of this Agreement (or such other address as the Company shall designate in writing to Indemnitee). In addition, Indemnitee shall give the Company such information and cooperation as it may reasonably require and as shall be within Indemnitee's power. c. No Presumptions; Burden of Proof. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by this Agreement or applicable law. In addition, neither the failure of any Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by any Reviewing Party that Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee to secure a judicial determination that Indemnitee should be indemnified under this Agreement under applicable law, shall be a defense to Indemnitee's claim or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief. In connection with any determination by any Reviewing Party or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder under applicable law, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. d. Notice to Insurers. If, at the time of the receipt by the Company of a notice of a Claim pursuant to Section 4(b) hereof, the Company has liability insurance in effect which may cover such Claim, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Claim in accordance with the terms of such policies. e. Selection of Counsel. In the event the Company shall be obligated hereunder to provide indemnification for or make any Expense Advances with respect to the Expenses of any Claim, the Company, if appropriate, shall be entitled to assume the defense of such Claim with counsel approved by Indemnitee (which approval shall not be unreasonably withheld) upon the delivery to Indemnitee of written notice of the Company's election to do so. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any fees or expenses of separate counsel subsequently retained by or on behalf of Indemnitee with respect to the same Claim; provided that, (i) Indemnitee shall have the right to employ Indemnitee's separate counsel in any such Claim at Indemnitee's expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably -6- 7 concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of any such defense, or (C) the Company shall not continue to retain such counsel to defend such Claim, then the fees and expenses of Indemnitee's separate counsel shall be Expenses for which Indemnitee may receive indemnification or Expense Advances hereunder. 5. Additional Indemnification Rights; Nonexclusivity. a. Scope. The Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement, the Company's Certificate of Incorporation, the Company's Bylaws or by statute. In the event of any change after the date of this Agreement in any applicable law, statute or rule which expands the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits afforded by such change. In the event of any change in any applicable law, statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, employee, agent or fiduciary, such change, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement, shall have no effect on this Agreement or the parties' rights and obligations hereunder except as set forth in Section 10(a) hereof. b. Nonexclusivity. The indemnification and the payment of Expense Advances provided by this Agreement shall be in addition to any rights to which Indemnitee may be entitled under the Company's Certificate of Incorporation, its Bylaws, any other agreement, any vote of stockholders or disinterested directors, the General Corporation Law of the State of Delaware, or otherwise. The indemnification and the payment of Expense Advances provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified capacity even though subsequent thereto Indemnitee may have ceased to serve in such capacity. 6. No Duplication of Payments. The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, provision of the Company's Certificate of Incorporation, Bylaws or otherwise) of the amounts otherwise payable hereunder. 7. Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses incurred in connection with any Claim, but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion of such Expenses to which Indemnitee is entitled. 8. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that in certain instances, federal law or applicable public policy may prohibit the Company from indemnifying its directors, officers, employees, agents or fiduciaries under this Agreement or otherwise. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the future to undertake with the Securities and Exchange Commission to submit the -7- 8 question of indemnification to a court in certain circumstances for a determination of the Company's right under public policy to indemnify Indemnitee. 9. Liability Insurance. To the extent the Company maintains liability insurance applicable to directors, officers, employees, agents or fiduciaries, Indemnitee shall be covered by such policies in such a manner as to provide Indemnitee the same rights and benefits as are provided to the most favorably insured of the Company's directors, if Indemnitee is a director; or of the Company's officers, if Indemnitee is not a director of the Company but is an officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee is not an officer or director but is a key employee, agent or fiduciary. 10. Exceptions. Notwithstanding any other provision of this Agreement, the Company shall not be obligated pursuant to the terms of this Agreement: a. Excluded Actions or Omissions. To indemnify or make Expense Advances to Indemnitee with respect to Claims arising out of acts, omissions or transactions for which Indemnitee is prohibited from receiving indemnification under applicable law. b. Claims Initiated by Indemnitee. To indemnify or make Expense Advances to Indemnitee with respect to Claims initiated or brought voluntarily by Indemnitee and not by way of defense, counterclaim or crossclaim, except (i) with respect to actions or proceedings brought to establish or enforce a right to indemnification under this Agreement or any other agreement or insurance policy or under the Company's Certificate of Incorporation or Bylaws now or hereafter in effect relating to Claims for Covered Events, (ii) in specific cases if the Board of Directors has approved the initiation or bringing of such Claim, or (iii) as otherwise required under Section 145 of the Delaware General Corporation Law, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, Expense Advances, or insurance recovery, as the case may be. c. Lack of Good Faith. To indemnify Indemnitee for any Expenses incurred by the Indemnitee with respect to any action instituted (i) by Indemnitee to enforce or interpret this Agreement, if a court having jurisdiction over such action determines as provided in Section 13 that each of the material assertions made by the Indemnitee as a basis for such action was not made in good faith or was frivolous, or (ii) by or in the name of the Company to enforce or interpret this Agreement, if a court having jurisdiction over such action determines as provided in Section 13 that each of the material defenses asserted by Indemnitee in such action was made in bad faith or was frivolous. d. Claims Under Section 16(b). To indemnify Indemnitee for Expenses and the payment of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute. 11. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall constitute an original. -8- 9 12. Binding Effect; Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), spouses, heirs and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect, and whether by purchase, merger, consolidation or otherwise) to all, substantially all, or a substantial part, of the business or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as a director, officer, employee, agent or fiduciary (as applicable) of the Company or of any other enterprise at the Company's request. 13. Expenses Incurred in Action Relating to Enforcement or Interpretation. In the event that any action is instituted by Indemnitee under this Agreement or under any liability insurance policies maintained by the Company to enforce or interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee with respect to such action (including without limitation attorneys' fees), regardless of whether Indemnitee is ultimately successful in such action, unless as a part of such action a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that each of the material assertions made by Indemnitee as a basis for such action was not made in good faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances hereunder with respect to such action. In the event of an action instituted by or in the name of the Company under this Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee shall be entitled to be indemnified for all Expenses incurred by Indemnitee in defense of such action (including without limitation costs and expenses incurred with respect to Indemnitee's counterclaims and cross- claims made in such action), unless as a part of such action a court having jurisdiction over such action makes a final judicial determination (as to which all rights of appeal therefrom have been exhausted or lapsed) that each of the material defenses asserted by Indemnitee in such action was made in bad faith or was frivolous; provided, however, that until such final judicial determination is made, Indemnitee shall be entitled under Section 3 to receive payment of Expense Advances hereunder with respect to such action. 14. Period of Limitations. No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company against Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action, such shorter period shall govern. 15. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and signed for -9- 10 by the party addressed, on the date of such delivery, or (ii) if mailed by domestic certified or registered mail with postage prepaid, on the third business day after the date postmarked. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice. 16. Consent to Jurisdiction. The Company and Indemnitee each hereby irrevocably consent to the jurisdiction of the courts of the State of Delaware for all purposes in connection with any action or proceeding which arises out of or relates to this Agreement and agree that any action instituted under this Agreement shall be commenced, prosecuted and continued only in the Court of Chancery of the State of Delaware in and for New Castle County, which shall be the exclusive and only proper forum for adjudicating such a claim. 17. Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, and the remaining provisions shall remain enforceable to the fullest extent permitted by law. Furthermore, to the fullest extent possible, the provisions of this Agreement (including without limitation each portion of this Agreement containing any provision held to be invalid, void or otherwise unenforceable, that is not itself invalid, void or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable. 18. Choice of Law. This Agreement, and all rights, remedies, liabilities, powers and duties of the parties to this Agreement, shall be governed by and construed in accordance with the laws of the State of Delaware as applied to contracts between Delaware residents entered into and to be performed entirely in the State of Delaware without regard to principles of conflicts of laws. 19. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure such rights and to enable the Company effectively to bring suit to enforce such rights. 20. Amendment and Termination. No amendment, modification, termination or cancellation of this Agreement shall be effective unless it is in writing signed by both the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed to be or shall constitute a waiver of any other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver. 21. Integration and Entire Agreement. This Agreement sets forth the entire understanding between the parties hereto and supersedes and merges all previous written and oral negotiations, commitments, understandings and agreements relating to the subject matter hereof between the parties hereto. 22. No Construction as Employment Agreement. Nothing contained in this Agreement shall be construed as giving Indemnitee any right to be retained in the employ of the Company or any of its subsidiaries or affiliated entities. -10- 11 IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written. E-LOAN, INC. By: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- Address: 5875 Arnold Road, Suite 100 Dublin, CA 94568 AGREED TO AND ACCEPTED INDEMNITEE: ----------------------------------- (Signature) [NAME] ----------------------------------- Name ----------------------------------- Address ----------------------------------- -11- EX-10.2 9 1997 STOCK PLAN 1 EXHIBIT 10.2 E-LOAN, INC. 1997 STOCK PLAN (as amended and restated _________, 1999) 1. Purposes of the Plan. The purposes of this 1997 Stock Plan are: - to attract and retain the best available personnel for positions of substantial responsibility, - to provide additional incentive to Employees, Directors and Consultants, and - to promote the success of the Company's business. Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant. Stock Purchase Rights may also be granted under the Plan. 2. Definitions. As used herein, the following definitions shall apply: (a) "Administrator" means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan. (b) "Applicable Laws" means the requirements relating to the administration of stock option plans under U. S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or jurisdiction where Options or Stock Purchase Rights are, or will be, granted under the Plan. (c) "Board" means the Board of Directors of the Company. (d) "Code" means the Internal Revenue Code of 1986, as amended. (e) "Committee" means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan. (f) "Common Stock" means the common stock of the Company. (g) "Company" means E-Loan, Inc., a Delaware corporation. (h) "Consultant" means any person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity. (i) "Director" means a member of the Board. 2 (j) "Disability" means total and permanent disability as defined in Section 22(e)(3) of the Code. (k) "Employee" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, on the 181st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. (l) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (m) "Fair Market Value" means, as of any date, the value of Common Stock determined as follows: (i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the last market trading day prior to the day of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator. (n) "Incentive Stock Option" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. (o) "Nonstatutory Stock Option" means an Option not intended to qualify as an Incentive Stock Option. -2- 3 (p) "Notice of Grant" means a written or electronic notice evidencing certain terms and conditions of an individual Option or Stock Purchase Right grant. The Notice of Grant is part of the Option Agreement. (q) "Officer" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (r) "Option" means a stock option granted pursuant to the Plan. (s) "Option Agreement" means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan. (t) "Option Exchange Program" means a program whereby outstanding Options are surrendered in exchange for Options with a lower exercise price. (u) "Optioned Stock" means the Common Stock subject to an Option or Stock Purchase Right. (v) "Optionee" means the holder of an outstanding Option or Stock Purchase Right granted under the Plan. (w) "Parent" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code. (x) "Plan" means this 1997 Stock Plan. (y) "Restricted Stock" means shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan. (z) "Restricted Stock Purchase Agreement" means a written agreement between the Company and the Optionee evidencing the terms and restrictions applying to stock purchased under a Stock Purchase Right. The Restricted Stock Purchase Agreement is subject to the terms and conditions of the Plan and the Notice of Grant. (aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan. (bb) "Section 16(b)" means Section 16(b) of the Exchange Act. (cc) "Service Provider" means an Employee, Director or Consultant. -3- 4 (dd) "Share" means a share of the Common Stock, as adjusted in accordance with Section 13 of the Plan. (ee) "Stock Purchase Right" means the right to purchase Common Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant. (ff) "Subsidiary" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code. 3. Stock Subject to the Plan. Subject to the provisions of Section 13 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 2,500,000 Shares, plus an annual increase to be added on the first day of the Company's fiscal year (beginning in 2000) equal to the lesser of (i) 1,500,000 Shares, (ii) 4% of the outstanding shares on such date or (iii) a lesser amount determined by the Board. The Shares may be authorized, but unissued, or reacquired Common Stock. If an Option or Stock Purchase Right expires or becomes unexercisable without having been exercised in full, or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); provided, however, that Shares that have actually been issued under the Plan, whether upon exercise of an Option or Right, shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if Shares of Restricted Stock are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan. 4. Administration of the Plan. (a) Procedure. (i) Multiple Administrative Bodies. The Plan may be administered by different Committees with respect to different groups of Service Providers. (ii) Section 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as "performance-based compensation" within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more "outside directors" within the meaning of Section 162(m) of the Code. (iii) Rule 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3. -4- 5 (iv) Other Administration. Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws. (b) Powers of the Administrator. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion: (i) to determine the Fair Market Value; (ii) to select the Service Providers to whom Options and Stock Purchase Rights may be granted hereunder; (iii) to determine the number of shares of Common Stock to be covered by each Option and Stock Purchase Right granted hereunder; (iv) to approve forms of agreement for use under the Plan; (v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option or Stock Purchase Right granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options or Stock Purchase Rights may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or Stock Purchase Right or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine; (vi) to reduce the exercise price of any Option or Stock Purchase Right to the then current Fair Market Value if the Fair Market Value of the Common Stock covered by such Option or Stock Purchase Right shall have declined since the date the Option or Stock Purchase Right was granted; (vii) to institute an Option Exchange Program; (viii) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan; (ix) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of qualifying for preferred tax treatment under foreign tax laws; -5- 6 (x) to modify or amend each Option or Stock Purchase Right (subject to Section 15(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan; (xi) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option or Stock Purchase Right that number of Shares having a Fair Market Value equal to the amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable; (xii) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option or Stock Purchase Right previously granted by the Administrator; (xiii) to make all other determinations deemed necessary or advisable for administering the Plan. (c) Effect of Administrator's Decision. The Administrator's decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options or Stock Purchase Rights. 5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may be granted to Service Providers. Incentive Stock Options may be granted only to Employees. 6. Limitations. (a) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted. (b) Neither the Plan nor any Option or Stock Purchase Right shall confer upon an Optionee any right with respect to continuing the Optionee's relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee's right or the Company's right to terminate such relationship at any time, with or without cause. (c) The following limitations shall apply to grants of Options: -6- 7 (i) No Service Provider shall be granted, in any fiscal year of the Company, Options to purchase more than 750,000 Shares. (ii) In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 750,000 Shares which shall not count against the limit set forth in subsection (i) above. (iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 13. (iv) If an Option is canceled in the same fiscal year of the Company in which it was granted (other than in connection with a transaction described in Section 13), the canceled Option will be counted against the limits set forth in subsections (i) and (ii) above. For this purpose, if the exercise price of an Option is reduced, the transaction will be treated as a cancellation of the Option and the grant of a new Option. 7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless terminated earlier under Section 15 of the Plan. 8. Term of Option. The term of each Option shall be stated in the Option Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement. 9. Option Exercise Price and Consideration. (a) Exercise Price. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following: (i) In the case of an Incentive Stock Option (A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. -7- 8 (B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate transaction. (b) Waiting Period and Exercise Dates. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions which must be satisfied before the Option may be exercised. (c) Form of Consideration. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of: (i) cash; (ii) check; (iii) promissory note; (iv) other Shares which (A) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised; (v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; (vi) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee's participation in any Company-sponsored deferred compensation program or arrangement; (vii) any combination of the foregoing methods of payment; or -8- 9 (viii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws. 10. Exercise of Option. (a) Procedure for Exercise; Rights as a Shareholder. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be tolled during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share. An Option shall be deemed exercised when the Company receives: (i) written or electronic notice of exercise (in accordance with the Option Agreement) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised. Full payment may consist of any consideration and method of payment authorized by the Administrator and permitted by the Option Agreement and the Plan. Shares issued upon exercise of an Option shall be issued in the name of the Optionee or, if requested by the Optionee, in the name of the Optionee and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 13 of the Plan. Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) Termination of Relationship as a Service Provider. If an Optionee ceases to be a Service Provider, other than upon the Optionee's death or Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. -9- 10 (c) Disability of Optionee. If an Optionee ceases to be a Service Provider as a result of the Optionee's Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (d) Death of Optionee. If an Optionee dies while a Service Provider, the Option shall vest and become exercisable in full, including Shares as to which it would not otherwise be vested or exercisable, and the Option may be exercised within such period of time as is specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Notice of Grant), by the Optionee's estate or by a person who acquires the right to exercise the Option by bequest or inheritance. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. The Option may be exercised by the executor or administrator of the Optionee's estate or, if none, by the person(s) entitled to exercise the Option under the Optionee's will or the laws of descent or distribution. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan. (e) Buyout Provisions. The Administrator may at any time offer to buy out for a payment in cash or Shares an Option previously granted based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made. 11. Stock Purchase Rights. (a) Rights to Purchase. Stock Purchase Rights may be issued either alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing or electronically, by means of a Notice of Grant, of the terms, conditions and restrictions related to the offer, including the number of Shares that the offeree shall be entitled to purchase, the price to be paid, and the time within which the offeree must accept such offer. The offer shall be accepted by execution of a Restricted Stock Purchase Agreement in the form determined by the Administrator. (b) Repurchase Option. Unless the Administrator determines otherwise, the Restricted Stock Purchase Agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's service with the Company for any reason (including death or Disability). The purchase price for Shares repurchased pursuant to the Restricted -10- 11 Stock Purchase Agreement shall be the original price paid by the purchaser and may be paid by cancellation of any indebtedness of the purchaser to the Company. The repurchase option shall lapse at a rate determined by the Administrator. (c) Other Provisions. The Restricted Stock Purchase Agreement shall contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. (d) Rights as a Shareholder. Once the Stock Purchase Right is exercised, the purchaser shall have the rights equivalent to those of a shareholder, and shall be a shareholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 13 of the Plan. 12. Non-Transferability of Options and Stock Purchase Rights. Unless determined otherwise by the Administrator, an Option or Stock Purchase Right may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option or Stock Purchase Right transferable, such Option or Stock Purchase Right shall contain such additional terms and conditions as the Administrator deems appropriate. 13. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale. (a) Changes in Capitalization. Subject to any required action by the shareholders of the Company, the number of shares of Common Stock covered by each outstanding Option and Stock Purchase Right, and the number of shares of Common Stock which have been authorized for issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or which have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of Common Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option or Stock Purchase Right. -11- 12 (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Administrator in its discretion may provide for an Optionee to have the right to exercise his or her Option until fifteen (15) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Administrator may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action. (c) Merger or Asset Sale. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option and Stock Purchase Right shall be assumed or an equivalent option or right substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option or Stock Purchase Right, the Optionee shall fully vest in and have the right to exercise the Option or Stock Purchase Right as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option or Stock Purchase Right becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option or Stock Purchase Right shall be fully vested and exercisable for a period of fifteen (15) days from the date of such notice, and the Option or Stock Purchase Right shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option or Stock Purchase Right shall be considered assumed if, following the merger or sale of assets, the option or right confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option or Stock Purchase Right immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock subject to the Option or Stock Purchase Right, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets. 14. Date of Grant. The date of grant of an Option or Stock Purchase Right shall be, for all purposes, the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other later date as is determined by the Administrator. Notice of the -12- 13 determination shall be provided to each Optionee within a reasonable time after the date of such grant. 15. Amendment and Termination of the Plan. (a) Amendment and Termination. The Board may at any time amend, alter, suspend or terminate the Plan. (b) Shareholder Approval. The Company shall obtain shareholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws. (c) Effect of Amendment or Termination. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination. 16. Conditions Upon Issuance of Shares. (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of an Option or Stock Purchase Right unless the exercise of such Option or Stock Purchase Right and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance. (b) Investment Representations. As a condition to the exercise of an Option or Stock Purchase Right, the Company may require the person exercising such Option or Stock Purchase Right to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required. 17. Inability to Obtain Authority. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 18. Reservation of Shares. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. -13- 14 19. Shareholder Approval. The Plan shall be subject to approval by the shareholders of the Company within twelve (12) months after the date the Plan is adopted. Such shareholder approval shall be obtained in the manner and to the degree required under Applicable Laws. -14- 15 E-LOAN, INC. 1997 STOCK PLAN STOCK OPTION AGREEMENT Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option Agreement. I. NOTICE OF STOCK OPTION GRANT [Optionee's Name and Address] You have been granted an option to purchase Common Stock of the Company, subject to the terms and conditions of the Plan and this Option Agreement, as follows: Grant Number _________________________ Date of Grant _________________________ Vesting Commencement Date _________________________ Exercise Price per Share $________________________ Total Number of Shares Granted _________________________ Total Exercise Price $________________________ Type of Option: ___ Incentive Stock Option ___ Nonstatutory Stock Option Term/Expiration Date: _________________________ Vesting Schedule: This Option may be exercised, in whole or in part, in accordance with the following schedule: 16 Termination Period: This Option may be exercised for three months after Optionee ceases to be a Service Provider. Upon the death or Disability of the Optionee, this Option may be exercised for one year after Optionee ceases to be a Service Provider. In no event shall this Option be exercised later than the Term/Expiration Date as provided above. II. AGREEMENT 1. Grant of Option. The Plan Administrator of the Company hereby grants to the Optionee named in the Notice of Grant attached as Part I of this Agreement (the "Optionee") an option (the "Option") to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per share set forth in the Notice of Grant (the "Exercise Price"), subject to the terms and conditions of the Plan, which is incorporated herein by reference. Subject to Section 15(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Option Agreement, the terms and conditions of the Plan shall prevail. If designated in the Notice of Grant as an Incentive Stock Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO"). 2. Exercise of Option. (a) Right to Exercise. This Option is exercisable during its term in accordance with the Vesting Schedule set out in the Notice of Grant and the applicable provisions of the Plan and this Option Agreement. (b) Method of Exercise. This Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit A (the "Exercise Notice"), which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the "Exercised Shares"), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice shall be completed by the Optionee and delivered to the Secretary of the Company. The Exercise Notice shall be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed to be 17 exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price. No Shares shall be issued pursuant to the exercise of this Option unless such issuance and exercise complies with Applicable Laws. Assuming such compliance, for income tax purposes the Exercised Shares shall be considered transferred to the Optionee on the date the Option is exercised with respect to such Exercised Shares. 3. Method of Payment. Payment of the aggregate Exercise Price shall be by any of the following, or a combination thereof, at the election of the Optionee: (a) cash; or (b) check; or (c) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan; or (d) surrender of other Shares which (i) in the case of Shares acquired upon exercise of an option, have been owned by the Optionee for more than six (6) months on the date of surrender, AND (ii) have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares; or (e) with the Administrator's consent, delivery of Optionee's promissory note (the "Note") in the form attached hereto as Exhibit C, in the amount of the aggregate Exercise Price of the Exercised Shares together with the execution and delivery by the Optionee of the Security Agreement attached hereto as Exhibit B. The Note shall bear interest at the "applicable federal rate" prescribed under the Code and its regulations at time of purchase, and shall be secured by a pledge of the Shares purchased by the Note pursuant to the Security Agreement. 4. Non-Transferability of Option. This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by the Optionee. The terms of the Plan and this Option Agreement shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. 5. Term of Option. This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option Agreement. 6. Tax Consequences. Some of the federal tax consequences relating to this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE -3- 18 SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES. (a) Exercising the Option. (i) Nonstatutory Stock Option. The Optionee may incur regular federal income tax liability upon exercise of a NSO. The Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price. If the Optionee is an Employee or a former Employee, the Company will be required to withhold from his or her compensation or collect from Optionee and pay to the applicable taxing authorities an amount in cash equal to a percentage of this compensation income at the time of exercise, and may refuse to honor the exercise and refuse to deliver Shares if such withholding amounts are not delivered at the time of exercise. (ii) Incentive Stock Option. If this Option qualifies as an ISO, the Optionee will have no regular federal income tax liability upon its exercise, although the excess, if any, of the Fair Market Value of the Exercised Shares on the date of exercise over their aggregate Exercise Price will be treated as an adjustment to alternative minimum taxable income for federal tax purposes and may subject the Optionee to alternative minimum tax in the year of exercise. In the event that the Optionee ceases to be an Employee but remains a Service Provider, any Incentive Stock Option of the Optionee that remains unexercised shall cease to qualify as an Incentive Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option on the date three (3) months and one (1) day following such change of status. (b) Disposition of Shares. (i) NSO. If the Optionee holds NSO Shares for at least one year, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. (ii) ISO. If the Optionee holds ISO Shares for at least one year after exercise and two years after the grant date, any gain realized on disposition of the Shares will be treated as long-term capital gain for federal income tax purposes. If the Optionee disposes of ISO Shares within one year after exercise or two years after the grant date, any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the lesser of (A) the difference between the Fair Market Value of the Shares acquired on the date of exercise and the aggregate Exercise Price, or (B) the difference between the sale price of such Shares and the aggregate Exercise Price. Any additional gain will be taxed as capital gain, short-term or long-term depending on the period that the ISO Shares were held. -4- 19 (c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on or before the later of (i) two years after the grant date, or (ii) one year after the exercise date, the Optionee shall immediately notify the Company in writing of such disposition. The Optionee agrees that he or she may be subject to income tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares by payment in cash or out of the current earnings paid to the Optionee. 7. Entire Agreement; Governing Law. The Plan is incorporated herein by reference. The Plan and this Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and may not be modified adversely to the Optionee's interest except by means of a writing signed by the Company and Optionee. This agreement is governed by the internal substantive laws, but not the choice of law rules, of California. 8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE. By your signature and the signature of the Company's representative below, you and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Option Agreement. Optionee has reviewed the Plan and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option Agreement and fully understands all provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Option Agreement. Optionee further agrees to notify the Company upon any change in the residence address indicated below. OPTIONEE: E-LOAN, INC. -5- 20 - ----------------------------------- ---------------------------------------- Signature By - ----------------------------------- ---------------------------------------- Print Name Title - ----------------------------------- Residence Address - ----------------------------------- CONSENT OF SPOUSE The undersigned spouse of Optionee has read and hereby approves the terms and conditions of the Plan and this Option Agreement. In consideration of the Company's granting his or her spouse the right to purchase Shares as set forth in the Plan and this Option Agreement, the undersigned hereby agrees to be irrevocably bound by the terms and conditions of the Plan and this Option Agreement and further agrees that any community property interest shall be similarly bound. The undersigned hereby appoints the undersigned's spouse as attorney-in-fact for the undersigned with respect to any amendment or exercise of rights under the Plan or this Option Agreement. ---------------------------------------- Spouse of Optionee -6- 21 EXHIBIT A E-LOAN, INC. 1997 STOCK PLAN EXERCISE NOTICE E-Loan, Inc. 540 University Avenue, Suite 350 Palo Alto, CA 94301 Attention: Secretary 1. Exercise of Option. Effective as of today, ________________, _____, the undersigned ("Purchaser") hereby elects to purchase ______________ shares (the "Shares") of the Common Stock of E-Loan, Inc. (the "Company") under and pursuant to the 1997 Stock Plan (the "Plan") and the Stock Option Agreement dated _________, ____ (the "Option Agreement"). The purchase price for the Shares shall be $________ , as required by the Option Agreement. 2. Delivery of Payment. Purchaser herewith delivers to the Company the full purchase price for the Shares. 3. Representations of Purchaser. Purchaser acknowledges that Purchaser has received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions. 4. Rights as Shareholder. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the Optioned Stock, notwithstanding the exercise of the Option. The Shares so acquired shall be issued to the Optionee as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance, except as provided in Section 13 of the Plan. 5. Tax Consultation. Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser's purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice. 22 6. Entire Agreement; Governing Law. The Plan and Option Agreement are incorporated herein by reference. This Agreement, the Plan and the Option Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser's interest except by means of a writing signed by the Company and Purchaser. This agreement is governed by the internal substantive laws, but not the choice of law rules, of California. Submitted by: Accepted by: PURCHASER: E-LOAN, INC. - ---------------------------------- ------------------------------------- Signature By - ---------------------------------- ------------------------------------- Print Name Its Address: Address: - ---------------------------------- E-Loan, Inc. 540 University Avenue, Suite 350 - ---------------------------------- Palo Alto, CA 94301 ------------------------------------- Date Received -2- 23 EXHIBIT B SECURITY AGREEMENT This Security Agreement is made as of __________, _____ between E-Loan, Inc. a Delaware corporation ("Pledgee"), and _________________________ ("Pledgor"). Recitals Pursuant to Pledgor's election to purchase Shares under the Option Agreement dated ________ (the "Option"), between Pledgor and Pledgee under Pledgee's 1997 Stock Plan, and Pledgor's election under the terms of the Option to pay for such shares with his promissory note (the "Note"), Pledgor has purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price of $________ per share, for a total purchase price of $__________. The Note and the obligations thereunder are as set forth in Exhibit C to the Option. NOW, THEREFORE, it is agreed as follows: 1. Creation and Description of Security Interest. In consideration of the transfer of the Shares to Pledgor under the Option Agreement, Pledgor, pursuant to the California Commercial Code, hereby pledges all of such Shares (herein sometimes referred to as the "Collateral") represented by certificate number ______, duly endorsed in blank or with executed stock powers, and herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"), who shall hold said certificate subject to the terms and conditions of this Security Agreement. The pledged stock (together with an executed blank stock assignment for use in transferring all or a portion of the Shares to Pledgee if, as and when required pursuant to this Security Agreement) shall be held by the Pledgeholder as security for the repayment of the Note, and any extensions or renewals thereof, to be executed by Pledgor pursuant to the terms of the Option, and the Pledge holder shall not encumber or dispose of such Shares except in accordance with the provisions of this Security Agreement. 2. Pledgor's Representations and Covenants. To induce Pledgee to enter into this Security Agreement, Pledgor represents and covenants to Pledgee, its successors and assigns, as follows: a. Payment of Indebtedness. Pledgor will pay the principal sum of the Note secured hereby, together with interest thereon, at the time and in the manner provided in the Note. b. Encumbrances. The Shares are free of all other encumbrances, defenses and liens, and Pledgor will not further encumber the Shares without the prior written consent of Pledgee. 24 c. Margin Regulations. In the event that Pledgee's Common Stock is now or later becomes margin-listed by the Federal Reserve Board and Pledgee is classified as a "lender" within the meaning of the regulations under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee in making any amendments to the Note or providing any additional collateral as may be necessary to comply with such regulations. 3. Voting Rights. During the term of this pledge and so long as all payments of principal and interest are made as they become due under the terms of the Note, Pledgor shall have the right to vote all of the Shares pledged hereunder. 4. Stock Adjustments. In the event that during the term of the pledge any stock dividend, reclassification, readjustment or other changes are declared or made in the capital structure of Pledgee, all new, substituted and additional shares or other securities issued by reason of any such change shall be delivered to and held by the Pledgee under the terms of this Security Agreement in the same manner as the Shares originally pledged hereunder. In the event of substitution of such securities, Pledgor, Pledgee and Pledgeholder shall cooperate and execute such documents as are reasonable so as to provide for the substitution of such Collateral and, upon such substitution, references to "Shares" in this Security Agreement shall include the substituted shares of capital stock of Pledgor as a result thereof. 5. Options and Rights. In the event that, during the term of this pledge, subscription Options or other rights or options shall be issued in connection with the pledged Shares, such rights, Options and options shall be the property of Pledgor and, if exercised by Pledgor, all new stock or other securities so acquired by Pledgor as it relates to the pledged Shares then held by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under the terms of this Security Agreement in the same manner as the Shares pledged. 6. Default. Pledgor shall be deemed to be in default of the Note and of this Security Agreement in the event: a. Payment of principal or interest on the Note shall be delinquent for a period of 10 days or more; or b. Pledgor fails to perform any of the covenants set forth in the Option or contained in this Security Agreement for a period of 10 days after written notice thereof from Pledgee. In the case of an event of Default, as set forth above, Pledgee shall have the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee shall thereafter be entitled to pursue its remedies under the California Commercial Code. 7. Release of Collateral. Subject to any applicable contrary rules under Regulation G, there shall be released from this pledge a portion of the pledged Shares held by Pledgeholder here- -2- 25 under upon payments of the principal of the Note. The number of the pledged Shares which shall be released shall be that number of full Shares which bears the same proportion to the initial number of Shares pledged hereunder as the payment of principal bears to the initial full principal amount of the Note. 8. Withdrawal or Substitution of Collateral. Pledgor shall not sell, withdraw, pledge, substitute or otherwise dispose of all or any part of the Collateral without the prior written consent of Pledgee. 9. Term. The within pledge of Shares shall continue until the payment of all indebtedness secured hereby, at which time the remaining pledged stock shall be promptly delivered to Pledgor, subject to the provisions for prior release of a portion of the Collateral as provided in paragraph 7 above. 10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency proceeding is instituted by or against it, or if a receiver is appointed for the property of Pledgor, or if Pledgor makes an assignment for the benefit of creditors, the entire amount unpaid on the Note shall become immediately due and payable, and Pledgee may proceed as provided in the case of default. 11. Pledgeholder Liability. In the absence of willful or gross negligence, Pledgeholder shall not be liable to any party for any of his acts, or omissions to act, as Pledgeholder. 12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that the enforceability or invalidity of any provision or provisions of this Security Agreement shall not render any other provision or provisions herein contained unenforceable or invalid. 13. Successors or Assigns. Pledgor and Pledgee agree that all of the terms of this Security Agreement shall be binding on their respective successors and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein shall be deemed to include, for all purposes, the respective designees, successors, assigns, heirs, executors and administrators. 14. Governing Law. This Security Agreement shall be interpreted and governed under the internal substantive laws, but not the choice of law rules, of California. -3- 26 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. "PLEDGOR" ---------------------------------------- Signature ---------------------------------------- Print Name Address: ---------------------------------------- ---------------------------------------- "PLEDGEE" E-LOAN, INC., a Delaware corporation ---------------------------------------- Signature ---------------------------------------- Print Name ---------------------------------------- Title "PLEDGEHOLDER" ---------------------------------------- Secretary of E-Loan, Inc. -4- 27 EXHIBIT C NOTE $ Palo Alto, Ca. - ---------------------------- --------------, ----- FOR VALUE RECEIVED, _______________ promises to pay to E-Loan, Inc. a Delaware corporation (the "Company"), or order, the principal sum of _______________________ ($_____________), together with interest on the unpaid principal hereof from the date hereof at the rate of _______________ percent (____%) per annum, compounded semiannually. Principal and interest shall be due and payable on __________, _____. Payment of principal and interest shall be made in lawful money of the United States of America. The undersigned may at any time prepay all or any portion of the principal or interest owing hereunder. This Note is subject to the terms of the Option, dated as of ________________. This Note is secured in part by a pledge of the Company's Common Stock under the terms of a Security Agreement of even date herewith and is subject to all the provisions thereof. The holder of this Note shall have full recourse against the undersigned, and shall not be required to proceed against the collateral securing this Note in the event of default. In the event the undersigned shall cease to be an employee, director or consultant of the Company for any reason, this Note shall, at the option of the Company, be accelerated, and the whole unpaid balance on this Note of principal and accrued interest shall be immediately due and payable. Should any action be instituted for the collection of this Note, the reasonable costs and attorneys' fees therein of the holder shall be paid by the undersigned. ---------------------------------------- ---------------------------------------- 28 1997 STOCK PLAN NOTICE OF GRANT OF STOCK PURCHASE RIGHT Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Notice of Grant. [Grantee's Name and Address] You have been granted the right to purchase Common Stock of the Company, subject to the Company's Repurchase Option and your ongoing status as a Service Provider (as described in the Plan and the attached Restricted Stock Purchase Agreement), as follows: Grant Number _________________________ Date of Grant _________________________ Price Per Share $________________________ Total Number of Shares Subject _________________________ to This Stock Purchase Right Expiration Date: _________________________ YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES. By your signature and the signature of the Company's representative below, you and the Company agree that this Stock Purchase Right is granted under and governed by the terms and conditions of the 1997 Stock Plan and the Restricted Stock Purchase Agreement, attached hereto as Exhibit A-1, both of which are made a part of this document. You further agree to execute the attached Restricted Stock Purchase Agreement as a condition to purchasing any shares under this Stock Purchase Right. GRANTEE: E-LOAN, INC. - --------------------------- -------------------------------- Signature By - --------------------------- -------------------------------- Print Name Title 29 EXHIBIT A-1 1997 STOCK PLAN RESTRICTED STOCK PURCHASE AGREEMENT Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Restricted Stock Purchase Agreement. WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is an Service Provider, and the Purchaser's continued participation is considered by the Company to be important for the Company's continued growth; and WHEREAS in order to give the Purchaser an opportunity to acquire an equity interest in the Company as an incentive for the Purchaser to participate in the affairs of the Company, the Administrator has granted to the Purchaser a Stock Purchase Right subject to the terms and conditions of the Plan and the Notice of Grant, which are incorporated herein by reference, and pursuant to this Restricted Stock Purchase Agreement (the "Agreement"). NOW THEREFORE, the parties agree as follows: 1. Sale of Stock. The Company hereby agrees to sell to the Purchaser and the Purchaser hereby agrees to purchase shares of the Company's Common Stock (the "Shares"), at the per Share purchase price and as otherwise described in the Notice of Grant. 2. Payment of Purchase Price. The purchase price for the Shares may be paid by delivery to the Company at the time of execution of this Agreement of cash, a check, or some combination thereof. 3. Repurchase Option. (a) In the event the Purchaser ceases to be a Service Provider for any or no reason (including death or disability) before all of the Shares are released from the Company's Repurchase Option (see Section 4), the Company shall, upon the date of such termination (as reasonably fixed and determined by the Company) have an irrevocable, exclusive option (the "Repurchase Option") for a period of sixty (60) days from such date to repurchase up to that number of shares which constitute the Unreleased Shares (as defined in Section 4) at the original purchase price per share (the "Repurchase Price"). The Repurchase Option shall be exercised by the Company by delivering written notice to the Purchaser or the Purchaser's executor (with a copy to the Escrow Holder) AND, at the Company's option, (i) by delivering to the Purchaser or the Purchaser's executor a check in the amount of the aggregate Repurchase Price, or (ii) by canceling an amount of the Purchaser's indebtedness to the Company equal to the aggregate Repurchase Price, or (iii) by a combination of 30 (i) and (ii) so that the combined payment and cancellation of indebtedness equals the aggregate Repurchase Price. Upon delivery of such notice and the payment of the aggregate Repurchase Price, the Company shall become the legal and beneficial owner of the Shares being repurchased and all rights and interests therein or relating thereto, and the Company shall have the right to retain and transfer to its own name the number of Shares being repurchased by the Company. (b) Whenever the Company shall have the right to repurchase Shares hereunder, the Company may designate and assign one or more employees, officers, directors or shareholders of the Company or other persons or organizations to exercise all or a part of the Company's purchase rights under this Agreement and purchase all or a part of such Shares. If the Fair Market Value of the Shares to be repurchased on the date of such designation or assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of such Shares, then each such designee or assignee shall pay the Company cash equal to the difference between the Repurchase FMV and the aggregate Repurchase Price of such Shares. 4. Release of Shares From Repurchase Option. (a) _______________________ percent (______%) of the Shares shall be released from the Company's Repurchase Option [one year] after the Date of Grant and __________________ percent (______%) of the Shares [at the end of each month thereafter], provided that the Purchaser does not cease to be a Service Provider prior to the date of any such release. (b) Any of the Shares that have not yet been released from the Repurchase Option are referred to herein as "Unreleased Shares." (c) The Shares that have been released from the Repurchase Option shall be delivered to the Purchaser at the Purchaser's request (see Section 6). 5. Restriction on Transfer. Except for the escrow described in Section 6 or the transfer of the Shares to the Company or its assignees contemplated by this Agreement, none of the Shares or any beneficial interest therein shall be transferred, encumbered or otherwise disposed of in any way until such Shares are released from the Company's Repurchase Option in accordance with the provisions of this Agreement, other than by will or the laws of descent and distribution. 6. Escrow of Shares. (a) To ensure the availability for delivery of the Purchaser's Unreleased Shares upon repurchase by the Company pursuant to the Repurchase Option, the Purchaser shall, upon execution of this Agreement, deliver and deposit with an escrow holder designated by the Company (the "Escrow Holder") the share certificates representing the Unreleased Shares, together with the stock assignment duly endorsed in blank, attached hereto as Exhibit A-2. The Unreleased Shares and -2- 31 stock assignment shall be held by the Escrow Holder, pursuant to the Joint Escrow Instructions of the Company and Purchaser attached hereto as Exhibit A-3, until such time as the Company's Repurchase Option expires. As a further condition to the Company's obligations under this Agreement, the Company may require the spouse of Purchaser, if any, to execute and deliver to the Company the Consent of Spouse attached hereto as Exhibit A-4. (b) The Escrow Holder shall not be liable for any act it may do or omit to do with respect to holding the Unreleased Shares in escrow while acting in good faith and in the exercise of its judgment. (c) If the Company or any assignee exercises the Repurchase Option hereunder, the Escrow Holder, upon receipt of written notice of such exercise from the proposed transferee, shall take all steps necessary to accomplish such transfer. (d) When the Repurchase Option has been exercised or expires unexercised or a portion of the Shares has been released from the Repurchase Option, upon request the Escrow Holder shall promptly cause a new certificate to be issued for the released Shares and shall deliver the certificate to the Company or the Purchaser, as the case may be. (e) Subject to the terms hereof, the Purchaser shall have all the rights of a shareholder with respect to the Shares while they are held in escrow, including without limitation, the right to vote the Shares and to receive any cash dividends declared thereon. If, from time to time during the term of the Repurchase Option, there is (i) any stock dividend, stock split or other change in the Shares, or (ii) any merger or sale of all or substantially all of the assets or other acquisition of the Company, any and all new, substituted or additional securities to which the Purchaser is entitled by reason of the Purchaser's ownership of the Shares shall be immediately subject to this escrow, deposited with the Escrow Holder and included thereafter as "Shares" for purposes of this Agreement and the Repurchase Option. 7. Legends. The share certificate evidencing the Shares, if any, issued hereunder shall be endorsed with the following legend (in addition to any legend required under applicable state securities laws): THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY. 8. Adjustment for Stock Split. All references to the number of Shares and the purchase price of the Shares in this Agreement shall be appropriately adjusted to reflect any stock split, stock dividend or other change in the Shares which may be made by the Company after the date of this Agreement. -3- 32 9. Tax Consequences. The Purchaser has reviewed with the Purchaser's own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Purchaser is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. The Purchaser understands that the Purchaser (and not the Company) shall be responsible for the Purchaser's own tax liability that may arise as a result of the transactions contemplated by this Agreement. The Purchaser understands that Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the difference between the purchase price for the Shares and the Fair Market Value of the Shares as of the date any restrictions on the Shares lapse. In this context, "restriction" includes the right of the Company to buy back the Shares pursuant to the Repurchase Option. The Purchaser understands that the Purchaser may elect to be taxed at the time the Shares are purchased rather than when and as the Repurchase Option expires by filing an election under Section 83(b) of the Code with the IRS within 30 days from the date of purchase. The form for making this election is attached as Exhibit A-5 hereto. THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON THE PURCHASER'S BEHALF. 10. General Provisions. (a) This Agreement shall be governed by the internal substantive laws, but not the choice of law rules of California. This Agreement, subject to the terms and conditions of the Plan and the Notice of Grant, represents the entire agreement between the parties with respect to the purchase of the Shares by the Purchaser. Subject to Section 15(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan shall prevail. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Agreement. (b) Any notice, demand or request required or permitted to be given by either the Company or the Purchaser pursuant to the terms of this Agreement shall be in writing and shall be deemed given when delivered personally or deposited in the U.S. mail, First Class with postage prepaid, and addressed to the parties at the addresses of the parties set forth at the end of this Agreement or such other address as a party may request by notifying the other in writing. Any notice to the Escrow Holder shall be sent to the Company's address with a copy to the other party hereto. (c) The rights of the Company under this Agreement shall be transferable to any one or more persons or entities, and all covenants and agreements hereunder shall inure to the benefit of, -4- 33 and be enforceable by the Company's successors and assigns. The rights and obligations of the Purchaser under this Agreement may only be assigned with the prior written consent of the Company. (d) Either party's failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, nor prevent that party from thereafter enforcing any other provision of this Agreement. The rights granted both parties hereunder are cumulative and shall not constitute a waiver of either party's right to assert any other legal remedy available to it. (e) The Purchaser agrees upon request to execute any further documents or instruments necessary or desirable to carry out the purposes or intent of this Agreement. (f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE. By Purchaser's signature below, Purchaser represents that he or she is familiar with the terms and provisions of the Plan, and hereby accepts this Agreement subject to all of the terms and provisions thereof. Purchaser has reviewed the Plan and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. Purchaser agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Agreement. Purchaser further agrees to notify the Company upon any change in the residence indicated in the Notice of Grant. DATED: ----------------------- PURCHASER: E-LOAN, INC. - ------------------------------ ---------------------------------------- Signature By - ------------------------------ ---------------------------------------- Print Name Title -5- 34 EXHIBIT A-2 ASSIGNMENT SEPARATE FROM CERTIFICATE FOR VALUE RECEIVED I, __________________________, hereby sell, assign and transfer unto ______________________________ (__________) shares of the Common Stock of E-Loan, Inc. standing in my name of the books of said corporation represented by Certificate No. _____ herewith and do hereby irrevocably constitute and appoint to transfer the said stock on the books of the within named corporation with full power of substitution in the premises. This Stock Assignment may be used only in accordance with the Restricted Stock Purchase Agreement (the "Agreement") between________________________ and the undersigned dated ______________, ____. Dated: _______________, _____ Signature:______________________________ INSTRUCTIONS: Please do not fill in any blanks other than the signature line. The purpose of this assignment is to enable the Company to exercise the Repurchase Option, as set forth in the Agreement, without requiring additional signatures on the part of the Purchaser. 35 EXHIBIT A-3 JOINT ESCROW INSTRUCTIONS ----------, -- Corporate Secretary E-Loan, Inc. 540 University Avenue, Suite 350 Palo Alto, Ca 94301 Dear _______________: As Escrow Agent for both E-Loan, Inc., a Delaware corporation (the "Company"), and the undersigned purchaser of stock of the Company (the "Purchaser"), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Restricted Stock Purchase Agreement ("Agreement") between the Company and the undersigned, in accordance with the following instructions: 1. In the event the Company and/or any assignee of the Company (referred to collectively as the "Company") exercises the Company's Repurchase Option set forth in the Agreement, the Company shall give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Company. Purchaser and the Company hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice. 2. At the closing, you are directed (a) to date the stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate evidencing the shares of stock to be transferred, to the Company or its assignee, against the simultaneous delivery to you of the purchase price (by cash, a check, or some combination thereof) for the number of shares of stock being purchased pursuant to the exercise of the Company's Repurchase Option. 3. Purchaser irrevocably authorizes the Company to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as defined in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as Purchaser's attorney-in-fact and agent for the term of this escrow to execute with respect to such securities all documents necessary or appropriate to make such securities negotiable and to complete any transaction herein contemplated, including but not limited to the filing with any applicable state blue sky authority of any required applications for consent to, or notice of transfer of, the securities. Subject to the provisions of this paragraph 3, Purchaser shall exercise all rights and privileges of a shareholder of the Company while the stock is held by you. 36 4. Upon written request of the Purchaser, but no more than once per calendar year, unless the Company's Repurchase Option has been exercised, you shall deliver to Purchaser a certificate or certificates representing so many shares of stock as are not then subject to the Company's Repurchase Option. Within 90 days after Purchaser ceases to be a Service Provider, you shall deliver to Purchaser a certificate or certificates representing the aggregate number of shares held or issued pursuant to the Agreement and not purchased by the Company or its assignees pursuant to exercise of the Company's Repurchase Option. 5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of the same to Purchaser and shall be discharged of all further obligations hereunder. 6. Your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto. 7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith, and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith. 8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction. 9. You shall not be liable in any respect on account of the identity, authorities or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder. 10. You shall not be liable for the outlawing of any rights under the statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you. 11. You shall be entitled to employ such legal counsel and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor. -2- 37 12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be an officer or agent of the Company or if you shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent. 13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments. 14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities held by you hereunder, you are authorized and directed to retain in your possession without liability to anyone all or any part of said securities until such disputes shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings. 15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties thereunto entitled at the following addresses or at such other addresses as a party may designate by ten days' advance written notice to each of the other parties hereto. COMPANY: E-Loan, Inc. 540 University Avenue, Suite 350 Palo Alto, CA 94301 PURCHASER: ---------------------------------------- ---------------------------------------- ---------------------------------------- ESCROW AGENT: Corporate Secretary E-Loan, Inc. 540 University Avenue Palo Alto, CA 94301 16. By signing these Joint Escrow Instructions, you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement. -3- 38 17. This instrument shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and permitted assigns. 18. These Joint Escrow Instructions shall be governed by, and construed and enforced in accordance with, the internal substantive laws, but not the choice of law rules, of California. Very truly yours, E-LOAN, INC. ---------------------------------------- By ---------------------------------------- Title PURCHASER: ---------------------------------------- Signature ---------------------------------------- Print Name ESCROW AGENT: - ------------------------------------- Corporate Secretary -4- 39 EXHIBIT A-4 CONSENT OF SPOUSE I, ____________________, spouse of ___________________, have read and approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In consideration of the Company's grant to my spouse of the right to purchase shares of E-Loan, Inc., as set forth in the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to the exercise of any rights under the Agreement and agree to be bound by the provisions of the Agreement insofar as I may have any rights in said Agreement or any shares issued pursuant thereto under the community property laws or similar laws relating to marital property in effect in the state of our residence as of the date of the signing of the foregoing Agreement. Dated: _______________, _____ ---------------------------------------- Signature of Spouse 40 EXHIBIT A-5 ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986 The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with his or her receipt of the property described below: 1. The name, address, taxpayer identification number and taxable year of the undersigned are as follows: NAME: TAXPAYER: SPOUSE: ADDRESS: IDENTIFICATION NO.: TAXPAYER: SPOUSE: TAXABLE YEAR: 2. The property with respect to which the election is made is described as follows: ___________ shares (the "Shares") of the Common Stock of E-Loan, Inc. (the "Company"). 3. The date on which the property was transferred is: _____________, ________. 4. The property is subject to the following restrictions: The Shares may be repurchased by the Company, or its assignee, upon certain events. This right lapses with regard to a portion of the Shares based on the continued performance of services by the taxpayer over time. 5. The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such property is: $_______________. 6. The amount (if any) paid for such property is: $_______________. The undersigned has submitted a copy of this statement to the person for whom the services were performed in connection with the undersigned's receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property. The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner. Dated: ___________________, ____________________________________________________ Taxpayer The undersigned spouse of taxpayer joins in this election. Dated: ___________________, ____________________________________________________ Spouse of Taxpayer EX-10.3 10 1999 EMPLOYEE STOCK PURCHASE PLAN 1 EXHIBIT 10.3 E-LOAN, INC. 1999 EMPLOYEE STOCK PURCHASE PLAN 1. Purpose. The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code. 2. Definitions. (a) "Board" shall mean the Board of Directors of the Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended. (c) "Common Stock" shall mean the Common Stock of the Company. (d) "Company" shall mean E-Loan, Inc., a Delaware corporation, and any Designated Subsidiary of the Company. (e) "Compensation" shall mean all base straight time gross earnings, commissions, cash incentive compensation and bonuses, exclusive of payments for overtime, shift premium, non-cash incentive compensation and other compensation. (f) "Designated Subsidiary" shall mean any Subsidiary which has been designated by the Board from time to time in its sole discretion as eligible to participate in the Plan. (g) "Employee" shall mean any individual who is an Employee of the Company for tax purposes whose customary employment with the Company is at least twenty (20) hours per week and more than five (5) months in any calendar year. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company. Where the period of leave exceeds 90 days and the individual's right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the 91st day of such leave. (h) "Enrollment Date" shall mean the first day of each Offering Period. (i) "Exercise Date" shall mean the last day of each Offering Period. 2 (j) "Fair Market Value" shall mean, as of any date, the value of Common Stock determined as follows: (1) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system for the last market trading day on the date of such determination, as reported in The Wall Street Journal or such other source as the Board deems reliable, or; (2) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the Common Stock on the date of such determination, as reported in The Wall Street Journal or such other source as the Board deems reliable, or; (3) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board. (k) "Offering Period" shall mean a period of approximately six (6) months during which an option granted pursuant to the Plan may be exercised, commencing on the first Trading Day on or after May 1 and terminating on the last Trading Day in the period ending the following October 31, or commencing on the first Trading Day on or after November 1 and terminating on the last Trading Day in the period ending the following April 30; provided, however, that the first Offering Period under the Plan shall commence with the first Trading Day on or after the date on which the Securities and Exchange Commission declares the Company's Registration Statement effective and ending on the last Trading Day on or before October 31. The duration of Offering Periods may be changed pursuant to Section 4 of this Plan. (l) "Plan" shall mean this Employee Stock Purchase Plan. (m) "Purchase Price" shall mean an amount equal to 85% of the Fair Market Value of a share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower; provided, however, that the Purchase Price may be adjusted by the Board pursuant to Section 20. (n) "Reserves" shall mean the number of shares of Common Stock covered by each option under the Plan which have not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but not yet placed under option. (o) "Subsidiary" shall mean a corporation, domestic or foreign, of which not less than 50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary. (p) "Trading Day" shall mean a day on which national stock exchanges and the Nasdaq System are open for trading. -2- 3 3. Eligibility. (a) Any Employee who shall be employed by the Company on a given Enrollment Date shall be eligible to participate in the Plan. (b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) to the extent that, immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Subsidiary, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans of the Company and its subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time. 4. Offering Periods. The Plan shall be implemented by consecutive Offering Periods with a new Offering Period commencing on the first Trading Day on or after May 1 and November 1 each year, or on such other date as the Board shall determine, and continuing thereafter until terminated in accordance with Section 20 hereof; provided, however, that the first Offering Period under the Plan shall commence with the first Trading Day on or after the date on which the Securities and Exchange Commission declares the Company's Registration Statement effective and ending on the last Trading Day on or before October 31. The Board shall have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future offerings without stockholder approval if such change is announced at least five (5) days prior to the scheduled beginning of the first Offering Period to be affected thereafter. 5. Participation. (a) An eligible Employee may become a participant in the Plan by completing a subscription agreement authorizing payroll deductions in the form of Exhibit A to this Plan and filing it with the Company's payroll office prior to the applicable Enrollment Date. (b) Payroll deductions for a participant shall commence on the first payroll following the Enrollment Date and shall end on the last payroll in the Offering Period to which such authorization is applicable, unless sooner terminated by the participant as provided in Section 10 hereof. 6. Payroll Deductions. (a) At the time a participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each pay day during the Offering Period in an amount not exceeding fifteen percent (15%) of the Compensation which he or she receives on each pay day during the Offering Period. -3- 4 (b) All payroll deductions made for a participant shall be credited to his or her account under the Plan and shall be withheld in whole percentages only. A participant may not make any additional payments into such account. (c) A participant may discontinue his or her participation in the Plan as provided in Section 10 hereof, or may increase or decrease the rate of his or her payroll deductions during the Offering Period by completing or filing with the Company a new subscription agreement authorizing a change in payroll deduction rate. The Board may, in its discretion, limit the number of participation rate changes during any Offering Period. The change in rate shall be effective with the first full payroll period following five (5) business days after the Company's receipt of the new subscription agreement unless the Company elects to process a given change in participation more quickly. A participant's subscription agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof. (d) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll deductions may be decreased to zero percent (0%) at any time during an Offering Period. Payroll deductions shall recommence at the rate provided in such participant's subscription agreement at the beginning of the first Offering Period which is scheduled to end in the following calendar year, unless terminated by the participant as provided in Section 10 hereof. (e) At the time the option is exercised, in whole or in part, or at the time some or all of the Company's Common Stock issued under the Plan is disposed of, the participant must make adequate provision for the Company's federal, state, or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the participant's compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Employee. 7. Grant of Option. On the Enrollment Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on the Exercise Date of such Offering Period (at the applicable Purchase Price) up to a number of shares of the Company's Common Stock determined by dividing such Employee's payroll deductions accumulated prior to such Exercise Date and retained in the Participant's account as of the Exercise Date by the applicable Purchase Price; provided that in no event shall an Employee be permitted to purchase during each Offering Period more than 1,250 shares (subject to any adjustment pursuant to Section 19), and provided further that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8 hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The Option shall expire on the last day of the Offering Period. 8. Exercise of Option. Unless a participant withdraws from the Plan as provided in Section 10 hereof, his or her option for the purchase of shares shall be exercised automatically on the -4- 5 Exercise Date, and the maximum number of full shares subject to option shall be purchased for such participant at the applicable Purchase Price with the accumulated payroll deductions in his or her account. No fractional shares shall be purchased; any payroll deductions accumulated in a participant's account which are not sufficient to purchase a full share shall be retained in the participant's account for the subsequent Offering Period, subject to earlier withdrawal by the participant as provided in Section 10 hereof. Any other monies left over in a participant's account after the Exercise Date shall be returned to the participant. During a participant's lifetime, a participant's option to purchase shares hereunder is exercisable only by him or her. 9. Delivery. As promptly as practicable after each Exercise Date on which a purchase of shares occurs, the Company shall arrange the delivery to each participant, as appropriate, the shares purchased upon exercise of his or her option. 10. Withdrawal. (a) A participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by giving written notice to the Company in the form of Exhibit B to this Plan. All of the participant's payroll deductions credited to his or her account shall be paid to such participant promptly after receipt of notice of withdrawal and such participant's option for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of shares shall be made for such Offering Period. If a participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the succeeding Offering Period unless the participant delivers to the Company a new subscription agreement. (b) A participant's withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the participant withdraws. 11. Termination of Employment. Upon a participant's ceasing to be an Employee for any reason, he or she shall be deemed to have elected to withdraw from the Plan and the payroll deductions credited to such participant's account during the Offering Period but not yet used to exercise the option shall be returned to such participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15 hereof, and such participant's option shall be automatically terminated. The preceding sentence notwithstanding, a participant who receives payment in lieu of notice of termination of employment shall be treated as continuing to be an Employee for the participant's customary number of hours per week of employment during the period in which the participant is subject to such payment in lieu of notice. 12. Interest. No interest shall accrue on the payroll deductions of a participant in the Plan. -5- 6 13. Stock. (a) Subject to adjustment upon changes in capitalization of the Company as provided in Section 19 hereof, the maximum number of shares of the Company's Common Stock which shall be made available for sale under the Plan shall be 500,000 shares, plus an annual increase to be added on the first day of the Company's fiscal year beginning in 2000 equal to the lesser of (i) 500,000 shares, (ii) 2% of the outstanding shares on such date or (iii) a lesser amount determined by the Board. If, on a given Exercise Date, the number of shares with respect to which options are to be exercised exceeds the number of shares then available under the Plan, the Company shall make a pro rata allocation of the shares remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable. (b) The participant shall have no interest or voting right in shares covered by his option until such option has been exercised. (c) Shares to be delivered to a participant under the Plan shall be registered in the name of the participant or in the name of the participant and his or her spouse. 14. Administration. The Plan shall be administered by the Board or a committee of members of the Board appointed by the Board. The Board or its committee shall have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding, decision and determination made by the Board or its committee shall, to the full extent permitted by law, be final and binding upon all parties. 15. Designation of Beneficiary. (a) A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant's account under the Plan in the event of such participant's death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant's account under the Plan in the event of such participant's death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective. (b) Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate. -6- 7 16. Transferability. Neither payroll deductions credited to a participant's account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 15 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof. 17. Use of Funds. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions. 18. Reports. Individual accounts shall be maintained for each participant in the Plan. Statements of account shall be given to participating Employees at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the remaining cash balance, if any. 19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or Asset Sale. (a) Changes in Capitalization. Subject to any required action by the stockholders of the Company, the Reserves, the maximum number of shares each participant may purchase per Offering Period (pursuant to Section 7), as well as the price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration". Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option. (b) Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Offering Period then in progress shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and shall terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Board. The New Exercise Date shall be before the date of the Company's proposed dissolution or liquidation. The Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof. -7- 8 (c) Merger or Asset Sale. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each outstanding option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the option, the Offering Period then in progress shall be shortened by setting a new Exercise Date (the "New Exercise Date"). The New Exercise Date shall be before the date of the Company's proposed sale or merger. The Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof. 20. Amendment or Termination. (a) The Board of Directors of the Company may at any time and for any reason terminate or amend the Plan. Except as provided in Section 19 hereof, no such termination can affect options previously granted, provided that an Offering Period may be terminated by the Board of Directors on any Exercise Date if the Board determines that the termination of the Offering Period or the Plan is in the best interests of the Company and its stockholders. Except as provided in Section 19 and Section 20 hereof, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant. To the extent necessary to comply with Section 423 of the Code (or any other applicable law, regulation or stock exchange rule), the Company shall obtain shareholder approval in such a manner and to such a degree as required. (b) Without stockholder consent and without regard to whether any participant rights may be considered to have been "adversely affected," the Board (or its committee) shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company's processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant's Compensation, and establish such other limitations or procedures as the Board (or its committee) determines in its sole discretion advisable which are consistent with the Plan. (c) In the event the Board determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to: (1) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price; -8- 9 (2) shortening any Offering Period so that Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Board action; and (3) allocating shares. Such modifications or amendments shall not require stockholder approval or the consent of any Plan participants. 21. Notices. All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof. 22. Conditions Upon Issuance of Shares. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law. 23. Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the stockholders of the Company. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 20 hereof. -9- 10 EXHIBIT A E-LOAN, INC. 1999 EMPLOYEE STOCK PURCHASE PLAN SUBSCRIPTION AGREEMENT _____ Original Application Enrollment Date: __________ _____ Change in Payroll Deduction Rate _____ Change of Beneficiary(ies) 1. _____________________________________ hereby elects to participate in the E-Loan, Inc. 1999 Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and subscribes to purchase shares of the Company's Common Stock in accordance with this Subscription Agreement and the Employee Stock Purchase Plan. 2. I hereby authorize payroll deductions from each paycheck in the amount of ____% of my Compensation on each payday (from 1 to 15%) during the Offering Period in accordance with the Employee Stock Purchase Plan. (Please note that no fractional percentages are permitted.) 3. I understand that said payroll deductions shall be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with the Employee Stock Purchase Plan. I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used to automatically exercise my option. 4. I have received a copy of the complete Employee Stock Purchase Plan. I understand that my participation in the Employee Stock Purchase Plan is in all respects subject to the terms of the Plan. I understand that my ability to exercise the option under this Subscription Agreement is subject to stockholder approval of the Employee Stock Purchase Plan. 5. Shares purchased for me under the Employee Stock Purchase Plan should be issued in the name(s) of (Employee or Employee and Spouse only): _________. 6. I understand that if I dispose of any shares received by me pursuant to the Plan within 2 years after the Enrollment Date (the first day of the Offering Period during which I purchased such shares), I will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the excess of the fair market value of the shares at the time such shares were purchased by me over the price which I paid for the shares. I hereby agree to notify the Company in writing within 30 days after the date of any 11 disposition of shares and I will make adequate provision for Federal, state or other tax withholding obligations, if any, which arise upon the disposition of the Common Stock. The Company may, but will not be obligated to, withhold from my compensation the amount necessary to meet any applicable withholding obligation including any withholding necessary to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by me. If I dispose of such shares at any time after the expiration of the 2-year holding period, I understand that I will be treated for federal income tax purposes as having received income only at the time of such disposition, and that such income will be taxed as ordinary income only to the extent of an amount equal to the lesser of (1) the excess of the fair market value of the shares at the time of such disposition over the purchase price which I paid for the shares, or (2) 15% of the fair market value of the shares on the first day of the Offering Period. The remainder of the gain, if any, recognized on such disposition will be taxed as capital gain. 7. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Employee Stock Purchase Plan. 8. In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due me under the Employee Stock Purchase Plan: NAME: (Please print) _____________________________________________________ (First) (Middle) (Last) Relationship _____________________________ _______________________________________ (Address) Employee's Social Security Number: _______________________________________ Employee's Address: _______________________________________ _______________________________________ -2- 12 I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME. Dated: ___________________ ________________________________________ Signature of Employee ________________________________________ Spouse's Signature (If beneficiary other than spouse) -3- 13 EXHIBIT B E-LOAN, INC. 1999 EMPLOYEE STOCK PURCHASE PLAN NOTICE OF WITHDRAWAL The undersigned participant in the Offering Period of the E-Loan, Inc. 1999 Employee Stock Purchase Plan which began on ___________, ______ (the "Enrollment Date") hereby notifies the Company that he or she hereby withdraws from the Offering Period. He or she hereby directs the Company to pay to the undersigned as promptly as practicable all the payroll deductions credited to his or her account with respect to such Offering Period. The undersigned understands and agrees that his or her option for such Offering Period will be automatically terminated. The undersigned understands further that no further payroll deductions will be made for the purchase of shares in the current Offering Period and the undersigned shall be eligible to participate in succeeding Offering Periods only by delivering to the Company a new Subscription Agreement. Name and Address of Participant: ________________________________________ ________________________________________ ________________________________________ Signature: ________________________________________ Date: __________________________________ EX-10.4 11 RESTATED INVESTOR RIGHTS AGREEMENT 1 EXHIBIT 10.4 E-LOAN, INC. RESTATED INVESTOR RIGHTS AGREEMENT This Restated Investor Rights Agreement (the "Agreement") is effective as of September 4, 1998 by and among E-Loan, Inc. (the "Company") and the investors listed on Schedule A attached hereto (the "Investors"). This Agreement amends and restates the Investor Rights Agreement dated as of December 18, 1997 ("Prior Agreement"). The Prior Agreement is hereby terminated in its entirety and restated herein. Such termination and restatement is effective upon the execution of this Agreement by the holders of at least a majority of the shares of Registrable Securities (as the term is defined under the Prior Agreement) outstanding as of the date of this Agreement. RECITALS A. Pursuant to that certain Series D Preferred Stock Purchase Agreement of even date herewith (the "Series D Agreement"), the Company has agreed to sell to certain Investors (the "Series D Holders") a total of up to 1,950,000 shares of the Series D Preferred Stock of the Company and, as an inducement for the Series D Holders to purchase such shares, the Company agreed to enter into this Agreement. The shares of Series D Preferred Stock sold pursuant to the Series D Agreement are referred to herein as the "Shares." 1. Registration Rights. 1.1 Definitions. For purposes of this Section 1: (a) The term "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Act, and the declaration or ordering of effectiveness of such registration statement or document; (b) The term "Registrable Securities" means (1) the Common Stock issued or issuable upon conversion of the outstanding Series C Preferred Stock and the Series D Preferred Stock issued or issuable pursuant to the Series D Preferred Stock Purchase Agreement dated August 31, 1998, and any Common Stock held by the Investors and any of their affiliates, (2) the Common Stock issued or issuable upon conversion of any Series C-1 Preferred Stock issued or issuable in exchange for Series C Preferred Stock pursuant to Article IV, Section 3(d) of the Company's Amended and Restated Articles of Incorporation, and (3) any Common Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, such Preferred Stock or Common Stock, excluding in all cases, however, (i) any Registrable Securities sold by a person in a transaction in which such person's rights under this 2 Section 1 are not assigned, or (ii) any Registrable Securities sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction; (c) The number of shares of "Registrable Securities then outstanding" shall be determined by the number of shares of Common Stock outstanding which are issuable pursuant to then exercisable or convertible securities which are, Registrable Securities; (d) The term "Holder" means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1.13 hereof; (e) The term "Form S-3" means such form under the Act as in effect on the date hereof or any registration form under the Act subsequently adopted by the Securities and Exchange Commission (the "SEC") which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC; and (f) The term "Act" shall mean the Securities Act of 1933, as amended. 1.2 Request for Registration . (a) If the Company shall receive at the earlier of (i) December 31, 2001 or (ii) six (6) months after the effective date of the Company's initial registration statement (but not within six (6) months of the effective date of a registration statement for a public offering of securities of the Company (other than a registration statement relating either to the sale of securities to employees of the Company pursuant to a stock option, stock purchase or similar plan or a SEC Rule 145 transaction)), a written request from the Holders of at least 66 2/3% of the Registrable Securities then outstanding (including securities convertible into Registrable Securities) that the Company file a registration statement under the Act covering the registration of Registrable Securities having an aggregate offering price in excess of $1,500,000, then the Company shall, within ten (10) days of the receipt thereof, give written notice of such request to all Holders and shall, subject to the limitations of Section 1.2(b), effect as soon as practicable, and in any event within 90 days of the receipt of such request, the registration under the Act of all Registrable Securities which the Holders request to be registered within twenty (20) days of the mailing of such written notice by the Company; provided, however, that the Company shall not be obligated to take any action to effect any such registration, qualification or compliance pursuant to this Section 1.2(a): (i) During the period starting with the date sixty (60) days prior to the Company's estimated date of filing of, and ending on the date 120 days immediately following the effective date of, any registration statement pertaining to securities of the Company (other than a registration of securities in a Rule 145 transaction or with respect to an employee benefit plan), provided that the Company is actively employing in good faith all reasonable efforts to cause such registration statement to become effective; -2- 3 (ii) After the Company has effected two such registrations pursuant to this Section 1.2(a), and both registrations have been declared or ordered effective; or (iii) If the Company shall furnish to such Holders a certificate signed by the Chairman of the Board of the Company stating that in the good faith judgment of the Board of Directors it would be seriously detrimental to the Company or its shareholders for a registration statement to be filed at such time, then the Company's obligation to use its best efforts to register, qualify or comply under this Section 1.2(a) shall be deferred for a period not to exceed 120 days from the date of receipt of written request from the Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period. (b) If the Holders initiating the registration request hereunder (the "Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 1.2 and the Company shall include such information in the written notice referred to in Section 1.2(a). In such event, the right of any Holder to include his Registrable Securities in such registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 1.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders. Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder. 1.3 Company Registration. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registration effected by the Company for shareholders other than the Holders) any of its stock or other securities under the Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to the sale of securities to participants in a Company stock plan, the Company shall, at such time, promptly give each Holder written notice of such registration. Upon the written request of each Holder given within twenty (20) days after mailing of written notice by the Company, the Company shall, subject to the provisions of Section 1.8, cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to be registered. 1.4 Obligations of the Company. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: -3- 4 (a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for up to one hundred twenty (120) days. (b) Prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement. (c) Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them. (d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement provided that such underwriting agreement shall not provide for indemnification or contribution obligations on the part of the holders greater than the obligations set forth in Section 1.10(b). (f) Notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto is required to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing, or otherwise fails to comply with the requirements of the Act and the rules and regulations promulgated thereunder. The Company shall, promptly upon the happening of any such event, provide each such Holder with revised prospectuses correcting any such untrue statement or omission or failure to comply. (g) Furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 1, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, if such securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes -4- 5 effective, (i) an opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to the Holders requesting registration of Registrable Securities and (ii) if such offering is being underwritten, a letter dated such date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters. 1.5 Furnish Information. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable Securities of any selling Holder that such holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Holder's Registrable Securities. 1.6 Expenses of Demand Registration. All expenses other than underwriting discounts and commissions incurred in connection with the registration, filing or qualification pursuant to Section 1.2, including all registration, filing and qualification fees, printers' and accounting fees, fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one counsel for the selling Holders shall be borne by the Company; provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all Participating Holders shall bear such expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to a demand registration pursuant to Section 1.2; provided further, however, that if at the time of such withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Section 1.2. 1.7 Expenses of Company Registration. The Company shall bear and pay all expenses incurred in connection with any registration, filing or qualification of Registrable Securities with respect to the registrations pursuant to Section 1.3 for each Holder (which right may be assigned as provided in Section 1.13), including all registration, filing, and qualification fees, printers and accounting fees relating or apportionable thereto and the fees and disbursements of one counsel for the selling Holders selected by them, but excluding underwriting discounts and commissions relating to Registrable Securities. 1.8 Underwriting Requirements. In connection with any offering involving an underwriting of shares being issued by the Company, the Company shall not be required under Section 1.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it, and then only in such quantity as will not, in the opinion of the underwriters, jeopardize the success of the offering by the Company; provided that such underwriting agreement shall not provide for -5- 6 indemnification or contribution obligations on the part of the Holders greater than the obligations set forth in Section 1.10(b). If the total amount of securities, including Registrable Securities, requested by shareholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters reasonably believe compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters believe will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling shareholders according to the total amount of securities entitled to be included therein owned by each selling shareholder or in such other proportions as shall mutually be agreed to by such selling shareholders, provided that the Holders shall have the first right to include all of their shares in the offering before any shares held by other selling shareholders) and in no event shall the Holder's shares be reduced below 25% of the shares sold in any offering with the exception of the Company's initial public offering. For purposes of apportionment, any selling shareholder which is a Holder of Registrable Securities and which is a partnership or corporation, the affiliated partnerships, partners, retired partners and shareholders of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single "selling shareholder", and any pro rata reduction with respect to such "selling shareholder" shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such "selling shareholder," as defined in this sentence. 1.9 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 1. 1.10 Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 1: (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the Securities Exchange Act of 1934, amended (the "1934 Act"), against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act, any state securities law or any rule or regulation promulgated under the Act, the 1934 Act or any state securities law; and the Company will pay to each such Holder, underwriter or controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity -6- 7 agreement contained in this Section 1.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling person. (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter, any other Holder selling securities in such registration statement and any controlling person of any such underwriter or other selling Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration; and each such Holder will pay any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this Section 1.10(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this Section 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any indemnity under this Section 1.10(b) exceed the net proceeds from the offering received by such Holder. (c) Promptly after receipt by an indemnified party under this Section 1.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 1.10, but the omission to so deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.10. -7- 8 (d) If the indemnification provided for in Section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified party thereunder, shall to the extent permitted by applicable law contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the Violation(s) that resulted in such loss, claim, damage or liability, as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by a court of law by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, that in no event shall any contribution by a Holder hereunder exceed the net proceeds from the offering received by such Holder. (e) The obligations of the Company and Holders under this Section 1.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and otherwise. 1.11 Reports Under Securities Exchange Act of 1934. With a view to making available to the Holders the benefits of Rule 144 promulgated under the Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company agrees to: (a) make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times after ninety (90) days after the effective date of the first registration statement filed by the Company for the offering of its securities to the general public; (b) take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which the first registration statement filed by the Company for the offering of its securities to the general public is declared effective; (c) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and (d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective -8- 9 date of the first registration statement filed by the Company), the Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form. 1.12 Form S-3 Registration. (a) In case the Company shall receive from any Holder or Holders who hold 20% of the Company's Registrable Securities, a written request or requests that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders, the Company will: (i) promptly give written notice of the proposed registration, and any related qualification or compliance, to all other Holders; and (ii) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder's or Holders' Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within 15 days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration, qualification or compliance, pursuant to this Section 1.12: (1) if Form S-3 is not available for such offering by the Holders; (2) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (if any) at an aggregate price to the public of less than $1,500,000; (3) if the Company shall furnish to the Holders a certificate signed by the Chairman of the Board of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3 registration statement for a period of not more than 120 days after receipt of the request of the Holder or Holders under this Section 1.12; provided, however, that the Company shall not utilize this right more than once in any twelve (12) month period; or (4) in any particular jurisdiction in which the Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification or compliance. (b) If the Holders initiating the registration request hereunder (the "Initiating Holders") intend to distribute the Registrable Securities covered by their request by means of an underwriting, they shall so advise the Company as part of their request made pursuant to this Section 1.12 and the Company shall include such information in the written notice referred to in Section 1.12(a)(i). In such event, the right of any Holder to include his Registrable Securities in such -9- 10 registration shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in Section 1.4(e)) enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by a majority in interest of the Initiating Holders. Notwithstanding any other provision of this Section 1.12, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder. (c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered as soon as practicable after receipt of the request or requests of the Holders and use its best efforts to keep such registration statement effective until the registered shares are sold or for three months, whichever comes first. All expenses incurred in connection with a registration requested pursuant to Section 1.12, including all registration, filing, qualification, printer's and accounting fees and the reasonable fees and disbursements of one counsel for the selling Holders selected by them, but excluding any underwriters' discounts or commissions associated with Registrable Securities, shall be borne by the Company. Registrations effected pursuant to this Section 1.12 shall not be counted as demands for registration or registrations effected pursuant to Section 1.2 or 1.3, respectively. 1.13 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned by a Holder to a transferee or assignee who acquires at least 500,000 shares of Registrable Securities, provided the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned; and provided, further, that such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Act. Notwithstanding the above, such rights may be assigned by a Holder to a limited partner, general partner, affiliated partnership, former partner, majority owned subsidiary or other affiliate of an Investor (the "Transferee") regardless of the number of shares acquired by such Transferee. For purposes of determining the number of shares of Registrable Securities held by a transferee or assignee, the holdings of transferees and assignees of a partnership who are partners or retired partners of such partnership (including spouses and ancestors, lineal descendants and siblings of such partners or spouses who acquire Registrable Securities by gift, will or intestate succession) shall be aggregated together and with the partnership; provided that all assignees, and transferees who would not qualify individually for assignment of registration rights shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action under this Section 1. -10- 11 1.14 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of at least a majority of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder to include such securities in any registration filed under Section 1.2 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the Registrable Securities of the Holders which is included. 1.15 "Market Stand-Off" Agreement. Each holder of securities which are or at one time were Registrable Securities (or which are or were convertible into Registrable Securities) hereby agrees that, during a period not to exceed 180 days, following the effective date of a registration statement of the Company filed under the Act, it shall not, to the extent requested by the Company and such underwriter, sell or otherwise transfer or dispose of (other than to a donee who agrees to be similarly bound) any Common Stock of the Company held by it at any time during such period except Common Stock included in such registration; provided, however, that: (a) such agreement shall be applicable only to the first such registration statement of the Company which covers Common Stock (or other securities) to be sold on its behalf to the public in an underwritten offering; and (b) all officers and directors of the Company enter into similar agreements. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities of each Investor (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. 1.16 Termination of Registration Rights. No shareholder shall be entitled to exercise any right provided for in this Section 1 after the earlier of seven (7) years following the consummation of the sale of securities pursuant to a registration statement filed by the Company under the Act in connection with the initial firm commitment underwritten offering of its securities to the general public or when all Registrable Securities can be sold in any three month period under Rule 144. 2. Information Rights. 2.1 Delivery of Financial Statements. The Company shall deliver to each Investor which holds, together with its affiliates, an aggregate of 500,000 shares of Preferred Stock (or Common Stock issued or issuable upon conversion of Preferred Stock and as adjusted for stock dividends, splits, combinations and the like): -11- 12 (a) as soon as practicable, but in any event within ninety (90) days after the end of each fiscal year of the Company, statements of operations and cash flow for such fiscal year, a balance sheet of the Company as of the end of such year, and a schedule as to the sources and applications of funds for such year, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles ("GAAP"), and audited and certified by independent public accountants of nationally recognized standing selected by the Company; (b) as soon as practicable, but in any event at least thirty (30) days prior to the commencement of each fiscal year of the Company, an annual budget and plan of operations for the upcoming fiscal year; (c) within forty five (45) days of the end of each fiscal quarter, and until a public offering of Common Stock of the Company, an unaudited statement of operations and balance sheet for and as of the end of such quarter, in reasonable detail and prepared in accordance with GAAP, subject to year end audit adjustments and the absence of footnotes; (d) within thirty (30) days of the end of each month, an unaudited income statement and statement of cash flows and balance sheet for and as of the end of such month, in reasonable detail; (e) with respect to the financial statements called for in subsection (c) of this Section 2.1, an instrument executed by the Chief Financial Officer or President of the Company and certifying that such financials were prepared in accordance with GAAP consistently applied with prior practice for earlier periods and fairly present the financial condition of the Company and its results of operation for the period specified, subject to year-end audit adjustments and the absence of footnotes. 2.2 Inspection. The Company shall permit each Investor which holds, together with is affiliates, an aggregate of 500,000 shares of Preferred Stock (or Common Stock issued or issuable upon conversion of such Preferred Stock), at such Investor's expense, to visit and inspect the Company's properties, to examine its books of account and records and to discuss the Company's affairs, finances and accounts with its officers, all at such reasonable times as may be requested by the Investor; provided, however, that the Company shall not be obligated pursuant to this Section 2.2 to provide access to any information which the Board of Directors reasonably considers to be a trade secret or similar confidential information. 2.3 Termination of Covenants. The covenants set forth in Sections 2.1, and 2.2 shall terminate as to Investors and be of no further force or effect when the sale of securities pursuant to a registration statement filed by the Company under the Act in connection with the firm commitment underwritten offering of its securities to the general public is consummated in which the public offering price is less than $13.89 per share and in which the aggregate offering price is not less than $15,000,000 or when the Company first becomes subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the Securities Exchange Act of 1934, whichever event shall first occur. -12- 13 2.4 Board of Directors. (a) With respect to those two (2) members of the Company's Board of Directors that the Articles of Incorporation provides are to be elected by the holders of Series C and Series C-1 Preferred Stock, the Investors hereby agree to vote all of their shares of Preferred Stock now owned or hereafter acquired in favor of the election of two designees of Benchmark Capital Partners II. (b) With respect to those two (2) members of the Company's Board of Directors that the Articles of Incorporation provides are to be elected by the holders of Common Stock, the Investors hereby agree to vote all of their shares of Preferred Stock now owned or hereafter acquired in favor of the election of two designees of the holders of outstanding Common Stock. (c) With respect to the member of the Company's Board of Directors that the Articles of Incorporation provides are to be elected by the holders of Series D Preferred Stock, the Investors hereby agree to vote all of their shares of Preferred Stock now owned or hereafter acquired in favor of the election of one designee of the holders of outstanding Series D Preferred Stock. (d) With respect to the remaining members of the Company's Board of Directors that the Articles of Incorporation provides are to be elected by the holders of Preferred Stock and Common Stock (voting together as a single class and not as a separate series, and on an as-converted basis), the Investors hereby agree to vote all of their shares of Preferred Stock and Common Stock now owned or hereafter acquired in favor of the election of designees acceptable to a majority of the members of the Board of Directors and a majority of the outstanding shares of Series C and Series C-1 Preferred Stock (voting on an as-converted basis) and a majority of the outstanding shares of Series D Preferred Stock (voting on an as converted basis), voting as separate classes. (e) This Section 2.4 shall terminate in its entirety and be of no further force or effect upon the earlier to occur of (i) the sale of securities pursuant to a registration statement filed by the Company under the Act in connection with the firm commitment underwritten offering of its securities to the general public is consummated in which the public offering price is less than $13.89 per share and in which the aggregate offering price is not less than $15,000,000, or (ii) the date upon which the Company first becomes subject to the reporting requirements of Sections 12(g) or 15(d) of the 1934 Act. 2.5 Observer Rights. As long as affiliates of Softbank own not less than fifty percent (50%) of the shares of the Series D Preferred it is purchasing on an even date herewith (or an -13- 14 equivalent amount of Common Stock issued upon conversion thereof), the Company shall invite a representative of Softbank to be an Observer As long as any funds affiliated with Sequoia Capital ("Sequoia") owns not less than fifty percent (50%) of the shares of the Series D Preferred it is purchasing on an even date herewith (or an equivalent amount of Common Stock issued upon conversion thereof), the Company shall invite a representative of Sequoia to be an Observer. As long as any funds affiliated with Technology Partners ("Technology Partners") owns not less than fifty percent (50%) of the shares of the Series C Preferred Stock it purchased on December 18, 1997 (or an equivalent amount of Common Stock or Series C-1 Preferred Stock issued upon conversion thereof), the Company shall invite a representative of Technology Partners to be an Observer. For purposes of this Agreement, an Observer shall attend all meetings of its Board of Directors in a nonvoting observer capacity and, in this respect, shall be given copies of all notices, minutes, consents, and other materials that the Company provides to its directors; provided, however, that the Observer shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided; and, provided further, that the Company reserves the right to withhold any information and to exclude the Observer from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or would result in disclosure of trade secrets to the Observer or if Softbank, Sequoia or Technology Partners, or the Observer is a direct competitor of the Company. 2.6 Series D Preferred Stock Protective Provision. In the exercise of the rights set forth in Article IV Section 6(b)(v), the holders of Series D Preferred Stock of the Company hereby agree that the Series D Preferred Stock approval of a sale, merger or other transaction shall not be unreasonably withheld. 3. Preemptive Rights. 3.1 Grant of Right. Subject to the terms and conditions specified in this Section 3, the Company hereby grants to each Series D Holder and other Investor holding more than 500,000 shares of Preferred Stock a preemptive right with respect to future sales by the Company of its Future Shares (as hereinafter defined). 3.2 Future Shares. "Future Shares" shall mean shares of any capital stock of the Company, whether now authorized or not, and any rights, options or warrants to purchase such capital stock, and securities of any type that are, or may become, convertible into such capital stock; provided however, that "Future Shares" do not include (i) the shares Common Stock issued or issuable upon the conversion of Preferred Stock currently outstanding, (ii) securities offered pursuant to a registration statement filed under the Act, (iii) securities issued pursuant to the acquisition of another corporation by the Company by merger or, purchase of substantially all of the assets or other reorganization, (iv) securities issued in connection with or as consideration for a collaborative partnership arrangement, acquisition or licensing of technology or other significant assets to be used in the Company's business and (v) up to 1,500,000 shares of Common Stock issuable or issued to employees, consultants, directors or vendors (if in transactions with primarily non-financing -14- 15 purposes) of this corporation directly or pursuant to a stock option plan or restricted stock plan approved by the Board of Directors of the Company and any other shares issued in connection with transactions (including additions to the stock option plan) provided such issuances are unanimously approved by the Board of Directors of this corporation. 3.3 Notice. In the event the Company proposes to offer any of its Future Shares, the Company shall first make an offering of such Future Shares to each Investor in accordance with the following provisions: (a) The Company shall deliver a notice by certified mail (the "Notice") to the Investors stating (i) its bona fide intention to offer such Future Shares, (ii) the number of such Future Shares to be offered, (iii) the price, if any, for which it proposes to offer such Future Shares, and (iv) a statement as to the number of days from receipt of such Notice within which the Investor must respond to such Notice. (b) Within 20 calendar days after receipt of the Notice, the Investor may elect to purchase or obtain, at the price and on the terms specified in the Notice, up to that portion of such Future Shares which equals the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion of the Registerable Securities then held, by such Investor bears to the total number of shares of Common Stock issued and outstanding, including shares issuable upon conversion of convertible securities issued and outstanding. Each Investor shall be entitled to assign or apportion the right of first offer hereby granted it among itself and its partners and affiliates (including in the case of a venture capital fund other venture capital funds affiliated with such fund) in such proportions as it deems appropriate. The Company shall promptly, in writing, inform each Investor which purchases all of the Future Shares available to it (the "Fully-Exercising Investor") of any other Investor's failure to do likewise. During the ten-day period commencing after receipt of such information, each Fully-Exercising Investor shall be entitled to obtain that portion of the Future Shares offered to the Investors which was not subscribed for, which is equal to the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion of the Shares then held, by such Fully-Exercising Investor bears to the total number of shares of Common Stock issued and outstanding, including shares issuable upon conversion of convertible securities issued and outstanding then held, by all Fully-Exercising Investors who wish to purchase some of the unsubscribed shares. 3.4 Sale after Notice. If all such Future Shares referred to in the Notice are not elected to be obtained as provided in Section 3.3 hereof, the Company may, during the 90-day period following the expiration of the period provided in Section 3.3 hereof, offer the remaining unsubscribed Future Shares to any person or persons at a price not less than, and upon terms no more favorable to the offeree than those specified in the Notice. If the Company does not enter into an agreement for the sale of the Future Shares within such period, or if such agreement is not consummated within 90 days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Future Shares shall not be offered unless first reoffered to the Investors in accordance herewith. -15- 16 3.5 Assignment. In addition to the rights to assign or apportion set forth in Section 3.3(b), the right of first offer granted under this Section 3 is assignable by the Investors to any transferee who acquires at least the lesser of all of the shares owned by such Investor or a minimum of 500,000 shares of Common Stock (including any shares of Common Stock into which shares of Preferred Stock are convertible). 3.6 Termination of Rights. No shareholder shall be entitled to exercise any right provided for in this Section 3, (i) upon the consummation of the sale of securities pursuant to a registration statement filed by the Company under the Act in connection with a firm commitment underwritten offering of its securities to the general public in which the public offering price is less than $13.89 per share and in which the aggregate offering price is not less than $15,000,000 or (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Securities Exchange Act of 1934, whichever event shall first occur. 4. Miscellaneous Provisions. 4.1 Waivers and Amendments. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of at least a majority of the shares of Registrable Securities. Any amendment or waiver effected in accordance with this Section 3.1 shall be binding upon each person or entity which are granted certain rights under this Agreement and the Company. 4.2 Notices. All notices and other communications required or permitted hereunder shall be in writing and, except as otherwise noted herein, shall be deemed effectively given upon personal delivery, delivery by nationally recognized courier or five business days after deposit with the United States Post Office (by first class mail, postage prepaid), addressed: (a) if to the Company, at 540 University Avenue, Suite 350, Palo Alto, CA 94301 (or at such other address as the Company shall have furnished to the Investors in writing) attention of President and (b) if to an Investor, at the latest address of such person shown on the Company's records. 4.3 Descriptive Headings. The descriptive headings herein have been inserted for convenience only and shall not be deemed to limit or otherwise affect the construction of any provisions hereof. 4.4 Governing Law. This Agreement shall be governed by and interpreted under the laws of the State of California as applied to agreements among California residents, made and to be performed entirely within the State of California. 4.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original and all of which shall constitute the same instrument, but only one of which need be produced. -16- 17 4.6 Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney's fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 4.7 Successors and Assigns. Except as otherwise expressly provided in this Agreement, this Agreement shall benefit and bind the successors, assigns, heirs, executors and administrators of the parties to this Agreement. 4.8 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject matter of this Agreement. 4.9 Separability; Severability. Unless expressly provided in this Agreement, the rights of each Investor under this Agreement are several rights, not rights jointly held with any other Investors. Any invalidity, illegality or limitation on the enforceability of this Agreement with respect to any Investor shall not affect the validity, legality or enforceability of this Agreement with respect to the other Investors. If any provision of this Agreement is judicially determined to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired. 4.10 Stock Splits. All references to numbers of shares in this Agreement shall be appropriately adjusted to reflect any stock dividend, split, combination or other recapitalization of shares by the Company occurring after the date of this Agreement. -17- 18 IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first set forth above. COMPANY: E-LOAN, INC. By: ------------------------------- Title: ------------------------------- INVESTORS: YAHOO! INC. By: ------------------------------- Title: ------------------------------- SOFTBANK HOLDINGS, INC. By: ------------------------------- Title: ------------------------------- SOFTBANK TECHNOLOGY VENTURES IV L.P. By: STV IV LLC Its General Partner By: ------------------------------- RESTATED INVESTOR RIGHTS AGREEMENT 19 SOFTBANK TECHNOLOGY ADVISORS FUND L.P. By: STV IV LLC Its General Partner By: ------------------------------- SEQUOIA CAPITAL as nominee for: Sequoia Capital VIII Sequoia International Technology Partners VIII Sequoia International Technology Partners VIII-Q Sequoia 1997 CMS Partners By: ------------------------------- Title: ------------------------------- BENCHMARK CAPITAL PARTNERS II, L.P. By: BENCHMARK CAPITAL MANAGEMENT CO. II, L.L.C. Its General Partner By: ------------------------------- Member TECHNOLOGY PARTNERS FUND VI, L.P. By: TP Management VI, L.L.C. By: ------------------------------- Ira Ehrenpreis, Managing Member TECHNOLOGY PARTNERS FUND V, L.P. By: TPW Management V, L.P. By: ------------------------------- Ira Ehrenpreis, General Partner E*TRADE GROUP, INC. By: ------------------------------- Title: ------------------------------- RESTATED INVESTOR RIGHTS AGREEMENT 20 EXHIBIT A LIST OF INVESTORS
NAME NUMBER OF SHARES SERIES - ------------------------------------------------ ---------------- -------- Yahoo! Inc. 323,869 Series D Softbank Holdings, Inc. 388,643 Series D Softbank Technology Ventures IV, L.P. 380,402 Series D Softbank Technology Advisors Fund, L.P. 8,241 Series D Sequoia Capital VIII 352,227 Series D Sequoia International Technology Partners VIII 4,469 Series D Sequoia International Technology Partners VIII-Q 23,319 Series D Sequoia 1997 855 Series D CMS Partners 7,773 Series D Benchmark Capital Partners II 97,161 Series D 2,589,959 Series C Technology Partners Fund V, L.P. 10,111 Series D 739,989 Series C Technology Partners Fund VI, L.P. 65,459 Series D 739,988 Series C E*TRADE Group, Inc. 200,000 Series C
RESTATED INVESTOR RIGHTS AGREEMENT EX-10.5 12 WARRANT AGREEMENT TO PURCHASE SHARES 1 Exhibit 10.5 THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. WARRANT AGREEMENT TO PURCHASE SHARES OF THE SERIES C PREFERRED STOCK OF E-LOAN, INC. DATED AS OF MARCH 4, 1998 (THE "EFFECTIVE DATE") WHEREAS, E-Loan, Inc., a California corporation (the "Company") has entered into a Master Lease Agreement dated as of March 4, 1998, Equipment Schedules No. VL-1 and VL-2 dated as of March 4, 1998, and related Summary Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and WHEREAS, the Company desires to grant to Warrantholder, in consideration for such Leases, the right to purchase shares of its Series C Preferred Stock; NOW, THEREFORE, in consideration of the Warrantholder executing and delivering such Leases and in consideration of mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows: 1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK. For value received, the Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase from the Company that number of fully paid and assessable shares of the Company's Series C Preferred Stock ("Preferred Stock") equal to Thirty Thousand Dollars ($30,000.00) ("Aggregate Purchase Price") divided by the exercise price as set forth below ("Exercise Price"). Notwithstanding the foregoing, the Exercise Price shall equal $2.00 per share if Company raises a round of equity financing of at least $1,000,000.00 (the "Next Round") or issues additional warrants within 120 days from the date hereof. In the event the Next Round or a warrant issuance does not occur within such 120 day period, the Exercise Price shall equal to the sum of $1.22852 per share (the "Last Round") plus the product of (a) the difference between the price per share of the Next Round and the Last Round, multiplied by (b) the fraction resulting from dividing (x) the number of days from the date of closing of the Last Round to the date of execution of the Leases, by (y) the number of days from the date of the closing of the Last Round to the date of closing of the Next Round; provided however, if the Next Round is not successfully completed within twenty-four (24) months of the date hereof, then the Exercise Price shall be equal to $1.22852 per share. The number and purchase price of such shares are subject to adjustment as provided in Section 8 hereof. 2. TERM OF THE WARRANT AGREEMENT. Except as otherwise provided for herein, the term of this Warrant Agreement and the right to purchase Preferred Stock as granted herein shall commence on the Effective Date and shall be exercisable for a period of (i) seven (7) years or (ii) three (3) years from the effective date of the Company's initial public offering, whichever is shorter. 3. EXERCISE OF THE PURCHASE RIGHTS. The purchase rights set forth in this Warrant Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2 above, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as Exhibit I (the "Notice of - 1 - 2 Exercise"), duly completed and executed. Promptly upon receipt of the Notice of Exercise and the payment of the purchase price in accordance with the terms set forth below, and in no event later than twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a certificate for the number of shares of Preferred Stock purchased and shall execute the acknowledgment of exercise in the form attached hereto as Exhibit II (the "Acknowledgment of Exercise") indicating the number of shares which remain subject to future purchases, if any. The Exercise Price may be paid at the Warrantholder's election either (i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as determined below. If the Warrantholder elects the Net Issuance method, the Company will issue Preferred Stock in accordance with the following formula: X = Y(A-B) ------ A Where: X = the number of shares of Preferred Stock to be issued to the Warrantholder. Y = the number of shares of Preferred Stock requested to be exercised under this Warrant Agreement. A = the fair market value of one (1) share of Preferred Stock. B = the Exercise Price. For purposes of the above calculation, current fair market value of Preferred Stock shall mean with respect to each share of Preferred Stock: (i) if the exercise is in connection with an initial public offering of the Company's Common Stock, and if the Company's Registration Statement relating to such public offering has been declared effective by the SEC, then the fair market value per share shall be the product of (x) the initial "Price to Public" specified in the final prospectus with respect to the offering and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; (ii) if this Warrant is exercised after, and not in connection with the Company's initial public offering, and: (a) if traded on a securities exchange, the fair market value shall be deemed to be the product of (x) the average of the closing prices over a twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; or (b) if actively traded over-the-counter, the fair market value shall be deemed to be the product of (x) the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) over the twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; (iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the current fair market value of Preferred Stock shall be the product of (x) the highest price per share which the Company could obtain from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by its Board of Directors and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise, unless the Company shall become subject to a merger, acquisition or other consolidation pursuant to which the Company is not the surviving party, in which case the fair market value of Preferred Stock shall be deemed to be the value received by the holders of the Company's Preferred Stock on a common equivalent basis pursuant to such merger or acquisition. Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Warrant Agreement representing the remaining number of shares purchasable hereunder. All other terms and - 2 - 3 conditions of such amended Warrant Agreement shall be identical to those contained herein, including, but not limited to the Effective Date hereof. 4. RESERVATION OF SHARES. (a) Authorization and Reservation of Shares. During the term of this Warrant Agreement, the Company will at all times have authorized and reserved a sufficient number of shares of its Preferred Stock to provide for the exercise of the rights to purchase Preferred Stock as provided for herein. (b) Registration or Listing. If any shares of Preferred Stock required to be reserved hereunder require registration with or approval of any governmental authority under any Federal or State law (other than any registration under the Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any similar Federal statute then enforced, or any state securities law, required by reason of any transfer involved in such conversion), or listing on any domestic securities exchange, before such shares may be issued upon conversion, the Company will, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered, listed or approved for listing on such domestic securities exchange, as the case may be. 5. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect. 6. NO RIGHTS AS SHAREHOLDER. This Warrant Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder of the Company prior to the exercise of the Warrant. 7. WARRANTHOLDER REGISTRY. The Company shall maintain a registry showing the name and address of the registered holder of this Warrant Agreement. 8. ADJUSTMENT RIGHTS. The purchase price per share and the number of shares of Preferred Stock purchasable hereunder are subject to adjustment, as follows: (a) Merger and Sale of Assets. If at any time there shall be a capital reorganization of the shares of the Company's stock (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), or a merger or consolidation of the Company with or into another corporation whether or not the Company is the surviving corporation, or the sale of all or substantially all of the Company's properties and assets to any other person (hereinafter referred to as a "Merger Event"), then, as a part of such Merger Event, lawful provision shall be made so that the Warrantholder shall thereafter be entitled to receive, upon exercise of the Warrant, the number of shares of preferred stock or other securities of the successor corporation resulting from such Merger Event, equivalent in value to that which would have been issuable if Warrantholder had exercised this Warrant immediately prior to the Merger Event. In any such case, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant Agreement with respect to the rights and interest of the Warrantholder after the Merger Event to the end that the provisions of this Warrant Agreement (including adjustments of the Exercise Price and number of shares of Preferred Stock purchasable) shall be applicable to the greatest extent possible. (b) Reclassification of Shares. If the Company at any time shall, by combination, reclassification, exchange or subdivision of securities or otherwise, change any of the securities as to which purchase rights under this Warrant Agreement exist into the same or a different number of securities of any other class or classes, this Warrant Agreement shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant Agreement immediately prior to such combination, reclassification, exchange, subdivision or other change. - 3 - 4 (c) Subdivision or Combination of Shares. If the Company at any time shall combine or subdivide its Preferred Stock, the Exercise Price shall be proportionately decreased in the case of a subdivision, or proportionately increased in the case of a combination. (d) Stock Dividends. If the Company at any time shall pay a dividend payable in, or make any other distribution (except any distribution specifically provided for in the foregoing subsections (a) or (b)) of the Company's stock, then the Exercise Price shall be adjusted, from and after the record date of such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction (i) the numerator of which shall be the total number of all shares of the Company's stock outstanding (on an as-converted basis) immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of all shares of the Company's stock outstanding (on an as-converted basis) immediately after such dividend or distribution. The Warrantholder shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares of Preferred Stock (calculated to the nearest whole share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Preferred Stock issuable upon the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. (e) Antidilution Rights. Additional antidilution rights applicable to the Preferred Stock purchasable hereunder are as set forth in the Company's Certificate of Incorporation, as amended through the Effective Date, a true and complete copy of which is attached hereto as Exhibit IV (the "Charter"). The Company shall promptly provide the Warrantholder with any restatement, amendment, modification or waiver of the Charter. The Company shall provide Warrantholder with prior written notice of any issuance of its stock or other equity security to occur after the Effective Date of this Warrant, which notice shall include (a) the price at which such stock or security is to be sold, (b) the number of shares to be issued, and (c) such other information as necessary for Warrantholder to determine if a dilutive event has occurred. (f) Notice of Adjustments. If: (i) the Company shall declare any dividend or distribution upon its stock, whether in cash, property, stock or other securities; (ii) the Company shall offer for subscription prorata to the holders of any class of its Preferred or other convertible stock any additional shares of stock of any class or other rights; (iii) there shall be any Merger Event; (iv) there shall be an initial public offering; or (v) there shall be any voluntary dissolution, liquidation or winding up of the Company; then, in connection with each such event, the Company shall send to the Warrantholder: (A) at least twenty (20) days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution, subscription rights (specifying the date on which the holders of Preferred Stock shall be entitled thereto) or for determining rights to vote in respect of such Merger Event, dissolution, liquidation or winding up; (B) in the case of any such Merger Event, dissolution, liquidation or winding up, at least twenty (20) days' prior written notice of the date when the same shall take place (and specifying the date on which the holders of Preferred Stock shall be entitled to exchange their Preferred Stock for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding up); and (C) in the case of a public offering, the Company shall give the Warrantholder at least twenty (20) days written notice prior to the effective date thereof. Each such written notice shall set forth, in reasonable detail, (i) the event requiring the adjustment, (ii) the amount of the adjustment, (iii) the method by which such adjustment was calculated, (iv) the Exercise Price, and (v) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given by first class mail, postage prepaid, addressed to the Warrantholder, at the address as shown on the books of the Company. (g) Timely Notice. Failure to timely provide such notice required by subsection (f) above shall entitle Warrantholder to retain the benefit of the applicable notice period notwithstanding anything to the contrary contained in any insufficient notice received by Warrantholder. The notice period shall begin on the date Warrantholder actually receives a written notice containing all the information specified above. 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. (a) Reservation of Preferred Stock. The Preferred Stock issuable upon exercise of the Warrantholder's rights has been duly and validly reserved and, when issued in accordance with the provisions of this Warrant Agreement, will be validly issued, fully paid and non-assessable, and will be free of any taxes, liens, charges or encumbrances of any nature whatsoever; provided, however, that the Preferred Stock issuable pursuant to this Warrant Agreement may be subject to restrictions on transfer under state and/or Federal securities laws. The Company has made available to the Warrantholder true, correct and complete copies of its Charter and Bylaws, as amended. The issuance of certificates for shares of Preferred Stock upon exercise of the Warrant Agreement shall - 4 - 5 be made without charge to the Warrantholder for any issuance tax in respect thereof, or other cost incurred by the Company in connection with such exercise and the related issuance of shares of Preferred Stock. The Company shall not be required to pay any tax which may be payable in respect of any transfer involved and the issuance and delivery of any certificate in a name other than that of the Warrantholder. (b) Due Authority. The execution and delivery by the Company of this Warrant Agreement and the performance of all obligations of the Company hereunder, including the issuance to Warrantholder of the right to acquire the shares of Preferred Stock, have been duly authorized by all necessary corporate action on the part of the Company, and the Leases and this Warrant Agreement are not inconsistent with the Company's Charter or Bylaws, do not contravene any law or governmental rule, regulation or order applicable to it, do not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument to which it is a party or by which it is bound, and the Leases and this Warrant Agreement constitute legal, valid and binding agreements of the Company, enforceable in accordance with their respective terms. (c) Consents and Approvals. No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, Federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Warrant Agreement, except for the filing of notices pursuant to Regulation D under the 1933 Act and any filing required by applicable state securities law, which filings will be effective by the time required thereby. (d) Issued Securities. All issued and outstanding shares of Common Stock, Preferred Stock or any other securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. All outstanding shares of Common Stock, Preferred Stock and any other securities were issued in full compliance with all Federal and state securities laws. In addition: (i) The authorized capital of the Company consists of (A) 10,000,000 shares of Common Stock, of which 4,113,750 shares are issued and outstanding, and (B) 450,000 shares of Series A preferred stock, of which 428,635 shares are issued and outstanding and are convertible into 428,635 shares of Common Stock at $1.00 per share, 450,207 shares of Series B preferred stock, of which 430,207 shares are issued and outstanding and are convertible into 430,207 shares of Common Stock at $1.00 per share, 4,467,912 shares of Series C preferred stock, of which 4,061,738 shares are issued and outstanding and are convertible into 4,061,738 shares of Common Stock at $1.00 per share and 4,467,912 shares of Series C-1 preferred stock, of which no shares are issued and outstanding. (ii) The Company has reserved (A) 890,000 shares of Common Stock for issuance under its Incentive/Nonqualified Stock Option Plan, under which 425,378 options are outstanding. There are no other options, warrants, conversion privileges or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the Company's capital stock or other securities of the Company. (iii) In accordance with the Company's Articles of Incorporation, no shareholder of the Company has preemptive rights to purchase new issuances of the Company's capital stock. (e) Insurance. The Company has in full force and effect insurance policies, with extended coverage, insuring the Company and its property and business against such losses and risks, and in such amounts, as are customary for corporations engaged in a similar business and similarly situated and as otherwise may be required pursuant to the terms of any other contract or agreement. (f) Other Commitments to Register Securities. Except as set forth in this Warrant Agreement, the Company is not, pursuant to the terms of any other agreement currently in existence, under any obligation to register under the 1933 Act any of its presently outstanding securities or any of its securities which may hereafter be issued. (g) Exempt Transaction. Subject to the accuracy of the Warrantholder's representations in Section 10 hereof, the issuance of the Preferred Stock upon exercise of this Warrant will constitute a transaction exempt from (i) the registration requirements of Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws. (h) Compliance with Rule 144. At the written request of the Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise of the Warrant in compliance with Rule 144 promulgated by the Securities and Exchange Commission, the Company shall furnish to the Warrantholder, within ten days after receipt - 5 - 6 of such request, a written statement confirming the Company's compliance with the filing requirements of the Securities and Exchange Commission as set forth in such Rule, as such Rule may be amended from time to time. 10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER. This Warrant Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder: (a) Investment Purpose. The right to acquire Preferred Stock or the Preferred Stock issuable upon exercise of the Warrantholder's rights contained herein will be acquired for investment and not with a view to the sale or distribution of any part thereof, and the Warrantholder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption. (b) Private Issue. The Warrantholder understands (i) that the Preferred Stock issuable upon exercise of this Warrant is not registered under the 1933 Act or qualified under applicable state securities laws on the ground that the issuance contemplated by this Warrant Agreement will be exempt from the registration and qualifications requirements thereof, and (ii) that the Company's reliance on such exemption is predicated on the representations set forth in this Section 10. (c) Disposition of Warrantholder's Rights. In no event will the Warrantholder make a disposition of any of its rights to acquire Preferred Stock or Preferred Stock issuable upon exercise of such rights unless and until (i) it shall have notified the Company of the proposed disposition, and (ii) if requested by the Company, it shall have furnished the Company with an opinion of counsel (which counsel may either be inside or outside counsel to the Warrantholder) satisfactory to the Company and its counsel to the effect that (A) appropriate action necessary for compliance with the 1933 Act has been taken, or (B) an exemption from the registration requirements of the 1933 Act is available. Notwithstanding the foregoing, the restrictions imposed upon the transferability of any of its rights to acquire Preferred Stock or Preferred Stock issuable on the exercise of such rights do not apply to transfers from the beneficial owner of any of the aforementioned securities to its nominee or from such nominee to its beneficial owner, and shall terminate as to any particular share of Preferred Stock when (1) such security shall have been effectively registered under the 1933 Act and sold by the holder thereof in accordance with such registration or (2) such security shall have been sold without registration in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been issued to the Warrantholder at its request by the staff of the Securities and Exchange Commission or a ruling shall have been issued to the Warrantholder at its request by such Commission stating that no action shall be recommended by such staff or taken by such Commission, as the case may be, if such security is transferred without registration under the 1933 Act in accordance with the conditions set forth in such letter or ruling and such letter or ruling specifies that no subsequent restrictions on transfer are required. Whenever the restrictions imposed hereunder shall terminate, as hereinabove provided, the Warrantholder or holder of a share of Preferred Stock then outstanding as to which such restrictions have terminated shall be entitled to receive from the Company, without expense to such holder, one or more new certificates for the Warrant or for such shares of Preferred Stock not bearing any restrictive legend. (d) Financial Risk. The Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, and has the ability to bear the economic risks of its investment. (e) Risk of No Registration. The Warrantholder understands that if the Company does not register with the Securities and Exchange Commission pursuant to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to Section 15(d), of the 1934 Act", or if a registration statement covering the securities under the 1933 Act is not in effect when it desires to sell (i) the rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to purchase, it may be required to hold such securities for an indefinite period. The Warrantholder also understands that any sale of its rights of the Warrantholder to purchase Preferred Stock or Preferred Stock which might be made by it in reliance upon Rule 144 under the 1933 Act may be made only in accordance with the terms and conditions of that Rule. (f) Accredited Investor. Warrantholder is an "accredited investor" within the meaning of the Securities and Exchange Rule 501 of Regulation D, as presently in effect. 11. REQUESTS FOR REGISTRATION Warrantholder and Company agree that all shares of Preferred Stock subject to the Warrant Agreement shall have the same registration rights and be subject to the same terms and conditions with respect to the registration and sale - 6 - 7 of such stock as possessed by the Series C Shareholders as provided for in the Investor Rights Agreement dated December 19, 1997, by and among the Company and those certain Purchasers identified therein, attached hereto as Exhibit V. 12. TRANSFERS. Subject to the terms and conditions contained in Section 10 hereof, this Warrant Agreement and all rights hereunder are transferable in whole or in part by the Warrantholder and any successor transferee, provided, however, in no event shall the number of transfers of the rights and interests in all of the Warrants exceed three (3) transfers. The transfer shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. 13. MISCELLANEOUS. (a) Effective Date. The provisions of this Warrant Agreement shall be construed and shall be given effect in all respects as if it had been executed and delivered by the Company on the date hereof. This Warrant Agreement shall be binding upon any successors or assigns of the Company. (b) Attorney's Fees. In any litigation, arbitration or court proceeding between the Company and the Warrantholder relating hereto, the prevailing party shall be entitled to attorneys' fees and expenses and all costs of proceedings incurred in enforcing this Warrant Agreement. (c) Governing Law. This Warrant Agreement shall be governed by and construed for all purposes under and in accordance with the laws of the State of California. (d) Counterparts. This Warrant Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (e) Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, facsimile transmission (provided that the original is sent by personal delivery or mail as hereinafter set forth) or seven (7) days after deposit in the United States mail, by registered or certified mail, addressed (i) to the Warrantholder at 6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease Administration, cc: Legal Department, Attention.: General Counsel, (and/or, if by facsimile, (847) 518-5465 and (847)518-5088) and (ii) to the Company at 540 University Av., Suite 150, Palo Alto, CA 94301, Attention:______ (and/or if by facsimile, (650) 617-0410) or at such other address as any such party may subsequently designate by written notice to the other party. (f) Remedies. In the event of any default hereunder, the non-defaulting party may proceed to protect and enforce its rights either by suit in equity and/or by action at law, including but not limited to an action for damages as a result of any such default, and/or an action for specific performance for any default where Warrantholder will not have an adequate remedy at law and where damages will not be readily ascertainable. The Company expressly agrees that it shall not oppose an application by the Warrantholder or any other person entitled to the benefit of this Agreement requiring specific performance of any or all provisions hereof or enjoining the Company from continuing to commit any such breach of this Agreement. (g) No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Warrantholder against impairment. (h) Survival. The representations, warranties, covenants and conditions of the respective parties contained herein or made pursuant to this Warrant Agreement shall survive the execution and delivery of this Warrant Agreement. (i) Severability. In the event any one or more of the provisions of this Warrant Agreement shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Warrant Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision. - 7 - 8 (j) Amendments. Any provision of this Warrant Agreement may be amended by a written instrument signed by the Company and by the Warrantholder. (k) Additional Documents. The Company, upon execution of this Warrant Agreement, shall provide the Warrantholder with certified resolutions with respect to the representations, warranties and covenants set forth in subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase price for the Leases referenced in the preamble of this Warrant Agreement exceeds $1,000,000, the Company will also provide Warrantholder with an opinion from the Company's counsel with respect to those same representations, warranties and covenants. The Company shall also supply such other documents as the Warrantholder may from time to time reasonably request. IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date. COMPANY: E-LOAN, INC. By: /s/ Chris Larsen -------------------------- Title: President ----------------------- WARRANTHOLDER: COMDISCO, INC. By: /s/ Illegible -------------------------- Title: President, Comdisco Ventures Division ----------------------- - 8 - 9 EXHIBIT I NOTICE OF EXERCISE TO: ____________________________ (1) The undersigned Warrantholder hereby elects to purchase _______ shares of the Series ____ Preferred Stock of _________________, pursuant to the terms of the Warrant Agreement dated the ______ day of ________________________, 19__ (the "Warrant Agreement") between _____________________________________ and the Warrantholder, and tenders herewith payment of the purchase price for such shares in full, together with all applicable transfer taxes, if any. (2) In exercising its rights to purchase the Series ____ Preferred Stock of ________________________________________, the undersigned hereby confirms and acknowledges the investment representations and warranties made in Section 10 of the Warrant Agreement. (3) Please issue a certificate or certificates representing said shares of Series ____ Preferred Stock in the name of the undersigned or in such other name as is specified below. _________________________________ (Name) _________________________________ (Address) WARRANTHOLDER: COMDISCO, INC. By: _________________________ Title: _________________________ Date: _________________________ - 9 - 10 EXHIBIT II ACKNOWLEDGMENT OF EXERCISE The undersigned ____________________________________, hereby acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares of the Series ____ Preferred Stock of _________________, pursuant to the terms of the Warrant Agreement, and further acknowledges that ______ shares remain subject to purchase under the terms of the Warrant Agreement. COMPANY: By: _________________________ Title: _________________________ Date: _________________________ - 10 - 11 EXHIBIT III TRANSFER NOTICE (TO TRANSFER OR ASSIGN THE FOREGOING WARRANT AGREEMENT EXECUTE THIS FORM AND SUPPLY REQUIRED INFORMATION. DO NOT USE THIS FORM TO PURCHASE SHARES.) FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights evidenced thereby are hereby transferred and assigned to ___________________________________________________________________ (Please Print) whose address is___________________________________________________ ___________________________________________________________________ Dated: ___________________________________ Holder's Signature: _____________________ Holder's Address: _____________________ ___________________________________________ Signature Guaranteed: ____________________________________________ NOTE: The signature to this Transfer Notice must correspond with the name as it appears on the face of the Warrant Agreement, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant Agreement. - 11 - EX-10.7 13 MARKETING AGREEMENT WITH DLJDIRECT, INC. 1 EXHIBIT 10.7 MARKETING AGREEMENT This Marketing Agreement (the "Agreement") is made as of September 4, 1998 by and between DLJDIRECT Inc., a Delaware corporation with an address at One Pershing Plaza, Jersey City, NJ 07399 ("DLJdirect"), and E-LOAN, INC., a California corporation with an address at 540 University Avenue, Palo Alto, California 94301 ("E-Loan"), for the purpose of defining the terms and conditions for providing loan services and hypertext links from the DLJdirect Web site to the E-Loan Web site. Whereas DLJdirect and E-Loan intend to enter into an arrangement to offer DLJdirect customers access to E-Loan content and services: 1. LOAN CENTER. 1.1 LOAN CENTER. E-Loan will create a "Loan Center," an internet site accessible by DLJdirect customers and the general public, for DLJdirect that will have the DLJdirect "look and feel," including the current DLJdirect navigation header, with a graphical reference to E-Loan. The Loan Center will contain various hypertext links to mortgage tools, services, and articles provided by E-Loan and shall enable customers of DLJdirect to, at a minimum, (a) search for rates for mortgages, second mortgages, home equity loans, and refinancings (collectively, "Loan Products") from a variety of lenders; (b) apply online for a Loan Product; and (c) prequalify for a Loan Product. All hypertext links from the Loan Center shall be subject to the prior written approval of DLJdirect. All tools, services and articles will have an E-Loan/DLJdirect co-branded header ("Co-Branded Pages"), and use the current DLJdirect navigation header and E-Loan sidebar and footer. Both parties shall agree to the "look and feel" of the Loan Center. 1.2 NUMBER OF LENDERS. E-Loan shall guarantee that for the duration of the Agreement it will maintain a relationship with at least [*] lenders that are eligible to offer Loan Products to DLJdirect customers in the Loan Center. DLJdirect shall have the right to exclude certain lenders from the Loan Center for any reason. 1.3 MORTGAGE LICENSES. E-Loan shall take steps necessary at its own cost and expense to become licensed in at least [*] states [*] by the end of 1998 and in [*] states and [*] by the end of June, 1999 as a mortgage broker and as a mortgage bank. E-Loan represents that it will not offer or process mortgage loans in states where it is not licensed or authorized to do so. Further, E-Loan represents that the establishment of the Loan Center and the anticipated compensation of DLJdirect hereunder does not constitute mortgage brokerage by DLJdirect (provided that appropriate disclosures are made on the Loan Center). 1.4 COMPLIANCE WITH CONSUMER LAW AND REGULATION. With regard to both E-Loan's activities in general and, in particular, in its handling of each application for each Loan Product, E-Loan shall comply with all State, Federal and local laws, rules and regulations, including but not limited to: (i) the Federal Truth in Lending Act, as amended ("TILA"), and Federal Reserve Regulation Z thereunder; (ii) the Federal Equal Credit Opportunity Act ("ECOA") and Federal Reserve Regulation B thereunder; (iii) the Federal Fair Credit Reporting - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 2 Act; (iv) the Federal Real Estate Settlement Procedures Act as amended (RESPA), and Regulation X thereunder; (v) the Home Mortgage Disclosure Act and Regulation C thereunder; (vi) the Fair Housing Act; and (vii) the National Affordable Housing Act. In connection with ECOA and Regulation B, E-Loan agrees that it will not discourage or pre-screen any applicant or in any other manner violate the Act and Regulation. Further, E-Loan or its agents, or, if applicable, the originating lender shall be responsible for timely providing all consumer compliance disclosures (such as Good Faith Estimates of Settlement Services; HUD-1 Settlement Statements; ECOA adverse action notifications; TILA disclosures) required by the foregoing laws and regulations. E-Loan shall maintain, available for DLJdirect's inspection, and shall deliver to DLJdirect upon demand, evidence of compliance with all such requirements. 2. LOAN COLLATERALIZED BY SECURITIES ACCOUNT. E-Loan and DLJdirect will develop a loan product ("Loan Collateralized By Securities Account" or "LCBSA") that allows customers of DLJdirect to use their DLJdirect account as collateral for a home mortgage. E-Loan agrees not to offer or announce its intention to offer a similar product to the customers of any other financial services company until [*]. E-Loan shall not preclude any other Loan Center lenders from originating loans collateralized by DLJdirect securities accounts through the Loan Center, which lenders have been approved in writing by DLJdirect to do so. If, for any reason, a separate written agreement is not executed by the parties regarding the terms of the LCBSA on or before [*] either party may, at its option, terminate all obligations under this Paragraph 2. In such event, either party may enter into agreements with other parties to develop and market LCBSA products. All other provisions of this Agreement shall continue unchanged in the event either party elects to terminate all obligations of Paragraph 2. 3. DEBT TRACKER. At DLJdirect's request, E-Loan will work with DLJdirect to integrate E-Loan's Debt Tracker service into DLJdirect's Web site, which will allow DLJdirect customers and visitors to the DLJdirect site to monitor their mortgages. DLJdirect reserves the right not to offer Debt Tracker to all or some of its customers/visitors. 4. MARKETING FEES. 4.1 MARKETING FEES. E-Loan will pay a marketing fee to DLJdirect the greater of (i) [*] per month or (ii) [*] per click-through from the Loan Center to any of the links to E-Loan services (excluding links to articles or calculators). Upon the delivery of a written opinion of counsel acceptable to, and in form and substance satisfactory to DLJdirect, to the effect that RESPA and other applicable laws permit payment on a per completed loan application or closed loan basis, the marketing fee payment to DLJdirect with respect to all loans sourced or originated by E-Loan in connection with the "Co-Branded Pages" shall be not less than [*] per completed application or [*] per closed loan, whichever is greater (and not on the basis set forth in the preceding sentence). This fee structure will be re-negotiated by the parties in good faith if DLJdirect or its affiliates becomes a licensed mortgage broker or licensed mortgage banker. 4.2 PAYMENT. Payment on a click-through basis shall be made no more than thirty (30) days after the last day of each calendar month. E-Loan will issue DLJdirect a user code, - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. -2- 3 which must be used by DLJdirect to allow E-Loan to monitor traffic coming from the Loan Center. When and if payment is ever made on a per completed application or on a per closed loan basis, payment shall be made no more than sixty (60) days after the last day of each calendar month. 4.3 MARKETING. In return for the marketing fees, DLJdirect shall: (a) Issue a joint press release with E-Loan which shall be mutually agreed upon by both parties. (b) Announce the Loan Center in its quarterly newsletter to customers, IQ. (c) Announce the Loan Center in a statement message. (d) Establish a link to the Loan Center from within at least one (1) of the six (6) main sections of the DLJdirect site (currently Market Monitor). (e) Include the Loan Center in its marketplace area, when such area becomes available on its site, but not later than November 30, 1998. (f) Refer to the Loan Center in the "Awards and Announcements" section of its home page under the heading "DLJdirect Facts." (g) Refer to the Loan Center in the "Common Questions" section of its home page. 4.4 HOME EQUITY LINE OF CREDIT. E-Loan shall offer customers of DLJdirect, who apply for and obtain a first mortgage loan through the Loan Center, a Home Equity Line of Credit ("HELOC"), which must close concurrently with the first mortgage loan. E-Loan will charge no additional fees for the HELOC and E-Loan will credit DLJdirect customers [*] for closing both the first mortgage loan and the HELOC. The [*] will be credited to DLJdirect customers at the time of closing. E-LOAN agrees not to offer this product to customers of any other company until November 1, 1998. 5. WARRANTS. In consideration of DLJdirect entering into this Agreement, E-Loan shall issue to DLJdirect warrants to purchase $500,000 of E-Loan stock per the Warrant Purchase Agreement ("Purchase Agreement") dated September 4, 1998 and the Warrant to Purchase Preferred Stock of E-Loan ("Warrant to Purchase Preferred Stock") dated September 4, 1998, both of which are attached hereto. Any warrants that have become exercisable pursuant to the Warrant to Purchase Preferred Stock shall be deemed vested and non-forfeitable. 6. DONALDSON, LUFKIN & JENRETTE (DLJ). With respect to residential mortgage loans sourced or originated by E-Loan in connection with the "Co-Branded Pages" and utilizing DLJ's posted price, E-Loan shall sell such loans to DLJ Mortgage Capital, Inc. (or another DLJ company, at the direction of DLJdirect), provided the mutually agreed upon underwriting guidelines have been satisfied. - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. -3- 4 7. USAGE INFORMATION. E-Loan will monitor user traffic coming from the Loan Center and provide DLJdirect with a report of this information on a monthly basis. DLJdirect shall provide E-Loan with a monthly report of the number of page views for any page on its site which links to the Loan Center. 8. LICENSE. 8.1 LICENSE OF MARKS. DLJdirect and E-Loan each grants to the other during the term of this Agreement a non-exclusive, non-transferable, royalty-free, worldwide license to use those of its trademarks, service marks, trade names, legal or other commercial or product designations (collectively, "Marks") on the other's Web site solely in connection with the object of this Agreement, including but not limited to inclusion in hypertext links, marketing, promotion, inclusion in content directories or indexes, and in electronic or print advertising, publicity materials, press releases, newsletters, and mailings, subject to the prior written approval by the licensing party of each individual use of that party's Mark(s). 8.2 LICENSE OF OTHER PROPRIETARY INTELLECTUAL PROPERTY MATERIALS. DLJdirect and E-Loan each grants to the other during the term of this Agreement a non-exclusive, non-transferable, royalty-free, worldwide license to use any and all other proprietary materials, whether protected under copyright, patent, trade secret or other law (collectively, "IP Materials") on the other's Web site solely in connection with the object of this Agreement, including but not limited to inclusion in Web content pages, marketing, promotion, inclusion in content directories or indexes, and in electronic or print advertising, publicity materials, press releases, newsletters, and mailings, subject to the prior written approval by the licensing party of the first use of each piece of IP Material and the right of that party to terminate the use of that IP Material upon thirty (30) days written notice. 8.3 PROVIDED IN GOOD FAITH. Both parties represent and warrant that their respective Web sites, their Marks, and their IP Materials, as well as all products or services available either through their respective Web sites or otherwise are provided in good faith, in compliance with applicable law and current business practices and do not violate the terms of any agreements with third parties. 8.4 REMOVAL OF MARKS. DLJdirect may, upon written request of E-Loan or on its own initiative, remove the E-Loan Marks and all other references to E-Loan from its site. 9. CONTENT. Subject to Paragraphs 1.1 and 10, E-Loan shall give prior notice to DLJdirect in the event that it intends to materially alter the essential nature of its Internet site such that it materially affects the content being provided therein. 10. ADVERTISING. E-Loan shall not display advertisements of any type or references to third parties on the Loan Center or on the Co-Branded Pages or on any of the links from the Loan Center without the prior written consent of DLJdirect. DLJdirect shall not display advertisements of any type on any pages which display the E-Loan Marks without the written approval of E-Loan, except that DLJdirect may display links to other content providers and that this shall not prevent DLJdirect from linking to the Loan Center from the marketplace section of its site. -4- 5 11. EXCLUSIVITY. E-Loan will be the exclusive content provider of home mortgage comparison services to DLJdirect during the first year of this Agreement. This does not limit DLJdirect from selling advertising to other single source mortgage providers (e.g. banks) on all pages of the DLJdirect Web site other than the Loan Center or the Co-Branded pages. Exclusivity will only be extended during the second year of the term if DLJdirect elects to receive the second installment of warrants as specified in the Warrant to Purchase Preferred Stock. Exclusivity shall not apply to the provision of the LCBSA described in Paragraph 2 in the event either party terminates the obligations set forth in Paragraph 2. 12. INTELLECTUAL PROPERTY RIGHTS. Each party represents and warrants that it owns all right, title and interest or, to the extent not owned, has all necessary rights to use all materials owned by any third party which are used in its online service or Web site, and in its Marks and its IP Materials, and that the use thereof shall not violate any U.S. patent, copyright, intellectual property, contractual or other right of any third party. 13. BENEFITS ON THIRD PARTIES. Nothing in this agreement shall be construed to confer benefits on third parties, including but not limited to the customers of DLJdirect or E-Loan and/or users of or visitors to the E-Loan Web site. 14. AUDIT. Either party may, at its own expense, upon reasonable notice and during normal business hours, no more than once annually, inspect and audit the other party's records directly relating to the terms of this Agreement. Such audits shall be conducted by an independent certified public accountant at the cost of the requesting party and shall be limited in scope to a period of twelve (12) months prior to the month in which the audit commences, but not to include any period of time prior to the commencement of this Agreement. 15. INDEMNIFICATION. Each party (indemnitor) shall indemnify and hold harmless the other (indemnitee) from and against any losses or damages (including reasonable attorneys' fees and disbursements) suffered by the indemnitee arising from any and all claims, suits, actions or causes of action seeking damages for losses caused by the actions or omissions of the indemnitor, including without limitation any breach of any warranty made by the indemnitor in this Agreement, except to the extent that such claims, suits, actions or causes of action relate to the negligence or willful misconduct of the indemnitee. E-Loan shall indemnify DLJdirect from all costs and expenses (including attorneys and other experts) of any mortgage regulatory inquiry that may be initiated relating to this Agreement. DLJdirect shall indemnify E-Loan from all costs and expenses (including fees and disbursements of attorneys and other experts) of any regulatory inquiry related to a securities transaction in a customer's DLJdirect account that may be initiated relating to this Agreement. Further, E-Loan shall indemnify DLJdirect from all costs and expenses (including attorneys, other experts and any related court costs) arising from E-Loan's failure to comply with the consumer appliance laws and regulations set forth in Paragraph 1.4 of this Agreement, and in particular, for failure to timely provide all of the disclosures required by such laws and regulations. -5- 6 16. NOTIFICATION. Each party shall notify the other as soon as practicable in the event that it receives a complaint, claim or regulatory inquiry concerning the other or becomes aware of any misuse of or misrepresentation concerning Marks, IP Material, Confidential Information, or services of the other party. 17. DISCLAIMER OF WARRANTIES. Both parties shall provide all services hereunder "AS IS" and without any warranty of any kind. E-Loan does not guarantee continuous or uninterrupted display or distribution of the Co-Branded Pages and DLJdirect does not guarantee continuous or uninterrupted operation of its Web site. In the event of interruption of display or distribution of the Loan Center or of the Co-Branded Pages or of DLJdirect's Web site, the affected party's sole obligation shall be to restore service as soon as reasonably possible. 18. LIMITATIONS ON LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO, SUCH DAMAGES ARISING FROM BREACH OF CONTRACT OR WARRANTY OR FROM NEGLIGENCE OR STRICT LIABILITY), OR FOR INTERRUPTED COMMUNICATIONS OR LOSS OF USE THEREOF, LOST BUSINESS, LOST DATA OR LOST PROFITS, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. 19. TERM AND TERMINATION. 19.1 TERM. The initial term of this Agreement shall be for [*] years and this Agreement shall automatically renew for one (1) year periods thereafter unless and until terminated by written notice from one party to the other given not less than sixty (60) days prior to the beginning of the next one (1) year period. The following Paragraphs shall survive the termination of this Agreement: 15; 18; 19; 21; 22; 23; and 26. 19.2 TERMINATION FOR BREACH. Except as expressly provided elsewhere in this Agreement, either party may terminate this Agreement at any time in the event of a breach of the Agreement by the other party which remains uncured after thirty (30) days written notice thereof to the other party (or such shorter period as may be specified elsewhere in this Agreement); provided that the cure period with respect to any scheduled payment will be fifteen (15) days following the due date. 19.3 TERMINATION FOR BANKRUPTCY/INSOLVENCY. Either party may terminate this Agreement immediately following written notice to the other party if the other party (i) abandons its business in the normal course; (ii) becomes or is declared insolvent or bankrupt; (iii) is the subject of any proceeding related to its liquidation or insolvency (whether voluntary or involuntary) which is not dismissed within ninety (90) calendar days; or (iv) makes an assignment for the benefit of creditors. 19.4 TERMINATION ON CHANGE OF CONTROL. In the event of a change of control of DLJdirect resulting in control of DLJdirect by an interactive mortgage comparison service company, E-Loan may terminate this Agreement by providing thirty (30) days prior written notice of such intent to terminate. In the event of a change of control of E-Loan resulting in control of E-Loan by an online brokerage service or other securities firm, DLJdirect may - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. -6- 7 terminate this Agreement by providing thirty (30) days prior written notice of such intent to terminate. A change of control shall be defined as ownership of more than 50% of the applicable company by a different entity than the owner as of the date of this Agreement. 19.5 TERMINATION ON ACQUISITION OF COMPETITOR. In the event E-Loan acquires ownership or control of a provider of securities brokerage services or establishes its own offering of securities brokerage services, then DLJdirect may terminate this Agreement by providing thirty (30) days prior written notice of such intent to terminate. In the event DLJdirect acquires ownership and control of an interactive mortgage comparison service or establishes its own interactive mortgage comparison service, then E-Loan may terminate this Agreement by providing thirty (30) days prior written notice of such intent to terminate. 20. ARBITRATION. All disputes, claims or controversies arising out of this Agreement shall be exclusively settled in accordance with the rules of arbitration of the National Association of Securities Dealers Regulation, Inc. whose decision shall be final and binding upon the parties. The parties further agree that the arbitrators shall have the power to grant injunctive relief. Each party shall bear its own cost and expense of the arbitration. The decision of the arbitrators may be enforced in a court of competent jurisdiction in New York City. The location for all arbitration hearings shall be in New York City. 21. CONFIDENTIAL INFORMATION. Each party acknowledges that during the term of this Agreement such party may come into possession of Confidential Information of the other party. For the purposes of this Agreement, "Confidential Information" means any information which the party disclosing the information (the "Discloser") designated as confidential or which the party receiving the information (the "Receiver") knows or has reason to know is confidential to the Discloser. Without limitation on the foregoing, Confidential Information includes: the terms of this Agreement, the E-Loan server logs and all information contained therein, all information provided by users to E-Loan in connection with the use of the Co-Branded Pages, the Co-Branded Pages specifications, code for the Co-Branded Pages and the company content. Confidential Information does not include information which is (a) already known by the Receiver at time of disclosure; (b) is or becomes, through no act or fault of the Receiver, publicly known; (c) received by the Receiver from a third party without a restriction on disclosure or use; (d) independently developed by the Receiver without reference to Discloser's Confidential Information; or (e) required to be disclosed by a court or governmental agency pursuant to a statute, regulation, or valid order. 22. GOVERNING LAW. This Agreement will be governed and construed in accordance with the laws of the State of New York without giving effect to principles of conflict of laws. 23. ENTIRE AGREEMENT. This Agreement sets forth the entire understanding and agreement of the parties and supersedes any and all oral or written agreements or understandings between the parties as to the subject matter of this Agreement. This Agreement may only be amended in a writing jointly executed by both parties hereto. 24. ASSIGNMENT. This Agreement is not assignable by either party without the written consent of the other party except that either party may assign this Agreement in full to the -7- 8 surviving entity in a merger or acquisition or to a purchaser of more than 50% of its assets, but subject to Paragraph 19.4. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the successors and permitted assigns of the parties. 25. YEAR 2000 WARRANTY. E-Loan represents and warrants that its proprietary technology, system and processes ("Software") will record, store, process, calculate, and present calendar dates falling on or after (and if applicable, spans of time including) January 1, 2000, in the same manner, and with the same functionality, data integrity and performance, as the Software records, stores, processes, calculates and presents calendar dates on or before December 31, 1999 ("2000 Compliant"). E-Loan represents that the Software (i) will lose no functionality with respect to the introduction of records containing dates falling on or after January 1, 2000; and (ii) will function with other software used by DLJdirect and/or Pershing ("Other Software") which may deliver records to the Software or receive records from Software, or interact with the Software, including but not limited to back-up and archived data, except to the extent that Other Software is not 2000 Compliant. 26. GENERAL. If any provision of this Agreement is held to be invalid or unenforceable for any reason, the remaining provisions will continue in full force without being impaired or invalidated in any way. The parties of this Agreement are independent contractors, and no agency, partnership, joint venture or employee-employer relationship is intended or created by this Agreement.
DLJDIRECT INC.: E-LOAN, INC.: By: /s/ Lia Hecht By: /s/ Doug Galen -------------------------------- ------------------------------------ Lia Hecht Douglas Galen Vice President Vice President of Sales & Business Development Date: Date: -------------------------------- ----------------------------------
-8- 9 WARRANT PURCHASE AGREEMENT THIS WARRANT PURCHASE AGREEMENT ("Agreement") is made as of the 4th day of September, 1998, by and among E-Loan, Inc., a California corporation (the "Company"), and DLJdirect, a Delaware corporation ("DLJdirect" or the "Holder"). RECITALS: WHEREAS, pursuant to the terms of the Marketing Agreement, by and between the Company and DLJdirect, dated September 4, 1998 (the "Marketing Agreement"), and in consideration thereof, the Company desires to issue a Warrant (as hereafter defined) to DLJdirect, and DLJdirect wishes to receive a Warrant, to purchase that number of shares of the Company's Series D Preferred Stock ("Series D Preferred Stock") as determined in this Agreement and in the Warrant; WHEREAS, the parties also wish to set forth certain representations, warranties, covenants, and agreements relating to the purchase of the Warrant provided for herein. NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS: 1. Authorization and Issuance of the Warrant. 1.1 Authorization. The Company has authorized the sale and issuance of the Warrant to DLJdirect. 1.2 Sale and Issuance of the Warrant. Subject to the terms and conditions hereof, the Company agrees to issue to the Holder a Warrant exercisable, at a price per share equal to $9.27, for that number of shares of Series D Preferred Stock as calculated in accordance with Section 1 of the Warrant, the form of which is attached hereto as Exhibit A (the "Warrant"). 2. Closing. 2.1 Closing; Closing Date. The closing of the issuance of the Warrant under this Agreement (the "Closing") shall take place on the date of this Agreement (the "Closing Date"), in accordance with arrangements mutually satisfactory to the Holder and counsel for the Company. 2.2 Closing Delivery. At the Closing, the Company will deliver to the Holder a Warrant to purchase that number of shares of Series D Preferred Stock as set forth in Section 1.2 hereto. 3. Market Stand-Off. The Holder hereby agrees that the Holder shall be bound by the following market stand-off requirements with respect to the Series D Preferred Stock obtained upon exercise of the Warrant, and the Common Stock obtained upon conversion of the Series D Preferred Stock, or any securities issued in exchange or replacement thereof (any of the foregoing, and collectively, the "Warrant Shares"): 10 The Holder hereby agrees that, during a period not to exceed 180 days, following the effective date of a registration statement of the Company filed under the Securities Act of 1933, as amended (the "Act"), it shall not, to the extent requested by the Company and the representative(s) of the underwriters in connection therewith, directly or indirectly sell, offer to sell, contract to sell (including, without limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) any Warrant Shares of the Company held by it at any time during such period except Common Stock included in such registration; provided, however, that: 3.1 Such agreement shall be applicable only to the first such registration statement of the Company which covers Common Stock (or other securities) to be sold on its behalf to the public in an underwritten offering; and 3.2 all officers and directors of the Company enter into similar agreements. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Warrant Shares until the end of any applicable restricted period. 4. Representations And Warranties of the Company. 4.1 Authorization. Subject to necessary corporate action to designate and authorize a sufficient number of Warrant Shares to affect the exercise of the Warrant, all corporate action on the part of the Company, its officers, directors, and shareholders necessary for the authorization, execution, and delivery of this Agreement, the performance of all the Company's obligations hereunder and for the authorization, issuance, sale, and delivery of the Warrant and the Warrant Shares has been taken or will be taken prior to the Closing. 4.2 Validity of Warrant and Warrant Shares. The Warrant, when issued in accordance with the terms of this Agreement, shall be duly and validly issued. The issuance of the Warrant and any subsequent issuance of the Warrant Shares are not and will not be subject to any preemptive rights and, when issued, sold, and delivered in compliance with the provisions of this Agreement and the terms of the Warrant and in accordance with the Company's Articles of Incorporation, as amended or restated, the Warrant and the Warrant Shares will be validly issued, fully paid, and nonassessable, and will be free of any liens or encumbrances; provided, however, that the Warrant and the Warrant Shares may be subject to restrictions on transfer under state and/or federal securities laws as set forth herein or as otherwise required by such laws at the time a transfer is proposed. 4.3 Governmental Consents. All consents, approvals, orders, or authorizations of, or registrations, qualifications, designations, declarations, or filings with, any governmental authority, required on the part of the Company in connection with the valid execution and delivery of this Agreement, the offer, sale, or issuance of the Warrant and the Warrant Shares, or the consummation of any other transaction contemplated hereby shall have been obtained and will be effective at the Closing, except (i) for necessary corporate action to designate and authorize a sufficient number of Warrant Shares to affect the exercise of the Warrant and (ii) for notices required -2- 11 or permitted to be filed with certain state and federal securities commissions, which notices will be filed on a timely basis. 5. Representations and Warranties of the Holder. The Holder hereby represents and warrants to the Company as follows: 5.1 Legal Authority. It has the requisite legal power to enter into this Agreement, to purchase the Warrant hereunder and to carry out and perform its obligations under the terms of this Agreement. 5.2 Due Execution. This Agreement has been duly authorized, executed, and delivered by it, and, upon execution and delivery by the Company, this Agreement will be a valid and binding agreement of it. 5.3 Investment Representations. (a) It is acquiring the Warrant for its own account, not as nominee or agent, for investment and not with a view to, or for resale in connection with, any distribution or public offering of the Warrant or Warrant Shares within the meaning of the Securities Act of 1933, as amended (the "1933 Act"). (b) It understands that (i) the Warrant and Warrant Shares have not been registered under the 1933 Act by reason of a specific exemption therefrom, that they must be held by it indefinitely, and that Holder must, therefore, bear the economic risk of such investment indefinitely, unless a subsequent disposition thereof is registered under the 1933 Act or is exempt from such registration; and (ii) the Warrant and each certificate representing the Warrant Shares will be endorsed with the following legend: "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL (WHO MAY BE COUNSEL TO THE COMPANY) SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED." (c) It has been furnished with such materials and has been given access to such information relating to the Company as it or its qualified representative has requested and it has been afforded the opportunity to ask questions regarding the Company and the Warrant and the Warrant Shares, all as it has found necessary to make an informed investment decision. (d) By reason of its business or financial experience, or the business or financial experience of its professional advisor, it has the capacity to protect its own interests in connection with this transaction. -3- 12 (e) If it is a corporation, partnership, trust, or other entity, it was not formed for the specific purpose of acquiring the Warrant or the Warrant Shares offered hereunder. (f) It is an "accredited investor" as provided under the 1933 Act and regulations adopted thereunder; and all information supplied by such Holder to the Company with respect to his or its purchase of the Warrant and the Warrant Shares has been and shall be true, complete, and accurate. 6. Miscellaneous. 6.1 California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT. 6.2 Governing Law. This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements among California residents, made and to be performed entirely within the State of California. 6.3 Successors and Assigns. Except as otherwise expressly provided herein, the terms and conditions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors, and administrators of the parties hereto. 6.4 Entire Agreement. This Agreement, the Marketing Agreement and the Exhibit hereto, and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement among the parties with regard to the subjects hereof and no party shall be liable or bound to any other party in any manner by any representations, warranties, covenants, or agreements except as specifically set forth herein or therein. 6.5 Separability. In case any provision of this Agreement shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 6.6 Amendment and Waiver. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived with the written consent of the Company and the Holder. -4- 13 6.7 Communications. All notices or other communications hereunder shall be in writing and shall be given by personal delivery, confirmed facsimile, overnight courier service, or by registered or certified mail (postage prepaid and return receipt requested) addressed as set forth below (or at such other address as a party may designate by notice to the other parties): If to the Company: E-LOAN, INC. 540 University Ave #350 Palo Alto, CA 94301 If to the Holder: At the address indicated for the Holder on the signature pages hereof Notice sent pursuant to or required by this Agreement shall be deemed given (i) in the case of personal delivery, on the date of such delivery, (ii) in the case of telex or facsimile transmission, on the date on which the sender receives confirmation by telex or facsimile transmission that such notice was received by the addressee, provided that a copy of such transmission is additionally sent by overnight air courier or mail as set forth in (iii) or (iv), respectively, below; (iii) in the case of overnight air courier, on the next business day following the day sent, with receipt confirmed by the courier; and (iv) in the case of mailing by first class certified or registered mail, postage prepaid, return receipt requested, on the fifth business day following such mailing. 6.8 Expenses. The Company and the Holder shall each bear its respective expenses and legal fees incurred with respect to this Agreement and the transactions contemplated hereby. 6.9 Titles and Subtitles. The titles of the paragraphs and subparagraphs of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. 6.10 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. -5- 14 IN WITNESS WHEREOF, the Company has caused this Warrant Purchase Agreement to be signed by its duly authorized officer. E-LOAN, INC. By: /s/ D. Galen -------------------------------------- Name: Douglas Galen ------------------------------------ Title: VP ----------------------------------- DLJDIRECT. By: /s/ Lia Hecht -------------------------------------- Name: Lia Hecht ------------------------------------ Title: Vice President ----------------------------------- One Pershing Plaza Jersey City, NJ 07399 -6- 15 EXHIBIT A FORM OF WARRANT E-1 16 THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT. WARRANT TO PURCHASE SERIES D PREFERRED STOCK OF E-LOAN, INC. VOID AFTER SEPTEMBER 4, 2001 This Warrant is issued to DLJdirect, a Delaware corporation, or its registered assigns ("Holder") by E-Loan, Inc., a California corporation (the "Company"), on September 4, 1998 (the "Warrant Issue Date"). This Warrant is issued pursuant to the terms of that certain Marketing Agreement, by and between the Company and DLJdirect, dated as of the date hereof (the "Marketing Agreement") and the Warrant Purchase Agreement, dated as of the date hereof (the "Purchase Agreement"). 1. Purchase of Shares. Subject to the terms and conditions hereinafter set forth and set forth in the Purchase Agreement, the Holder is entitled, upon surrender of this Warrant at the principal office of the Company (or at such other place as the Company shall notify the holder hereof in writing), to purchase from the Company up to that number of fully paid and nonassessable shares of Series D Preferred Stock of the Company, as more fully described below, that equals the quotient obtained by dividing (a) five hundred thousand dollars ($500,000), by (b) $9.27. The shares of Series D Preferred Stock issuable pursuant to this Section 1 (the "Shares") shall also be subject to adjustment pursuant to Section 8 hereof. 2. Exercise Price. The purchase price for the Shares shall be $9.27. Such price shall be subject to adjustment pursuant to Section 8 hereof (such price, as adjusted from time to time, is herein referred to as the "Exercise Price"). 3. Exercise Period. This Warrant shall become exercisable upon the later of (i) 30 days after the date of the initial commercial launch of the "Loan Center" as described in Section 1.1 of the Marketing Agreement and (ii) the first to occur of (A) the closing of a Corporate Transaction (as hereafter defined) or (B) the closing of the Company's Series D Financing; provided, however, that this Warrant shall not become exercisable with respect to 50% of the shares purchasable hereby unless DLJdirect shall have irrevocably elected to extend the term of E-Loan to be the exclusive content provider of home mortgage comparison services for an additional year in accordance with Section 11 of the Marketing Agreement. This Warrant shall remain so exercisable 17 until 5:00 p.m. on September 4, 2001; provided, however, that in the event of (a) the closing of the issuance and sale of shares of Common Stock of the Company in the Company's first underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended (the "IPO"), (b) the closing of the Company's sale or transfer of all or substantially all of its assets, or (c) the closing of the acquisition of the Company by another entity by means of merger, consolidation or other transaction or series of related transactions, resulting in the exchange of the outstanding shares of the Company's capital stock such that the stockholders of the Company prior to such transaction own, directly or indirectly, less than 50% of the voting power of the surviving entity, this Warrant shall, on the date of such event, no longer be exercisable and become null and void. In the event of a proposed transaction of the kind described above (any of the foregoing, a "Corporate Transaction"), the Company shall notify the holder of the Warrant at least twenty (20) business days prior to the consummation of such event or transaction; provided that the Board of Directors of the Company may shorten such twenty (20) business day notice period upon its good faith determination that a shorter period shall be required to consummate an acquisition transaction so long as Holder has a reasonable period of time to exercise the Warrant. 4. Method of Exercise. While this Warrant remains outstanding and exercisable in accordance with Section 3 above, the Holder may exercise, in whole or in part, the purchase rights evidenced hereby. Such exercise shall be effected by: (a) the surrender of the Warrant, together with a duly executed copy of the form of Notice of Election attached hereto, to the Secretary of the Company at its principal offices; and (b) the payment to the Company of an amount equal to the aggregate Exercise Price for the number of Shares being purchased. 5. Net Exercise. In lieu of exercising this Warrant pursuant to Section 4, the Holder may elect to receive, without the payment by the Holder of any additional consideration, shares of Series D Preferred Stock equal to the value of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with notice of such election, in which event the Company shall issue to the holder hereof a number of shares of Series D Preferred Stock computed using the following formula: Y (A - B) --------- X = A Where: X = The number of shares of Series D Preferred Stock to be issued to the Holder pursuant to this net exercise; Y = The number of Shares in respect of which the net issue election is made; A = The fair market value of one share of the Series D Preferred Stock at the time the net issue election is made; B = The Exercise Price (as adjusted to the date of the net issuance). -2- 18 For purposes of this Section 5, the fair market value of one share of Series D Preferred Stock (or, to the extent all such Series D Preferred Stock has been converted into the Company's Common Stock) as of a particular date shall be determined as follows: (i) if traded on a securities exchange or through the Nasdaq National Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the thirty (30) day period ending three (3) days prior to the net exercise election; (ii) if traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever is applicable) over the thirty (30) day period ending three (3) days prior to the net exercise; and (iii) if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board of Directors of the Company; provided, that, if the Warrant is being exercised upon the closing of the IPO, the value will be the initial "Price to Public" of one share of such Series D Preferred Stock (or Common Stock issuable upon conversion of such Series D Preferred Stock) specified in the final prospectus with respect to such offering. 6. Certificates for Shares. Upon the exercise of the purchase rights evidenced by this Warrant, one or more certificates for the number of Shares so purchased shall be issued as soon as practicable thereafter (with appropriate restrictive legends, if applicable), and in any event within thirty (30) days of the delivery of the subscription notice. 7. Issuance of Shares. The Company covenants that the Shares, when issued pursuant to the exercise of this Warrant, will be duly and validly issued, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof. 8. Adjustment of Exercise Price and Number of Shares. The number of and kind of securities purchasable upon exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time as follows: (a) Subdivisions, Combinations and Other Issuances. If the Company shall at any time prior to the expiration of this Warrant subdivide its Series D Preferred Stock, by split-up or otherwise, or combine its Series D Preferred Stock, or issue additional shares of its Series D Preferred Stock or Common Stock as a dividend with respect to any shares of its Series D Preferred Stock, the number of Shares issuable on the exercise of this Warrant shall forthwith be proportionately increased in the case of a subdivision or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments shall also be made to the purchase price payable per share, but the aggregate purchase price payable for the total number of Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 8(a) shall become effective at the close of business on the date the subdivision or combination becomes effective, or as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend. (b) Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change in the Series D Preferred Stock of the Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 8(a) above), then, as a condition of such reclassification, reorganization, or change, lawful provision shall be made, and duly executed documents evidencing the same from the Company or its successor shall be delivered to the Holder, so that the Holder shall have the right at any time prior to the expiration -3- 19 of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a holder of the same number of shares of Series D Preferred Stock as were purchasable by the Holder immediately prior to such reclassification, reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of the Holder so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per share payable hereunder, provided the aggregate purchase price shall remain the same. (c) Notice of Adjustment. When any adjustment is required to be made in the number or kind of shares purchasable upon exercise of the Warrant, or in the Warrant Price, the Company shall promptly notify the holder of such event and of the number of shares of Series D Preferred Stock or other securities or property thereafter purchasable upon exercise of this Warrant. (d) Other Events. In case any event shall occur as to which the provisions of Section 8(a) and Section 8(b) hereof are not strictly applicable but the failure to make any adjustment would not, in the opinion of the Holder of this Warrant, fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles of such Sections, then, at the request of such holder, the Company and such Holder shall appoint a mutually and reasonably acceptable arbiter which shall give an opinion upon the adjustment to this Warrant, if any, on a basis consistent with the essential intent and principles established in Section 8(a) and Section 8(b) hereof, necessary to preserve the purchase rights represented by this Warrant. Upon receipt of such opinion, the Company will promptly make the adjustments described therein. If no adjustment to this Warrant are described therein, then such Holder shall pay the fees and expenses of such arbiter, and otherwise the Company shall pay such fees and expenses. 9. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor on the basis of the Exercise Price then in effect. 10. No Stockholder Rights. Prior to exercise of this Warrant, the Holder shall not be entitled to any rights of a stockholder with respect to the Shares, including (without limitation) the right to vote such Shares, receive dividends or other distributions thereon, exercise preemptive rights or be notified of stockholder meetings, and such holder shall not be entitled to any notice or other communication concerning the business or affairs of the Company. However, nothing in this Section 10 shall limit the right of the Holder to be provided the Notices required under this Warrant or the Purchase Agreement. 11. Transfers of Warrant. Subject to compliance with applicable federal and state securities laws, this Warrant and all rights hereunder are transferable in whole or in part by the Holder to any person or entity upon written notice to the Company. The transfer shall be recorded on the books of the Company upon the surrender of this Warrant, properly endorsed, to the Company at its principal offices, and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. In the event of a partial transfer, the Company shall issue to the holders one or more appropriate new warrants. -4- 20 12. Successors and Assigns. The terms and provisions of this Warrant and the Purchase Agreement shall inure to the benefit of, and be binding upon, the Company and the Holders hereof and their respective successors and assigns. 13. Amendments and Waivers. Any term of this Warrant may be amended and the observance of any term of this Warrant may be waived (either generally or in a particular instance and either retroactively or prospectively), with the written consent of the Company and the Holder. 14. Notices. All notices required under this Warrant shall be deemed to have been given or made for all purposes upon confirmation of receipt when delivered by: (i) personal delivery, (ii) facsimile; (iii) professional overnight courier service, or (iv) registered or certified mail. Notices to the Company shall be sent to the principal office of the Company (or at such other place as the Company shall notify the Holder hereof in writing). Notices to the Holder shall be sent to the address of the Holder on the books of the Company (or at such other place as the Holder shall notify the Company hereof in writing). 15. Attorneys' Fees. If any action of law or equity is necessary to enforce or interpret the terms of this Warrant, the prevailing party shall be entitled to its reasonable attorneys' fees, costs and disbursements in addition to any other relief to which it may be entitled. 16. Captions. The section and subsection headings of this Warrant are inserted for convenience only and shall not constitute a part of this Warrant in construing or interpreting any provision hereof. 17. Governing Law. This Warrant shall be governed by the laws of the State of California as applied to agreements among California residents made and to be performed entirely within the State of California. IN WITNESS WHEREOF, E-Loan, Inc. caused this Warrant to be executed by an officer thereunto duly authorized. E-Loan, Inc. /s/ D. Galen --------------------------------------------- Print Name: Douglas Galen ---------------------------------- Title: VP --------------------------------------- -5- 21 NOTICE OF EXERCISE To: [CORPORATION NAME] The undersigned hereby elects to [check applicable subsection]: - -------------- (a) Purchase _______ shares of Series D Preferred Stock of ______________, pursuant to the terms of the attached Warrant and payment of the Exercise Price per share required under such Warrant accompanies this notice; OR - -------------- (b) Exercise the attached Warrant for [all of the shares] [________ of the shares] [cross out inapplicable phrase] purchasable under the Warrant pursuant to the net exercise provisions of Section 5 of such Warrant. The undersigned hereby represents and warrants that the undersigned is acquiring such shares for its own account for investment purposes only, and not for resale or with a view to distribution of such shares or any part thereof. WARRANTHOLDER: ---------------------------------------------- By: ------------------------------------------- [NAME] Address: ---------------------------------------------- ---------------------------------------------- Date: --------------------------------------- Name in which shares should be registered: - -------------------------------------------- EX-10.8 14 CO-MARKETING AGREEMENT WITH E*TRADE GROUP, INC. 1 EXHIBIT 10.8 CO-MARKETING AGREEMENT This Co-Marketing Agreement ("Agreement") is made and entered into as of March 26, 1998 ("Effective Date"), by and between E-Loan Inc., a California corporation located at 540 University Avenue, Palo Alto, CA 94301 ("E-Loan") and E*TRADE Group, Inc., a Delaware corporation located at Four Embarcadero Place, 2400 Geng Road, Palo Alto, CA 94303 ("E*TRADE"). 1. Definitions. a. "Co-Branded Site" means the Co-Branded version of the E-Loan Site as specified in Exhibit A attached hereto. b. "E*TRADE Services" means E*TRADE's electronic brokerage services and related products available at the E*TRADE Site. c. "E*TRADE Site" means E*TRADE's web site located at (http://www.etrade.com) (or any replacement or successor address). d. "E-Loan Services" means E-Loan's on-line mortgage brokerage services and related products available through the E-Loan Site. e. "E-Loan Site" means E-Loan's web site located at (http://www.eloan.com) (or any replacement or successor address) and all third party Co-Branded or mirrored addresses or sites thereof. f. "Investor Tools Page" means the investor tools page on the E*TRADE Site at (http://www.etrade.com/cgi- bin/cgitrade/investors). 2. Co-Branded Web Site; Promotion. a. Scope. The parties shall undertake and perform the obligations for the marketing and promotion of the E-Loan Services along with the E*TRADE Services on the CoBranded Site, the E-Loan Site and E*TRADE Site, as described in Exhibit A attached hereto. All such promotional activity shall be subject to the prior approval of both parties, such approval not to be unreasonably withheld. E-Loan shall not sell advertising to, or otherwise promote, any other securities brokers on the Co-Branded Site. E-Loan shall not sell any advertising space on the ELoan Site to any third party on-line securities brokers. E*TRADE shall not sell advertising to, or otherwise promote, any other multi-lender vendor or mortgage product offering on the Co-Branded Site. E*TRADE shall not offer or sell any advertising space on the E*TRADE Site to any third party multi-lender vendor. E*TRADE will be included on all other E-Loan Co-Branded sites, unless prohibited by third party agreement. However, upon request from E*TRADE, E-Loan agrees to remove E*TRADE from any E-Loan Co-Branded site if so instructed by E*TRADE. 2 b. Exclusive. E-Loan will be the exclusive multi-lender vendor featured on the E*TRADE Site; E*TRADE will be the exclusive on-line securities broker listed in E-Loan's Site. c. Customer Service and Loan Service Support. E-Loan agrees to provide customer service support to users accessing the E-Loan Services. E-Loan will provide E*TRADE with its standard customer service metrics and policies. E- Loan agrees to provide the same level of service to E*TRADE customers as would be provided to other E-Loan customers. However, in no case shall such metrics or policies be below accepted industry standards. d. Restrictions. Other than by engaging in the activities described in Section 2.a and 2.b above, E-Loan and its employees will not (i) describe E*TRADE's brokerage services (other than disseminating or posting promotional or advertising materials approved in each case by E*TRADE pursuant to Section 3 below); (ii) recommend or endorse specific securities (other than by disseminating publications or information prepared by third parties that are responsible for such content); (iii) become involved in the financial services offered by E*TRADE, including, without limitation, by: (A) opening, maintaining, administering, or closing customer brokerage accounts with E*TRADE; (B) soliciting, processing, or facilitating securities transactions relating to customer brokerage accounts with E*TRADE; (C) extending credit to any customer for the purpose of purchasing securities through, or carrying securities with, E*TRADE; (D) answering E*TRADE customer inquiries or engaging in negotiations involving brokerage accounts or securities transactions; (E) accepting customer securities orders, selecting among broker-dealers or routing orders to markets for E*TRADE execution; (F) handling funds or securities of E*TRADE customers, or effecting clearance or settlement of customer securities trades; or (G) resolving or attempting to resolve any problems, discrepancies, or disputes involving E*TRADE customer accounts or related transactions. E-Loan acknowledges that engaging in any of the above activities may subject E-Loan to broker-dealer registration requirements under the Securities Exchange Act of 1934 and applicable state law. 3. Licensed Marks. a. License to E*TRADE Marks. Subject to all the terms and conditions of this Agreement, E*TRADE hereby grants E-Loan a nonexclusive, non-transferable, non-sublicensable license to use the E*TRADE Marks solely on the E-Loan Site and Co-Branded Site, and solely in connection with the marketing and promotion of the E-Loan Services and the E*TRADE Services. "E*TRADE Marks" shall mean solely the E*TRADE name and logo specified in Exhibit B hereto; provided, however, that E*TRADE, in its sole discretion from time to time, may change the appearance and/or style of the E*TRADE Marks or add or subtract from the list in Exhibit B, provided that, unless required earlier by a court order or to avoid potential infringement liability, E-Loan shall have fourteen (14) days' notice to implement any such changes. E-Loan hereby acknowledges and agrees that (i) the E*TRADE Marks are owned solely and exclusively by E*TRADE, (ii) except as set forth herein, E-Loan has no rights, title or interest in or to the E*TRADE Marks and (iii) all use of the E*TRADE Marks by E-Loan shall inure to the benefit of E*TRADE. E-Loan agrees not to apply for registration of the E*TRADE Marks (or any mark confusingly similar thereto) anywhere in the world. E-Loan agrees that it shall not engage, -2- 3 participate or otherwise become involved in any activity or course of action that diminishes and/or tarnishes the image and/or reputation of any E*TRADE Mark. b. Use and Display of E*TRADE Marks. E-Loan acknowledges and agrees that the presentation and image of the E*TRADE Marks should be uniform and consistent with respect to all services, activities and products associated with the E*TRADE Marks. Accordingly, E-Loan agrees to use the E*TRADE Marks solely in the manner which E*TRADE shall specify from time to time in E*TRADE's sole discretion. All usage by E-Loan of the E*TRADE Marks shall include the registered trademark symbol and shall be in the following form, as appropriate: [E*TRADE Mark](R). All literature and materials printed, distributed or electronically transmitted by E-Loan and containing the E*TRADE Marks shall include the following notice: [E*TRADE Mark] is a registered trademark of E*TRADE Group, Inc. c. License to E-Loan Marks. Subject to all the terms and conditions of this Agreement, E-Loan hereby grants E*TRADE a nonexclusive, non-transferable, non-sublicensable license to use the E-Loan Marks solely on the E*TRADE Site and in connection with the marketing and distribution of the E*TRADE Services to its customers. "E-Loan Marks" shall mean solely the E-Loan trade names, marks and logos specified in Exhibit C hereto; provided, however, that E-Loan, in its sole discretion from time to time, may change the appearance and/or style of the E-Loan Marks or add or subtract from the list in Exhibit C, provided that, unless required earlier by a court order or to avoid potential infringement liability, E*TRADE shall have fourteen (14) days' notice to implement any such changes. E*TRADE hereby acknowledges and agrees that, (i) the E-Loan Marks are owned solely and exclusively by E-Loan, (ii) except as set forth herein, E*TRADE has no rights, title or interest in or to the E-Loan Marks and (iii) all use of the E-Loan Marks by E*TRADE shall inure to the benefit of E-Loan. E*TRADE agrees not to apply for registration of the E-Loan Marks (or any mark confusingly similar thereto) anywhere in the world. E*TRADE agrees that it shall not engage, participate or otherwise become involved in any activity or course of action that diminishes and/or tarnishes the image and/or reputation of any E-Loan Mark. d. Use and Display of E-Loan Marks. E*TRADE acknowledges and agrees that the presentation and image of the E- Loan Marks should be uniform and consistent with respect to all services, activities and products associated with the E- Loan Marks. Accordingly, E*TRADE agrees to use the E-Loan Marks solely in the manner which E-Loan shall specify from time to time in E-Loan's sole discretion. All usage by E*TRADE of the E-Loan Marks shall include the appropriate trademark symbol and shall be in the following form, as appropriate: [E-Loan Mark](R) or [E-Loan Mark](TM). All literature and materials printed, distributed or electronically transmitted by E-Loan and containing the E-Loan Marks shall include the following notice: [E-Loan Mark] is a [registered] trademark of E-Loan Group, Inc. -3- 4 4. Payment; Reports; Audit Rights. a. Fees. Subject to the terms and conditions of this Agreement, E-Loan agrees to pay E*TRADE the following fees: (i) "Click-Through" Fees. E-Loan shall pay to E*TRADE [*] per each click-through by a user via hyperlinks (hereinafter "click-through") from the E*TRADE Site to the Co-Branded Site. E-Loan shall guarantee a monthly minimum payment of click-through fees of [*] to E*TRADE during such time as E-Loan is featured on the Investor Tools Page. Once E*TRADE moves E- Loan content to a new center (yet to be named) on the E*TRADE Site that includes, among other things, information on mortgage loans as described in Exhibit A hereto (hereinafter the "Financial Services Center"), E- Loan shall pay to E*TRADE the greater of actual click-through fees for such period or the following minimum click-through fees: [*]. At the end of [*] with [*] being defined as beginning with the date E-Loan content is moved into the Financial Services Center and continuing for the subsequent twelve month period, provided that such period may be extended up to two months, by the approval of both parties, in order to make up for any shortfall of minimum click- through fees. At the end of [*], with [*] being defined as beginning at the end of [*] (including any extension) and continuing for the next twelve month period, provided that such term may be extended up to three months, by the approval of both parties, in order to make up for any shortfall of minimum click-through fees. At the end of [*] with [*] being defined as beginning at the end of [*] (including any extension) and continuing for the next twelve month period, provided that such term may be extended up to three months, by the approval of both parties, in order to make up for any shortfall of minimum click-through fees. (ii) Educational Articles and Calculators. E-Loan will provide to E*TRADE educational articles and calculators to E*TRADE for use on the E*TRADE Site and, which will be served on the E*TRADE server, free of charge. (iii) Compensation in Connection with Loans. When the regulations promulgated under the Real Estate Settlement Procedures Act ("RESPA") are revised to permit payments of commissions for referrals of loan candidates, E-Loan shall pay to E*TRADE either [*] or, if such loan application results in a closed loan, [*]. E-Loan shall pay to E*TRADE an additional [*] for each such loan that qualifies for volume rebates from the lender (for a total of [*] qualifying for volume rebates). These loan fees will be paid in lieu of the click-through fees listed in - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. -4- 5 Section 4.a(i) above. E-Loan shall guarantee a monthly minimum payment of loan fees of [*] during such time as E-Loan is featured on the Investor Tools Page. Once E*TRADE moves E-Loan content to the Financial Services Center, E-Loan shall pay to E*TRADE the greater of the actual loan fees for such period or the following minimum loan fees: [*]. At the end of [*], such twelve month period may be extended up to two months, by the approval of both parties, in order to make up for any shortfall of minimum loan fees. At the end of [*] each such twelve month period may be extended up to three months, by the approval of both parties, in order to make up for any shortfall of minimum loan fees. (iv) Credit Reports and Services. E-Loan shall pay to E*TRADE [*] of all revenue E-Loan earns from the sale of three agency credit reports, single agency credit reports, and subscriptions to credit monitoring services sold through the Co-Branded Site. (v) New Services. E-Loan and E*TRADE agree to negotiate in good faith to determine the terms and conditions for sharing the revenue generated from any new services, such as car loans, that become features on the Co-Branded Site. b. Impression Guarantees. E*TRADE guarantees to provide the following page impressions, with impressions being defined as each time a user views a page on the E*TRADE site featuring the E-Loan Services, as follows: [*] provided that E-Loan's sole remedy for E*TRADE's failure to meet the foregoing guarantees shall be the right to terminate this Agreement pursuant to Section 6.b(vi) below. c. Advertising Revenues. If the parties decide to have third party advertising on the Co-Branded Site or in E- Loan articles or calculators hosted by E*TRADE, revenues generated from advertising sales will be shared as follows: (i) If E*TRADE sells and serves the advertisement, E*TRADE shall retain a commission of [*] of the total advertising revenues therefrom. Advertising revenue remaining after the commission and other required third party fees have been paid will be split equally between E*TRADE and E- Loan. (ii) If E-Loan sells and serves the advertisement, E-Loans shall retain a commission of [*] of the total advertising revenues therefrom. Advertising revenue remaining after the commission and other required third party fees have been paid will be split equally between E*TRADE and E-Loan. - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. -5- 6 (iii) If a third party sells and serves the advertisement, advertising revenue remaining after the commission to such third party and other related fees have been paid will be split equally between E*TRADE and E-Loan. All advertising activity hereunder shall be subject to the prior approval of both parties, such approval not to be unreasonably withheld. d. Reports and Payment. The parties shall deliver to one another the following reports and payments: (i) E*TRADE Reports and Payments. Within ten (10) days following the end of each month, E*TRADE shall furnish E-Loan with a report detailing (1) the number of impressions and sources, if available, for pages on the E*TRADE Site with links to E-Loan Services (2) the number of click-throughs from each link at the E*TRADE Site to the Co-Branded Site, and (3) all advertisements that E*TRADE has sold and served for the Co-Branded Site. All fees owning to one party from the other pursuant to such report shall be paid within thirty (30) days after the end of each month in which they accrue. (ii) E-Loan Reports and Payments. Within thirty (30) days following the end of each month, E-Loan shall furnish E*TRADE with a report detailing (1) all advertisements that are sold and/or served during such month pursuant to Section 4.c above, whether sold by E-Loan, E*TRADE or any third party, (2) the number of three party credit reports, single agency credit reports, and subscriptions to credit monitoring services sold through the Co-Branded Site, and (3) when referral payments are permitted under RESPA, the number of loan applications, closed loans, and closed loans qualifying for volume discounts from the lender during such month. Along with each such report, E-Loan shall submit all payments due to E*TRADE, including payments for click-through fees or loan referral payments, whichever is applicable, along with the basis for calculating such payments for each such month. e. Audit Rights. Each party shall keep, maintain and preserve for at least two (2) years following termination or expiration of the term of this Agreement or any renewal(s) thereof, accurate records relating to such party's payment obligations hereunder. Such records shall be maintained as confidential, but shall be available for inspection and audit as provided herein. Each party shall have the right at least once per calendar year to have an independent public accountant, reasonably acceptable to the other party, examine such other party's relevant books, records and accounts for the purpose of verifying the accuracy of payments made to the other party as required under this Agreement. Each party acknowledges and agrees that such accountant shall not have access to the books, records, and accounts relating to other products or services except as such books, records and accounts also directly relate to the payments due hereunder. Each audit will be conducted at the audited party's place of business, or other place agreed to by E-Loan and -6- 7 E*TRADE, during the audited party's normal business hours and with at least five (5) business days prior written notice to the audited party. The auditing party shall pay the fees and expenses of the auditor for the examination; provided that should any examination disclose a greater than five percent (5%) shortfall in the payments due the auditing party for the period being audited, the audited party shall pay the reasonable fees and expenses of the auditor for that examination. 5. Ownership. Each party or their respective licensors and third party information and content providers retain all rights, title and interest in and to all of the information, content, data designs, materials and all copyrights, patent rights, trademarks rights and other proprietary rights thereto provided by such Party pursuant to this Agreement. Except as expressly provided herein, no other right or license with respect to any copyrights, patent rights, trademark rights or other proprietary rights is granted under this Agreement. All rights not expressly granted hereunder by a party are expressly reserved to such party and its licensors and information and content providers. 6. Term and Termination. a. This Agreement shall commence on the Effective Date ad shall remain in full force and effect (unless terminated earlier as provided below) for an initial term of [*]. b. This Agreement may be terminated by a party for cause immediately by written notice upon the occurrence of any of the following events: (i) If the other ceases to do business, or otherwise terminates its business operations, except as a result of an assignment permitted under Section 13.a below; or (ii) If the other shall fail to promptly secure or renew any license, registration, permit, authorization or approval for the conduct of its business in the manner contemplated by this Agreement or if any such license, registration, permit, authorization or approval is revoked or suspended and not reinstated within sixty (60) days; or (iii) If the other materially breaches any material provision of this Agreement and fails to cure substantially such breach within thirty (30) days of written notice describing the breach, excepting a breach of Section 10, in which case the other party shall have the right to immediately terminate upon written notice to the breaching party; or (iv) Effective immediately and without notice if the other becomes insolvent or seeks protection under any bankruptcy, receivership, trust deed, creditors arrangement, composition or comparable proceeding, or if any such proceeding is instituted against the other (and not dismissed within ninety (90) days). - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. -7- 8 (v) E-Loan is unable to meet the guaranteed annual (including extension periods) click-throughs as stated in Section 4.a, E*TRADE shall have the right to terminate this Agreement with 30 days written notice. (vi) E*TRADE is unable to provide the guaranteed annual (including extension periods) impressions as stated in Section 4.b, and such shortfall prevents E-Loan from meeting its guaranteed annual click-throughs as stated in Section 4.a, E-Loan shall have the right to terminate this Agreement with 30 days written notice. (vii) E-Loan does not meet the service level standards as specified in Exhibit D to this Agreement for a period of 3 consecutive months or 3 out of 6 months. In such event, E*TRADE shall have the right to immediately terminate this Agreement upon written notice. c. Survival. Sections 4.d and 5 through and including 13, all accrued payment obligations and, except as otherwise expressly provided herein, any right of action for breach of this Agreement prior to termination shall survive any termination of this Agreement. Furthermore, upon termination or expiration of this Agreement, the Co-Branded Site shall be discontinued and the licenses and obligations in Sections 2 and 3 shall cease. 7. Warranty; Disclaimer. Each party represents and agrees that any information, content or other materials or services provided, uploaded or transmitted by or for it to the other party or any of its customers or licensees will not, to the best actual knowledge of the providing party (a) violate any local, state, federal or other law or regulation, (b) contain any libelous, defamatory, disparaging, pornographic or obscene materials, (c) contain, or introduce to any system or database of the other party or any of its customers or licensees, any virus or similar destructive programs, codes, routines or algorithms or other materials that will interfere with use of such databases, systems, or networks or will cause any system, network or database to become erased, contaminated, inoperable or otherwise incapable of being used in the manner in which they were used prior to introduction of such materials (collectively "Viruses"), (d) infringe any copyright, trademark or other proprietary right of any person or (e) give rise to any civil liability. Each party agrees that it will only use computer systems or services employing reasonable means to check for and prevent (i) the spread of Viruses and (ii) use or access by unauthorized persons. Except for the foregoing, NEITHER PARTY MAKES ANY WARRANTIES TO ANY PERSON OR ENTITY WITH RESPECT TO ANY INFORMATION, CONTENT OR OTHER MATERIALS PROVIDED OR MADE AVAILABLE BY IT HEREUNDER AND DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. 8. Indemnification. Each party (the "Indemnitor") shall defend or settle at its expense a claim or suit against the other party (the "Indemnitee"), its sublicensees, distributors, and end users arising out of or in connection with an assertion that the information, content or other -8- 9 materials or services provided or made available by the Indemnitor or the use thereof as specifically authorized by the Indemnitor, infringe any copyright or trademark rights of any third party, or are a misappropriation of any third party's trade secret, or contain any libelous, defamatory, disparaging, pornographic or obscene materials. The Indemnitor shall indemnify and hold harmless the Indemnitee against and from damages, costs, and attorneys' fees, if any, incurred in defending and/or resolving such suit; and in addition, E-Loan will indemnify and hold harmless E*TRADE against and from damages, costs, and attorneys' fees, if any, incurred as a result of any claims for violations of RESPA rules or regulations relating to transactions under this Agreement; provided that (a) the Indemnitor is promptly notified in writing of such claim or suit, (b) the Indemnitor shall have the sole control of the defense and/or settlement thereof, (c) the Indemnitee furnishes to the Indemnitor, on request, information available to the Indemnitee for such defense, and (d) the Indemnitee cooperates in any defense and/or settlement thereof as long as the Indemnitor pays all of the Indemnitee's reasonable out of pocket expenses and attorneys' fees. The Indemnitee shall not admit any such claim without prior consent of the Indemnitor. 9. Limited Liability. EXCEPT AS OTHERWISE PROVIDED BELOW, AND NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY SHALL BE LIABLE OR OBLIGATED UNDER ANY SECTION OF THIS AGREEMENT OR UNDER CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOST PROFITS OR COST OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES. THE LIMITATIONS IN THIS SECTION 9 SHALL NOT APPLY TO ANY BREACH OF SECTION 10. 10. Confidential Information. a. Each party ("Receiving Party") agrees to keep confidential and not disclose or use except in performance of its obligations under this Agreement, confidential or proprietary information related to the other party's ("Disclosing Party") technology or business that the Receiving Party learns in connection with this Agreement and any other information received from the other, including without limitation, to the extent previously, currently or subsequently disclosed to the Receiving Party hereunder or otherwise: information relating to products or technology of the Disclosing Party or the properties, composition, structure, use or processing thereof, or systems therefor, or to the Disclosing Party's business (including, without limitation, computer programs, code, algorithms, schematics, data, know- how, processes, ideas, inventions (whether patentable or not), names and expertise of employees and consultants, all information relating to customers and customer transactions and other technical, business, financial, customer and product development plans, forecasts, strategies and information), all of the foregoing, "Confidential Information"). Neither party shall disclose the terms of this Agreement to any third party without the prior written consent of the other party. Each party shall use reasonable precautions to protect the other's Confidential Information and employ at least those precautions that such party employs to protect its own confidential or proprietary information. "Confidential Information" shall not include information the Receiving Party can document (a) is in or (through no improper action or inaction by the Receiving Party or any affiliate, agent or employee) enters the -9- 10 public domain (and is readily available without substantial effort), or (b) was rightfully in its possession or known by it prior to receipt from the Disclosing Party, or (c) was rightfully disclosed to it by another person without restriction, (d) was independently developed by it by persons without access to such information and without use of any Confidential Information of the Disclosing Party or (e) is required to be disclosed to a governmental entity or agency in connection with seeking any governmental or regulatory approval, or pursuant to the lawful requirement or request of a governmental entity or agency, provided that reasonable measures are taken to guard against further disclosure. b. The Receiving Party acknowledges and agrees that due to the unique nature of the Disclosing Party's Confidential Information, there can be no adequate remedy at law for any breach of its obligations hereunder, that any such breach may allow the Receiving Party or third parties to unfairly compete with the Disclosing Party resulting in irreparable harm to the Disclosing Party, and therefore, that upon any such breach or any threat thereof, the Disclosing Party shall be entitled to appropriate equitable relief in addition to whatever remedies it might have at law and to be indemnified by the Receiving Party from any loss or harm, including, without limitation, lost profits and attorney's fees, in connection with any breach or enforcement of the Receiving Party's obligations hereunder or the unauthorized use or release of any such Confidential Information. The Receiving Party will notify the Disclosing Party in writing immediately upon the occurrence of any such unauthorized release or other breach. Any breach of this Section 10 will constitute a material breach of this Agreement. 11. Relationship of Parties. The parties hereto expressly understand and agree that each party is an independent contractor in the performance of each and every part of this Agreement, is solely responsible for all of its employees and agents and its labor costs and expenses arising in connection therewith. Neither party nor its agents or employees are the representatives of the other party for any purpose and neither party has the power or authority as agent, employee or any other capacity to represent, act for, bind or otherwise create or assume any obligation on behalf of the other party for any purpose whatsoever. 12. Notices. Notices under this Agreement shall be sufficient only if personally delivered, delivered by a major commercial rapid delivery courier service or mailed, postage or charges prepaid, by certified or registered mail, return receipt requested to a party at its addresses set forth on the first page above or as amended by notice pursuant to this Section. If not received sooner, notice by mail shall be deemed received five (5) days after deposit in the U.S. mails. 13. Miscellaneous. a. Prohibition Against Assignment. Neither this Agreement nor any rights, licenses or obligations hereunder, may be assigned by either party without the prior written approval of the non-assigning party. Notwithstanding the foregoing, either party may assign this Agreement to any acquiror of all or of substantially all of such party's equity securities, assets or business relating to the subject matter of this Agreement. Any attempted assignment in violation of -10- 11 this Section will be void and without effect. Subject to the foregoing, this Agreement will benefit and bind the parties' successors and assigns. b. Applicable Law; Attorneys' Fees. This Agreement shall be governed by and construed in accordance with the laws of the State of California without reference to conflict of law principles thereof. In any action to enforce this Agreement the prevailing party will be entitled to costs and attorneys' fees. c. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior discussions, documents, agreements and prior course of dealing, and shall not be effective until signed by both parties. d. Amendment and Waiver. Except as otherwise expressly provided herein, any provision of this Agreement may be amended or modified and the observance of any provision of this Agreement may be waived (either generally or any particular instance and either retroactively or prospectively) only with the written consent of the parties. The failure of either party to enforce its rights under this Agreement at any time for any period shall not be construed as a waiver of such rights. e. Severability. In the event that any of the provisions of this Agreement shall be held by a court or other tribunal of competent jurisdiction to be unenforceable, such provisions shall be limited or eliminated to the minimum extent necessary so that this Agreement shall otherwise remain in full force and effect and enforceable. f. Publicity. Any press releases in connection with this Agreement shall be subject to the prior written mutual approval of the parties. g. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but both of which together shall constitute one and the same instrument. h. Third Party Beneficiaries. E*TRADE's and E-Loan's third party licensors and information providers are intended beneficiaries of this Agreement. i. Headings. Headings and captions are for convenience only and are not to be used in the interpretation of this Agreement. -11- 12 IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective Date. All signed copies of this Agreement shall be deemed originals. E-LOAN INC. By: /s/ Chris Larsen ------------------------------------ Name: Chris Larsen ---------------------------------- Title: President --------------------------------- E*TRADE GROUP, INC. By: /s/ Judy Balint ------------------------------------ Name: Judy Balint ---------------------------------- Title: Senior Vice President --------------------------------- -12- 13 EXHIBIT A E-Loan's Promotional Obligations Pursuant to Section 2.a of the Agreement, E-Loan's promotional efforts and obligations shall include but are not limited to the following: 1. Placement of E*TRADE Content. E-Loan shall feature the E*TRADE's Marks, text descriptions of the E*TRADE Services and hyperlinks to the E*TRADE Site with prominent display, as agreed upon by the parties, on the "Online Resources" area (http://www.eloan.com/cgi-bin/resources) or similar area of all versions of the E-Loan Site, including without limitation, third party Co-Branded and mirrored versions of the E-Loan Site, so long as such placement is not required to be excluded by the third party. Such logos, content and hyperlinks will be featured with prominence no less than that provided to other financial service companies who may, over time, be listed in the E-Loan's Online Resources area. E-Loan shall use materials and content provided by E*TRADE for such promotion. E*TRADE shall have the right to the review and prior approval of all uses of the E*TRADE Marks and content, with such approval not unreasonably withheld. 2. Co-Branded Site. E-Loan shall develop and host a Co-Branded version of the E-Loan Site which shall include, without limitation, E-Loan's search engine and process to view, search, monitor, qualify and apply for a loan, as well as information to aid the consumer with the loan selection and financing process ("Co-Branded Site"). The Co-Branded Site shall be available and promoted only to customers from the E*TRADE Site and shall be framed by E*TRADE and will include E*TRADE's logo, navigation buttons and hyperlinks back to the E*TRADE Site. E*TRADE shall have the right to the review and prior approval of the co-branding and all uses of the E*TRADE Marks and content, with such approval not unreasonably withheld. 3. Promotion of the relationship created by this Agreement through a joint press release and in other appropriate promotional materials and campaigns mutually agreed upon by the parties. E*TRADE's Promotional Obligations E*TRADE's promotional efforts will include, but are not limited to the following: 1. E*TRADE will initially feature a description of E-Loan and the E-Loan Services and a hyperlink to the Co- Branded Site on the Investor tools page (http://www.etrade.com/cgi-bin/cgitrade/investors) of the E*TRADE Site. By June 1998, E*TRADE will create a center on the E*TRADE Site that will include information on mortgage loans. E-Loan will receive a premium position in this center that will serve as the access point to the Co-Branded Site. This position will, at minimum, include space for an E-Loan logo and a brief text description. -13- 14 2. E*TRADE will provide its standard level of partner marketing support, which includes: - a joint press release with E-Loan announcing the relationship and other promotions as appropriate. - inclusion of E-Loan in the quarterly E*TRADE Edge newsletter. - a headline at the top of the Main Menu page (http://www.etrade.com/cgi- bin/cgitrade/MainMenu) for a period of no less than one week within one month of the move of E- Loan's content to the Financial Services Center. These marketing activities will include use of content provided by E-Loan for such purposes, provided that E- Loan shall have the right to review and prior approval of such use of E-Loan content, such approval shall not be unreasonably withheld. 3. E*TRADE shall utilize excess banner inventory to promote the Financial Services Center. -14- 15 EXHIBIT B E*TRADE Marks E*TRADE(R)E*TRADE Securities, Inc. (R) E*TRADE Group, Inc.(R) TELE*MASTER (R) Someday, we'll all invest this way.SM Personal Market Page SM E*TRADE Logo(R) -15- 16 EXHIBIT C E-Loan Marks -16- 17 EXHIBIT D 1. PERFORMANCE. a) Average less than [*] of requests. Measures server response time only, not network transmission time. b) Average [*] up time. c) Post an approved message in the event of a system outage. 2. MONITORING/REPORTING a) Provide details on the method used to monitor performance times. b) Provide weekly and monthly reporting which details server up time with the following details per period: o average response o actual daily response time detail o average server up time o actual daily up time This information will be emailed to the appropriate contact within the E*TRADE Information Systems Division on Monday of each week for the previous week's reports and the first working day of each month for the previous month's reports. 3. ESCALATION PROCEDURES a) Notify E*TRADE via the following email addresses in case of a service outage: o operators@etrade.com o helpdesk@etrade.com b) Notify E*TRADE within 5 minutes of a service outage. Status information to include: o reason for the outage. o ETA for service restoral. c) If E*TRADE experiences a service outage and has not been notified by email by E-Loan, E*TRADE will contact (insert E-Loan contact name) at E-Loan at (insert E-Loan contact phone number) and will be given the information listed in 3.b. d) Continue to notify E*TRADE with updated status for the duration of the outage. e) Provided a post incident summary. This summary should include: o the cause of the problem. o method used to correct the problem. o measures E-Loan will take to prevent further occurrences. - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. -17- 18 4. BUSINESS RESUMPTION a) E-Loan must prove the ability to switch processing from the primary server to a hot backup server within 10 minutes. Testing of this procedure will be conducted as requested by E*TRADE on a designated weekend by both E-Loan and E*TRADE personnel. b) Perform an analysis that documents all of the single points of failure in the E-Loan network and system configuration. Include network components such as routers, hardware and software components. c) Provide geographic redundancy to primary server within 2 months from the date of the effective date of the Co-Marketing Agreement between E*TRADE and E-Loan. d) Eliminate all of the single points of failure within the E-Loan domain within 3 months from the effective date of the Co-Marketing Agreement between E*TRADE and E-Loan. 5. REVENUE IMPACT RECOUPMENT a) In the event that E-Loan fails to meet the performance objectives defined in Section 1.a), a penalty of [*] will be due E*TRADE. b) In the event that E-Loan fails to meet the performance objectives defined in Section 1.b), E-Loan will credit E*TRADE a prorated amount of the monthly service fee as compensation for the service outage. The calculation for this credit will be as follows: The monthly fee as specified in Section 4.a.(i) divided by 720 hours (30 days per month times 24 hours per day) times the total time of the outage. c) In the event that E-Loan fails to meet the performance objectives defined in Section 1.c), a penalty of [*] will be due E*TRADE. d) These penalties will be credited to the month's billing in which the performance failure occurred. e) Failure by E-Loan to meet these performance objectives for 3 consecutive months or 3 out of 6 months shall constitute a breach of this Agreement and E*TRADE will have the right to terminate immediately after providing written notice to E-Loan of such intent. - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. -18- 19 [LOGO PAGE] EX-10.9 15 MARKETING AGREEMENT WITH MARKETWATCH.COM 1 EXHIBIT 10.9 MARKETING AGREEMENT This Marketing Agreement is entered into as of February 8, 1999 ("Contract Date") by and between MarketWatch.com, Inc., a Delaware corporation having an office at 825 Battery Street, San Francisco, CA 94111 ("MarketWatch") and E-LOAN, Inc., a California corporation having an office at 540 University Avenue, Palo Alto, California 94301 ("E-LOAN"). The Launch Date of this Agreement shall be the date the program described in the Marketing Agreement is made available to the public ("Launch Date"). Whereas, MarketWatch is engaged in providing news, expert analysis and market data for the investing community via its website located at cbs.marketwatch.com; and Whereas, E-LOAN is engaged in marketing mortgage services and related services via the Internet, including, but not limited to attracting visitors to E-LOAN's website located at www.eloan.com, providing visitors with a variety of mortgage loan options, and displaying competitive products in the market for various types of loans; and Whereas, E-LOAN is also engaged in providing various services, goods and facilities to companies on the Internet, including, but not limited to website design, technology support and troubleshooting, maintenance of hardware and software configurations, maintenance of communication links and equipment, licensing of its brand name, trademarks and service marks; and Whereas MarketWatch and E-LOAN wish to develop a program ("Program") for the purpose of which will be to market E-LOAN's loan products to visitors to MarketWatch's website; Now, therefore, in consideration of the mutual promises contained herein, the parties hereby agree as follows: 1. The Program. (A) As soon as possible after the Contract Date, E-LOAN will create and host (at no charge to MarketWatch) a Loan Center ("Loan Center") for MarketWatch that will have the MarketWatch "look and feel" with a graphical reference to E-LOAN. The Loan Center will contain various hyperlinks to mortgage tools, services and articles provided by E-LOAN for use by MarketWatch visitors. All tools, services and articles provided by E-LOAN will be co-branded and mutually agreed upon. (B) MarketWatch will place hyperlinks to the Loan Center reasonably acceptable to MarketWatch as set forth below; (i) The MarketWatch Front Page, left-side navigation bar. 1 2 (ii) Additional hyperlinks to the Loan Center will be added to the bottom of all articles relating to interest rates, real estate or additional articles that MarketWatch deems appropriate. (iii) MarketWatch will provide E-LOAN with [*] ROS banner advertisements each month of the first year of the Agreement. Should this Agreement enter into a second year, both parties will mutually agree in advance of the second year upon the number of banner advertisements E-LOAN will receive each month. (iv) MarketWatch will promote the Loan Center to its e-mail member base no less than once per quarter. Both parties will mutually agree upon the content contained in each e-mail. (v) MarketWatch will offer its portfolio members the capability to include a customized module, the E-LOAN Mortgage Tracker, as part of the portfolio service. (C) MarketWatch guarantees a minimum of [*] page views delivered containing hyperlinks to the Loan Center for the first year of this Agreement ("Minimum Guarantee"). Should this Agreement enter into a second year, both parties will mutually agree upon a Minimum Guarantee. In the event that MarketWatch does not meet the Minimum Guarantee set forth above, the Agreement will be extended until the Minimum Guarantee is met. (D) Within sixty (60) days after execution of this Agreement, MarketWatch will develop or otherwise make available new services or features for MarketWatch visitors which will include, but are not limited to, a "bond area" and a "taxation area", as reasonably defined by MarketWatch. Subject to any limitations arising from any existing agreements, MarketWatch will provide hyperlinks to the Loan Center and further integration within these areas. All hyperlinks and integration will be mutually agreed upon. (E) In the event that MarketWatch plans to develop or modify a service on its site which will have as its primary feature mortgages, real estate or mortgage interest rates, MarketWatch will notify E-LOAN in advance on a confidential basis to allow discussion about the possible provision of such services by E-LOAN. MarketWatch agrees to discuss such possible provision of services by E-LOAN; provided that neither MarketWatch nor E-LOAN will be obligated to contract for such services unless agreed by both parties in detail in writing. (F) E-LOAN will ensure that MarketWatch has control over all ads that appear on the Loan Center, subject to Section 5. MarketWatch will have the sole right to collect revenue from such ads. - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 2 3 2. Compensation. (A) E-LOAN will compensate MarketWatch for setting up this marketing agreement in the nonrefundable amount of [*] per month for the first year of this Agreement ("Monthly Fee"), payable in advance of each such month. The Monthly Fee is not based on MarketWatch providing loan origination services, rather, this fee is to compensate MarketWatch for the advertising aspect inherent in the links it will be providing E-LOAN. (B) Forty five (45) days prior to the end of the first year of this Agreement, both parties shall have the right to re-evaluate the fair market value of the goods and services being provided by MarketWatch and notify the other party should they wish to amend the Monthly Fee. If both parties cannot come to an agreement on the amended Monthly Fee, this Agreement will be terminated upon the expiration of the first year's term. (C) In addition to the Monthly Fee, E-LOAN will compensate MarketWatch [*] for each "Lead", defined as a complete loan application submitted through the Loan Center from an applicant who reached the Loan Center via the MarketWatch website, in excess of [*] Leads in the first year. Should this Agreement enter into a second year, both parties will mutually agree in advance of the commencement of such second year, upon a new fee per Lead. (D) The Monthly Fee shall be paid to MarketWatch within thirty (30) business days after the beginning of each three-month period. The parties acknowledge and agree that the Monthly Fee reflects the reasonable and fair market value of the marketing services to be provided to E-LOAN by MarketWatch under the Program. 3. Term and Termination. (A) Initial and Renewal Terms. The term of this Agreement shall be for a period of [*] years commencing on the Launch Date, unless earlier terminated in accordance with the provisions of this Section 3 or 2(B) above. Upon expiration of the initial two-year term, the Agreement shall automatically renew for additional one-year periods unless and until terminated by a 45-day written notice from the terminating party to the other party. The initial and any renewal terms are referred to collectively as the "Term." (B) Termination by the Parties. Both parties may terminate this Agreement (1) in the event that either party fails to substantially perform its obligations to each other hereunder, upon 30 days written notice from the terminating party to the other party specifying the default and providing 30 days to cure the default, or (2) in the event that either party discontinues its business, becomes insolvent or in the event of its bankruptcy. - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 3 4 (C) Rights and Obligations Following Termination. Following termination of this Agreement for any reason, (1) E-LOAN shall continue to process, in due course, any mortgage loan applications submitted by consumers prior to termination and (2) E-LOAN's obligation to pay any then-due Monthly Fees will be pro-rated as of the date of termination. In addition, Sections 6 through 10 and 12 through 19 will survive termination of this Agreement for any reason. 4. Reporting. (A) Within fifteen (15) days after the last day of each calendar month, MarketWatch-will provide E-LOAN with a monthly report of user traffic to include the number of impressions, click-through rates and page views for any links, banner advertising or other promotions provided by MarketWatch to the Loan Center and E-LOAN. (B) Within fifteen (15) days after the last day of each calendar month, E-LOAN will provide MarketWatch with a monthly report of users and applications received from the Loan Center. 5. Exclusivity. During the term of this Agreement, E-LOAN will be the exclusive, integrated mortgage company of MarketWatch. No other mortgage lending services will be offered on the Loan Center other than E-LOAN. This does not limit MarketWatch from selling banner advertisements, on a cost per thousand or any other basis, to other mortgage providers; except that MarketWatch is prohibited from selling banner advertisements, sponsorships or other forms of advertisements to other mortgage providers on the Loan Center. 6. Relationship. The relationship between MarketWatch and E-LOAN shall be that of independent contractors and neither party shall be or represent itself to be an agent, employee, partner or joint venturer of the other, nor shall either party have or represent itself to have any power or authority to act for, bind or commit the other. 7. Severability. If any provision of this Agreement is held invalid, illegal or in conflict with any applicable state or federal law or regulation, such law or regulation shall control, to the extent of such conflict, without affecting the remaining portions of this Agreement. 8. Representations and Warranties. (A) Authority/Legal Actions. MarketWatch is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware with full corporate power and authority to transact any and all business contemplated by this Agreement and it possesses all requisite authority, power, licenses, permits and franchises to conduct its business as presently conducted. Its execution, 4 5 delivery and compliance with its obligations under the terms of this Agreement are not prohibited or restricted by any government agency. There is no claim, action, suit, proceeding or investigation pending or, to the best of MarketWatch's knowledge, threatened against it or against any of its principal officers, directors or key employees, which, either in any one instance or in the aggregate, may result in any adverse change in the business, operations, financial condition, properties or assets of MarketWatch, or in any impairment of the right or ability of MarketWatch to carry on its business substantially as now conducted through its existing management group, or in any material liability on the part of MarketWatch, or which would draw into question the validity of this Agreement. (B) MarketWatch's Compliance. MarketWatch website format, information, content and the marketing and use thereof by MarketWatch shall be in full compliance with all applicable federal and state laws. MarketWatch has obtained, or will have obtained in connection with the transactions contemplated by this Agreement, all necessary federal and state approvals in connection with operation and ownership of its website and the content thereof. The Privacy Notices and Privacy Policies of MarketWatch website shall be consistent with the Federal Trade Commission's procedure or rules, and comply with acceptable trade practices. (C) E-LOAN's Compliance. E-LOAN's website format, information, content and marketing and use thereof by E-LOAN shall be in full compliance with all applicable federal and state laws. E-LOAN has obtained, or will have obtained in connection with the transactions contemplated by this Agreement, all necessary federal and state approvals in connection with operation and ownership of its website and the content thereof. The Privacy Notices and Privacy Policies of E-LOAN's website shall be consistent with the Federal Trade Commission's procedure or rules, and comply with acceptable trade practices. (D) Execution/Conflict with Existing Laws or Contracts. The parties have taken all necessary action to authorize their respective execution, delivery and performance of this Agreement. The execution and delivery of this Agreement and the performance of the obligations of the respective parties hereunder will not (i) conflict with or violate the Certificate of Incorporation or By-laws of either party, or any provision of any law or regulation or any decree, demand or order to which either party is subject, or (ii) conflict with or result in a breach of or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under any of the terms, conditions or provisions of any agreement or instrument to which either party is a party or by which it is bound, or any order or decree applicable to either party, or result in the creation or imposition of any lien on any of their assets or property. 5 6 (E) Noninfringing Content. All content provided by E-LOAN to MarketWatch or any third party in connection with this Agreement which is the subject of any intellectual property right(s) of any third party(s), including but not limited to and copyright and trademark rights, and the use of such content by MarketWatch and third parties as contemplated in this Agreement, will be licensed or otherwise permitted by the owner(s) of such intellectual property right(s) and will not infringe such intellectual property rights in any way. 9. Indemnification/Hold Harmless. (A) E-LOAN agrees to indemnify, defend and hold MarketWatch harmless from and against any and all claims, suits, actions, liability, losses, expenses or damages which may hereafter arise, which MarketWatch, its affiliates, directors, officers, agents or employees may sustain due to, or arising out of any breach of any representation or warranty herein, or arising out of any act or omission by E-LOAN, its affiliates, officers, agents, representatives or employees in connection with this Agreement. However, the above indemnification shall not provide coverage for (a) any claim, suit, action, liability, loss, expense or damage to the extent resulting from an act or omission of MarketWatch or (b) the amount by which any cost, fee, expense or loss associated with any of the foregoing were increased as a result of an act or omission on the part of MarketWatch. As a condition of the foregoing indemnity obligation, MarketWatch agrees to give E-LOAN reasonably prompt notice of any third party claim which may be indemnified, cooperation and, at E-LOAN's sole cost and expense, sole control of the defense and settlement of such claim. (B) MarketWatch agrees to indemnify, defend and hold E-LOAN harmless from and against any and all claims, suits, actions, liability, losses, expenses or damages which may hereafter arise, which E-LOAN, its affiliates, directors, officers, agents or employees may sustain due to, or arising out of any breach of any representation or warranty herein, or arising out of any act or omission by MarketWatch, its affiliates, officers, agents, representatives or employees or out of any act by MarketWatch, its affiliates, officers, agents, representatives or employees in connection with this Agreement. However, the above indemnification shall not provide coverage for (a) any claim, suit, action, liability, loss, expense or damage to the extent resulting from an act or omission of E-LOAN or (b) the amount by which any cost, fee, expense or loss associated with any of the foregoing were increased as a result of an act or omission on the part of E-LOAN. As a condition of the foregoing indemnity obligation, E-LOAN agrees to give MarketWatch reasonably prompt notice of any third party claim which may be indemnified, cooperation and, at MarketWatch's-LOAN's sole cost and expense, sole control of the defense and settlement of such claim. (C) Notice of Claims. Each party shall promptly notify the other in writing of any and all litigation and claims known to such party made against it or the other party in connection with this Agreement. 6 7 10. Capitalized Terms. Capitalized terms used herein shall have the meanings set forth herein. 11. Trademark Licenses. (A) For the term of this Agreement, MarketWatch hereby grants to E-LOAN a non-exclusive, royalty-free, worldwide license to reproduce, display, and affix MarketWatch's Marks (as defined below) in electronic media in connection with any link from or in conjunction with the E-LOAN's website. Neither party may use the other party's trademarks, service marks, trade names, logos or other commercial or product designation (collectively, "Marks") for any purpose whatsoever without the prior written consent of the other party except as set forth in this section. (B) For the term of this Agreement, E-LOAN hereby grants to MarketWatch a non-exclusive, royalty-free, worldwide license to reproduce, display, and affix E-LOAN's Marks (as defined below) in electronic media in connection with any link from or in conjunction with the MarketWatch website. Neither party may use the other party's trademarks, service marks, trade names, logos or other commercial or product designation (collectively, "Marks") for any purpose whatsoever without the prior written consent of the other party except as set forth in this section. (C) Subject only to the express rights granted above, each party will retain all proprietary rights and interest in and to its respective Marks and retain and own all goodwill in and to such Marks resulting from their use, whether such use is by or for the owner or the licensee. 12. Confidential Information. Each party recognizes that during the Term, its directors, officers, employees and authorized representatives such as attorneys and accountants, may obtain knowledge of trade secrets, customer lists, membership lists and other confidential information of the other party which is valuable, proprietary, special or unique to the continued business of that party, which information is initially delivered in written form including electronic form or is summarized and delivered in writing within thirty (30) days after initial delivery in nonwritten form, and which writing is marked "Confidential" or in a similar nature to indicate its nonpublic and proprietary nature ("Confidential Information"). However, Confidential Information does not include information that is (i) or becomes available to the general public other than through a breach by the recipient party, (ii) is already known to the recipient party as of the time of communication to the recipient party, (iii) is developed by the recipient party independently of and without reference to information communicated by the other party, or (iv) rightfully received by the recipient party from a third party which third party is not under a legal duty of confidentiality with respect to such information. Accordingly, each 7 8 party as a recipient of the other's Confidential Information agrees to hold the Confidential Information of the communicating party and the terms and conditions of this Agreement in confidence and to use diligent efforts to ensure that the communicating party's Confidential Information the terms hereof are held in confidence by its officers, directors, employees, representatives and others over whom it exercises control. Upon discovering any unauthorized disclosure of the communicating party's Confidential Information or the terms of this Agreement, the recipient party will use diligent efforts to recover such information and to prevent its further disclosure to additional third parties. The recipient party will promptly notify the communicating party in writing of any such authorized disclosure of the communicating party's Confidential Information by the recipient party or its personnel. The parties' obligations under this paragraph will survive for a period of three (3) years following the expiration or earlier termination of this Agreement. 13. Notices. All notices required or permitted by this Agreement shall by in writing and shall be given by certified mail, return receipt requested, or by reputable overnight courier with package tracing capability and shall be sent to the address at the head of this Agreement or to such other address that a party specifies in writing in accordance with this section. 14. Disclaimer Concerning Tax Effects. Neither party to this Agreement makes any representation or warranty to the other regarding the effect that this Agreement and the consummation of the transactions contemplated hereby may have upon the foreign, federal, state or local tax liability of the other. 15. Disclaimer of Warranties. Both parties provide all service hereunder "AS IS" and without any warranty of any kind. E-LOAN does not guarantee continuous or uninterrupted display or distribution of the link and MarketWatch does not guarantee continuous or uninterrupted operation of its Web site. In the event of interruption of display or distribution of E-LOAN's link or of MarketWatch's web site, both parties' sole obligation shall be to restore service as soon as reasonably possible. 16. Amendments. The terms and conditions of this Agreement may not be modified or amended other than by a writing signed by both parties. 17. Assignment/Binding Nature. Neither party may assign, voluntarily, by operation of law, or otherwise, any rights, or delegate any duties under this Agreement without the other party's prior written consent, except that either party may assign this Agreement or any of its rights or obligations arising hereunder to the surviving entity in a merger, acquisition, or consolidation in which it participates, or to a purchaser of substantially all of its assets; provided that the assigning party will give reasonable written notice to the nonassigning party in advance of such merger, acquisition or other assignment. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties. 18. Entire Agreement. This Agreement and any exhibits attached hereto constitute the entire agreement between the parties and supersede all oral and written negotiations of the parties with respect to the subject matter hereof. 8 9 19. LIMITATION OF LIABILITY. EXCEPT FOR THE PARTIES' RESPECTIVE OBLIGATIONS UNDER SECTIONS 9 AND 12 HEREOF, IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, [AND] WHETHER OR NOT THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 20. Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of California without giving effect to its conflicts of laws principles. Both parties agree to submit to jurisdiction in California, and further agree that any cause of action arising under this Agreement may be brought in a court in Santa Clara County, California. In witness whereof, the parties have caused this Agreement to be executed the day and year first above written. E-LOAN, Inc. MarketWatch.com, Inc. By: /s/ D. Galen By: /s/Signature Illegible 2/8/99 ------------------------- ----------------------------- Name: DOUGLAS GALEN Name: WILLIAM BISHOP ---------------------- -------------------------- Title: VP Bus. Dev. Title: VP, BUSINESS DEVELOPMENT ---------------------- -------------------------- 9 EX-10.10 16 MARKETING AGREEMENT WITH PRISM MORTAGE COMPANY 1 Exhibit 10.10 MARKETING AGREEMENT This Marketing Agreement ("Agreement") is entered into as of May 1, 1998 ("Effective Date") between Prism Mortgage Company ("Prism"), an Illinois corporation having an office at 350 West Hubbard Street, Chicago, Illinois 60610 and E-Loan, Inc., a California corporation having an office at 540 University Way, Palo Alto, California 94301 ("E-Loan") (the "Parties") WHEREAS, Prism is engaged in providing mortgage services that include counseling, processing, origination, and funding mortgage loans secured by residential properties located in the United States; and WHEREAS, E-Loan is engaged in marketing mortgage services via the Internet including attracting visitors to E-Loan's website, providing visitors with a variety of mortgage options, and displaying the most competitive products on the market for various types of loans. WHEREAS, Prism and E-Loan wish to develop a marketing program ("Program") the purpose of which will be to market Prism's loan products to visitors of E-Loan's web site. NOW, THEREFORE, in consideration of the mutual promises contained herein, the Parties hereby agree as follows: 1. The Program. (a) E-Loan shall market Prism's various mortgage programs and products to Internet users. The Program shall include a comprehensive marketing plan designed, executed, and paid for by E-Loan, that will attract visitors to E-Loan's website ("Customers") for the purpose of obtaining mortgage loans from Prism and other mortgage companies. In addition, E-Loan will advise Customers regarding the various mortgage programs and products that Prism offers and match Customers with specific Prism mortgage products. E-Loan will then engage Customers in on-line prequalification interviews and help Customers complete an on-line preliminary application form for Prism mortgage products. As part of the Program, E-Loan will transfer all completed preliminary applications to Prism for further processing. (b) Although E-Loan shall market Prism to its Customers as required by the Program: (i) E-Loan shall not be required to, and shall not, endorse Prism, in any communications under the Program that are targeted to Customers; (ii) E-Loan shall not be required to recommend Prism as a mortgage provider and (iii) E-Loan shall not be required to, and shall not as part of the Program, provide advice, counseling or assistance to Customers in connection with any particular mortgage loan, for which they have applied to Prism. 2. Compensation. (a) Beginning the Effective Date, Prism shall pay a fee to E-Loan ("Semiannual Marketing Fee") for the marketing provided under the Program every six months during the term of this Agreement. The amount of the Semiannual Marketing Fee shall be $72,000 ("First Semiannual Marketing Fee"), unless adjusted as provided in this Section 2. (b) The First Semiannual Marketing Fee will be paid as follows: (i) $20,000 shall be paid within ten (10) days of the Effective Date and (ii) $13,000 shall be paid within ten (10) days following July 31, 1998 and each month thereafter for a total of four (4) months. 2 (c) All Semiannual Marketing Fees thereafter shall be paid in arrears, in equal monthly installments, within ten (10) days following the end of each month. The Parties each acknowledge and agree that the Semiannual Marketing Fee reflects the reasonable and fair market value of the goods and services to be provided by E-Loan under the Program, without regard to the value or volume of mortgage loans that may be attributable to the Program. (d) Not more than once each six-month term, either party may notify the other, in writing, of its determination (Determination), and the bases therefore, that the Semiannual Marketing Fee amount may fail to reflect the reasonable and fair market value of the goods and services to be provided by E-Loan, and upon other information made available to the Parties including but not limited to: (i) the number of visitors to E-Loan's website; (ii) E-Loan's marketing coverage; and (iii) E-Loan's effectiveness in disseminating accurate information regarding mortgage programs and products as indicated by surveys or other mean. If the other party agrees with the Determination, the Semiannual Marketing Fee amount shall be so adjusted, effective upon the commencement of the next six-month term. If there is disagreement, the Parties shall attempt in good faith to resolve the disagreement. (e) E-Loan guarantees the delivery of no less than one hundred and forty (140) referrals of similar quality of all referrals to Prism by the 61st day following the Effective Date. (f) Referrals pertain to sales leads only. The actual number of closed loans resulting from the Program does not affect this Agreement in any way, including, but not limited to, the guarantee in this Section 2(e). 3. Relationship. The relationship between Prism and E-Loan shall be that of independent contractors and neither party shall be or represent itself to be an agent, employee, partner or joint venture of the other, nor shall either party have or represent itself to have any power or authority to act for, bind or commit the other. 4. Confidential Information. Each party recognizes that, during the term of this Agreement, its directors, officers or employees may obtain knowledge of trade secrets, membership lists and other confidential information of the other party which are valuable, special or unique to the continued business of that party. Accordingly, each party hereby agrees to hold such information and all information contained in or pertaining to this Agreement in confidence and to use its best efforts to ensure that such information is held in confidence by its officers, directors and employees. 5. Disclaimer. Neither Prism or E-Loan make any representation or warranty to the other regarding the effect that this agreement and the consummation of the transactions contemplated hereby may have upon the Foreign, Federal, State or local tax liability of the other. 3 6. Severability. If any provision of this Agreement should be invalid, illegal or in conflict with any applicable state or federal law or regulation, such law or regulation shall control, to the extent of such conflict, without affecting the remaining provisions of this Agreement. 7. Term and Termination. (a) The term of this Agreement shall be for a period of one (1) year commencing on its Effective Date unless earlier terminated in accordance with the provisions of this Section 8. Upon expiration of the initial one (1) year term, this Agreement shall automatically renew from year to year unless earlier terminated in accordance with the provisions of this Section 8. (b) Prism may terminate this Agreement, at any time, with or without cause by providing thirty (30) written days notice to E-Loan. E-Loan may terminate this Agreement with or without cause by providing thirty (30) written days notice to Prism. (c) Upon termination of this Agreement, as provided herein: (i) Prism shall continue to process, in due course, any mortgage loan applications submitted by E-Loan's customers prior to termination of this Agreement and (ii) Prism's obligation to pay any then due Semiannual Marketing Fee will be prorated as of such date, and the provisions of Section 5 and 9 of this Agreement shall survive. 8. Hold Harmless: (a) Prism agrees to indemnify, defend and hold E-Loan harmless from and against any and all claims, suits, actions, liability, losses, expenses or damages which may hereafter arise, which E-Loan, its affiliates, directors, officers, agents or employees may sustain due to or arising out of any negligent act or omission by Prism, its affiliates, officers, agents, representatives or employees or out of any act by Prism, its affiliates, officers, agents, representatives or employees in violation of this Agreement or in violation of any applicable law or regulation. Provided, however, the above indemnification shall not provide coverage for (a) any claim, suit, action, liability, loss, expense or damage that resulted from an act or omission of E-Loan or (b) the amount by which any cost, fee, expense or loss associated with any of the foregoing were increased as a result of an act or omission on the part of E-Loan. (b) E-Loan agrees to indemnify, defend and hold Prism harmless from and against any and all claims, suits, actions, liability, losses, expenses or damages which may hereafter arise, which Prism, its affiliates, directors, officers, agents or employees may sustain due to or arising out of any negligent act or omission by E-Loan, its affiliates, officers, agents, representatives or employees or out of any act by E-Loan, its affiliates, officers, agents, representatives or employees in violation of this Agreement or in violation of any applicable law or regulation. Provided, however, the above indemnification shall not provide coverage for (a) any claim, suit, action, liability, loss, expense or damage that resulted from an act or omission of Prism or (b) the amount by which any cost, fee, expense or loss associated with any of the foregoing were increased as a result of an act or omission on the part of Prism. 4 9. Notices. All notices required or permitted by this Agreement shall be in writing and shall be given by certified mail, return receipt requested or by reputable overnight courier with package tracing capability and sent to the address at the head of this Agreement or such other address that a party specified in writing in accordance with this paragraph. 10. Amendment. The terms and conditions of this Agreement may not be modified or amended other than by a writing signed by both parties. 11. Assignment: Binding Nature. The terms of this Agreement shall be binding upon and shall inure to the benefit of the Parties hereto. This Agreement shall not be assigned by any party without the express prior written consent of the other party. 12. Entire Agreement. This Agreement and any Exhibits attached hereto constitute the entire Agreement between the Parties and supersede all oral and written negotiations of the Parties with respect to the subject matter hereof. 13. Governing Law. This agreement shall be subject to and construed under the laws of the State of California, without reference to conflicts of law provisions thereof. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed the day and year first above written. E-LOAN Attest: Signature: /s/ Doug Galen -------------------------- --------------------------- By: Doug Galen ---------------------------------- Its: VP Bus. Dev. --------------------------------- PRISM MORTGAGE COMPANY Attest: Signature: /s/ Daniel Fisher -------------------------- --------------------------- By: Daniel Fisher ---------------------------------- Its: VP Bus. Dev. --------------------------------- EX-10.11 17 LICENSE AGREEMENT WITH YAHOO!, INC. 1 EXHIBIT 10.11 YAHOO! INC. - E-LOAN INC. LICENSE AGREEMENT This License Agreement (the "Agreement") is entered into as of ___________, 1998 (the "Effective Date") between Yahoo!, Inc., a California corporation with offices at 3420 Central Expressway, Santa Clara, CA 95051 ("Yahoo") and E-LOAN Inc., a California corporation with offices at 540 University Avenue, Suite 150, Palo Alto, CA 94301 ("E-Loan"). WHEREAS, Yahoo and E-Loan entered into a License Agreement on December 5, 1997 the ("License Agreement") which contained, among other things, a license to certain of E-Loan's mortgage related content and services; and WHEREAS, the parties wish to enter into this Agreement, where subject to the terms contained herein, E-Loan will license to Yahoo certain of E-Loan's mortgage related content and services upon the expiration of the term of License Agreement and the parties will conduct other joint marketing activities. In consideration of the mutual promises contained herein, the parties agree as follows: SECTION 1: DEFINITIONS. Unless otherwise specified, capitalized terms used in this Agreement shall have the meanings attributed to them in Exhibit A hereto. SECTION 2: LICENSES. 2.1 License to Yahoo. Subject to the terms and conditions of this Agreement, E-Loan hereby grants to Yahoo, under E-Loan's Intellectual Property Rights: (a) A non-exclusive, worldwide license to use, modify, reproduce, distribute, display and transmit the E-Loan Content in connection with the Yahoo Loan Center and other Yahoo Properties and to permit Users to download and print the E-Loan Content. Yahoo's license to modify the E-Loan Content shall be limited to modifying the E-Loan Content to fit the format and look and feel of the Yahoo Property. (b) A non-exclusive, worldwide, fully paid license to use, reproduce and display the E-Loan Brand Features: (i) in connection with the presentation of the E-Loan Content on the Yahoo Properties; and (ii) in connection with the marketing and promotion of the Yahoo Properties. (c) Yahoo shall be entitled to sublicense the rights set forth in this Section 2.1 (i) to its Affiliates only for inclusion in Yahoo Properties, and (ii) in connection with 1 CONFIDENTIAL 2 any mirror site, derivative site, or distribution arrangement concerning a Yahoo Property. 2.2 License to E-Loan. Subject to the terms and conditions of this Agreement, Yahoo hereby grants to E-Loan, under Yahoo's Intellectual Property Rights a non-exclusive, worldwide, fully paid license to use, reproduce and display the Yahoo Brand Features (i) in connection with the co-branded banner described in 3.2(a), (ii) to indicate the location of the graphic link described in Section 3.2(f) below and (iii) in connection with the marketing and promotion of the Yahoo Loan Center, provided that Yahoo has the right to approve all marketing and promotional material and all other uses of the Yahoo Brand Features prior to its first distribution. 2.3 Exclusivity. (a) In the Yahoo Loan Center, E-Loan shall be the exclusive integrated on-line provider of home mortgage content that provides the User with the same features as the E-Loan Transaction Content. Nothing in this Section 2.3(a) shall preclude Yahoo from including in the Yahoo Loan Center (i) [*], so long as Yahoo does not include content or a direct link to content from [*] on the Yahoo Loan Center that has the same features and functionality as the E-Loan Transaction Content, (ii) other merchants with content relating to loans and home mortgages and (iii) a directory of and links to other mortgage providers. E-Loan acknowledges that Yahoo shall not be precluded from including links to merchants and mortgage providers on the Yahoo Loan Center that may provide content with the same features as the E-Loan Transaction Content or that allow a user to apply for a loan on-line so long as such content is not one click away from the Yahoo Loan Center. In addition, Yahoo shall not be restricted from placing banner advertisements or other advertisements and promotions from any source on the Yahoo Loan Center; provided that Yahoo shall not place any banner advertising on the first page of the Yahoo Loan Center by or on behalf of any third party whose primarily business is providing customers with customized mortgage quotes for first or second home mortgage products on-line. (b) E-Loan shall not license, distribute or integrate its content, features or services at a level similar or greater than that contained herein with any of Yahoo's competitors (which currently include, but are not limited to, Excite, Lycos, AOL, Microsoft, C/net, Intuit, Netscape and Infoseek and their successors). Notwithstanding the foregoing, E-Loan shall not be restricted from placing banner advertisements or links to the E-Loan Site below the line in the normal course of business on any of the foregoing sites. SECTION 3: RESPONSIBILITIES OF THE PARTIES. 3.1 Yahoo's Responsibilities. - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 2 CONFIDENTIAL 3 (a) Yahoo shall be solely responsible for the design, layout, posting, and maintenance of the Yahoo Loan Center and the Co-Branded Pages. The E-Loan Content shall appear on the Yahoo Loan Center in a manner similar to the example set forth on Exhibit D. E-Loan shall have the right to approve --------- any material changes to the design and placement of the E-Loan Content, such consent not to be unreasonably withheld. Except for the E-Loan Transaction Content and except for Yahoo's obligations regarding the module in My Yahoo described in Section 3.1(f) below, Yahoo is under no obligation, express or implied, to post or otherwise include any of the E-Loan Content in any Yahoo Property, including without limitation, on the Yahoo Loan Center. (b) Co-Branded Pages will include a co-branded banner with the Yahoo Brand Features and the E-Loan Brand Features in a manner similar to the example set forth in Exhibit D. [*]. Yahoo shall include on the Co-Branded Pages a text link above the fold, and a link at the bottom of the page that shall direct users to E-Loan Transaction Content pages hosted by Yahoo. (c) Yahoo will include a text link to the Yahoo Loan Center on the Yahoo Properties as set forth below. The appearance and placement of such text link is in Yahoo's sole discretion. (i) [*] (ii) The front page of Yahoo Finance currently located at http://quote.yahoo.com/ (iii)The residential real estate listings of Yahoo Real Estate Classifieds, which currently appears at the bottom of each such page but may be changed as determined by Yahoo. (iv) The front page and on the left side, where applicable (or in such other location as determined by Yahoo), of the real estate page of Yahoo Classifieds currently located at [*] (v) For not less than [*] days during the Term, on the front page of the Yahoo Main Site; provided that such text link may link to the front page of the Yahoo Loan Center or any subpages. The timing, placement and - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 3 CONFIDENTIAL 4 appearance of such text link shall be at Yahoo's sole discretion and shall be subject to availability. (vi) For not less than [*] days during the Term, on the "Inside Yahoo" module on the top pages of [*] (vii) On a navigational area on the top page of real estate news that appears in Yahoo Real Estate. (viii) A text link or graphic button (to be determined in Yahoo's sole discretion) on the keyword and directory pages related to real estate on the Yahoo Main Site as set forth on Exhibit E. From time to time and at any time Yahoo shall have the right to change such keyword and directory pages. [*] [*] (d) Yahoo shall provide [*] page views of banner advertisements that link to the Yahoo Loan Center. Such banner advertisements shall be created by Yahoo and placed, subject to availability, on run of Yahoo network. In the event that Yahoo fails to deliver such number of page views at the expiration of the Term, Yahoo will "make good" the shortfall by extending its obligations to place such banner advertisements beyond the end of the Term until such page view obligation is satisfied. The provisions set forth in this Section 3.1(d) set forth the entire liability of Yahoo, and E-Loan's sole remedy, for Yahoo's breach of its page view obligations. (e) Yahoo shall integrate a text link to the Co-Branded Pages in each residential real estate listing of Yahoo Real Estate Classifieds. The appearance and look and feel of such text link shall be at Yahoo's discretion. (f) Yahoo will continue to offer users of My Yahoo the capability to include a customized module on the finance page of My Yahoo of E-Loan's monitor a loan feature. - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 4 CONFIDENTIAL 5 (g) [*] 3.2 E-Loan Responsibilities. (a) E-Loan shall provide and host the initial page and all subsequent pages that contain the results of User's inquiries in connection with the E-Loan Transaction Content. Such pages will be co-branded with the Yahoo Brand Features and the E-Loan Brand Features. The design and content of such pages shall be mutually agreed upon by the parties and shall (i) reflect the Yahoo look and feel and (ii) contain a graphic link provided by Yahoo that links back to Yahoo. The parties agree that the design and content of such pages currently hosted by E-Loan as of the Effective Date are deemed acceptable for purposes of this Section 3.2(a). (b) E-Loan shall continue to provide users of My Yahoo with customized monitor a loan results on a daily basis via the User's account with My Yahoo. (c) E-Loan shall use best efforts to ensure that all pages of the E-Loan Site linked from any Yahoo Property comply with the scale, speed and performance equivalent to that provided by the Yahoo Main Site but in no event less than the current speed, scale and performance of the E-Loan Site. E-Loan shall also operate and maintain the E-Loan Site to be competitive with other similar sites on the world wide web, based on performance, quality and comparative standing of the E-Loan Site. (d) E-Loan shall provide Yahoo the E-Loan Content and shall use best efforts to ensure that Users receive results of inquiries in connection with the E-Loan Transaction Content that are accurate, comprehensive and error-free. Users that click-through to the E-Loan Site to apply for a loan shall also receive results of such requests that are accurate, comprehensive and error-free. (e) In no event shall any page on the E-Loan Site linked from any Yahoo Property contain graphic or textual hyperlinks, sponsorships or advertising banners of any kind from [*] (f) E-Loan shall place a Yahoo graphic link on those pages of the E-Loan Site to which users Click-through. Such Yahoo graphic link shall (a) be placed on the E- - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 5 CONFIDENTIAL 6 Loan Site in a manner approved by Yahoo (b) contain the Yahoo name and logo as provided by Yahoo and (c) directly link the user back to a page designated by Yahoo on the Yahoo Properties. Yahoo shall provide all graphic images, text, URLs, URL formats, and any other information or technology necessary for E-Loan to place such Yahoo graphic link back to Yahoo. (g) In the event that E-Loan includes a "tools/other resources" (or similar area) on the E-Loan Site, E-Loan shall place a text link to Yahoo Finance. In addition, if E-Loan elects to promote any free email service in the "tools/other resources" (or similar area) on the E-Loan Site, then E-Loan shall promote Yahoo Mail in such area of the E-Loan Site and in a manner mutually agreed upon by the parties. E-Loan shall not promote or feature any other email service in any manner on the E-Loan Site. (h) E-Loan shall ensure that all information provided by users of the E-Loan Site is maintained, accessed and transmitted in a secure environment and in compliance with security specifications equal to that currently provided on the E-Loan Site as of the Effective Date.. E-Loan shall provide a link to its policy (or to Yahoo's policy) regarding the protection of user data on those pages of the E-Loan Site where the user is requested to provide personal or financial information. (i) E-Loan shall deliver the E-Loan Content and all updates to Yahoo in accordance with the delivery specifications set forth in Exhibit C. 3.3 Mutual Responsibilities. (a) Yahoo and E-Loan shall continue the current process where certain information submitted by a user is transmitted in an intelligent query to E-Loan from Yahoo. For example, if a User is looking for a $1,000,000 home, that information will be sent to the E-Loan Site and would appear as mortgage information for that User. (b) Each party shall comply with the trademark guidelines provided by the other party with respect to the use of such party's Brand Features and neither party will alter or impair any acknowledgment of copyright or other Intellectual Property Rights of the other. (c) E-Loan will remain solely responsible for the operation of the E-Loan Site, and Yahoo will remain solely responsible for the operation of the Yahoo Properties. Each party, subject to the terms of this Agreement, retains sole right and control over the programming, content and conduct of transactions over its respective site. (d) Each party shall provide on-going assistance to the other party with regard to technical, administrative and service-oriented issues relating to the utilization, transmission and maintenance of the E-Loan Content, as may be reasonably requested. 6 CONFIDENTIAL 7 SECTION 4: COMPENSATION. 4.1 Slotting Fee. In consideration of Yahoo's performance and obligations as set forth herein, E-Loan will pay to Yahoo a total slotting fee equal to [*]. The slotting fee shall not be determined in any manner by the number or amount of loan applications taken or loans originated by E-Loan. Such fee shall be paid to Yahoo quarterly on the dates set forth below with the first payment designated as a set up fee for the design, consultation, development, implementation and placement of the E-Loan Content.
Payment Date - --------- --------------------------------- [*] [*]
4.2 Click-through Fee. In addition to the slotting fee, E-Loan shall pay to Yahoo a fee equal to [*] per Click-through after a total of [*] Click-throughs have occurred and continuing until [*] Click-throughs have occurred. Thereafter, E-Loan shall pay Yahoo [*] per Click-through. The Click-through fee shall not be determined in any manner by the number or amount of loan applications taken or loans originated by E-Loan. Payments of the Click-through fee are due and payable within thirty (30) days after the last day of each calendar quarter during the term of this Agreement. 4.3 Audit Rights. Yahoo shall have the right, at its own expense, to direct an independent certified public accounting firm to inspect and audit the accounting and sales books and records of E-Loan that are relevant to the payments set out in Section 4.2 above; provided, however, that: (i) Yahoo shall provide E-Loan [*] days notice prior to such audit; (ii) any such inspection and audit shall be conducted during regular business hours in such a manner as not to interfere with normal business activities; (iii) in no event shall audits be made more frequently than [*] per calendar year unless an underpayment of more than [*] is revealed in any audit and then, no more than [*] every quarter; and (iv) in the event that any audit reveals an underpayment of more than [*] of the amounts due Yahoo for any calendar quarter, E-Loan will reimburse the reasonable cost of such audit. If any audit shall reveal an overpayment of the amounts due Yahoo, E-Loan shall be entitled to credit such amounts against further payments due, and if no further payments are due, Yahoo shall promptly refund such amount to E-Loan. 4.4 Advertising Revenue. Yahoo shall have the sole right to sell, license or otherwise dispose of all advertising and promotional rights with respect to the Yahoo Properties, including the Yahoo Loan Center, the Co-Branded Pages and all other pageviews to - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 7 CONFIDENTIAL 8 Yahoo's servers. E-Loan shall have the sole right to sell, license or otherwise dispose of all advertising and promotional rights with respect to the E-Loan Site and all other pageviews to E-Loan's servers. 4.5 Payment Information. All payments herein are non-refundable and non-creditable (except as set forth in Section 4.3 above) and shall be made by E-Loan in U.S. dollars via wire transfer into Yahoo's main account pursuant to the wire transfer instructions set forth on Exhibit F. Any portion of the above payments which has not been paid on the dates set forth above shall bear interest at the lesser of (i) one percent (1%) per month or (ii) the maximum amount allowed by law. Notwithstanding the foregoing, any failure by E-Loan to make the payments specified in Sections 4.1 and 4.2 on the dates set forth therein shall constitute a material breach of this Agreement. SECTION 5: REPRESENTATIONS AND WARRANTIES. 5.1 Each of Yahoo and E-Loan represents and warrants that at all times during the term of this Agreement it shall have all licenses and approvals to enter into this Agreement and grant the licenses contained herein and that the negotiation, entry and performance of this Agreement will not violate, conflict with, interfere with, result in a breach of, or constitute a default under any other agreement to which they are a party or any government order or decree to which they are subject. 5.2 E-Loan represents and warrants that it is, and at all times during the term of this Agreement shall be, in compliance with any and all applicable laws, rules and regulations of any jurisdiction, including, without limitation, the Federal Real Estate Settlement Procedures Act of 1974 and HUD Regulation X promulgated thereunder, the Federal Equal Credit Opportunity Act, and Federal Reserve Regulation B, the Federal Truth in Lending Act and Federal Reserve Regulation Z promulgated thereunder, the Federal Fair Credit Reporting Act, and all federal, state and local privacy laws, rules and regulations and any other applicable laws of any jurisdiction now in effect and that may come into existence during the term hereof. 5.3 E-Loan represents and warrants that the E-Loan Content is substantially free from programming errors or viruses and will produce results in response to User's inquiries that are accurate, comprehensive and error-free. E-Loan further represents and warrants that all User information will be obtained, maintained and distributed in a secure environment and will not be used or disclosed except as allowed herein. SECTION 6: INDEMNIFICATION. 6.1 E-Loan, at its own expense, will indemnify, defend and hold harmless Yahoo, its Affiliates and their employees, representatives, agents and affiliates, against any claim, suit, action, or other proceeding brought against Yahoo or an Affiliate 8 CONFIDENTIAL 9 based on or arising from a claim (a) that, if true, would constitute a breach of the representations and warranties set forth in Section 5 above or (b) that the E-Loan Brand Features, any E-Loan Content or any material, product, information, data or service produced, distributed, offered or provided by E-Loan or any material presented on any site on the Internet produced, maintained, or published by E-Loan, infringes in any manner any copyright, patent, trademark, trade secret or any other intellectual property right of any third party, is or contains any material or information that is obscene, defamatory, libelous, slanderous, or that violates any law or regulation, is negligently performed, or that otherwise violates or breaches any duty toward, or rights of any person or entity, including, without limitation, rights of publicity, privacy or personality, or has otherwise resulted in any consumer fraud, product liability, tort, breach of contract, injury, damage or harm of any kind to any person or entity and also including any claim relating to any mortgage loan approval or mortgage application provided by E-Loan; provided; however, that in any such case: (x) Yahoo provides E-Loan with prompt notice of any such claim; (y)Yahoo permits E-Loan to assume and control the defense of such action, with counsel chosen by E-Loan (who shall be reasonably acceptable to Yahoo); and (z) E-Loan does not enter into any settlement or compromise of any such claim without Yahoo's prior written consent, which consent shall not be unreasonably withheld. E-Loan will pay any and all costs, damages, and expenses, including, but not limited to, reasonable attorneys' fees and costs awarded against or otherwise incurred by Yahoo or an Affiliate in connection with or arising from any such claim, suit, action or proceeding. It is understood and agreed that Yahoo does not intend and will not be required to edit or review for accuracy or appropriateness any E-Loan Content. 6.2 Yahoo, at its own expense, will indemnify, defend and hold harmless E-Loan and its employees, representatives, agents and affiliates, against any claim, suit, action, or other proceeding brought against E-Loan based on or arising from a claim [*] provided, however, that in any such case: (x) E-Loan provides Yahoo with prompt notice of any such claim; (y) E-Loan permits Yahoo to assume and control the defense of such action upon Yahoo's written notice to E-Loan of its intention to indemnify; and (z) upon Yahoo's written request, and at no expense to E-Loan, E-Loan will provide to Yahoo all available information and assistance necessary for Yahoo to defend such claim. Yahoo will not enter into any settlement or compromise of any such claim, which settlement or compromise would result in any liability to E-Loan, without E-Loan's prior written consent, which shall not unreasonably be withheld. Yahoo will pay any and all costs, damages, and expenses, including, but not limited to, reasonable attorneys' fees and costs awarded against or otherwise incurred by E-Loan in connection with or arising from any such claim, suit, action or proceeding. - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 9 CONFIDENTIAL 10 SECTION 7: LIMITATION OF LIABILITY. EXCEPT AS PROVIDED IN SECTIONS 4 AND 6, UNDER NO CIRCUMSTANCES SHALL E-LOAN, YAHOO, OR ANY AFFILIATE BE LIABLE TO ANOTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES ARISING FROM THIS AGREEMENT, EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS. SECTION 8: TERM AND TERMINATION. 8.1 Term. This Agreement will become effective as of the Effective Date and shall, unless sooner terminated as provided below or as otherwise agreed, remain effective for a term of twelve (12) months following the Launch Date. (a) [*] after the Launch Date, Yahoo will provide written notice to E-Loan in the event that Yahoo, in its sole discretion, elects to extend the program described in this Agreement [*]. 8.2 Termination for Cause. Notwithstanding the foregoing, this Agreement may be terminated by either party immediately upon notice if the other party: (w) becomes insolvent; (x) files a petition in bankruptcy; (y) makes an assignment for the benefit of its creditors; or (z) breaches any of its obligations under this Agreement in any material respect, which breach is not remedied within thirty (30) days (ten (10) days in the case of a failure to pay) following written notice to such party. . In the event that Yahoo provides a notice of termination under clause (z) above due to a failure to pay, Yahoo shall have the right to suspend performance under Sections 2.3(a) and 3.1 of this Agreement for the notice period until the breach is fully remedied by E-Loan. 8.3 Effect of Termination. Any termination pursuant to this Section 8 shall be without any liability or obligation of the terminating party, other than with respect to any breach of this Agreement prior to termination. The provisions of Sections 4.1, 4.3, 4.5, and 5 - 12 shall survive any termination or expiration of this Agreement; except that if this Agreement terminates due to a breach by Yahoo, then Section 4.1 shall not survive. SECTION 9: OWNERSHIP. - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 10 CONFIDENTIAL 11 9.1 By E-Loan. Yahoo acknowledges and agrees that: (i) as between E-Loan on the one hand, and Yahoo and its Affiliates on the other, E-Loan owns all right, title and interest in the E-Loan Content and the E-Loan Brand Features; (ii) nothing in this Agreement shall confer in Yahoo or an Affiliate any right of ownership in the E-Loan Content or the E-Loan Brand Features; and (iii) neither Yahoo or its Affiliates shall now or in the future contest the validity of the E-Loan Brand Features. 9.2 By Yahoo. E-Loan acknowledges and agrees that: (i) as between E-Loan on the one hand, and Yahoo and its Affiliates on the other, and subject to E-Loan's right in the E-Loan Content and the E-Loan Brand Features, Yahoo or the Affiliates own all right, title and interest in the Yahoo Loan Center, the Co-Branded Pages and any other Yahoo Property and the Yahoo Brand Features; (ii) nothing in this Agreement shall confer in E-Loan any license or right of ownership in the Yahoo Brand Features; and (iii) E-Loan shall not now or in the future contest the validity of the Yahoo Brand Features. 9.3 [*] SECTION 10: PUBLIC ANNOUNCEMENTS; CONFIDENTIALTIY. 10.1 Public Announcements. The parties will cooperate to create any and all appropriate public announcements relating to the relationship set forth in this Agreement. Neither party shall make any public announcement regarding the existence or content of this Agreement without the other party's prior written approval and consent. Yahoo will publicly announce this relationship by issuing a joint press release. 10.2 Confidentiality. Yahoo and E-Loan have previously entered into a Mutual Nondisclosure Agreement, dated December 10, 1997, and expressly acknowledge that such Mutual Nondisclosure Agreement remains in full force and effect in accordance with its terms. - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 11 CONFIDENTIAL 12 SECTION 11: INSURANCE. E-Loan agrees that it will maintain insurance with a carrier that is reasonably acceptable to Yahoo and with coverage for commercial general liability of at least two million dollars per occurrence. Prior to the launch of the E-Loan Content on the Yahoo Loan Center, E-Loan shall obtain coverage for errors and omissions of at least two million dollars per occurrence and E-Loan will name Yahoo as an additional insured on such insurance. E-Loan will provide evidence of such insurance to Yahoo prior to the launch of the E-Loan Content on the Yahoo Loan Center. Yahoo shall have the right to terminate this Agreement upon written notice to E-Loan without liability or obligation of any kind to E-Loan for any such termination by Yahoo. E-Loan shall not cancel or modify such insurance without Yahoo's prior written consent and such insurance shall remain in effect after the termination hereof except that E-Loan shall not be obligated to continue to name Yahoo as an additional insured after the expiration of the term of this Agreement. SECTION 12: NOTICE; MISCELLANEOUS PROVISIONS 12.1 Notices. All notices, requests and other communications called for by this Agreement shall be deemed to have been given immediately if made by telecopy or electronic mail (confirmed by concurrent written notice sent first class U.S. mail, postage prepaid), if to Yahoo at 3420 Central Expressway, Santa Clara, CA 95051, Fax: (408) 731-3301 Attention: Vice President (e-mail: ellen@yahoo-inc.com), with a copy to its General Counsel (e-mail: jplace@yahoo-inc.com), and if to E-Loan at the physical and electronic mail addresses set forth on the signature page of this Agreement, or to such other addresses as either party shall specify to the other. Notice by any other means shall be deemed made when actually received by the party to which notice is provided. 12.2 Miscellaneous Provisions. This Agreement will bind and inure to the benefit of each party's permitted successors and assigns. Neither party may assign this Agreement, in whole or in part, without the other party's written consent; provided, however, that: (i) either party may assign this Agreement without such consent in connection with any merger, consolidation, any sale of all or substantially all of such party's assets or any other transaction in which more than fifty percent (50%) of such party's voting securities are transferred. Any attempt to assign this Agreement other than in accordance with this provision shall be null and void. This Agreement will be governed by and construed in accordance with the laws of the State of California, without reference to conflicts of laws rules, and without regard to its location of execution or performance. If any provision of this Agreement is found invalid or unenforceable, that provision will be enforced to the maximum extent permissible and the other provisions of this Agreement will remain in force. The prevailing party in any action to enforce this Agreement shall be entitled to reimbursement of its expenses, including reasonable attorneys' fees. Neither this Agreement, nor any terms and conditions contained herein may be construed as creating or constituting a partnership, joint venture or agency relationship between the parties. No failure of either party to exercise or enforce any of its rights under this Agreement will act 12 CONFIDENTIAL 13 as a waiver of such rights. Except as provided in Section 10.2 and except that the License Agreement shall continue in effect until it terminates according to its terms, this Agreement and its exhibits are the complete and exclusive agreement between the parties with respect to the subject matter hereof, superseding and replacing any and all prior agreements, communications, and understandings, both written and oral, regarding such subject matter. Notwithstanding the foregoing, the provisions of this Agreement expressly supersedes and replaces the provisions set forth in Section 8.1(a) of the License Agreement with respect to continuing the program beyond the term set forth in the License Agreement. This Agreement may only be modified, or any rights under it waived, by a written document executed by both parties. No third party beneficiaries are created or established by this Agreement. Except as otherwise specifically provided for herein, each party shall bear its own expenses for the negotiation of and the performance of this Agreement. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute a single instrument. Execution and delivery of this Agreement may be evidenced by facsimile transmission. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their duly authorized representatives as of the date first written above. YAHOO! INC. E-LOAN, INC. By: By: --------------------------- ---------------------------- Title: Title: --------------------------- ---------------------------- Address: Address: --------------------------- ---------------------------- Telecopy: Telecopy: --------------------------- ---------------------------- E-mail: E-mail: --------------------------- ---------------------------- 13 CONFIDENTIAL 14 EXHIBIT A DEFINITIONS "Affiliates" shall mean any company or any other entity world-wide, including, without limitation, corporations, partnerships, joint ventures, and Limited Liability Companies, in which Yahoo owns at least a twenty percent ownership, equity, or financial interest. "Click-through" shall mean a user presence at the E-Loan Site that originated from a Yahoo Property. "Co-Branded Pages" shall mean those pages hosted by Yahoo that are co-branded and that solely contain E-Loan Content. "Launch Date" shall mean March 1, 1999. "E-Loan Brand Features" shall mean all trademarks, service marks, logos and other distinctive brand features of E-Loan that are used by E-Loan, including, without limitation, the trademarks, service marks and logos described in Exhibit B hereto. "E-Loan Content" shall mean information and data relating to first and second mortgage loans and the loan process and includes the E-Loan Transaction Content as mutually agreed upon from time to time. "E-Loan Transaction Content" shall mean (i) E-Loan's mortgage quote feature that provides a user with customized quotes on mortgage products designated by the user, (ii) E-Loan's mortgage loan recommendation feature that provides recommendations on mortgage products based on the user's response to a series of questions, (iii) E-Loan's mortgage qualification feature that provides an analysis of a user's position as a borrower compared to general lender guidelines and, in response to a series of questions, will match a user's borrowing criteria against a database of lenders and their guidelines, and (iv) E-Loan's monitor a loan service that, in response to a series of questions, determines whether any mortgage products are available in the market that are superior to a user's current mortgage. E-Loan Transaction Content includes the foregoing features and services set forth in clauses (i) through (iv) above as applied to second loans and home equity loans when such features and services are available in a significant number of states and acceptable to both parties and does not include any content or feature allowing a user to apply for a loan on-line. "E-Loan Site" shall mean E-Loan's World Wide Web site currently located at http://www.eloan.com. "Intellectual Property Rights" shall mean all rights in and to trade secrets, patents, copyrights, trademarks, know-how, as well as moral rights and similar rights of any type under the laws of any governmental authority, domestic or foreign. CONFIDENTIAL 15 "Internet" shall mean the collection of computer networks commonly known as the Internet, and shall include, without limitation, the World Wide Web. "My Yahoo" shall mean that personalized web product that is part of the Yahoo Main Site and currently located at http://www.my.yahoo.com. "User" shall mean a user of the Yahoo Properties. "Yahoo Brand Features" shall mean all trademarks, service marks, logos and other distinctive brand features of Yahoo that are used in or relate to a Yahoo Property, including, without limitation, the trademarks, service marks and logos described in Exhibit B. "Yahoo Loan Center" shall mean the Yahoo branded U.S. based property with information relating to home mortgages currently located at http://loan.yahoo.com/. Yahoo shall have the right to change the name of the Yahoo Loan Center from time to time. "Yahoo Main Site" shall mean Yahoo's principal U.S. based directory to the World Wide Web currently located at http://www.yahoo.com. "Yahoo Real Estate Classifieds" shall mean the portion of Yahoo's U.S. based web site that contains classified listings of residential real estate and is currently located at http://classifieds.yahoo.com/residential.html "Yahoo Properties" shall mean any Yahoo branded or co-branded media properties, including, without limitation, Internet guides, developed in whole or in part by Yahoo or its Affiliates and distributed or made available by Yahoo or its Affiliates over the Internet. CONFIDENTIAL 16 EXHIBIT B E-LOAN BRAND FEATURES YAHOO BRAND FEATURES Yahoo! Yahoo related logos CONFIDENTIAL 17 EXHIBIT C A. E-Loan's Responsibilities: E-Loan will deliver the E-Loan Content to Yahoo via e-mail. B. Yahoo's Responsibilities: CONFIDENTIAL 18 EXHIBIT D SAMPLE PAGES Co-Branded Page (E-Loan Content) [GRAPHIC] CONFIDENTIAL 19 Co-Branded Page (E-Loan Transaction Content) [GRAPHIC] CONFIDENTIAL 20 Inside Yahoo! Module [GRAPHIC] CONFIDENTIAL 21 EXHIBIT E KEYWORD AND DIRECTORY PAGES [*] CONFIDENTIAL - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 22 EXHIBIT F WIRE TRANSFER INSTRUCTIONS [*] CONFIDENTIAL - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 23 AMENDMENT YAHOO, INC. - E-LOAN INC. LICENSE AGREEMENT This Amendment is entered into as of March 19, 1999 (the "Effective Date") between Yahoo! Inc., a California corporation ("Yahoo") and E-LOAN Inc., a California corporation ("E-Loan") and amends the License Agreement (the "Agreement") entered into between Yahoo and E-Loan with a Launch Date of March 1, 1999. For good and valuable consideration, the receipt of which is hereby acknowledged, Yahoo and E-Loan hereby agree to amend the Agreement as follows: 1. The term of the Agreement described in Section 8.1 will be extended for an additional term of one year commencing March 1, 2000 and continuing until February 28, 2001 (the "Subsequent Term"). 2. During the Subsequent Term, Section 4.1 of the Agreement which describes the slotting fee to be paid by E-Loan will be replaced in its entirety by the following paragraph: "4.1 Slotting Fee. In consideration of Yahoo's performance and obligations as set forth herein, E-Loan will pay to Yahoo a slotting fee calculated as follows: [*] 3. During the Subsequent Term, E-loan will pay Yahoo a Click-through fee as described in Section 4.2 of the Agreement. In addition, during the original term of the Agreement and the Subsequent Term, the following provisions are added to the end to the last sentence of Section 4.2: "Click-through fees are calculated and will be paid by E-Loan based on Yahoo's advertising tracking system. [*] 4. The following new provision is added to Section 3.2 regarding E-Loan Responsibilities: - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. 24 "(j) E-Loan shall deliver to Yahoo a monthly report specifying the following: [*] 5. The following amendments are made to the definitions set forth in Exhibit A: The definition of Click-through is replaced by the following: "Click-through" shall mean a user presence at the E-Loan Site that originated from a Yahoo Property including, without limitation, a user selecting or clicking on any link on a Yahoo Property that will link the user to the E-Loan Site. A new definition of Unique Users is added as follows: "Unique Users" shall mean the total number of unduplicated users that visited the Yahoo Loan Center once during any month as reported by Media Metrix or similar third party internet measurement and reporting agency. The definition of Yahoo Loan Center is replaced by the following: "Yahoo Loan Center" shall mean the Yahoo branded U.S. based property with information related to loans currently located at http://loan.yahoo.com." 6. Except as expressly amended as set forth herein, the Agreement shall remain in full force and effect in accordance with its terms. 7. This Amendment has been executed by the duly authorized representatives of the parties, effective as of the date first set forth above. YAHOO! INC. E-LOAN INC. By: Illegible By: /s/ Doug Galen ----------------------- ----------------------- Name: Illegible Name: Doug Galen --------------------- --------------------- Title: VP Title: VP -------------------- --------------------- - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. EX-10.12 18 WAREHOUSING CREDIT AND SECURITY AGREEMENT 1 EXHIBIT 10.12 ================================================================================ WAREHOUSING CREDIT AND SECURITY AGREEMENT (SINGLE-FAMILY MORTGAGE LOANS) BETWEEN E-LOAN, INC., A CALIFORNIA CORPORATION AND BANK UNITED, A FEDERAL SAVINGS BANK DATED AS OF FEBRUARY 3, 1999 ================================================================================ 2 TABLE OF CONTENTS 1. DEFINITIONS.........................................................................................Page 1 1.1 Defined Terms..............................................................................Page 1 1.2 Other Definitional Provisions.............................................................Page 11 2. THE CREDIT.........................................................................................Page 11 2.1 The Commitment............................................................................Page 11 2.2 Procedures for Obtaining Advances.........................................................Page 12 2.3 Note......................................................................................Page 13 2.4 Interest..................................................................................Page 13 2.5 Principal Payments........................................................................Page 14 2.6 Expiration of Commitment..................................................................Page 16 2.7 Method of Making Payments.................................................................Page 16 2.8 Non-Usage Fee.............................................................................Page 16 2.9 Miscellaneous Charges.....................................................................Page 17 2.10 Bailee....................................................................................Page 17 3. COLLATERAL.........................................................................................Page 17 3.1 Grant of Security Interest................................................................Page 17 3.2 Security Interest in Mortgage-backed Securities...........................................Page 18 3.3 Delivery of Collateral Documents..........................................................Page 19 3.4 Delivery of Additional Collateral or Mandatory Prepayment.................................Page 19 3.5 Right of Redemption from Pledge...........................................................Page 20 3.6 Collection and Servicing Rights...........................................................Page 20 3.7 Return or Release of Collateral at End of Commitment......................................Page 20 3.8 Master Repurchase Agreement...............................................................Page 20 4. CONDITIONS PRECEDENT...............................................................................Page 21 4.1 Initial Advance...........................................................................Page 21 4.2 Each Advance..............................................................................Page 22 5. REPRESENTATIONS AND WARRANTIES.....................................................................Page 23 5.1 Organization; Good Standing; Subsidiaries.................................................Page 23 5.2 Authorization and Enforceability..........................................................Page 23 5.3 Financial Condition.......................................................................Page 24 5.4 Litigation................................................................................Page 24 5.5 Compliance with Laws......................................................................Page 24 5.6 Regulation U..............................................................................Page 25 5.7 Investment Company Act....................................................................Page 25 5.8 Agreements................................................................................Page 25 5.9 Title to Properties.......................................................................Page 25 5.10 ERISA.....................................................................................Page 25 5.11 Eligibility...............................................................................Page 25
Page i 3 5.12 Special Representations Concerning Collateral.............................................Page 26 5.13 RICO......................................................................................Page 28 5.14 Proper Names..............................................................................Page 28 5.15 Direct Benefit From Loans.................................................................Page 28 5.16 Loan Documents Do Not Violate Other Documents.............................................Page 28 5.17 Consents Not Required.....................................................................Page 28 5.18 Material Fact Representations.............................................................Page 29 5.19 Place of Business.........................................................................Page 29 5.20 Use of Proceeds; Business Loans...........................................................Page 29 5.21 No Undisclosed Liabilities................................................................Page 29 5.22 Tax Returns and Payments..................................................................Page 29 5.23 Subsidiaries..............................................................................Page 30 5.24 Holding Company...........................................................................Page 30 5.25 Year 2000 Issue...........................................................................Page 30 6. AFFIRMATIVE COVENANTS..............................................................................Page 30 6.1 Payment of Note...........................................................................Page 30 6.2 Financial Statements and Other Reports....................................................Page 30 6.3 Maintenance of Existence; Conduct of Business.............................................Page 31 6.4 Compliance with Applicable Laws...........................................................Page 32 6.5 Inspection of Properties and Books........................................................Page 32 6.6 Notice....................................................................................Page 32 6.7 Payment of Debt, Taxes, etc...............................................................Page 32 6.8 Insurance.................................................................................Page 33 6.9 Other Loan Obligations....................................................................Page 33 6.10 Use of Proceeds of Advances...............................................................Page 33 6.11 Special Affirmative Covenants Concerning Collateral.......................................Page 33 6.12 Cure of Defects in Loan Documents.........................................................Page 34 6.13 Year 2000 Compliant.......................................................................Page 34 7. NEGATIVE COVENANTS.................................................................................Page 35 7.1 Contingent Liabilities....................................................................Page 35 7.2 Pledge of Mortgage Loans..................................................................Page 35 7.3 Merger; Acquisitions......................................................................Page 35 7.4 Loss of Eligibility.......................................................................Page 35 7.5 Debt to Adjusted Tangible Worth Ratio.....................................................Page 35 7.6 Minimum Adjusted Tangible Net Worth.......................................................Page 36 7.7 Transactions with Affiliates..............................................................Page 36 7.8 Limits on Corporate Distributions.........................................................Page 36 7.9 RICO......................................................................................Page 36 7.10 No Loans or Investments Except Approved Investments.......................................Page 36 7.11 Charter Documents and Business Termination................................................Page 37 7.12 Changes in Accounting Methods.............................................................Page 37 7.13 Changes in Business or Assets.............................................................Page 37 7.14 Changes in Office or Inventory Location...................................................Page 37
Page ii 4 7.15 Special Negative Covenants Concerning Collateral..........................................Page 37 7.16 No Indebtedness...........................................................................Page 38 8. DEFAULTS; REMEDIES.................................................................................Page 38 8.1 Events of Default.........................................................................Page 38 8.2 Remedies..................................................................................Page 41 8.3 Application of Proceeds...................................................................Page 43 8.4 Lender Appointed Attorney-in-Fact.........................................................Page 44 8.5 Right of Set-Off..........................................................................Page 44 9. NOTICES............................................................................................Page 45 10. REIMBURSEMENT OF EXPENSES; INDEMNITY...............................................................Page 45 11. FINANCIAL INFORMATION..............................................................................Page 46 12. MISCELLANEOUS......................................................................................Page 47 12.1 Terms Binding Upon Successors; Survival of Representations................................Page 47 12.2 Assignment................................................................................Page 47 12.3 Amendments................................................................................Page 47 12.4 Governing Law.............................................................................Page 47 12.5 Participations............................................................................Page 47 12.6 Relationship of the Parties...............................................................Page 47 12.7 Severability..............................................................................Page 48 12.8 Usury.....................................................................................Page 48 12.9 CONSENT TO JURISDICTION...................................................................Page 49 12.10 Arbitration...............................................................................Page 49 12.11 ADDITIONAL INDEMNITY......................................................................Page 50 12.12 No Waivers Except in Writing..............................................................Page 51 12.13 Waiver of Jury Trial......................................................................Page 51 12.14 Multiple Counterparts.....................................................................Page 51 12.15 No Third Party Beneficiaries..............................................................Page 51 12.16 RELEASE OF LENDER LIABILITY...............................................................Page 51 12.17 Entire Agreement; Amendment...............................................................Page 52 12.18 NO ORAL AGREEMENTS........................................................................Page 52 EXHIBIT "A".................................................................................................Page 54 EXHIBIT "B".................................................................................................Page 56 EXHIBIT "C".................................................................................................Page 57 EXHIBIT "D".................................................................................................Page 61 EXHIBIT "E".................................................................................................Page 62
Page iii 5 EXHIBIT "F".................................................................................................Page 63 ANNEX "A"...................................................................................................Page 64 EXHIBIT "G".................................................................................................Page 66 EXHIBIT "H".................................................................................................Page 67 EXHIBIT "I".................................................................................................Page 68 EXHIBIT "J".................................................................................................Page 69 EXHIBIT "K".................................................................................................Page 73 EXHIBIT "L".................................................................................................Page 75 EXHIBIT "M".................................................................................................Page 76 EXHIBIT "N".................................................................................................Page 79
Page iv 6 WAREHOUSING CREDIT AND SECURITY AGREEMENT THIS WAREHOUSING CREDIT AND SECURITY AGREEMENT (this "Agreement"), is dated as of February 3, 1999, by and between E-LOAN, INC., a California corporation (the "Company"), having its principal office at 5875 Arnold Road, Dublin, California 94568, and BANK UNITED, a federal savings bank (the "Lender"), having its principal office at 3200 Southwest Freeway, Suite 2000, Houston, Texas 77027. WHEREAS, the Company has requested the Lender to make certain loans to the Company to finance the origination or purchase of Mortgage Loans (as that term is herein defined) which loans are for the benefit of the Company; WHEREAS, the Lender is willing to make such loans as herein provided, upon the terms, agreements and covenants and subject to the conditions hereinafter set forth and in reliance on the representations and warranties herein made and referred to; and WHEREAS, the Company and the Lender desire to set forth herein the terms and conditions upon which the Lender shall provide warehouse financing to the Company; NOW, THEREFORE, for good and valuable consideration, the amount and sufficiency of which are hereby acknowledged by the parties hereto, to induce the Lender to provide the warehouse financing facility to the Company and in reliance of the representations and warranties made herein, the parties hereto hereby agree as follows: 1. DEFINITIONS. 1.1 Defined Terms. Capitalized terms defined below or elsewhere in this Agreement (including the exhibits hereto) shall have the following meanings: "Adjusted Tangible Net Worth" means, with respect to Company at any date, the Tangible Net Worth of Company at such date plus 1.0% of the sum of the outstanding principal balances of Mortgage Loans for which Company owns the Servicing Rights plus Subordinated Debt of the Company. "Advance" means a disbursement by the Lender under the Commitment pursuant to Article 2 of this Agreement. "Advance Request" has the meaning set forth in Section 2.2(a) hereof. "Affiliate" shall mean any Person controlling, controlled by or under common control with any other Person. For purposes of this definition "control" (including "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 such Person, whether through the ownership of voting securities, by contract, or otherwise or owning or possessing Page 1 7 the power to vote 10% or more of any class of voting securities of any Person. Without limiting the generality of the foregoing, for purposes of this Agreement, Company and each of its respective Subsidiaries shall be deemed to be Affiliates of one another. "Aged Mortgage Loans" means an Eligible Mortgage Loan that has been included in Collateral for a period of more than ninety (90) days. "Agreement" means this Warehousing Credit and Security Agreement (Single Family Mortgage Loans), either as originally executed or as it may from time to time be supplemented, modified or amended. "Applicable Law" shall mean the laws of the State of Texas and the United States of America in effect from time to time and applicable to the transactions between the Lender and the Company pursuant to this Agreement and the other Loan Documents whichever permits the charging and collection of the highest nonusurious rate of interest on such transactions. For purposes of determining Texas law with respect to the highest nonusurious rate of interest, the weekly ceiling permitted under Chapter 1D. of the Texas Credit Title, as amended, shall be controlling. "Approved Custodian" means a Person acceptable to the Lender from time to time in its sole discretion, who possesses Mortgage Loans that secure Mortgaged-backed Securities. "Bailee Letter" has the meaning set forth in Section 3.3 hereof. "Business Day" means any day excluding Saturday, Sunday and any day on which Lender is closed for business. "Capitalized Lease" shall mean any lease under which rental payments are required to be capitalized on a balance sheet of the lessee in accordance with GAAP. "Capitalized Rentals" shall mean the amount of aggregate rentals due and to become due under all Capitalized Leases under which the Company is a lessee that would be reflected as a liability on a balance sheet of the Company. "Collateral" has the meaning set forth in Section 3.1 hereof. "Collateral Documents" means all of the documents and other items described on EXHIBIT "C" hereto and required to be delivered to the Lender in connection with an Advance. "Collateral Value" means (a) with respect to any Eligible Mortgage Loan, an amount equal to the least of (i) the actual out-of-pocket cost of such Mortgage Loan to the Company, i.e., Page 2 8 the net amount actually funded against such Mortgage Loan or the net purchase price of such Mortgage Loan, (ii) the Par Value thereof, (iii) the amount which the Investor has committed to pay for such Mortgage Loan pursuant to a Purchase Commitment, or (iv) the Fair Market Value of such Mortgage Loan; (b) with respect to Mortgage-backed Securities, an amount equal to the least of (i) the sum of the principal balances of the Mortgage Loans from which such Mortgage-backed Securities were created, (ii) the amount which the Investor has committed to pay for such Mortgage-backed Securities pursuant to a Purchase Commitment, or (iii) the Fair Market Value of such Mortgage-backed Security; (c) with respect to Collateral that is not described within (a) or (b), and that is pledged pursuant to Section 3.4 hereof, Collateral Value shall equal an amount established by Lender in its sole discretion; (d) with respect to Collateral that is not described in (a), (b), or (c) the Collateral Value shall be equal to $0.00; (e) notwithstanding the foregoing, with respect to Mortgage Loans that are not Eligible Mortgage Loans, the Collateral Value thereof shall equal $0.00. "Commitment" has the meaning set forth in Section 2.1(a) hereof. "Company" has the meaning set forth in the first paragraph of this Agreement. "Conventional Mortgage Loan" means a Single-family Mortgage Loan, other than an FHA Loan or VA Loan, that complies with all applicable material requirements for purchase under the FNMA or FHLMC standard form of conventional mortgage purchase contract. "Debt" means, with respect to any Person, at any date (a) all indebtedness or other obligations of such Person which, in accordance with GAAP, would be included in determining total liabilities as shown on the liabilities side of a balance sheet of such Person at such date; and (b) all indebtedness or other obligations of such Person for borrowed money or for the deferred purchase price of property or services; provided that for purposes of this Agreement, there shall be excluded from Debt at any date loan loss reserves, deferred taxes arising from capitalized excess service fees, and operating leases. "Default" means the occurrence of any event or existence of any condition which, but for the giving of notice, the lapse of time, or both, would constitute an Event of Default. "Default Rate" has the meaning set forth in Section 2.4(c) hereof. "Electronic Request" has the meaning set forth in Section 2.2(a) hereof. Page 3 9 "Eligible Mortgage Loan" means a Conventional Mortgage Loan, FHA Loan, Jumbo Loan, or VA Loan that, at all times during the term of this Agreement, (a) is evidenced by loan documents that are the standard forms approved by FNMA or FHLMC or forms previously approved, in writing, by the Lender in its sole discretion; (b) is validly pledged to the Lender, subject to no other Liens; (c) is not in default in the payment of principal and interest or in the performance of any obligation under the Mortgage Note or the Mortgage evidencing or securing such Eligible Mortgage Loan for a period of 60 days or more; (d) has closed less than 25 days prior to the date of the Advance made in connection with such Eligible Mortgage Loan; and (e) is covered by a Purchase Commitment. "Eligible Mortgage Pool" means a pool of Mortgage Loans that will secure a "mortgage related security", as defined in Section 3(a)(41) of the Exchange Act administered or to be administered by a trustee acceptable to Lender in its sole discretion where the Mortgage, Mortgage Note and other documents relating to such Mortgage Loans are held or to be held by an Approved Custodian. "ERISA" means the Employee Retirement Income Security Act of 1974 and all rules and regulations promulgated thereunder, as amended from time to time and any successor statute. "Event of Default" means any of the conditions or events set forth in Section 8.1 hereof. "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time and any successor statute. "Fair Market Value" shall mean, at any date, with respect to: (a) any Mortgage-backed Security, the bid price rate reflected on the Telerate screen for a Mortgage-backed Security with the closest coupon rate that does not exceed that of the Mortgage-backed Security in question multiplied by the original face amount of such Mortgage-backed Security, and multiplied by the current pool factor for such Mortgage-backed Security. (b) any Mortgage Loan, the market price rate reflected on the Telerate screen for thirty (30) day mandatory future delivery of such Mortgage Loan multiplied by the outstanding principal balance thereof. In the event Telerate ceases to publish either the market or bid price referenced in (a) and (b) above, the average bid price quoted in writing to the Lender as of the date of determination by any two nationally recognized dealers reasonably selected by Lender that are making a market in similar Mortgage Loans or Mortgaged-backed Securities shall be utilized in lieu of the market or bid price, as the case may be. "FHA" means the Federal Housing Administration and any successor thereto. Page 4 10 "FHA Loan" means a Single-family Mortgage Loan, payment of which is partially or completely insured by the FHA under the National Housing Act or Title V of the Housing Act of 1949 or with respect to which there is a current, binding and enforceable commitment for such insurance issued by the FHA. "FHLMC" means the Federal Home Loan Mortgage Corporation and any successor thereto. "FHLMC Guide" means the Freddie Mac Sellers' and Servicers' Guide, dated September 17, 1984, applicable bulletins, the applicable MIDANET Users Guide (or the MIDAPHONE User's Guide) and any particular purchase documents as defined in the Sellers' and Servicers' Guide, as revised prior to the date hereof. "FICA" means the Federal Insurance Contributions Act. "First Mortgage" means a mortgage or deed of trust which constitutes a first Lien on the property covered thereby. "First Mortgage Loan" means a Mortgage Loan secured by a First Mortgage. "Floating Rate" has the meaning set forth in Section 2.4(a) hereof. "FNMA" means the Federal National Mortgage Association and any successor thereto. "FNMA Guide" means the FNMA Servicing Guide dated June 30, 1990, as revised prior to the date hereof. "Funding Account" means the non-interest bearing demand checking account established with, maintained by, and pledged to Lender into which shall be deposited the proceeds of Advances, the proceeds from any sale of Collateral, and from which funds shall be disbursed for the acquisition of Mortgage Loans. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board and 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 may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. "GNMA" means the Government National Mortgage Association and any successor thereto. "GNMA Guide" means the GNMA I Mortgage-Backed Securities Guide, Handbook GNMA 5500.1 REV. 6, as revised prior to the date hereof, and as may be revised from time Page 5 11 to time, and GNMA II Mortgage-Backed Securities Guide Handbook GNMA 5500.2, as revised prior to the date hereof. "HUD" means the Department of Housing and Urban Development and any successor thereto. "Indebtedness" shall mean and include, without duplication, (1) all items which in accordance with GAAP, consistently applied, would be included on the liability side of a balance sheet on the date as of which Indebtedness is to be determined (excluding shareholders' equity), (2) Capitalized Rentals under any Capitalized Lease, (3) guaranties, endorsements and other contingent obligations in respect of, or any obligations to purchase or otherwise acquire, Indebtedness of others, and (4) indebtedness secured by any mortgage, pledge, security interest or other Lien existing on any property owned by the Person with respect to which indebtedness is being determined, whether or not the indebtedness secured thereby shall have been assumed. "Indemnified Liabilities" has the meaning set forth in Article 10 hereof. "Interim Date" has the meaning set forth in Section 4.1(a)(5) hereof. "Internal Revenue Code" means the Internal Revenue Code of 1986, or any subsequent federal income tax law or laws, as any of the foregoing have been or may from time to time be amended. "Investor" means FNMA, FHLMC, GNMA, any of the Persons listed in EXHIBIT "L" hereto, or a financially responsible institution which is acceptable to Lender, in its sole discretion; provided that at any time by written notice to Company Lender may disapprove any Investor in its reasonable discretion, whether or not that Person is named as an Investor in this definition or in EXHIBIT "L" or has been previously approved as an Investor by Lender. Upon receipt of such notice, the Persons named in Lender's notice shall no longer be Investors from and after the date of the receipt of such notice; provided, that Pledged Mortgages covered by Purchase Commitments from Persons named in such notice and held by the Lender prior to the date of the receipt of such notice shall not cease being Eligible Mortgage Loans because of such disapproval. "Jumbo Loan" means a Single-family Mortgage Loan (other than a FHA Loan or VA Loan) that complies with all applicable requirements for purchase under the FNMA or FHLMC standard form of conventional mortgage purchase contract then in effect except that the amount of such Mortgage Loan exceeds the maximum amount under those requirements, but in no event shall the amount of such Single-family Mortgage Loan exceed $650,000.00. "Lender" has the meaning set forth in the first paragraph of this Agreement. "LIBOR Rate" means a rate of interest equal to the London Interbank Offered Rate for U. S. dollar deposits as quoted by Telerate, Bloomberg or any other rate quoting service, Page 6 12 selected by Lender in its sole discretion for an interest period of one month, effective two (2) Business Days from the date of quotation. In the event such rate ceases to be published, LIBOR Rate shall mean a comparable rate of interest reasonably selected by Lender. "Lien" means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof, and any agreement to give any security interest). "Loan Documents" means this Agreement, the Note, and each other document, instrument or agreement executed by the Company or any other Person in connection herewith or therewith, as any of the same may be amended, restated, renewed or replaced from time to time. "Margin Stock" has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time. "Master Repurchase Agreement" means that certain Master Repurchase Agreement dated of even date herewith by and between Company and Lender. "Maximum Rate" shall mean the maximum lawful non-usurious rate of interest (if any) that, under Applicable Law, the Lender may charge the Company on the Advances from time to time. To the extent that the interest rate laws of the State of Texas are applicable and unless changed in accordance with law, the applicable rate ceiling shall be the weekly ceiling determined in accordance with Chapter 1D. of the Texas Credit Title, as amended. "Monthly Average LIBOR Rate" means the average of all LIBOR Rates quoted during a given month. In the event (i) the Note is paid in full and the Commitment is terminated prior to a month end; or (ii) the initial Advance hereunder occurs on a date other than the first day of that month on which LIBOR Rates are quoted, the Monthly Average LIBOR Rate shall mean, in the case of clause (i), the average of all LIBOR Rates quoted that month up to and including the last Business Day prior to such payment in full; or, in the case of clause (ii), the LIBOR Rates quoted on the date of the initial Advance through the end of that month. "Mortgage" means a First Mortgage or Second Mortgage on improved real property. "Mortgage-backed Securities" means FHLMC, GNMA or FNMA securities that are backed by Mortgage Loans. "Mortgage Loan" means any loan evidenced by a Mortgage Note. A Mortgage Loan, unless otherwise expressly stated herein, means a Single-family Mortgage Loan. "Mortgage Note" means a note secured by a Mortgage. Page 7 13 "Mortgage Note Amount" means, as of the date of determination, the then outstanding unpaid principal amount of a Mortgage Note. "Mortgage Pool" means a pool of Mortgage Loans that were warehoused with the Lender, on the basis of which there is to be issued a Mortgage-backed Security. "Mortgaged Property" means the property, real, personal, tangible or intangible, securing a Mortgage Note. "Multiemployer Plan" means a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA that is maintained for employees of the Company or a Subsidiary of the Company. "Net Investable Balances" means the average collected balances in non-interest bearing deposit accounts controlled or maintained by the Company and its Subsidiaries in accounts at the Lender, less balances to support float, activity charges, reserve requirements, Federal Deposit Insurance Corporation insurance premiums and such other assessments as may be imposed by governmental authorities from time to time. "Non-Usage Fee" has the meaning set forth in Section 2.8 hereof. "Note" has the meaning set forth in Section 2.3 hereof. "Notices" has the meaning set forth in Article 9 hereof. "Obligations" shall mean any and all indebtedness, obligations and liabilities of the Company to the Lender (whether now existing or hereafter arising, voluntary or involuntary, whether or not jointly owed with others, direct or indirect, absolute or contingent, liquidated or unliquidated, and whether or not from time to time decreased or extinguished and later increased, created or incurred), arising out of or related to the Loan Documents, or any of them. "Officer's Certificate" means a certificate executed on behalf of the Company by its chief financial officer or its treasurer or by such other officer as may be designated herein, in form and substance satisfactory to Lender. "OTS" means the Office of Thrift Supervision. "Par Value" means, with respect to any Mortgage Loan, the unpaid principal balance of such Mortgage Loan, on the date of the Advance made against such Mortgage Loan. "Participant" has the meaning set forth in Section 12.5 hereof. "Person" means and includes natural persons, corporations, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, Page 8 14 banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and federal and state governments and agencies or regulatory authorities and political subdivisions thereof. "Plans" has the meaning set forth in Section 5.10 hereof. "Pledged Mortgages" has the meaning set forth in Section 3.1(a) hereof. "Pledged Securities" has the meaning set forth in Section 3.1(b) hereof. "PMI" means any private mortgage insurance company selected by Company and reasonably acceptable to Lender. "Purchase Commitment" means a written commitment, in form and substance reasonably satisfactory to the Lender, issued in favor of the Company by an Investor pursuant to which that Investor commits to purchase Mortgage Loans or Mortgage-backed Securities. "Purchase Price" shall have the meaning set forth in the Master Repurchase Agreement. "Redemption Amount" has the meaning set forth in Section 3.5 hereof. "RICO" means the Racketeer Influenced and Corrupt Organizations Act of 1970, as amended. "Second Mortgage" means a mortgage or deed of trust which constitutes a second Lien on the property covered thereby. "Second Mortgage Loan" means a Mortgage Loan secured by a Second Mortgage. "Securities" means the Mortgage Notes, securities, and financial instruments sold by Company to the Lender under the Master Repurchase Agreement at any time and from time to time. "Servicing Contract" means, with respect to any Person, the arrangement, whether or not in writing, pursuant to which such Person has the right to service Mortgage Loans. "Servicing Rights" means (a) the rights, obligations, remedies, powers, and responsibilities of a Person to service Mortgage Loans owned by that Person, including without limitation the right to collect principal and interest payments, administer escrow accounts, and the right to own and possess loan files and all records, documents, and data relating to such Mortgage Loans, and (b) the obligations, rights, remedies, powers, privileges, benefits and responsibilities of a Person to service Mortgage Notes for GNMA, FNMA or FHLMC under and in accordance with the GNMA Guide, the FNMA Guide and Page 9 15 the FHLMC Guide, respectively or for any Investor under any Servicing Contract, including, without limitation, (i) the right to receive servicing fees, termination fees, net sales proceeds, late charges, insufficient fund fees, and other ancillary income relating to the Mortgage Notes (ii) the right to hold and administer the escrow accounts, and (iii) the right to all loan files, insurance files, tax records, collection records, documents, ledgers, computer printouts, computer tapes and other records, data or information relating to the Mortgage Notes, the escrow accounts or the servicing or otherwise necessary or proper to perform the obligations of servicer. "Single-family Mortgage Loan" means a Mortgage Loan secured by a Mortgage covering improved real property containing one to four family residences. "Statement Date" has the meaning set forth in Section 4.1(a)(5) hereof. "Subordinated Debt" means, with respect to any Person, all Indebtedness of such Person, for borrowed money, which is, by its terms (which terms shall have been approved by the Lender) or by the terms of a subordination agreement, in form and substance satisfactory to the Lender, effectively subordinated in right of payment to all other present and future obligations and all indebtedness of such Person, of every kind and character, owed to the Lender. "Subsidiary" means any corporation, association or other business entity in which more than fifty percent (50%) of the total voting power or shares of stock entitled to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more of the other Subsidiaries of that Person or a combination thereof. "Tangible Net Worth" means, with respect to any Person at any date, the sum of the total shareholders' equity in such Person (including capital stock, additional paid-in capital, and retained earnings, but excluding treasury stock, if any), on a consolidated basis; less the aggregate book value of all intangible assets of such Person (as determined in accordance with GAAP), including without limitation, goodwill, trademarks, trade names, service marks, copyrights, patents, licenses, franchises, and Servicing Rights, each to be determined in accordance with GAAP consistent with those applied in the preparation of the financial statements referred to in Section 5.3 hereof; provided that, for purposes of this Agreement, there shall be excluded from total assets, advances or loans to shareholders, officers or Affiliates, investments in Affiliates, assets pledged to secure any liabilities not included in the Debt of such Person and those other assets which would be deemed by HUD to be non-acceptable in calculating adjusted net worth in accordance with its requirements in the Audit Guide for Audit of Approved Non-Supervised Mortgagees", as in effect as of such date. "Termination Date" shall mean February 2, 2000, or such earlier date upon which Lender's obligation to fund shall be terminated pursuant to the terms of this Agreement. Page 10 16 "Tribunal" shall mean any court or governmental department, commission, board, bureau, agency, or instrumentality of any state, commonwealth, nation, territory, possession, county, parish, or municipality, whether now or hereafter constituted and/or existing. "VA" means the Veterans Administration and any successor thereto. "VA Loan" means a Single-family Mortgage Loan, payment of which is partially or completely guaranteed by the VA under the Servicemen's Readjustment Act of 1944 or Chapter 37 of Title 38 of the United States Code or with respect to which there is a current binding and enforceable commitment for such a guaranty issued by the VA. "Wet Settlement Advance" means a disbursement by the Lender under the Commitment and pursuant to Section 2.2(a) of this Agreement, in respect of the closing or settlement of a Single-family Mortgage Loan, in anticipation of and pending subsequent delivery and examination of the Collateral Documents as provided in Section II of EXHIBIT "C". "Year 2000 Issue" means the failure of computer software, hardware, and firmware systems and equipment containing embedded computer chips to properly receive, transmit, process, manipulate, store, retrieve, re-transmit or in any other way utilize data and information due to the occurrence of the year 2000 or the inclusion of dates on or after January 1, 2000. 1.2 Other Definitional Provisions. (a) Accounting terms not otherwise defined herein shall have the meanings given the terms under GAAP. (b) Defined terms may be used in the singular or the plural, as the context requires. 2. THE CREDIT. 2.1 The Commitment. (a) Subject to the terms and conditions of this Agreement and provided no Default or Event of Default has occurred and is continuing, the Lender agrees, from time to time during the period from the date hereof to and including the Termination Date, to make Advances to the Company, provided the sum of the total aggregate principal amount outstanding at any one time of all such Advances plus the aggregate Purchase Prices of all Securities which have not been repurchased by the Company under the Master Repurchase Agreement shall not exceed FORTY MILLION AND NO/100 DOLLARS ($40,000,000.00). The obligation of the Lender to make Advances hereunder up to such limit is hereinafter referred to as the "Commitment." Within the Commitment, the Company may borrow, repay and reborrow. All Advances under this Agreement shall constitute a single indebtedness, Page 11 17 and all of the Collateral shall be security for the Note and for the performance of all the Obligations of the Company to the Lender. Notwithstanding anything contained herein to the contrary or otherwise, each purchase of Securities by the Lender under the Master Repurchase Agreement will automatically reduce by the amount of the purchase price for such Securities, dollar for dollar, the principal amount available to be borrowed within the Commitment for so long as that purchase is outstanding under the Master Repurchase Agreement. (b) Advances shall be used by the Company solely for the purpose of funding the acquisition or origination of Mortgage Loans, as specified in the Advance Request and none other, and shall be made at the request of the Company in the manner hereinafter provided in Section 2.2, against the pledge of such Mortgage Loans and such other collateral as is set forth in Section 3.1 hereof as Collateral therefor. Advances shall also be subject to the following restrictions: (1) No Advance shall be made against Mortgage Loans which are not Eligible Mortgage Loans. (2) The aggregate amount of Wet Settlement Advances outstanding at any one time shall not exceed FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00). (3) The aggregate amount of Advances against Second Mortgage Loans outstanding at any one time shall not exceed FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00). (4) The aggregate amount of Advances against Aged Mortgage Loans outstanding at any one time shall not exceed FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00). (c) No Advance against a Mortgage Loan shall exceed an amount equal to 99% of the Collateral Value of such Mortgage Loan, to be determined as of the date such Mortgage Loan is pledged to Lender. 2.2 Procedures for Obtaining Advances. (a) The Company may obtain an Advance hereunder subject to the following: (1) The Company may obtain an Advance hereunder, subject to the satisfaction of the conditions set forth in Sections 4.1 and 4.2 hereof, upon compliance with the procedures set forth in this Section 2.2 and in EXHIBIT "C" attached hereto and made a part hereof. Requests for Advances shall be initiated by the Company (i) by delivering to the Lender and its designee, by telecopy (with original to be sent immediately thereafter by overnight mail) a completed and signed request for an Advance (an "Advance Request") in the form of EXHIBIT "A" attached Page 12 18 hereto and made a part hereof, or (ii) by using the electronic data transmission service provided by the Lender and its licensor, MBMS Incorporated, to transmit to the Lender a request for Advance ("Electronic Request"), which shall include all information required by EXHIBIT "A" through the Warehouse Management System software provided by the Lender and its licensor, MBMS Incorporated. The Lender shall have the right, on not less than three (3) Business Days' prior notice to the Company, to modify the Advance Request, Electronic Request, or any exhibits hereto to conform to current legal requirements or Lender practices, and, as so modified, said Advance Request, Electronic Request or exhibits shall be deemed a part hereof. In consideration of the Lender permitting the Company to make Electronic Requests for Advances utilizing the Warehouse Management System software or Advance Requests by telecopy, the Company covenants and agrees to assume liability for and to protect, indemnify and save the Lender harmless from, any and all liabilities, obligations, damages, penalties, claims, causes of action, costs, charges and expenses, including attorneys' fees and expenses of employees, which may be imposed, incurred by or asserted against the Lender by reason of any loss, damage or claim howsoever arising or incurred because of, out of or in connection with (i) any action of the Lender pursuant to Electronic Requests or Advance Requests by telecopy, (ii) the breach of any provisions of this Agreement by the Company or, willful misconduct or gross negligence (iii) the transfer of funds pursuant to such Electronic Requests or Advance Requests by telecopy. The Lender is entitled to rely upon and act upon Electronic Requests or Advance Requests by telecopy, and the Company shall be unconditionally and absolutely estopped from denying (x) the authenticity and validity of any such transaction so acted upon by the Lender once the Lender has advanced funds and has deposited or transferred such funds as requested in any such Electronic Request or Advance Request by telecopy, and (y) the Company's liability and responsibility therefor. (2) In the case of any Wet Settlement Advances, the Company shall follow the procedures and, at or prior to the Lender's making of such Wet Settlement Advance, shall deliver to the Lender or its designee the documents set forth in Section II of EXHIBIT "C" hereto. In case of Collateral financed through a Wet Settlement Advance, the Company shall cause all Collateral Documents to be delivered to the Lender or its designee within five (5) Business Days after the date of the Wet Settlement Advance relating thereto. (3) Before funding, the Lender and its designee shall have a reasonable time to examine such Advance Request and the Collateral Documents to be delivered prior to such requested Advance, as set forth in the applicable Exhibit hereto, and may reject such of them as do not meet the requirements of this Agreement or of the related Purchase Commitment. The Advance Request and the Collateral Documents must be received by Lender no later than 2:00 p.m. Houston, Texas time in order for funding to occur the same day. Page 13 19 (b) To make an Advance, the Lender shall credit the Funding Account upon compliance by the Company with the terms of this Agreement. 2.3 Note. The Company's obligation to pay the principal of, and interest on, all Advances made by the Lender shall be evidenced by a promissory note (the "Note") of the Company dated as of the date hereof, in form of EXHIBIT "N" hereto. The term "Note" shall include all extensions, renewals and modifications of the Note and all substitutions therefor. All terms and provisions of the Note are hereby incorporated herein. 2.4 Interest. (a) (1) The unpaid amount of each Advance against Mortgage Loans that are not Aged Mortgage Loans shall bear interest from the date of such Advance until paid in full, at a rate of interest equal to the lesser of (i) the Maximum Rate, or (ii) a floating rate of interest (the "Floating Rate") which is equal to 185 basis points (1.85%) per annum over the Monthly Average LIBOR Rate. (2) The unpaid amount of each Advance outstanding against Mortgage Loans that are Aged Mortgage Loans shall bear interest from the date such Mortgage Loans become Aged Mortgage Loans until such Advance is paid in full at a rate of interest equal to the lesser of (i) the Maximum Rate or (ii) a variable rate of interest which is equal to 285 basis points (2.85%) per annum over the Monthly Average LIBOR Rate. (3) Notwithstanding Section 2.4(a)(1) and (2) above to the contrary, the unpaid portion of Advances ("NIB Advances") equal to Net Investable Balances shall bear interest at the following rates in the following priority: (i) First, NIB Advances against Mortgage Loans that are not Aged Mortgage Loans shall bear interest at the rate of 1.85% per annum; and, (ii) Second, the balance, if any, of NIB Advances against Aged Mortgage Loans shall bear interest at the rate of 2.85% per annum. (b) Interest shall be computed on the basis of a 360-day year and applied to the actual number of days elapsed in each interest calculation period and shall be payable monthly in arrears, on the first day of each month, commencing with the first month following the date of this Agreement, and ending on Termination Date. (c) Obligations not paid when due (whether at stated maturity, upon acceleration following the occurrence of an Event of Default or otherwise) shall bear interest, from the date due until paid in full, at a rate of interest ("Default Rate") at all times equal to the lesser of (i) four percent (4%) per annum over the Floating Rate; or (ii) the Maximum Rate, said interest to be payable on demand by Lender. Page 14 20 2.5 Principal Payments. (a) The outstanding unpaid principal amount of all Advances shall be payable in full upon February 2, 2000. (b) The Company shall have the right to prepay the outstanding Advances in whole or in part, from time to time, without premium or penalty, subject to the Company's obligation to pay the Non-Usage Fee pursuant to Section 2.8 hereof. (c) The Company shall be obligated to pay to the Lender, without the necessity of prior demand or notice from the Lender, and the Company authorizes the Lender to charge the Funding Account or any other accounts of the Company (excluding any monies held by Company in trust for third parties) in Lender's possession for the amount of any outstanding Advance against a specific Mortgage Loan, upon the earliest occurrence of any of the following events: (1) The expiration of ninety (90) days from the date of any Advance for any Mortgage Loan (excluding Aged Mortgage Loans); (2) The expiration of thirty (30) days from the date the Mortgage Loan was delivered to an Investor for examination and purchase, without the purchase being made; (3) The expiration of forty-five (45) days from the date Mortgage Loan is delivered to the certificating custodian acceptable to the Lender for the issuance of a Mortgage-backed Security; (4) The expiration of five (5) Business Days from the date a Wet Settlement Advance was made without receipt of all Collateral Documents relating to such Mortgage Loan, or such Collateral Documents, upon examination by the Lender, are found not to be in compliance with the requirements of this Agreement or the related Purchase Commitment; (5) The expiration of fifteen (15) calendar days from the date a Collateral Document in connection with such Mortgage Loan was delivered to the Company for correction or completion, without being returned to the Lender, corrected or completed; (6) The Mortgage Loan is in default and such default continues for a period of sixty (60) days or more; (7) The expiration of five (5) Business Days after the date on which the related Purchase Commitment, if any, expires, is terminated or otherwise canceled or no longer in full force and effect and the specific Mortgage Loan was not delivered under the Purchase Commitment prior to such termination, expiration or cancellation; Page 15 21 (8) Upon sale of the Mortgage Loan. Upon receipt of such payment by the Lender, such Mortgage Loans or Mortgage-backed Securities shall be considered to have been redeemed from pledge, and the Collateral Documents relating thereto which have not been delivered to the Investor or the pool custodian or pool trustee shall be released by the Lender to the Company. (d) With respect to each Aged Mortgage Loan, the Company shall be obligated to pay to the Lender (and the Company authorizes the Lender to charge the Funding Account or any other accounts of the Company [excluding monies held by the Company in trust for third parties] in Lender's possession for the payment thereof), the principal payments in the amounts and on the dates specified below: (1) On the date a Pledged Mortgage becomes an Aged Mortgage Loan, a principal payment in an amount equal to twenty percent (20%) of the outstanding unpaid Advances against such Aged Mortgage Loan; (2) On the date an Aged Mortgage Loan has been included in the Collateral for 120 days (computed from the date it was originally pledged as Collateral), a principal payment in an amount equal to ten percent (10%) of the outstanding unpaid Advances against such Aged Mortgage Loan; (3) On the date an Aged Mortgage Loan has been included in the Collateral for 150 days (computed from the date it was originally pledged as Collateral), a principal payment in an amount equal to ten percent (10%) of the outstanding unpaid Advances made against such Aged Mortgage Loan; (4) On the date an Aged Mortgage Loan has been included in the Collateral for 180 days (computed from the date it was originally pledged as Collateral), an amount equal to the balance of the aggregate outstanding unpaid Advances against such Aged Mortgage Loan. 2.6 Expiration of Commitment. Unless extended or terminated earlier as permitted hereunder, the Commitment shall expire of its own term, and without the necessity of action by the Lender, at the close of business on the Termination Date. However, the remainder of this Agreement shall remain in full force and effect until all amounts due on the Obligations have been paid in full. The Lender has not made, and does not hereby make, any commitment to renew, extend, rearrange or otherwise refinance the outstanding and unpaid principal of the Note or accrued interest thereon. In the event, however, the Lender from time to time renews, extends, rearranges, increases and/or otherwise refinances any portion or all of any Obligation and any accrued interest thereon at any time, such refinancing shall be evidenced by an appropriate promissory note in form and substance satisfactory to the Lender and, unless otherwise noted or modified at such time or times by the terms of such promissory note or any agreements executed in connection therewith, any such promissory note or notes and refinancing evidenced thereby shall be governed in all respects by the terms of this Agreement. Page 16 22 2.7 Method of Making Payments. Except as otherwise specifically provided herein, all payments hereunder shall be made to the Lender not later than the close of business (Houston time) on the date when due unless such date is a non-Business Day, in which case, such payment shall be due on the first Business Day thereafter, and shall be made in lawful money of the United States of America in immediately available funds. 2.8 Non-Usage Fee. At the end of each month during the term of this Agreement (i.e., from its effective date through the Termination Date), the Lender shall determine average usage of the Commitment by calculating the arithmetic daily average of the outstanding balance of Advances in the preceding month. The Lender shall then subtract the average usage (the "Used Portion") from the Commitment (the result being called the "Unused Portion") and the Company shall pay in arrears (without duplication of payment), on or before five (5) days after the later of (a) the end of each month or (b) the Company's receipt of the Lender's bill for such monthly period, a Non-Usage Fee equal to 0.250% per annum on the total amount of the Unused Portion of the Commitment, as compensation to the Lender for its agreement to make the Commitment available to the Company during that month and not as compensation for the use, forbearance or detention of money (i.e., as a "true commitment fee" under Texas law); provided that such fee shall be waived for the first two (2) calendar months following the execution of this Agreement and for any month if the Unused Portion for such month is equal to or less than fifty percent (50%) of the Commitment. Each calculation by the Lender of the amount of any Non-Usage Fee shall be conclusive and binding on the Company, absent manifest error. 2.9 Miscellaneous Charges. At the end of each month during the term of this Agreement, the Company shall pay to the Lender in arrears on or before five (5) days after the later of (a) the end of each calendar month or (b) the Company's receipt of the Lender's bill for such monthly period, a transaction fee equal to $20.00 per Pledged Mortgage held by Lender during such month and for which Lender has not previously received a transaction fee, for the handling and administration of Advances and Collateral. For the purposes hereof, Company shall, at its sole cost and expense, pay all miscellaneous charges and expenses incurred by the Lender in connection with the handling and administration of Advances and Collateral, including, without limitation, all charges for security delivery fees and charges for overnight delivery of Collateral to Investors. Miscellaneous charges are due when incurred, but shall not be delinquent if paid within ten (10) days after receipt of an invoice or an account analysis statement from the Lender. 2.10 Bailee. Lender appoints Company - and Company shall act - as its bailee to (i) hold in trust for Lender (A) the original recorded copy of the mortgage, deed of trust, or trust deed securing each Pledged Mortgage, (B) a mortgagee policy of title insurance (or binding unexpired and unconditional commitment to issue such insurance if the policy has not yet been delivered to Company) insuring the Company's perfected, first priority Lien created by that mortgage, deed of trust, or trust deed, (C) the original insurance policies for each Pledged Mortgage, and (D) all other original documents relating to each Pledged Mortgage, including any promissory notes, any other loan documents, and supporting documentation, surveys, settlement statements, closing instructions, and Mortgage-backed Securities, and (ii) deliver to Lender any of the foregoing items as soon as reasonably practicable upon Lender's request. Page 17 23 3. COLLATERAL. 3.1 Grant of Security Interest. As security for the payment of the Note and for the performance of all of the Company's Obligations hereunder, the Company hereby assigns and transfers all right, title and interest in and to and grants a security interest to the Lender in the following described property, whether now owned or hereafter acquired (the "Collateral"): (a) All Mortgage Loans including all Mortgage Notes and Mortgages evidencing such Mortgage Loans including without limitation all Mortgage Loans in respect of which Wet Settlement Advances have been made by the Lender, which from time to time are delivered or caused to be delivered to the Lender or its designee, come into the possession, custody or control of the Lender for the purpose of assignment or pledge or in respect of which an Advance has been made by the Lender hereunder (the "Pledged Mortgages"). (b) All Mortgage-backed Securities which are from time to time delivered or caused to be delivered to, or are otherwise in the possession of the Lender, or its designee, its agent, bailee or custodian as assignee or pledged to the Lender, or for such purpose are registered by book-entry in the name of the Lender (the "Pledged Securities"). (c) All private mortgage insurance and all commitments issued by the FHA or VA to insure or guarantee any Mortgage Loans included in the Pledged Mortgages; all guaranties related to Pledged Securities; all Purchase Commitments held by the Company covering the Pledged Mortgages or the Pledged Securities and all proceeds resulting from the sale thereof to Investors pursuant thereto; all personal property, contract rights, servicing and servicing fees and income or other proceeds, amounts and payments payable to the Company as compensation or reimbursement, accounts and general intangibles of whatsoever kind relating to the Pledged Mortgages, the Pledged Securities and all other documents or instruments relating to the Pledged Mortgages, the Pledged Securities, including, without limitation, any interest of the Company in any fire, casualty or hazard insurance policies and any awards made by any public body or decreed by any court of competent jurisdiction for a taking or for degradation of value in any eminent domain proceeding as the same relate to the Pledged Mortgages. (d) All right, title and interest of the Company in and to all escrow accounts, documents, instruments, files, surveys, certificates, correspondence, appraisals, computer programs, tapes, discs, cards, accounting records (including all information, records, tapes, data, programs, discs and cards necessary or helpful in the administration or servicing of the foregoing Collateral) and other information and data of the Company relating to the foregoing Collateral. (e) All now existing or hereafter acquired cash delivered to or otherwise in the possession of the Lender or its agent, bailee or custodian or designated on the books and records of the Company as assigned and pledged to the Lender. Page 18 24 (f) All cash and non-cash proceeds of the foregoing Collateral, including all dividends, distributions and other rights in connection with, and all additions to, modifications of and replacements for, the foregoing Collateral, and all products and proceeds of the foregoing Collateral, together with whatever is receivable or received when the foregoing Collateral or proceeds thereof are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, including, without limitation, all rights to payment with respect to any cause of action affecting or relating to the foregoing Collateral or proceeds thereof. 3.2 Security Interest in Mortgage-backed Securities. The Company's ability to convert Mortgage Loans that are within the Collateral to Mortgage-backed Securities are subject to the following conditions: (a) Pledged Mortgages that are to be transferred to a pool custodian in connection with the issuance of Mortgage-backed Securities, shall be released from the Lender's security interest only against payment to the Lender of the amount due the Lender in connection with such Pledged Mortgages as determined in accordance with Section 3.5 of this Agreement or against the issuance of such Mortgage-backed Securities and the continuation of the Lender's first priority, perfected security interest in such Mortgage-backed Securities and the proceeds thereof until payment due the Lender in respect of said Pledged Mortgages is made to the Lender. (b) In the case of Mortgage-backed Securities created from Pledged Mortgages, the Lender shall have the exclusive right to the possession of the Mortgage-backed Securities or, if the Mortgage-backed Securities are not to be issued in certificated form, shall have the right to have the book entries for the Mortgage-backed Securities issued in the Lender's name or the name or names of its designees. Lender shall cause delivery of the Mortgage-backed Securities to be made to the Investor or the book entries registered in the name of the Investor or the Investor's designee only against payment therefor. The Company acknowledges that the Lender may enter into one or more standing arrangements with other financial institutions for the issuance of Mortgage-backed Securities in book entry form in the name of such other financial institutions, as agent for the Lender, and the Company agrees upon request of the Lender, to execute and deliver to such other financial institutions the Company's written concurrence in any such standing arrangements. 3.3 Delivery of Collateral Documents. The Lender or its designee exclusively shall deliver Pledged Mortgages or Pledged Securities to (a) an Investor that has issued a Purchase Commitment with respect thereto for its examination and purchase, or (b) an Approved Custodian for purposes of examination or delivery in connection with the issuance of Mortgage-backed Securities. In such cases where the Lender must deliver documents to an Investor or Approved Custodian, the Lender must receive signed shipping instructions (in the form of EXHIBIT "D" attached hereto), no later than 2:00 p.m. Houston, Texas time one (1) Business Day prior to the expiration of the appended Purchase Commitment, in addition to any other documents listed in Section III of EXHIBIT "C" in respect of the issuance of Mortgage-backed Securities. If shipping instructions are received by Lender before 2:00 p.m. Houston, Texas time of any Business Day, Page 19 25 Lender will ship the documents together with the Bailee Letter (in form of EXHIBIT "K") to the Investor or Approved Custodian on the same Business Day, otherwise Lender will ship the documents the next Business Day following receipt of shipping instructions. In any case in which an Advance has been made hereunder against Pledged Mortgages, based on the existence of a Purchase Commitment covering such Pledged Mortgages, the Company agrees that such Pledged Mortgages will not be placed in any mortgage pool other than an Eligible Mortgage Pool, unless such Pledged Mortgages have been redeemed from pledge as permitted hereunder or other arrangements, satisfactory to the Lender in its sole discretion, have been made for the redemption of such Pledged Mortgages from pledge hereunder. The Lender may deliver any document relating to the Collateral to the Company for correction or completion against a trust receipt in the form of EXHIBIT "E" attached hereto executed by the Company. The Company hereby represents and warrants to and agrees with the Lender that any request by the Company for release of the Collateral consisting of or relating to Mortgage Loans to the Company shall be solely for the purposes of correcting clerical or non-substantial documentation problems in preparation for returning such Collateral to the Lender for ultimate sale or exchange and the aggregate Collateral Value of the Collateral released to the Company pursuant to this Section 3.3 will not exceed $500,000.00; the Company shall request such release in compliance with all of the terms and conditions of such release set forth herein; and the Company will return to the Lender such documentation released to the Company pursuant to this Section 3.3 within ten (10) calendar days after such delivery. 3.4 Delivery of Additional Collateral or Mandatory Prepayment. At any time that the aggregate Collateral Value of the Collateral then pledged hereunder is less than the aggregate amount of the Advances then outstanding hereunder, the Lender may request, and the Company shall within two (2) Business Days after Notice by the Lender (a) deliver to the Lender or its designee for pledge hereunder additional Mortgage Loans and/or cash, in aggregate amounts sufficient to cover the difference between the Collateral Value of the Collateral pledged and the aggregate amount of Advances outstanding hereunder, or (b) repay the Advances in an amount sufficient to reduce the aggregate balance thereof outstanding to an amount equal to or below the Collateral Value of the Collateral pledged hereunder. 3.5 Right of Redemption from Pledge. So long as no Event of Default has occurred the Company may redeem a Mortgage Loan or, Mortgage-backed Security, by notifying the Lender of its intention to redeem such Mortgage Loan or Mortgage-backed Security, from pledge and by paying, or causing an Investor to pay, to the Lender, for application to prepayment of the principal balance of the Note, an amount (the "Redemption Amount") equal to the amount of the Advance made with respect to or relating to such Mortgage Loan or Mortgage-backed Security. 3.6 Collection and Servicing Rights. So long as no Event of Default shall have occurred, the Company shall be entitled to service and receive and collect directly all sums payable to the Company in respect of the Collateral other than proceeds of any Purchase Commitment or proceeds of the sale of any Collateral unless deposited to funding account. Following the occurrence of any Event of Default the Lender or its designee shall thereafter be entitled to service and receive and collect all sums payable to the Company in respect of the Collateral, and in such case (a) the Lender or its designee in its discretion may, in its own name or in the name of the Company or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on Page 20 26 account of or in exchange for any of the Collateral, but shall be under no obligation to do so, (b) the Company shall, if the Lender so requests, forthwith pay to the Lender at its principal office all amounts thereafter received by the Company upon or in respect of any of the Collateral, advising the Lender as to the source of such funds, and (c) all amounts so received and collected by the Lender shall be held by it as part of the Collateral. 3.7 Return or Release of Collateral at End of Commitment. If (a) the Commitment shall have expired or been terminated, and (b) no Advances, interest or other Obligations evidenced by the Loan Documents or due under this Agreement shall be outstanding and unpaid, the Lender shall deliver or release all Collateral in its possession to the Company. The receipt of the Company for any Collateral released or delivered to the Company pursuant to any provision of this Agreement shall be a complete and full acquittance for the Collateral so returned, and the Lender shall thereafter be discharged from any liability or responsibility therefor. 3.8 Master Repurchase Agreement. If the Lender purchases any Pledged Mortgages under the Master Repurchase Agreement, the Purchase Price to be paid by the Lender for such Pledged Mortgage under the Master Repurchase Agreement shall be credited against the Note in an amount equal to the outstanding Advance made against such Pledged Mortgage and the balance of the Purchase Price after such application, if any, shall be paid to the Company. Any Pledged Mortgage shall be eligible for purchase by Lender under the Master Repurchase Agreement following delivery of such Pledged Mortgage to the Investor. 4. CONDITIONS PRECEDENT. 4.1 Initial Advance. The obligation of the Lender to make the initial Advance under this Agreement is subject to the satisfaction, in the sole discretion of the Lender, on or before the date thereof, of the following conditions precedent: (a) The Lender shall have received the following, all of which must be satisfactory in form and content to the Lender, in its sole discretion: (1) The Loan Documents dated as of the date hereof duly executed by the Company; (2) Certified copies of the Company's articles of incorporation and bylaws and certificates of good standing dated no less recently than ninety (90) days prior to the date of this Agreement and a certification from the taxing authority of the state of incorporation stating that the Company is in good standing with said taxing authority; (3) An original resolution of the board of directors of the Company, certified as of the date of this Agreement by its corporate secretary, authorizing the execution, delivery and performance of this Agreement and the other Loan Page 21 27 Documents, and all other instruments or documents to be delivered by the Company pursuant to this Agreement; (4) A certificate (in the form of EXHIBIT "J") of the Company's corporate secretary as to the resolution of the board of directors of the Company authorizing the execution, delivery and performance of this Agreement and the other Loan Documents and the incumbency and authenticity of the signatures of the officers of the Company executing this Agreement and the other Loan Documents and each Advance Request and all other instruments or documents to be delivered pursuant hereto (the Lender being entitled to rely thereon until a new such certificate has been furnished to the Lender); (5) Financial statements of the Company (and its Subsidiaries, on a consolidated basis) containing a balance sheet as of September 30, 1998 (the "Statement Date") and related statements of income, changes in stockholders' equity and cash flows for the period ended on the Statement Date and a balance sheet as of December 31, 1998 ("Interim Date") and related statement of income for the period ended on the Interim Date, all prepared in accordance with GAAP applied on a basis consistent with prior periods and in the case of the statements as of the Statement Date, audited by independent certified public accountants of recognized standing acceptable to the Lender; (6) A favorable written opinion of counsel to the Company, dated as of the date of this Agreement, to be in substantially the form of EXHIBIT "M" hereto, and addressed to the Lender; (7) A tax, lien and judgment search of the appropriate public records for the Company, including a search of Uniform Commercial Code financing statements, which search shall not have disclosed the existence of any prior Lien on the Collateral other than in favor of the Lender or as permitted hereunder; (8) Copies of the certificates, documents or other written instruments which evidence the Company's eligibility described in Section 5.11 hereof, all in form and substance satisfactory to the Lender; (9) Copies of the Company's errors and omissions insurance policy or mortgage impairment insurance policy and blanket bond coverage policy, all in form and content satisfactory to the Lender, showing compliance by the Company as of the date of this Agreement with the related provisions of Section 6.8 hereof and showing Lender as an additional loss payee on such policies; (10) Executed financing statements in recordable form covering the Collateral and ready for filing in all jurisdictions required by the Lender; Page 22 28 (11) Evidence that the Funding Account has been established with the Lender. 4.2 Each Advance. The obligation of the Lender to make the initial and each subsequent Advance under this Agreement is subject to the satisfaction, in the sole discretion of the Lender, as of the date of each such Advance, of the following additional conditions precedent: (a) In connection with an Advance, the Company shall have delivered to the Lender the Advance Request or the Electronic Request, Collateral Documents, and documents required under and shall have satisfied the procedures set forth in Section 2.2 and EXHIBIT "C", according to the type of Collateral to be financed through the requested Advance. All items delivered to the Lender or its designee shall be satisfactory to the Lender in form and content, and the Lender may reject such of them as do not meet the requirements of this Agreement or of the related Purchase Commitment. (b) The Lender shall have received evidence satisfactory to it as to the making and/or continuation of any book entry or the due filing and recording in all appropriate offices of all financing statements and other instruments as may be necessary to perfect the security interest of the Lender in the Collateral under the Uniform Commercial Code of Texas or other applicable law. (c) The representations and warranties of the Company contained in Article 5 hereof shall be accurate and complete in all material respects as if made on and as of the date of each Advance. (d) The Company shall have performed all agreements to be performed by it hereunder, including without limitation, the payment of all Non-Usage Fees when due hereunder, and, as of the date of the Advance Request, and after giving effect to the requested Advance, there shall exist no Default or Event of Default hereunder. (e) The Company shall not have incurred any material liabilities, direct or contingent, except as approved by Lender pursuant to Section 7.16, since the dates of the Company's most recent financial statements theretofore delivered to the Lender. (f) The Lender shall have received from counsel for the Company, if requested by the Lender in its sole discretion, an updated opinion, in form and substance satisfactory to the Lender, addressed to the Lender and dated as of the date of such Advance, covering such of the matters as the Lender may reasonably request. (g) Such additional documents, instruments, and information as Lender or its legal counsel may require. Acceptance of the proceeds of the requested Advance by the Company shall be deemed a representation by the Company that all conditions set forth in this Article 4 shall have been satisfied as of the date of such Advance. Page 23 29 5. REPRESENTATIONS AND WARRANTIES. The Company hereby represents and warrants to the Lender, as of the date of this Agreement and (unless otherwise notified in writing by the Company and Lender, in its sole discretion, approves in writing) as of the date of each Advance Request and the making of each Advance, that: 5.1 Organization; Good Standing; Subsidiaries. The Company and each Subsidiary of the Company is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, has the full legal power and authority to own its property and to carry on its business as currently conducted and is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction in which the transaction of its business makes such qualification necessary, except in jurisdictions, if any, where a failure to be in good standing has no material adverse effect on the business, operations, assets or financial condition of the Company or any such Subsidiary. For the purposes hereof, good standing shall include qualification for any and all licenses and payment of any and all taxes required in the jurisdiction of its incorporation and in each jurisdiction in which the Company transacts business. The Company has no Subsidiaries except as set forth on EXHIBIT "F" hereto. EXHIBIT "F" sets forth with respect to each such Subsidiary, its name, address, place of incorporation, each state in which it is qualified as a foreign corporation, and the percentage ownership of the Company in such Subsidiary. 5.2 Authorization and Enforceability. The Company has all requisite corporate power and authority to execute, deliver, create, issue, comply and perform this Agreement, the Note and all other Loan Documents to which the Company is party and to make the borrowings hereunder. The execution, delivery and performance by the Company of this Agreement, the Note and all other Loan Documents to which the Company is party and the making of the borrowings hereunder and thereunder, have been duly and validly authorized by all necessary corporate action on the part of the Company (none of which actions has been modified or rescinded, and all of which actions are in full force and effect) and do not and will not conflict with or violate any provision of the articles of incorporation or by-laws of the Company, conflict with or result in a breach of or constitute a default or require any consent under any contracts to which Company is a party, or result in the creation of any Lien upon any property or assets of the Company other than the Lien on the Collateral granted hereunder, or result in or require the acceleration of any Indebtedness of the Company pursuant to any agreement, instrument or indenture to which the Company is a party or by which the Company or its property may be bound or affected, or to the Company's knowledge, materially violate any provision of law applicable to the Company. This Agreement, the Note and all other Loan Documents contemplated hereby or thereby constitute legal, valid, and binding obligations of the Company, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or other such laws affecting the enforcement of creditors' rights generally. 5.3 Financial Condition. The balance sheet of the Company provided to Lender pursuant to Section 4.1(a)(5) hereof (and if applicable, its Subsidiaries, on a consolidating and consolidated basis) as at the Statement Date, and the related statements of income, changes in stockholders' equity, and cash flows for the fiscal year ended on Page 24 30 the Statement Date, heretofore furnished to the Lender, fairly present the financial condition of the Company and its Subsidiaries as at the Statement Date and the Interim Date and the results of its and their operations for the fiscal period ended on the Statement Date and the Interim Date. The Company had, on the Statement Date and the Interim Date, no known material liabilities, direct or indirect, fixed or contingent, matured or unmatured, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements, and at the present time there are no material unrealized or anticipated losses from any loans, advances or other commitments of the Company except as heretofore disclosed to the Lender in writing. Said financial statements were prepared in accordance with GAAP applied on a consistent basis throughout the periods involved. Since the Statement Date, there has been no material adverse change in the business, operations, assets or financial condition of the Company or its Subsidiaries, nor is the Company aware of any state of facts particular to the Company which (with or without notice or lapse of time or both) would or could result in any such material adverse change. 5.4 Litigation. Except as disclosed on EXHIBIT "H", there are no actions, claims, suits or proceedings pending, or to the knowledge of the Company, threatened or reasonably anticipated against or affecting the Company or any Subsidiary of the Company in any court or before any arbitrator or before any government commission, board, bureau or other administrative agency which, if adversely determined, may reasonably be expected to result in any material and adverse change in the business, operations, assets or financial condition of the Company or any of Company's Subsidiaries, as a whole. 5.5 Compliance with Laws. To the knowledge of Company, neither the Company nor any Subsidiary of the Company is in violation of any provision of any law, or of any judgment, award, rule, regulation, order, decree, writ or injunction of any court or public regulatory body or authority which might have a material adverse effect on the business, operations, assets or financial condition of the Company or any of Company's Subsidiaries, as a whole. 5.6 Regulation U. The Company is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any Advances made hereunder will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. 5.7 Investment Company Act. Neither the Company nor any of its Subsidiaries is an "investment company" or controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 5.8 Agreements. Neither the Company nor any Subsidiary of the Company is a party to any agreement, instrument or indenture, or subject to any restriction, materially and adversely affecting its business, operations, assets or financial condition, except as disclosed in the financial statements described in Section 5.3 hereof. The Company and each Subsidiary of the Company are not in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement, instrument, or indenture which default could have a material adverse effect on the business, operations, properties or financial condition of the Company as a whole. No holder of any Indebtedness of the Company or of any of its Subsidiaries has given notice Page 25 31 of any alleged default thereunder or, if given, the same has been cured or will be cured by Company within the cure period provided therein, and no liquidation or dissolution of the Company or any of its Subsidiaries and no receivership, insolvency, bankruptcy, reorganization or other similar proceedings relative to the Company or any of its Subsidiaries or any of their respective properties is pending, or to the knowledge of the Company, threatened. 5.9 Title to Properties. The Company and each Subsidiary of the Company has good, valid, insurable (in the case of real property) and marketable title to all of its properties and assets (whether real or personal, tangible or intangible) reflected on the financial statements described in Section 5.3 hereof, and all such properties and assets are free and clear of all Liens except as disclosed in such financial statements and not prohibited under this Agreement. 5.10 ERISA. All plans ("Plans") of a type described in Section 3(3) of ERISA in respect of which the Company or any Subsidiary of the Company is an "Employer," as defined in Section 3(5) of ERISA, are in substantial compliance with ERISA, and none of such Plans is insolvent or in reorganization, has an accumulated or waived funding deficiency within the meaning of Section 412 of the Internal Revenue Code, and neither the Company nor any Subsidiary of the Company has incurred any material liability (including any material contingent liability) to or on account of any such Plan pursuant to Sections 4062, 4063, 4064, 4201 or 4204 of ERISA; and no proceedings have been instituted to terminate any such Plan, and no condition exists which presents a material risk to the Company or a Subsidiary of the Company of incurring a liability to or on account of any such Plan pursuant to any of the foregoing Sections of ERISA. No Plan or trust forming a part thereof has been terminated since December 1, 1974. 5.11 Eligibility. The Company has all requisite corporate power and authority to carry on its business as now conducted. The Company has all necessary licenses, permits, franchises and all other authorizations to own its property and to carry on its business as now conducted, except where the failure to have such licenses, permits, franchises, and other authorizations has no material adverse effect on the business operations, assets or financial condition of the Company or any Subsidiary of Company. If approved now or hereafter as a lender or seller/servicer for any one or more of the governmental agencies as set forth below, the Company will remain at all times approved and qualified and in good standing and meet all requirements applicable to such status: (a) FNMA approved seller/servicer of Mortgage Loans, eligible to originate, purchase, hold, sell, and service Mortgage Loans to be sold to FNMA. (b) FHLMC approved seller/servicer of Mortgage Loans, eligible to originate, purchase, hold, sell, and service Mortgage Loans to be sold to FHLMC. (c) GNMA approved seller/servicer of Mortgage Loans, eligible to originate, purchase, hold, sell, and service Mortgage Loans to be sold to GNMA. (d) HUD approved lender, eligible to originate, purchase, hold, sell and service FHA-insured Mortgage Loans. Page 26 32 (e) VA lender in good standing under the VA loan guarantee program eligible to originate, purchase, hold, sell, and service VA-guaranteed Mortgage Loans. 5.12 Special Representations Concerning Collateral. The Company hereby represents and warrants to the Lender, as of the date of this Agreement and as of the date of each Advance, that: (a) The Company is the legal and equitable owner and holder, free and clear of all Liens (other than Liens granted hereunder), of the Pledged Mortgages and the Pledged Securities. All Pledged Mortgages, Pledged Securities, and Purchase Commitments have been duly authorized and validly granted or issued to the Company, and all of the foregoing items of Collateral comply with all of the requirements of this Agreement, and have been validly pledged or assigned to the Lender, subject to no other Liens. (b) The Company has, and will continue to have, the full right, power and authority to pledge the Collateral pledged and to be pledged by it hereunder. (c) Any Mortgage Loan and related documents included in the Pledged Mortgages (1) as of the date of the Advance Request for such Mortgage Loan, has been duly executed and delivered by the parties thereto at a closing held not more than sixty (60) days prior to such date; (2) has been made in compliance with all requirements of the Real Estate Settlement Procedures Act, Equal Credit Opportunity Act, the federal Truth-In-Lending Act and all other applicable laws and regulations; (3) is valid and enforceable in accordance with its terms, without defense or offset; (4) has not been modified or amended except in writing, which writing is part of the Collateral Documents, nor any requirements thereof waived; and (5) complies with the terms of this Agreement and, if applicable, with the related Purchase Commitment held by the Company. Each Mortgage Loan has been fully advanced in the face amount thereof and each Mortgage creates a Lien on the premises described therein. (d) No monetary default, nor, to the knowledge of the Company, any event which, with notice or lapse of time or both, would become a default, has occurred and is continuing under any Mortgage Loan included in the Pledged Mortgages; provided, however, that, with respect to Pledged Mortgages which have already been pledged as Collateral hereunder, if any such default or event has occurred, the Company will promptly notify the Lender and the same shall not have continued for more than sixty (60) days. (e) The Company has complied with all laws, rules and regulations in respect of the FHA insurance or VA guarantee of each Mortgage Loan included in the Pledged Mortgages designated by the Company as an FHA insured or VA guaranteed Mortgage Loans, and such insurance or guarantee is in full force and effect. All such FHA insured and VA guaranteed Mortgage Loans comply in all respects with all applicable requirements for purchase under the FNMA standard form of selling contract for FHA insured and VA guaranteed loans and any supplement thereto then in effect. (f) All fire and casualty policies covering Mortgaged Property encumbered by a Pledged Mortgage (1) name the Company and its successors and assigns as the insured Page 27 33 under a standard mortgagee clause, (2) are and will continue to be in full force and effect, and (3) afford and will continue to afford insurance against fire and such other risks as are usually insured against in the broad form of extended coverage insurance from time to time available, as well as insurance against flood hazards if the same is required by FHA or VA. (g) Pledged Mortgages encumbering Mortgaged Property located in a special flood hazard area designated as such by the Secretary of HUD are and shall continue to be covered by special flood insurance under the National Flood Insurance Program. (h) Each FHA insured Mortgage Loan pledged hereunder meets all applicable governmental requirements for such insurance. Each Mortgage Loan, against which an Advance is made on the basis of a Purchase Commitment meets all requirements of such Purchase Commitment. The Company shall assure that Mortgage Loans pledged pursuant to this Agreement and intended to be used in the formation of Mortgage-backed Securities shall comply, or prior to the formation of any such Mortgage-backed Security, shall comply with the requirements of the governmental instrumentality, department or agency guaranteeing such Mortgage-backed Security. (i) For Pledged Mortgages which will be used to secure GNMA Mortgage-backed Securities, the Company has received from GNMA a Confirmation Notice or Confirmation Notices for Request Additional Commitment Authority and for Request Pool Numbers, and there remains available thereunder a commitment on the part of GNMA sufficient to permit the issuance of GNMA Mortgage-backed Securities in an amount at least equal to the amount of such Pledged Mortgages designated by the Company as the Mortgage Loans to be used to secure such GNMA Mortgage-backed Securities; each such Confirmation Notice is in full force and effect; each of such Pledged Mortgages has been assigned by the Company to one of such Pool Numbers and a portion of the available GNMA Commitment has been allocated thereto by the Company, in an amount at least equal to the principal amount of each Mortgage Note secured by such Pledged Mortgages; and each such assignment and allocation has been reflected in the books and records of the Company. (j) Each Pledged Mortgage in excess of $250,000.00 is supported by an appraisal that meets the appraisal requirements of FNMA or FHLMC (in the case of residential Mortgaged Property), or the Office of Thrift Supervision for the type of Mortgaged Property securing that Pledged Mortgage; or, alternatively, such Pledged Mortgage is eligible for purchase or is guaranteed or insured by a U.S. Government agency or a U.S. Government sponsored enterprise. 5.13 RICO. The Company is not in violation of any laws, statutes or regulations, including, without limitation, RICO, which contain provisions which could potentially override Lender's security interest in the Collateral. 5.14 Proper Names. The Company does not operate in any jurisdiction under a trade name, division, division name or name other than those names set forth on EXHIBIT "I" attached Page 28 34 hereto and all such names included on EXHIBIT "I" are utilized by the Company only in the jurisdictions listed therein. 5.15 Direct Benefit From Loans. The Company has received, or, upon the execution and funding thereof, will receive (a) direct benefit from the making and execution of this Agreement and the other Loan Documents to which it is a party, and (b) fair and independent consideration for the entry into, and performance of, this Agreement and the other Loan Documents to which it is a party. Contemporaneously with the disbursements of each Advance by the Lender to the Company, all such proceeds will be used to finance the origination or purchase of Mortgage Loans. 5.16 Loan Documents Do Not Violate Other Documents. Neither the execution and delivery by the Company of this Agreement or any other Loan Document to which it is a party nor the consummation of the transactions herein and therein contemplated, nor the performance of, or compliance with, the terms and provisions hereof and thereof, does or will contravene, breach or conflict with any provision of either of its articles of incorporation or by-laws, or, to its knowledge, any applicable law, statute, rule or regulation or any judgment, decree, writ, injunction, franchise, order or permit applicable to the Company or its assets or properties, or does or will conflict or be inconsistent with, or does or will result in any breach or default of, any of the terms, covenants, conditions or provisions of, or constitute a default under, or result in the creation or imposition of any Lien upon any of the property or assets of the Company pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, or other instrument to which the Company is a party or by which the Company or any of its property may be bound, the contravention, conflict, inconsistency, breach or default of which will have a materially adverse effect on the Company's condition, financial or otherwise, or affect its ability to perform, promptly and fully, its obligations hereunder or under any of the other Loan Documents. 5.17 Consents Not Required. Except for those consents that have already been obtained and delivered to Lender or required as a condition to any Advance hereunder, no consent of any Person and no consent, license, permit, approval, or authorization of, exemption by, or registration or declaration with, any Tribunal is required in connection with the execution, delivery, performance, validity, or enforceability of this Agreement or any of the Loan Documents by the Company. 5.18 Material Fact Representations. Neither the Loan Documents nor any other agreement, document, certificate, or written statement furnished to the Lender by or on behalf of the Company in connection with the transactions contemplated in any of the Loan Documents contains any untrue statement of a material adverse fact. There are no material adverse facts or conditions relating to the making of the Commitment, any of the Collateral, and/or the financial condition and business of the Company known to the Company which have not been fully disclosed, in writing, to the Lender, it being understood that this representation is made as of, and shall be limited to the date of this Agreement. All writings heretofore or hereafter exhibited or delivered to the Lender by or on behalf of the Company are and will be genuine and what they purport to be. 5.19 Place of Business. The principal place of business of the Company is 5875 Arnold Road, Dublin, California 94568, and the chief executive office of the Company and the office where Page 29 35 it keeps its financial books and records relating to its property and all contracts relating thereto and all accounts arising therefrom is located at the address set forth for the Company in Section 9 hereof. 5.20 Use of Proceeds; Business Loans. The Company will use the proceeds of the Advances made pursuant to the Commitment solely as follows, and for no other purpose: finance the origination and purchase of Mortgage Loans. All loans evidenced by the Note are and shall be "business loans", as such term is used in the Depository Institutions Deregulation and Monetary Control Act of 1980, as amended, and such loans are for business or commercial purposes and not primarily for personal, family, household or agricultural use, as such terms are used or defined in Texas Revised Civil Statutes, Texas Credit Title, Regulation Z promulgated by the Board of Governors of the Federal Reserve System, and Titles I and V of the Consumer Credit Protection Act. The provisions of the Texas Credit Title which regulate revolving loans and revolving triparty accounts) shall not apply to this Agreement. 5.21 No Undisclosed Liabilities. Other than as permitted in Section 7.16 hereof and as disclosed in the financial statements delivered to Lender prior to the date hereof, the Company does not have any liabilities or Indebtedness, direct or contingent, except for liabilities or Indebtedness which, in the aggregate, do not exceed $25,000.00. 5.22 Tax Returns and Payments. All federal, state and local income, excise, property and other tax returns required to be filed with respect to Company's operations and those of its Subsidiaries in any jurisdiction have been filed on or before the due date thereof (plus any applicable extensions); all such returns are true and correct; all taxes, assessments, fees and other governmental charges upon the Company, and Company's Subsidiaries and upon its property, income or franchises, which are due and payable have been paid, including, without limitation, all FICA payments and withholding taxes, if appropriate, other than those which are being contested in good faith by appropriate proceedings, diligently pursued and as to which the Company has established adequate reserves determined in accordance with GAAP, consistently applied. The amounts reserved, as a liability for income and other taxes payable, in the financial statements described in Section 5.3 hereof are sufficient for payment of all unpaid federal, state and local income, excise, property and other taxes, whether or not disputed, of the Company and its Subsidiaries, accrued for or applicable to the period and on the dates of such financial statements and all years and periods prior thereto and for which the Company, and Company's Subsidiaries may be liable in their own right or as transferee of the assets of, or as successor to, any other Person. 5.23 Subsidiaries. The Company has not issued, and does not have outstanding, any warrants, options, rights or other obligations to issue or purchase any shares of its capital stock or other securities. The outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable. All of Company's Subsidiaries are listed on EXHIBIT "H", attached hereto. 5.24 Holding Company. The Company is not a "holding company" or a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. Page 30 36 5.25 Year 2000 Issue. The Company and its Subsidiaries are in the process of reviewing the effect of the year 2000 Issue on the computer software, hardware, and firmware systems and equipment containing embedded microchips owned or operated by or for the Company and its Subsidiaries or used or relied upon in the conduct of their business (including systems and equipment supplied by others or with which such computer systems of the Company and its Subsidiaries interface if the failure of such systems would have a material adverse effect on the operations of the Company or its Subsidiaries ). The Company and its Subsidiaries currently do not believe that the costs to the Company and its Subsidiaries of any reprogramming required as a result of the Year 2000 Issue to permit the proper functioning of such systems and equipment and the proper processing of data, and the testing of such reprogramming, and of the reasonably foreseeable consequences of the year 2000 Issue to the Company or any of its Subsidiaries (including reprogramming errors and the failure of systems or equipment supplied by others if the failure of such systems would have a material adverse effect on the operations of the Company or its Subsidiaries), are not reasonably expected to result in a Default or Event of Default or to have a material adverse effect on the business, assets, operations, prospects, or condition (financial or otherwise) of the Company or its Subsidiaries. 6. AFFIRMATIVE COVENANTS. The Company hereby covenants and agrees that, so long as the Commitment is outstanding or there remain any Obligations of the Company to be paid or performed under this Agreement or under any other Loan Document, the Company shall: 6.1 Payment of Note. Punctually pay or cause to be paid the principal of, interest on and all other amounts payable hereunder and under the Note in accordance with the terms thereof. 6.2 Financial Statements and Other Reports. Deliver to the Lender: (a) As soon as available and in any event within thirty (30) days after the end of each calendar month, statements of income and changes in stockholders' equity and cash flow of the Company and, if applicable, Company's Subsidiaries, on a consolidated and consolidating basis for the immediately preceding month, and related balance sheet as at the end of the immediately preceding month, all in reasonable detail, prepared in accordance with GAAP applied on a consistent basis, and certified as to the fairness of presentation by the president or chief financial officer of the Company, subject, however, to year-end audit adjustments. (b) As soon as available and in any event within ninety (90) days after the close of each fiscal year: statements of income, changes in stockholders' equity and cash flows of the Company, and, if applicable, Company's Subsidiaries, on a consolidated and consolidating basis for such year, the related balance sheet as at the end of such year (setting forth in comparative form the corresponding figures for the preceding fiscal year), all in reasonable detail, prepared in accordance with GAAP applied on a consistent basis throughout the periods involved, and accompanied by an opinion in form and substance satisfactory to the Lender and prepared by an accounting firm reasonably satisfactory to the Page 31 37 Lender, or other independent certified public accountants of recognized standing selected by the Company and acceptable to the Lender, as to said financial statements and a certificate signed by the president or chief financial officer of the Company stating that said financial statements fairly present the financial condition and results of operations of the Company and, if applicable, Company's Subsidiaries as at the end of, and for, such year. (c) Together with each delivery of financial statements required in this Section 6.2, an Officer's Certificate in substantially the form of EXHIBIT "F" hereto. (d) Reports in respect of the Pledged Mortgages and Pledged Securities, in such detail and at such times as the Lender in its discretion may request at any time or from time to time, including, without limitation, a monthly pipeline report in form satisfactory to Lender, to be delivered with the monthly financial statements required in Section 6.2(a). (e) Copies of all regular or periodic financial and other reports, if any, which the Company shall file with the Securities and Exchange Commission or any governmental agency successor thereto and copies of any audits completed by GNMA, FHLMC, or FNMA. Copies of the Mortgage Bankers' Financial Reporting Forms (FNMA Form 1002) which the Company shall have filed with FNMA. (f) From time to time, with reasonable promptness, such further information regarding the business, operations, properties or financial condition of the Company as the Lender may reasonably request. 6.3 Maintenance of Existence; Conduct of Business. Preserve and maintain its corporate existence in good standing and all of its rights, privileges, licenses and franchises necessary in the normal conduct of its business, including, without limitation, its eligibility as lender, seller/servicer and issuer described under Section 5.11 hereof; conduct its business in an orderly and efficient manner; maintain a net worth of acceptable assets as required by HUD at any and all times for maintaining the Company's status as a FHA approved mortgagee; and make no material change in the nature or character of its business or engage in any business in which it was not engaged on the date of this Agreement. 6.4 Compliance with Applicable Laws. Comply with the requirements of all applicable laws, rules, regulations and orders of any governmental authority, a breach of which could materially adversely affect its business, operations, assets, or financial condition, except where contested in good faith and by appropriate proceedings, and with sufficient reserves established therefor. 6.5 Inspection of Properties and Books. Permit authorized representatives of the Lender to (a) discuss the business, operations, assets and financial condition of the Company and Company's Subsidiaries with their officers and employees and to examine their books of account, records, reports and other papers and make copies or extracts thereof, and (b) inspect all of the Company's property and all related information and reports at Lender's expense, all at such reasonable times as the Lender may request. The Company will provide its accountants with a copy of this Agreement promptly after the execution hereof and will instruct its accountants to answer candidly any and all Page 32 38 questions that the officers of the Lender or any authorized representatives of the Lender may address to them in reference to the financial condition or affairs of the Company and Company's Subsidiaries. The Company may have its representatives in attendance at any meetings between the officers or other representatives of the Lender and the Company accountants held in accordance with this authorization. 6.6 Notice. Give prompt written notice to the Lender of (a) any action, suit or proceeding instituted by or against the Company or any of its Subsidiaries in any federal or state court or before any commission or other regulatory body (federal, state or local, domestic or foreign) which action, suit or proceeding has at issue in excess of Seventy-Five Thousand Dollars ($75,000.00) (except for normal collection and foreclosure proceedings initiated by the Company in connection with a Mortgage Loan or any other mortgage loan), or any such proceedings threatened against the Company, or any of Company's Subsidiaries in writing containing the details thereof, (b) the filing, recording or assessment of any federal, state or local tax Lien against it, or any of its assets or any of its Subsidiaries, (c) the occurrence of any Event of Default hereunder or the occurrence of any Default and continuation thereof for five (5) days, (d) the suspension, revocation or termination of the Company's eligibility, in any respect, as approved lender, seller/servicer or issuer as described under Section 5.11 hereof, (e) the transfer, loss or termination of any Servicing Contract to which the Company is a party, or which is held for the benefit of the Company, and the reason for such transfer, loss or termination, if known to the Company, and (f) any other action, event or condition of any nature which may lead to or result in a material adverse effect upon the business, operations, assets, or financial condition of the Company or Company's Subsidiaries or which, with or without notice or lapse of time or both, would constitute a default under any other agreement instrument or indenture to which the Company is a party or to which the Company its properties or assets may be subject. 6.7 Payment of Debt, Taxes, etc. Pay and perform all obligations and Indebtedness of the Company, and cause to be paid and performed all obligations and Indebtedness of its Subsidiaries in accordance with the terms thereof and pay and discharge or cause to be paid and discharged all taxes, assessments and governmental charges or levies imposed upon the Company or its Subsidiaries, or upon their respective income, receipts or properties before the same shall become past due, as well as all lawful claims for labor, materials and supplies or otherwise which, if unpaid, might become a Lien or charge upon such properties or any part thereof; provided, however, that the Company and its Subsidiaries shall not be required to pay obligation, Indebtedness, taxes, assessments or governmental charges or levies or claims for labor, materials or supplies for which the Company or its Subsidiaries shall have obtained an adequate bond or adequate insurance or which are being contested in good faith and by proper proceedings which are being reasonably and diligently pursued if such proceedings do not involve any likelihood of the sale, forfeiture or loss of any such property or any interest therein while such proceedings are pending, and provided further that book reserves adequate under generally accepted accounting principles shall have been established with respect thereto and provided further that the owing Person's title to, and its right to use, its property is not materially adversely affected thereby. 6.8 Insurance. Maintain (a) errors and omissions insurance or mortgage impairment insurance and blanket bond coverage, with such companies and in such amounts as satisfy prevailing Page 33 39 PFNMA and FHLMC requirements applicable to a qualified mortgage originating institution, and (b) liability insurance and fire and other hazard insurance on its properties, with responsible insurance companies approved by the Lender, in such amounts and against such risks as is customarily carried by similar businesses operating in the same vicinity; and (c) within thirty (30) days after notice from the Lender, obtain such additional insurance as the Lender shall reasonably require, all at the sole expense of the Company. Copies of such policies shall be furnished to the Lender without charge upon obtaining such coverage or any renewal of or modification to such coverage. 6.9 Other Loan Obligations. Perform all obligations under the terms of each loan agreement, note, mortgage, security agreement or debt instrument by which the Company is bound or to which any of its property is subject, and promptly notify the Lender in writing of a declared default under or the termination, cancellation, reduction or non-renewal of any of its other lines of credit or financing agreements with any other lender. EXHIBIT "B" hereto is a true and complete list of all such lines of credit or financing agreements as of the date hereof. 6.10 Use of Proceeds of Advances. Use the proceeds of each Advance solely for the purpose of financing or purchasing Pledged Mortgages, including the issuance of Mortgage-backed Securities based thereon. 6.11 Special Affirmative Covenants Concerning Collateral. (a) Warrant and defend the right, title and interest of the Lender in and to the Collateral against the claims and demands of all Persons whomsoever. (b) Service or cause to be serviced all Pledged Mortgages in accordance with the standard requirements of the issuers of Purchase Commitments covering the same and all applicable FHA and VA requirements, including without limitation taking all actions necessary to enforce the obligations of the obligors under such Mortgage Loans. The Company shall service or cause to be serviced all Mortgage Loans backing Pledged Securities in accordance with applicable governmental requirements and issuers of Purchase Commitments covering the same. The Company shall hold all escrow funds collected in respect of Pledged Mortgages and Mortgage Loans backing Pledged Securities in trust, without commingling the same with non-custodial funds, and apply the same for the purposes for which such funds were collected. (c) Execute and deliver to the Lender such Uniform Commercial Code financing statements with respect to the Collateral as the Lender may request. The Company shall also execute and deliver to the Lender such further instruments of sale, pledge or assignment or transfer, and such powers of attorney, as required by the Lender to secure the Collateral, and shall do and perform all matters and things necessary or desirable to be done or observed, for the purpose of effectively creating, maintaining and preserving the security and benefits intended to be afforded the Lender under this Agreement. The Lender shall have all the rights and remedies of a secured party under the Uniform Commercial Code of Texas, or any other applicable law, in addition to all rights provided for herein. Page 34 40 (d) Notify the Lender within two (2) Business Days after receipt of notice from an Investor of any default under, or of the termination of, any Purchase Commitment relating to any Pledged Mortgage, Eligible Mortgage Pool or Pledged Security. (e) Promptly comply in all respects with the terms and conditions of all Purchase Commitments, and all extensions, renewals and modifications or substitutions thereof or thereto. The Company will cause to be delivered to the Investor the Pledged Mortgages and Pledged Securities to be sold under each Purchase Commitment not later than the expiration thereof. (f) Maintain, at its principal office or in a regional office approved by the Lender, or in the office of a computer service bureau engaged by the Company and approved by the Lender, and, upon request, shall make available to the Lender the originals, or copies in any case where the originals have been delivered to the Lender or to an Investor, of its Mortgage Notes and Mortgages included in Pledged Mortgages, Mortgage-backed Securities delivered to the Lender as Pledged Securities, Purchase Commitments, and all related Mortgage Loan documents and instruments, and all files, surveys, certificates, correspondence, appraisals, computer programs, tapes, discs, cards, accounting records and other information and data relating to the Collateral. 6.12 Cure of Defects in Loan Documents. The Company will promptly cure and cause to be promptly cured any defects in the creation, issuance, execution and delivery of this Agreement and the other Loan Documents; and upon request of the Lender and at the Company's expense, the Company will promptly execute and deliver, and cause to be executed and delivered, to the Lender or its designee, all such additional documents, agreements and/or instruments in compliance with or in accomplishment of the covenants and agreements of this Agreement and the other Loan Documents, and/or to create, perfect, preserve, extend and/or maintain any and all Liens created pursuant hereto or pursuant to any other Loan Document as valid and perfected Liens (of a priority as set forth in this Agreement) in favor of the Lender to secure the Obligations, all as reasonably requested from time to time by the Lender. 6.13 Year 2000 Compliant. Will take all necessary reasonable action to complete in all material respects by July 1, 1999, the reprogramming of computer software, hardware, and firmware systems used or relied upon in the conduct of the Company's business (including systems and equipment supplied by others or with which such systems of Company interface if the failure of such system would have a material adverse effect on the operations of the Company or its Subsidiaries) required as a result of the Year 2000 Issue to permit the proper functioning of such computer systems and other equipment and testing of such systems and equipment, as so reprogrammed. At the request of the Lender, Company shall provide to the Lender reasonable assurance of its compliance with the preceding sentence. 7. NEGATIVE COVENANTS. The Company hereby covenants and agrees that, so long as the Commitment is outstanding or there remain any Obligations of the Company to be paid or performed under this Agreement or Page 35 41 any other Loan Document, the Company shall not, either directly or indirectly, without the prior written consent of the Lender: 7.1 Contingent Liabilities. Assume, incur, create, guarantee, endorse, or otherwise become or be liable for the obligation of any Person other than the Company except by endorsement of negotiable instruments for deposit or collection in the ordinary course of business and excluding the sale of Mortgage Loans with recourse in the ordinary course of the company's business. 7.2 Pledge of Mortgage Loans. Except for Mortgage Loans pledged to the lenders described in EXHIBIT "B", pledge or grant a security interest in any existing or future Mortgage Loans acquired by the Company other than to the Lender except as otherwise expressly permitted in this Agreement; provided, however, that if no Default or Event of Default has occurred and is continuing, servicing on individual Mortgage Loans may be sold concurrently with and incidental to the sale of such Mortgage Loans (with servicing released) in the ordinary course of the Company's business. 7.3 Merger; Acquisitions. Company shall, or shall permit any of its Subsidiaries which are engaged in the mortgage banking business to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation (except mergers or consolidations of a Subsidiary into the Company, with the Company as the surviving corporation), or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time) all or any part of its property or assets which are material (including, but not limited to, any rights to service Mortgage Loans), individually or in the aggregate, other than obsolete or worn out property, whether now owned or hereafter acquired, other than in the ordinary course of business as presently conducted and at fair market value, without the prior approval of the Lender (which approval shall not be reasonably withheld), except that the Company and its Subsidiaries may, in the ordinary course of business, acquire Mortgage Loans for resale and sell Mortgage Loans and Mortgage-backed Securities. 7.4 Loss of Eligibility. Take any action that would cause the Company to lose all or any part of its status as an eligible lender, seller/servicer and issuer as described under Section 5.11 hereof. 7.5 Debt to Adjusted Tangible Worth Ratio. Permit the ratio of Debt to Adjusted Tangible Worth of the Company (and its Subsidiaries, on a consolidated basis) to exceed 10:1 computed as of the end of each calendar month. 7.6 Minimum Adjusted Tangible Net Worth. Permit Adjusted Tangible Net Worth of the Company (and its Subsidiaries, on a consolidated basis) to be less than Twelve Million Dollars ($12,000,000.00), computed as of the end of each calendar month. 7.7 Transactions with Affiliates. Directly or indirectly (a) make any loan, advance, extension of credit or capital contribution to any of its Affiliates, (b) transfer, sell, pledge, assign or otherwise dispose of any of its assets to or on behalf of such Affiliates, or (c) merge or consolidate Page 36 42 with or purchase or acquire assets from such Affiliates except for transactions described in clauses (a) through (c) of this Section 7.7 involving not more than $25,000.00 each. 7.8 Limits on Corporate Distributions. Pay, make or declare or incur any liability to pay, make or declare any dividend (excluding stock dividends) or other distribution, direct or indirect, on or on account of any shares of its stock or any redemption or other acquisition, direct or indirect, of any shares of its stock or of any warrants, rights or other options to purchase any shares of its stock nor purchase, acquire, redeem or retire any stock or ownership interest in itself whether now or hereafter outstanding except that so long as no Default, Event of Default or violation of Sections 7.5 and 7.6 hereof exists at such time, or would exist immediately thereafter, the Company may declare and pay cash dividends to its shareholders; provided, however, that (a) such cash dividends must be declared and paid within 20 days after delivery to Lender of the financial statements described in Section 6.2(a) hereof; and (b) provided, further that such dividends shall not exceed, in the aggregate during any fiscal year, fifty percent (50%) of the Company's net income for such fiscal year; provided, however, that this restriction shall not apply to the repurchase of shares of common stock from employees, officers, directors, consultants or other persons performing services for this Company or any Subsidiary pursuant to agreements under which this Company has the option to repurchase such shares upon the occurrence of certain events, such as the termination of employment. 7.9 RICO. Violate any laws, statutes or regulations, whether federal or state, for which forfeiture of its properties is a potential penalty, including, without limitations, RICO. 7.10 No Loans or Investments Except Approved Investments. Without the prior written consent of Lender, make or permit to remain outstanding any loans or advances to, or investments in, any Person, except that the foregoing restriction shall not apply to: (a) investments in marketable obligations maturing no later than 180 days from the date of acquisition thereof by the Company and issued and fully guaranteed, directly, by the full faith and credit of the Government of the United States of America or any agency thereof; and (b) investments in certificates of deposit maturing no later than 180 days from the date of issuance thereof and issued by commercial banks in the United States and such banks rated by Moody's Investor Service, Inc. and receiving a rating of Prime-2 or higher on Moody's short term debt rating or rated by Standard & Poor's Corporation and receiving a rating of AA-/A1+ or higher on S&P's short term debt rating, or issued by Lender, it being acknowledged and agreed that the foregoing requirements shall pertain to certificates of deposit issued and/or received on a date on or after the date of this Agreement); and (c) investments not to exceed $100,000.00 in the aggregate. Page 37 43 7.11 Charter Documents and Business Termination. (a) Except as permitted in Section 7.3 hereof, issue, sell or commit to issue or sell any shares of its capital stock of any class, or other equity or investment security, (b) Amend or otherwise modify its corporate charter or otherwise change its corporate structure in any manner which will have a materially adverse effect on the Company's condition, financial or otherwise, or which will have a material adverse effect upon the Company's ability to perform, promptly and fully, its obligations hereunder or under any of the other Loan Documents, or (c) Take any action with a view toward its dissolution, liquidation or termination, or, in fact, dissolve, liquidate or terminate its existence. 7.12 Changes in Accounting Methods. Make any change in its accounting method as in effect on the date of this Agreement or change its fiscal year ending date from September 30, unless such changes (a) are required for conformity with generally accepted accounting principles and, in such event, the Company will give prior written notice of each such change to the Lender or (b) or if not so required, are in conformity with generally accepted accounting principles and have the prior written approval of the Lender which approval shall not be unreasonably withheld. 7.13 Changes in Business or Assets. Except as permitted by Section 7.3 hereof, make any substantial change (a) in the nature of its business as now conducted, or (b) in the use of its property as now used and proposed to be used. 7.14 Changes in Office or Inventory Location. Change the address and/or location of its chief executive office or principal place of business or the place where it keeps its books and records or its inventory to a location outside the State of California unless, prior to any such change, the Company shall execute and cause to be executed such additional agreements and/or lien instruments as the Lender may reasonably request to conform with the provisions hereof and the transactions and perfected Liens in the Collateral contemplated under this Agreement and the other Loan Documents. 7.15 Special Negative Covenants Concerning Collateral. (a) The Company shall not amend or modify, or waive any of the terms and conditions of, or settle or compromise any claim in respect of, any Pledged Mortgages or Pledged Securities. (b) The Company shall not sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge or otherwise encumber (except pursuant to this Agreement or as permitted herein) any of the Collateral or any interest therein. (c) The Company shall not make any compromise, adjustment or settlement in respect of any of the Collateral or accept other than cash in payment or liquidation of the Collateral. Page 38 44 7.16 No Indebtedness. Except for the Indebtedness described in EXHIBIT "B" hereto, without the prior written consent of Lender, the Company will not incur, create, assume or guarantee or in any manner become or be liable or permit to be outstanding any Indebtedness (including obligations for the payment of rentals other than provided for herein) nor guarantee any contract or other obligation, and will not in any way become or be responsible for obligations of any Person, whether by agreement to purchase the Indebtedness of any other Person or agreement for the furnishing of funds to any other Person through the purchase of goods, supplies or services (or by way of stock purchase, capital contribution, advance or loan) for the purpose of paying or discharging the Indebtedness of any other Person or otherwise, except that the foregoing restrictions shall not apply to: (a) the Obligations. (b) liabilities for taxes, assessments, governmental charges or levies which are not yet due and payable or which are being contested in good faith by appropriate proceedings diligently conducted if reserves adequate under generally accepted accounting principles have been established therefor. (c) endorsements of negotiable instruments for collection in the ordinary course of business. (d) Indebtedness incurred in the ordinary course of business in connection with normal trade or business obligations which are payable within 90 days of the occurrence thereof, provided, however, that no Indebtedness shall be incurred by the Company to any Affiliate other than in the ordinary course of business and upon substantially the same or better terms as it could obtain in an arm's length transaction with a Person who is not an Affiliate. (e) Indebtedness of less than $100,000.00, in the aggregate, incurred in the ordinary course of business. (f) Indebtedness incurred in the ordinary course of business for the purpose of leasing office space or equipment to be used in the conduct of the business of the Company. 8. DEFAULTS; REMEDIES. 8.1 Events of Default. The occurrence of any of the following conditions or events shall be an event of default ("Event of Default"): (a) Failure to pay the principal of any Advance when due, whether at stated maturity, by acceleration, or otherwise; or failure to pay any installment of interest on any Advance or any other amount due under this Agreement within ten (10) days after the due date; or failure to pay, beyond any applicable grace period, the principal or interest on any other indebtedness due the Lender; or Page 39 45 (b) Failure of the Company to pay any sums due and payable under the Master Repurchase Agreement or Company's breach or default of any term, condition, covenant, or agreement of the Master Repurchase Agreement and such default shall not have been remedied or waived within ten (10) days after receipt of notice from the Lender of such default; or (c) Failure of the Company or any of its Subsidiaries to pay, or any default in the payment of any principal or interest on, any other Indebtedness or in the payment of any contingent obligation beyond any period of grace provided; or breach or default with respect to any other material term of any other Indebtedness of any loan agreement, mortgage, indenture or other agreement relating thereto, if the effect of such failure, default or breach is to cause, or to permit the holder or holders thereof (or a trustee on behalf of such holder or holders) to cause, Indebtedness of the Company or its Subsidiaries in the aggregate amount of Fifty Thousand Dollars ($50,000.00) or more to become or be declared due prior to its stated maturity (upon the giving or receiving of notice, lapse of time, both, or otherwise) or failure of the Company to comply with Section 6.11 hereof; or (d) Any of the Company's representations or warranties made or deemed made herein or in any other Loan Document, or in any statement or certificate at any time given by the Company in writing pursuant hereto or thereto shall be inaccurate or incomplete in any materially adverse respect on the date as of which made or deemed made; or (e) The Company shall default in the performance of or compliance with any term or covenant contained in this Agreement and such default shall not have been remedied or waived within thirty (30) days after receipt of notice from the Lender of such default other than those referred to above in Subsections 8.1(a), 8.1(b), 8.1(c), or 8.1(d); or (f) (1) A court having jurisdiction shall enter a decree or order for relief in respect of the Company or any of Company's Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect in respect of the Company or any of Company's Subsidiaries, which decree or order is not stayed; or a filing of an involuntary case under any applicable bankruptcy, insolvency or other similar law in respect of the Company or any of Company's Subsidiaries has occurred; or (2) any other similar relief shall be granted under any applicable federal or state law; or a decree or order of a court having jurisdiction for the appointment of a receiver, liquidator, sequestrator, trustee, custodian or other officer having similar powers over the Company or any of Company's Subsidiaries, or over all or a substantial part of their respective property, shall have been entered; or the involuntary appointment of an interim receiver, trustee or other custodian of the Company or any of Company's Subsidiaries, for all or a substantial part of their respective property; or the issuance of a warrant of attachment, execution or similar process against any substantial part of the property of the Company or any of Company's Subsidiaries, and the continuance of any such events in Subsections (1) and (2) above for sixty (60) days unless dismissed or discharged; or Page 40 46 (g) The Company or any of Company's Subsidiaries shall have an order for relief entered with respect to it or commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or shall consent to the entry of an order for relief in an involuntary case, or to the conversion to an involuntary case, under any such law, or shall consent to the appointment of or taking possession by a receiver, trustee or other custodian for all or a substantial part of its property; the making by the Company or any of Company's Subsidiaries of any assignment for the benefit of creditors; or the failure of the Company or any of Company's Subsidiaries, or the admission by any of them of its inability, to pay its debts as such debts become due; or (h) Any money judgment, writ or warrant of attachment, or similar process involving in any case an amount in excess of One Hundred Thousand Dollars ($100,000.00) shall be entered or filed against the Company or any of its Subsidiaries or any of their respective assets and shall remain undischarged, unvacated, unbonded or unstayed for a period of thirty (30) days or in any event no later than five (5) days prior to the date of any proposed sale thereunder; or (i) Any order, judgment or decree shall be entered against the Company decreeing the dissolution or split up of the Company and such order shall remain undischarged or unstayed for a period in excess of twenty (20) days; or (j) Any Plan maintained by the Company or any of Company's Subsidiaries shall be terminated within the meaning of Title IV of ERISA or a trustee shall be appointed by an appropriate United States district court to administer any Plan, or the Pension Benefit Guaranty Corporation (or any successor thereto) shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan if as of the date thereof the Company's or any Subsidiary's liability (after giving effect to the tax consequences thereof) to the Pension Benefit Guaranty Corporation (or any successor thereto) for unfunded guaranteed vested benefits under the Plan exceeds the then current value of assets accumulated in such Plan by more than One Hundred Thousand Dollars ($100,000.00) (or in the case of a termination involving the Company or any of Company's Subsidiaries as a "substantial employer" (as defined in Section 4001(a)(2) of ERISA) the withdrawing employer's proportionate share of such excess shall exceed such amount); or (k) The Company or any of Company's Subsidiaries as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in an annual amount exceeding One Hundred Thousand Dollars ($100,000.00); or (l) The Company shall purport to disavow its obligations hereunder or shall contest the validity or enforceability hereof, or the Lender's security interest on any portion of the Collateral shall become unenforceable or otherwise impaired; provided that, subject to the Lender's approval, no Event of Default shall occur as a result of such impairment if all Page 41 47 Advances made against any such Collateral shall be paid in full within ten (10) days of the date of such impairment; or (m) The Company dissolves or terminates its existence, or discontinues its usual business; or (n) Any court shall find or rule, or the Company shall assert or claim, (i) that the Lender does not have a valid, perfected, enforceable Lien and security interest in the Collateral of the priority as represented in this Agreement or in any other Loan Document, or (ii) that this Agreement or any of the Loan Documents does not or will not constitute the legal, valid, binding and enforceable obligations of the party or parties (as applicable) thereto, or (iii) that any Person has a conflicting or adverse Lien, claim or right in, or with respect to, the Collateral and the Company is unable within 10 days to have such finding or ruling reversed or to have such adverse Lien, claim or right removed; or (o) The Company shall have concealed, removed, or permitted to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them, or made or suffered a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law; or shall have made any transfer of its property to or for the benefit of a creditor at a time when other creditors similarly situated have not been paid; or shall have suffered or permitted, while insolvent, any creditor to obtain a Lien upon any of its property through legal proceedings or distraint or other process which is not vacated within 60 days from the date thereof; or 8.2 Remedies. (a) Upon the occurrence of any Event of Default described in Sections 8.1(f) or 8.1(g), the Commitment shall be terminated and all Obligations of the Company shall automatically become due and payable, without presentment for payment, demand, notice of non-payment, protest, notice of protest, notice of intent to accelerate, notice of acceleration, maturity, or any other notices or requirements of any kind of Lender to the Company or any other Person liable thereon or with respect thereto, all of which are hereby expressly waived by the Company. (b) Upon the occurrence of any Event of Default, other than those described in Sections 8.1(f) or 8.1(g), the Lender may, by written notice to the Company, terminate the Commitment and/or declare all Obligations of the Company to be immediately due and payable, whereupon the same shall forthwith become due and payable, together with all accrued and unpaid interest thereon, and the obligation of the Lender to make any Advances shall thereupon terminate. (c) Upon the occurrence of any Event of Default, the Lender may also do any of the following: Page 42 48 (1) Foreclose upon or otherwise enforce its security interest in and Lien on the Collateral to secure all payments and performance of Obligations of the Company in any manner permitted by law or provided for hereunder. (2) Notify all obligors in respect of the Collateral that the Collateral has been assigned to the Lender and that all payments thereon are to be made directly to the Lender or such other party as may be designated by the Lender; settle, compromise, or release, in whole or in part, any amounts owing on the Collateral, any such obligor or any Investor or any portion of the Collateral, on terms acceptable to the Lender; enforce payment and prosecute any action or proceeding with respect to any and all Collateral; and where any such Collateral is in default, foreclose on and enforce security interests in, such Collateral by any available judicial procedure or without judicial process and sell property acquired as a result of any such foreclosure. (3) Act, or contract with a third party to act, as servicer or subservicer of each item of Collateral requiring servicing and perform all obligations required in connection with Purchase Commitments, such third party's fees to be paid by the Company. (4) Require the Company to assemble the Collateral and/or books and records relating thereto and make such available to the Lender at a place to be designated by the Lender. (5) Enter onto property where any Collateral or books and records relating thereto are located and take possession thereof with or without judicial process. (6) Prior to the disposition of the Collateral, prepare it for disposition in any manner and to the extent the Lender deems appropriate. (7) Exercise all rights and remedies of a secured creditor under the Uniform Commercial Code of Texas or other applicable law, including, but not limited to, selling or otherwise disposing of the Collateral, or any part thereof, at one or more public or private sales, whether or not such Collateral is present at the place of sale, for cash or credit or future delivery, on such terms and in such manner as the Lender may determine, including, without limitation, sale pursuant to any applicable Purchase Commitment. If notice is required under such applicable law, the Lender will give the Company not less than ten (10) days' notice of any such public sale or of the date after which private sale may be held. The Company agrees that ten (10) days' notice shall be reasonable notice. The Lender may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by the Lender until the selling price is paid by the purchaser thereof, but the Lender shall not incur any liability in case of the failure of Page 43 49 such purchaser to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may again be sold upon like notice. The Lender may, however, instead of exercising the power of sale herein conferred upon it, proceed by a suit or suits at law or in equity to collect all amounts due upon the Collateral or to foreclose the pledge and sell the Collateral or any portion thereof under a judgment or decree of a court or courts of competent jurisdiction, or both. (8) Proceed against the Company on the Note. (d) The Lender shall incur no liability as a result of the sale or other disposition of the Collateral, or any part thereof, at any public or private sale or disposition. The Company hereby waives (to the extent permitted by law) any claims it may have against the Lender arising by reason of the fact that the price at which the Collateral may have been sold at such private sale was less than the price which might have been obtained at a public sale or was less than the aggregate amount of the outstanding Advances and the unpaid interest accrued thereon, even if the Lender accepts the first offer received and does not offer the Collateral to more than one offeree and none of the actions described herein shall render Lender's disposition of the Collateral in such a manner as commercially unreasonable. (e) The Company specifically waives (to the extent permitted by law) any equity or right of redemption, all rights of redemption, stay or appraisal which the Company has or may have under any rule of law or statute now existing or hereafter adopted, and any right to require the Lender to (1) proceed against any Person, (2) proceed against or exhaust any of the Collateral or pursue its rights and remedies as against the Collateral in any particular order, or (3) pursue any other remedy in its power. The Lender shall not be required to take any steps necessary to preserve any rights of the Company against holders of mortgages prior in lien to the Lien of any Mortgage included in the Collateral or to preserve rights against prior parties. (f) The Lender may, but shall not be obligated to, advance any sums or do any act or thing necessary to uphold and enforce the Lien and priority of, or the security intended to be afforded by, any Mortgage included in the Collateral, including, without limitation, payment of delinquent taxes or assessments and insurance premiums. All advances, charges, costs and expenses, including reasonable attorneys' fees and disbursements, incurred or paid by the Lender in exercising any right, power or remedy conferred by this Agreement, or in the enforcement hereof, together with interest thereon, at the Default Rate, from the time of payment until repaid, shall become a part of the principal balance outstanding hereunder and under the Note. (g) No failure on the part of the Lender to exercise, and no delay in exercising, any right, power or remedy provided hereunder, at law or in equity shall operate as a waiver thereof; nor shall any single or partial exercise by the Lender of any right, power or remedy provided hereunder, at law or in equity preclude any other or further exercise thereof or the exercise of any other right, power or remedy. Without intending to limit the foregoing, all defenses based on the statute of limitations are hereby waived by the Company to the extent Page 44 50 permitted by law. The remedies herein provided are cumulative and are not exclusive of any remedies provided at law or in equity. 8.3 Application of Proceeds. The proceeds of any sale, disposition or other enforcement of the Lender's security interest in all or any part of the Collateral shall be applied by the Lender: First, to the payment of the costs and expenses of such sale or enforcement, including reasonable compensation to the Lender's agents and counsel, and all expenses, liabilities and advances made or incurred by or on behalf of the Lender in connection therewith; Second, to the payment of any other amounts due (other than principal and interest) under the Note or this Agreement; Third, to the payment of interest accrued and unpaid on the Note; Fourth, to the payment of the outstanding principal balance of the Note; and Finally, to the payment to the Company, or to its successors or assigns, or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. If the proceeds of any such sale, disposition or other enforcement are insufficient to cover the costs and expenses of such sale, as aforesaid, and the payment in full of all Obligations of the Company, the Company shall remain liable for any deficiency. 8.4 Lender Appointed Attorney-in-Fact. The Lender is hereby appointed the attorney-in-fact of the Company, with full power of substitution, for the purpose of carrying out the provisions hereof and taking any action and executing any instruments which the Lender may deem necessary or advisable to accomplish the purposes hereof, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Without limiting the generality of the foregoing, the Lender shall have the right and power to give notices of its security interest in the Collateral to any Person, either in the name of the Company or in its own name, to endorse all Pledged Mortgages or Pledged Securities payable to the order of the Company, to change or cause to be changed the book-entry registration or name of subscriber or Investor on any Pledged Security, or to receive, endorse and collect all checks made payable to the order of the Company representing any payment on account of the principal of or interest on, or the proceeds of sale of, any of the Pledged Mortgages or Pledged Securities and to give full discharge for the same. 8.5 Right of Set-Off. If the Company shall default in the payment of the Note, any interest accrued thereon, or any other sums which may become payable hereunder when due, or in the performance of any of its other Obligations under this Agreement, the Lender, shall have the right, at any time and from time to time, without notice, to set-off and to appropriate or apply any and all property or indebtedness of any kind at any time held or owing by the Lender to or for the credit of the account of the Company (excluding any monies held by the Company in trust for third parties) against and on account of the Obligations, irrespective of whether or not the Lender shall have made any demand hereunder and whether or not said Obligations shall have matured; provided, Page 45 51 however, that the Lender shall not be allowed to set-off against funds in accounts with respect to which (i) the Company is a trustee or an escrow agent in respect of bona fide third parties other than Affiliates, and (ii) such trust or escrow arrangement was so denominated at the time of the creation of such account. 9. NOTICES. All notices, demands, consents, requests and other communications required or permitted to be given or made hereunder (collectively, "Notices") shall, except as otherwise expressly provided hereunder, be in writing and shall be delivered in person or mailed, first class, return receipt requested, postage prepaid, or delivered by overnight courier, addressed to the respective parties hereto at their respective addresses hereinafter set forth or, as to any such party, at such other address as may be designated by it in a Notice to the other. All Notices shall be conclusively deemed to have been properly given or made when duly delivered, in person or by overnight courier, or if mailed on the third Business Day after being deposited in the mails, addressed as follows: If to the Company: E-LOAN, INC. Attn: Chris Larsen 5875 Arnold Road Dublin, California 94568 Fax No.: (925) 556-2178 If to the Lender: Bank United Attn: Ms. Julie Persse, Vice President Mortgage Banker Financing 1646 North California, Suite 342 Walnut Creek, California 94596 Fax No.: (510) 210-8065 with a copy to: Bank United Attn: Frank Hattemer Managing Director, Mortgage Banker Financing 3200 Southwest Freeway, Suite 1300 Houston, Texas 77027 Fax No.: (713) 543-6022 and: Bank United Attn: Jonathon K. Heffron General Counsel 3200 Southwest Freeway, Suite 1300 Houston, Texas 77027 Fax No.: (713) 543-6469 Page 46 52 10. REIMBURSEMENT OF EXPENSES; INDEMNITY. The Company shall: (a) pay all out-of-pocket costs and expenses of the Lender, including, without limitation, reasonable attorneys' fees, in connection with the preparation, negotiation, documentation, enforcement and administration of this Agreement, the Note, and other Loan Documents and the making and repayment of the Advances and the payment of interest thereon; provided, however, costs and expenses of Lender for attorneys fees in connection with the preparation, negotiation and documentation of the lending transaction evidenced by this Agreement shall not exceed $3,000.00 plus the reasonable expenses of Lender's counsel; (b) pay, and hold the Lender and any holder of the Note harmless from and against, any and all present and future stamp, documentary and other similar taxes with respect to the foregoing matters and save the Lender and the holder or holders of the Note harmless from and against any and all liabilities with respect to or resulting from any delay or omission to pay such taxes; (C) INDEMNIFY, PAY AND HOLD HARMLESS THE LENDER AND ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS AND ANY SUBSEQUENT HOLDER OF THE NOTE FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, JUDGMENTS, SUITS, COSTS, EXPENSES AND DISBURSEMENTS OF ANY KIND WHATSOEVER (THE "INDEMNIFIED LIABILITIES") (INCLUDING, WITHOUT LIMITATION, INDEMNIFIED LIABILITIES RESULTING, IN WHOLE OR IN PART, FROM LENDER'S OWN NEGLIGENCE OR STRICT LIABILITY) WHICH MAY BE IMPOSED UPON, INCURRED BY OR ASSERTED AGAINST THE LENDER OR SUCH HOLDER IN ANY WAY RELATING TO OR ARISING OUT OF THIS AGREEMENT, THE NOTE, OR ANY OTHER LOAN DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY TO THE EXTENT THAT ANY SUCH INDEMNIFIED LIABILITIES RESULT (DIRECTLY OR INDIRECTLY) FROM ANY CLAIMS MADE, OR ANY ACTIONS, SUITS OR PROCEEDINGS COMMENCED OR THREATENED, BY OR ON BEHALF OF ANY CREDITOR (EXCLUDING THE LENDER AND THE HOLDER OR HOLDERS OF THE NOTE), SECURITY HOLDER, SHAREHOLDER, CUSTOMER (INCLUDING, WITHOUT LIMITATION, ANY PERSON HAVING ANY DEALINGS OF ANY KIND WITH THE COMPANY), TRUSTEE, DIRECTOR, OFFICER, EMPLOYEE AND/OR AGENT OF THE COMPANY ACTING IN SUCH CAPACITY, THE COMPANY OR ANY GOVERNMENTAL REGULATORY BODY OR AUTHORITY. THE FOREGOING INDEMNITY SHALL NOT APPLY TO THE EXTENT THE INDEMNIFIED LIABILITIES RESULT FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER OR LENDER'S OWN VIOLATIONS OF REGULATIONS APPLICABLE TO IT. THE AGREEMENT OF THE COMPANY CONTAINED IN THIS SUBSECTION (C) SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS AGREEMENT AND THE PAYMENT IN FULL OF THE NOTE. ATTORNEYS' FEES AND DISBURSEMENTS INCURRED IN ENFORCING, OR ON APPEAL FROM, A JUDGMENT PURSUANT HERETO SHALL BE RECOVERABLE SEPARATELY FROM AND IN ADDITION TO ANY OTHER AMOUNT INCLUDED IN SUCH JUDGMENT, AND THIS CLAUSE IS INTENDED TO BE SEVERABLE FROM THE OTHER PROVISIONS OF THIS Page 47 53 AGREEMENT AND TO SURVIVE AND NOT BE MERGED INTO SUCH JUDGMENT. 11. FINANCIAL INFORMATION. All financial statements and reports furnished to the Lender hereunder shall be prepared in accordance with GAAP, applied on a basis consistent with that applied in preparing the financial statements as at, and for the period ended, the Statement Date (except to the extent otherwise required to conform to good accounting practice). 12. MISCELLANEOUS. 12.1 Terms Binding Upon Successors; Survival of Representations. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. All representations, warranties, covenants and agreements herein contained on the part of the Company shall survive the making of any Advance and the execution of the Note, and shall be effective so long as the Commitment is outstanding hereunder or there remain any Obligations of the Company hereunder or under the Note to be paid or performed. 12.2 Assignment. This Agreement may not be assigned by the Company. The Lender may assign, at any time, in whole or in part, its rights and delegate its obligations under this Agreement and the other Loan Documents, along with the Lender's security interest in any or all of the Collateral, and any assignee thereof may enforce this Agreement and the other Loan Documents, and such security interest. 12.3 Amendments. Except as otherwise provided in this Agreement, this Agreement may not be amended, modified or supplemented unless such amendment, modification or supplement is set forth in a writing signed by the parties hereto. 12.4 Governing Law. This Agreement and the other Loan Documents shall be governed by the laws of the State of Texas, without reference to its principles of conflicts of laws. 12.5 Participations. The Lender may at any time sell, assign or grant participations in, or otherwise transfer to any other Person (a "Participant"), all or part of the Obligations of the Company under this Agreement. Without limitation of the exclusive right of the Lender to collect and enforce such Obligations, the Company agrees that each disposition will give rise to a debtor-creditor relationship of the Company to the Participant, and the Company authorizes each Participant, upon the occurrence of an Event of Default, to proceed directly by right of setoff, banker's lien, or otherwise, against any assets of the Company which may be in the hands of such Participant. The Company authorizes the Lender to disclose to any prospective Participant and any Participant any and all information in the Lender's possession concerning the Company, this Agreement and the Collateral. Page 48 54 12.6 Relationship of the Parties. This Agreement provides for the making of Advances by the Lender, in its capacity as a lender, to the Company, in its capacity as a borrower, and for thepayment of interest, repayment of principal by the Company to the Lender, and for the payment of certain fees by the Company to the Lender. The relationship between the Lender and the Company is limited to that of creditor/secured party, on the one hand, and debtor, on the other hand. The provisions herein for compliance with financial covenants and delivery of financial statements are intended solely for the benefit of the Lender to protect its interests as lender in assuring payments of interest and repayment of principal and payment of certain fees, and nothing contained in this Agreement shall be construed as permitting or obligating the Lender to act as a financial or business advisor or consultant to the Company, as permitting or obligating the Lender to control the Company or to conduct the Company's operations, as creating any fiduciary obligation on the part of the Lender to the Company, or as creating any joint venture, agency, or other relationship between the parties hereto other than as explicitly and specifically stated in this Agreement. The Company acknowledges that it has had the opportunity to obtain the advice of experienced counsel of its own choosing in connection with the negotiation and execution of this Agreement and to obtain the advice of such counsel with respect to all matters contained herein, including, without limitation, the provision for waiver of trial by jury. The Company further acknowledges that it is experienced with respect to financial and credit matters and has made its own independent decisions to apply to the Lender for credit and to execute and deliver this Agreement. 12.7 Severability. If any provision of this Agreement shall be declared to be illegal or unenforceable in any respect, such illegal or unenforceable provision shall be and become absolutely null and void and of no force and effect as though such provision were not in fact set forth herein, but all other covenants, terms, conditions and provisions hereof shall nevertheless continue to be valid and enforceable. 12.8 Usury. It is the intent of Lender and the Company in the execution and performance of this Agreement and the Note or any Loan Document to remain in strict compliance with Applicable Law from time to time in effect. In furtherance thereof, Lender and the Company stipulate and agree that none of the terms and provisions contained in the Note, this Agreement or any Loan Document shall ever be construed to create a contract to pay for the use, forbearance or detention of money with interest at a rate or in an amount in excess of the Maximum Rate or amount of interest permitted to be charged under Applicable Law. For purposes of this Agreement, the Note and any other Loan Document, "interest" shall include the aggregate of all charges which constitute interest under Applicable Law that are contracted for, taken, charged, reserved, or received under this Agreement, the Note or any other Loan Document. The Company shall never be required to pay unearned interest or interest at a rate or in an amount in excess of the Maximum Rate or amount of interest that may be lawfully charged under Applicable Law, and the provisions of this paragraph shall control over all other provisions of this Agreement and the Note or any Loan Document, which may be in actual or apparent conflict herewith. If the Note is prepaid, or if the maturity of the Note is accelerated for any reason, or if under any other contingency the effective rate or amount of interest which would otherwise be payable under the Note would exceed the Maximum Rate or amount of interest Lender or any other holder of the Note is allowed by Applicable Law to charge, contract for, take, reserve or receive, or in the event Lender or any holder of the Note shall charge, contract for, take, reserve or receive monies that are deemed to constitute interest which would, in Page 49 55 the absence of this provision, increase the effective rate or amount of interest payable under the Note to a rate or amount in excess of that permitted to be charged, contracted for, taken, reserved or received under Applicable Law then in effect, then the principal amount of the Note or the amount of interest which would otherwise be payable under the Note or both shall be reduced to the amount allowed under Applicable Law as now or hereinafter construed by the courts having jurisdiction, and all such moneys so charged, contracted for, taken, reserved or received that are deemed to constitute interest in excess of the Maximum Rate or amount of interest permitted by Applicable Law shall immediately be returned to or credited to the account of the Company upon such determination. Lender and the Company further stipulate and agree that, without limitation of the foregoing, all calculations of the rate or amount of interest contracted for, charged, taken, reserved or received under the Note which are made for the purpose of determining whether such rate or amount exceeds the Maximum Rate, shall be made to the extent not prohibited by Applicable Law, by amortizing, prorating, allocating and spreading during the period of the full stated term of the Note, all interest at any time contracted for, charged, taken, reserved or received from the Company or otherwise by Lender or any other holder of the Note. 12.9 CONSENT TO JURISDICTION. SUBJECT TO THE PROVISIONS OF SECTION 12.9 OF THIS AGREEMENT, THE COMPANY HEREBY AGREES THAT ANY ACTION OR PROCEEDING UNDER THIS AGREEMENT, THE NOTE OR ANY DOCUMENT DELIVERED PURSUANT HERETO MAY BE COMMENCED AGAINST IT IN ANY COURT OF COMPETENT JURISDICTION WITHIN THE STATE OF TEXAS, BY SERVICE OF PROCESS UPON THE COMPANY BY FIRST CLASS REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE COMPANY AT ITS ADDRESS LAST KNOWN TO THE LENDER. THE COMPANY AGREES THAT ANY SUCH SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER SUCH DOCUMENT MAY BE INSTITUTED IN HARRIS COUNTY, STATE DISTRICT COURT OR IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF TEXAS AT THE OPTION OF THE LENDER; AND THE COMPANY HEREBY WAIVES ANY OBJECTION TO THE VENUE, OR ANY CLAIM AS TO INCONVENIENT FORUM, OF ANY SUCH SUIT, ACTION OR PROCEEDING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO ACCOMPLISH SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION OR COURT. 12.10 Arbitration. To the maximum extent not prohibited by law, any controversy, dispute or claim arising out of, in connection with, or relating to the Commitment or the Loan Documents or any transaction provided for therein, including but not limited to any claim based on or arising from an alleged tort or an alleged breach of any agreement contained in any of the Loan Documents, shall, at the request of any party to the Loan Documents (either before or after the commencement of judicial proceedings), be settled by arbitration pursuant to Title 9 of the United States Code, which the parties hereto acknowledge and agree applies to the transaction involved herein, and in accordance with the Commercial Arbitration Rules of the American Arbitration Association (the "AAA"). If Title 9 of the United States Code is inapplicable to any such claim, dispute or controversy for any reason, such arbitration shall be conducted pursuant to the Texas General Arbitration Act and in accordance with the Commercial Arbitration Rules of the AAA. In any such arbitration proceeding: (i) all statutes of limitations which would otherwise be applicable shall apply; and (ii) the proceeding shall be conducted in Houston, Texas, by a single arbitrator, if the amount in controversy is $1,000,000.00 or less, or by a panel of three arbitrators if the amount in controversy is over $1,000,000.00. All arbitrators shall be selected by the process of appointment Page 50 56 from a panel pursuant to Section 13 of the AAA Commercial Arbitration Rules and each arbitrator shall be either an active attorney, a mortgage banker or retired judge with an AAA acknowledged expertise in the subject matter of the controversy, dispute or claim. Any award rendered in any such arbitration proceeding shall be final and binding, and judgment upon any such award may be entered in any court having jurisdiction. If any party to any Loan Document files a proceeding in any court to resolve any such controversy, dispute or claim, such action shall not constitute a waiver of the right of such party or a bar to the right of any other party to seek arbitration under the provisions of this Section of that or any other claim, dispute or controversy, and the court shall, upon motion of any party to the proceeding, direct that such controversy, dispute or claim be arbitrated in accordance with this Section. Notwithstanding any of the foregoing, the parties hereto agree that no arbitrator or panel of arbitrators shall possess or have the power to (i) assess punitive damages, (ii) dissolve, rescind or reform (except that the arbitrator may construe ambiguous terms) any Loan Document, (iii) enter judgment on the debt, (iv) exercise equitable powers or issue or enter any equitable remedies with respect to matters submitted to arbitration, or (v) allow discovery of attorney/client privileged information. The Commercial Arbitration Rules of the AAA are hereby modified to this extent for the purpose of arbitration of any dispute, controversy or claim arising out of, in connection with, or relating to the Loan or any Loan Document. The parties hereby further agree to waive, each to the other, any claims for punitive damages and agree neither an arbitrator nor any court shall have the power to assess such damages. No provision of, or the exercise of any rights under, this Section shall limit or impair the right of any party to any Loan Document before, during or after any arbitration proceeding to: (i) exercise self-help remedies such as setoff or repossession; (ii) foreclose (judicially or otherwise) any Lien on or security interest in any real or personal Collateral; or (iii) obtain emergency relief from a court of competent jurisdiction to prevent the dissipation, damage, destruction, transfer, hypothecation, pledging or concealment of assets or of Collateral securing any Indebtedness, obligation or guaranty referenced in any Loan Document. Such emergency relief may be in the nature of, but is not limited to: pre-judgment attachments, garnishments, sequestrations, appointments of receivers, or other emergency injunctive relief to preserve the status quo. 12.11 ADDITIONAL INDEMNITY. IN ADDITION TO THE INDEMNITY PROVIDED IN SECTION 10, THE COMPANY SHALL INDEMNIFY AND HOLD THE LENDER, ITS SUCCESSORS, ASSIGNS, AGENTS, AND EMPLOYEES, HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS, ACTIONS, SUITS, PROCEEDINGS, COSTS, EXPENSES, DAMAGES, FINES, PENALTIES, AND LIABILITIES, INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES AND COSTS, ARISING OUT OF, CONNECTED WITH, OR RESULTING FROM (A) THE OPERATION OF THE COMPANY'S BUSINESSES, (B) THE LENDER'S PRESERVATION OR ATTEMPTED PRESERVATION OF COLLATERAL, AND (C) ANY FAILURE OF THE SECURITY INTERESTS AND LIENS IN THE COLLATERAL GRANTED TO THE LENDER PURSUANT TO THIS AGREEMENT TO BE OR TO REMAIN PERFECTED OR TO Page 51 57 HAVE THE PRIORITY AS CONTEMPLATED THEREIN REGARDLESS OF WHETHER THE CLAIM IS CAUSED BY OR ARISES OUT OF, IN WHOLE OR IN PART, THE NEGLIGENCE OF THE LENDER OR MAY BE BASED ON THE STRICT LIABILITY OF THE LENDER. THIS INDEMNITY SHALL NOT APPLY TO THE EXTENT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LENDER. AT THE LENDER'S REQUEST, THE COMPANY SHALL, AT ITS OWN COST AND EXPENSE, DEFEND OR CAUSE TO BE DEFENDED ANY AND ALL SUCH ACTIONS OR SUITS THAT MAY BE BROUGHT AGAINST THE LENDER AND, IN ANY EVENT, SHALL SATISFY, PAY, AND DISCHARGE ANY AND ALL JUDGMENTS, AWARDS, PENALTIES, COSTS, AND FINES THAT MAY BE RECOVERED AGAINST THE LENDER IN ANY SUCH ACTION, PLUS ALL ATTORNEYS' FEES AND COSTS RELATED THERETO TO THE EXTENT PERMITTED BY APPLICABLE LAW; PROVIDED, HOWEVER, THAT THE LENDER SHALL GIVE THE COMPANY (TO THE EXTENT THE LENDER SEEKS INDEMNIFICATION THEREFOR FROM THE COMPANY UNDER THIS SECTION 12.11) WRITTEN NOTICE OF ANY SUCH CLAIM, DEMAND, OR SUIT AFTER THE LENDER HAS RECEIVED WRITTEN NOTICE THEREOF, AND THE LENDER SHALL NOT SETTLE ANY SUCH CLAIM, DEMAND, OR SUIT, IF THE LENDER SEEKS INDEMNIFICATION THEREFOR FROM THE COMPANY, WITHOUT FIRST GIVING NOTICE TO THE COMPANY OF THE LENDER'S DESIRE TO SETTLE AND OBTAINING THE CONSENT OF THE COMPANY TO THE SAME, WHICH CONSENT THE COMPANY HEREBY AGREES NOT TO UNREASONABLY WITHHOLD. ALL OBLIGATIONS OF THE COMPANY UNDER THIS SECTION 12.11 SHALL SURVIVE THE PAYMENT OF THE NOTE AND THE OBLIGATIONS. 12.12 No Waivers Except in Writing. No failure or delay on the part of the Lender in exercising any power or right hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No notice to or demand on the Company or any other Person in any case shall entitle the Company or such other Person to any other or further notice or demand in similar or other circumstances. 12.13 Waiver of Jury Trial. Company hereby expressly waives any right to a trial by jury in any action or legal proceeding arising out of or relating to this Agreement or any other Loan Document for the transactions contemplated hereby or thereby. 12.14 Multiple Counterparts. This Agreement may be executed in any number of counterparts, all of which, taken together, shall constitute one and the same instrument. 12.15 No Third Party Beneficiaries. This Agreement is for the sole and exclusive benefit of the Company and Lender. This Agreement does not create, and is not intended to create, any rights in favor of or enforceable by any other Person. This Agreement may be amended or modified Page 52 58 by the agreement of the Company and Lender, without any requirement or necessity for notice to, or the consent of or approval of any other Person. 12.16 RELEASE OF LENDER LIABILITY. TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW FROM TIME TO TIME IN EFFECT, THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY (AND AFTER IT HAS CONSULTED WITH ITS OWN ATTORNEY) IRREVOCABLY AND UNCONDITIONALLY AGREES THAT NO CLAIM MAY BE MADE BY THE COMPANY AGAINST THE LENDER OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS, ACCOUNTANTS, AGENTS OR INSURERS, OR ANY OF ITS OR THEIR SUCCESSORS AND ASSIGNS, FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN RESPECT OF ANY BREACH OR WRONGFUL CONDUCT (WHETHER THE CLAIM IS BASED ON CONTRACT OR TORT OR DUTY IMPOSED BY LAW) ARISING OUT OF, OR RELATED TO, THE TRANSACTIONS CONTEMPLATED BY ANY OF THIS AGREEMENT, THE NOTE, OR ANY OTHER LOAN DOCUMENTS, OR ANY ACT, OMISSION, OR EVENT OCCURRING IN CONNECTION HEREWITH OR THEREWITH. IN FURTHERANCE OF THE FOREGOING, THE COMPANY HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE UPON ANY CLAIM FOR ANY SUCH DAMAGES, WHETHER OR NOT ACCRUED AND WHETHER OR NOT KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR. 12.17 Entire Agreement; Amendment. This Agreement, the Note, and the other Loan Documents referred to herein embody the final, entire Agreement among the parties hereto and supersede any and all prior commitments, agreements, representations, and understandings, whether written or oral, relating to the subject matter hereof. The provisions of this Agreement and the other Loan Documents to which the Company is a party may be amended or waived only by an instrument in writing signed by the parties hereto. 12.18 NO ORAL AGREEMENTS. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written. E-LOAN, INC. a California corporation By: /s/ signature illegible --------------------------------- STEVEN M. MAJERUS, Director, Mortgage Banking Page 53 59 BANK UNITED By: --------------------------------- Name: ------------------------------ Title: ----------------------------- EXHIBITS: A - Advance Request B - Existing Company Indebtedness C - Procedures and Documentation for Warehousing Single-family Mortgage Loans D - Shipping Instructions E - Trust Receipt F - Officer's Certificate G - Subsidiaries H - Litigation I - Trade Names J - Secretary's Certificate K - Bailee Letter L - Investors M - Legal Opinion N - Note Page 54 60 EXHIBIT "A" REQUEST FOR ADVANCE SINGLE-FAMILY MORTGAGE LOANS Mortgage Company: E-LOAN, INC. Loan Number: Mortgagor: Prepared By: ---------------------- -------------------------- Address: Warehouse Date: ---------------------- ----------------------- Social Security No.: Loan Type (check all that apply): ------------ ----- Advance Type (check all that apply): Jumbo Conventional --- --- Wet Settlement Advance VA FHA - ------ --- --- Dry Settlement Advance First Second - ------ --- --- Interest Rate: Note Amount: --------- ------------------- Requested Warehouse Note Date: Amount: --------------------- ---------- Credit Rating: Investor Expiration Date: ------------------ ----------- Investor: ---------------------- Investor Takeout Price: --------- Purchase Commitment No.: -------- METHOD OF ADVANCE ( ) Wire Transfer (see attached instructions) Amount of Wire/Check:$ ( ) Check No. Date of Wire/Check: Page 55 61 REQUIRED DOCUMENTATION (in addition to this Advance Request) Attached please find the following documents in connection with the above request: Wet Settlement Advance o Copy of check funding the Single-family Mortgage Loan, if not funded by wire transfer. o Copy of closing instructions to title company or closing agent, noting Lender's security interest in the Single-family Mortgage Loan. o Copy of specific Purchase Commitment. Dry Settlement Advance o Copy of check funding the Single-family Mortgage Loan, if not funded by wire transfer. o Original Mortgage Note, endorsed in blank. o Certified copy of Mortgage. o Recordable Assignment of Mortgage (in blank). o Certified copies of all interim Assignments (if applicable). o Copy of specific Purchase Commitment. BAILEE PLEDGE The Company creates and grants in favor and for the benefit of the Lender a security interest in and to the Single-family Mortgage Loans listed above and all instruments and documents described as Required Documentation above. The Company has given to ___________________________________ ("Closing Agent") who has possession of such instruments and documents, notice of the foregoing described security interest in favor of the Lender. The Company further agrees to deliver the documents described above to Lender, immediately upon the request of the Lender (whether written or oral), but in any event, on or before five (5) Business Days from the date hereof. The Company further agrees that this Agreement shall be binding upon and inure to the benefit of the legal representatives, successors or assigns of the Lender. The Company further agrees that all rights, interests, duties and liabilities arising hereunder shall be determined according to the laws of the State of Texas. Executed as of the ____________ day of ____________________, 199__. E-LOAN, INC., a California corporation By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- EXHIBIT "A" Page 56 62 EXHIBIT "B" LIST OF EXISTING INDEBTEDNESS OF COMPANY
========================================================================================= LENDER TYPE OF FINANCING COMMITMENT COLLATERAL AVERAGE BALANCE AMOUNT OUTSTANDING AS OF DECEMBER 31, 1998 ========================================================================================= G.E. Warehouse 15 million 10 million - ----------------------------------------------------------------------------------------- Greenwich Warehouse 35 milliion 25 million =========================================================================================
EXHIBIT "B" Page 57 63 EXHIBIT "C" PROCEDURES AND DOCUMENTATION FOR WAREHOUSING SINGLE-FAMILY MORTGAGE LOANS The following procedures and documentation requirements must be observed in all respects by the Company. All documents must be satisfactory to Lender in its sole discretion. Terms used below, which are not otherwise defined, shall have the meanings given them in the Warehousing Credit and Security Agreement, as amended, modified or renewed from time to time. The HUD, FNMA and FHLMC form numbers referred to herein are for convenience only and the Company shall use the equivalent forms required at the time of delivery of the Mortgage Loans or Mortgage-backed Securities. I. Prior to making an Advance that is not a Wet Settlement Advance, the Lender must receive the following: (1) Copy of settlement or funding check issued to, or signed wire transfer request directing funds to escrow/title company or closing agent. (2) If not an Electronic Request, Original Request for Advance against Single-Family Mortgage Loans (Exhibit "A"). (3) Original signed Mortgage Note, endorsed by the Company in blank with corresponding interim endorsements, if applicable. (4) Copy of the Mortgage certified true by the escrow/title company or closing agent. (5) Certified true copies of all interim assignments (recorded or sent for recordation) of the Mortgage. (6) An Assignment of the Mortgage to the Lender in recordable form but unrecorded. (7) Copy of specific Purchase Commitment. II. Prior to making a Wet Settlement Advance, the Lender must receive the following: (1) Copy of settlement or funding check issued to, or signed wire transfer request directing funds to escrow/title company or closing agent. (2) If not an Electronic Request, Original Request for Advance against Single-Family Mortgage Loans (Exhibit "A"). (3) Copy of specific Purchase Commitment. EXHIBIT "C" Page 58 64 (4) A copy of the Company's final closing instructions to the title company or closing agent, noting Lender's security interest in the loan, as provided below: "You are hereby notified that Bank United, a federal savings bank (the "Lender") has a security interest in the promissory note, the deed of trust or mortgage, and all other supporting documents for the above referenced loan. Unless the Lender otherwise instructs you, all loan documents are to be returned to the undersigned company within twenty-four (24) hours after settlement." The Mortgage Note and other supporting documents described in Section I must be received by the Lender within five (5) Business Days of the date of the Wet Settlement Advance. III. The Lender exclusively shall deliver Pledged Mortgages or Pledged Securities and all related loan documents and/or pool documents to Investor or Approved Custodian unless otherwise agreed in writing. A. The following procedures are to be followed for deliveries of Pledged Mortgages to Investors: No later than 2:00 p.m. Houston, Texas time one (1) Business Day prior to the expiration date of the Purchase Commitment, the Lender must receive the following: (1) Signed or electronic shipping instructions for the delivery of the Pledged Mortgages including the following: (a) Name and address of the office of the Investor to which the loan documents are to be shipped and the preferred method of delivery; (b) Instructions for endorsement of the Mortgage Note; (c) Names of Mortgagor and Mortgage Note Amounts of Pledged Mortgages to be shipped; and (d) Number and expiration date of the Purchase Commitment. (2) All loan documents related to the Pledged Mortgages required for delivery to the Investor. (3) For deliveries of Pledged Mortgages to FNMA for cash purchase, the following additional documents are required: a) Original Loan Schedule (FNMA Form 1068 or 1069) showing the Lender's designated FNMA payee code as recipient of the loan purchase proceeds. (4) For deliveries of Pledged Mortgages to FHLMC for cash purchase, the following additional documents are required: EXHIBIT "C" Page 59 65 a) Original completed Warehouse Lender Release of Security Interest (FHLMC Form 996) to be executed by the Lender. b) Original Wire Transfer Authorization for a Cash Warehouse Delivery (FHLMC Form 987), designating the Lender as the Warehouse Lender and showing the cash collateral account designated by the Lender as the receiving account for loan purchase proceeds. B. The following procedures are to be followed for deliveries of Pledged Mortgages to Approved Custodians: No later than one (1) Business Day prior to required delivery date to the Approved Custodian, the Lender must receive the following: 1. Signed or electronic shipping instructions for the delivery of the Pledged Mortgages to the Approved Custodian including the following: a) Name and address of the office of the Approved Custodian to which the loan documents are to be shipped and the preferred method of delivery; b) Instructions for endorsement of the Mortgage Note; and c) Names of Mortgagor and Mortgage Note Amounts of Pledged Mortgages to be shipped. d) Commitment number and expiration date of the Purchase Commitment for the Pledged Securities. 2. All loan documents related to the Pledged Mortgages required for the issuance of the Mortgage-backed Securities. 3. For FNMA Mortgage-backed Securities issuance, the following additional documents are required: a) Original Schedule of Mortgages (FNMA Form 2005 or 2025). b) Original executed Security Release Certification (FNMA Form 2004) to be executed by the Lender. c) Original Delivery Schedule (FNMA Form 2014), instructing FNMA to issue the Mortgage-backed Securities in the name of the Company with the Lender as pledgee and to deliver the Mortgage-backed Securities to the Lender's custody account at Banker's Trust (Account No. 92798) and bearing the following instructions: These instructions may not be changed without the prior written consent of Bank United. EXHIBIT "C" Page 60 66 4. For FHLMC Mortgage-backed Securities issuance, the following additional documents are required: a) Original Settlement Information and Delivery Authorization (FHLMC Form 939), designating the Lender as the Warehouse Lender and instructing FHLMC to deliver the Mortgage-backed Securities to the Lender's custody account at Banker's Trust, Account No. 92798. 5. For GNMA Mortgage-backed Securities issuance, the following additional documents are required: a) Signed original Schedule of Mortgages (HUD Form 11706). b) Signed original Schedule of Subscribers (HUD Form 11705) instructing GNMA to issue the Mortgage-backed Securities in the name of the Company and designating Bankers Trust as Agent for the Lender as the subscriber, using the following language: BANKERS TRUST AS AGENT FOR BANK UNITED and deliver the Mortgage-backed Securities to the Lender's custody Account No. 92798 at Bankers Trust. The following instructions must also be included on the form: "These instructions may not be changed without the prior written consent of Bank United." c) Completed original Release of Security Interest (HUD Form 11711A) to be executed by the Lender. Upon instruction by the Company, the Lender will complete the endorsement of the Mortgage Note and make arrangements for the delivery of the complete loan package with the appropriate Bailee Letter to the Investor or Approved Custodian. Upon receipt of Mortgage-backed Securities, the Lender will cause such Mortgage-backed Securities to be delivered to the Investor which issued the Purchase Commitment. Mortgage-backed Securities will be released to the Investor only upon payment of the purchase proceeds to the Lender. Cash proceeds of sales of Pledged Mortgages and Pledged Securities shall be applied to related Advances outstanding under the Commitment. Provided no Default exists, the Lender shall return any excess proceeds of the sale of Mortgage Loans or Mortgage-backed Securities to the Company, unless otherwise instructed in writing. EXHIBIT "C" Page 61 67 EXHIBIT "D" FORM OF SHIPPING REQUEST AND AUTHORIZATION [Company Letterhead] Date: BANK UNITED [Address] Attention: Re: Commitment No. This letter is to serve as authorization for you to endorse and ship Loan Documents for the following loans: LOAN NUMBER BORROWER NAME NOTE AMOUNT ----------- ------------- ----------- to the following address: NAME: ADDRESS: ATTENTION: Please endorse the notes as follows: Please ship the Loan Documents either by _________________________ or by such other courier service we have specifically approved in writing. You are not responsible for any delays in shipment or any other actions or inactions of the courier. However, because the commitment expires on _________________________, 19___, we ask that you deliver the Loan Documents to the courier no later than _________________________, 19___. Please have the courier bill us by using our account no. _______________. If you should have any questions, or should feel the need for additional documentation, please do not hesitate to call _____________________. E-LOAN, INC., a California corporation By: ----------------------------------- Name: --------------------------------- Title: --------------------------------- EXHIBIT "D" Page 62 68 EXHIBIT "E" TRUST RECEIPT Trust Receipt No. ______________, 19___ The undersigned, E-LOAN, INC., a California corporation (the "Company"), acknowledges receipt from Bank United, a federal savings bank ("Lender"), pursuant to that certain Warehousing Credit and Security Agreement (Single-Family Mortgage Loans) dated effective as of February 3, 1999, by and between the Company and Lender (the "Agreement"), of the following described property (the "Trust Property"), possession of which is herewith entrusted to the Company for the purposes set forth below: Mortgage Loan No. Note Amount: Obligor: Purpose: [Specify nature of clerical or other documentation problem to be corrected.] The Company hereby acknowledges that a security interest in the Trust Property and in the proceeds of the Trust Property has been granted to the Lender pursuant to the Agreement. In consideration of the delivery of the Trust Property by the Lender to the Company, the Company hereby agrees to hold the Trust Property in trust for the Lender as provided under and in accordance with all provisions of the Agreement and to return the Trust Property to the Lender no later than the close of business on the tenth day following the date hereof or, if such day is not a Business Day, on the following Business Day. The Company further agrees that the aggregate Collateral Value of Single-family Mortgage Loans with respect to which notes or other documentation has been released under trust receipts, does not exceed $500,000.00. E-LOAN, INC., a California corporation By: ----------------------------------- Name: --------------------------------- Title: --------------------------------- Delivery to Company Acknowledged BANK UNITED By: --------------------------------- Name: ------------------------------- Title: ------------------------------ The undersigned, acknowledges that the above-mentioned Trust Property has been returned to the Lender on __________________, 19___. BANK UNITED By: ----------------------------------- Name: --------------------------------- Title: --------------------------------- EXHIBIT "E" Page 63 69 EXHIBIT "F" OFFICER'S CERTIFICATE COMPANY: E-LOAN, INC., a California corporation LENDER: BANK UNITED DATE: REPORTING PERIOD: ended , 199___ This certificate is delivered to Lender under the Warehousing Credit and Security Agreement dated effective as of February 3, 1999, between Company and Lender (the "Agreement"), all the defined terms of which have the same meanings when used herein. I hereby certify that: (a) I am, and at all times mentioned herein have been, the duly elected, qualified, and acting officer of Company designated below; (b) to the best of my knowledge, the Financial Statements of Company for the period shown above (the "Reporting Period") and which accompany this certificate were prepared in accordance with GAAP and present fairly the financial condition of Company as of the end of the Reporting Period and the results of its operations for the Reporting Period; (c) a review of the Agreement and of the activities of the Company during the Reporting Period has been made under my supervision with a view to determining Company's compliance with the covenants, requirements, terms, and conditions of the Agreement, and such review has not disclosed the existence during or at the end of the Reporting Period (and I have no knowledge of the existence as of the date hereof) of any Event of Default or Default, except as disclosed on Annex "A" hereto (which specifies the nature and period of existence of each Event of Default or Default, if any, and what action Company has taken, is taking, and proposes to take with respect to each); (d) the calculations described on the attached Annex "A" evidence that the Company is in compliance with the requirements of Sections 7.5 and 7.6 of the Agreement at the end of the Reporting Period (or if Company is not in compliance, showing the extent of non-compliance and specifying the period of non-compliance and what actions the Company proposes to take with respect thereto; (e) the Company was, as of the end of the Reporting Period, in compliance and good standing with applicable FNMA, GNMA, FHLMC, and HUD net worth requirements. E-LOAN, INC., a California corporation By: ----------------------------------- Name: --------------------------------- Title: --------------------------------- EXHIBIT "F" Page 64 70 ANNEX "A" COMPANY NAME: E-LOAN, INC., a California corporation REPORTING PERIOD: All financial calculations set forth herein are as of the Reporting Period. (a) TANGIBLE NET WORTH The Tangible Net Worth of the Company is: GAAP Net Worth: $_______________ Minus: Intangible Assets, including Capitalized Servicing Rights: $_______________ Minus: Advances or loans to shareholders, officers or Affiliates $_______________ Minus: Investments in Affiliates: $_______________ Minus: Assets pledged to secure liabilities not included in Debt: $_______________ Minus: Any other HUD nonacceptable assets: $_______________ TANGIBLE NET WORTH: $_______________ (b) ADJUSTED TANGIBLE NET WORTH The Adjusted Tangible Net Worth of the Company is: Tangible Net Worth (from above): $_______________ Plus: Subordinated Debt $_______________ Plus: 1% of Servicing Rights $_______________ ADJUSTED TANGIBLE NET WORTH: $_______________ MINIMUM ADJUSTED TANGIBLE NET WORTH IS $12,000,000.00 Covenant Satisfied:__________ Covenant Not Satisfied:__________
ANNEX "A" Page 65 71 (c) DEBT OF THE COMPANY Total Liabilities: $_______________ DEBT: $_______________ (d) DEBT TO ADJUSTED TANGIBLE NET WORTH The ratio of Debt to Adjusted Tangible Net Worth is: _______ to 1. MAXIMUM DEBT TO ADJUSTED TANGIBLE NET WORTH RATIO IS 10:1. Covenant Satisfied:_________ Covenant Not Satisfied:___________ (e) DEFAULTS OR EVENTS OF DEFAULT (DISCLOSE NATURE AND PERIOD OF EXISTENCE AND ACTION BEING TAKEN IN CONNECTION THEREWITH; IF NONE, STATE NONE)
ANNEX "A" Page 66 72 EXHIBIT "G" LIST OF SUBSIDIARIES
================================================================================ NAME ADDRESS OF STATE OF WHERE COMPANY'S PRINCIPAL INCORPORATION QUALIFIED PERCENTAGE OFFICE FOREIGN CORP. OWNERSHIP - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
None. EXHIBIT "G" Page 67 73 EXHIBIT "H" DISCLOSURE OF PENDING LITIGATION (Include the caption of the case, including styling, cause number, and court in which it is pending, date filed, status of the proceedings, and description of claims, counterclaims and damages asserted.) None. EXHIBIT "H" Page 68 74 EXHIBIT "I" TRADE NAMES OF COMPANY
- -------------------------------------------------------------------------------- TRADE NAME JURISDICTION USED - -------------------------------------------------------------------------------- None. - --------------------------------------------------------------------------------
EXHIBIT "I" Page 69 75 EXHIBIT "J" CERTIFICATE OF CORPORATE RESOLUTIONS AND INCUMBENCY OF OFFICERS (BORROWING AUTHORITY) I, the undersigned, hereby certify that I am the Secretary of E-LOAN, INC., a corporation duly organized and existing under the laws of the State of California (the "Corporation"). I further certify that true and correct copies of the Articles of Incorporation and Bylaws of the Corporation together with all amendments thereto are attached hereto as EXHIBITS "A" AND "B", respectively, and that such articles and bylaws remain unaltered and in full force and effect. I further certify that the following resolutions were duly adopted by the Board of Directors of the Corporation at a meeting of the Board of Directors of the Corporation, duly and legally called and held in accordance with the Articles of Incorporation and Bylaws of the Corporation on the _____ day of February, 1999, at which meeting a quorum was present and voting throughout, or (if the foregoing date was not completed) pursuant to a written consent signed by all of the members of the Board of Directors of the Corporation in accordance with the Articles of Incorporation and Bylaws of the Corporation, and that such resolutions are now in full force and effect and have not been amended, modified or revoked: "RESOLVED, that each of the following officers of this Corporation: Chris Larsen Janina Pawlowski Steven M. Majerus acting alone without the joinder of any other officer, is hereby authorized in the name and on behalf of this Corporation (i) to borrow from and to otherwise incur liabilities to BANK UNITED ("Lender") from time to time, in such amounts, for such periods of time, at such rates of interest and payable in such manner as such officers may deem necessary or proper, and (ii) as evidence of such indebtedness so incurred, to execute and deliver to Lender such promissory notes, loan agreements and other instruments, documents and agreements, containing such terms and provisions as may be acceptable or agreeable to any one of such officers, such acceptance and agreement to be conclusively evidenced by the execution and delivery thereof by any one of such officers; FURTHER RESOLVED, that this Corporation grant to Lender a lien and/or security interest upon such assets of this Corporation as may be agreed upon between any one of the above named officers and Lender, as security for all present and future indebtedness, obligations and liabilities of this Corporation to Lender and that each of said officers, acting alone without the joinder of any other officer, is hereby authorized in the name and on behalf of this Corporation to execute and deliver such EXHIBIT "J" Page 70 76 security agreements, deeds of trust and other instruments, documents and agreements as may be required by Lender in connection with each such grant of a lien and/or security interest and containing such terms and provisions as may be acceptable or agreeable to any one of such officers, such acceptance and agreement to be conclusively evidenced by the execution and delivery thereof by any one of such officers; FURTHER RESOLVED, that any one of the above named officers, acting alone without the joinder of any other officer, is hereby authorized in the name and on behalf of this Corporation to take such further action and to do all things that any one of such officers deems necessary in connection with any (i) increases, renewals, extensions, rearrangements, retirements or compromises of any indebtedness, obligations and liabilities owing to Lender from time to time by this Corporation, either directly or by assignment, and (ii) amendments to any of the provisions contained in any instruments, documents or agreements evidencing, securing, governing and/or pertaining to any indebtedness, obligations and liabilities owing to Lender by this Corporation from time to time; FURTHER RESOLVED, that any one of the above named officers, or any one of the following representatives of this Corporation: Cheri Toth Margo Howe Jan Hammond acting alone without the joinder of any other officer or representative, is hereby authorized in the name and on behalf of this Corporation to (i) make requests for advances under any credit facility that this Corporation may have with Lender from time to time, and (ii) do or cause to be done all such acts or things and to sign and deliver, or cause to be signed and delivered, all such instruments, documents, agreements and certificates (including without limitation, any and all notices and certificates required or permitted to be given or made to Lender under the terms of any of the instruments, documents or agreements executed on behalf of this Corporation in connection with these resolutions), as any and all of such officers or representatives may deem necessary, advisable or appropriate to effectuate and carry out the purposes and intent of the foregoing resolutions and to perform the obligations of this Corporation under all instruments, documents and agreements executed on behalf of this Corporation in connection with any indebtedness, obligations or liabilities incurred by this Corporation to Lender from time to time; FURTHER RESOLVED, that any one of the above named officers, acting alone without joinder of any other officer or representative is hereby authorized in the name and on behalf of this Corporation (i) to sell and transfer notes, securities and financial instruments of this Corporation to the Lender, from time to time, in such amounts and on such terms and conditions and in such manner as any one of EXHIBIT "J" Page 71 77 such officers may deem necessary or proper and (ii) in connection therewith, to execute and deliver to the Lender a master repurchase agreement and such other documents and agreements containing such terms and provisions as may be acceptable or agreeable to any one of such officers, such acceptance and agreement to be conclusively evidenced by the execution and delivery thereof by any one of such officers; FURTHER RESOLVED, that all acts, transactions or agreements with Lender undertaken prior to the adoption of the foregoing resolutions by any one or more of the officers and/or representatives of this Corporation in its name and on its behalf in connection with the foregoing matters are hereby ratified, confirmed and adopted by this Corporation; and FURTHER RESOLVED, that each of the officers of this Corporation is hereby authorized and directed to certify these resolutions to Lender; FURTHER RESOLVED, the foregoing resolutions shall continue in full force and effect, and the Lender is authorized to rely upon the foregoing resolutions unless and until (i) countermanded by resolution of the Board of Directors of this Corporation, and (ii) a copy of such resolution, properly certified by an officer of this Corporation, has actually been received by Lender." I further certify that the foregoing resolutions do not conflict with the Articles of Incorporation or Bylaws of the Corporation, or any amendments thereto. I further certify that neither the seal of the Corporation, nor the attestation by the Secretary, Assistant Secretary or any other officer of the Corporation, is necessary to make any instruments, documents or agreements executed by the officers or representatives of this Corporation pursuant to the foregoing resolutions, enforceable against the Corporation, unless such seal is affixed to, or such attestation is provided on, such instruments, documents or agreements. I further certify that the officers of the Corporation set forth below have been duly elected and qualified and as of the date hereof hold the specified offices with the Corporation, that the signature set forth beside each officer's name is the true signature of such officer, and that the signature set forth beside the name of each of the representatives specified in the foregoing resolutions is the true signature of such representative:
TITLE TYPED NAME SIGNATURE ----- ---------- --------- CEO Chris Larsen ------------------------ President Janina Pawlowski ------------------------ Dir., Mortgage Banking Operations Steven M. Majerus ------------------------
EXHIBIT "J" Page 72 78
TITLE TYPED NAME SIGNATURE ----- ---------- --------- Secretary Janina Pawlowski ------------------------ - ------------------------ Cheri Toth ------------------------ - ------------------------ Margo Howe ------------------------ - ------------------------ Jan Hammond ------------------------
IN WITNESS WHEREOF, I hereunto subscribe my name this _____ day of February, 1999. By: Janina Pawlowski, Secretary STATE OF CALIFORNIA ) ) COUNTY OF _______________ ) The foregoing instrument was acknowledged before me this __________ day of February, 1999, by Janina Pawlowski, Secretary of E-LOAN, INC., a California corporation, on behalf of said corporation. --------------------------------- NOTARY PUBLIC IN AND FOR [Seal] THE STATE OF CALIFORNIA EXHIBIT "J" Page 73 79 EXHIBIT "K" BAILEE LETTER (Investor Name and Address) Re: Purchase of Mortgage Loans from E-LOAN, INC., a California corporation . Ladies and Gentlemen: Attached please find those Mortgage Loans listed separately on the attached schedule, which Mortgage Loans are owned by E-LOAN, INC., a California corporation (the "Company") and are being delivered to you for purchase. The Mortgage Loans comprise a portion of the Collateral under (and as the term "Collateral" and capitalized terms not otherwise defined hereunder are defined in) that certain Warehousing Credit and Security Agreement (Single-family Mortgage Loans) ("Warehouse Agreement") dated effective as of February 3, 1999, by and between the Company and BANK UNITED, a federal savings bank ("Lender"). Each of the Mortgage Loans is subject to a security interest in favor of Lender, which security interest shall be automatically released upon our receipt of the full amount due to the Lender under the Warehouse Agreement in connection with such Mortgage Loans (as set forth on the schedule attached hereto) by wire transfer to the following account: Bank United Houston, Texas ABA #313071904 Credit: Account: Until payment therefor is received, the aforesaid security interest therein will remain in full force and effect, and you shall hold possession of such Collateral and the documentation evidencing same as custodian, agent and bailee for and on behalf of Lender. In the event any Mortgage Loan is unacceptable for purchase, return the reject item directly to the undersigned at the address set forth below. In no event shall any Mortgage Loan be returned or sales proceeds remitted in full no later than thirty (30) days from the date hereof. If you are unable to comply with the above instructions, please so advise the undersigned immediately. NOTE: BY ACCEPTING THE MORTGAGE LOANS DELIVERED TO YOU WITH THIS LETTER, YOU CONSENT TO BE THE CUSTODIAN, AGENT AND BAILEE FOR LENDER ON THE TERMS DESCRIBED IN THIS LETTER. THE UNDERSIGNED REQUESTS THAT YOU ACKNOWLEDGE RECEIPT OF THE ENCLOSED MORTGAGE LOANS AND THIS EXHIBIT "K" Page 74 80 LETTER BY SIGNING AND RETURNING THE ENCLOSED COPY OF THIS LETTER TO THE UNDERSIGNED AT THE FOLLOWING ADDRESS: 3200 Southwest Freeway, Suite 2025, Houston, Texas 77027. HOWEVER, YOUR FAILURE TO DO SO DOES NOT NULLIFY SUCH CONSENT. Sincerely, BANK UNITED By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- IRREVOCABLY ACKNOWLEDGED AND AGREED TO: [INVESTOR] By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- EXHIBIT "K" Page 75 81 EXHIBIT "L" LIST OF INVESTORS
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{See Attached} EXHIBIT "L" Page 76 82 EXHIBIT "M" OPINION LETTER February 3, 1999 Bank United 3200 Southwest Freeway Suite 1300 Houston, Texas 77027 Re: Warehousing Credit and Security Agreement (Single-Family Mortgage Loans) Gentlemen: We have acted as special counsel for E-LOAN, INC., a California corporation (the "Company"), in connection with the negotiation and execution of the following documents (collectively, the "Credit Documents"): 1. the Warehousing Credit and Security Agreement (Single-Family Mortgage Loans) dated effective as of February 3, 1999 (the "Loan Agreement"), between the Company and Bank United (the "Lender"); and 2. the Note dated effective as of February 3, 1999 (the "Note"), executed and delivered by the Company. Unless otherwise provided herein, terms used herein which are defined in the Credit Documents (including schedules and exhibits thereto) and not defined herein shall have the meanings attributed thereto in the Credit Documents. I. BASIS OF OPINION. As the basis for the conclusions expressed in this opinion letter, we have examined, considered and relied upon the following: (1) A copy of each of the Credit Documents executed by the Company; (2) A Recent Certificate of Domestic Status of the Company issued by the Secretary of State of California; (3) A copy of the Articles of Incorporation and amendments thereto, and a copy of the Bylaws of the Company, in each case as certified to us by the Company Certificate; (4) Such other documents and records as we have deemed relevant, necessary or appropriate in connection with or as a basis for the opinions hereafter set forth; and EXHIBIT "M" Page 77 83 Bank United February 3, 1999 (5) Such matters of law as we have considered necessary or appropriate for the expression of the opinions contained herein. For the purposes of this opinion letter, the documents and information referred to in this Section A are herein collectively referred to as the "Documents". II. OPINIONS. Based upon our examination and consideration of the foregoing Documents, and subject to the comments, assumptions, exceptions, qualifications and limitations set forth in Section C below, we are of the opinion that: (1) The Company (i) is a corporation duly organized, validly existing, and in good standing under the laws of the State of California (ii) has the full legal power and authority and all necessary licenses, permits, franchises, and other authorizations to own and operate its property and assets and to transact the business in which it is engaged, and (iii) is duly qualified to transact business as a foreign corporation in each jurisdiction where the nature of the business it transacts or the property it owns requires such qualification or licensing except in such jurisdictions where the failure to be in good standing or be licensed (as the case may be) would have no material adverse effect on the Company. (2) The Company has the requisite corporate power to execute, deliver, and perform the terms and provisions of each of the Credit Documents and has taken all necessary corporate action to authorize the execution, delivery, and performance by it of each such Credit Document. The Company has duly executed each of the Credit Documents, and each such Credit Document constitutes its legal, valid, and binding obligation enforceable in accordance with its terms, except as the enforceability of the rights and remedies of the Lender under each of the Credit Documents may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (regardless of whether the issue of enforceability is considered in a proceeding in equity or at law) including requirements of reasonableness and good faith in the exercise of rights and remedies under the Credit Documents. (3) Neither the execution, delivery, or performance by the Company of the Credit Documents, nor compliance by it with the terms and provisions thereof, (i) will contravene any law, statute, rule, or regulation; (ii) to the best of our knowledge, will contravene any order, writ, injunction, or decree of any court or governmental instrumentality; (iii) to the best of our knowledge, will conflict or be inconsistent with or result in any breach of any of the material terms, covenants, conditions, or provisions of, or constitute a default under, or result in the creation or imposition of (or the obligation to create or impose) any lien upon any of the property or assets of the Company EXHIBIT "M" Page 78 84 Bank United February 3, 1999 pursuant to the terms of any agreement of the Company; (iv) will violate any provision of the Articles of Incorporation or Bylaws of the Company. (4) No order, consent, approval, license, authorization or validation of, or filing, recording or registration with, or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of any Credit Document, or (ii) the legality, validity, binding effect or enforceability of any such Credit Document. (5) To the best of our knowledge, there are no actions, suits, or proceedings pending or threatened (i) with respect to any Credit Document or (ii) that could materially and adversely affect the business, operations, property, assets, condition (financial or otherwise) or prospects of the Company. (6) The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (7) The Company is not a "holding company" or a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. (8) The execution and delivery of the Loan Agreement by the Borrower is effective to create a valid and enforceable security interest in favor of the Lender in the Collateral and the proceeds thereof. (9) The Lender will have a valid and duly perfected security interest, without further requirements for perfection, in (a) the Pledged Mortgages and Pledged Securities upon the delivery thereof to the Lender and (b) the other Collateral described in the Financing Statements to the extent that a security interest therein may be perfected under Article 9 of the UCC solely by filing a financing statement with the Secretary of State of California, which lien shall be superior to any other interests therein. III. COMMENTS, ASSUMPTIONS, LIMITATION, QUALIFICATIONS AND EXCEPTIONS. The opinions expressed in Section B above are based upon, and subject to, the further comments, assumptions, limitations, qualifications and exceptions set forth below: Respectfully submitted, EXHIBIT "M" Page 79 85 EXHIBIT "N" PROMISSORY NOTE $40,000,000.00 Houston, Texas February 3, 1999 FOR VALUE RECEIVED, the undersigned, E-LOAN, INC., a California corporation (herein called the "Borrower"), hereby promises to pay to the order of BANK UNITED, a federal savings bank (the "Lender" or, together with its successors and assigns, the "Holder") whose principal place of business is 3200 Southwest Freeway, Suite 1300, Houston, Texas 77027, or at such other place as the Holder may designate from time to time, the principal sum of FORTY MILLION AND NO/100 DOLLARS ($40,000,000.00) or so much thereof as may be outstanding from time to time pursuant to the Warehousing Credit and Security Agreement (the "Agreement') dated the date hereof between the Borrower and the Lender, as the same may be amended or supplemented from time to time, and to pay interest on said principal sum or such part thereof as shall remain unpaid from time to time, from the date of each Advance until repaid in full, and all other fees and charges due under the Agreement, at the rate and at the times set forth in the Agreement. All payments hereunder shall be made in lawful money of the United States and in immediately available funds. This Note is given to evidence an actual warehouse line of credit in the above amount and is the Note referred to in the Agreement, and is entitled to the benefits thereof. Reference is hereby made to the Agreement (which is incorporated herein by reference as fully and with the same effect as if set forth herein at length) for a description of the Collateral, a statement of the covenants and agreements, a statement of the rights and remedies and securities afforded thereby and other matters contained therein. Capitalized terms used herein, unless otherwise defined herein, shall have the meanings given them in the Agreement. The entire unpaid principal balance of this Note plus all accrued and unpaid interest shall be due and payable in full on February 2, 2000. This Note may be prepaid in whole or in part at any time without premium or penalty. Should this Note be placed in the hands of attorneys for collection, the Borrower agrees to pay, in addition to principal and interest, fees and charges due under the Agreement, and all costs of collecting this Note, including reasonable attorneys' fees and expenses. This Note shall be construed and enforced in accordance with the laws of the State of Texas, without reference to its principles of conflicts of law, and applicable federal laws of the United States of America. This Note is secured by all security agreements, collateral assignments, deeds of trust and lien instruments executed by the Borrower in favor of Lender, or executed by any other Person as security for this Note, including any executed prior to, simultaneously with, or after the date of this Note. EXHIBIT "N" Page 80 86 The Borrower and any and each co-maker, guarantor, accommodation party, endorser or other Person liable for the payment or collection of this Note expressly waive notice, presentment, demand for payment, protest, notice of protest and non-payment or dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, bringing of suit, and diligence in taking any action to collect amounts called for hereunder and in the handling of Collateral at any time existing as security in connection herewith, and shall be directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder or in connection with any Lien at any time had or existing as security for any amount called for hereunder. It is the intention of the parties hereto to conform strictly to usury laws applicable to the Lender. Accordingly, if the transactions contemplated hereby would be usurious under applicable law (including the laws of the United States of America and the State of Texas), then, in that event, notwithstanding anything to the contrary herein or in the Agreement or in any other Loan Document or agreement entered into in connection with or as security for this Note, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to the Lender that is contracted for, taken, reserved, charged, or received herein or under the Agreement or under any of the other aforesaid Loan Documents or agreements or otherwise in connection herewith shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be credited by the Lender on the principal amount of the Obligations (or, if the principal amount of the Obligations shall have been paid in full, refunded by the Lender to the Borrower, as required); and (ii) in the event that the maturity of this Note is accelerated by reason of an election of the Lender resulting from any Event of Default under the Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to the Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in the Agreement or otherwise shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by the Lender on the principal amount of the Obligations (or, if the principal amount of the Obligations shall have been paid in full, refunded by the Lender to the Borrower, as required). Without limiting the foregoing, all calculations of the rate of interest taken, reserved, contracted for, charged, received or provided for under this Note or any of the Loan Documents which are made for the purpose of determining whether the interest rate exceeds the Maximum Rate shall be made, to the extent allowed by law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the loan evidenced hereby, all interest at any time taken, reserved, contracted for, charged, received, or provided for under this Note of any of the Loan Documents. To the extent that the Texas Credit Title is relevant for purposes of determining the Maximum Rate, the Lender hereby elects to determine the applicable rate ceiling under such statute by the weekly rate ceiling from time to time in effect, subject to the Lender's right subsequently to change such method in accordance with applicable law. EXHIBIT "N" Page 81 87 E-LOAN, INC., a California corporation By: -------------------------------- STEVEN M. MAJERUS, Director, Mortgage Banking EXHIBIT "N" Page 82 88 FINANCING STATEMENT This Financing Statement is presented to a Filing Officer in the Office of the Secretary of State of the State of California for filing pursuant to the Uniform Commercial Code. 1. The name, address and federal tax number of the Debtor is: E-LOAN, INC. 6200 Village Parkway, Suite 102 Dublin, California 94568 Federal Tax I.D. 77-0460084 2. The name, address and federal tax number of the Secured Party is: BANK UNITED 3200 Southwest Freeway, Suite 1300 Houston, Texas 77027 Federal Tax I.D. No. 76-0266000 3. This Financing Statement covers all right, title, and interest of Debtor in, to and under the following, whether now owned or hereafter acquired (collectively, the "Collateral"): (a) All Mortgage Loans, including all Mortgage Notes and Mortgages evidencing such Mortgage Loans including without limitation all Mortgage Loans in respect of which Wet Settlement Advances have been made by the Secured Party, which from time to time are delivered or caused to be delivered to the Secured Party or its designee, come into the possession, custody or control of the Secured Party for the purpose of assignment or pledge or in respect of which an Advance has been made by the Secured Party (the "Pledged Mortgages"). (b) All Mortgage-backed Securities which are from time to time delivered or caused to be delivered to, or are otherwise in the possession of the Secured Party, or its designee, its agent, bailee or custodian as assignee or pledged to the Secured Party, or for such purpose are registered by book-entry in the name of the Secured Party (the "Pledged Securities"). (c) All private mortgage insurance and all commitments issued by the FHA or VA to insure or guarantee any Mortgage Loans included in the Pledged Mortgages; all guaranties related to Pledged Securities; all Purchase Commitments held by the Debtor covering the Pledged Mortgages or the Pledged Securities and all proceeds resulting from the sale thereof to Investors pursuant thereto; all personal property, contract rights, servicing and servicing fees and income or other proceeds, amounts and payments payable to the Debtor as compensation or reimbursement, accounts and general intangibles of whatsoever kind relating to the Pledged Mortgages, the Pledged Securities, and all other documents or Page 1 89 instruments relating to the Pledged Mortgages and the Pledged Securities, including, without limitation, any interest of the Debtor in any fire, casualty or hazard insurance policies and any awards made by any public body or decreed by any court of competent jurisdiction for a taking or for degradation of value in any eminent domain proceeding as the same relate to the Pledged Mortgages. (d) All right, title and interest of the Debtor in and to all escrow accounts, documents, instruments, files, surveys, certificates, correspondence, appraisals, computer programs, tapes, discs, cards, accounting records (including all information, records, tapes, data, programs, discs and cards necessary or helpful in the administration or servicing of the foregoing Collateral) and other information and data of the Debtor relating to the foregoing Collateral. (e) All now existing or hereafter acquired cash delivered to or otherwise in the possession of the Secured Party or its agent, bailee or custodian or designated on the books and records of the Debtor as assigned and pledged to the Secured Party. (f) All cash and non-cash proceeds of the foregoing Collateral, including all dividends, distributions and other rights in connection with, and all additions to, modifications of and replacements for, the foregoing Collateral, and all products and proceeds of the foregoing Collateral, together with whatever is receivable or received when the foregoing Collateral or proceeds thereof are sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, including, without limitation, all rights to payment with respect to any cause of action affecting or relating to the foregoing Collateral or proceeds thereof. 4. Definitions: The following terms shall have the meanings set forth below unless the context otherwise requires. Such definitions shall be equally applicable to the singular and plural forms of the terms defined. "Advance" means any advance by the Secured Party to Debtor under the Warehouse Credit Agreement. "Collateral Documents" has the meaning set forth in the Warehouse Credit Agreement. "FHA" means the Federal Housing Administration and any successor thereto. "FHLMC" means the Federal Home Loan Mortgage Corporation and any successor thereto. "FHLMC Guide" means the Freddie Mac Sellers' and Servicers' Guide dated September 17, 1984, as amended, revised, modified and supplemented from time to time heretofore, now and hereafter. Page 2 90 "FHLMC Pool" means a "group" or "grouping" of Mortgage Loans assembled in accordance with (and as such term is used in) the FHLMC Guide. "First Mortgage" means a mortgage or deed of trust which constitutes a first lien on the property covered thereby. "FNMA" means the Federal National Mortgage Association and any successor thereto. "FNMA Guide" means the Fannie Mae Servicing Guide dated June 30, 1990, as amended, revised, modified and supplemented from time to time heretofore, now and hereafter. "FNMA Pool" means a "group" or "grouping" of Mortgage Loans assembled in accordance with (and as such term is used in) the FNMA Guide. "GNMA" means the Government National Mortgage Association and any successor thereto. "GNMA Guide" means, as applicable under the circumstances, (a) the GNMA I Mortgage-Backed Securities Guide, Handbook GNMA 5500.1 REV-6, as amended, revised, modified and supplemented from time to time heretofore, now and hereafter or (b) the GNMA II Mortgage-Backed Securities Guide, Handbook GNMA 5500.2, as amended, revised, modified and supplemented from time to time heretofore, now and hereafter.. "GNMA Pool" means, as applicable under the circumstances, a "pool" of Mortgage Loans assembled in accordance with (and as such term is used in) the GNMA Guide. "Investor" means FNMA, FHLMC, GNMA, or a financially responsible institution which is acceptable to Secured Party, in its sole discretion; provided that at any time by written notice to Debtor Secured Party may disapprove any Investor in its sole discretion for any reason, whether or not that Person is named as an Investor in this definition or has been previously approved as an Investor by Secured Party. Upon receipt of such notice, the Persons named in Secured Party's notice shall no longer be Investors from and after the date of the receipt of such notice. "Mortgage" means a First Mortgage or Second Mortgage on improved real property. "Mortgage-backed Securities" means FHLMC, GNMA or FNMA securities that are backed by Mortgage Loans. "Mortgage Loan" means any loan evidenced by a Mortgage Note. "Mortgage Note" means a note secured by a Mortgage. Page 3 91 "Mortgage Pool" means (a) a FHLMC Pool, (b) a FNMA Pool, or (c) a GNMA Pool. "Person" means and includes natural persons, corporations, limited partnerships, general partnerships, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and federal and state governments and agencies or regulatory authorities and political subdivisions thereof. "Purchase Commitment" means a written commitment, in form and substance satisfactory to the Secured Party, issued in favor of the Debtor by an Investor pursuant to which that Investor commits to purchase Mortgage Loans or Mortgage-backed Securities. "Second Mortgage" means a mortgage or deed of trust which constitutes a second lien on the property covered thereby. "Servicing Contract" means, with respect to any Person, the arrangement, whether or not in writing, pursuant to which such Person has the right to service Mortgage Loans. "Single-family Mortgage Loan" means a Mortgage Loan secured by a Mortgage covering improved real property containing one to four family residences. "VA" means the Veterans Administration and any successor thereto. "Warehouse Credit Agreement" means the Warehousing Credit and Security Agreement dated of even date herewith between Debtor and Secured Party. "Wet Settlement Advance" means an Advance by the Secured Party pursuant to Section 2.2(a) of the Warehouse Credit Agreement, in respect of the closing or settlement of a Single-family Mortgage Loan, in anticipation of and pending subsequent delivery and examination of the Collateral Documents as provided in Section II of EXHIBIT "C" to the Warehouse Credit Agreement. EXECUTED effective as of the 3rd day of February, 1999. DEBTOR: E-LOAN, INC., a California corporation By: ------------------------------- STEVEN M. MAJERUS, Director, Mortgage Banking Page 4 92 SECURED PARTY: BANK UNITED By: ------------------------------- Name: ----------------------------- Title: ---------------------------- After recording, return copy to: Strasburger & Price, L.L.P. Attn: Jeff J. Brashier 1221 McKinney Street, Suite 2800 Houston, Texas 77010 Page 5 93 PROMISSORY NOTE $40,000,000.00 Houston, Texas February 3, 1999 FOR VALUE RECEIVED, the undersigned, E-LOAN, INC., a California corporation (herein called the "Borrower"), hereby promises to pay to the order of BANK UNITED, a federal savings bank (the "Lender" or, together with its successors and assigns, the "Holder") whose principal place of business is 3200 Southwest Freeway, Suite 1300, Houston, Texas 77027, or at such other place as the Holder may designate from time to time, the principal sum of FORTY MILLION AND NO/100 DOLLARS ($40,000,000.00) or so much thereof as may be outstanding from time to time pursuant to the Warehousing Credit and Security Agreement (the "Agreement') dated the date hereof between the Borrower and the Lender, as the same may be amended or supplemented from time to time, and to pay interest on said principal sum or such part thereof as shall remain unpaid from time to time, from the date of each Advance until repaid in full, and all other fees and charges due under the Agreement, at the rate and at the times set forth in the Agreement. All payments hereunder shall be made in lawful money of the United States and in immediately available funds. This Note is given to evidence an actual warehouse line of credit in the above amount and is the Note referred to in the Agreement, and is entitled to the benefits thereof. Reference is hereby made to the Agreement (which is incorporated herein by reference as fully and with the same effect as if set forth herein at length) for a description of the Collateral, a statement of the covenants and agreements, a statement of the rights and remedies and securities afforded thereby and other matters contained therein. Capitalized terms used herein, unless otherwise defined herein, shall have the meanings given them in the Agreement. The entire unpaid principal balance of this Note plus all accrued and unpaid interest shall be due and payable in full on February 2, 2000. This Note may be prepaid in whole or in part at any time without premium or penalty. Should this Note be placed in the hands of attorneys for collection, the Borrower agrees to pay, in addition to principal and interest, fees and charges due under the Agreement, and all costs of collecting this Note, including reasonable attorneys' fees and expenses. This Note shall be construed and enforced in accordance with the laws of the State of Texas, without reference to its principles of conflicts of law, and applicable federal laws of the United States of America. This Note is secured by all security agreements, collateral assignments, deeds of trust and lien instruments executed by the Borrower in favor of Lender, or executed by any other Person as security for this Note, including any executed prior to, simultaneously with, or after the date of this Note. Page 1 94 The Borrower and any and each co-maker, guarantor, accommodation party, endorser or other Person liable for the payment or collection of this Note expressly waive notice, presentment, demand for payment, protest, notice of protest and non-payment or dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, bringing of suit, and diligence in taking any action to collect amounts called for hereunder and in the handling of Collateral at any time existing as security in connection herewith, and shall be directly and primarily liable for the payment of all sums owing and to be owing hereon, regardless of and without any notice, diligence, act or omission as or with respect to the collection of any amount called for hereunder or in connection with any Lien at any time had or existing as security for any amount called for hereunder. It is the intention of the parties hereto to conform strictly to usury laws applicable to the Lender. Accordingly, if the transactions contemplated hereby would be usurious under applicable law (including the laws of the United States of America and the State of Texas), then, in that event, notwithstanding anything to the contrary herein or in the Agreement or in any other Loan Document or agreement entered into in connection with or as security for this Note, it is agreed as follows: (i) the aggregate of all consideration which constitutes interest under law applicable to the Lender that is contracted for, taken, reserved, charged, or received herein or under the Agreement or under any of the other aforesaid Loan Documents or agreements or otherwise in connection herewith shall under no circumstances exceed the maximum amount allowed by such applicable law, and any excess shall be credited by the Lender on the principal amount of the Obligations (or, if the principal amount of the Obligations shall have been paid in full, refunded by the Lender to the Borrower, as required); and (ii) in the event that the maturity of this Note is accelerated by reason of an election of the Lender resulting from any Event of Default under the Agreement or otherwise, or in the event of any required or permitted prepayment, then such consideration that constitutes interest under law applicable to the Lender may never include more than the maximum amount allowed by such applicable law, and excess interest, if any, provided for in the Agreement or otherwise shall be canceled automatically as of the date of such acceleration or prepayment and, if theretofore paid, shall be credited by the Lender on the principal amount of the Obligations (or, if the principal amount of the Obligations shall have been paid in full, refunded by the Lender to the Borrower, as required). Without limiting the foregoing, all calculations of the rate of interest taken, reserved, contracted for, charged, received or provided for under this Note or any of the Loan Documents which are made for the purpose of determining whether the interest rate exceeds the Maximum Rate shall be made, to the extent allowed by law, by amortizing, prorating, allocating and spreading in equal parts during the period of the full stated term of the loan evidenced hereby, all interest at any time taken, reserved, contracted for, charged, received, or provided for under this Note of any of the Loan Documents. To the extent that the Texas Credit Title is relevant for purposes of determining the Maximum Rate, the Lender hereby elects to determine the applicable rate ceiling under such statute by the weekly rate ceiling from time to time in effect, subject to the Lender's right subsequently to change such method in accordance with applicable law. Page 2 95 E-LOAN, INC., a California corporation By: ------------------------------ STEVEN M. MAJERUS, Director, Mortgage Banking Page 3 EX-10.13 19 BROKER AGREEMENT WITH CITICORP MORTAGE, INC. 1 EXHIBIT 10.13 Broker Program BROKER {PRIVATE} AGREEMENT - --------- This Agreement to dated and effective the 23 day of SEPTEMBER -- --------- 1997 - between Citicorp Mortgage, Inc. for itself or on behalf of Citibank, FSB, Citibank (NYS), Citibank, N.A. and/or Citibank (Nevada), N.A. (each referred to hereinafter as "Lender") and E-LOAN, INC. ("Broker"). In ------------ consideration of the terms contained in this Agreement. Lender and Broker agree as follows; NOTE: Only One Box Should Be Checked. TABLE FUNDING BROKERS - THE FOLLOWING PROVISIONS ARE APPLICABLE: 1. APPLICATION SUBMISSION; ELIGIBLE PRODUCTS Broker may submit mortgage loan application package(s) ("Application(s)") to Lender in contemplation of possible table funding by lender. "Table fund" or "Table funding" means lender provides the funding at or before closing, closing occurs in the name of Broker, and Broker assigns all rights to each loan ("Loan") to Lender simultaneously with closing of the Loan. Applications shall related to the various residential mortgage loan products described in Lender's "Citicorp Mortgage, Inc. Broker's Guide," which Lender may modify at any time following 7 calendar days written notice to Broker. Lender will have complete discretion to approve or disapprove Applications for table funding. If Lender agrees to table fund a Loan, Lender shall be responsible for the underwriting of the Loan. Broker shall close such Loan using loan documentation and accounting to producers approved by Lender. Each appraisal of property securing a Loan will be appraised only by an appraises included in Lender's list of approved appraisers, are in effect from time to time. 2. FUNDING Lender will provide table funding for each approved Loan under the terms described in the Citicorp Mortgage, Inc. Table Funding Commitment executed following Citicorp approval of the Application. The Citicorp Funding Commitment may vary from Loan to Loan. [X]PROCESSING BROKERS - THE FOLLOWING PROVISIONS ARE APPLICABLE: /s/ J. Pawlowski 2. PRODUCTS AND SERVICES Broker may submit mortgage loan application(s) ("Application(s)") to Lender. Lender will make available various residential mortgage loan products and services described in lender's "Citicorp Mortgage, Inc. Broker's a Guide," which Lender may modify at any time following 7 calendar days written notice to Broker. Lender will have complete discretion to approve or disapprove Applications and will close each approved loan ("Loan") in its own name. 3. BORROWER FEES AND DISCLOSURE Lender will not impose any charges other than those set forth in Lender's customer disclosures and pricing bulletins in affect from time to time. 2 Nothing in this Agreement will prohibit Broker from imposing loan ("Broker Fees") on its customers for consultations and other services ("Broker Services"), provided any Broker Pass are imposed pursuant to a written agreement and in accordance with applicable law. Broker Fees may be disbursed from closing funds if authorized in writing by the customer. The payment of Broker Fees will not be a condition of closing. Any dispute regarding a Broker Fee shall be resolved by the Broker and the customer without involvement by Lender. 3 Broker Program BROKER AGREEMENT - --------- If any Loan or Application submitted by Broker to Lender is rescinded or withdrawn pursuant to the Federal Truth-in-Lending Act, applicable Federal regulations or any State law, Broker will refund to the rescinding customer any and all Broker Fees it received. Broker will immediately reimburse Lender upon request for any Broker Fee refunded by Lender in the event of such a rescission or withdrawal. THE FOLLOWING PROVISIONS ARE APPLICABLE TO ALL BROKERS: 3. REPRESENTATIONS, WARRANTIES AND COVENANTS Broker represents, warrants and covenants throughout the term of this Agreement as follows: (a) That it is a (corporation)(banking association)(partnership)(proprietorship)(limited liability company/partnership) (cross out inapplicable choices) duly organized, validly existing and in good standing and is authorized to do business in the State(s) of CALIFORNIA and that ---------- all corporate of other actions and approvals necessary for the execution and performance of this Agreement have been taken and/or received. (b) That it is the holder of one or more valid lender, broker or other applicable license(s) bearing number(s) 01223430 issued by the State(s) of -------- CALIFORNIA, which Broker shall maintain in good ---------- standing throughout the term of this Agreement, and is in compliance with any mortgage lender or broker or other laws applicable to its activities under this Agreement. Broker agrees to promptly provide Lender with copies of all such license(s) upon request by Lender. (c) That the (principals)(partners)(owners) forces out inapplicable choices) consent to allow Lender to periodically investigate their backgrounds. The scope of background checks will include but not be limited to obtaining credit bureau reports. The aforesaid individual(s) acknowledge that Lender reserves the right to obtain updates to all such background information on a periodic basis and the aforesaid individual(s) will, upon written request by Lender, execute all documents necessary to obtain such updates. (d) That it is thoroughly familiar with and will comply with all applicable Federal, State and local laws and regulations directly or indirectly relating to its activities under this Agreement (including but not limited to involvement in such activities of individuals convicts of crimes involving dishonesty or branch of trust). (e) That this Agreement is nonexclusive and that Broker maintains loan funding relationships with more than one funding source. (f) That Broker has obtained "Citicorp Mortgages, Inc. Broker's Guide" and has reviewed, or promptly will review it, and will comply with its contents and will process such Application and close each loan in accordance with the instructions and criteria contained in such Guide and any amendment(s) thereto. Such instructions and criteria shall include but not be limited to underwriting criteria, documentation requirements and closing criteria. Both parties agree that the aforesaid Guide and all amendments, supplements, and bulletins to such Guide shall be incorporated by references herein and shall form part of this Agreement. (g) That all information provided by Broker, including information obtained by Broker from other sources, is true, correct, currently valid and genuine. 4 (h) That each Application will be originated by Broker and not by any third party, such as a correspondent of Broker. 5 Broker Program BROKER AGREEMENT - --------- (i) That Broker does not currently and will not in the future employ any entity or individual on the FHLMC exclusionary list. (j) That Broker will immediately notify Lender if it (i) fails to maintains any licenses in violation of (b) above, (ii) becomes subject to any enforcement and/or investigative proceeding by any licensing or regulatory authority or agency and/or (iii) is named as a party or becomes involved in any material litigation. (k) That Broker will immediately notify Lender if (i) Broker and/or any of its principal owner(s) becomes the debtor in any voluntary or involuntary bankruptcy proceeding, (ii) Broker and/or any of its principal owner(s) requests the appointment of a receiver and/or (iii) Broker and/or any of the principal owner(s) has incurred or is likely to incur is material, adverse change in its/their financial condition. (l) That Broker will immediately notify Lender of any material change in ownership and/or management. (m) That Broker will promptly respond to or otherwise comply with Lender's responsible request(s) for periodic financial statements of Broker and/or any of its principal owner(s). 4. ADVERTISING Brokers may advertise to the public the availability of lending programs, but Broker may not in any may identity Lender in any advertising unless otherwise required by applicable law and Lender has given its advance written approval. Broker agrees that the borrower(s) on all Loans purchased by Lender are the exclusive customers of Lender. Neither Broker nor any of its affiliates shall directly target the Loan borrower(s) for any loan refinance solidation(s). Without the prior written consent of Lender. Broker shall not sell or distribute any customer list incorporating the names of such borrower(s) and shall include any such that to solicit or promotes, or to allow any other person to solicit or promote, the sale of any financial services of products to any such borrower(s). 5. TERM This Agreement is for an initial one-year term and shall automatically renew for successive one-year terms, unless terminated pursuant to section of this Agreement. 6. RELATIONSHIP BETWEEN LENDER AND BROKER. This Agreement will not create any agency between Broker and Lender, Broker shall conduct its business under this Agreement as an independent contractor and shall have the rights and responsibilities of an independent contractor. Notwithstanding the above, Broker shall be deemed an agent of Lender for the sale and limited purpose of directly engaging real salaries ?? from Lender's approved list of real estate appraisers as revised from times to time by Lender. Any selection of a real estate appraiser by Broker not on Lender's list of approved real estimate appraisers than in effect shall be construed as an act outside the scope of this limited agency. Under no circumstances shall Broker's appointment as a limited agent under this paragraph be continued by any person an confusing any authority respond the simple engagement of real estate appraiser. The limited agency created Lender this paragraph may be revoked by Lender in its discretion at any time upon notice to Broker. Broker's sections under this Agreement shall be demand to be for the inclusive benefit of its customers. Lender shall not be responsible for any actions or omissions by Broker. 6 Broker Program BROKER AGREEMENT - --------- Broker agrees it will not represent, orally, in writing, by implication or otherwise, that it can secure, guarantee or otherwise obtain credit or loan approval by, or otherwise act in any capacity on behalf of, Lender. Lender is prescribing no marketing plan for Broker and exercises no control over the methods, operations and practices (including but not limited to any mortgage pre-qualification practices) of Broker except as provided in this Agreement and procedures adopted by Lender relating to the submission of Applications by Broker. Broker acknowledges it is not selling or distributing Lender's services and Lender has made no premises, representation or warranty regarding the profitability of any arrangement with Lender. Broker acknowledges Lender will be providing Broker with valuable proprietary information ("Confidential Information"), including but not limited to information regarding Lender's products, programs, underwriting policies, procedures and customers. Except as necessary to perform its obligations under this Agreement or as required by law. Broker will not disclose any Confidential Information to any person outside Broker's organization and will limit access to this information within its organization on a strict "need to know" basis. Broker will require all of its employees and other agents to meet its obligations under this Agreement regarding Confidential Information. 7. TERMINATION Lender may immediately terminate this Agreement without notice and Lender then will have no further obligations under this Agreement upon: (1) the failure of Broker to perform or abide by any term or obligation contained in this Agreement; (2) any representation or warranty made by Broker being found by Lender to be false or incorrect in any material respect; (3) commencement by or against Broker of any bankruptcy, insolvency of similar proceedings; (4) the failure of loan applications referred by Broker to satisfy Lender's expectations regarding loan quality and performance; or (5) Lender's determination that Broker's actions contravene the terms of this Agreement or could adversely impact Lender's activities of reputation. Either party may terminate this Agreement for any other reason upon 10 calendar days prior notice to the other. In the event of termination, Broker shall fully cooperate with and insist Lender in obtaining the documentation necessary to complete the processing and full resolution of all matters relating to registered applications eligible for closing and all closed loans. 8. ASSIGNMENT Broker may not assign this Agreement or delegate any of us responsibilities under this Agreement. Lender reserves the right, upon notice to Broker, to assign or delegate in whole or in part its obligations and responsibilities under this Agreement to any affiliated entity engaged in the business of residential financing. 9. NON-EXCLUSIVE AGREEMENT Broker's rights under this Agreement are on a non-exclusive basis. Lender shall be free to market its products and services to, and to contract with, other parties and customers as it deems appropriate. Broker is under no obligation to submit Applications or to refer its customers to Lender for any purpose. 10. INDEMNIFICATION Broker agrees to indemnify and hold Lender nominee from any and all claims, actions and costs, including reasonable attorneys' fees and costs, arising from (i) Broker's performance or failure to perform under the terms of this Agreement, (ii) any fraud, misrepresentation or breach of any representation, warranty or covenant contained in this Agreement and/or (iii) Broker's advertisements, promotions or other activities. This indemnification shall extend to any action or inaction by employees, officers, agents, independent contractors or other representatives of Broker and shall survive the expiration and termination of this Agreement. 7 Broker Program BROKER AGREEMENT - --------- 11. CURE OR REPURCHASE If Lender, in its sole and exclusive discretion, determines that any Loan: (i) was underwritten and/or originated in violation of any term or condition of this Agreement, the Guide referenced in Section 3(f) above and all amendments thereto: (ii) was underwritten and/or originated based on any materially inaccurate information or material misrepresentation made by the loan borrower(s), Broker, Broker's employees, agents and/or affiliates, or any other party providing information relating to said Loan; (iii)was or is capable of being rescinded by the applicable borrower(s) pursuant to the provisions of any applicable federal or state law or regulation including but not limited to the federal Truth-In-Lending Act; and/or (iv) must be repurchased from any secondary manual Investor (including but not limited to the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation) due to a breach by Broker of any representation, warranty or covenant contained in this Agreement. the Guide referenced in Section 3(f) above and all amendment thereto Broker ??, upon notification by Lender and/or such secondary market Investor, (i) Immediately correct or pure such defect within the time prescribed by Lender and/or any such secondary market Investor to the full and complete satisfaction of Lender and/or any such secondary market Investor or (ii) repurchase such defective Loan from Lender or such secondary market investor and the price required by Lender or such secondary market, investor ("Buyout Price"). If Lender or such secondary market investor requests such repurchase. Broker shall, within ten (10) business days of Broker's receipt of such repurchase request, pay to Lender and/or such secondary market investor the Buyout Price by cashier's check or wire transfer of immediately available federal funds. Broker agrees and acknowledges that the provisions of this Section 11 do not, in any way, eliminate, diminish or impair the indemnification obligations contained in Section 10. 12. GOVERNING LAW This Agreement shall be governed by the laws of the State of Missouri and applicable federal law. 13. NOTICE All notices shall be in writing and shall be sent by registered, certified or first-class mail, postage fully prepaid. All notices addressed to Lender should be sent to its office at: REGULAR MAIL OVERNIGHT MAIL Citicorp Mortgage, Inc. Citicorp Mortgage, Inc. Attn.: Intermediary Management Attn.: Intermediary Management P.O. Box 790150 12558 N. Outer Forty Road St. Louis, MO 83178-0150 St. Louis, MO 83141
or to such other address designated in writing by Lender from time to time. All notices addressed to Broker should be sent to its office at: 590 UNIVERSITY AVE SUITE 350 ---------------------------- PALO ALTO, CA 94301 ------------------- or to such other address designated in writing by Broker from time to time. 8 Broker Program BROKER AGREEMENT - --------- IN WITNESS WHEREOF, the parties have signed this Agreement. Citicorp Mortgage, Inc. ("Lender") E-LOAN, INC.(Broker) ------------ By /s/ Signature Illegible By JANINA PAWLOWSKI /s/ Signature Illegible ---------------- Title /s/ Signature Illegible Title C.E.O. ------- Date 10/30/97 Date 9-23-97 -------- -------
Karen M. Lopez, VP, CMI - Credit Analyst 1 Sansome Street, 6th Floor San Francisco, CA 94104 NOTE: THE TEXT OF THIS AGREEMENT MAY NOT BE CHANGED IN ANY MANNER WHATSOEVER WITHOUT THE PRIOR WRITTEN PERMISSION OF CMI. EX-10.14 20 UNDERWRITING REVIEW AGREEMENT WITH CMAC SERVICE CO 1 EXHIBIT 10.14 UNDERWRITING REVIEW AGREEMENT This AGREEMENT, made and entered into this 3rd day of September, 1998, --- by and between CMAC SERVICE COMPANY, a corporation organized and existing under the laws of the Commonwealth of Pennsylvania, with its principal offices located at 1601 Market Street, Philadelphia, Pennsylvania 19103 (hereinafter referred to as "CMAC-SC") and E-LOAN, INC., a corporation organized and existing under the laws of the State of California, with its principal office located at 6200 Village Parkway, Suite 102, Dublin, California 94568 (hereinafter referred to as "Customer"). WITNESSETH: ---------- WHEREAS, Customer originates and/or purchases residential mortgage loans and in connection therewith desires certain underwriting services; and WHEREAS, CMAC-SC is willing to provide underwriting services to the Customer in accordance with the terms and conditions of this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, agree as follows: 1. DEFINITIONS ----------- When used in this Agreement, the following terms shall have the specific meaning shown unless the context of any provision hereof clearly indicates otherwise: (A) "Application" shall mean a residential loan application completed by a borrower and prepared by an employee or agent of Customer and submitted to CMAC-SC for underwriting pursuant to this Agreement. An Application shall contain all of the supporting documentation customarily included in residential loan packages including, without limitation: verifications of employment and income, and source of down payment and other funds, residential appraisals, credit reports, and such other forms and/or documents as CMAC-SC and/or Customer may reasonably require. (B) "Approved Correspondent Lender or Broker" shall mean those mortgage originators who Customer has approved. (C) "Automated Underwriting Application" shall mean a FannieMae Form 1003 or Freddie Mac Form 65, or such other information as may be required, prepared by an employee or agent of Customer and submitted to CMAC-SC for underwriting pursuant to this Agreement. -1- 2 (D) "Automated Underwriting Guidelines" shall mean the most current applicable Underwriting and/or submission guidelines for Desktop Underwriter, Loan Prospector, or any other Automated Underwriting System approved by CMAC-SC for use by Customer as set forth on Exhibit "C." (E) "Automated Underwriting System" shall mean FannieMae Desktop Underwriter ("DU"), Freddie Mac Loan Prospector ("LP") and/or any other AutomatedUnderwriting System approved in writing by CMAC-SC for use by Customer. (F) "Business Day" shall mean any regularly scheduled work day for employees of the United States Government or CMAC-SC. (G) "Loan" shall mean any note, bond, or other evidence of indebtedness secured by a mortgage, deed of trust, or other instrument which constitutes or is equivalent to a first lien charge on Property. For purposes of this Agreement, no Loan shall exceed $500,000. (H) "Property" shall mean residential real property, including all improvements thereon, securing a Loan and shall be limited to any building, or units in a condominium designed for occupancy by not more than four (4) families. (I) "Underwriting Guidelines" shall mean those specific underwriting criteria set forth in the Federal National Mortgage Association ("FannieMae") and/or Federal Home Loan Mortgage Corporation ("Freddie Mac") Seller's Guide and/or such other underwriting Guidelines as set forth on Exhibit "D" as agreed upon by CMAC-SC and Customer as of the effective date of this Agreement, as updated or amended by FannieMae or Freddie Mac or Customer in writing. (J) "Exclusions" shall mean those specific property and loan types as set forth on Exhibit "E." (K) "Mortgage Insurance Standards" shall mean all programs acceptable to CMAC for Mortgage Insurance and any limitations as set forth in Exhibit "F." 2. UNDERWRITING SERVICES --------------------- In consideration of the payment by Customer of the appropriate fees as hereinafter set forth, CMAC-SC hereby agrees to review Applications for Customer and determine if such Applications comply with the Underwriting Guidelines, as appropriate. For Automated Underwriting Applications, CMAC-SC agrees to properly submit the Application data to the applicable Automated Underwriting System, and to accurately report to Customer the Automated Underwriting System's decision with regard to the Loan. -2- 3 Customer hereby agrees that any and all decisions made by CMAC-SC pursuant to this Agreement constitute decisions of Customer and any action taken in respect thereof shall be deemed undertaken solely on behalf of Customer. 3. APPLICATION PROCESSING ---------------------- The procedures set forth in this Section 3 shall be followed for each Application submitted to CMAC-SC under this Agreement. (A) Customer shall deliver complete Applications to the appropriate office of CMAC-SC, the addresses of which are set forth on Exhibit "A", and/or to such other offices as CMAC-SC may notify Customer in writing. CMAC-SC shall stamp each Application upon receipt and such date stamp shall be conclusive evidence of the date of receipt by CMAC-SC. (B) CMAC-SC shall be entitled to retain all documents submitted by or on behalf of Customer and shall have no obligation to complete its review with respect to any Application unless such Application is complete. (C) In the event any Application is found to be incomplete or in the opinion of CMAC-SC, additional information or documentation is required, CMAC-SC shall notify Customer of the missing or required documentation. Customer shall provide such missing or additional documentation within ten (10) Business Days of the date of such notice. (D) CMAC-SC shall provide Customer with a monthly report detailing all Applications received and processed during the prior month. Such statement shall list with respect to each Application set forth, the Application number, borrower's name, date of receipt, date of decision and such other information as Customer may reasonably require. (E) CMAC-SC shall use reasonable best efforts to review each Application within two (2) to five (5) Business Days after its receipt of a complete Application and complete its review and notify Customer of its decision. Such notification shall be made by telephone and thereafter confirmed in writing. (F) Applications reviewed pursuant to this Agreement may be classified in one of three categories: (1) "APPROVED". An Approved Application is one which is ---------- determined to be in conformity with the Underwriting Guidelines. An Approved Loan may have conditions added to it which Customer or a borrower must satisfy prior to or upon the closing of the Loan. (2) "DENIED. A Denied Application is one which is ------- determined not to be in conformity with the Underwriting Guidelines. -3- 4 (3) "SUSPENDED". A Suspended Application is one which is ----------- determined to be incomplete according to sub-section (C) above. (G) Automated Underwriting Applications reviewed pursuant to this Agreement shall be classified according to the designation(s) given by the applicable Automated Underwriting System. 4. ON-SITE PROVISIONS ------------------ Where Customer elects to invite, and CMAC-SC agrees to place, an underwriter(s) on the Customer's premises, Section 3 (A) and (B) shall not apply, and the following provisions shall apply to any Loan(s) underwritten at the location(s) set forth in Exhibit "B" hereto. (A) Work Space(s). Customer agrees to provide CMAC-SC's ------------- underwriter(s) with appropriate work space(s) at the location(s) set forth on Exhibit "B" hereto. (B) Application Processing. Customer shall deliver complete ---------------------- Applications to CMAC-SC's underwriter(s) at the Customer's business location(s) as set forth in Exhibit "B" and/or to such other offices as CMAC-SC and Customer may agree in writing. CMAC-SC's Underwriter shall follow the procedures set forth in Sections 3(C) through 3(F). (C) File Maintenance. Customer represents and warrants that it ---------------- shall maintain a complete Application file, including the complete documentation included in the original Application file, and in accordance with the requirements of FannieMae and/or Freddie Mac if applicable, for each Loan underwritten by CMAC-SC pursuant to the Agreement. Customer acknowledges that CMAC-SC will rely on Customer for all file maintenance. (D) File Review. Customer agrees that upon reasonable notice from ----------- CMAC-SC, it will copy and forward to CMAC-SC, or allow CMAC-SC access to any Application file(s) requested by CMAC-SC for audit, review, or any other purpose. (E) Failure to Maintain or Produce Files. In the event that ------------------------------------ Customer does not provide for maintenance of Application files as noted above, or fails to produce such Application files upon reasonable request, CMAC-SC shall have no liability whatsoever for the Loan or Loans in question and Customer shall waive those sections of the Agreement relating to its indemnification. 5. PRIVATE MORTGAGE GUARANTY INSURANCE ----------------------------------- Nothing contained in this Agreement shall be deemed to be a representation, warranty or commitment that CMAC-SC shall be obligated to obtain private mortgage guaranty or pool insurance for any Loan. Notwithstanding, the fact that any Application is classified as Approved hereunder, CMAC-SC makes no representation or warranty of any nature regarding the insurability of any such Application. -4- 5 Upon request of Customer, CMAC-SC shall forward any Application to Commonwealth Mortgage Assurance Company ("CMAC") for mortgage insurance underwriting pursuant to the Mortgage Insurance Standards set forth on Exhibit "F" of this Agreement. 6. FEES ---- Customer and/or Approved Correspondent Lender or Broker agrees to pay CMAC-SC an Underwriting Review Fee pursuant to the terms and conditions of this Agreement; regardless of the underwriting decision reached. (A) Applications for Loans insured by CMAC: [*] (B) Applications for Loans not insured with CMAC: [*] (C) [*] (D) Automated Underwriting Applications: Pursuant to the fee schedule set forth on Exhibit "C." Customer shall be responsible for all costs of delivering Applications to CMAC-SC. CMAC-SC shall provide Customer with a monthly invoice detailing the total number of Applications reviewed and, if a per diem rate under Section 6(C), an itemized accounting of the hours worked per underwriter during the previous month, and the total charges owed to CMAC-SC. Customer shall pay any such invoice within fifteen (15) days of its receipt by Customer. To the extent Customer requires that Applications be underwritten at sites which are not set forth in Exhibit "A", Customer hereby agrees to reimburse CMAC-SC for all travel and lodging expenses incurred by CMAC-SC employees relating to this Agreement. CMAC-SC shall provide Customer with a detailed summary of such expenses and Customer shall remit the amount due to CMAC-SC within fifteen (15) days of its receipt thereof. CMAC-SC will not incur any costs for travel and lodging without the Customer's prior approval. In the event an Application is determined by CMAC-SC to be incomplete and the missing or required documentation is not provided within the time period set forth in Section 3(C) above, Customer shall be obligated to pay CMAC-SC an Underwriting Review Fee, notwithstanding the fact, that the review of such Application has not been completed. If Customer subsequently completes the Application and requests a new review of the Application in question, an additional Underwriting Review Fee shall be required. - ---------- *Confidential treatment requested pursuant to a request for confidential treatment filed with the Securities and Exchange Commission. Omitted portions have been filed separately with the Commission. -5- 6 7. REPRESENTATIONS, WARRANTIES OF CUSTOMER --------------------------------------- Customer makes the following representations and warranties to CMAC-SC: (A) CMAC-SC shall be entitled to rely upon the information and documents constituting the Application or Automated Underwriting Application and shall incur no liability for the accuracy thereof in fulfilling its obligations under this Agreement. In addition, CMAC-SC shall not have any obligation to independently verify any information provided to it, nor shall the terms of this Agreement imply any duty upon CMAC-SC to determine whether such information is false. CMAC-SC and its officers, employees, and agents may rely upon any information or document submitted by Customer to CMAC-SC in connection with an Application or Automated Underwriting Application, and shall not be responsible to Customer or any other person for errors and omissions therein, so long as such information or document appears to be: (a) regular on its face; (b) properly executed; and (c) is either included with an Application or Automated Underwriting Application or is supplied to CMAC-SC by (i) Customer, (ii) Customer's employees, (iii) persons or entities to whom CMAC-SC has been referred to by Customer, or (iv) persons or entities identified in any document supplied by Customer as part of an Application or Automated Underwriting Application. (B) Customer is a corporation duly organized, validly existing and in good standing under the laws of the State of California and has all the requisite power and authority to carry on its business as currently conducted. 8. REPRESENTATIONS, WARRANTIES OF CMAC-SC -------------------------------------- CMAC-SC makes the following representations and warranties to Customer: (A) CMAC-SC is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Pennsylvania and has all the requisite power and authority to carry on its business as currently conducted. (B) All Applications reviewed pursuant to this Agreement shall be underwritten pursuant to the Underwriting Guidelines and/or the Automated Underwriting Guidelines. (C) CMAC-SC is an independent contractor. Nothing contained in this Agreement shall be deemed to create a joint venture or partnership relationship between CMAC-SC and Customer. 9. INDEMNIFICATION OF CMAC-SC -------------------------- CMAC-SC shall have no duty hereunder to either: (i) ensure that any Application complies with or (ii) review any Application for compliance with any state, federal or local laws or regulations relating to consumer credit protection, truth-in-lending or equal credit opportunity, including but not limited to the Consumer Credit Protection Act and Regulation Z promulgated thereunder, the Equal Credit Opportunity Act and Regulation B promulgated thereunder, Title VIII of the Fair Housing Act of 1968, the Real Estate Settlement Procedures -6- 7 Act, the Fair Credit Reporting Act, and the Home Mortgage Disclosure Act ("HMDA"). Customer shall comply, or instruct its designee that submitted an Application to comply, with the Equal Credit Opportunity Act notification requirements and all other requirements under state or federal law for notification to applicants for Loans with respect to each Application reviewed by CMAC-SC. CMAC-SC shall also have no duty to provide any Loan borrower or other third party with any disclosure required under any of the foregoing laws or regulations, it being understood that Customer shall provide such disclosures or cause its designee that submitted the Application to provide such disclosures. Customer acknowledges that CMAC-SC obtains any and all HMDA data from Customer and/or Approved Correspondent Lender or Broker, and Customer agrees that CMAC-SC shall have no liability for the accuracy or completeness of such HMDA data. Customer agrees to indemnify and hold CMAC-SC and its affiliates, and each of their directors, officers, employees and agents ("Indemnitees"), harmless from all losses, damages, penalties, fines, expenses (including attorneys' fees) and costs ("Losses"), incurred by each Indemnitee resulting or arising, directly or indirectly, from: (i) any failure by Customer to provide any disclosures set forth above, and (ii) any claim, demand, suit or other proceeding brought by a borrower with respect to the application by CMAC-SC of the applicable Underwriting Guidelines to the Application, except for Losses resulting or arising under Section 10 herein. In the event that any claim, action or proceeding indemnified against herein shall be brought or commenced against CMAC-SC, any affiliated company or any officer, director, employee or agent thereof, then upon written notice to Customer, Customer shall provide promptly for such action or defense as may be necessary to effectuate the provisions hereof. CMAC-SC hereby agrees to cooperate with Customer and counsel designated by Customer, provided, however, that nothing contained herein shall preclude CMAC-SC from taking such actions as may be necessary or appropriate to mitigate and/or prevent any loss, damage, cost or expense. 10. INDEMNIFICATION OF CUSTOMER --------------------------- (A) Indemnification --------------- (1) Subjective Interpretation. The parties recognize and ------------------------- agree that the Underwriting Guidelines and their application to any Loan entail a certain degree of subjective interpretation and necessarily involve subjective analysis of certain data where the judgment of prudent underwriters could differ. Accordingly, CMAC-SC does not guarantee or warrant that any third party, including, but not limited to, any reviewing authority or investor, will agree with CMAC-SC that a Loan complies with the Underwriting Guidelines. (2) Standard of Care. Notwithstanding anything contained ---------------- in this Agreement to the contrary, CMAC-SC will not be liable, in connection with this Agreement or the -7- 8 services rendered by CMAC-SC hereunder, to Customer or any other person or entity, in contract, tort, strict liability, equity or otherwise, for any act, failure to act, error, mistake, or omission in reviewing a Loan hereunder, unless all of the following conditions are satisfied: (a) such act, failure to act, error, mistake, or omission materially restricts or impairs the salability of such Loan or results in a material reduction of the value of such Loan; and (b) such act, failure to act, error, mistake, or omission constitutes gross negligence or willful misconduct and results from CMAC-SC failure to perform underwriting review services for such Loan File in accordance with the terms and conditions of this Agreement; and (c) Customer provides written notice of such act, failure to act, error, mistake, or omission to CMAC-SC within thirty (30) days after Customer discovers, or should reasonably have discovered, such act, failure to act, error, mistake, or omission, but in no event later than: three (3) years after underwriting review services for such Loan were performed by CMAC-SC. (3) Subrogation. In the event and to the extent that ----------- CMAC-SC is liable to Customer under this Agreement, Customer shall preserve and, absent CMAC-SC's prior, express, written consent, shall not modify or release, any and all rights which Customer may have against any other person or entity which may be liable to Customer in connection with any Loan for which CMAC-SC is liable to Customer. CMAC-SC shall be subrogated to Customer's rights against such other person or entity and Customer shall assign to CMAC-SC such rights. (B) Limitation of Liability ----------------------- It is hereby understood and agreed that in the event Customer is entitled to indemnification pursuant to Section 10(A), CMAC-SC shall, within thirty (30) days of receipt of a written demand for indemnification from Customer, elect one of the following options: (1) Provide for such additional insurance or other credit enhancement that will be satisfactory to Customer, the cost of which is to be borne by CMAC-SC; or (2) Purchase the Loan in question, at a price equal to the sum of: (a) the unpaid principal balance at the time of purchase; plus (in the case of original purchase price premiums), or minus (in the case of original purchase price discounts) the original purchase price discount, or as appropriate, premium percentage multiplied by the unpaid principal balance at the time of purchase; plus -8- 9 (b) accrued and unpaid interest amount through the date the Loan is purchased. (3) In the event that CMAC-SC elects to purchase the Loan pursuant to Section 10 (B) (2) above, Customer represents and warrants that the Loan is free of any other defects and has been closed in conformity with Customer's regular policies and procedures. Customer warrants that the mortgage loan documents and the transaction taken as a whole comply with all applicable state and federal laws. Customer agrees to provide CMAC-SC with a complete closed loan package for its review prior to the purchase hereunder and to cure any defect, whether or not discovered at that time, for the life of the Loan. (C) Exclusive Remedy ---------------- Any liability of CMAC-SC set forth in this section shall be exclusive and in lieu of any other remedy or liability. CMAC-SC shall not be liable for any special, indirect, consequential, punitive or other damages which Customer or any other entity suffers or incurs as a result of any act or omission of CMAC-SC. Upon the purchase of a Loan or the provision of additional insurance or other credit enhancement, CMAC-SC shall have no further obligation or liability to Customer in respect of the Loan in question. 11. ARM'S LENGTH TRANSACTION ------------------------ CMAC-SC and Customer agree that any payments made to CMAC-SC are being made solely in respect of the underwriting review services provided hereunder and in no way reflect or constitute payment to CMAC for any underwriting performed by CMAC in connection with any private mortgage guaranty or pool insurance. 12. TERMINATION ----------- This Agreement may be terminated by either party as of the end of any calendar month by giving the other party thirty (30) days written notice. The obligation of CMAC-SC to accept Applications to be reviewed shall cease upon the effective date of the notice of termination. However, any such notice of termination shall not have the effect of terminating any other right or obligation of any party to this Agreement, and this Agreement shall remain in full force and effect, with respect to all Applications previously processed by CMAC-SC, on behalf of Customer under and pursuant to this Agreement. Provided, however, that the provisions of this Agreement shall continue in full force and effect with respect to all Applications registered as being en-route to CMAC-SC prior to the receipt of the notice of termination. Any such list of registered Applications shall be delivered to CMAC-SC with the notice of termination. 13. MISCELLANEOUS PROVISIONS ------------------------ (A) Assignment ---------- This Agreement may not be assigned by either party without the prior written consent of the other party. -9- 10 (B) Attorney's Fees --------------- In the event any action or proceeding at law or in equity is brought to enforce or interpret the provisions of this Agreement, the prevailing party shall be entitled to recover its reasonable attorney's fees and costs including attorney's fees and costs incurred in any appeal in addition to any other remedy or relief to which such prevailing party may be entitled. (C) Amendment, Modification ----------------------- This Agreement may not be modified, amended or superseded except in writing signed by both parties. (D) Notices ------- Any notices required or permitted to be given under this Agreement may be affected either by personal delivery in writing or by certified mail, postage prepaid, addressed as follows: CMAC SERVICE COMPANY 1601 Market Street Philadelphia, Pennsylvania 19103 Attention: C. Robert Quint (Financial Notices) Attention: Timothy W. Hunter (Legal Notices) E-Loan, Inc. 600 Village Parkway, Suite 102 Dublin, California 94568 Attention: Karen Bacchetti, Senior Underwriter (E) Severability ------------ If any of the provisions of this Agreement are held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof shall nevertheless continue in full force and effect, without being impaired or invalidated in any way. -10- 11 IN WITNESS WHEREOF, the parties have entered into this Agreement as of the day and year first above written. CMAC SERVICE COMPANY By: /s/ Susan Kropp ----------------------------------------- Susan Kropp, Vice President, National Underwriting Director Attest: /s/ Signature Illegible ------------------------------------- E-Loan, Inc. By: /s/ Steven M. Majerus ----------------------------------------- Steven M. Majerus Director Mortgage Banking Operations Attest: /s/ Signature Illegible -11- 12 EXHIBIT "A" - CMAC-SC Locations E-Loan, Inc. shall deliver Loan Packages to CMAC-SC at the following addresses:
CMAC SERVICE COMPANY 4647 North 32nd Street 100 W. Big Beaver Road Suite 245 Suite 160 Phoenix, Arizona 85018 Troy, Michigan 48084 2010 Main Street 2001 Killebrew Drive Suite 215 Suite 157 Irvine, California 92614 Bloomington, Minnesota 55425 4275 Executive Square 13610 Barrett Office Drive Suite 335 Suite 110 La Jolla, California 93037 Manchester, Missouri 63021 4000 Moorpark Avenue The Plazas, Suite D305 Suite 100 2340 Paseo Del Prado San Jose, California 95117 Las Vegas, Nevada 89102 Orchard Place IV, Suite 130 425 Broadhollow Road 5990 Greenwood Plaza Blvd. Suite 400 Englewood, Colorado 80111 Melville, New York 11747 4901 NW 17th Way 6060 J.A. Jones Drive Suite 506 Suite 310 Fort Lauderdale, Florida 33309 Charlotte, North Carolina 28287 Westshore Place II 130 East Wilson Bridge Road 4300 West Cypress, Suite 1075 Suite 205 Tampa, Florida 33607 Worthington, Ohio 43085 5775 Peachtree Dunwoody Road 3501 Northwest 63rd Street Suite 460, Building C Suite 401 Atlanta, Georgia 30342 Oklahoma City, Oklahoma 73116 One Century Centre One Lincoln Center, Suite 420 1750 East Golf Road, Suite 290 10300 SW Greenburg Road Schaumburg, Illinois 60173 Portland, Oregon 97223 10 Forbes Road (temporary - starting September 1998) 2nd Floor, East Building 400 Market Street, 2nd floor Braintree, Massachusetts 02184 Philadelphia, Pennsylvania 19106
(continued) -12- 13 EXHIBIT "A" - CMAC-SC Locations (continued) 13760 Noel Road Suite 614 Dallas, Texas 75240-9990 Three Northborough 12707 North Freeway, Suite 390 Houston, Texas 77060 Centennial Plaza 45 West 10000 South, Suite 309 Sandy, Utah 84070 7600 West Leesburg Pike, Suite 250 Falls Church, Virginia 22043 Bellevue Corporate Plaza 600 108th Avenue, Suite 1020 Bellevue, Washington 98004 -13- 14 EXHIBIT "B" - Customer's On-Site Location(s) CMAC-SC's underwriter(s) shall perform the Underwriting Services at the following location: 6200 Village Parkway, Suite 102 Dublin, California 94568 -14- 15 EXHIBIT "C" - Automated Underwriting Fee Schedule NOT APPLICABLE -15- 16 EXHIBIT "E" - Exclusions Property and Loan types not eligible for underwriting services under this Agreement o Closed Loan Transactions o Condomium-Hotel Properties o Construction Loan Transactions (end loans acceptable) o Cooperative Properties o Federal Housing Administration (FHA) Loans o Foreign National Borrowers o Guam, Hawaii, Puerto Rico, Alaska, Virgin Islands o Lot Loans o Rural Housing Service (RHS) Loans [formerly FmHA] o Single-wide Mobile Homes o Subordinate Financing (home equity, junior liens, combination loans) o Sub-prime Products o Time Shares o Veterans Administration (VA) Loans CMAC-SC reserves the right to review all products and exclude those deemed not eligible for underwriting services. -17- 17 EXHIBIT "F" For special CMAC Mortgage Insurance Standards issued by CMAC's Credit Policy Division, if applicable. -18- EX-10.15 21 WAREHOUSE CREDIT AGREEMENT WITH COOPER RIVER 1 EXHIBIT 10.15 $15,000,000 WAREHOUSE CREDIT AGREEMENT among E-LOAN, INC., as Borrower, COOPER RIVER FUNDING INC., as Lender and GE CAPITAL MORTGAGE SERVICES, INC., as Agent Dated as of June 24, 1998 2 TABLE OF CONTENTS -----------------
Page SECTION 1. DEFINITIONS AND PRINCIPLES OF CONSTRUCTION 1 1.01 Defined Terms 1 1.02 Principles of Construction 14 SECTION 2. AMOUNT AND TERMS OF CREDIT 15 2.01 Commitment 15 2.02 Minimum Borrowing Amount 15 2.03 Pledge of Collateral 15 2.04 Request for Advance 16 2.05 Disbursement of Funds 16 2.06 Note 16 2.07 Interest 17 SECTION 3. FEES 17 3.01 Fees 17 SECTION 4. PREPAYMENTS; PAYMENTS 18 4.01 Voluntary Prepayments 18 4.02 Mandatory Prepayments 18 4.03 Release of Collateral; Substitution 20 4.04 Sale of Collateral to Investors 21 4.05 Method and Place of Payment 22 4.06 Net Payments 22 SECTION 5. CONDITIONS PRECEDENT 22 5.01 Execution of Agreement; Note 22 5.02 No Default; Representations and Warranties 22 5.03 Request for Advance 22 5.04 Opinion of Counsel 23 5.05 Diligence 23 5.06 Corporate Documents; Proceedings 23 5.07 Financial Statements 23 5.08 Mandatory Prepayment 23 5.09 Warehouse Security Agreement 24 5.10 No Adverse Change 24 5.11 Insurance 24 5.12 [Intentionally omitted] 24 5.13 Delivery of the Collateral 24 5.14 Fees 25 5.15 No Litigation 25 5.16 Liquidity Agreement 25 5.17 Acknowledgment 25 5.18 Legal or Regulatory Proceedings 25 5.19 Guaranty Agreement 25 5.20 Support Agreement 25 5.21 Intercreditor Agreement 25 5.22 Treatment of Existing Liens 26 SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS 26
i 3 6.01 Corporate Status 26 6.02 Corporate Power and Authority 26 6.03 No Violation 26 6.04 Governmental Approvals 27 6.05 Financial Statements; Financial Condition; Undisclosed Liabilities; etc. 27 6.06 Litigation 27 6.07 True and Complete Disclosure 27 6.08 Use of Proceeds; Margin Regulations 28 6.09 Tax Returns and Payments 28 6.10 Compliance with ERISA 28 6.11 Capitalization 28 6.12 Subsidiaries 29 6.13 Compliance with Statutes, etc 29 6.14 Investment Company Act 29 6.15 No Burdensome Agreement 29 6.16 Security Interests 29 6.17 Registration 29 6.18 Representations Relating to the Mortgage Loans 30 6.19 Representations Relating to the Mortgage-backed Securities 31 6.20 Insurance 31 6.21 Title to Property 32 6.22 No Recourse Sales 32 6.23 Fictitious Names 32 SECTION 7. AFFIRMATIVE COVENANTS 32 7.01 Information Covenants 32 7.02 Books, Records and Inspections 35 7.03 Maintenance of Property, Insurance 35 7.04 Corporate Franchises 36 7.05 Compliance with Statutes, etc. 36 7.06 ERISA 36 7.07 Performance of Obligations 37 7.08 Mortgage Loans 37 7.09 Payment of Taxes 37 7.10 Corporate Separateness 38 7.11 Collateral 38 7.12 Portfolio Hedging Arrangements 38 7.13 Borrowing Base Valuation Reports 38 SECTION 8. NEGATIVE COVENANTS 39 8.01 Liens 39 8.02 Consolidation, Merger, Sale of Assets, etc. 39 8.03 Dividends 39 8.04 [Intentionally omitted] 40 8.05 Advances, Investments and Loans 40 8.06 Transactions with Affiliates 40 8.07 Capital Expenditures 41 8.08 Maximum Adjusted Leverage Ratio 41 8.09 Minimum Adjusted Tangible Net Worth 41 8.10 [Intentionally omitted] 41 8.11 Modifications of Certificate of Incorporation, By-Laws, Certain Other Agreements and Collateral 41 8.12 Limitation on Restrictions on Subsidiary Dividends and Other Distributions 41 8.13 Limitation on Issuances of Capital Stock by Subsidiaries 41 8.14 Business 42 8.15 Portfolio Aging 42
ii 4 8.16 Minimum Current Ratio 42 SECTION 9. EVENTS OF DEFAULT 42 9.01 Payments 42 9.02 Representations, etc. 42 9.03 Covenants 42 9.04 Default Under Other Agreements 42 9.05 Default Under Agreements With Agent 43 9.06 Bankruptcy, etc. 43 9.07 ERISA 43 9.08 Warehouse Security Agreement 43 9.09 [Intentionally omitted] 43 9.10 Management 43 9.11 Judgments 44 9.12 Material Adverse Change 44 9.13 Default Not a Condition of a 120-Day Demand 44 SECTION 10. THE AGENT 44 10.01 Authorization and Action 44 10.02 Agent's Duties 45 10.03 GE Capital Mortgage Services, Inc. and Affiliates 45 10.04 Successor Agent 45 SECTION 11. MISCELLANEOUS 46 11.01 Payment of Expenses; Indemnity 46 11.02 Notices 51 11.03 Benefit of Agreement 51 11.04 Remedies Cumulative 51 11.05 Calculations; Computations 51 11.06 Governing Law; Submission to Jurisdiction; Venue 51 11.07 No Proceedings 52 11.08 Counterparts 52 11.09 Effectiveness 52 11.10 Headings Descriptive 52 11.11 Amendment or Waiver 52 11.12 Survival 52 11.13 Waiver of Jury Trial 53 SCHEDULES SCHEDULE 6.11 CAPITALIZATION SCHEDULE 6.12 LIST OF SUBSIDIARIES SCHEDULE 7.01(p) CREDIT PACKAGE DOCUMENTS (LIST OF DOCUMENTS TO BE DELIVERED WITH RESPECT TO A PLEDGED MORTGAGE)
iii 5
EXHIBITS EXHIBIT A-1 - FORM OF PLEDGE OF COLLATERAL EXHIBIT A-2 - FORM OF REQUEST FOR ADVANCE BY CHECK EXHIBIT A-3 - FORM OF REQUEST FOR ADVANCE BY WIRE EXHIBIT B-1 - FORM OF WET ADVANCE DISBURSEMENT INSTRUCTION EXHIBIT B-2 - FORM OF BORROWER'S WET ADVANCE DISBURSEMENT INSTRUCTION EXHIBIT C - INTENTIONALLY OMITTED EXHIBIT D - FORM OF NOTE EXHIBIT E - FORM OF OPINION OF SPECIAL COUNSEL FOR THE BORROWER EXHIBIT F-1 - FORM OF OFFICERS' CERTIFICATE FOR BORROWER EXHIBIT F-2 - FORM OF OWNERS' AND OFFICERS' CERTIFICATION EXHIBIT G - CREDIT SCORES EXHIBIT H - FORM OF ACKNOWLEDGEMENT OF COLLATERAL AGENT'S RIGHTS EXHIBIT I - FORM OF WAREHOUSE SECURITY AGREEMENT EXHIBIT J - FORM OF GUARANTY AGREEMENT EXHIBIT K - FORM OF SUPPORT AGREEMENT EXHIBIT L - FORM OF INTERCREDITOR AGREEMENT
iv 6 WAREHOUSE CREDIT AGREEMENT (as modified, supplemented or amended from time to time, this "Agreement"), dated as of June 24, 1998, among E-LOAN, INC., a California corporation (the "Borrower"), COOPER RIVER FUNDING INC., a Delaware corporation (the "Lender"), and GE CAPITAL MORTGAGE SERVICES, INC., a New Jersey corporation (the "Agent"). WITNESSETH: ---------- WHEREAS, subject to and upon the terms and conditions herein set forth, the Lender is willing to make available to the Borrower the credit facilities provided for herein; NOW, THEREFORE, IT IS AGREED: Section 1. Definitions and Principles of Construction. ------------------------------------------ 1.01 Defined Terms. As used in this 'Agreement, the following terms ------------- shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Adjusted Leverage Ratio" shall mean, as to any Person, the ratio of ----------------------- the Consolidated Liabilities of such Person to the Adjusted Tangible Net Worth of such Person. "Adjusted Tangible Net Worth" shall mean, as to any Person, (x) the ---------------------------- sum of, without duplication, the Consolidated Net Worth of such Person and its Subsidiaries, plus an amount equal to 0% of the aggregate principal amount of the Servicing Portfolio of such Person, plus the principal amount of any Indebtedness that is subordinated to the payment of the Obligations on such terms as are acceptable to the Agent and that does not permit or require any principal payment in respect thereof prior to the Expiry Date in effect from time to time, less (y) the sum of (i) the amount of all intangible items, including, without limitation, goodwill, franchises, licenses, patents, trademarks, trade names, copyrights, service marks, brand names, write-ups of assets and purchased, capitalized or excess servicing, (ii) all receivables from any officer, director or Affiliate of the Borrower, (iii) all unpaid stock subscriptions, (iv) the Contingent Obligations of such Person as determined by the Agent and (v) any other assets determined by the Agent in its reasonable discretion. "Advance" shall have the meaning provided in Section 2.01. ------- "Advance Account" shall mean the depositary account of the Borrower --------------- designated by the Borrower by written notice to the Agent and the Lender. "Affiliate" shall mean, as to any Person, any other Person (other --------- than an individual) directly or indirectly controlling, controlled by, or under direct or indirect common control with, such 7 Person; provided, however, that for purposes of Section 8.06, an Affiliate of -------- ------- the Borrower shall include any Person that directly or indirectly owns more than 5% of the Borrower and any officer or director of the Borrower or any such Person. A Person shall be deemed to control another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise. "Bankruptcy Code" shall mean Title 11 of the United States Code --------------- entitled "Bankruptcy," as now or hereafter in effect, or any successor thereto. "Borrower's Wet Advance Disbursement Instruction" shall have the ----------------------------------------------- meaning provided in Section 2.05. "Borrowing Base" shall mean, as of any date, an amount that is the sum -------------- of the following, with respect to all Eligible Mortgage Loans, Eligible Nonconforming Mortgage Loans and Liquid Assets pledged to the Security Agent as of such date: (1) the sum for all Conforming Loans that are Committed Mortgage Loans and are the subject of an Interest Rate Commitment of the product of (x) the Mortgage Loan Aging Percentage with respect to such Mortgage Loan and (y) 100% of the Market Value of such Mortgage Loan, (2) the sum for all other Conforming Loans that are Committed Mortgage Loans of the product of (x) the Mortgage Loan Aging Percentage with respect to such Mortgage Loan and (y) 99% of the Market Value of such Mortgage Loan, (3) the sum for all Jumbo Loans (each of which shall be a Committed Mortgage Loan) which are the subject of an Interest Rate Commitment of the product of (x) the Mortgage Loan Aging Percentage with respect to such Mortgage Loan and (y) 100% of the Market Value of such Mortgage Loan, (4) the sum for all other Jumbo Loans (each of which shall be a Committed Mortgage Loan) of the product of (x) the Mortgage Loan Aging Percentage with respect to such Mortgage Loan and (y) 99% of the Market Value of such Mortgage Loan, (5) the sum for all Mortgage Loans that are FHA Loans, VA Loans or State Loans of the product of (x) the Mortgage Loan Aging Percentage with respect to such Mortgage Loan and (y) 99% of the Market Value of such Mortgage Loan, (6) 0% of the Market Value of each Mortgage-backed Security, (7) an amount equal to the aggregate principal amount of the Liquid Assets, (8) the sum for all Credit A- Loans of the product of (x) the Nonconforming Mortgage Loan Aging Percentage with respect to such Mortgage Loan and (y) 99% of the Market Value of such Mortgage Loan, (9) the sum for all Credit B Loans of the product of (x) the Nonconforming Mortgage Loan Aging Percentage with respect to such Mortgage Loan and (y) 99% of the Market Value of such Mortgage Loan, (10) the sum for all Credit C Loans of the product of (x) the Nonconforming Mortgage Loan Aging Percentage with respect to such Mortgage Loan and (y) 98% of the Market Value of such Mortgage Loan and (11) the sum for all Credit D Loans of the product of (x) the Nonconforming Mortgage Loan Aging Percentage with respect to such Mortgage Loan and (y) 0% of the Market Value of such Mortgage Loan. "Borrowing Base Valuation Report" shall have the meaning provided in ------------------------------- Section 7.13. "Business Day" shall mean any day except Saturday, Sunday and any ------------ day which shall be in New York, New York, a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close. 2 8 "Cash Equivalents" means (i) securities with maturities of sixty days ---------------- or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (ii) certificates of deposit, eurodollar time deposits, overnight bank deposits, bankers' acceptances and repurchase agreements of any commercial bank whose short-term obligations are rated "A-1" by S&P and, if rated by Moody's, "P-1" by Moody's and, if rated by Fitch, "F-1" by Fitch, having maturities of sixty days or less from the date of acquisition, (iii) commercial paper having maturities of sixty days or less from the date of acquisition, rated at least "A-1" by S&P or "P-1" by Moody's and, if rated by Fitch, "F-1" by Fitch, (iv) money market funds rated at least "AAAm" or "AAA-G" by S&P or "P-1" by Moody's and, if rated by Fitch, "AAA" by Fitch, and (v) repurchase agreements with counterparties whose short-term obligations are rated at least "A-1" by S&P or "P-1" by Moody's and, if rated by Fitch, "F-1" with a term of sixty days or less. "Code" shall mean the Internal Revenue Code of 1986, as amended from ---- time to time. "Collateral" shall mean all "Collateral" as defined in the Warehouse ---------- Security Agreement. "Collateral Agent" shall mean General Electric Capital Corporation in ---------------- its capacity as collateral agent pursuant to the Cooper River Security Agreement. "Collateral Documents" shall mean, as to a Mortgage Loan which has -------------------- been or is to be pledged to the Security Agent as Collateral, the following documents and instruments: (i) The original Mortgage Note executed with respect to such Mortgage Loan by a third party in favor of the Borrower (or properly endorsed to the Borrower if purchased or acquired by the Borrower) and endorsed in blank by the Borrower; (ii) The original recorded Mortgage securing such Mortgage Note or a copy of the original Mortgage securing such Mortgage Note, certified by the Borrower or a title company or escrow company reasonably satisfactory to the Security Agent to be a true copy of the original instrument submitted for recording; (iii) If the Mortgage Note was purchased by the Borrower, an original properly recorded assignment of the related Mortgage to the Borrower or a copy of such assignment certified by the Borrower or a title or escrow company reasonably satisfactory to the Security Agent to be a true copy of the original instrument submitted for recording and a certified copy of each intervening assignment of such Mortgage, if any; (iv) An assignment of the Mortgage by the Borrower to the Security Agent fully completed and in recordable form. If appropriate filing and recording information regarding the Mortgage has not been inserted into the assignment, the Borrower hereby authorizes the Security Agent to insert such information, when available. Such assignment shall not be filed for recordation unless the Security Agent shall in good faith deem such action necessary to further secure any Advances, in which 3 9 case the Security Agent may file of record any or all such assignments. The Borrower shall immediately reimburse the Security Agent for any and all costs and expenses incurred by the Security Agent in connection with such recordation; (v) A closing protection letter executed by an authorized representative of a title insurance company or escrow company reasonably satisfactory to the Agent stating that the closing agent with respect to such Mortgage Loan is an authorized agent of such title insurance company or escrow company; and (vi) Such other documents as the Security Agent may reasonably require from time to time, including, without limitation, a copy of any Purchase Commitment or Master Commitment relating to the Mortgage Loan. "Collateral Value" shall mean, at any time, with respect to a Mortgage --------------- Loan or a Mortgage-backed Security, the amount resulting from that part of the calculation of the Borrowing Base at such time that relates to such Mortgage Loan or Mortgage-backed Security. "Combined Loan-to-Value Ratio" shall mean, as to any Mortgage Loan, ---------------------------- the ratio expressed as a percentage that the sum of the original principal balance of such Mortgage Loan and the then current principal balance of any related first priority mortgage bears to the appraised value of the related mortgaged property at the time such Mortgage Loan was originated. "Commercial Paper" shall mean the short-term promissory notes of the ---------------- Lender. "Commercial Paper Rate" shall mean with respect to any calendar month, --------------------- a rate per annum determined by annualizing the aggregate interest expense of Lender (determined on an accrual basis) for such calendar month in respect of (i) Commercial Paper outstanding during such calendar month and (ii) any borrowings made by Lender under the Liquidity Agreement. "Commitment" shall mean the obligation of the Lender to make Advances ---------- in an aggregate principal amount outstanding at any time not to exceed $15,000,000. "Committed Mortgage Loans" shall mean all Mortgage Loans pledged to ------------------------ the Security Agent pursuant to the terms of this Agreement and of the Warehouse Security Agreement (i) which satisfy all of the requirements of any Purchase Commitment or are covered by a Hedging Contract, (ii) which could be delivered under any such Purchase Commitment, and (iii) which, in respect of all Mortgage Loans of a particular type and yield, do not in the aggregate have a principal amount in excess of the sum of (A) the aggregate then remaining amount of all Purchase Commitments the requirements of which are satisfied by Mortgage Loans of such type and yield owned by the Borrower plus (B) the aggregate amount of all Hedging Contracts that cover Mortgage Loans of such type and yield owned by the Borrower. "Conforming Loan" shall mean a Mortgage Loan (other than a VA Loan, --------------- an FHA Loan or a State Loan) that is underwritten in conformity with FHLMC or FNMA underwriting standards and is otherwise eligible for purchase by FNMA or FHLMC. 4 10 "Consolidated Liabilities" shall mean, as to any Person, the ------------------------ liabilities of such Person and its Subsidiaries determined on a consolidated basis and in accordance with generally accepted accounting principles in the United States, applied on a consistent basis, and shall include in any event the Contingent Obligations of such Person and its Subsidiaries. "Consolidated Net Worth" shall mean, as to any Person, the Net Worth ---------------------- of such Person and its Subsidiaries determined on a consolidated basis and in accordance with generally accepted accounting principles in the United States, applied on a consistent basis. "Consolidated Subsidiaries" shall mean, as to any Person, all ------------------------- Subsidiaries of such Person which are or are required to be consolidated with such Person for financial reporting purposes in accordance with generally accepted accounting principles in the United States. "Contingent Obligation" shall mean, as to any Person, any obligation --------------------- of such Person arising from an existing condition or situation that involves uncertainty as to outcome and that will be resolved by the occurrence or nonoccurrence of some future event, including but not limited to any obligation of such Person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("primary obligations") of any other Person (the "primary obligor") in any manner, whether directly or indirectly; provided, -------- however, that the term Contingent Obligation shall not include endorsements of - ------- instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such Person is required to perform thereunder) as determined by the Agent. "Cooper River Security Agreement" shall mean the Assignment and ------------------------------- Security Agreement dated as of March 1, 1993 among the Lender, the Collateral Agent and the cash collateral bank named therein (as such agreement may be amended, supplemented or modified from time to time). "Credit A-Loan" shall mean a Mortgage Loan (other than a Mortgage ------------- Loan that satisfies all the requirements of an Eligible Mortgage Loan) the obligor of which has a Credit Score as described on Exhibit G hereto. "Credit B Loan" shall mean a Mortgage Loan (other than a Mortgage ------------- Loan that satisfies all the requirements of an Eligible Mortgage Loan) the obligor of which has a Credit Score as described on Exhibit G hereto. "Credit C Loan" shall mean a Mortgage Loan (other than a Mortgage ------------- Loan that satisfies all the requirements of an Eligible Mortgage Loan) the obligor of which has a Credit Score as described on Exhibit G hereto. 5 11 "Credit D Loan" shall mean a Mortgage Loan (other than a Mortgage ------------- Loan that satisfies all the requirements of an Eligible Mortgage Loan) the obligor of which has a Credit Score as described on Exhibit G hereto. "Credit Documents" shall mean this Agreement, the Note and the ---------------- Warehouse Security Agreement. "Credit Package Documents" shall have the meaning provided in Section ------------------------ 7.01(p). "Credit Score" shall mean the numeric consumer credit score developed ------------ by Fair Isaac & Co., Inc. and referred to as a "FICO Score". "Current Ratio" shall mean, as to any Person, the ratio of current ------------- assets to current liabilities, as determined in accordance with generally accepted accounting principles in the United States, applied on a consistent basis. "Custodian" shall mean, with respect to any Investor, any financial --------- institution selected by such Investor to act as a custodian for Mortgage Loans acquired or to be acquired by such Investor; provided that such financial institution has been approved by the Security Agent and meets all applicable requirements of such Investor to act as such custodian. "Default" shall mean any event, act or condition which with notice ------- or lapse of time, or both, would constitute an Event of Default. "Depositary" shall mean Bankers Trust Company, a New York banking ---------- corporation, in its capacity as issuing and paying agent for the Commercial Paper under the Depositary Agreement. "Depositary Agreement" shall mean the Depositary Agreement entered -------------------- into by the Lender, the Depositary, and the agent under the Liquidity Agreement, as such agreement may be supplemented or modified from time to time. "Effective Date" shall have the meaning provided in Section 11.09. -------------- "Eligible Mortgage Loan" shall mean at the time of the determination ---------------------- thereof (a) a Mortgage Loan, which at such time (i) is pledged as Collateral pursuant to the terms of this Agreement and of the Warehouse Security Agreement and is not pledged as security for any Indebtedness owing to, or otherwise subject to a Lien for the benefit of, any person other than the Lender, (ii) is a First Mortgage Loan, (iii) is, without duplication, a Conforming Loan, a Jumbo Loan, an FHA Loan, a VA Loan or a State Loan, (iv) is subject to a Purchase Commitment or covered by a Hedging Contract or is a Mortgage Loan that bears interest at an adjustable rate and is covered by a Master Commitment, (v) in the case of a Mortgage Loan that is not subject to a Wet Advance, has an Origination Date that is less than 180 calendar days prior to such time, (vi) in the case of a Mortgage Loan that is subject to a Wet Advance, has an Origination Date that is not more than five Business Days prior to such time and (vii) has a Combined Loan-to-Value Ratio of 100% or less, excluding in all such cases, however, any Mortgage Loan about which any of the 6 12 representations, warranties and agreements contained in Section 6.18 is not true and correct; provided that, in the case of a Mortgage Loan (other than a State -------- Loan), the interest rate on such Mortgage Loan was, as of the date on which such interest rate was set or established, at least equal to the then current market rate of interest for mortgage loans of the same type as determined by the Agent; or (b) a Mortgage-backed Security which at such time (i) is subject to a Purchase Commitment, (ii) is pledged as Collateral pursuant to the terms of this Agreement and of the Warehouse Security Agreement and (iii) was issued by FNMA, FHLMC or GNMA not more than 60 calendar days prior to such time. "Eligible Nonconforming Mortgage Loan" shall mean at the time of the ------------------------------------ determination thereof, a Mortgage Loan, which at such time (i) is pledged as Collateral pursuant to the terms of this Agreement and of the Warehouse Security Agreement and is not pledged as security for any Indebtedness owing to, or otherwise subject to a Lien for the benefit of, any person other than the Lender, (ii) is, without duplication, a First Mortgage Loan or a Second Mortgage Loan, (iii) is subject to a Purchase Commitment, (iv) has and has had no delinquency with respect to any payment due thereunder, (v) has no deficiencies in respect of the documentation therefor, (vi) is, without duplication, a Credit A- Loan, a Credit B Loan, a Credit C Loan or a Credit D Loan, (vii) in the case of a Mortgage Loan that is not subject to a Wet Advance, has an Origination Date that is less than 20 calendar days prior to such time, (viii) in the case of a Mortgage Loan that is subject to a Wet Advance, has an Origination Date that is not more than five Business Days prior to such time and (ix) has a Combined Loan-to-Value Ratio of 100% or less, excluding in all such cases, however any Mortgage Loan about which any of the representations, warranties and agreements contained in Section 6.18 is not true and correct; provided that the interest --------- rate on such Mortgage Loan was, as of the date on which such interest rate was set or established, at least equal to the then current market rate of interest for mortgage loans of the same type as determined by the Agent. "ERISA" shall mean the Employee Retirement Income Security Act of ----- 1974, as amended from time to time, and the regulations promulgated and rulings issued thereunder. "ERISA Affiliate" shall mean any person (as defined in Section 3(9) --------------- of ERISA) which together with the Borrower or any of its Subsidiaries would be a member of the same "controlled group" within the meaning of Section 414(b), (m), (c) and (o) of the Code. "Event of Default" shall have the meaning provided in Section 9. ---------------- "Existing Indebtedness" shall have the meaning provided in Section --------------------- 8.04(ii). "Expiry Date" shall mean the earlier of (i) June 30, 1999 as such ----------- date may be extended upon mutual agreement among the Borrower, the Lender and the Agent from time to time, (ii) the date which is fifteen days prior to the Liquidity Termination Date in effect from time to time and (iii) the date that is 120 days after the date on which the Lender shall have given the Borrower the notice referred to in Section 9.13 hereof. 7 13 "Facility Documents" shall mean the Credit Documents, the Collateral ------------------ Documents, the Liquidity Agreement, the Depositary Agreement, the Reimbursement Agreement, the Cooper River Security Agreement, any letters of credit issued pursuant to the terms of the Reimbursement Agreement, the Commercial Paper and any agreements entered into by the Lender with placement agent(s) or dealer(s) for the placement or sale of Commercial Paper. "Fees" shall mean all fees and expenses required to be paid by the ---- Borrower pursuant to Section 3.01. "FHA" shall mean the Federal Housing Administration or any successor --- thereto. "FHA Loan" shall mean a Mortgage Loan which (i) is eligible for -------- insurance by FHA and (ii) is so insured or is subject to a current binding and enforceable commitment for such insurance pursuant to the provisions of the National Housing Act, as now in effect and as may be hereafter amended from time to time, and is otherwise eligible for inclusion in a GNMA Mortgage-backed Security pool. "FHLMC" shall mean the Federal Home Loan Mortgage Corporation or ----- any successor thereto. "First Mortgage Loan" shall mean a Mortgage Loan that is underwritten ------------------- in conformity with underwriting standards approved by the applicable Investor and is secured by a first priority Mortgage. "Fitch" shall mean Fitch Investors Service, L.P. ----- "FNMA" shall mean the Federal National Mortgage Association or any ---- successor thereto. "GNMA" shall mean the Governmental National Mortgage Association or ---- any successor thereto. "Guaranty Agreement" shall have the meaning provided in Section 5.19. ------------------ "Hedging Contract" shall mean a written contractual arrangement ---------------- designed to provide protection against fluctuations in interest rates with respect to Mortgage Loans and commitments made to prospective Mortgage Loan obligors to extend Mortgage Loans at specified rates of interest, in each case in accordance with guidelines acceptable to the Agent. "HUD" shall mean the Department of Housing and Urban Development or --- any successor thereto. "Indebtedness" shall mean, as to any Person, without duplication, ------------ (i) all indebtedness (including principal; interest, fees and charges) of such Person for borrowed money or for the deferred purchase price of property or services, (ii) the face amount of all letters of credit issued for the account of such Person and all drafts drawn thereunder, (iii) all liabilities secured by any Lien 8 14 on any property owned by such Person, whether or not such liabilities have been assumed by such Person, (iv) the aggregate amount required in accordance with generally accepted accounting principles to be capitalized under leases under which such Person is the lessee and (v) all Contingent Obligations of such Person. "Initial Borrowing Date" shall mean the date on which the initial ---------------------- incurrence of Advances occurs. "Insolvency Event" shall mean, with respect to any Person, the ---------------- occurrence of any of the following events: (i) such Person shall become insolvent or generally fail to pay, or admit in writing its inability to pay, its debts as they become due, or shall voluntarily commence any proceeding or file any petition under any bankruptcy, insolvency or similar law or seeking dissolution, liquidation or reorganization or the appointment of a receiver, trustee, custodian, conservator or liquidator for itself or a substantial portion of its property, assets or business or to effect a plan or other arrangement with its creditors, or shall file any answer admitting the jurisdiction of the court and the material allegations of an involuntary petition filed against it in any bankruptcy, insolvency or similar proceeding, or shall be adjudicated bankrupt, or shall make a general assignment for the benefit of creditors, or such Person, or a substantial part of its property, assets or business, shall be subject to, consent to or acquiesce in the appointment of a receiver, trustee, custodian, conservator or liquidator for itself or a substantial portion of its property, assets or business; (ii) corporate action shall be taken by such Person for the purpose of effectuating any of the foregoing; (iii) an order for relief shall be entered in a case under the Bankruptcy Code in which such Person is a debtor; or (iv) involuntary proceedings or an involuntary petition shall be commenced or filed against such Person under any bankruptcy, insolvency or similar law or seeking the dissolution, liquidation or reorganization of such Person or the appointment of a receiver, trustee, custodian, conservator or liquidator for such Person or of a substantial part of the property, assets or business of such Person, or any writ, order, judgment, warrant of attachment, execution or similar process shall be issued or levied against a substantial part of the property, assets or business of such Person, and such proceeding or petition shall not be dismissed, or such execution or similar process shall not be released, vacated or fully bonded, within sixty (60) days after commencement, filing or levy, as the case may be. "Interest Rate Commitment" shall mean a commitment whereby the ------------------------ Borrower agrees to deliver a Mortgage Loan to GE Capital Mortgage Services, Inc., as investor, according to the terms of a Purchase Commitment and GE Capital Mortgage Services, Inc. agrees to a specified interest rate and purchase price for a designated length of time. "Investor" shall mean FHLMC, FNMA, GNMA or any financial institution, -------- broker, dealer, institutional investor or state agency or instrumentality approved by the Agent. "Jumbo Loan" shall mean a Mortgage Loan (other than an FHA Loan, a ---------- VA Loan, or a State Loan) that is underwritten in accordance with standards approved by the Agent that are generally comparable to the standards established by FNMA or FHLMC in all respects other than the original principal amount of the Mortgage Loan and that were established by an Investor (other than FHLMC, FNMA or GNMA). 9 15 "Lien" shall mean any mortgage, pledge, hypothecation, assignment, ---- deposit arrangement, encumbrance, lien (statutory or other), preference, priority or other security agreement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing or similar statement or notice filed under the UCC or any other similar recording or notice statute, and any lease having substantially the same effect as any of the foregoing). "Liquid Assets" shall mean (i) certificates of deposit of any ------------- commercial bank whose short-term obligations are rated "A-1+" by S&P and, if rated by Moody's, "P-1" by Moody's and, if rated by Fitch, "F-1+" by Fitch having maturities of 60 days or less from the date of acquisition and (ii) securities issued or fully guaranteed or insured by the United States Government or any agency thereof having maturities of 60 days or less from the date of acquisition. "Liquidity Agreement" shall mean the Liquidity Agreement dated as of ------------------- March 1, 1993 among the Lender, the liquidity lenders party thereto and General Electric Capital Corporation, as liquidity agent, as the same may be amended or modified from time to time. "Liquidity Lenders" shall mean the banks and financial institutions ----------------- that are parties to the Liquidity Agreement from time to time. "Liquidity Termination Date" shall mean the earlier of (i) March 31, -------------------------- 1999, as such date may be extended in accordance with the terms of the Liquidity Agreement and (ii) the date on which the commitment of the Liquidity Lenders under the Liquidity Agreement is terminated following the occurrence of an event of default thereunder. "LOC Providers" shall mean those banks and financial institutions ------------- that are parties to the Reimbursement Agreement. "Margin Stock" shall have the meaning provided in Regulation U of the ------------ Board of Governors of the Federal Reserve System. "Market Value" shall mean as of any date at which the amount thereof ------------ is to be determined, (i) as to any Mortgage-backed Security, the purchase price therefor (exclusive of any accrued interest included in such purchase price) under the Purchase Commitment with respect thereto; and (ii) as to any Mortgage Loan an amount equal to the lower of (A) an amount equal to (1) with respect to a Mortgage Loan that was funded directly by the Borrower to the obligor thereunder, the outstanding principal amount of such Mortgage Loan or (2) with respect to a Mortgage Loan that was purchased by the Borrower, the lesser of (x) the purchase price paid by the Borrower therefor (exclusive of any accrued interest or servicing release premium included in such purchase price) and (y) the outstanding principal amount of such Mortgage Loan, as applicable, (B) the amount determined by the Agent, in its reasonable discretion, as the price (exclusive of any accrued interest that would be included in such price) at which such Mortgage Loan could on the date of such determination be sold in the secondary market to a bona fide investor in an arm's-length transaction and (C) the price at which an Investor has committed to purchase such Mortgage Loan. - --- ----- 10 16 "Master Commitment" shall mean a written master commitment or any ----------------- other written commitment, on general terms and conditions approved by the Agent, from an Investor to purchase from the Borrower from time to time up to a specified dollar amount of Mortgage Loans without specification of the yield or purchase price of each such Mortgage Loan. "Moody's" shall mean Moody's Investors Service, Inc. ------- "Mortgage" shall mean a first or second mortgage, first or second -------- deed of trust, first or second deed to secure debt or other first or second security device which is customary and serves the same function as a mortgage under the law and practice in the jurisdiction in which the premises subject to the mortgage are located. For all Mortgage Loans secured by premises located in states in which it is customary to use deeds of trust or security deeds as the security device, a deed of trust or security deed, as the case may be, shall be used as the security device. Mortgages shall, unless the Agent shall otherwise approve, be on forms acceptable to FNMA, GNMA or FHLMC. "Mortgage-backed Securities" shall mean securities that are (A)(i) -------------------------- issued in accordance with guidelines established by GNMA, FNMA or FHLMC, (ii) guaranteed as to payment by GNMA, FNMA or FHLMC in accordance with the guidelines established by such entities and (iii) secured by a pool of Mortgage Loans originally included as Eligible Mortgage Loans hereunder, or which would have otherwise satisfied the requirements for Eligible Mortgage Loans if such Mortgage Loans had been pledged to the Security Agent pursuant to the terms of this Agreement and of the Warehouse Security Agreement, (B) subject to a Purchase Commitment and (C) issued in book-entry form. "Mortgage Bankers' Reporting Forms" shall have the meaning provided --------------------------------- in Section 7.01(o). "Mortgage Loan" shall mean a loan evidenced by a Mortgage Note and ------------- secured by a Mortgage encumbering a completed one to four family residential property (including, without limitation, condominium units and excluding cooperative ownership interests). "Mortgage Loan Aging Percentage" shall mean, as of any date, with ------------------------------ respect to any Eligible Mortgage Loan, (i) 100% if such Mortgage Loan has an Origination Date that is less than 90 days prior to such date, (ii) 75% if such Mortgage Loan has an Origination Date that is less than 120 days and more than 89 days prior to such date, (iii) 50% if such Mortgage Loan has an Origination Date that is less than 150 days and more than 119 days prior to such date, (iv) 25% if such Mortgage Loan has an Origination Date that is less than 180 days and more than 149 days prior to such date and (v) 0% if such Mortgage Loan has an Origination Date that is 180 or more days prior to such date. "Mortgage Note" shall mean a promissory note executed by a competent ------------- party which is secured by a Mortgage. 11 17 "Net Worth" shall mean, as to any Person, the sum of (i) its capital --------- stock, capital in excess of par or stated value of shares of its capital stock, retained earnings and any other account which, in accordance with generally accepted accounting principles in the United States, constitutes stockholder equity less (ii) any treasury stock, any unpaid stock subscriptions and any subordinated or other loans from stockholders, in each case to the extent included in clause (i). "Nonconforming Commitment" shall have the meaning provided in Section ------------------------ 2.01. "Nonconforming Mortgage Loan Aging Percentage" shall mean, as of any -------------------------------------------- date, with respect to any Eligible Nonconforming Mortgage Loan, (i) 100% if such Mortgage Loan has an Origination Date that is less than 60 days prior to such date, (ii) 50% if such Mortgage Loan has an Origination Date that is less than 90 days and more than 59 days prior to such date and (iii) 0% if such Mortgage Loan has an Origination Date that is 90 days or more prior to such date. "Note" shall have the meaning provided in Section 2.06. ---- "Obligations" shall mean all amounts owing to the Lender or the Agent ----------- pursuant to the terms of this Agreement and any other Credit Document. "Office" shall mean the office of the Agent located at Three Executive ------ Campus, Cherry Hill, New Jersey 08002 or such other address as the Agent may specify from time to time in a written notice to the Borrower and the Lender. "Origination Date" shall mean, with respect to any Mortgage Loan, the ---------------- date such Mortgage Loan was funded to the obligor thereon. "PBGC" shall mean the Pension Benefit Guaranty Corporation established ---- pursuant to Section 4002 of ERISA or any successor thereto. "Person" shall mean any individual, partnership, joint venture, firm, ------ corporation, association, trust or other enterprise or any government or political subdivision or any agency, department or instrumentality thereof. "Plan" shall mean any multiemployer plan or single-employer plan as ---- defined in Section 4001 of ERISA, which is maintained or contributed to by (or to which there is an obligation to contribute of), or at any time during the five calendar years preceding the date of this Agreement was maintained or contributed to by (or to which there is an obligation to contribute of), the Borrower or by a Subsidiary of the Borrower or an ERISA Affiliate. "Purchase Commitment" shall mean a current binding and enforceable ------------------- written commitment (or contract for purchase) from an Investor to purchase from the Borrower Mortgage Loans or Mortgage-backed Securities of a particular type and yield owned by the Borrower at a committed price, which commitment shall at all times be subject to approval by the Agent as to terms and conditions. 12 18 "Rating Agency" shall mean each credit rating agency that the Lender ------------- shall have requested to provide a credit rating with respect to the Commercial Paper and which is then providing such a credit rating. "Reimbursement Agreement" shall mean the Letter of Credit and ----------------------- Reimbursement Agreement dated as of March 1, 1993 among the Lender, the banks and financial institutions party thereto and General Electric Capital Corporation, as letter of credit agent, as such agreement may be amended, supplemented or modified from time to time. "Reportable Event" shall mean an event described in Section 4043(b) ---------------- of ERISA with respect to a Plan as to which the 30-day notice requirement has not been waived by the PBGC. "Request for Advance" shall have the meaning provided in Section 2.04. ------------------- "S&P" shall mean Standard & Poor's Corporation. --- "Second Mortgage Loan" shall mean a Mortgage Loan that is underwritten -------------------- in conformity with underwriting standards approved by the applicable Investor and is secured by a second priority Mortgage. "Security Agent" shall mean GE Capital Mortgage Services, Inc. in its -------------- capacity as security agent for the Lender pursuant to the Warehouse Security Agreement. "Servicing Portfolio" shall mean, as to any Person, all Mortgage Loans ------------------- the servicing or subservicing rights for which are owned by such Person and with respect to which such Person functions as the servicing institution. "State Loan" shall mean a Mortgage Loan that is (i) underwritten in ---------- conformity with underwriting standards that are established by a state agency or instrumentality and approved by the Agent and (ii) subject to a Purchase Committment from such state agency or instrumentality. "Subsidiary" shall mean, as to any Person, (i) any corporation more ---------- than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person and/or one or more Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has (A) more than a 50% equity interest at the time or (B) an interest satisfying the provisions of clause (i) hereof in any general partner of any limited partnership or joint venture. "Support Agreement" shall have the meaning provided in Section 5.20. ----------------- "Taxes" shall have the meaning provided in Section 11.01(e). ----- 13 19 "UCC" shall mean the Uniform Commercial Code as from time to time in --- effect in New Jersey or any other relevant jurisdiction, as applicable. "Unfunded Current Liability" of any Plan means the amount, if any, by -------------------------- which the present value of the accrued benefits under the Plan as of the close of its most recent plan year, determined in accordance with Statement of Financial Accounting Standards No. 35, based upon the actuarial assumptions used by the Plan's actuary in the most recent annual valuation of the Plan, exceeds the fair market value of the assets allocable thereto, determined in accordance with Section 412 of the Code. "VA" shall mean the Veterans Administration or any successor thereto. -- "VA Loan" shall mean a Mortgage Loan which is eligible for guarantee ------- by VA and is either so guaranteed or is subject to a current binding and enforceable commitment for such guarantee pursuant to the provisions of the Servicemen's Readjustment Act, as now in effect and as may be hereafter amended from time to time, and is otherwise eligible for inclusion in a GNMA Mortgage-backed Security pool. "Warehouse Payment Account" shall mean the segregated direct deposit ------------------------- account number 00-377-975 maintained by the Collateral Agent with respect to this Agreement at Bankers Trust Company in accordance with the terms of the Cooper River Security Agreement. "Warehouse Security Agreement" shall have the meaning provided in ---------------------------- Section 5.09. "Wet Advance" shall mean an Advance made by the Lender against the ----------- pledge of Eligible Mortgage Loans or Eligible Nonconforming Mortgage Loans with respect to which the Borrower has delivered to the Agent a Request for Advance in accordance with Section 2.04 in lieu of the delivery of the Mortgage Note related thereto: provided, however, that from and after the date on which the -------- ------- Mortgage Note with respect to any such Mortgage Loan is received by the Security Agent, such Advance shall cease to be a Wet Advance. "Wet Advance Disbursement Instruction" shall have the meaning provided ------------------------------------ in Section 2.05. "Wholly-Owned Subsidiary" shall mean, as to any Person, (i) any ----------------------- corporation 100% of whose capital stock is at the time owned by such Person and/or one or more Wholly-Owned Subsidiaries of such Person and (ii) any partnership, association, joint venture or other entity in which such Person and/or one or more Wholly-Owned Subsidiaries of such Person has a 100% equity interest at such time. 1.02 Principles of Construction. (a) All references to sections, -------------------------- schedules and exhibits are to sections, schedules and exhibits in or to this Agreement unless otherwise specified. The words "hereof," "herein," "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. 14 20 (b) All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles in conformity with those used in the preparation of the financial statements referred to in Section 6.05(a). Section 2. Amount and Terms of Credit. -------------------------- 2.01 Commitment. Subject to and upon the terms and conditions set ---------- forth herein, the Lender agrees, at any time and from time to time prior to the Expiry Date (or such earlier date as the Commitment shall have been terminated pursuant to the terms hereof), to make an advance or advances (each an "Advance" and, collectively, the "Advances") to the Borrower, which Advance: (i) shall be made at any time and from time to time in accordance with the terms hereof on and after the Effective Date and prior to the Expiry Date; (ii) shall bear interest as provided in Section 2.07; (iii) may be prepaid and reborrowed in accordance with the provisions hereof; and (iv) shall be made against the pledge by the Borrower of Eligible Mortgage Loans, Eligible Nonconforming Mortgage Loans or Liquid Assets as Collateral for such Advance as provided herein and in the Warehouse Security Agreement; provided, however, that (1) the aggregate -------- ------- principal amount of Advances outstanding at any time shall not exceed the lesser of (x) the Commitment and (y) the Borrowing Base, at such time, (2) the aggregate principal amount of Advances outstanding at any time secured by Mortgage-backed Securities shall not exceed 0% of the Commitment, (3) the aggregate principal amount of Wet Advances outstanding at any time shall not exceed 30% of the Commitment, (4) the aggregate principal amount of Advances outstanding at any time secured by Jumbo Loans shall not exceed 75% of the Commitment, (5) the aggregate principal amount of Advances outstanding at any time secured by Eligible Nonconforming Mortgage Loans shall not exceed $1,500,000 (the "Nonconforming Commitment"), (6) the aggregate principal amount of Advances outstanding at any time secured by Credit A- Loans shall not exceed 100% of the Nonconforming Commitment, (7) the aggregate principal amount of Advances outstanding at any time secured by Credit B Loans shall not exceed 100% of the Nonconforming Commitment, (8) the aggregate principal amount of Advances outstanding at any time secured by Credit C Loans shall not exceed 50% of the Nonconforming Commitment and (9) the aggregate principal amount of Advances outstanding at any time secured by Credit D Loans shall not exceed 0% of the Nonconforming Commitment. 2.02 Minimum Borrowing Amount. The principal amount of each ------------------------ Advance shall not be less than $500. 2.03 Pledge of Collateral. Whenever the Borrower desires to -------------------- pledge a Mortgage Loan or Mortgage-Backed Security to the Security Agent, it shall deliver to the Agent at its office a pledge of Collateral substantially in the form of Exhibit A-1 (the "Pledge of Collateral"). Each Pledge of Collateral: (i) shall be appropriately completed by an authorized employee of the Borrower to describe the Collateral to be pledged; and (ii) shall have attached thereto each of the Collateral Documents required in the Pledge of Collateral, including, without limitation, in the case of a Mortgage Loan with respect to which a Wet Advance is being requested in accordance with Section 2.04, an assignment by the Borrower to the Security Agent of the related Mortgage fully completed and in recordable form. 15 21 2.04 Request for Advance. Whenever the Borrower desires to incur ------------------- an Advance hereunder, it shall deliver to the Agent at its Office a request for Advance substantially in the form of Exhibit A-2 or Exhibit A-3, as applicable (the "Request for Advance") not later than the close of business on the Business Day prior to the proposed date of such Advance; provided, however, --------- ------- that before submitting a request for an Advance to be secured by a Mortgage Loan with an outstanding principal amount in excess of $650,000, the Borrower shall have obtained the prior approval of the Agent. Each Request for Advance: (i) shall be appropriately completed by an authorized employee of the Borrower to specify the aggregate principal amount of the Advance or Wet Advance to be made and the proposed date of such Advance (which shall be a Business Day); and (ii) shall, in the case of a Wet Advance, include instructions with respect to the disbursement of such Wet Advance. 2.05 Disbursement of Funds. (a) No later than 3:00 P.M. (New York --------------------- City time) on the date specified in the Request for Advance with respect to any Advance other than a Wet Advance, the Lender shall make available to the Borrower the amount of such Advance requested to be made on such date by wire transfer of funds to the Borrower's Advance Account. (b) No later than 3:00 P.M. (New York City time) on the date specified in the Request for Advance with respect to any Wet Advance, the Agent shall disburse the amount of such Wet Advance directly to the appropriate title company, escrow agent or closing agent, by cashier's check or wire transfer in accordance with the instructions set forth in the related Request for Advance, the Agent's customary practice and the requirements of applicable law. (c) In the event that a Wet Advance is disbursed by a cashier's check sent by the Agent or the Agent's bank to the appropriate title company, escrow agent or closing agent, the Agent shall disburse the amount of such Wet Advance under cover of an instruction letter substantially in the form of Exhibit B-1 (a "Wet Advance Disbursement Instruction"). In the event that a Wet Advance is to be disbursed by wire transfer or by a cashier's check printed at the Borrower's office and sent by the Borrower to the appropriate title company, escrow agent or closing agent, the Borrower shall deliver to the appropriate title company, escrow agent or closing agent an instruction letter substantially in the form of Exhibit B-2 (a "Borrower's Wet Advance Disbursement Instruction"). Upon the request of the Agent, the Borrower shall deliver to the Agent a copy of any Borrower's Wet Advance Disbursement Instruction delivered by the Borrower. 2.06 Note. The Borrower's obligation to pay the principal of, and ---- interest on, all Advances made to it by the Lender shall be evidenced by a promissory note substantially in the form of Exhibit D (the "Note"). The Note shall (i) be executed by the Borrower, (ii) be payable to the order of the Lender and be dated on or prior to the Initial Borrowing Date, (iii) be in a stated principal amount equal to the Commitment and be payable in the aggregate principal amount of the Advances evidenced thereby, (iv) mature, with respect to each Advance evidenced thereby, on the Expiry Date, (v) bear interest as provided in Section 2.07, (vi) be subject to mandatory prepayment as provided in Section 4.02 and (vii) be entitled to the benefits of this Agreement and the other Credit Documents. The Lender will note on its internal records the amount of each Advance made by it and each payment in respect thereof and will prior to any transfer of the Note endorse on the 16 22 reverse side thereof the outstanding principal amount of Advances evidenced thereby. Failure to make any such notation shall not affect the Borrower's obligations in respect of such Advances. 2.07 Interest. (a) The Borrower agrees to pay interest in respect -------- of the outstanding principal amount of the Advances from the date the proceeds thereof are made available to the Borrower until the maturity thereof (whether by acceleration or otherwise) (i) with respect to Advances secured by Eligible Mortgage Loans, at a rate per annum equal to 2.00% in excess of the Commercial Paper Rate in effect from time to time and (ii) with respect to Advances secured by Eligible Nonconforming Mortgage Loans, at a rate per annum equal to 2.25% in excess of the Commercial Paper Rate in effect from time to time; provided, -------- however, that with respect to any Advance which is disbursed by cashier's check, - ------- which Advance has been outstanding for less than sixteen days (16), the applicable rate of interest, calculated in accordance with the provisions of this Section 2.07(a), shall be reduced by .50%. (b) Overdue principal and, to the extent permitted by law, overdue interest, and any other overdue amount payable by the Borrower hereunder, shall bear interest at a rate per annum equal to 4% per annum in excess of the rate specified in clause (a) above in effect from time to time; provided, however, -------- ------- that no Advance shall bear interest at a rate in excess of the maximum rate permitted by applicable law. (c) Accrued (and theretofore unpaid) interest shall be payable in respect of the Advances (i) monthly in arrears on the fifth Business Day of each calendar month with respect to interest accrued during the preceding calendar month, (ii) on any prepayment which reduces the outstanding Advances to zero, (iii) at maturity (whether by acceleration, demand or otherwise) and (iv) after such maturity, on demand. The Agent shall provide the Borrower with a notice setting forth the interest accrued with respect to each calendar month not later than the third Business Day following the end of such calendar month. Section 3. Fees. ---- 3.01 Fees. (a) The Borrower shall pay the Agent an administration ---- fee (the "Administration Fee") with respect to each calendar month during the term of this Agreement in an amount equal to the sum of $20.00 for each Mortgage Loan pledged as Collateral for the first time during such calendar month. In addition, the Borrower shall pay all administrative costs of the Lender or the Agent in connection with the making of an Advance and the handling of Collateral, including, but not limited to, the costs of overnight and express delivery, cashier's checks and wire transfers. The Administration Fee and administrative costs with respect to each calendar month. will be due and payable on the fifth Business Day following the end of such calendar month. (b) The Agent shall provide the Borrower with a notice setting forth the Administration Fee accrued and the administrative costs with respect to each calendar month not later than the third Business Day following the end of such calendar month. 17 23 Section 4. Prepayments; Payments. --------------------- 4.01 Voluntary Prepayments. The Borrower shall have the right to --------------------- prepay the Advances, without premium or penalty, in whole or in part from time to time on the following terms and conditions: (i) the Borrower shall give the Agent at its Office notice of its intent to prepay not later than 2:00 p.m. (New York City time) at least one Business Day prior to the date of such prepayment; provided, however, that with respect to any prepayment of an amount in excess - --------- ------- of 30% of the Advances then outstanding, the Borrower shall give the Agent notice of its intent to prepay at least 5 Business Days prior to the date of such prepayment, and (ii) the amount of such prepayment shall be at least $10,000. 4.02 Mandatory Prepayments. Except as set forth in Section --------------------- 4.03(b), a prepayment of Advances shall be required, without notice or demand of any kind to the Borrower, as follows: (a) if on any date the aggregate principal amount of Advances outstanding (after giving effect to all other repayments thereof on such date) exceeds the lesser of (x) the Commitment or (y) the Borrowing Base, as then in effect, the Borrower shall immediately prepay the principal of Advances in an aggregate amount equal to such excess; (b) if on any date the aggregate principal amount outstanding of Advances secured by Mortgage-backed Securities exceeds 0% of the Commitment, the Borrower shall immediately prepay the principal of Advances secured by Mortgage-backed Securities in an aggregate amount equal to such excess; (c) if on any date the aggregate principal amount outstanding of Wet Advances exceeds 30% of the Commitment, the Borrower shall immediately prepay the principal of Wet Advances in an aggregate amount equal to such excess; (d) if on any date the aggregate principal amount outstanding of Advances secured by Jumbo Loans exceeds 75% of the Commitment, the Borrower shall immediately prepay the principal of Advances secured by Jumbo Loans in an aggregate amount equal to such excess; (e) if (i) 60 calendar days shall have elapsed from the date of first issuance of a Mortgage-backed Security in respect of which an Advance has been made hereunder, and (ii) such Mortgage-backed Security has not been sold by the Borrower and paid for by an Investor and (iii) the Advances secured by such Mortgage-backed Security have not been prepaid pursuant to any other clause of this Section 4.02, the Borrower shall immediately prepay the principal of Advances in an aggregate amount equal to the Collateral Value of such Mortgage-backed Security; (f) if the Agent shall have notified the Borrower or the Borrower otherwise becomes aware that any Mortgage Loan or Mortgage-backed Security originally included as an Eligible Mortgage Loan or an Eligible Nonconforming Mortgage Loan no longer constitutes an Eligible Mortgage Loan or an Eligible Nonconforming Mortgage Loan pursuant to the terms and standards set forth herein and in the Warehouse Security 18 24 Agreement, the Borrower shall immediately prepay the principal of Advances in an aggregate amount equal to the Collateral Value of such Mortgage Loan or Mortgage-backed Security; (g) if a Mortgage Loan or a Mortgage-backed Security in respect of which an Advance has been made hereunder is sold, the Borrower shall on the date of settlement for such sale prepay the principal of Advances in an aggregate amount equal to the Collateral Value of such Mortgage Loan or Mortgage-backed Security; (h) if 21 calendar days shall have elapsed from the date a Mortgage Loan is sent from the Security Agent to an Investor or the Custodian for an Investor as provided in Section 4.04 and in the Warehouse Security Agreement and such Mortgage Loan has neither been redelivered to the Security Agent nor purchased pursuant to the letter of transmittal delivered therewith, the form of which shall be that customarily used by the Security Agent or, if appropriate, the form required by FNMA or FHLMC, the Borrower shall immediately prepay the principal of Advances in an aggregate amount equal to the Collateral Value of such Mortgage Loan; (i) if 14 calendar days shall have elapsed from the date on which the Borrower is requested by the Security Agent to obtain a substantially corrected or completed copy of any material document in connection with any Mortgage Loan or Mortgage-backed Security and the same shall not have been delivered to the Security Agent with the appropriate completion or correction, the Borrower shall immediately prepay the principal of Advances in an aggregate amount equal to the Collateral Value of such Mortgage Loan or Mortgage-backed Security; (j) if (1) there shall be a default in the payment of principal or interest by the obligor under (x) an Eligible Mortgage Loan in respect of which an Advance has been made hereunder and such default shall be continuing for 60 days or more or (y) a Mortgage-backed Security in respect of which an Advance has been made hereunder and such default shall be continuing for 3 Business Days or more or (z) an Eligible Nonconforming Mortgage Loan in respect of which an Advance has been made hereunder and such default shall be continuing for 60 days or more, (2) an Insolvency Event shall occur in respect of an obligor on any Mortgage Loan in respect of which an Advance has been made hereunder or (3) foreclosure or similar proceedings shall be commenced in respect of the premises which secure any Mortgage Loan in respect of which an Advance has been made hereunder, the Borrower shall immediately prepay the principal of Advances in an aggregate amount equal to the Collateral Value of such Mortgage Loan or Mortgage-backed Security; (k) if the Mortgage Loan to be funded with the proceeds of any Wet Advance is not funded on the date of such Wet Advance, the Borrower shall immediately prepay the full principal amount of such Wet Advance; (l) if the Mortgage Note in respect of any Mortgage Loan securing a Wet Advance is not delivered to the Lender within five Business Days following the date on 19 25 which such Wet Advance was made, the Borrower shall immediately prepay the full principal amount of such Wet Advance; (m) if on any date the aggregate principal amount of Advances outstanding at any time secured by Eligible Nonconforming Mortgage Loans exceeds the Nonconforming Commitment then in effect, the Borrower shall immediately prepay the principal of Advances in an aggregate amount equal to such excess; (n) if on any date the aggregate principal amount of Advances secured by Credit A- Loans exceeds 100% of the Nonconforming Commitment, the Borrower shall immediately prepay the principal of Advances secured by Credit A- Loans in an aggregate amount equal to such excess; (o) if on any date the aggregate principal amount of Advances secured by Credit B Loans exceeds 100% of the Nonconforming Commitment, the Borrower shall immediately prepay the principal of Advances secured by Credit B Loans in an aggregate amount equal to such excess; (p) if on any date the aggregate principal amount of Advances secured by Credit C Loans exceeds 50% of the Nonconforming Commitment, the Borrower shall immediately prepay the principal of Advances secured by Credit C Loans in an aggregate amount equal to such excess; and (q) if on any date the aggregate principal amount of Advances secured by Credit D Loans exceeds 0% of the Nonconforming Commitment, the Borrower shall immediately prepay the principal of Advances secured by Credit D Loans in an aggregate amount equal to such excess. 4.03 Release of Collateral; Substitution. (a) So long as no ----------------------------------- Default or Event of Default has occurred and is continuing or would result therefrom, upon the Borrower's request therefor accompanied by a prepayment by the Borrower of Advances in an amount sufficient to cause the amount of Advances outstanding to be less than or equal to the Borrowing Base (calculated without reference to any Collateral which the Borrower requests be released from the Lien granted pursuant to the Warehouse Security Agreement) and a deposit by the Borrower of such amount as the Agent shall reasonably designate as a reserve for application to any fees, accrued interest or breakage costs payable with respect to the calendar month in which such prepayment occurs, the Security Agent shall, within one Business Day after the later of the receipt of such request or such prepayment and deposit, release from the Lien granted pursuant to the Warehouse Security Agreement and deliver to the Borrower in accordance with the terms of the Warehouse Security Agreement (i) the Collateral corresponding to such Mortgage Loan(s) or Mortgage-backed Security(ies) and (ii) the Collateral Documents pertaining thereto. (b) So long as no Default or Event of Default has occurred and is continuing in lieu of any required pre-payment of principal pursuant to Section 4.02, the Borrower may, subject to the terms and conditions hereof and the prior consent of the Agent, substitute and pledge additional Eligible Mortgage Loans and/or Eligible Nonconforming Mortgage Loans (together with all 20 26 required Collateral Documents with respect thereto) having an aggregate Collateral Value in an amount such that immediately after giving effect to such substitution or addition, such prepayment is no longer required. 4.04 Sale of Collateral to Investors. (a) The Security Agent ------------------------------- shall arrange, in accordance with the provisions of the Warehouse Security Agreement, for the delivery of Mortgage Loans pledged to the Security Agent to an Investor (or such Investor's Custodian) pursuant to a Purchase Commitment for examination and purchase thereof by such Investor; provided, however, that prior -------- ------- thereto the Security Agent shall have received from the Borrower one Business Day's prior written notice describing the Mortgage Loan(s) to be delivered and the shipping or wiring instructions therefor, such notice executed by an authorized employee of the Borrower and identifying the Investor and the price which such Investor has agreed to pay for such Collateral and/or the Mortgage-backed Security that is to be issued against the delivery and release of such Collateral. (b) The Security Agent shall release Collateral consisting of Mortgage-backed Securities to the Investor under the related Purchase Commitment on the settlement date specified in such Purchase Commitment by book-entry transfer of such Mortgage-backed Securities to the account of such Investor against the wire transfer to the account of the Security Agent of the full purchase price specified in such Purchase Commitment; provided -------- that (i) the Security Agent shall have received from the Investor or the Borrower appropriate instructions with respect to such delivery, transfer and payment and (ii) the Borrower shall have made all deposits (if any) required in connection therewith pursuant to Section 4.04(c) below. (c) The Borrower shall make a deposit in immediately available funds into the Warehouse Payment Account by 4:00 p.m. on the Business Day on which the release of the Security Agent's security interest in such Mortgage Loan or Mortgage-backed Securities is scheduled to occur pursuant to the purchase by an Investor under a Purchase Commitment, in an amount equal to the amount by which the aggregate amount of Advances outstanding exceeds the Borrowing Base (calculated without reference to any such Mortgage Loan or Mortgage-backed Security). (d) Each delivery of Collateral pursuant to this Section 4.04 shall be accompanied by a bailee letter in accordance with the requirements of the Warehouse Security Agreement. All payments in respect of such Collateral so purchased shall not be deemed received by the Security Agent until such funds constitute "immediately available" funds in the Warehouse Payment Account or such Mortgage-backed Securities have been credited to the account of the Security Agent. For purposes hereof, confirmation of receipt of wired funds shall constitute "immediately available" funds. (e) In the event that the Borrower has entered into an agreement which provides for the sale by the Borrower to an Investor of the rights to service any Mortgage Loan (which sale is separate from the sale of such Mortgage Loan) pledged to the Security Agent pursuant to the terms of this Agreement and the Warehouse Security Agreement, the Borrower shall provide such Investor with written notice (in a form satisfactory to the Agent) that the payment for such servicing rights shall be made directly to the Agent for the account of the Lender. 21 27 (f) The Borrower shall deliver to the Agent, on or prior to 10:30 a.m. on the Business Day following receipt by the Security Agent of payment from an Investor for Mortgage Loans (or the right to service Mortgage Loans) or Mortgage-backed Securities purchased, notice designating the Mortgage Loans or Mortgage-backed Securities to which such payment applies. An amount equal to the funds transferred to the Security Agent in respect of Mortgage Loans (or the right to service Mortgage Loans) or Mortgage-backed Securities purchased by an Investor (whether such funds were transferred by the Borrower pursuant to Section 4.04(c) or by the Investor pursuant to Sections 4.04(b), 4.04(d) or 4.04(e)) shall be applied by the Security Agent as a prepayment of Advances. 4.05 Method and Place of Payment. Except as otherwise specifically --------------------------- provided herein, all payments under this Agreement and the Note shall be made to the Agent for the account of the Lender not later than 2:00 p.m. (New York City time) on the date when due and shall be made in immediately available funds for deposit to the Warehouse Payment Account. Any payment received after 2:00 p.m. (New York City time) on any Business Day shall be treated as being received on the next succeeding Business Day. Whenever any payment to be made hereunder or under the Note shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day and, with respect to payments of principal, interest, fees and penalties shall be payable at the rate otherwise applicable. The Borrower hereby authorizes the Lender, with prior notice to the Borrower by the Lender, to deduct from each Advance to be made hereunder, all amounts due and owing to the Lender or Agent including interest, penalties, fees or mandatory prepayments. 4.06 Net Payments. All payments made by or on behalf of the ------------ Borrower hereunder will be made without setoff, counter-claim or other defense. Section 5. Conditions Precedent. -------------------- The obligation of the Lender to make each Advance to the Borrower hereunder is subject, at the time of the making of each such Advance (except as hereinafter indicated), to the satisfaction of the following conditions: 5.01 Execution of Agreement; Note. On or prior to the Initial ---------------------------- Borrowing Date, (i) the Effective Date shall have occurred and (ii) there shall have been delivered to the Lender the Note executed by the Borrower in the amount, maturity and as otherwise provided herein. 5.02 No Default; Representations and Warranties. At the time of ------------------------------------------ the making of each Advance and also after giving effect thereto (i) there shall exist no Default or Event of Default, and (ii) all representations and warranties contained herein and in the other Credit Documents shall be true and correct in all material respects with the same effect as though such representations and warranties had been made on and as of the date of such Advance. 5.03 Request for Advance. Prior to the making of each Advance, ------------------- the Agent shall have received a Request for Advance with respect thereto meeting the requirements of Section 2.04. 22 28 5.04 Opinion of Counsel. On the Initial Borrowing Date, the Lender ------------------ shall have received from outside counsel for the Borrower (who shall be reasonably satisfactory to the Lender) an opinion addressed to the Lender and dated the Initial Borrowing Date covering the matters set forth in Exhibit E and such other matters incident to the transactions contemplated herein as the Lender may reasonably request. 5.05 Diligence. On or prior to the Effective Date, the Agent shall --------- have satisfactorily completed its due diligence review of the Borrower's operations, business, financial condition and underwriting and origination of Mortgage Loans. 5.06 Corporate Documents: Proceedings. (a) On the Initial -------------------------------- Borrowing Date, the Lender shall have received a certificate, dated the Initial Borrowing Date, signed by the President or any Vice President of the Borrower, and attested to by the Secretary or any Assistant Secretary of the Borrower, substantially in the form of Exhibit F-1 and with appropriate insertions, together with copies of the Certificate of Incorporation and By-Laws of the Borrower, the resolutions of the Borrower referred to in such certificate and a good-standing certificate from the Secretary of State of the jurisdiction of incorporation of the Borrower. (b) All corporate and legal proceedings and all instruments and agreements in connection with the transactions contemplated in this Agreement and the other Credit Documents shall be reasonably satisfactory in form and substance to the Lender, and the Lender shall have received all information and copies of all documents and papers, including records of corporate proceedings and governmental approvals, if any, which the Lender reasonably may have requested in connection therewith, such documents and papers where appropriate to be certified by proper corporate or governmental authorities. 5.07 Financial Statements. On or prior to the Initial Borrowing -------------------- Date, the Lender shall have received (i) the consolidated and consolidating balance sheets of the Borrower and its Consolidated Subsidiaries for the fiscal year most recently ended and the related statements of income and retained earnings and statements of cash flows of the Borrower and its Consolidated Subsidiaries for such fiscal year, in each case certified by an independent certified public accountant reasonably acceptable to the Lender and prepared in accordance with generally accepted accounting principles in the United States consistently applied, together with any "management letters" detailing any "material weaknesses in internal controls" (as defined by the Financial Accounting Standards Board) noted by such accountants for such period and (ii) copies of any uniform single audit reports in respect of the Borrower required or requested by FNMA or FHLMC, any audits or financial reports in respect of the Borrower completed or requested by HUD, GNMA, FNMA, FHLMC or any other governmental agency or Investor and any Mortgage Bankers' Reporting Forms prepared by the Borrower, in each case during the year preceding the date hereof. 5.08 Mandatory Prepayment. After giving effect to the proposed -------------------- Advance, no prepayment would be required pursuant to Section 4.02. 23 29 5.09 Warehouse Security Agreement. The Borrower shall have duly ---------------------------- authorized, executed and delivered a Warehouse Security Agreement substantially in the form of Exhibit I (as modified, supplemented or amended from time to time, the "Warehouse Security Agreement") covering all of the Borrower's present and future Collateral, together with: (a) acknowledgment copies of proper financing statements (Form UCC-1) duly filed under the UCC of each jurisdiction as may be necessary or, in the opinion of the Security Agent, desirable to perfect the security interests purported to be created by the Warehouse Security Agreement; (b) certified copies of "Requests for Information or Copies" (Form UCC-11), or equivalent reports, listing the financing statements referred to in clause (a) above and all other effective financing statements that name the Borrower as debtor and that are filed in the jurisdictions referred to in said clause (a), together with copies of such other financing statements (none of which shall cover the Collateral, except to the extent evidencing Liens permitted pursuant to Section 8.01); and (c) evidence of the completion of all other recordings and filings of, or with respect to, the Warehouse Security Agreement and the taking of all other actions as may be necessary or, in the opinion of the Security Agent, desirable to perfect the security interests purported to be created by the Warehouse Security Agreement. 5.10 No Adverse Change. Since April 30, 1998, there shall have ----------------- been no material adverse change in the operations, business, property, assets or financial condition or prospects of the Borrower. 5.11 Insurance. On or prior to the Initial Borrowing Date, the --------- Lender shall have received from the Borrower, a copy of a fidelity bond and policy of insurance containing errors and omissions coverage and such other insurance as the Lender shall require, each of which policies, where applicable, shall be in such form, with such companies and in such amounts as are in accordance with the Agent's requirements and shall name the Lender and the Agent as loss payees and certificate holders. 5.12 [Intentionally omitted] 5.13 Delivery of the Collateral. Prior to the making of an -------------------------- Advance, the Security Agent shall have received (a) if such Advance is to be made inrespect of Mortgage Loans and is not to be a Wet Advance, the Collateral Documents relating to the Mortgage Loans pledged to secure such Advance; (b) if such Advance is to be a Wet Advance, a duly executed assignment by the Borrower to the Security Agent of the related Mortgage fully completed and in recordable form, a copy of the Purchase Commitment or the Master Commitment, if applicable, and satisfactory confirmation that the Collateral Documents relating thereto are to be delivered to an escrow agent, closing agent or title company acceptable to the Lender with instructions that such Collateral Documents are to be delivered directly to the Security Agent; or (c) if such Advance is to be made in respect of Mortgage-backed Securities, copies of the applicable mortgage schedules and FNMA, 24 30 FHLMC or GNMA delivery schedules, the confirmed trade ticket and satisfactory confirmation of the Security Agent's interest in such Mortgage-backed Securities. 5.14 Fees. Prior to the making of an Advance, the Borrower shall ---- have paid all Fees then due and payable to the Lender and the Agent. 5.15 No Litigation. There shall be no judgment, order, injunction ------------- or other restraint which shall prohibit or impose, and no litigation pending or threatened against or affecting the Borrower or any of its Subsidiaries which, in the opinion of the Lender or the Agent, would prohibit or result in the imposition of materially adverse conditions upon, the financing contemplated hereby, or otherwise have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower or any of its Subsidiaries. 5.16 Liquidity Agreement. The Liquidity Agreement shall be in full ------------------- force and effect and the Lender shall have obtained sufficient funds to permit it to make such Advance through the issuance of Commercial Paper as provided in the Liquidity Agreement or through the borrowing of such funds from the Liquidity Lenders. 5.17 Acknowledgment. On or prior to the Initial Borrowing Date, -------------- the Borrower shall have executed and delivered to the Agent an Acknowledgment of Collateral Agent's Rights substantially in the form of Exhibit H pursuant to which the Borrower shall have acknowledged that all of the right, title and interest of the Lender in and to this Agreement, the Note and the Collateral has been pledged and assigned to, and will be enforceable by, General Electric Capital Corporation, as Collateral Agent for the secured parties under the Cooper River Security Agreement. 5.18 Legal or Regulatory Proceedings. On or prior to the Initial ------------------------------- Borrowing Date, the Borrower shall have delivered to the Agent certificates of the principal shareholders and senior officers of the Borrower, in substantially the form of Exhibit F-2, with respect to certain legal and regulatory proceedings relating to such persons. 5.19 Guaranty Agreement. On or prior to the Initial Borrowing ------------------ Date, the Lender shall have received from Christian A. Larsen and Janina D. Pawlowski (each a "Guarantor" and collectively the "Guarantors") a duly executed Guaranty and Surety Agreement substantially in the form of Exhibit J hereto (as modified, supplemented or amended from time to time, the "Guaranty Agreement"). 5.20 Support Agreement. On or prior to the Initial Borrowing Date, ----------------- the Lender shall have received from Christian A. Larsen and Janina D. Pawlowski a duly executed Support Agreement substantially in the form of Exhibit K hereto (as modified, supplemented or amended from time to time, the "Support Agreement"). 5.21 Intercreditor Agreement. Within sixty (60) days after the ----------------------- Borrower shall have entered into any agreement with a lender pursuant to which such lender agrees to make available to the Borrower a revolving warehouse line of credit, the Borrower shall deliver to the Agent an 25 31 Intercreditor Agreement substantially in the form of Exhibit L hereto, duly executed by such lender and by the Borrower (as modified, supplemented or amended from time to time, the "Intercreditor Agreement"). 5.22 Treatment of Existing Liens. Within ten (10) days after the --------------------------- Initial Borrowing Date, the Borrower shall have delivered to the Agent for filing a proper amendment to financing statement (Form UCC-2) duly executed by Silicon Valley Bank, evidencing the amendment of the original financing statement filed by such lender to make clear that the collateral covered by such financing statement does not include any of the Collateral. The acceptance of the benefits of each Advance shall constitute a representation and warranty by the Borrower to the Lender that all the conditions specified in Sections 5.02, 5.08, 5.10 and 5.15 exist as of that time. All of the Note, certificates and other documents and papers referred to in this Section 5, unless otherwise specified, shall be delivered to the Agent at the Office for the account of the Lender and shall be reasonably satisfactory in form and substance to the Agent. Section 6. Representations. Warranties and Agreements. ------------------------------------------ In order to induce the Lender to enter into this Agreement and to make the Advances, the Borrower makes the following representations, warranties and agreements as of the Effective Date, all of which shall survive the execution and delivery of this Agreement and the Note and the making of the Advances (with the execution and delivery of this Agreement and the making of each Advance thereafter being deemed to constitute a representation and warranty that the matters as specified in this Section 6 are true and correct in all respects on and as of the date hereof and as of the date of such Advance, unless stated to relate to a specific earlier date): 6.01 Corporate Status. Each of the Borrower and its Subsidiaries ---------------- (i) is a duly organized and validly existing corporation in good standing under the laws of the jurisdiction of its incorporation, (ii) has the power and authority to own its property and assets and to transact the business in which it is engaged and (iii) is duly qualified as a foreign corporation and in good standing in each jurisdiction where the ownership, leasing or operation of property or the conduct of its business requires such qualification, except where the failure to be so qualified would not have a material adverse effect on the business and operations of the Borrower. 6.02 Corporate Power and Authority. The Borrower has the corporate ----------------------------- power to execute, deliver and perform the terms and provisions of each of the Credit Documents and has taken all necessary corporate action to authorize the execution, delivery and performance by it of each of such Credit Documents. The Borrower has duly executed and delivered each of the Credit Documents, and each of such Credit Documents constitutes its legal, valid and binding obligation enforceable in accordance with its terms, subject to the effect of applicable bankruptcy and other similar laws affecting the rights of creditors generally and the effect of equitable principles whether applied in an action at law or a suit in equity. 6.03 No Violation. Neither the execution, delivery or performance ------------ by the Borrower of the Credit Documents, nor compliance by it with the terms and provisions thereof, (i) will 26 32 contravene any provision of any law, statute, rule or regulation or any order, writ, injunction or decree of any court or governmental instrumentality, (ii) will conflict or be inconsistent with or result in any breach of any of the material terms, covenants, conditions or provisions of, or constitute a material default under, or result in the creation or imposition of (or the obligation to create or impose) any Lien other than a Lien permitted pursuant to Section 8.01 upon any of the property or assets of the Borrower pursuant to the terms of any indenture, mortgage, deed of trust, credit agreement, loan agreement or any other agreement, contract or instrument to which the Borrower is a party or by which it or any of its property or assets is bound or to which it may be subject or (iii) will violate any provision of the certificate of incorporation or by-laws of the Borrower. 6.04 Governmental Approvals. No order, consent, approval, license, ---------------------- authorization or validation of, or filing, recording or registration with (except as have been obtained or made prior to the Effective Date), or exemption by, any governmental or public body or authority, or any subdivision thereof, is required to authorize, or is required in connection with, (i) the execution, delivery and performance of any Credit Document or (ii) the legality, validity, binding effect or enforceability of any such Credit Document. 6.05 Financial Statements; Financial Condition; Undisclosed ------------------------------------------------------ Liabilities; etc. (a) - ---------------- The consolidated and consolidating balance sheet of the Borrower and its Consolidated Subsidiaries and the related consolidated and consolidating statements of income and retained earnings and statements of cash flows of the Borrower and its Consolidated Subsidiaries furnished to the Lender in accordance with Section 5.07 hereof present fairly the consolidated and consolidating financial condition of the Borrower and its Consolidated Subsidiaries at the dates of such balance sheets and the consolidated and consolidating results of the operations of the Borrower and its Consolidated Subsidiaries for the fiscal periods covered by such statements of income and retained earnings and statements of cash flows. All such financial statements have been prepared in accordance with generally accepted accounting principles and practices in the United States consistently applied. Since April 30, 1998 there has not been any material adverse change in the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower. (b) Except as fully reflected on the financial statements referred to in Section 6.05(a), there will be as of the Effective Date no liabilities or obligations with respect to the Borrower or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued, contingent or otherwise and whether or not due) which, either individually or in the aggregate, would be material to the Borrower or to the Borrower and its Subsidiaries taken as a whole. 6.06 Litigation. There are no actions, suits or proceedings ---------- pending or threatened (i) with respect to any Credit Document or (ii) that could materially and adversely affect the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower. 6.07 True and Complete Disclosure. All factual information (taken ---------------------------- as a whole) heretofore or contemporaneously furnished by or on behalf of the Borrower to the Lender or the Agent (including, without limitation, all information contained in the Credit Documents) for purposes of or in connection with this Agreement, the Warehouse Security Agreement or any transaction contemplated herein or therein is, and all other such factual information (taken as a 27 33 whole) hereafter furnished by or on behalf of the Borrower to the Lender or the Agent will be, true and accurate in all material respects on the date furnished to the Lender or the Agent and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided. 6.08 Use of Proceeds; Margin Regulations. All proceeds of each ----------------------------------- Advance will be used by the Borrower for the financing of the Borrower's mortgage lending business; provided that no part of the proceeds of any Advance -------- will be used by the Borrower to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock. Neither the making of any Advance nor the use of the proceeds thereof will violate or be inconsistent with the provisions of Regulation G, T, U or X of the Board of Governors of the Federal Reserve System. 6.09 Tax Returns and Payments. The Borrower and each of its ------------------------ Subsidiaries has filed all tax returns required to be filed by it and has paid all income taxes payable by it which have become due pursuant to such tax returns and all other taxes and assessments payable by it which have become due, other than those not yet delinquent and except for those contested in good faith and for which adequate reserves have been established. The Borrower and each of its Subsidiaries has paid, or has provided adequate reserves (in the good faith judgment of the management of the Borrower or such Subsidiary, as the case may be) for the payment of, all federal, state and foreign income taxes applicable for all prior fiscal years and for the current fiscal year to the date hereof. 6.10 Compliance with ERISA. Each Plan is in substantial compliance --------------------- with ERISA and the Code; no Reportable Event has occurred with respect to a Plan; no Plan is insolvent or in reorganization, no Plan has an Unfunded Current Liability, and no Plan has an accumulated or waived funding deficiency or permitted decreases in its funding standard account within the meaning of Section 412 of the Code; neither the Borrower nor any ERISA Affiliate of the Borrower has incurred any material liability to or on account of a Plan pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code or expects to incur any liability under any of the foregoing sections on account of the termination of, participation in or contributions to any such Plan; no proceedings have been instituted to terminate any Plan; no condition exists which presents a material risk to the Borrower or any ERISA Affiliate of incurring a liability to or on account of a Plan pursuant to the foregoing provisions of ERISA and the Code; no Lien imposed under the Code or ERISA on the assets of the Borrower exists or is likely to arise on account of any Plan; and the Borrower may terminate contributions to any other employee benefit plans maintained by it without incurring any material liability to any Person interested therein. 6.11 Capitalization. Set forth on Schedule 6.11 is an accurate -------------- and complete list of all Persons who own 5% or more of the voting stock of the Borrower, together with the percentage ownership of each. All outstanding shares of the Borrower's capital stock have been duly and validly issued, are fully paid and non-assessable. The Borrower does not have outstanding any securities convertible into or exchangeable for its capital stock or outstanding any rights to subscribe for or to purchase, or any options for the purchase of, or any agreements providing for 28 34 the issuance (contingent or otherwise) of, or any calls, commitments or claims of any character relating to, its capital stock except as set forth on Schedule 6.11 hereto. 6.12 Subsidiaries. Set forth on Schedule 6.12 is an accurate and ------------ all Subsidiaries of the Borrower and the percentage ownership by the Borrower in each such Subsidiary on the Effective Date, together with a brief description of the business of each such Subsidiary. 6.13 Compliance with Statutes, etc. The Borrower and each of its ----------------------------- Subsidiaries is in compliance with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property, except such noncompliances as would not (i) in the aggregate, have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower and (ii) affect in any respect the validity or enforceability of any Credit Document or the Security Agent's rights in the Collateral. 6.14 Investment Company Act. Neither the Borrower nor any ---------------------- Subsidiary of the Borrower is an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 6.15 No Burdensome Agreement. Neither of the Borrower nor any ----------------------- Subsidiary is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction which by its terms would have a material adverse effect on the business, condition (financial or otherwise), operations or properties of the Borrower or such Subsidiary or on the ability of the Borrower to carry out its obligations under the Note or the other Credit Documents to which it is a party. 6.16 Security Interests. The Warehouse Security Agreement creates, ------------------ as security for the Obligations, valid and enforceable security interests in and Liens on all of the Collateral in favor of the Security Agent on behalf of the Lender which are perfected and superior and prior to the rights of all third Persons and subject to no other Liens (other than Liens permitted pursuant to Section 8.01). The Borrower has, or will have at the time of pledge thereof, good and marketable title to all of the Collateral, free and clear of all Liens except those described in the preceding sentence. 6.17 Registration. The Borrower currently is, and will be at all ------------ times at which any Advance is outstanding hereunder, licensed, registered, approved, qualified or otherwise authorized in good standing to the extent required under applicable law, as a mortgage banker, mortgage broker, real estate broker, servicer of mortgage loans or otherwise in each jurisdiction in which the conduct of its business requires such licensing, registration, approval, qualification or other authorization, including, without limitation, as applicable, as a (i) GNMA approved seller and/or servicer of Mortgage Loans and issuer of Mortgage-backed Securities guaranteed by GNMA, (ii) FNMA approved seller and/or servicer of Mortgage Loans, eligible to originate, purchase, hold, sell and service Mortgage Loans to be sold to FNMA, (iii) FHLMC approved seller and/or servicer of Mortgage Loans, eligible to originate, purchase, hold, sell and service Mortgage Loans to be sold to FHLMC, (iv) lender in good standing under the VA loan guaranty program eligible to originate, 29 35 purchase, hold, sell and service VA Loans, (v) HUD approved lender, eligible to originate, purchase, hold, sell and service FHA Loans and (vi) licensed mortgage banker in each state in which it originates Mortgage Loans. To the best of the Borrower's knowledge, all appraisers providing services in connection with the origination of Mortgage Loans by the Borrower have all licenses, registrations, approvals and qualifications required by all applicable laws or regulations. 6.18 Representations Relating to the Mortgage Loans. (a) At all ---------------------------------------------- times during which a Mortgage Loan is pledged as Collateral for Advances hereunder, such Mortgage Loan will (i) be an FHA Loan, a VA Loan, a Conforming Loan, a Jumbo Loan, a State Loan, a Credit A- Loan, a Credit B Loan, a Credit C Loan or a Credit D Loan; (ii) be an Eligible Mortgage Loan or an Eligible Nonconforming Mortgage Loan and be free of any default and the Borrower will have had no notice of any event which has occurred which may, with the passage of time or the giving of notice, or both, become a default; (iii) comply with the terms of this Agreement and with the relevant Purchase Commitment and/or Master Commitment, if any; (iv) be a legal, valid and binding obligation of the mortgagor and the mortgagee thereunder enforceable in accordance with its terms and subject to no offset, defense or counterclaim, obligating such mortgagor to make the payments specified therein, and each FHA Loan and each VA Loan will be fully eligible for, and the Borrower will have complied with all applicable requirements of law, rule or regulation in respect of, FHA insurance or VA guaranty, respectively; (v) if such Mortgage Loan is an Eligible Nonconforming Mortgage Loan, be subject to a Purchase Commitment, or if such Mortgage Loan is an Eligible Mortgage Loan, be subject to a Purchase Commitment or Hedging Contract or, if it is a Mortgage Loan that bears interest at an adjustable rate, a Master Commitment which Purchase Commitment or Master Commitment is a legal, valid and binding obligation of the Investor party thereto, is enforceable against such Investor in accordance with its terms (subject to the effect of applicable bankruptcy and other similar laws affecting the rights of creditors generally and the effect of equitable principles whether applied in an action at law or a suit in equity), and, except as is otherwise notified in writing by the Borrower to the Lender and Agent, permits the assignment thereof to the Security Agent; (vi) be owned by the Borrower and be subject to no Lien or claim whatsoever, either legal or equitable, other than that granted to the Security Agent for the benefit of the Lender; (vii) be fully disbursed, the final disbursement to the mortgagor in connection therewith having been made no more than 30 days prior to the date of pledge if such disbursement was made by the Borrower (unless such Mortgage Loan is delivered as Collateral securing the initial Advance made to the Borrower hereunder); (viii) not be modified (except as to correction of clerical or scrivener errors), amended, superseded or otherwise subject to any other agreement or contract of any kind with the relevant mortgagor under such Mortgage Loan except to the extent such amendment, modification or other agreement or contract has been disclosed in writing to the Security Agent by the Borrower at the time of the pledge and does not affect the salability of such Mortgage Loan pursuant to any applicable Master Commitment or Purchase Commitment; (ix) be a valid first or second lien on the mortgaged premises subject thereto; (x) if required by the Investor, have a title insurance policy or binder, in ALTA form satisfactory to the Agent insuring the priority of the Borrower's first or second lien therein subject only to (1) the lien of the related first mortgage, if any, (2) the lien of current real property taxes and assessments, (3) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of the related mortgage or deed of trust, such exceptions appearing of record being acceptable to mortgage lending institutions generally in the area wherein the property subject 30 36 thereto is located and (4) 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 related mortgage or deed of trust and (xi) not have been selected for pledge hereunder utilizing procedures, other than those necessary to comply with the representations and warranties set forth herein, which are adverse to the interests of the Lender. (b) At the time of the pledge of each Mortgage Loan, the Borrower will have received with respect to each such Mortgage Loan (i) a hazard insurance policy with a standard mortgagee clause in a form satisfactory to the Agent and with extended coverage in an amount which is at least equal to the maximum insurable value of the improvements securing such Mortgage Loan from time to time or the principal balance owing on such Mortgage Loan, whichever is less and (ii) a policy, or other satisfactory evidence, of flood insurance or satisfactory documentation to demonstrate that the mortgaged premises are not located in a special flood hazard area. Such documentation will be retained in the Borrower's files relating to such Mortgage Loan. (c) With respect to each Mortgage Loan pledged to the Security Agent, the Borrower has fully complied with, and will fully comply with, or the original mortgagee thereof has fully complied with and will fully comply with, (A) all applicable state and federal laws and regulations, including but not limited to (i) the Real Estate Settlement Procedures Act of 1974, (ii) the Equal Credit Opportunity Act, (iii) the Federal Truth in Lending Act and Regulation Z of the Board of Governors of the Federal Reserve System, (iv) any laws requiring persons providing appraisals of property values to be properly licensed, and (v) all other usury, disclosure, consumer credit protection or truth-in-lending laws which may apply, and in each such case with all regulations promulgated in connection therewith as the same may be from time to time amended and will maintain sufficient documentary evidence in its file to substantiate such compliance (including, without limitation, delivery of all necessary disclosure statements) and (B) all of the terms and provisions of such Mortgage Loan and of any contractual escrow arrangements applicable thereto. 6.19 Representations Relating to the Mortgage-backed Securities. ---------------------------------------------------------- At the time a Mortgage-backed Security is pledged as Collateral, such Mortgage-backed Security will be (i) an Eligible Mortgage Loan free of any default, (ii) subject to a Purchase Commitment which is a legal, valid and binding obligation of the Investor party thereto, is enforceable against such Investor in accordance with its terms, permits the assignment thereof to the Security Agent and the Collateral Agent and may be enforced against such Investor by the Security Agent or the Collateral Agent, (iii) comply with all of the terms of such Purchase Commitment, (iv) a legal, valid and binding obligation of the issuer thereof enforceable in accordance with its terms, and (v) subject to no Lien or claim whatsoever, either legal or equitable, other than that granted to the Security Agent for the benefit of the Lender and the interest of the Investor under the related Purchase Commitment. 6.20 Insurance. The Borrower has blanket fidelity bond coverage --------- and errors and omissions insurance coverage in such form, with such companies and in such amounts as are in accordance with standards and requirements satisfactory to the applicable Investor. 31 37 6.21 Title to Property. The Borrower has good and marketable title ----------------- to all of its property, the value of which is included in the financial statements delivered pursuant hereto, subject to no Liens, encumbrances or claims other than those disclosed on such financial statements. 6.22 No Recourse Sales. No commitment or other contractual ----------------- arrangement pursuant to which the Borrower has sold or currently has a right to sell Mortgage Loans to a third party provides for any recourse to the Borrower except in the event of a breach of representations or warranties made in connection with such sale. 6.23 Fictitious Names. Neither the Borrower nor any Subsidiary ---------------- of the Borrower operates or does business under any assumed, trade or fictitious name. Section 7. Affirmative Covenants. --------------------- The Borrower covenants and agrees that as of the Effective Date, and thereafter for so long as this Agreement is in effect and until the Commitment has terminated, the Note is no longer outstanding and the Advances, together with interest, Fees and all other Obligations, are paid in full: 7.01 Information Covenants. The Borrower will furnish to the Agent --------------------- (unless otherwise indicated): (a) Monthly Financial Statements. Within 30 days after the close ---------------------------- of each monthly accounting period of the Borrower, the consolidated statements of financial condition of the Borrower and its Consolidated Subsidiaries as at the end of such period, and the related consolidated statements of income and retained earnings and statements of cash flows for such period and for the elapsed portion of the fiscal year ended with the last day of such period, setting forth comparative figures for the related periods in the prior fiscal year, all of which shall be in form and substance satisfactory to the Agent and certified as to fairness of presentation by the Chief Financial Officer of the Borrower, subject to normal year-end audit adjustments and accompanied by a certificate from such financial officer to the effect that no Default or Event of Default has occurred and is continuing, and a statement as to the beneficial ownership of all of the issued and outstanding capital stock of the Borrower as at the end of such period, certified as accurate by such financial officer. (b) Annual Financial Statements. Within 90 days after the close --------------------------- of each fiscal year of the Borrower, the consolidated and consolidating statements of financial conditions of the Borrower and its Consolidated Subsidiaries as at the end of such fiscal year, and the related consolidated and consolidating statements of income and retained earnings and statements of cash flows for such fiscal year, in form and substance satisfactory to the Agent and setting forth comparative figures for the preceding fiscal year and certified, in the case of the consolidated financial statements, by independent certified public accountants reasonably acceptable to the Agent, together with a report of such accounting firm stating that its regular audit of the financial statements of the Borrower was conducted in accordance with generally accepted auditing standards. 32 38 (c) Management Letters. Promptly, and in no event later than ------------------ five days, after receipt by the Borrower thereof, a copy of any "management letter" received by the Borrower from its certified public accountants detailing any "material weaknesses in internal control" noted by such accountants (as defined by the Financial Accounting Standards Board). (d) Officer's Certificates. At the time of the delivery of the ---------------------- financial statements provided for in Section 7.01(a) and (b), a certificate of the Chief Financial Officer of the Borrower to the effect that, to the best of his knowledge, no Default or Event of Default has occurred and is continuing or, if any Default or Event of Default has occurred and is continuing, specifying the nature and extent thereof and any actions taken or proposed to be taken to cure any such Default or Event of Default, which certificate shall set forth the calculations required to establish whether the Borrower was in compliance with the provisions of Sections 8.08 and 8.09, at the end of such month or fiscal year, as the case may be. (e) Notices. Promptly (and in no event later than five days ------- following the occurrence thereof), notice of (i) the occurrence of any event which constitutes a Default or Event of Default, detailing the nature of such Default or Event of Default and any actions taken or proposed to be taken to cure such Default or Event of Default, (ii) the commencement of any action, suit or proceeding against the Borrower or any of its Subsidiaries before any court, arbitrator or governmental department, commission, board, bureau, agency or instrumentality which (A) could result in liability or loss of $250,000 or more, in excess of any applicable insurance coverage to the Borrower or such Subsidiary, as the case may be, or (B) would otherwise materially adversely affect the management or the condition or operations (financial or otherwise) of the Borrower or any of its Subsidiaries, (iii) any change in any of the President, Chief Executive Officer, Chief Financial Officer or Director of Mortgage Banking Operations of the Borrower, or (iv) any loss or any threatened loss known to the Borrower of any authorization, qualification, license or permit issued by any governmental or regulatory authority to the Borrower or any of its Subsidiaries the loss of which could have a material adverse effect upon the financial condition or business of the Borrower or any of its Subsidiaries. (f) Reports Relating to Collateral. In respect of the Collateral, ------------------------------ bi-weekly or more frequently as Agent may, from time to time, request a position valuation report from the Borrower in a form acceptable to the Agent (the "Position Valuation Report"). (g) Monthly Servicing Reports. Within 30 days after the close of ------------------------- each calendar month in which the Borrower owns a Servicing Portfolio, a consolidated report of the Borrower providing a summary, for all Mortgage Loans the servicing rights to which are owned by the Borrower, regardless of whether such Mortgage Loans are pledged to the Lender, of (i) the entities that own such Mortgage Loans, (ii) the original terms of such Mortgage Loans and whether such Mortgage Loans bear interest at a fixed rate or an adjustable rate, (iii) the weighted average interest rate and the weighted average net servicing fee with respect to such Mortgage Loans, (iv) whether any such Mortgage Loans were sold by the Borrower with recourse and the nature of such recourse, (v) which of such Mortgage Loans (A) are current and in good standing, (B) are more than 30, 60 or 90 days past due, 33 39 respectively, (C) are the subject of pending litigation, bankruptcy or foreclosure proceedings, and (D) have been converted (through foreclosure or other proceedings in lieu thereof) by the Borrower into real estate owned by the Borrower, and (vi) any reserves established by the Borrower for losses in respect of delinquent Mortgage Loans or real estate owned by the Borrower. (h) Other Reports and Filings. Promptly, and in any event within ------------------------- 10 days following the filing thereof, copies of all financial information, proxy materials and other information and reports, if any, which the Borrower shall file with the Securities and Exchange Commission or any governmental agencies substituted therefor. (i) Servicing Transactions. (i) Promptly, and in any event within ---------------------- 10 days following the execution thereof, copies of any agreements executed by the Borrower which provide for the sale by the Borrower to an Investor of the rights to service any Mortgage Loan, which sale is separate from the sale of the related Mortgage Loan, pledged to the Security Agent pursuant to the terms of this Agreement and the Warehouse Security Agreement and (ii) written notice not less than 10 days prior to any purchase or sale of mortgage servicing rights or any other transaction which would result in greater than a 10 percent increase or decrease in the aggregate unpaid principal balance of all Mortgage Loans included in the Servicing Portfolio of the Borrower. (j) Leases. Written notice not less than 10 days prior to any ------ agreement to rent or lease any real or personal property which would result in aggregate payments thereunder by the Borrower (including, without limitation, any property taxes paid as additional rent or lease payments) in excess of $250,000. (k) Capital Expenditures. Written notice not less than 10 days ------------------- prior to any agreement by the Borrower pursuant to which the Borrower intends to make any expenditure for fixed or capital assets (including, without limitation, expenditures for maintenance and repairs which should be capitalized in accordance with generally accepted accounting principles and including capitalized lease obligations) which will exceed $250,000. (l) [Intentionally omitted] (m) Commitment Default. Notice within 2 Business Days of any ------------------ default under, or of the termination, invalidation or cancellation of, any Purchase Commitment or Master Commitment relating to any Mortgage Loan or Mortgage-backed Security constituting Collateral. (n) Collateral Servicing Report. Within five (5) Business Days --------------------------- after the end of each calendar month, a report detailing the identities of the entities other than the Borrower, if any, servicing any Mortgage Loans pledged as Collateral hereunder or which secure a Mortgage-backed Security pledged as Collateral hereunder. 34 40 (o) Other Information. Promptly, and in any event within five ----------------- (5) Business Days after the Borrower's receipt or filing thereof, (i) copies of any notices or information given to or received from the holders of any Indebtedness of the Borrower relating to any actual or alleged default, demand for payment or acceleration of payment, or from the PBGC or the United States Department of Labor in connection with any matter arising with respect to ERISA, (ii) copies of all audits completed by HUD, GNMA, FNMA, FHLMC or any other governmental agency or Investor with respect to the Borrower, (iii) all Mortgage Bankers' Financial Reporting Form Statement of Condition (designated as FHLMC Form 1055 and FNMA Form 1002, respectively, and any successor thereto or replacement thereof) (the "Mortgage Bankers' Reporting Forms") filed by the Borrower with FHLMC or FNMA, (iv) copies of any uniform single audit reports required or requested by FNMA or FHLMC, and (v) such other information or documents (financial or otherwise) as the Agent or the Lender may reasonably request. (p) Credit Package Documents. Promptly upon the written request ------------------------ by the Agent, to the extent available, each of the documents listed in Schedule 7.01(p) (collectively, the "Credit Package Documents"), as applicable. (q) Guarantors' Financial Information. (i) Within 90 days after --------------------------------- the close of each calendar year, an updated personal financial statement of each Guarantor and (ii) copies of each Guarantor's federal income tax returns within 30 days after the filing date of each such return. 7.02 Books, Records and Inspections. The Borrower will, and will ------------------------------ cause each of its Subsidiaries to, keep proper books of record and account in which full, true and correct entries in conformity with generally accepted accounting principles in the United States and all requirements of law shall be made of all dealings and transactions in relation to its business and activities. The Borrower will, and will cause each of its Subsidiaries to, permit officers and designated representatives of the Agent or the Lender to visit and inspect any of the properties of the Borrower or such Subsidiary, and to examine the books of record and account of the Borrower or such Subsidiary and discuss the affairs, finances and accounts of the Borrower or such Subsidiary with, and be advised as to the same by, its and their officers, employees and independent accountants, all at such reasonable times and intervals and to such extent as the Agent or the Lender may request. Any such inspection and/or examination may include an audit by the Agent of the servicing of the Collateral and the Borrower's Servicing Portfolio and such procedures as the Agent deems appropriate to confirm the reporting of Mortgage Loan balances. 7.03 Maintenance of Property, Insurance. The Borrower will, and ---------------------------------- will cause each of its Subsidiaries to, (i) keep all property necessary for the operation of its business in good working order and condition, (ii) except as otherwise provided in clause (iii) below, maintain with financially sound and reputable insurance companies insurance in at least such amounts and against at least such risks as are customarily insured against by companies in the same or similar business, (iii) maintain fidelity bond coverage and errors and omissions insurance coverage in accordance with standards and requirements reasonably satisfactory to the applicable Investor and the Agent and (iv) furnish to the Agent or the Lender, upon written request, full information as to 35 41 the insurance carried. The provisions of this Section 7.03 shall be deemed to be supplemental to, but not duplicative of, the provisions of any of the security documents that require the maintenance of insurance. 7.04 Corporate Franchises. The Borrower will, and will cause each -------------------- of its Subsidiaries to, do or cause to be done, all things necessary to preserve and keep in full force and effect its existence and its material rights, franchises, qualifications, licenses, permits and patents; provided, however, --------- ------- that nothing in this Section 7.04 shall prevent the withdrawal by the Borrower or any of its Subsidiaries of its qualification as a foreign corporation in any jurisdiction where such withdrawal could not have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower or such Subsidiary. 7.05 Compliance with Statutes, etc. The Borrower will, and will ------------------------------ cause each of its Subsidiaries and will use commercially reasonable efforts to cause each appraiser, correspondent, broker or other service provider that participates with the Borrower in the origination or servicing of Mortgage Loans to, comply with all applicable statutes, regulations and orders of, and all applicable restrictions imposed by, all governmental bodies, domestic or foreign, in respect of the conduct of its business and the ownership of its property (including applicable statutes, regulations, orders and restrictions relating to (1) licensing or registration (as described in Section 6.17 hereof) and (2) environmental standards and controls), except such noncompliances as could not (i) adversely affect in any manner the legality, validity or enforceability of any Mortgage Loan, Mortgage-backed Security, Purchase Commitment or Hedging Contract or (ii) in the aggregate, have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower or the Borrower and its Subsidiaries taken as a whole. 7.06 ERISA. As soon as possible and, in any event, within 10 days ----- after the Borrower or any of its Subsidiaries or ERISA Affiliates knows or has reason to know any of the following, the Borrower will deliver to the Agent a certificate of the Chief Financial Officer of the Borrower setting forth details as to such occurrence and such action, if any, which the Borrower, such Subsidiary or such ERISA Affiliate is required or proposes to take, together with any notices required or proposed to be given to or filed with or by the Borrower, such Subsidiary, such ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with respect thereto; that a Reportable Event has occurred; that an accumulated funding deficiency has been incurred or an application may be or has been made to the Secretary of the Treasury for a waiver or modification of the minimum funding standard (including any required installment payments) or an extension of any amortization period under Section 412 of the Code with respect to a Plan; that a Plan has been or may be terminated, reorganized, partitioned or declared insolvent under Title IV of ERISA; that a Plan has an Unfunded Current Liability giving rise to a Lien under ERISA; that proceedings may be or have been instituted to terminate a Plan; that a proceeding has been instituted pursuant to Section 515 of ERISA to collect a delinquent contribution to a Plan; or that the Borrower, any of its Subsidiaries or ERISA Affiliates will or may incur any liability (including any contingent or secondary liability) to or on account of the termination of or withdrawal from a Plan under Section 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or with respect to a Plan under Section 4971 or 4975 of the Code or Section 409, 502(i) or 502(1) of ERISA. The Borrower will deliver to the Agent a complete copy of the annual report (Form 5500) of each Plan required to be 36 42 filed with the Internal Revenue Service. In addition to any certificates or notices delivered to the Agent pursuant to the first sentence hereof, copies of annual reports and any other notices received by the Borrower or any of its Subsidiaries required to be delivered to the Agent hereunder shall be delivered to the Agent no later than 10 days after the later of the date such report or notice has been filed with the Internal Revenue Service or the PBGC, given to Plan participants or received by the Borrower or such Subsidiary. 7.07 Performance of Obligations. The Borrower will, and will -------------------------- cause each of its Subsidiaries to, perform all of its obligations under the terms of each mortgage, indenture, security agreement and other debt instrument by which it is bound, except such non-performances as could not in the aggregate, have a material adverse effect on the business, operations, property, assets, condition (financial or otherwise) or prospects of the Borrower or of the Borrower and its Subsidiaries taken as a whole. 7.08 Mortgage Loans. (a) The Borrower will not modify or waive -------------- any term of any pledged Mortgage Loan or release any security or obligor, if as a result thereof such Mortgage Loan would become, nor cause, through any activity or inactivity, a Mortgage Loan to become, ineligible for FHA insurance or VA guaranty, if applicable, or for purchase in accordance with the relevant Master Commitment or Purchase Commitment. The Borrower will notify the Agent of (i) any payment default in respect of any pledged Collateral which has continued for 30 days, 60 days or 90 days, respectively, (ii) the occurrence of an Insolvency Event of which the Borrower has knowledge in respect of an obligor on any Mortgage Loan pledged as Collateral, (iii) the commencement of foreclosure or similar proceedings in respect of the premises which secure any Mortgage Loan pledged as Collateral and (iv) any other material default in any other term of any pledged Collateral, such notice to be delivered not later than three (3) Business Days following the occurrence thereof in the case of an event specified in clauses (i) or (iii) and promptly upon the Borrower's receiving notice or otherwise becoming aware thereof in the case of an event specified in clauses (ii) or (iv). (b) All FHA Loans, and VA Loans will comply in all respects with all applicable requirements for purchase under the applicable GNMA or FNMA standard form of selling contract for FHA insured and VA guaranteed loans and any supplement thereto then in effect. All Conforming Mortgage Loans will comply in all respects with all applicable requirements for purchase under the applicable FNMA or FHLMC selling contract for Mortgage Loans of such type and any supplement thereto then in effect. All Jumbo Loans will comply in all respects with all applicable requirements for purchase under any Purchase Commitment relating thereto. All State Loans will comply in all respects with all applicable requirements for purchase by the state agency or instrumentality that issued a Purchase Commitment in respect thereof. All Eligible Nonconforming Mortgage Loans will comply in all respects with all applicable requirements for purchase under any Purchase Commitment relating thereto. All Mortgage Loans will be serviced and administered in accordance with all requirements of any Investor that has issued a Purchase Commitment or a Master Commitment applicable thereto. 7.09 Payment of Taxes. The Borrower will pay and discharge all ---------------- taxes, assessments and governmental charges or liens imposed upon the Borrower or upon the Borrower's income or 37 43 profits, or upon any properties belonging to the Borrower, prior to the date on which any penalties attach thereto, and all lawful claims which, if unpaid, might become a Lien upon any such property. 7.10 Corporate Separateness. The Borrower will, and will cause ---------------------- each of its Subsidiaries to, take such actions as are necessary to keep its operations and the operations of each of its Subsidiaries separate and apart from each of the other's, including, without limitation, insuring that all customary formalities regarding the corporate existence of the Borrower and each such Subsidiary, including holding regular meetings and maintenance of its current minute books, are followed. 7.11 Collateral. The Borrower will (a) warrant and defend the ---------- right, title and interest of the Lender and the Security Agent in and to the Collateral against the claims and demands of all persons whomsoever; (b) service, or cause to be serviced, all Mortgage Loans in accordance with the requirements of the issuers of Master Commitments and Purchase Commitments covering the same and all applicable FHA and VA requirements (including without limitation taking all actions necessary to enforce the obligations of the obligors under such Mortgage Loans) and service, or cause to be serviced, all Mortgage Loans backing Mortgage-backed Securities in accordance with applicable governmental requirements and the requirements of issuers of Purchase Commitments covering the same; (c) hold all escrow funds collected in respect of Mortgage Loans and mortgage loans backing Mortgage-backed Securities in trust, without commingling the same with non-custodial funds, and apply the same for the purposes for which such funds were collected; (d) comply in all respects with the terms and conditions of all Master Commitments and Purchase Commitments, and all extensions, renewals and modifications or substitutions thereof or thereto, and deliver or cause to be delivered to the applicable Investor the Mortgage Loans and Mortgage-backed Securities to be sold under each Purchase Commitment not later than three (3) Business Days prior to the expiration thereof; and (e) maintain, and, upon request, shall make available to the Lender, the Agent or the Security Agent the originals, or copies in any case where the original has been delivered to the Security Agent or to an Investor, of its Mortgage Notes, Mortgages, Purchase Commitments, Master Commitments, Hedging Contracts and all related Mortgage Loan documents and instruments, and all files, surveys, certificates, correspondence, appraisals, computer programs, tapes, discs, cards, accounting records and other information and data relating to the Collateral. 7.12 Portfolio Hedging Arrangements. The Borrower will enter into ------------------------------ and maintain from time to time Hedging Contracts with respect to Mortgage Loans held by it and commitments made by it to prospective Mortgage Loan obligors to extend Mortgage Loans at specified rates of interest. 7.13 Borrowing Base Valuation Reports. The Agent will prepare and -------------------------------- deliver to the Borrower weekly, or more frequently as the Agent may from time to time determine, a report with respect to all Eligible Mortgage Loans, Eligible Nonconforming Mortgage Loans and Liquid Assets pledged to the Security Agent as of such date (a "Borrowing Base Valuation Report"). Unless the Borrower shall, within 48 hours after receiving any such Borrowing Base Valuation Report, notify the Agent that the Borrower disagrees with the information contained therein, the Borrower shall be deemed to have certified to the Agent that, as of the date of the Borrowing Base 38 44 Valuation Report: (a) the calculations contained therein are accurate and have been prepared in accordance with the terms and conditions of the Warehouse Credit Agreement; and (b) no prepayment is required under the terms of Section 4.02 of the Warehouse Credit Agreement. Section 8. Negative Covenants. ------------------ The Borrower covenants and agrees that as of the Effective Date, and thereafter for so long as this Agreement is in effect and until the Commitment has terminated, the Note is no longer outstanding and the Advances, together with interest, Fees and all other Obligations, are paid in full, without the prior written consent of the Lender: 8.01 Liens. The Borrower will not, and will not permit any of its ----- Subsidiaries to, create, incur, assume or suffer to exist any Lien upon or with respect to (i) any Collateral, or (ii) any right of the Borrower or any of its Subsidiaries to service Mortgage Loans; provided that the provisions of this -------- Section 8.01 shall not prevent the creation, incurrence, assumption or existence of: (a) Liens for taxes not yet due, or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established; (b) Liens created pursuant to the Warehouse Security Agreement; and (c) Liens in favor of FNMA, GNMA or FHLMC on the right of the Borrower to service Mortgage Loans sold to such agencies. 8.03 Dividends. (a) Upon the occurrence and during the continuance --------- of any Default or Event of Default (determined after giving effect to any proposed action of the Borrower), the Borrower will not, and will not permit any of its Subsidiaries to, declare or pay any dividends, or return any capital, to its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock now or hereafter outstanding (or any options or warrants issued by the Borrower or by such Subsidiary with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or permit 39 45 any of its Subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock of the Borrower or such Subsidiary now or hereafter outstanding (or any options or warrants issued by the Borrower or such Subsidiary with respect to its capital stock), except that any Subsidiary may pay dividends to the Borrower or to any Wholly-Owned Subsidiary of the Borrower. (b) The Borrower will not at any time declare or pay any dividends, or return any capital, to its stockholders or authorize or make any other distribution, payment or delivery of property or cash to its stockholders as such, or redeem, retire, purchase or otherwise acquire, directly or indirectly, for a consideration, any shares of any class of its capital stock now or hereafter outstanding (or any options or warrants issued by the Borrower with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or permit any of its Subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock of the Borrower now or hereafter outstanding (or any options or warrants issued by the Borrower with respect to its capital stock), or pay any special distributions or bonuses not in the ordinary course of business to any officer or employee that owns capital stock of the Borrower, if after giving effect thereto the Adjusted Tangible Net Worth of the Borrower would be less than the amount required by Section 8.09 hereof. 8.04 [Intentionally omitted] 8.05 Advances, Investments and Loans. The Borrower will not, and ------------------------------- will not permit any of its Subsidiaries to, lend money or credit or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any other Person, except for: (a) Mortgage Loans or other loans extended in the ordinary course of the Borrower's or any Subsidiary's mortgage banking business; or (b) cash, Cash Equivalents and Mortgage-backed Securities. 8.06 Transactions with Affiliates. The Borrower will not, and ---------------------------- will not permit any of its Subsidiaries to, enter into any transaction or series of related transactions, whether or not in the ordinary course of business, with any Affiliate of the Borrower, other than on terms and conditions substantially as favorable to the Borrower or such Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time in a comparable arm's-length transaction with a Person other than an Affiliate; provided, however, that the Borrower -------- -------- will not, and will not permit any of its Subsidiaries to: (a) use, furnish, or rely upon an insurance policy (including but not limited to title insurance and hazard insurance) underwritten by or issued by any Affiliate of the Borrower; (b) use, furnish, or rely upon an appraisal issued by any Affiliate or by any Person controlled by any Affiliate of the Borrower except with respect to FHA Loans, VA Loans or State Loans; or 40 46 (c) pledge any Mortgage Loan to the Lender under which the Borrower or any Affiliate thereof is a mortgagor or guarantor for such Mortgage Loan. 8.07 Capital Expenditures. The Borrower will not, and will not -------------------- permit any of its Subsidiaries to, make any expenditure for fixed or capital assets (including, without limitation, expenditures for maintenance and repairs which should be capitalized in accordance with generally accepted accounting principles and including capitalized lease obligations) other than such expenditures made in the ordinary course of such Person's business in an amount not in excess of $250,000. 8.08 Maximum Adjusted Leverage Ratio. The Borrower will not permit ------------------------------- its Adjusted Leverage Ratio at any time during any fiscal year to be greater than 15 to 1. 8.09 Minimum Adjusted Tangible Net Worth. The Borrower will not ----------------------------------- permit its Adjusted Tangible Net Worth at any time during any fiscal year to be less than $1,500,000. 8.10 [Intentionally omitted] 8.11 Modifications of Certificate of Incorporation, By-Laws, -------------------------------------------------------- Certain Other Agreements and Collateral. The Borrower will not, without prior - --------------------------------------- written notice to the Lender, amend, modify or change its certificate of incorporation (including, without limitation, by the filing or modification of any certificate of designation) or by-laws, or any agreement entered into by it, with respect to its capital stock, or enter into any new agreement with respect to its capital stock. The Borrower will not, without the prior written consent of the Lender, amend, modify or waive any of the terms of, or settle or compromise any claim with respect to, any Collateral or any Collateral Document. 8.12 Limitation on Restrictions on Subsidiary Dividends and Other ------------------------------------------------------------ The Distributions. - ----------------- Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any such Subsidiary to (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by the Borrower or any Subsidiary of the Borrower, or pay any Indebtedness owed to the Borrower or any Subsidiary of the Borrower, (b) make loans or advances to the Borrower or (c) transfer any of its properties or assets to the Borrower, except for such encumbrances or restrictions existing under or by reasons of (i) applicable law, (ii) this Agreement and (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of the Borrower or any Subsidiary of the Borrower. 8.13 Limitation on Issuances of Capital Stock by Subsidiaries. -------------------------------------------------------- The Borrower will not permit any of its Subsidiaries to issue any capital stock (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, capital stock, except for (i) transfers and replacements of then outstanding shares of capital stock and (ii) any issuance of shares after which the Borrower continues to own or control, directly or indirectly, in the aggregate fifty-one percent (51%) or more of the voting capital stock of such Subsidiary. 41 47 8.14 Business. The Borrower will not, and will not permit any of -------- its Subsidiaries to, without the prior written consent of the Lender (which consent shall not be unreasonably withheld), engage (directly or indirectly) in any business other than the business in which the Borrower or such Subsidiary, respectively, is engaged on the Effective Date. 8.15 Portfolio Aging. The Borrower will not at any time permit the --------------- aggregate principal amount of the Eligible Mortgage Loans then pledged as Collateral that have an Origination Date that is more than 60 days prior to such time, to exceed 0% of the aggregate principal amount of all Eligible Mortgage Loans that are pledged as Collateral at such time and will not at any time permit the aggregate principal amount of the Eligible Nonconforming Mortgage Loans then pledged as Collateral that have an Origination Date that is more than 60 days prior to such time to exceed 0% of the aggregate principal amount of all Eligible Nonconforming Mortgage Loans that are pledged as Collateral at such time. 8.16 Minimum Current Ratio. The Borrower will not permit its --------------------- Current Ratio to be less than 1.0 to 1.0 at any time during any fiscal year. Section 9. Events of Default. ----------------- Upon the occurrence of any of the following specified events (each an "Event of Default"): 9.01 Payments. The Borrower shall (i) default in the payment when -------- due of any principal of any Advance or (ii) default, and such default shall continue unremedied for 3 or more days, in the payment when due of any interest on any Advance or any Fees or any other amount owing hereunder or under any Credit Document; or 9.02 Representations, etc. Any representation, warranty or -------------------- statement made or deemed made by the Borrower herein or in any other Credit Document or in any certificate delivered pursuant hereto or thereto or to the Agent as part of the Agent's due diligence review of the Borrower shall prove to be untrue in any material respect on the date as of which made or deemed made; or 9.03 Covenants. The Borrower shall (i) default in the due --------- performance or observance by it of any term, covenant or agreement contained in Sections 7.01(e), 7.04, 7.05, 7.06, 7.07, 7.08 or 8 or (ii) default in the due performance or observance by it of any term, covenant or agreement contained in this Agreement (other than those referred to in Sections 9.01 and 9.02 and clause (i) of this Section 9.03) and such default shall continue unremedied for a period of 15 days; or 9.04 Default Under Other Agreements. (a) The Borrower or any of ------------------------------ its Subsidiaries shall (i) default in any payment of any Indebtedness pursuant to which the Borrower is obligated in any manner in an amount in excess of $250,000 (other than the Obligations) beyond the period of grace (not to exceed 30 days), if any, provided in the instrument or agreement under which such Indebtedness was created or (ii) default in the observance or performance of any agreement or condition relating to any such Indebtedness (other than the Obligations) or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the 42 48 holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause (determined without regard to whether any notice is required), any such Indebtedness to become due prior to its stated maturity; or (b) any Indebtedness (other than the Obligations) of the Borrower or any Indebtedness of its Subsidiaries pursuant to which the Borrower is obligated in any manner shall be declared to be due and payable, or required to be prepaid other than by a regularly scheduled required prepayment or as a mandatory prepayment (unless such required prepayment or mandatory prepayment results from a default thereunder or an event of the type that constitutes an Event of Default), prior to the stated maturity thereof; or 9.05 Default Under Agreements With Agent. The Borrower, or any of ----------------------------------- its Subsidiaries, shall default under any contract, agreement or arrangement between the Borrower, or such Subsidiary, and the Agent or any Affiliate of the Agent, or the Borrower or such Subsidiary shall terminate, for any reason whatsover (other than the failure of any such Mortgage Loan to be funded to the obligor thereunder), any commitment of the Agent or any Affiliate of the Agent to purchase Mortgage Loans originated or owned by the Borrower or such Subsidiary; or 9.06 Bankruptcy, etc. An Insolvency Event shall occur with respect --------------- to the Borrower or any of its Subsidiaries or any Guarantor or any Person who has executed the Support Agreement; or 9.07 ERISA. Any Plan shall fail to satisfy the minimum funding ----- standard required for any plan year or part thereof or a waiver of such standard or extension of any amortization period is sought or granted under Section 412 of the Code, any Plan is, shall have been or is likely to be terminated or the subject of termination proceeding under ERISA, any Plan shall have an Unfunded Current Liability, or the Borrower or any of its Subsidiaries or ERISA Affiliates has incurred or is likely to incur a liability to or on account of a Plan under Section 409, 501(i), 501(1), 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or Section 4971 or 4975 of the Code, and there shall result from any such event or events the imposition of a Lien upon the assets of the Borrower or any of its Subsidiaries, the granting of a security interest, or a liability or a material risk of incurring a liability to the PBGC or a Plan or a trustee appointed under ERISA or a penalty under Section 4971 of the Code, which lien, security interest, liability or penalty, singly or in the aggregate exceeds $100,000; or 9.08 Warehouse Security Agreement. The Warehouse Security ---------------------------- Agreement or any provision thereof shall cease to be in full force and effect, or shall cease to give the Security Agent the Liens, rights, powers and privileges purported to be created thereby, or the Borrower shall default in the due performance or observance of any term, covenant or agreement on its part to be performed or observed pursuant to the Warehouse Security Agreement; or 9.09 [Intentionally omitted] 9.10 Management. Steven M. Majerus shall cease to be actively ---------- involved in the management of the Borrower and its Subsidiaries with substantially the same duties as currently performed and, within 90 days thereafter, the Borrower shall have failed to replace such individual 43 49 with a substitute reasonably satisfactory to the Lender and the Agent, based on such individual's experience and background in mortgage banking; or 9.11 Judgments. One or more judgments or decrees shall be entered --------- against the Borrower or any of its Subsidiaries involving in the aggregate for the Borrower and its Subsidiaries a liability (not paid or fully covered by insurance) of $100,000 or more, and all such judgments or decrees shall not have been vacated, discharged or stayed or bonded pending appeal within 30 days after the entry thereof; or 9.12 Material Adverse Change. A material adverse change shall ----------------------- occur in the financial condition, operations or prospects of the Borrower or any of its Subsidiaries or any Guarantor or any Person who has executed the Support Agreement; or any material adverse action shall be taken by any state or federal regulatory body or any court against the Borrower or any of its Subsidiaries which may result in the loss of any agreement, permit or license of the Borrower or any of its Subsidiaries, or otherwise limit the business or operations of the Borrower or any of its Subsidiaries which loss or limitation would have a material adverse effect on the financial condition, operations or prospects of the Borrower; then, and in any such event, and at any time thereafter, if any Event of Default shall then be continuing, the Agent may, and upon the written request of the Lender shall, by written notice to the Borrower, take any or all of the following actions, without prejudice to the rights of the Agent, the Lender or the holder of the Note to enforce its claims against the Borrower (provided, -------- that, if an Event of Default specified in Section 9.06 shall occur with respect to the Borrower, the result which would occur upon the giving of written notice by the Agent to the Borrower as specified in clauses (i) and (ii) below shall occur automatically without the giving of any such notice): (i) declare the Commitment terminated, whereupon the Commitment of the Lender shall forthwith terminate immediately and any Fees shall forthwith become due and payable without any other notice of any kind; and (ii) declare the principal of and any accrued interest in respect of all Advances and all Obligations to be, whereupon the same shall become, forthwith due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. 9.13 Default Not a Condition of a 120-Day Demand. Notwithstanding ------------------------------------------- any of the other terms of this Agreement, including, without limitation, the preceding provisions of this Section 9, the Lender shall have the right to demand payment of the outstanding Advances at any time, upon 120 days' prior written notice to the Borrower, whether or not any Default or Event of Default exists or the Expiry Date has occurred. Section 10. The Agent. --------- 10.01 Authorization and Action. The Lender hereby appoints and ------------------------ authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. The Lender hereby delegates to the Agent all of its powers hereunder. 44 50 9.14 Consolidation, Merger, Sale of Assets, etc. The Borrower ------------------------------------------- shall, or shall permit any of its Subsidiaries which are engaged in the mortgage banking business to, wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation (except mergers or consolidations of a Subsidiary into the Borrower, with the Borrower as the surviving corporation), or convey, sell, lease or otherwise dispose of (or agree to do any of the foregoing at any future time) all or any part of its property or assets which are material (including, but not limited to, any rights to service Mortgage Loans in the Borrower's Servicing Portfolio), individually or in the aggregate, other than obsolete or worn out property, whether now owned or hereafter acquired, other than in the ordinary course of business as presently conducted and at fair market value, without the prior approval of the Lender or the Agent (which approval shall not be reasonably withheld), except that the Borrower and its Subsidiaries may, in the ordinary course of business, acquire Mortgage Loans for resale and sell Mortgage Loans and Mortgage-backed Securities. 51 10.02 Agent's Duties. The Agent shall follow its customary -------------- standards, policies and procedures in performing its duties as Agent hereunder and in performing such duties shall use that degree of care and attention that the Agent exercises with respect to the administration of comparable financing facilities that the Agent extends for its own account. Neither the Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them as Agent under or in connection with this Agreement (including, without limitation, the Agent's servicing, administering or collecting Collateral as Security Agent pursuant to the Warehouse Security Agreement), except for its or their own willful misconduct, gross negligence or bad faith. Without limiting the generality of the foregoing, the Agent: (i) may consult with legal counsel, independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (ii) makes no warranty or representation to the Lender and shall not be responsible to the Lender for any statements, warranties or representations (whether written or oral) made by the Borrower in or in connection with this Agreement; (iii) shall not be responsible to the Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement, the Note, any other Credit Document, any Collateral Document or any other instrument or document furnished pursuant hereto; and (iv) shall incur no liability under or in respect of this Agreement by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by telecopier, telegram, cable or telex) believed by it to be genuine and signed or sent by the proper party or parties. 10.03 GE Capital Mortgage Services, Inc. and Affiliates. GE Capital ------------------------------------------------- Mortgage Services, Inc. and its Affiliates may generally engage in any kind of business with the Borrower, any of its Affiliates and any person who may do business with or own securities of the Borrower or any of its Affiliates, all as if GE Capital Mortgage Services, Inc. were not the Agent and without any duty to account therefor to the Lender. 10.04 Successor Agent. The Agent may resign at any time by giving --------------- written notice thereof to the Lender and the Borrower; provided, that each Rating Agency shall have confirmed in writing that such resignation shall not result in a withdrawal or reduction of the then current rating by such Rating Agency of the Commercial Paper. Upon any such resignation, the Lender shall have the right to appoint a successor Agent, subject to (i) the prior written approval of such successor Agent by each LOC Provider and each Liquidity Lender and (ii) receipt of written confirmation from each Rating Agency that such appointment shall not result in a withdrawal or downgrading of the then current credit rating of the Commercial Paper. If no successor Agent shall have been so appointed by the Lender or shall have accepted such appointed within 15 days after the retiring Agent's giving of notice of resignation, the Agent, on behalf of the Lender, may appoint a successor Agent. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and from such time the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent's resignation hereunder as Agent, the provisions of this Section 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement. 45 52 Section 11. Miscellaneous. ------------- 11.01 Payment of Expenses; Indemnity. (a) Whether or not the ------------------------------ transactions contemplated hereby are consummated, in addition to the rights of indemnification granted to the Indemnified Parties under Section 11.01(b) hereof, the Borrower agrees to pay on demand all costs and expenses in connection with the preparation, execution, delivery, modification, amendment, administration and monitoring of the Credit Documents and the other documents to be delivered thereunder (including the costs in respect of the perfection and maintenance of the security interests and conducting due diligence with respect to the Borrower and its business), including, without limitation, the fees and out-of-pocket expenses of counsel for the Lender and the Agent, and of local counsel who may be retained by the Lender and the Agent, with respect thereto and with respect to advising the Lender and the Agent as to their rights and remedies under the Credit Documents, and including all reasonable costs and expenses in connection with the servicing and liquidation of the Collateral. The Borrower further agrees to pay on demand all costs and expenses, if any (including, without limitation, reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, workout, legal proceedings or otherwise) of the Credit Documents and the other documents to be delivered thereunder, including, without limitation, reasonable counsel fees and expenses in connection with the enforcement of rights under this Section 11.01(a). (b) (i) The Borrower shall reimburse the Lender, upon demand (which demand shall contain reasonable details thereof), for all fees, expenses or increased costs payable by the Lender to any Liquidity Lender pursuant to the Liquidity Agreement due to either (x) the effectiveness of or the introduction of, or any change in, or in the interpretation of, any law or regulation or (y) compliance by such Liquidity Lender with any guideline or request from any central bank or other governmental authority or official (whether or not having the force of law), which subjects such Liquidity Lender (A) to an increase in the cost of making, funding or maintaining any loan or any commitment under the Liquidity Agreement or (B) to make a payment calculated by reference to the principal of, or interest on, such loan or such commitment made by such Liquidity Lender. (ii) The Borrower shall reimburse the Lender upon demand (which demand shall contain reasonable details thereof), for all fees, expenses or increased costs payable by the Lender to any Liquidity Lender or any LOC Provider (the Liquidity Lenders and the LOC Providers collectively referred to in this Section 11.01(b) as the "Financial Institutions" and, individually, as a "Financial Institution") pursuant to the Liquidity Agreement or the Reimbursement Agreement, respectively, due to either (x) the effectiveness of or the introduction of, or any change in, or in the interpretation of, any law or regulation or (y) compliance by any Financial Institution with any guideline or request from any central bank or other governmental authority or official (whether or not having the force of law and including, in any event, any law, regulation, interpretation, or guideline with respect to capital adequacy or request in connection with any of the foregoing and any law, regulation, interpretation, guideline or request contemplated by the report dated July, 1988 entitled "International Convergence of Capital Measurement and Capital Standards" issued by the Basle Committee on Banking Regulations and Supervisory Practices at the Bank for International Settlements) which has or would have the effect of reducing the rate of return on the capital of such Financial Institution, or any corporation controlling such Financial Institution, as a 46 53 consequence of its obligations under the Liquidity Agreement, the Reimbursement Agreement or the Letters of Credit, as the case may be, to a level below that which such Financial Institution, or such controlling corporation, could have otherwise achieved but for such adoption, change or compliance (taking into consideration such Financial Institution's, or the respective controlling corporation's, policies with respect to capital adequacy) or which has or would have the effect of increasing the amount of capital required or expected to be maintained by such Financial Institution, or such controlling corporation, as a consequence of its obligations under the Liquidity Agreement, the Reimbursement Agreement or the Letters of Credit, as the case may be. (iii) The Borrower shall reimburse the Lender, upon demand (which demand shall contain reasonable details thereof), for any increase in any sum payable by the Lender to any Liquidity Lender under the Liquidity Agreement to compensate such Liquidity Lender for deductions for Liquidity Taxes (as defined below) applicable to such sum (including deductions for Liquidity Taxes applicable to such increase in such sum) such that such Liquidity Lender shall receive an amount equal to the sum it would have otherwise received had no such deductions for Liquidity Taxes been made. As used in this Section 11.01(b), the term "Liquidity Taxes" shall mean any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities, with respect to any sum payable under the Liquidity Agreement (but excluding taxes that would not be imposed but for a connection between the Liquidity Lenders or the Liquidity Agent (as the case may be) and the jurisdiction imposing such tax, other than a connection arising by virtue of the activities of the Liquidity Lenders or the Liquidity Agent (as the case may be) pursuant to or in respect of the Liquidity Agreement or under any other Facility Document, including, without limitation, the entering into, the loan of money or the extension of credit pursuant to, the receipt of payments under, or the enforcement of, the Liquidity Agreement or any other Facility Document). (iv) The Borrower shall reimburse the Lender, upon demand (which demand shall contain reasonable details thereof), for all costs or expenses payable by the Lender under the Liquidity Agreement for any present or future stamp, recording or documentary taxes or similar levies arising from any payment made under the Liquidity Agreement or from the execution, delivery or registration of, or otherwise with respect to, the Liquidity Agreement or the promissory notes delivered by the Lender thereunder or from the execution, delivery or registration of, or otherwise with respect to, the Liquidity Agreement or such promissory notes. (v) The Borrower shall reimburse the Lender, upon demand (which demand shall contain reasonable details thereof), for any increase in any payment payable by the Lender to any LOC Provider under the Reimbursement Agreement to compensate such LOC Provider for deductions of LOC Taxes (as defined below) such that such increase results in a yield to such LOC Provider (after payment of all LOC Taxes) of interest or any other amounts payable under the Reimbursement Agreement at the rates or in the amounts specified in the Reimbursement Agreement. As used in this Section 11.01(b), the term "LOC Taxes" shall mean any present or future stamp or other taxes, levies, imports, duties, charges, fees, deductions, withholdings or restrictions or conditions of any nature whatsoever, now or hereafter imposed, levied, collected, withheld or assessed by any jurisdiction or by any political subdivision or taxing authority thereof or therein in respect of any payment made under the Reimbursement Agreement (but excluding, in 47 54 the case of each LOC Provider, any tax imposed on or measured by the net income of such LOC Provider pursuant to the laws of any jurisdiction (or any political subdivision or taxing authority thereof or therein) in which the principal office of such LOC Provider is located). (vi) The Borrower shall reimburse the Lender, upon demand (which demand shall contain reasonable details thereof), for all indemnities payable by the Lender to any placement agents or dealers for the Commercial Paper. (vii) In the event the Lender enters into agreements for the making of advances to one or more borrowers other than the Borrower, the Lender shall allocate the liability for the costs, expenses and other amounts referred to in clauses (i) through (vi), inclusive, of this Section 11.01(b) and Section 11.01(c) to the Borrower and each other borrower who has so agreed, provided -------- that if such costs, expenses or amounts are attributable to the Borrower or the Credit Documents and not attributable to any other borrower, the Borrower shall be solely liable for such costs, expenses and amounts. (c) Without limiting any other rights which the Lender, the Agent, the Security Agent, the LOC Providers, the Liquidity Lenders, the Collateral Agent, the Depositary or any Affiliate of any thereof, as well as their respective directors, officers, employees and agents (each, an "Indemnified Party") may have hereunder or under applicable law, the Borrower hereby agrees to indemnify each Indemnified Party from and against any and all claims, losses, damages, expenses and liabilities (including reasonable attorneys' fees) (all of the foregoing being collectively referred to as "Indemnified Amounts") arising out of, relating to or resulting from this Agreement, any other Facility Document, any Mortgage Loan, Mortgage-backed Security or other Collateral or the use of any proceeds of Advances, excluding, however, Indemnified Amounts to the extent (i) resulting from gross negligence or willful misconduct (as determined by a final judgment of a court of competent jurisdiction) on the part of such Indemnified Party or any Affiliate of such Indemnified Party which directly or indirectly controls, is controlled by or is under common control with such Indemnified Party or is a director or officer of such Indemnified Party or of an Affiliate of such Indemnified Party or (ii) resulting from negligence (as determined by a final judgment of a court of competent jurisdiction) on the part of such Indemnified Party or any -Affiliate of such Indemnified Party which directly or indirectly controls, is controlled by or is under common control with such Indemnified Party or is a director or officer of such Indemnified Party or of an Affiliate of such Indemnified Party, which negligence directly and proximately results in the loss of a Mortgage Note, the receipt of which Mortgage Note was previously acknowledged in writing by such Indemnified Party and the loss of which Mortgage Note cannot be mitigated by the cooperative efforts of the Borrower and the Indemnified Party. Without limiting or being limited by the foregoing, the Borrower shall pay on demand to each Indemnified Party any and all amounts necessary to indemnify such Indemnified Party from and against any and all Indemnified Amounts relating to or resulting from: (i) the making of an Advance secured by a pledge of a Mortgage Loan or Mortgage-backed Security which is not at the date of the creation of such security interest an Eligible Mortgage Loan or an Eligible Nonconforming Mortgage Loan or 48 55 which thereafter ceases to be an Eligible Mortgage Loan or an Eligible Nonconforming Mortgage Loan; (ii) reliance on any representation or warranty or statement made or deemed made by the Borrower (or any of its officers) under or in connection with any Credit Document which shall have been incorrect when made; (iii) the failure by the Borrower to comply with any applicable law, rule or regulation with respect to any Collateral, or the nonconformity of any Collateral with any such applicable law, rule or regulation; (iv) the failure to vest in the Security Agent under the Warehouse Security Agreement a valid first priority security interest in the Mortgage Loans, the Mortgage-backed Securities and the other Collateral, except as otherwise permitted by this Agreement; (v) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Collateral, whether at the time of any Advance or at any subsequent time; (vi) any breach or violation, or alleged violation, of federal or state securities laws in connection with the offering of the Commercial Paper; (vii) any investigation, litigation or proceeding related to this Agreement or, any other Credit Document or the use of proceeds of Advances or in respect of any Mortgage Loan or other Collateral; (viii) the loss, misplacement or destruction of any cashier's check issued by the Lender in respect of any Advance after receipt of such check by the closing agent, escrow agent, title company, attorney or any other authorized party identified in the Request for Advance relating to such Advance, it being understood and agreed that, notwithstanding the indemnity under this Section 11.01(c)(viii) or any such loss, misplacement or destruction, the funds represented by any such lost, misplaced or destroyed cashier's check shall constitute an Advance hereunder; and (ix) the making of any wire transfer to an incorrect account or in an incorrect amount in accordance with instructions received from the Borrower, it being understood and agreed that, notwithstanding the indemnity under this Section 11.01(c)(ix), the funds represented by any such wire shall constitute an Advance hereunder. (d) If after the date hereof due to either (a) the effectiveness or introduction of, or any change in, or any change in the interpretation of, any law or regulation by any court or administrative or governmental authority charged with administration thereof or (b) compliance 49 56 with any guideline or request from any central bank or other governmental authority or official (whether or not having the force of law and including, in any event, any law, regulation or interpretation with respect to capital adequacy or request in connection with any of the foregoing), there shall be an increase in the cost to the Lender of making, funding or maintaining any Advance or the Commitment hereunder or the Lender shall be required to make a payment calculated by reference to the principal of, or interest on, any Advance made by it or the Commitment (other than any such increased cost, reduction in the amount receivable, or payment required to be made resulting from the imposition or an increase in the rate of any Taxes unless such Taxes are payable by the Borrower under Section 11.01(e) or there shall be an increase in the amount of capital required or expected to be maintained by the Lender or any corporation controlling the Lender and the Lender reasonably determines that the amount of such capital is increased by or based upon the existence of the Lender's agreement, in its discretion, to make or maintain Advances hereunder and other similar agreements and facilities), then the Borrower shall, from time to time, upon demand by the Lender, immediately pay to the Lender additional amounts sufficient to compensate the Lender for any such increased cost or increase in capital (to the extent the Lender reasonably determines such increase in capital to be allocable to the existence of the Lender's agreements hereunder). A certificate of an officer of the Lender as to such amounts (and the calculation thereof) submitted to the Borrower shall be conclusive and binding for all purposes, absent manifest error. (e) Promptly upon (and in no event later than 10 days following) notice from the Lender or the Agent to the Borrower, the Borrower agrees to pay, prior to the date on which penalties attach thereto, all present and future income, stamp and other taxes, levies, or costs and charges whatsoever imposed, assessed, levied or collected on or in respect of an Advance and/or the recording, registration, notarization or other formalization of an Advance or the execution and delivery or otherwise with respect to the Agreement or the other Credit Documents and/or any payments of principal, interest or other amounts made on or in respect of an Advance (all such taxes, levies, costs and charges being herein collectively called "Taxes"); provided that Taxes shall not -------- include taxes imposed on or measured by the overall net income or receipts of the Lender by the United States of America or any political subdivision or taxing authority thereof or therein. The Borrower agrees to also pay such additional amounts equal to increases in taxes payable by the Lender described in the foregoing proviso, which increases arise solely from the receipt by the Lender of payments made by the Borrower described in the immediately preceding sentence of this Section 11.01(e). Promptly (and in no event later than 10 days) after the date on which payment of any such Tax is due pursuant to applicable law, the Borrower will, at the request of the Lender, furnish to the Lender evidence, in form and substance satisfactory to the Lender, that the Borrower has met its obligation under this Section 11.01(e). The Borrower agrees to indemnify the Lender against, and reimburse the Lender on demand for, any Taxes, as reasonably determined by the Lender in good faith. The Lender shall provide the Borrower with appropriate receipts for any payments or reimbursements made by the Borrower pursuant to this Section 11.01(e). (f) Notwithstanding anything to the contrary provided herein, the maximum aggregate amount that the Borrower shall be obligated to pay to the Lender or to any Indemnified Party pursuant to the provisions of Sections 11.01(b), (d) and (e) shall be $250,000. 50 57 11.02 Notices. Except as otherwise expressly provided herein, all ------- notices and other communications provided for hereunder shall be in writing (including telegraphic, telex, telecopier or cable communication) and mailed, telegraphed, telexed, telecopied, cabled or delivered: if to the Borrower, the Lender or the Agent, at its address specified opposite its signature below, or at such other address as shall be designated by such party in a written notice to the other parties hereto. All such notices and communications shall, when mailed, telegraphed, telecopied or sent by overnight courier, be effective when deposited in the mails, delivered to the telegraph company or overnight courier, as the case may be, or sent by telecopier, except that notices and communications given to the Agent or the Lender pursuant to Section 2 and Section 4 shall not be effective until received by the Agent or the Lender, as the case may be. 11.03 Benefit of Agreement. This Agreement shall be binding upon -------------------- and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided, however, that the Borrower may not -------- -------- assign or transfer any of its rights or obligations hereunder without the prior written consent of the Agent and the Lender. The Lender may at any time assign any of its rights and obligations hereunder or under the Note. 11.04 Remedies Cumulative. No failure or delay on the part of the ------------------- Agent or the Lender or the holder of the Note in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower and the Agent or the Lender or the holder of the Note shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder. The rights, powers and remedies herein or in any other Credit Document expressly provided are cumulative and not exclusive of any rights, powers or remedies which the Agent or the Lender or the holder of the Note would otherwise have. No notice to or demand on the Borrower in any case shall entitle the Borrower to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent or the Lender or the holder of the Note to any other or further action in any circumstances without notice or demand. 11.05 Calculations; Computations. (a) The financial statements to -------------------------- be furnished to the Lender pursuant hereto shall be made and prepared in accordance with generally accepted accounting principles in the United States consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Lender); provided that, except as otherwise specifically provided herein, all -------- computations determining compliance with Section 8 shall utilize accounting principles and policies in conformity with those used to prepare the historical financial statements referred to in Section 6.05(a). (b) All computations of interest and the Fees hereunder shall be made on the basis of a year of 360 days for the actual number of days occurring in the period for which such interest or fees are payable. 11.06 Governing Law; Submission to Jurisdiction; Venue. (a) This ------------------------------------------------ Agreement and the other Credit Documents and the rights and obligation of the parties hereunder and thereunder shall be construed in accordance with and be governed by the law of the State of New York, without 51 58 regard to principles of conflicts of laws. Any legal action or proceeding against the Borrower with respect to this Agreement or any other Credit Document may be brought in the courts of the State of New Jersey located in Camden County or in the United States Federal courts located in Camden County, and, by execution and delivery of this Agreement, the Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the jurisdiction of the aforesaid courts. (b) The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Agreement or any other Credit Document brought in the courts referred to in clause (a) above and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum. 11.07 No Proceedings. The Borrower hereby covenants and agrees -------------- that, prior to the date which is one year and one day after the payment in full of all outstanding Commercial Paper, it will not institute against, or join any other Person in instituting against, the Lender, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States. 11.08 Counterparts. This Agreement may be executed in any number ------------ of counterparts and by the different parties hereto on separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. A set of counterparts executed by all the parties hereto shall be lodged with the Borrower and the Agent. 11.09 Effectiveness. This Agreement shall become effective on the ------------- date (the "Effective Date") on which the Borrower, the Lender and the Agent shall have signed a copy hereof (whether the same or different copies) and shall have delivered the same to the Agent at its Office. 11.10 Headings Descriptive. The headings of the several sections -------------------- and subsections of this Agreement are inserted for convenience only and shall not in any way affect the meaning or construction of any provision of this Agreement. 11.11 Amendment or Waiver. Neither this Agreement nor any other ------------------- Credit Document nor any terms hereof or thereof may be changed, waived, discharged or terminated unless such change, waiver, discharge or termination is in writing signed by the Lender, the Agent and the Borrower. 11.12 Survival. All indemnities set forth herein including, without -------- limitation, in Section 11.01 shall survive the execution and delivery of this Agreement and the Note and the making and repayment of the Advances. 52 59 Waiver of Jury Trial. THE LENDER, THE AGENT AND THE BORROWER BY -------------------- KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES THE ??H OF THEM MAY HAVE TO A TRIAL BY JURY OF, UNDER OR IN ??N WITH THIS AGREEMENT, THE NOTE AND ANY AGREEMENT ??ATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE ??JCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR ??OR ACTIONS OF ANY PARTY RELATING HERETO OR THERETO. THIS ?? IS A MATERIAL INDUCEMENT FOR THE LENDER AND THE AGENT TO ??TO THIS AGREEMENT. WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to ??d deliver this Agreement as of the date first above written.
E-LOAN, INC. ??age Parkway, Suite 102 ??CA 94568 ??: Steven M. Majerus By /s/ Janina Pawlowski ?? No.: (925) 556-2614 Title: CEO Capital Mortgage Services, Inc. COOPER RIVER FUNDING INC. Executive Campus ?? Hill, NJ 08002 ??ion: Martin A. Schroeter By /s/ Signature Illegible ??mile No.: (609) 661-7528 Title: Assistant Treasurer GE CAPITAL MORTGAGE SERVICES, INC., ??e Executive Campus as Agent ??ry Hill, NJ 08002 ??tion: Martin A. Schroeter ??imile No.: (609) 661-7528 By /s/ Signature Illegible Title: Vice President
53 EX-10.16 22 LOAN PURCHASE AGREEMENT WITH COUNTRYWIDE HOME 1 EXHIBIT 10.16 LOAN PURCHASE AGREEMENT This Agreement, dated as of September 25, 1998, is made by and between Countrywide Home Loans, Inc., a New York corporation ("Countrywide"), and E-Loan, Inc. , a California corporation ("Seller"), for mutual considerations set forth herein. Countrywide agrees to purchase certain loans secured by real property, together with the servicing thereof (the "Loans"), from Seller under Countrywide's mortgage loan programs, and Seller agrees to sell to Countrywide certain such Loans pursuant to the terms and conditions set forth herein and in Countrywide's Correspondent Lending Division Loan Purchase Program Seller's Manual, as amended from time to time (the "Manual"). In connection therewith, the parties agree as follows: 1. ELIGIBLE LOANS A. Only those Loans fully complying with the standards for Conforming Conventional, Jumbo Conventional, Government and Second Mortgage Loan Programs set forth in the Mortgage Programs section of the Manual are eligible for purchase under this Agreement. Seller must be approved, qualified and/or licensed to originate such Loans. B. Seller shall fully underwrite each Loan prior to submission to Countrywide in accordance with Underwriting Guidelines and Lending Requirements sections of the Manual, or, if available, use a Countrywide-approved automated underwriting system for underwriting the Loan. C. Seller shall be responsible for assuring that Loans submitted to Countrywide comply with all terms and conditions of this Agreement and the Manual. 2. COMMITMENT TO PURCHASE LOANS The procedure pursuant to which Seller may commit to sell a Loan to Countrywide is detailed in the Loan Registration section of the Manual. For purposes of this Agreement, Countrywide and Seller define a best effort commitment to be a mandatory commitment if the Loan closes. Countrywide will confirm the conditions of the sale of the Loan to Countrywide by delivering a confirmation ("Commitment") to Seller which sets forth the terms of the transaction, including the price Countrywide will pay for each Loan, as determined pursuant to the Pricing standards set forth in the Manual (the "Purchase Price"). The terms of the Commitment, including the Purchase Price, shall be in effect for the period of time requested by Seller and approved by Countrywide (the "Commitment Period"). If Seller is approved by Countrywide to sell Loans to Countrywide on a bulk sale basis, Countrywide and Seller shall execute the Addendum to Loan Purchase Agreement (Bulk Sales) which shall be attached to and incorporated into this Agreement by reference. 3. UNDERWRITING AND PROPERTY APPRAISAL A. Countrywide shall have the right, but not the obligation, to underwrite any Loan submitted for purchase pursuant to this Agreement, or otherwise insure that any Loan submitted for purchase complies with all terms and conditions of this Agreement and the Manual; provided that neither the existence nor the exercise of this right shall affect in any way Seller's obligations hereunder, including without limitation, Seller's repurchase obligations under Section 7 hereof and Seller's hold harmless obligations under Section 9 hereof. The applicable procedures are set forth in the Prior Approval section of the Manual. B. Seller shall deliver to Countrywide an appraisal of the real estate security for each such Loan, signed by a qualified appraiser, as defined in the Manual, prior to Countrywide's approval to purchase such Loan. 2 4. DELIVERY OF LOAN DOCUMENTATION A Loan shall be deemed delivered to Countrywide if: (A) it is received by Countrywide within the Commitment Period; (B) it is in compliance with the requirements set forth in the Delivery of Closed Loans and Funding Documentation sections of the Manual; and (C) there are no outstanding conditions which would prevent Countrywide from funding the purchase of the Loan. Failure by Seller to deliver to Countrywide within 120 days from the date a Loan was purchased one or more of the original documents specified in the Delivery of Closed Loans section of the Manual shall result in assessment by Countrywide of a fee of $50 per month for each month, after the initial 120 day period, during which one or more of such documents is outstanding, i.e., has not been delivered to Countrywide for any period of time during the month. Such fee shall be $50 regardless of the number of such documents. Failure by Seller to deliver to Countrywide one or more of the original documents specified in the Delivery of Closed Loans section of the Manual within 270 days from the date the Loan was purchased by Countrywide shall obligate Seller to repurchase the Loan pursuant to the provisions of Section 7 of this Agreement. 5. PAYMENT OF PURCHASE PRICE AND SELLER'S WIRE INSTRUCTIONS Countrywide shall, after receipt of a Loan documentation package which fully complies with the requirements of the Manual, deliver the Purchase Price (less any fees or discounts due to Countrywide) set forth in the applicable Commitment to Seller in accordance with Seller's wire instructions or in accordance with any bailee letter or trust receipt submitted with the Loan, as determined in the sole and absolute discretion of Countrywide. 6. SELLER'S OBLIGATIONS, REPRESENTATIONS AND WARRANTIES A. Seller represents and warrants to Countrywide as to each Loan offered for sale under this Agreement that as of the date of Countrywide's purchase of such Loan: (1) The Loan documents have been duly executed by the trustor/mortgagor, acknowledged and recorded; each Loan is valid and complies with all criteria contained in the Manual; the note and deed of trust/mortgage constitute the entire Agreement between the trustor/mortgagor and the beneficiary/mortgagee, and there is no verbal understanding or written modification which would affect the terms of the note or the deed of trust/mortgage except by written instrument delivered and expressly made known to the beneficiary/mortgagee and recorded if recording is necessary to protect the interests of the beneficiary/mortgagee. (2) Seller is the sole owner of the Loan and has authority to sell, transfer and assign the same on the terms set forth herein and in the Manual. There has been no assignment, sale or hypothecation thereof by Seller, except the usual hypothecation of the documents in connection with Seller's normal banking transactions in the conduct of its business. (3) The full principal amount of the Loan has been advanced to the trustor/mortgagor, either by payment directly to such person or by payment made on such person's request or approval. The unpaid principal balance of the Loan is as represented by Seller. All costs, fees and expenses incurred in making, closing and recording the Loan have been paid. No part of the mortgaged property has been released from the lien of the Loan, the terms of the Loan have in no way been changed or modified, and the Loan is current and not in default. (4) Each Loan is a valid first lien or, if specifically approved by Countrywide, a valid second lien on the mortgaged property, and the mortgaged property is free and clear of all encumbrances and liens having priority over the lien of such Loan, except for the first lien, if applicable, and liens for real estate taxes and special assessments not yet due and payable and those exceptions allowed in connection with Government Loans and other exceptions set forth in the Manual. (5) The mortgaged property is free and clear of all mechanics' and materialmen's liens or liens in the nature thereof, and no rights are outstanding that under law could give rise to any such lien, nor is Seller aware of any facts which could give rise to any such lien. 2 3 (6) Each Loan which Seller represents to be insured or guaranteed is, or will within 120 days from the date of delivery of such Loan to Countrywide be, so insured or guaranteed. No action has been taken or failed to have been taken which has resulted or will result in an exclusion from, denial of, or defense to, coverage under such insurance or guarantee; and all conditions within the control of Seller as to the validity of the insurance or guaranty as required by the National Housing Act of 1934 and the rules and regulations thereunder, or as required by the Servicemen's Readjustment Act of 1944 and the rules and regulations thereunder, or imposed by the mortgage insurance companies or other insurers have been properly satisfied, and said insurance or guaranty is valid and enforceable. (7) All federal and state laws, rules and regulations applicable to the mortgage Loans have been complied with, including but not limited to: the Real Estate Settlement Procedures Act, the Flood Disaster Protection Act, the Federal Consumer Credit Protection Act including the Truth-in-Lending and Equal Credit Opportunity Acts, and all applicable statutes or regulations governing fraud, lack of consideration, unconscionability, consumer credit transactions or interest charges. (8) No Loan is the subject of, and Seller is not aware of any facts which could give rise to, litigation which could affect Countrywide's ability to enforce the terms of the obligation or its rights under the mortgage documents. (9) There is in force for each Loan either (a) a paid-up title insurance policy on the Loan issued by a Countrywide approved title company in an amount at least equal to the outstanding principal balance of the Loan or (b) an attorney's mortgage lien opinion. (Negatively amortizing loans require additional coverage.) (10) There is in force for each Loan valid hazard insurance policy coverage and, where applicable, valid flood insurance policy coverage, and such coverages meet the requirements of Countrywide specified in the Manual. (11) Seller will record the corporate assignment in the name of Countrywide Home Loans, Inc., at the time the deed of trust/mortgage is recorded, and the assignment of the Loan from Seller to Countrywide shall be valid and enforceable. (12) The borrower has no rights of rescission, set-offs, counter-claims or defenses to the note or deed of trust/mortgage securing the note arising from the acts and/or omissions of Seller. (13) Seller has no knowledge that any improvement located on or being part of the mortgaged property is in violation of any applicable zoning law or regulation. (14) All improvements included for the purpose of determining the appraised value of the mortgaged property lie wholly within the boundaries and building restriction lines of such property, and no improvements on adjoining properties encroach upon the mortgaged property. (15) There is no proceeding pending for total or partial condemnation of any mortgaged property and said property is free of substantial damage (including, but not limited to, any damage by fire, earthquake, windstorm, vandalism or other casualty) and in good repair. (16) Seller has no knowledge of any circumstances or conditions with respect to any Loan, mortgaged property, trustor/mortgagor or trustor's/mortgagor's credit standing that reasonably could be expected to cause private institutional investors to regard any Loan as an unacceptable investment, cause any Loan to become delinquent or adversely affect the value or marketability of the Loan. (17) All documents submitted are genuine. All other representations as to each such Loan are true and correct and meet the requirements and specifications of all parts of this Agreement and the Manual. 3 4 B. Seller represents and warrants to Countrywide that as of the date first set forth above and as of the date of Countrywide's purchase of each Loan hereunder: (1) Seller is duly organized, validly existing and in good standing under the laws of its state of incorporation and is qualified and/or licensed as necessary to transact business, including the originating and selling of mortgage loans, and is in good standing in each state where the property securing a Loan is located. (2) Seller has the full power and authority to hold and sell each Loan; and neither the execution and delivery of this Agreement, nor the acquisition or origination of the Loans, nor the sale of the Loans, nor the consummation of the transactions contemplated herein, nor the fulfillment of or compliance with the terms and conditions of this Agreement will conflict with, or result in a breach of any term, condition or provision of, Seller's certificate of incorporation or by-laws, any license held by Seller or governing Seller's activities or any agreement to which Seller is a party or by which Seller is bound, or constitute a material default or result in an acceleration under any of the foregoing. (3) No consent, approval, authorization or order of any court, governmental body or any other person or entity is required for the execution, delivery and performance by Seller of this Agreement, including but not limited to, the sale of the Loans to Countrywide. (4) Neither Seller nor its agents know of any Suit, action, arbitration or legal or administrative or other proceeding pending or threatened against Seller which would affect its ability to perform its obligations under this Agreement. (5) Seller is not a party to, bound by or in breach or violation of any agreement or instrument, or subject to or in violation of any statute, order or regulation of any court, regulatory body, administrative agency or governmental body having jurisdiction over it, which materially and adversely affects, or may in the future materially and adversely affect, the ability of Seller to perform its obligations under this Agreement or the Manual, including, without limitation, Seller's repurchase and indemnification obligations pursuant to Sections 7, 8 and 9 of this Agreement. 7. SELLER'S REPURCHASE OBLIGATIONS A. Seller shall repurchase any Loan sold to Countrywide pursuant to this Agreement within twenty business days of receipt of written notice from Countrywide of any of the following circumstances (the "Repurchase Obligation"): (1) Seller fails to deliver to Countrywide within 270 days from the date each Loan was purchased the original documents specified in the Delivery of Closed Loans section of the Manual. (2) Countrywide determines that there is any evidence of fraud in the origination of the Loan or in the sale of the Loan to Countrywide or that any matter in the mortgage loan file is not true and correct. (3) If Countrywide determines the Loan is not eligible for GNMA, FNMA or FHLMC pool participation or whole loan purchase or purchase by a private investor, or, if Countrywide has sold such Loan in whole or in part to GNMA, FNMA, FHLMC or a private investor, and GNMA, FNMA, FHLMC or the private investor requires Countrywide to repurchase said interest or reimburse it for losses, or the mortgage insurer denies coverage on the Loan; provided the reason for such ineligibility, repurchase, reimbursement or denial shall be due to a failure of the Loan to meet requirements specified in the Manual at the time of Countrywide's purchase of the Loan from Seller. 4 5 (4) If the first payment due Countrywide is not received by Countrywide, whether from the borrower directly or forwarded by Seller if the Borrower has submitted the payment to Seller, by the last day of the month in which it is due, and, in addition, at any time within the first twelve months after the Loan has been purchased by Countrywide, the Borrower is 90 days delinquent with respect to a monthly payment. For this purpose a Borrower shall be considered to be 90 days delinquent on a monthly payment if it is not received by Countrywide by the last day of the third month, regardless of the number of days in the month. For example, if the Borrower has not made his/her January payment by the last day of March, the Borrower shall be considered 90 days delinquent with respect to the January payment. Seller shall not have the right to advance funds for or on behalf of a Borrower for any delinquent payment or to otherwise make funds available to any Borrower to avoid or cure a default by the Borrower. A payment for which Countrywide deducted funds at the time it purchased the Loan from Seller shall not be considered the first payment due Countrywide. (5) Seller fails to observe or perform or breaches in any material respect any of the representations, warranties or agreements contained in this Agreement or the Manual with respect to a particular Loan. (6) With respect solely to VA Loans purchased by Countrywide pursuant to an Assignment of Trade Addendum to this Agreement or on a Direct Trade basis pursuant to a Direct Trade Addendum to this Agreement, if the Loan goes into foreclosure within 24 months from the date of sale of the Loan to Countrywide as to those Loans with full guarantees from the VA and 48 months from the date of sale of the Loan to Countrywide as to those Loans with partial guarantees from the VA and as to which the VA gives Countrywide a no-bid instruction in conjunction with the foreclosure sale on such Loan. B. The option to request or accept repurchase of any Loan is at the sole discretion of Countrywide. Notwithstanding that a Seller may be obligated pursuant to the terms of this Section 7 to repurchase a Loan, if such Loan is in compliance with all requirements of this Agreement and the Manual at the time of its purchase by Countrywide and if there is no evidence of fraud or misrepresentation in connection with the Loan, Countrywide, in its sole discretion and on terms determined solely by Countrywide, may consider permitting Seller to indemnify Countrywide against all suits, costs, damages, losses, fees or claims, including without limitation reasonable attorneys' fees, which may be incurred by Countrywide in connection with such Loan. Such indemnification shall be substantially in the form of the applicable Indemnification Agreement, the provisions of which shall include, without limitation, the requirement that the Seller shall pay to Countrywide, at the time that the Indemnification Agreement is executed, the amount specified by Countrywide as the amount necessary to cover its projected and potential costs and losses, and including the service release premium paid by Countrywide to the Seller with respect to the Loan. C. It is agreed by the parties that Seller's Repurchase Obligation with respect to a Loan shall not be obviated by the fact that the property securing the Loan has been foreclosed upon and said property has been acquired by Countrywide or a third party, it being understood that the term Repurchase Obligation encompasses within its meaning the repurchase of the property from Countrywide if Countrywide has acquired the property, or, if a third party has acquired the property, reimbursing Countrywide in the amount specified in Section 8.C. of this Agreement. D. It is further agreed by the parties that if Countrywide has made demand on Seller to repurchase a Loan pursuant to Section 7 of this Agreement, Countrywide shall have the right to withhold any moneys due Seller in connection with the Loan(s) subject to the Repurchase Obligation or any other Loans until the parties have agreed that the Repurchase Obligation is satisfied. 5 6 8. REPURCHASE PRICE A. The repurchase price for Loans subject to a Repurchase Obligation pursuant to Section 7 hereof shall be as follows: (1) The current unpaid principal balance of such Loan if it has been pooled or resold. If such loan has not been pooled or resold by Countrywide, the repurchase price shall be at the original price, less principal reduction since the original purchase of the Loan by Countrywide; plus (2) All interest accrued but unpaid on the principal balance of the Loan from the paid-to-date of the loan through and including the last day of the month in which the repurchase is made; plus (3) All expenses, including but not limited to reasonable fees and expenses of counsel, incurred by Countrywide in enforcing Seller's obligation to repurchase such Loan; plus (4) The original servicing release premium paid by Countrywide with respect to such Loan; plus (5) Any unreimbursed advances of taxes or insurance made by Countrywide with regard to such Loan as of the date of repurchase; less (6) Any proceeds of mortgage insurance with respect to the Loan collected by Countrywide. Upon any such repurchase of Loans by Seller, Countrywide shall endorse the promissory note (without recourse) and shall assign any security interest (without recourse and in recordable form) to Seller. B. If the real property security for the Loan has been foreclosed upon and purchased by Countrywide at the foreclosure sale, then the repurchase price pursuant to Section 7 hereof, notwithstanding the amount of Countrywide's credit bid, shall be: (1) The current unpaid principal balance of such Loan if it has been pooled or resold. If such loan has not been pooled or resold by Countrywide, the repurchase price shall be at the original price, less principal reduction since the original purchase of the Loan by Countrywide; plus (2) All interest accrued but unpaid on the principal balance of the Loan from the paid-to-date of the loan through and including the last day of the month in which the foreclosure sale occurs; plus (3) All costs and expenses, including but not limited to reasonable fees and expenses of counsel, incurred by Countrywide in connection with the foreclosure and in enforcing Seller's Repurchase Obligations hereunder; plus (4) The original servicing release premium paid by Countrywide with regard to such Loan; plus (5) Any unreimbursed advances of taxes or insurance made by Countrywide with regard to such Loan as of the date of repurchase; plus (6) Interest on the amounts set forth in paragraphs (1) through (5) above at the Loan rate from the end of the month in which the foreclosure sale occurred until and including the date of repurchase by Seller; less (7) Any proceeds of mortgage insurance collected by Countrywide with respect to the Loan. Upon payment of the repurchase price, Countrywide shall transfer title to the property securing such Loan to Seller. 6 7 C. If the real property security for the Loan has been sold at foreclosure and purchased by a third party, the amount Seller shall pay Countrywide to fulfill its Repurchase Obligation pursuant to Section 7 of this Agreement shall be as follows: (1) The current unpaid principal balance of such Loan if it has been pooled or resold. If such loan has not been pooled or resold by Countrywide, the repurchase price shall be at the original price, less principal reduction since the original purchase of the Loan by Countrywide; plus (2) All interest accrued but unpaid on the principal balance of the Loan from the paid-to-date of the loan through and including the last day of the month in which the foreclosure sale occurs; plus (3) All costs and expenses, including but not limited to reasonable fees and expenses of counsel, incurred by Countrywide in enforcing Seller's Repurchase Obligations hereunder; plus (4) The original servicing release premium paid by Countrywide with regard to such Loan; plus (5) Any unreimbursed advances of taxes or insurance made by Countrywide with regard to such Loan as of the date of repurchase; plus (6) Interest on the amounts set forth in paragraphs (1) through (5) above at the Loan rate from the end of the month in which the foreclosure sale occurred until and including the date of repurchase by Seller; less (7) The net proceeds of the foreclosure sale (sale price minus costs and expenses, including but not limited to reasonable fees and expenses of counsel, incurred by Countrywide in connection with the foreclosure sale); less (8) Any proceeds of mortgage insurance collected by Countrywide in connection with the Loan. 9. HOLD HARMLESS A. Seller shall hold Countrywide harmless and shall indemnify Countrywide from and against any and all suits, costs, damages, losses, fees or claims, including without limitation reasonable attorney's fees ("Loss"), arising out of or in connection with any negligence, fraud or a material omission on the part of Seller in receiving, processing or funding any Loan committed to Countrywide for sale under Section 2 above, during the origination period and Commitment Period up to and including the date the Loan is purchased by Countrywide. Seller's obligation to Countrywide in this regard shall remain effective after Countrywide's purchase of the Loan if the Loss arose prior to purchase but was undetected at time of purchase. This paragraph shall not modify Seller's obligations contained elsewhere in this Agreement. B. Seller shall also hold Countrywide harmless and shall indemnify Countrywide from and against any and all suits, costs, damages, fees or claims, including without limitation reasonable attorneys' fees, arising out of or in connection with any one or more of the items set forth in paragraphs (1) through (6) of Section 7 A. of this Agreement. 10. NO SOLICITATION Loans sold to Countrywide cannot be solicited by Seller for refinance for a period of 12 months from the date the Loan is purchased by Countrywide. Borrowers requesting a refinance from Seller within the 12 month period must be referred to Countrywide or, provided the refinanced loan meets all Countrywide requirements as specified in the Manual, may be processed by the Seller and sold to Countrywide for a service release premium, if any, to be negotiated by the parties. 8 11. PROHIBITION AGAINST USE OF NAME OR AFFILIATION Seller shall not hold itself out as a joint venturer, partner, representative, employee or agent of Countrywide. Nor shall it use Countrywide's name in any advertising or written or broadcast material without Countrywide's express prior written consent. This prohibition shall not prevent Seller from using any advertising media provided to it by Countrywide for use by Seller and containing any copyrighted Countrywide name or logo. Such copyrighted name or logo shall remain in place. 12. TERMINATION- SUSPENSION A. This Agreement may be terminated as to future commitments for sale of Loans by either party at any time, but such termination shall not in any respect change or modify the obligation of Seller with respect to Loans already subject to a Commitment. The effective time of termination shall be the earlier of the time written notice is actually received by the other party or five days after written notice is posted in the United States Postal Service by the canceling party. Termination of this Agreement shall not in any way affect either Seller's or Countrywide's obligations, representations, warranties or indemnifications with respect to Loans already purchased by Countrywide; provided, however, that Countrywide may immediately terminate its obligations hereunder without notice and immediately return to Seller any Loans subject to a Commitment, and Seller shall accept such loans if Countrywide reasonably determines that there has been any deception, fraud, concealment or material misrepresentation by Seller in performing any of its duties, obligations, responsibilities or actions undertaken in connection with this Agreement or in connection with any Loan sold to Countrywide pursuant to this Agreement. B. In addition to the termination rights set forth in Paragraph A. above, in the event that Countrywide believes in good faith that Seller has breached an obligation (including a Repurchase Obligation under Section 7), representation, warranty or covenant under the Agreement, or will be unable to fulfill any of its obligations under the Agreement or the Manual (including a Repurchase Obligation under Section 7), Countrywide may, in its sole and absolute discretion, suspend this Agreement as to future Commitments for the sale of Loans by Seller. Such suspension shall be effective immediately upon Seller's receiving written notice of same from Countrywide and shall last until Countrywide, in its sole discretion, determines to reactive or terminate this Agreement. 13. EXHIBITS All exhibits attached hereto or material referred to in this Agreement, including the Manual, are incorporated by reference into this Agreement. To the extent there are differences between requirements as stated in the Manual and as stated in this Agreement, the provisions of this Agreement shall govern. 14. ENTIRE AGREEMENT The entire agreement between the parties is contained in this Agreement and in the Manual and cannot be modified in any respect except by an amendment in writing signed by both parties. The invalidity of any portion of this Agreement shall in no way affect the balance thereof. 15. ASSIGNMENT Seller may not assign its rights or delegate its duties or obligations under this Agreement without the prior written consent of Countrywide. This Agreement shall be binding on and inure to the benefit of the permitted successors and assigns of the parties hereto. 8 9 16. ATTORNEYS' FEES AND EXPENSES-CHOICE OF LAW AND FORUM If any party hereto shall bring suit or other proceeding against the other as a result of any alleged breach or failure by the other party to fulfill or perform any covenants or obligations under this Agreement, then the prevailing party obtaining final judgment in such action shall be entitled to receive from the non-prevailing party reasonable attorneys' fees incurred by reason of such action and all costs of suit and preparation thereof at both trial and appellate levels. This Agreement shall be governed by and construed and enforced in accordance with applicable federal law and the laws of the State of California. In addition, any such suit or proceeding shall be brought in the federal or state courts located in Los Angeles County, California, which courts shall have sole and exclusive in personam, subject matter and other jurisdiction in connection with such suit or proceedings, and venue shall be appropriate for all purposes in such courts. 17. NO REMEDY EXCLUSIVE--WAIVER No remedy under this Agreement is exclusive of any other available remedy, but each remedy shall be cumulative and shall be in addition to other remedies given under this Agreement or existing at law or in equity. Any forbearance by a party to this Agreement in exercising any right or remedy under this Agreement or otherwise afforded by applicable law shall not be a waiver or preclude the exercise of that or any other right or remedy. 18. NOTICE Unless otherwise provided in this Agreement, all notices under this Agreement shall be in writing, deemed effective upon receipt and addressed as indicated below. To: Countrywide Home Loans, Inc. To Lender/Seller: E-Loan, Inc. Correspondent Lending Division Mortgage Banking Department --------------------------- 155 North Lake Avenue 6200 Village Parkway, Suite 10 --------------------------- Mail Stop No. 5-53 Dublin, CA 94562-3004 --------------------------- Pasadena, California 91101 Attention: Leslie Chang --------------------------- Attention: Vice President of Production --------------------------- AGREED TO AND ACCEPTED BY: Seller: E-Loan, Inc. Countrywide Home Loans, Inc. ------------------------- By: Steve M. Majerus By: /s/ signature illegible ------------------------- -------------------------- Signature Signature Name: Steven M. Majerus Name: Martin Govaerts ------------------------- -------------------------- Title: Director, Mortgage Banking Title: Assistant Vice President ------------------------- -------------------------- Dated: September 25, 1998 Dated: 10/28/98 ------------------------- -------------------------- 9 10 Addendum to LOAN Purchase Agreement for Junior Loans THIS ADDENDUM, IS MADE THIS 25th DAY OF SEPTEMBER 1998 BETWEEN COUNTRYWIDE HOME LOANS, INC., ("COUNTRYWIDE"), AND E-LOAN, INC. ("SELLER"), TO THE LOAN PURCHASE AGREEMENT ("LPA") DATED AS OF: SEPTEMBER 25, 1998 1. For the purposes of the sale of loans secured by liens that are other than senior loans ("Seconds"), including home equity lines of credit ("HELOCs") and fixed rate loans secured by junior liens, all provisions of the LPA shall be applicable and remain valid, binding and in full force and effect, except as specifically modified herein. For the purposes of the sale of all Loans other than Seconds, the provisions of the LPA as they currently exist without the modifications provided herein shall remain valid, binding and in full force and effect. The provisions in this Addendum shall have no effect upon the applicability of the LPA to Loans other than Seconds. 2. Wherever in the LPA the term "note" is used, the term shall include home equity credit line agreements, and agreements of similar import. Wherever in the LPA the term "manual" is used, the term "Guide" shall be used in its stead. 3. For the purposes of HELOCs, the first sentence of Section 6.A.(3) of the LPA is amended and restated in its entirety as follows: "The full amount of the draw indicated on the Authorization to Pay (as indicated in the Guide) delivered to Lender, and no other amount, has been fully funded to the borrower." 4. Section 6.A.(9) of the LPA is amended and restated in its entirety as follows: "(9) There is in force for the Loan either (a) a paid-up valid and enforceable lenders title insurance policy on the Loan insuring Seller, its successors and assigns, issued by a Countrywide approved title company, as to the first or second priority lien position, as applicable, in full compliance with all requirements in the Guide, (b) an attorney's mortgage lien opinion, or (c) if permitted under the requirements specified in the Guide, a title guarantee or title search. 5. Section 6.A.(18) of the LPA is added to the LPA as follows: "(18) If the Loan is in a second lien position, none of the documents evidencing, securing or otherwise relating to the mortgage loan in the first lien position in any way restricts or prohibits the borrower(s) from obtaining the Loan or from creating any of the liens granted as security for the Loan and the Loan does not violate any term or condition imposed by any such document." 6. Section 6.B.(1) of the LPA is hereby amended and restated in its entirety as follows: "(1) Seller is duly organized, validly existing and in good standing under the laws of its state of incorporation and is qualified and/or licensed as necessary to transact business, including the originating and selling of each Loan, including without limitation, with rates of interest, loan type and other terms provided in the Loan documents, and is in good standing in each state where property securing a Loan is located." 7. All references in Section 8 of the LPA to "service release premium" are replaced with "premium paid to Seller by Countrywide at the time of its purchase of the Loan". 8. The following is added as Sections 8.A.4a, 8.B.4a and 8.C.4a: "any un-reimbursed advances made by Countrywide with respect to such Loan, including but not limited to payments authorized by the loan documents or law to protect the security interest; plus", and Sections 8.A(1), 8.B(1) and 8.C(1) are amended and restated in their entirety as follows: "The repurchase price shall be the original purchase price, less principal reduction made since the Closing Date." THE PARTIES HERETO DO AGREE TO THE FOREGOING AS OF THE DATE ABOVE FIRST WRITTEN. SELLER: E-Loan, Inc. COUNTRYWIDE HOME LOANS, INC. --------------------- a: California Corporation A NEW YORK CORPORATION --------------------- By: /s/ Steve M. Majerus By: /s/ illegible --------------------- ---------------------------- SIGNATURE SIGNATURE Name: Steven M. Majerus Name: Martin Govaerts --------------------- -------------------------- Title: Director, Mortgage Banking Title: Assistant Vice President --------------------- -------------------------- 11 ADDENDUM TO LOAN PURCHASE AGREEMENT THIS ADDENDUM is made this 25th day of September, 1998 between Countrywide Home Loans, Inc., ("COUNTRYWIDE") and E-LOAN, Inc. ("SELLER") to the Loan Purchase Agreement ("LPA") dated as of September 25, 1998. 1. Definitions. The terms "Subprime Loan", "Mortgage Loan Schedule", "Commitment", "Commitment Letter", "Pool Commitment", "Spot Commitment" and "Closing Date" shall have the meanings set forth therefor in the "Guide" (as defined below). 2. Commitment to Purchase Loans. The following is hereby added at the end of the first sentence of Section 2: ", except that for the purposes of Subprime Loans, the procedure pursuant to which Seller may commit to sell a Subprime Loan to Countrywide is detailed in the Subprime section of the Guide." 3. Representations and Warranties. A. Section 6.A(7) is amended and restated in its entirety as follows: "All federal and state laws, rules and regulations applicable to the Loan for its applicable Loan Type have been complied with, including but not limited to: the Real Estate Settlement Procedures Act, the Flood Disaster Protection Act, the Federal Consumer Credit Protection Act including the Truth-in-Lending and Equal Credit Opportunity Acts, the Federal Fair Housing Act, the Home Ownership and Equity Protection Act of 1994 and all applicable federal and state statutes or regulations governing fraud, lack of consideration, unconscionability, consumer credit transactions, consumer protection, interest or other charges, licensing and mortgage insurance." B. Section 6.B(1) is amended and restated in its entirety as follows: "Seller is duly organized, validly existing and in good standing under the laws of its state of incorporation and is qualified and/or licensed as necessary to transact business, including the originating and selling of each Loan, including without limitation, with rates of interest, loan type and other terms provided in the Loan documents, and is in good standing in each state where property securing a Loan is located." C. Section 6.A(18) is added as follows: "For each Subprime Loan, all information regarding such Subprime Loan in the Confirmation therefor and the Mortgage Loan Schedule attached to such Confirmation is true and correct." 4. Purchase Limitation. The obligation to purchase any Subprime Loans identified in a Confirmation does not extend to any Loans that would violate any representation and warranty by Seller contained in the LPA. 5. Purchase Price. The purchase price of each Subprime Loan shall be calculated by multiplying the unpaid principal balance of each Subprime Loan (as adjusted for the borrower's next payment) on the Closing Date by its applicable purchase price percentage calculated in accordance with the rate sheet at the time of purchase for "Spot" Commitments, or as stated in the Commitment letter for "Pool" Commitments (the "PURCHASE PRICE"). If a borrower's payment is due 15 days or earlier after the Closing Date (an "Early Payment"), the portion of such payment attributable to principal shall be deducted from the unpaid principal balance for calculating the Purchase Price. Seller shall then retain borrower's Early Payment when made. The purchase proceeds paid by Countrywide to Seller shall consist of the Purchase Price plus accrued interest as of the Closing Date and less (i) any positive escrow balances, and (ii) any amounts actually owed and paid by Seller for Mortgage Loan tax service contracts and flood certification determinations which are transferable and transferred to Countrywide on the Closing Date. Without limitation on Countrywide's other rights herein, the Purchase Price is subject to change if it is determined that the loan characteristics of the Subprime Loan to be purchased differ from the characteristics represented on the Mortgage Loan Schedule. 12 6. Premium Recapture. Should any Borrower prepay a Subprime Loan during the twelve month period following Countrywide's purchase of the loan, Seller shall reimburse Countywide, upon demand, some or all of the purchase price premium above par paid by Countrywide. The reimbursement shall be calculated using the following formula for "Spot" commitments and "Pool" commitments unless stated otherwise in the "Pool" commitment letter: Purchase Price 12 minus the number of months Premium x expired since the date of purchase - Prepay = Premium ---------------------------------- paid by Countrywide 12 penalty Refund
7. Repurchase Price. For the purposes of determining the repurchase price of a Subprime Loan, Sections 8.A(4), 8.B(4) and 8.C(4) are deleted, and Sections 8.A(1), 8.B(1) and 8.C(1) are amended and restated in their entirety as follows: "The repurchase price shall be the original Purchase Price (as defined in this Addendum), less principal reduction made since the Closing Date." 8. Seller's Guide. All references to "Countrywide's Correspondent Lender Division Loan Purchase Program Seller's Manual" or "Manual" throughout the LPA are replaced with "Countrywide's Correspondent Lending Seller's Guide" or "Guide", respectfully. Seller acknowledges receipt of the Guide, which may be amended, modified or supplemented from time to time by Countrywide, in its sole and absolute discretion, which amendments, modifications or supplements shall be effective upon Countrywide's sending the same to Seller. 9. Brokers. Neither party has employed or otherwise engaged, nor shall employ, or otherwise engage, any broker or finder in connection with the negotiation or execution of the LPA, this Addendum or any Commitment, nor with respect to the transactions contemplated by this Addendum, in such a manner as to give rise to any claim, against any party, for any brokerage commission, finder's fee or similar payment. Each party shall indemnify and defend the other party for any claims for brokerage commission, finder's fee or similar payment based upon statements or agreements alleged to have been made by the indemnifying party. 10. LPA Terms. All provisions of the LPA shall be applicable and remain valid, binding and in full force and effect, except as specifically modified herein. The parties hereto do hereby agree to the foregoing as of the date above first written. Seller: Countrywide: E-Loan, Inc, --------------------- COUNTRYWIDE HOME LOANS, INC. a: California Corporation A NEW YORK CORPORATION --------------------- By: /s/ J. Pawlowski By: /s/ illegible --------------------- ---------------------------- Name: Janina Pawlowski Name: Martin Govaerts --------------------- -------------------------- Title: President Title: Assistant Vice President --------------------- -------------------------- 13 MANDATORY COMMITMENTS (BULK SALES) This agreement (the "Addendum") constitutes an Addendum to that Loan Purchase Agreement dated September, 1998 by and between Countrywide Home Loans, Inc. a New York Corporation ("Countrywide"), E-Loan, Inc. and a CA corporation ("Seller") (the "Agreement"). This Addendum is for the purpose of setting forth the obligations of the Seller to Countrywide in accordance with Countrywide's mandatory commitment program, which is further described in the Seller's Manual. The terms and conditions of the Loan Purchase Agreement are incorporated herein by reference. This Addendum shall modify, amend, and form a part of the terms of the Agreement. All terms contained herein shall have the same meaning as in the Agreement, unless otherwise defined herein. In the event of any conflict between the terms and conditions of the Agreement and this Addendum as it pertains to the mandatory commitment program, the terms and conditions of this Addendum shall prevail. GENERAL Seller may elect to deliver loans to Countrywide under the mandatory commitment program by entering into a mandatory delivery commitment (a "Commitment") to deliver a specified amount and type of loan on or before a specified date. Under the mandatory commitment program, the Seller shall be obligated to pay a mark-to-market pair-off fee if the Seller fails to deliver qualifying loans by the date specified in the Commitment (the Commitment Expiration Date"), in the amount specified in the Commitment (the "Commitment Amount"), or otherwise under the terms provided in the applicable Commitment. I. PAIR-OFF ASSESSMENT Pair-off fees shall be assessed as of the dates and times (the "Pair-Off Assessment Date") provided for: (a) as of the date and time that the Seller notifies Countrywide of its election for a reduction of any portion of the Commitment Amount; or (b) as of the date and time that the Seller notifies Countrywide of its election for a program substitution as described in the Seller's Manual for any portion of the mandatory commitment (such substitution to be treated as a reduction of the Commitment Amount); or (c) as of the close of the Commitment Expiration Date if qualifying loan files are not delivered by seller in an amount equal to the Commitment Amount, less the allowable delivery variance provided for in the Commitment; or (d) as of the close of business on such date subsequent to the Commitment Expiration Date that Countrywide determines that a loan delivered by the Commitment Expiration Date was not eligible for purchase. I. PAIR-OFF CALCULATION AND PAYMENT OF PAIR-OFF FEES The pair-off fee shall be assessed and calculated as provided: (a) A pair-off fee shall be assessed should the Seller notify Countrywide of its election to pair-off all or a portion of the Commitment Amount prior to the Commitment Expiration Date pursuant to the provisions of paragraphs I(a) and I(b) above. In such event, the Commitment shall be amended to require Seller to deliver, and for Countrywide to purchase, the original Commitment Amount reduced by the amount paired-off by Seller (the "Amended Commitment Amount") with all other terms of the Commitment remaining unchanged. Any such amount which Seller elects to pair-off shall hereinafter be referred to as the "Amount Paired-Off By Seller." (b) A pair-off fee shall be assessed should Seller fail to deliver qualifying loans by the Commitment Expiration Date with an aggregate principal balance equal to the Commitment Amount or the Amended Commitment Amount applicable, less the allowable delivery variance provided for in the Commitment. Any such shortfall in the delivery of qualifying loans by the Commitment Expiration Date shall be hereinafter referred to as the "Delivery Shortfall Amount.") 14 (c) The pair-off fee to be assessed on Amounts Paired-Off by Seller and Delivery Shortfall Amounts shall be calculated by multiplying the Amount Paired-Off by Seller or Delivery Shortfall Amount, as applicable, by a percentage equal to the sum of .125% (the "Administrative Fee"), plus the positive price difference, if any, between the percentage price posted by Countrywide as of the Pair-Off Assessment Date (on the loans which were the subject of the Commitment), and the percentage price to have been paid by Countrywide pursuant to the Commitment. Countrywide's posted percentage price on the Pair-Off Assessment Date shall be determined as follows: i. If the Pair-Off Assessment Date is the Commitment Expiration Date, or a subsequent date, pursuant to paragraph I(c) and (d) above, the posted percentage price to be used shall be that percentage price posted by Countrywide applicable to the earliest delivery option available on such Pair-Off Assessment Date (e.g., the price for a mandatory 2 day delivery). ii. If the Pair-Off Assessment Date is earlier than the Commitment Expiration Date pursuant to paragraphs I (a) or I (b), then the posted price to be used shall be the posted mandatory delivery price applicable to the delivery period option which expires closest to, but not after the Commitment Expiration Date. For Example, if the Pair-Off Assessment Date is 40 days prior to the Commitment Expiration Date, the posted price to be used for the pair-off fee calculation shall be Countrywide's 29 day mandatory delivery price on the Pair-Off assessment Date. (For purposes of this example, available mandatory delivery periods are: 2, 7, 15, 29, 45, 60 and 75 days.) (a) Notwithstanding the provisions of paragraph II (c) above, the administrative fee shall be a minimum of $100. (b) The pair-off fees assessed hereunder shall be due and payable within five (5) business days after the Pair-Off Assessment Date. In addition to Countrywide's other remedies, if pair-off fees are not paid within this time period, Seller agrees that Countrywide shall be entitled to net and offset such fees against other amounts owed by Countrywide to Seller. AUTHORIZED AGENTS The following person(s) have been authorized by appropriate resolution of Seller to execute this Addendum and all documents necessary and appropriate to bind Seller pursuant to the terms of this Addendum. Countrywide may rely on any instructions received from such person(s) and the same shall be fully binding on Seller until such time as Countrywide shall receive written instructions revoking the authority of such person to bind Seller to any future transactions. 1. Steve Majerus -------------------------------------------------------- 2. Christian Larsen -------------------------------------------------------- 3. Janina Pawlowski -------------------------------------------------------- 4. -------------------------------------------------------- COUNTRYWIDE HOME LOANS, INC. ("BUYER") BY: /s/ illegible ------------------------------------------------------- TITLE: Assistant Vice President ------------------------------------------------------- DATE: 10/28/98 ------------------------------------------------------- ("SELLER") BY: /s/ J. Pawlowski ------------------------------------------------------- TITLE: President ------------------------------------------------------- DATE: September 25, 1998 ------------------------------------------------------- EX-10.17 23 CONVENTIONAL LOAN PURCHASE AGREEMENT WITH CESTAR 1 EXHIBIT 10.17 CONVENTIONAL LOAN PURCHASE AGREEMENT This Purchase Agreement dated as of July 1, 1998, by and between CRESTAR MORTGAGE CORPORATION, a Virginia corporation with its principal office at 901 Semmes Avenue, Richmond, VA 23224, ("Purchaser"), and E. LOAN, Inc., a California corporation with its principal office at 6200 Village Parkway # 102 Dublin, CA 94568 ("Seller"), provides as follows: Section 1. RECITALS. Seller desires to originate and sell to Purchaser on a servicing released basis certain conventional residential Mortgage Loans as set forth in the Manual, defined below, provided to Seller by Purchaser. Purchaser and Seller desire to set forth in this Agreement the terms and conditions under which Mortgage Loans originated by Seller will be purchased by Purchaser, in consideration of the mutual promises and covenants contained herein, Seller agrees to sell Mortgage Loans to Purchaser and Purchaser agrees to purchase Mortgage Loans from Seller, all subject to the following terms and conditions of this Agreement. Section 2. DEFINITIONS. As used herein, the term: Section 2.1. "BORROWER" means the Individual(s) obligated to repay a Mortgage Loan. Section 2.2. "BUSINESS DAY" means any day on which Purchaser is open to the public for business, Purchaser is normally open to the public for business on any day other than (i) a Saturday or Sunday or (ii) New Year's Day, Martin Luther King Day, President's Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day and Christmas Day. Section 2.3. "CLOSING" means the time when a Borrower signs a Note evidencing a Mortgage Loan and the Mortgage securing payment of such Note. Section 2.4. "CLOSING PACKAGE" shall have the same meaning as defined in the Manual. Section 2.5. "CONFORMING" means that the Loan Amount of a Mortgage Loan is within FHLMC/FNMA Requirements. Section 2.6. "CONSUMER DISCLOSURES" means all disclosures or notices required, or customarily used by residential mortgage lenders, to comply with all applicable federal, state and local laws and regulations applying to consumer credit transactions Involving loans secured by residential real estate, including, without limitation, the Truth-In-Lending Act, the Real Estate Settlement Procedures Act, the Equal Credit Opportunity Act, and the Fair Credit Reporting Act. Section 2.7. "CREDIT PACKAGE" shall have the same meaning as defined in the Manual. Section 2.8. "DELINQUENT" means that all or any part of the monthly installment of principal and interest due on a Note is unpaid after the due date set forth in the Note or that Escrows or other amounts required by the Mortgage to be paid have not been paid. Section 2.9. "ESCROWS" means all funds collected from the Borrower to pay expenses required to be paid pursuant to the Mortgage, including, without limitation, hazard Insurance premiums, mortgage insurance premiums, taxes, special assessments, ground rents, water, sewer and other governmental charges that, if not paid, may result in liens on the Secured Property with priority over the Mortgage Loan. 2 Section 2.10. "FALLOUT LOAN" means a Mortgage Loan subject to a Lock-In which cannot be delivered according to the terms of the Lock-In, including, without limitation, (i) a Mortgage Loan which never reaches Closing due to Seller's denial of the Borrower's loan application or the Borrower's withdrawal of the loan application, or (ii) a Mortgage Loan which cannot be delivered under the terms of the Lock-In because of a change in the type of loan requested by the Borrower, or (iii) a Mortgage Loan which Purchaser for any reason declines to purchase. Section 2.11. "FHLMC" means the Federal Home Loan Mortgage Corporation. Section 2.12. "FNMA" means the Federal National Mortgage Association. Section 2.13. "FHLMC/FNMA REQUIREMENTS" mean the requirements, representations and warranties established from time to time by FHLMC and FNMA as set forth in the FHLMC Sellers' and Servicers" Guide, the FNMA Selling Guide or the FNMA Servicing Guide. Section 2.14. "LOAN AMOUNT" means the principal amount of a Mortgage Loan at the time of Closing. Section 2.15. "LOCK-IN" means an agreement between Seller and Purchaser establishing the price and terms for the purchase of a Mortgage Loan. Section 2.16. "MANUAL" means the manual provided to Seller by Purchaser, as the same may be amended and updated from time to time by Purchaser. Section 2.17. "MORTGAGE" means the security instrument securing a Mortgage Loan with real property, Including, without limitation, a mortgage, a deed of trust, a deed to secure debt, a security deed or any other security instrument. Section 2.18. "MORTGAGE LOAN" means any eligible conventional Mortgage Loan product as set forth in the Manual and meeting all the requirements of Section 4 of this Agreement. The term Mortgage Loan encompasses all of the Seller's right, title and interest in and to the Mortgage Loan, including, without limitation, the servicing rights, all Escrows, the Note, the Mortgage, all applicable insurance policies and all other documentation and Information collected by Seller in connection with the Mortgage Loan. Section 2.19. "NON-CONFORMING" means the Loan Amount of the Mortgage Loan exceeds FHLMC/FNMA Requirements. Section 2.20. "NOTE" means the written Instrument evidencing the Borrower's promise to repay the Loan Amount, plus interest, of the Mortgage Loan. Section 2.21. "POST CLOSING DOCUMENTS" shall have the same meaning as defined in the Manual. Section 2.22. "PURCHASE DATE" means the date on which the Purchaser remits funds to Seller or to Seller's warehouse lender for the purchase of a Mortgage Loan. Section 2.23. "PURCHASE PRICE" means the price paid by Purchaser for a Mortgage Loan exclusive of any Servicing-Release Premium. Section 2.24. "SECURED PROPERTY" means the land and improvements thereon subject to the lien of the Mortgage securing a Mortgage Loan. 2 3 Section 2.25. "SERVICING RELEASE PREMIUM" means the amount in addition to the Purchase Price that Purchaser pays, if any, to obtain a Mortgage Loan without reservation by Seller of the servicing right for such Mortgage Loan. Section 3. GENERAL. This Agreement sets forth the conditions and procedures under which Seller will sell Mortgage Loans to Purchaser and Purchaser will purchase Mortgage Loans from Seller. No obligation is created by this Agreement for Seller to sell or Purchaser to purchase a particular amount of Mortgage Loans or any particular Mortgage Loan. Section 4. MORTGAGE LOANS ELIGIBLE FOR PURCHASE. A Mortgage Loan must meet the following criteria to be eligible for purchase by Purchaser pursuant to this Agreement: Section 4.1. ELIGIBLE PROPERTY AND LIEN STATUS. A Mortgage Loan must be secured by a first priority lien Mortgage on a one-to-four family residential dwelling located in a state or jurisdiction in the United States approved by Purchaser, as set forth in the Manual. Section 4.2. PURCHASE OF LOANS ORIGINATED BY A PARTY OTHER THAN SELLER. Purchaser shall have no obligation to purchase a Mortgage Loan originated by a person other than Seller. For purposes of this Section 4.2, origination by a person other than Seller shall mean that any or all of the following conditions, as applicable, exist: (i) the loan application was taken by, or (ii) documents evidencing the credit-worthiness of the Mortgage Loan were collected by, or (iii) the appraisal of the Secured Property was obtained by, or (iv) the Mortgage Loan was closed by and/or in the name of a person other than Seller or other than a person in the direct and principal employment of Seller or other than a settlement agent acting on behalf of Seller. Notwithstanding the foregoing, for purposes of this paragraph Section 4.2, loan applications transferred from another lender to Seller for the convenience of the borrower and not as part of any business arrangement between the lender and Seller shall not be considered by Purchaser to be an origination by a person other than Seller. Section 4.3. UNDERWRITING GUIDELINES. Each Mortgage Loan purchased by Purchaser pursuant to this Agreement must conform to Purchaser's underwriting guidelines as set forth in the Manual as of the date the Credit Package is received by Purchaser or by Purchaser's designated underwriter. Section 4.4. SUBJECT TO LOCK-IN. Each Mortgage Loan purchased by Purchaser pursuant to this Agreement must be subject to a Lock-In no later than one Business Day prior to delivery of the Mortgage Loan to Purchaser. Section 5. TERMS OF LOCK-IN. Section 5.1. LOCK-IN OF PURCHASE TERMS. Seller must obtain from Purchaser a Lock-In for each Mortgage Loan to be offered for sale to Purchaser not later than one Business Day prior to delivery of the Mortgage Loan to Purchaser. The Lock-In shall establish the agreement of Seller to sell and Purchaser to purchase a particular Mortgage Loan subject to the terms and conditions of this Agreement and the Manual. Each Lock-In must relate to a particular Mortgage Loan. Seller may obtain a Lock-In of the Purchase Price and purchase terms for a particular Mortgage Loan according to procedures described in the Manual. Each Lock-In will have a stated expiration date. In addition to the purchase terms established by the Lock-In, Purchaser may charge to Seller fees in connection with the purchase or underwriting of Mortgage Loans, including without limitation underwriting and funding fees as set forth in the Manual. Section 5.2. TIME WHEN LOCK-IN PRICES ARE ESTABLISHED. Purchaser will establish each Business Day, the Purchase Price and Servicing-Release Premium it will pay for Mortgage Loans and will communicate such information to Seller in the time and manner set forth in the Manual. Section 5.3. CONFIRMATION OF LOCK-IN. Purchaser will confirm any Lock-In in writing according to procedures described in the Manual. 3 4 Section 5.4. CLOSING OF MORTGAGE LOAN SUBJECT TO A LOCK-IN. Seller agrees to close and deliver the Mortgage Loan on or before the expiration of a Lock-In. If the Mortgage Loan is not closed and delivered on or before the expiration of the Lock-In, the Mortgage Loan shall be subject to repricing as described in the Manual. Section 5.5. DELIVERY OF MORTGAGE LOAN SUBJECT TO A LOCK-IN. Seller agrees to deliver the Mortgage Loan to Purchaser for purchase within fifteen calendar days after its Closing. If such delivery is not made, the Mortgage Loan shall be subject to repricing as described in the Manual. Section 5.6. BEST EFFORTS LOCK-INS AND MANDATORY LOCK-INS. Purchaser may offer either "best efforts" Lock-Ins or "mandatory" Lock-Ins, or both. The terms of best efforts Lock-Ins include: (1) Seller will use its best efforts to close the Mortgage Loan according to the terms of the Lock-In, (2) if the Borrower changes the type of Mortgage Loan requested with the result that the terms of the Mortgage Loan no longer agree with the terms of the Lock-In, Seller will notify Purchaser in accordance with the procedures in the Manual and the Lock-In price may be changed at Purchaser's discretion, and (3) after Closing, the Mortgage Loan is required to be delivered to Purchaser. Seller must notify Purchaser of any Mortgage Loan subject to a Lock-In that does not reach Closing in accordance with the procedures with the Manual. Purchaser reserves the right to verify with the Borrower or by other means that the Mortgage Loan did not reach Closing. If Seller fails to deliver to Purchaser after Closing a Mortgage Loan subject to a best efforts Lock-In, such failure constitutes an Event of Default under this Agreement and, notwithstanding any other remedies set forth in Section 13 of this Agreement, Purchaser in its sole discretion may assess a pair-off fee as described and calculated in accordance with the provisions of the Manual. If the Lock-In is designated as a mandatory Lock-In, Seller must deliver the Mortgage Loan to Purchaser or pay Purchaser a pair-off fee, as described and calculated in accordance with the provisions of the Manual, regardless of whether or not the Mortgage Loan closes. Section 5.7. FALLOUT LOANS. a. NOTIFICATION. Seller shall notify Purchaser immediately in accordance with the procedures in the Manual of any Mortgage Loan which is a Fallout Loan. Such Notification must include the reason the Mortgage Loan became a Fallout Loan, documented in accordance with the Manual. b. MONITORING THE AMOUNT OF FALLOUT LOANS. Purchaser shall evaluate Seller's performance in managing Fallout Loans according to parameters described in the Manual. Seller's failure to manage Fallout Loans effectively may cause Purchaser to terminate this Agreement pursuant to 17 below. Section 6. APPROVAL OF MORTGAGE LOANS. Section 6.1. SUBMISSION OF CREDIT PACKAGE. Prior to closing a Mortgage Loan, Seller shall submit to Purchaser or Purchaser's designated underwriter the Credit Package for such Mortgage Loan as described and defined in the Manual. Seller agrees to pay an underwriter fee as set forth in the Manual for each conforming Mortgage Loan purchased and for each non-conforming Mortgage Loan submitted to Purchaser for review. Underwriting fees will be deducted from the funding on conforming and non-conforming Mortgage Loans. The FHLMC/FNMA Requirements and the requirements of the Manual applicable to credit and appraisal standards in effect as of the date a Credit Package is received by Purchaser shall apply to the related Mortgage Loan. Section 6.2. NOTIFICATION OF APPROVAL DECISION. Purchaser will use its best efforts to review and notify Seller of its purchase decision within two Business Days, but in no event later than five Business Days, after receiving the Credit Package for a Conforming Mortgage Loan. For Non-conforming Mortgage Loans, the underwriting may be performed by a mortgage insurance company or Investor designated by Purchaser and that company's policy concerning turnaround time shall apply. If the Credit Package is incomplete, Purchaser or Purchaser's designated underwriter shall notify Seller of the missing documentation, and Purchaser shall have no obligation to make a purchase decision on the Mortgage Loan until such documentation is received. 4 5 Section 6.3. ISSUANCE OF UNDERWRITER'S APPROVAL. Upon approval of a Credit Package for purchase, Purchaser shall issue to Seller a notification that the Mortgage Loan has been approved (the "Underwriter's Approval"), stating the conditions upon which purchase shall be made. The Lock-In, rather than the Underwriter's Approval, shall establish the Purchase Price for the Mortgage Loan. Unless an Underwriter's Approval has been issued with respect to a Credit Package, Purchaser shall have no obligations under this Agreement to purchase the related Mortgage Loan. The purchase will be subject to the conditions set forth in the Underwriter's Approval, the Lock-In, the Manual and this Agreement. Each Underwriter's Approval shall state an expiration date. If Seller does not close a Mortgage Loan on or before such expiration date, Seller shall resubmit to Purchaser the Credit Package along with such updated information as may be required by Purchaser for reapproval and issuance of a new Underwriter's Approval. Section 6.4. RETENTION OF CREDIT PACKAGE. If an Underwriter's Approval has been issued, Purchaser will retain the Credit Package pending Closing and purchase of the Mortgage Loan unless alternative arrangements are agreed to by Purchaser and Seller. Section 7. CLOSING OF MORTGAGE LOANS. Section 7.1. CLOSING A MORTGAGE LOAN SUBJECT TO A LOCK-IN. Seller agrees to notify Purchaser of the Closing not later than one Business Day after the Closing of any Mortgage Loan subject to a Lock-In. Seller agrees not to close any Mortgage Loan subject to a Lock-In unless Purchaser has issued an Underwriter's Approval which is in effect at the Closing. Section 7.2. TRANSMITTAL OF CLOSING PACKAGE TO PURCHASER. Within fifteen calendar days after the Closing of a Mortgage Loan, Seller shall provide to Purchaser the Closing Package as described and defined in the Manual. Seller agrees to do all acts necessary to transfer ownership of Mortgage Loan to Purchaser and shall assign and deliver the Closing Package to Purchaser with respect to the purchase of each Mortgage Loan, subject to the approval of Purchaser as to proper form, content and execution of all documents related to the Mortgage Loan. Purchaser shall use its best efforts to notify Seller within two Business Days, but in no event in more than five Business Days, if the Closing Package complies with Purchaser's requirements. The Closing Package will not be satisfactory if (i) it does not satisfy the terms and conditions of the Underwriter's Approval, the Lock-In, the Manual and this Agreement, or (ii) it contains one or more errors or is incomplete. If Purchaser determines that a Closing Package is not satisfactory due to an error or an omission that can be corrected, Purchaser shall grant to Seller an additional period of five Business Days, starting on the date that Purchaser notifies Seller of an unsatisfactory Mortgage Loan or starting fifteen calendar days After Closing, whichever occurs later, to correct any defect. If Seller corrects the defect within such five Business Day period, Purchaser shall purchase the Mortgage Loan in accordance with the Lock-In terms. If the defect is corrected after this time period, Purchaser shall have the option to establish a new Purchase Price for the Mortgage Loan. Section 7.3. ORIGINAL NOTE. If a copy of the Note was provided to Purchaser with the Closing Package, Seller agrees to deliver the original Note, properly endorsed, to Purchaser prior to the Purchase Date. Section 7.4. PURCHASE FUNDS. In the event Purchaser determines that a Mortgage Loan is acceptable for purchase, Purchaser shall transmit the purchase funds for the Mortgage Loan within five Business Days after receiving the Closing Package for such Mortgage Loan, provided, however, if the Note is received by Purchaser five or more Business Days after receipt of the Closing Package, Purchaser shall have two Business Days after receipt of the Note in which to transmit the purchase funds. The purchase funds will be transmitted net of any amounts due Purchaser in connection with such purchase, including, without limitation, all funds held in Escrow. Any funds due Seller by Purchaser in connection with such purchase, including, without limitation, per diem interest and any Servicing-Release Premium that may be owed, will be added to the purchase funds transmitted to Seller on the Purchase date. Purchaser shall have the right to offset any amount owed by Seller to Purchaser against any and all balances, credits, deposits, accounts or monies of Seller then or thereafter held by Purchaser. 5 6 title insurance policy with respect to the Secured Property issued by a title insurance company acceptable to Purchaser on standard ALTA mortgagee policy forms in an amount satisfactory to Purchaser and containing all applicable endorsements. By assignment or endorsement of Seller's Interest, Purchaser, its successors and assigns, is designated as a mortgagee and additional named insured with regard to the title insurance. Seller has not done, by act or omission, anything which would impair the title insurance coverage. Section 8.6. SECURED PROPERTY INTACT. The Secured Property has not been damaged so as to adversely and materially affect its value and is otherwise in good repair. There are no proceedings pending for the partial or total condemnation of the Secured Property. Section 8.7. HAZARD AND CASUALTY INSURANCE. There is in force for the Mortgage Loan adequate hazard and casualty insurance coverage with respect to the Secured Property in an amount and pursuant to a policy of insurance satisfactory to Purchaser insuring against fire or other casualty, and, if required by federal law, flood insurance. By assignment or endorsement of Seller's Interest, Purchaser, its successors and assigns, is designated as a mortgagee and additional named insured with regard to such insurance. Section 8.8. DELINQUENT STATUS. As of the Purchase Date, the Mortgage Loan is not sixteen calendar days or more Delinquent and Seller has no knowledge of any default or breach existing or threatened under the Security Instrument or Note. Section 8.9. MODIFICATION OF MORTGAGE LOAN DOCUMENTATION. The terms of the Mortgage Loan have in no way been changed or modified and the lien of the Security Instrument has not been released or subordinated. All Mortgage Loan documentation submitted to Purchaser is genuine, complete and accurate, and all representations as to each Mortgage Loan are true and correct and meet the requirements and specifications of all parts of this Agreement. Section 8.10. TAXES. All taxes due and payable on or prior to the Purchase date with respect to the Secured Property have been paid in full. Section 8.11. ACCEPTABLE INVESTMENT. Seller has no knowledge of any circumstances or conditions with respect to the Mortgage Loan, the real property secured by the Security Instrument, the Borrower or the Borrower's credit standing that can reasonably be expected to: (i) cause private institutional investors to regard the Mortgage Loan as an unacceptable Investment; or (ii) cause the Mortgage Loan to become delinquent; or (iii) adversely affect the Mortgage Loan's value or marketability. Section 8.12. ASSIGNMENT. A valid and recordable instrument of assignment, recorded, has been duly executed and delivered by the proper person(s) or entity(ies) to Purchaser, and such assignment is not subject to any other assignment, claim, lien, mortgage, pledge, charge, security interest or encumbrance. Section 8.13. QUALIFICATION OF SELLER. Seller has been duly incorporated and is validly existing and in good standing under the laws of the state of its incorporation. Seller is duly and validly qualified and authorized to do business and to originate and sell the Mortgage Loans in each state where the Secured Property is located or, in the event Seller is not so qualified, the lending of money and the acquisition and holding of Mortgage Loans does not constitute doing business in such state. Seller has all licenses required to engage in such transactions in each state where it originates Mortgage Loans. Section 8.14. QUALIFICATION OF APPRAISER. All appraisers performing and furnishing appraisals with respect to a Mortgage Loan must meet the qualifications set forth in the Manual. Section 9. OTHER WARRANTIES AND REPRESENTATIONS. Seller represents and warrants to Purchaser as of the date of this Agreement as follows: Section 9.1. DUE EXECUTION AND DELIVERY. The execution and delivery of this Agreement are within the corporate powers of Seller and have been duly authorized by all necessary action on the part of the 7 7 Seller and neither the execution and delivery of this Agreement by Seller, nor the consummation by Seller of the transactions herein contemplated nor compliance with the provisions hereof by Seller will (i) conflict with or result in a breach of, or constitute a default under, any of the provisions of the articles of Incorporation or bylaws of Seller or any law, governmental rule or regulation, or any Judgment, decree, or order binding on Seller, or any of its properties, or any of the provisions of any indenture, mortgage, deed of trust, contract or other instrument to which it is a party or by which it is bound or (ii) result in the creation or imposition of any lien, charge, or encumbrance upon any of its properties pursuant to the terms of any such indenture, mortgage, deed of trust, contract or other instrument. Section 9.2. BINDING AGREEMENT. This Agreement has been executed and delivered by Seller and constitutes a legal, valid and binding agreement of Seller, enforceable in accordance with Its terms, subject, as to enforcement of remedies, to applicable bankruptcy, reorganization, Insolvency, or other similar laws affecting creditors rights generally from time to time in effect, and to general principles of equity. Section 9A. SURVIVAL OF WARRANTIES. The representations and warranties made in this Agreement in Sections 8 and 9 above or elsewhere, shall survive the Purchase Date and shall Inure to the benefit of Purchaser, its successors, affiliates and assigns and with respect to any Mortgage Loan, regardless of any review or investigation made by or on behalf of Purchaser. Section 10. COVENANT REGARDING TAXES. Seller hereby covenants and agrees with Purchaser that if any taxes relating to the Secured Property are due within the sixty calendar days following the Closing date, and the bills for such taxes are available as of the Closing date, Seller will cause the taxes to be paid in full by the due date. Section 11. REPURCHASE REQUIREMENTS. In addition to any other rights and remedies which Purchaser may have against Seller, Seller agrees to repurchase any Mortgage Loan within ten calendar days after Purchaser's demand, and to indemnify Purchaser for any incurred loss or liability resulting from the occurrence of any of the following events: Section 11.1. BREACH OF WARRANTY OR REPRESENTATION. Purchaser has determined that there exists a breach of any representation or warranty made pursuant to this Agreement, provided that Seller shall have fifteen calendar days following notice thereof to cure any breach resulting from a clerical error. Section 11.2. TIMELY DELIVERY OF POST-CLOSING DOCUMENTS. The Post-closing Documents or any other documentation or corrections of any documentation have not been delivered within the time periods set forth in this Agreement. Section 11.3. FALSE OR MISLEADING STATEMENTS. Purchaser determines that any information submitted to seller or any statement, report or document furnished by Seller to Purchaser hereunder was incomplete, inaccurate, false, or misleading in any material respect when made or delivered. This provision includes any condominium or PUD warranties made by Seller to Purchaser. Section 11.4. REPURCHASE OF EARLY DEFAULTS. Seller agrees to repurchase any conforming or non-conforming conventional Mortgage Loan from Purchaser if a default occurs with respect to the payment of any installment of principal and interest due on the first payment due date after the Purchase Date. Section 12. REPURCHASE PRICE. In the event Seller is obligated to repurchase a Mortgage Loan, the repurchase price shall be at par or at the purchase price paid by Purchaser, whichever is greater, in an amount equal to the then unpaid principal balance of such Mortgage Loan, plus all accrued and unpaid interest and any costs or expenses, including, without limitation, reasonable attorney's fees and expenses and court costs incurred by Purchaser in connection with the repurchase of any such Mortgage Loan, enforcing such repurchase obligation, enforcing any obligation of the Borrower arising under the Note or foreclosing on the Secured Property. In addition, Seller shall repay to Purchaser any Servicing-Release Premium paid by Purchaser in connection with such repurchased Mortgage Loan. Purchaser shall have the right to offset the 8 8 amount owed by Seller to Purchaser against any and all balances, credits, deposits, accounts or monies of Seller then or thereafter held by Purchaser. Purchaser may, at the request of Seller, perform the servicing of a Mortgage Loan that Seller is required to repurchase pursuant to the provisions of this Agreement. The repurchase obligations under this Agreement shall survive (i) purchase of the Mortgage Loan; (ii) any transfer or grant of any interest in or sale of the Mortgage Loan by Purchaser or its affiliates or any of their successors or assignees; and (iii) termination of this Agreement. Section 13. EVENTS OF DEFAULT. Purchaser, at its option, shall have the right to immediately terminate this Agreement without notice should an Event of Default occur. In the event this Agreement is terminated, no additional Lock-Ins will be permitted. The following shall be Events of Default under this Agreement: Section 13.1. Repeated breaches by Seller of any warranty or representation contained in this Agreement, regardless of any action by Seller to cure breaches. Section 13.2. Repeated failure by Seller to deliver to Purchaser any Closing Documents or Post-closing Documents within the time periods required by the Manual or this Agreement. Section 13.3. Detection by Purchaser of participation by Seller or any of Seller's employees in fraudulently documenting one or more Mortgage Loans that are sold or offered for sale to Purchaser. Section 13.4. Failure by Seller to use its best efforts to close and deliver Mortgage Loans subject to a Lock-In to Purchaser for purchase pursuant to the terms of this Agreement. Section 14. INDEMNITY. Seller hereby agrees to indemnify and hold harmless Purchaser and its affiliates and the successors and assigns of Purchaser and its affiliates collectively referred to herein as "Indemnities" from and against any and all claims, losses, damages, fines, penalties, forfeitures, legal fees, judgments and any costs, fees and expenses relating to (i) a breach by Seller of any representation, warranty or obligation contained in or made pursuant to the Manual, this Agreement or any other agreement between Seller and Purchaser relating to the purchase of Mortgage Loans, (ii) a failure by Seller to disclose any information that renders any such representation or warranty misleading or inaccurate, or (iii) any material inaccuracy in information provided to Purchaser or misrepresentation made to Purchaser concerning any Mortgage Loan which is known to Seller or which Seller should have known if it exercised practices customarily undertaken by prudent residential mortgage lenders. This indemnification shall survive purchase, sale or transfer of the Mortgage Loan or any Interest therein by any of the indemnities, the liquidation of the Mortgage Loan or the termination of this Agreement. Section 15. RELATIONSHIP OF PARTIES. The parties understand and agree that neither party shall be deemed an agent, employee or legal representative of the other party, and that each party is acting solely on its own behalf and as an independent contractor. Neither party to this Agreement shall have the power or authority to represent, act for, bind or commit the other party in connection with any action taken pursuant to this Agreement. Neither execution nor performance of this Agreement shall be construed to establish any partnership or joint venture between the parties. Section 16. NOTICES. All Notices required to be given hereunder shall be in writing; provided, however, that at Seller's request Purchaser may give any notice orally to Seller, and provided further, that in the event any notice is given orally by Purchaser, Purchaser shall not be liable or responsible in any respect for any error, omission or delay in providing such oral notice. Any written notice required or permitted to be given hereunder shall be sufficient, if either personally delivered or sent by U.S. Mail, postage prepaid, to the following addresses: If to Purchaser: Crestar Mortgage Corporation 901 Semmes Avenue Richmond, Virginia 23224 Attention: Correspondent Loan Department 9 9 If to Seller: E LOAN, Inc. 6200 Village Parkway #102 Dublin, CA 94568 Attn: Frank Mu?? Section 17. TERM OF AGREEMENT. This Agreement may be terminated by either party at any time without cause by giving fifteen calendar days notice to the other party. In addition, this Agreement may be terminated by Purchaser pursuant to the provision of Section 13 hereof. Upon such notification, Purchaser shall cease accepting Mortgage Loans for credit approval as of the effective date of termination, but purchase pursuant to the terms of this Agreement any Mortgage Loans for which as Underwriter's Approval is in effect as of the termination date. Seller's representations, warranties, covenants and its obligation to indemnify Purchaser as to repurchase Mortgage Loans shall survive termination of this Agreement. Section 18. FINANCIAL STATEMENTS. Seller will deliver to Purchaser financial statements of Seller, as specified in the manual, within ninety calendar days after the end of the Seller's fiscal year. Section 19. ASSIGNMENT. This Agreement may not be assigned by Seller without prior written consent of Purchaser. Section 20. THE MANUAL. The Manual provided to Seller by Purchaser is incorporated herein by reference and shall be deemed to supplement this Agreement. All Mortgage Loans purchased pursuant to the Agreement will be subject to the terms of the Manual and this Agreement. Purchaser reserves the right to amend the Manual in its sole discretion from time to time by giving written notice of such amendments to Seller. Section 21. ENTIRE AGREEMENT. This Agreement and the Manual constitute the entire understanding of the parties with respect to the purchase and safe of Mortgage Loans covered by this Agreement. No modification or amendment of this Agreement shall be valid unless set forth in writing and executed by both Seller and Purchaser Section 22. NO WAIVER; RIGHTS AND REMEDIES CUMULATIVE. No failure or any delay on the part of Purchaser in exercising its rights, powers, privileges or remedies hereunder shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise or the exercise of any other rights, powers, privileges or remedies, all of which shall be cumulative Section 23. CAPTIONS. The captions of the various sections of this Agreement have been inserted only for purposes of convenience. Such captions are not part of this Agreement and shall not be deemed in any manner to modify, explain, enlarge or restrict any provisions of this Agreement. Section 24. APPLICABLE LAW. This Agreement shall be enforced and interpreted in accordance with the laws of the Commonwealth of Virginia. Section 25. TRAINING FEES. Seller agrees to reimburse Purchaser for travel expenses incurred during training of Seller should training be mutually agreed upon as necessary. Section 26. VALID AGREEMENT. This Agreement is not valid until accepted and signed by Purchaser. Section 27. AGREEMENT OF NON-SOLICITATION. Seller agrees it will not, after the execution of this Agreement, make any direct solicitation of any kind of the Borrowers, including, without limitation, solicitation to refinance any of the Mortgage Loans, or take any other action which would otherwise encourage the prepayment of any of the Mortgage Loans. In addition, Seller agrees that it will neither transfer or otherwise disclose any 10 10 information with respect to the Mortgage Loans to a third party, nor assist any other person or entity in making any direct solicitation of the respective Borrowers. IN WITNESS WHEREOF, each party has caused this Agreement to be executed by its duly authorized officer, all as of the date first above written. CRESTAR MORTGAGE CORPORATION SELLER By: /s/ Signature Illegible By: /s/ Steve M. Majerus Title: /s/ Signature Illegible Title: Director, Mortgage Banking 11 EX-10.18 24 GMAC MORTAGE CORPORATION SELLER'S AGREEMENT 1 EXHIBIT 10.18 GMAC MORTGAGE CORPORATION SELLER'S AGREEMENT RESIDENTIAL MORTGAGE LOANS BETWEEN E-LOAN, INC. "SELLER" AND GMAC MORTGAGE CORPORATION "PURCHASER" DATED AS OF JULY 1, 1998 2 TABLE OF CONTENTS ARTICLE I DEFINITIONS
SECTION Page Definitions 1 ARTICLE II SALE AND DELIVERY OF MORTGAGE LOANS 2.1 Offer 4 2.2 Acceptance 4 2.3 Exclusions 4 2.4 Closing 4 2.5 Computation; Adjustment 5 2.6 Refund of Premium 5 ARTICLE III GENERAL REPRESENTATIONS AND WARRANTIES OF SELLER 3.1 Due Organization and Good Standing 6 3.2 Authority and Capacity 6 3.3 Effective Agreement 6 3.4 Compliance with Contracts and Regulations 6 3.5 Sale Treatment 6 3.6 Litigation; Compliance with Laws 6 3.7 Statements Made 7 3.8 Bulk Sales 7 3.9 Compliance 7 3.10 Agency Approvals 7 3.11 Financial Statements 7 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO MORTGAGE LOANS 4.1 Origination of Mortgage Loans 8 4.2 Information 8 4.3 Mortgage File 8 4.4 Ownership of Mortgage Loans 8 4.5 Compliance with Applicable Law 8 4.6 Right of Rescission 8 4.7 Enforceability; No Setoff 8 4.8 Enforceable Provisions 8 4.9 Lien Priority 9
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SECTION Page 4.10 Assignment of Mortgage 9 4.11 No Modifications 9 4.12 Mortgage In Effect 9 4.13 No Default 9 4.14 Trustee 9 4.15 Title Insurance 9 4.16 Hazard and Flood Insurance 10 4.17 Appraisals 10 4.18 No Condemnation 10 4.19 Property Condition 10 4.20 Senior Lienholders 10 4.21 Proceeds Disbursed 10 4.22 Mechanic's Liens 10 4.23 No Accrued Liabilities 11 4.24 No Adverse Selection 11 4.25 Acceptable Investment 11 4.26 Environmental Conditions 11 4.27 Fraud 11 4.28 Reverse Mortgages 11 4.29 Qualified Originator 11 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER 5.1 Due Organization and Good Standing 12 5.2 Authority and Capacity 12 5.3 Effective Agreement 12 5.4 Litigation 12 5.5 Consent 12 5.6 Agency Approval 12 ARTICLE VI COVENANTS 6.1 Further Assurances and Corrective Instruments 13 6.2 Transfer of Insurance 13 6.3 Insurance Prepayment 13 6.4 Post-closing Payments 13 6.5 No Solicitation 13 6.6 Use of Name 13 6.7 Limited Power of Attorney 13 6.8 Public Announcement 14 6.9 Certain Notifications 14 6.10 Post-closing Reporting 14 6.11 Ongoing Due Diligence Review 15
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SECTION Page ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER 7.1 Representations 16 7.2 Compliance with this Agreement 16 7.3 Documentation and Files; Compliance 16 7.4 Corporate Resolution 16 7.5 Opinion 16 7.6 Officer's Certificate 16 7.7 Material Adverse Change 16 ARTICLE VIII REMEDIES 8.1 Indemnification by Seller 17 8.2 Repurchase 17 8.3 Indemnification by Purchaser 18 8.4 Notice of Claim 18 8.5 Limitation of Liability 18 ARTICLE IX TERMINATION 9.1 Termination without Cause 19 9.1 Termination without Cause 19 9.3 Seller's Termination for Cause 19 9.4 Effect of Termination 20 9.5 Survival of Obligations and Covenants 20 ARTICLE X MISCELLANEOUS 10.1 Costs and Expenses 21 10.2 Confidentiality of Information 21 10.3 Broker's Fees 21 10.4 Survival 21 10.5 Notices 21 10.6 Applicable Law 22 10.7 Jurisdiction and Venue 22 10.8 Integration 22 10.9 Modification 22 10.10 Third Party Beneficiaries 22 10.11 Construction 22 10.12 Captions 22 10.13 Counterparts 22
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SECTION Page 10.14 Attorneys' Fees 23 10.15 Binding Effect and Assignment 23 10.16 Incorporation of Exhibits 23 EXHIBITS - -------- EXHIBIT A Mortgage Loan Schedule EXHIBIT B Contents of Mortgage File EXHIBIT C Purchaser's Guidelines EXHIBIT D Form of Corporate Resolution EXHIBIT E Form of Opinion of Counsel EXHIBIT F Form of Officer's Certificate EXHIBIT G GMAC Mortgage Servicing Released Delivery Transmittal
iv 6 GMAC MORTGAGE CORPORATION SELLER'S AGREEMENT (MORTGAGE LOANS - FLOW DELIVERY) GMAC MORTGAGE CORPORATION SELLER'S AGREEMENT (the "Agreement"), dated as of June 29, 1998 by and between E-LOAN, INC. ("Seller"), a Massachusetts corporation with its principal office located at 6200 Village Parkway, Suite 102, Dublin, CA 94568 and GMAC MORTGAGE CORPORATION ("Purchaser"), a Pennsylvania corporation with its principal office located at 100 Witmer Road, Horsham, Pennsylvania 19044. RECITALS 1. Seller is engaged in the origination and sale of Mortgage Loans (as hereinafter defined); and 2. Seller desires to sell on a servicing-released basis, from time to time, and Purchaser desires to purchase, from time to time, all right, title, and interest in and to Mortgage Loans originated by Seller in accordance with the terms and conditions of this Agreement. This Agreement shall apply to every sale transaction and transfer between Purchaser and Seller with respect to Mortgage Loans, except as otherwise agreed by the parties. NOW, THEREFORE, in consideration of the mutual promises contained herein and for other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS All words or phrases defined in this Article I (except as herein otherwise expressly provided or unless the context otherwise requires) shall, for the purposes of this Agreement, have the respective meanings specified in this Article. 1.1 AFFILIATE means with respect to any party hereto, any person or entity which controls, is controlled by, or is under common control with, such party. 1.2 AGENCIES means The Federal National Mortgage Association and The Federal Home Loan Mortgage Corporation, The Department of Housing and Urban Development, and the Government National Mortgage Association or any successor organizations thereto. 1.3 AGREEMENT means this GMAC Mortgage Corporation Seller's Agreement and all exhibits, schedules, amendments and supplements attached hereto, and any written amendments or modifications hereto signed by both Seller and Purchaser. 7 1.4 APPLICABLE LAW means all applicable federal, state and local legal and regulatory requirements (including statutes, rules, regulations and ordinances), all other requirements and guidelines of each governmental agency, board, commission, instrumentality and other governmental body or officer having jurisdiction, and all applicable judicial and administrative judgments, orders, stipulations, awards, writs and injunctions. Applicable Law includes without limitation applicable provisions of the Equal Credit Opportunity Act, the Truth-in-Lending Act, the Real Estate Settlement Procedures Act, the Flood Disaster Protection Act, the Fair Credit Reporting Act, the Fair Housing Act, the Home Mortgage Disclosure Act and regulations promulgated with respect thereto. 1.5 ASSIGNMENT OF MORTGAGE means an assignment of all of Seller's right, title and interest in and to a Mortgage, in a form acceptable to Purchaser, to be executed by Seller in connection with each Mortgage Loan purchased hereunder. 1.6 BUSINESS DAY means a day of the week other than Saturday, Sunday, or a day which is a legal holiday in the Commonwealth of Pennsylvania, or the State of Florida. 1.7 CLOSING DATE means, with respect to each purchase of Mortgage Loans hereunder, the date on which such purchase shall occur and the applicable Purchase Price shall be paid, all as specified in the related Confirmation. 1.8 CONFIRMATION means a written confirmation letter delivered by Purchaser to Seller which shall provide, with respect to a purchase of Mortgage Loans hereunder, a Mortgage Loan Schedule, the Purchase Price to be paid by Purchaser for each Eligible Mortgage Loan to be purchased, additional terms and conditions pertaining to the purchase of Eligible Mortgage Loans, and the scheduled Closing Date. 1.9 CUTOFF DATE means, with respect to a purchase of Mortgage Loans, the date on which on which the unpaid principal balance of such Mortgage Loans shall be fixed for the purpose of calculating the Purchase Price, all as specified in the related Confirmation. 1.10 DEFECT means a determination by Purchaser, in its sole judgment, that with respect to a Mortgage Loan (a) any representation or warranty made by Seller herein is untrue or incorrect in any respect; (b) Seller has failed to comply with any covenant herein contained; (c) any document constituting a part of the Mortgage Loan Documents is defective, inaccurate or incomplete in any respect, and/or (d) any closing document shall not be valid and binding. 1.11 ELIGIBLE MORTGAGE LOAN means a Mortgage Loan which complies, in all material respects, with Purchaser's Guidelines. 1.12 MORTGAGE means a valid and enforceable mortgage, deed of trust, or other security instrument creating a first or second lien, as the case may be, upon described real property improved by a one-to-four family dwelling which secures a Mortgage Note. 1.13 MORTGAGE FILE means the Mortgage Loan Documents, records and other items referred to in Exhibit B attached hereto pertaining to a particular Mortgage Loan. Except to the extent required by Applicable Law, the Mortgage File may be retained in microfilm, microfiche, optical storage or magnetic media in lieu of hard copy. 1.14 MORTGAGE LOAN means an individual mortgage loan or home equity line of credit originated by Seller which is secured by an interest in residential (1 to 4 family) real estate, and which is the subject of a purchase under this Agreement. 2 8 1.15 MORTGAGE LOAN DOCUMENTS means the Mortgage Notes, Mortgages and all accompanying instruments, insurance policies, if applicable, evidence of compliance with Applicable Law, and other writings that document, evidence or relate to the Mortgage Loans purchased hereunder which include, without limitation, all documents required to be delivered by Seller to Purchaser pursuant to the terms of this Agreement, the related Confirmation and Purchaser's Guidelines. 1.16 MORTGAGE NOTE means a written promise by a Mortgagor to pay a sum of money at a stated interest rate during a specified term that evidences a Mortgage Loan. 1.17 MORTGAGE LOAN SCHEDULE means a list of Mortgage Loans to be purchased by Purchaser, as may be supplemented or amended from time to time, the form of which is attached hereto as Exhibit A. 1.18 MORTGAGED PROPERTY means the real property and improvements subject to a Mortgage, constituting security for repayment of the debt evidenced by the related Mortgage Note. 1.19 MORTGAGOR means the Mortgagor on a Mortgage Note. 1.20 PURCHASE PRICE means the purchase price to be paid with respect to a Mortgage Loan, which shall be calculated, as of the related Closing Date, as the sum of (a) the unpaid principal balance of the Mortgage Loan as of the Cutoff Date, (b) any accrued and unpaid interest thereon, and (c) any purchase premium or discount which shall be specified in the related Confirmation. 1.21 PURCHASER'S GUIDELINES means the Purchaser's written guidelines attached as Exhibit C hereto with respect to loan terms, minimum loan amount, underwriting criteria, sale criteria, and other matters relating to the eligibility of loans for purchase by Purchaser, which shall include without limitation applicable requirements of the Agencies, and which may be supplemented or amended in writing from time to time. 1.22 REPURCHASE PRICE means the sum of (a) the unpaid principal balance of a Mortgage Loan as of the date of repurchase, (b) all accrued and unpaid interest thereon calculated at the Mortgage Note rate through the last day of the month of repurchase, (c) any and all costs and expenses incurred by Purchaser with respect to such Mortgage Loan, including without limitation reasonable attorneys' fees and expenses incurred by Purchaser to secure a priority lien position with respect to the Mortgage Loan, and (d) any premium paid by Purchaser as part of the Purchase Price for such Mortgage Loan. 1.23 WIRE TRANSFER means (a) a bank wire transfer of immediately available funds or (b) an ACH transaction resulting in availability of funds on the same date as would have been the case had a bank wire transfer of immediately available funds been employed. 3 9 ARTICLE II SALE AND DELIVERY OF MORTGAGE LOANS 2.1 OFFER. From time to time during the term of this Agreement, Seller shall submit, for Purchaser's review and approval, (a) an offer to sell mortgage loans having a specified aggregate unpaid principal balance on a servicing-released basis under the terms of this Agreement, or (b) a proposed Mortgage Loan Schedule containing information concerning one or more mortgage loans offered by Seller for sale on a servicing-released basis under the terms of this Agreement. Such information shall be furnished in accordance with the requirements of Purchaser's Guidelines and in a format acceptable to Purchaser. 2.2 ACCEPTANCE. Upon receipt and review of any proposed Mortgage Loan Schedule, and any related information requested by Purchaser, Purchaser shall, in its absolute and sole discretion, approve or decline each loan for purchase. Within a mutually agreeable period of time, Purchaser shall issue a Confirmation with respect to the Eligible Mortgage Loans to be purchased by Purchaser, which shall include, without limitation, a preliminary Mortgage Loan Schedule which shall identify such Eligible Mortgage Loans, the Purchase Price to be paid for each Eligible Mortgage Loan, Purchaser's delivery requirements, and the scheduled Closing Date. The Confirmation shall also provide for liquidated damages in the event that Seller should fail to deliver the required Mortgage Loans. Only loans which are Eligible Mortgage Loans shall be accepted for purchase by Purchaser. When executed by both parties, the Confirmation shall constitute an acceptance of Seller's offer, and shall be incorporated herein and made part of this Agreement. Notwithstanding anything to the contrary contained in this Agreement, in the absence of a binding Confirmation issued by Purchaser with respect to an Eligible Mortgage Loan and accepted by Seller in a timely fashion, Purchaser shall have no obligation to purchase any loan offered by Seller. 2.3 EXCLUSIONS. At any time prior to the Closing Date, either Seller or Purchaser shall have the right to exclude from the related sale transaction any loan subject to a Confirmation, in the event that either party should determine that such loan will not be an Eligible Mortgage Loan as of the related Closing Date. 2.4 CLOSING. On each Closing Date hereunder: (a) No later than two (2) Business Days prior to such Closing Date, Seller shall deliver to Purchaser a final Mortgage Loan Schedule acceptable to Purchaser, and, with respect to each Mortgage Loan, and the related Mortgage Loan Documents specified in Exhibit B hereto, including a duly executed Assignment of Mortgage, Seller shall pay all costs of preparing and furnishing to Purchaser all Mortgage Files, including original or certified copies of the respective Mortgage Loan Documents and the Assignments of Mortgage. (b) Subject to, and upon the terms and conditions of, this Agreement, Seller shall sell, transfer, assign, transfer, convey and deliver to Purchaser, and Purchaser shall purchase, all right, title and interest in and to the Mortgage Loans. (c) The Purchaser shall deposit funds in an amount equal to the Purchase Price by Wire Transfer, (i) in accordance with the terms of any bailee letter delivered to Purchaser by Seller, (ii) in the 4 10 absence of any such bailee letter, to a bank account to be designated in writing by Seller, or (iii) as otherwise agreed upon in writing by the parties. (d) Upon payment of the Purchase Price, title to the Mortgage Loans, Mortgage Loan Documents, and all rights, benefits, collateral, payments, recoveries, proceeds and obligations arising from or in connection with the Mortgage Loans shall vest in Purchaser. 2.5 COMPUTATION; ADJUSTMENT. It is understood and agreed that: (a) All wiring instructions and Purchase Price information necessary to effect payment of the Purchase Price shall be provided to Purchaser at least two Business Days prior to the date of payment. (b) If the principal balance of any of the Mortgage Loans used in computing the payment of the Purchase Price shall be found to be incorrectly computed, the Purchase Price shall be promptly and appropriately adjusted and payment promptly made by the appropriate party. 2.6 REFUND OF PREMIUM. In the event that a purchase premium is paid by the Purchaser to the Seller with respect to a Mortgage Loan and such Mortgage Loan is prepaid in full, within a six month period following the related Closing Date, by the related Mortgagor, other than through refinancing by Purchaser or any Affiliate of Purchaser, Seller shall, upon demand by Purchaser, refund to Purchaser such purchase premium. 5 11 ARTICLE III GENERAL REPRESENTATIONS AND WARRANTIES OF SELLER As an inducement to Purchaser to enter into this Agreement, Seller represents and warrants as follows, as of each Closing Date: 3.1 DUE ORGANIZATION AND GOOD STANDING. Seller is a corporation validly existing and in good standing under the laws of the state of its incorporation during the time of its activities with respect to the Mortgage Loans. To the extent required by Applicable Law, Seller is properly licensed and qualified to transact business in all appropriate jurisdictions and to conduct all activities performed with respect to the origination of the Mortgage Loans. 3.2 AUTHORITY AND CAPACITY. Seller has all requisite corporate power, authority and capacity to enter into this Agreement and to perform the obligations required of it hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have each been duly and validly authorized by all necessary corporate action. This Agreement constitutes the valid and legally binding agreement of Seller enforceable in accordance with its terms, subject to bankruptcy laws and other similar laws of general application affecting rights of creditors and subject to the application of the rules of equity, including those respecting the availability of specific performance. 3.3 EFFECTIVE AGREEMENT. The execution, delivery and performance of this Agreement by Seller, its compliance with the terms hereof and consummation of the transactions contemplated hereby (assuming receipt of the various consents required pursuant to this Agreement) will not violate, conflict with, result in a breach of, constitute a default under, be prohibited by or require any additional approval under its certificate of incorporation, bylaws, or any instrument or agreement to which it is a party or by which it is bound or which affects the Mortgage Loan, or under Applicable Law. 3.4 COMPLIANCE WITH CONTRACTS AND REGULATIONS. Prior to each Closing Date, Seller will have complied with all material obligations under all contracts to which it was a party, and under Applicable Law, to the extent that such obligations might affect any of the Mortgage Loans being purchased by Purchaser hereunder. Seller has done and Seller will do, no act or thing which may adversely affect the Mortgage Loans. 3.5 SALE TREATMENT. The sale of each Mortgage Loan shall be reflected on Seller's balance sheet and other financial statements as a sale of assets by Seller, Seller will not take any action or omit to take any action which would cause the transfer of the Mortgage Loans to Purchaser to be treated as anything other than a sale to Purchaser of all of Seller's right, title and interest in and to each Mortgage Loan. 3.6 LITIGATION; COMPLIANCE WITH LAWS. There is no litigation, proceeding or governmental investigation pending, or any order, injunction or decree outstanding which might materially affect any of the Mortgage Loans. Additionally, there is no litigation, proceeding or governmental investigation existing or pending or, to the knowledge of Seller threatened, or any order, injunction or decree outstanding against or relating to Seller, that has not been disclosed by Seller to Purchaser or its counsel in writing prior to the execution of this Agreement, which could have a material adverse effect upon the Mortgage Loans, nor does Seller know of any basis for any such litigation, proceeding, or governmental investigation. Seller has not violated any applicable law, regulation, ordinance, order, injunction or decree, or any other requirement 6 12 of any governmental body or court, which may materially affect any of the Mortgage Loans or the Servicing. 3.7 STATEMENTS MADE. No representation, warranty or written statement made by Seller in this Agreement or in any exhibit, schedule, written statement or certificate furnished to Purchaser in connection with the transactions contemplated hereby by Seller contains or will contain any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading. 3.8 BULK SALES. The transfer, assignment and conveyance of Mortgage Loans by Seller pursuant to this Agreement are in the ordinary course of Sellers' business and are not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction. Seller is not transferring the Mortgage Loans with an actual intent to hinder, delay or defraud any of its creditors. Seller is solvent and will not be rendered insolvent by the sale of any Mortgage Loans. 3.9 COMPLIANCE. The sale, transfer, assignment and conveyance of the Mortgage Loans by Seller to Purchaser pursuant to this Agreement does not and shall not violate Applicable Law or the terms of any license held by Seller. 3.10 AGENCY APPROVAL. Seller is an approved seller/servicer for either one or both of the Agencies in good standing and is a mortgagee approved by the Secretary of the U.S. Department of Housing and Urban Development pursuant to Section 203 of the National Housing Act. 3.11 FINANCIAL STATEMENTS. Seller's financial statements furnished to Purchaser were prepared in accordance with generally accepted accounting principles consistently applied, and fully and fairly represent the financial condition of Seller as of the respective dates thereof, and the results of operations for the respective periods indicated therein, and there has been no material adverse change in the financial condition or business of Seller since the date of the last of such financial statements. 7 13 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER RELATING TO MORTGAGE LOANS As further inducement to Purchaser to enter into this Agreement, Seller represents and warrants to Purchaser as of each Closing Date, with respect to each Mortgage Loan sold and transferred to Purchaser thereon, as follows: 4.1 ORIGINATION OF MORTGAGE LOANS. Except as disclosed in writing to Purchaser and accepted by Purchaser prior to the Closing Date, each Mortgage Loan has been originated in accordance with applicable Purchaser's Guidelines and the terms and conditions of the applicable Confirmation. 4.2 INFORMATION. All information set forth as to each Mortgage Loan in each Mortgage Loan Schedule, is true and correct as of the date thereof. All other information furnished to Purchaser in writing by Seller with respect to the Mortgage Loan is true and correct. 4.3 MORTGAGE FILE. For each Mortgage Loan, the related Mortgage File contains each of the documents and instruments specified to be included therein. 4.4 OWNERSHIP OF MORTGAGE LOANS. Except with respect to the liens of certain warehouse lenders, as identified in Schedule 4.4 hereto, (a) Seller is the sole owner of the Mortgage Loan and has good and marketable title thereto, and has the right to assign, sell and transfer the Mortgage Loan to Purchaser free and clear of any encumbrance, lien, pledge, charge, claim or security interest, and (b) Seller has not sold, assigned or otherwise transferred any right or interest in or to the Mortgage Loan and has not pledged the Mortgage Loan as collateral for any debt or other purpose. 4.5 COMPLIANCE WITH APPLICABLE LAW. Each Mortgage Loan has been originated and, where applicable, serviced, in accordance with Applicable Law. Each Mortgage Loan meets or its exempt from Applicable Law and/or other requirements pertaining to usury, and the Mortgage Loan is not usurious. The forms of the related Mortgage Note, Mortgage, and other Mortgage Loan Documents are acceptable to the Agencies and comply with Applicable Law. The originator of each Mortgage Loan, whether Seller or any other entity, was duly licensed to participate in the making of such loan to the extent required by Applicable Law. 4.6 RIGHT OF RESCISSION. Any applicable period during which the Mortgagor may rescind the Mortgage Loan has expired. 4.7 ENFORCEABILITY; NO SETOFF. All parties to each Mortgage Note and Mortgage had legal capacity to enter into the respective Mortgage Loan and to execute and deliver the Mortgage Note and the Mortgage, and no Mortgagor has been released in whole or in part from any liability under the Mortgage Note. The Mortgage Note and the Mortgage have been duly and properly executed and delivered by such parties, and are in every respect genuine and each is the legal, valid and binding obligation of the maker thereof and is not subject to any discount, allowance, setoff, counterclaim, presently pending bankruptcy, or other defenses. 4.8 ENFORCEABLE PROVISIONS. The Mortgage Note and Mortgage contain customary, valid, legal and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the mortgage property of the benefits of the security created thereby. The Mortgage Note and Mortgage contain a provision for the acceleration of the payment of the unpaid 8 14 principal balance of the Mortgage Loan in the event that the related real property is sold without the prior consent of the mortgage thereunder. 4.9 LIEN PRIORITY. Each Mortgage Loan is secured by a valid, enforceable Mortgage lien, of the agreed-upon priority, on the fee simple title to the related real property, and the Mortgage has been duly and properly filed, recorded or otherwise perfected in accordance with Applicable Law in order to give constructive notice thereof to all subsequent purchasers or encumbrances of the Mortgaged Property. 4.10 ASSIGNMENT OF MORTGAGE. Each Assignment of Mortgage is in recordable form and is acceptable for recording under Applicable Law. The endorsement of each Mortgage Note and the delivery to Purchaser of the original endorsed Mortgage Note and of the related Assignment of Mortgage are sufficient to permit Purchaser to avail itself of all protection available under Applicable Law against the claims of any present of future creditors of Seller, and are sufficient to prevent any other sale, transfer, assignment, pledge or hypothecation of the Mortgage and the Mortgage Note by the Seller from being enforceable. 4.11 NO MODIFICATION. The terms, covenants and conditions of each Mortgage Loan have not been waived, altered, impaired or modified in any respect. The monthly payments of each Mortgage Loan, whether fixed or adjusted from time to time under the terms of the Note, are sufficient to amortize the original principal balance over the original term and to pay interest in arrears at the interest rate on the Note. 4.12 MORTGAGE IN EFFECT. The Mortgage securing any Mortgage Loan has not been satisfied, released, canceled, deferred or subordinated, in whole or in part, and the Real 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 satisfaction, release, cancellation, subordination, deferral or rescission. 4.13 NO DEFAULT. All payments required under the terms of the Mortgage Note to have been made up to the Closing Date have been made. There is no default, breach, violation or event of acceleration existing under the terms and covenants of each Mortgage Loan nor has any event occurred which, upon the giving of notice or the lapse of time, or both, would constitute a default, breach, violation or event of acceleration, nor has Seller waived any of the foregoing. All requirements set forth in the Mortgage Loan Documents and all requirements of any applicable Laws have been fully met and complied with. All costs, fees and expenses incurred in making, closing and recording each Mortgage Loan have been paid and all proceeds of each Mortgage Loan have been fully disbursed and received by, or for the benefit of, the Mortgagor. There is no requirement or obligation for future advances under each Mortgage Loan. There is not outstanding any advance of funds by Seller to or on behalf of the Mortgagor to be used by the Mortgagor for the payment on any monthly installment, principal, interest or other charges payable under any Mortgage Loan. 4.14 TRUSTEE. If the Mortgage is a deed of trust, a trustee, duly qualified under Applicable Law to serve as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or will become payable by Purchaser to such trustee, except in connection with a trustee's sale after default by the related Mortgagor. 4.15 TITLE INSURANCE. Seller holds a title insurance policy issued by a title insurer reasonably acceptable to Purchaser and qualified to do business in the jurisdiction where the Mortgaged Property is located insuring the Mortgage to be a lien of the agreed-upon priority upon the Mortgaged Property therein described (except for agreed-upon senior mortgages, the lien of current real property taxes and 9 15 assessments not yet due and payable, other matters to which like properties are commonly subject, and standard printed policy exceptions) having a liability limit at least as great as the unpaid principal balance of the Mortgage Loan and naming Seller and/or its successors and/or assigns as loss payee. 4.16 HAZARD AND FLOOD INSURANCE. The Mortgaged Property is insured against loss by fire or other casualty under a standard hazard and casualty insurance policy (including fire and extended coverage and other matters as are customary in the area of the Mortgaged Property) with a standard mortgagee clause naming Seller as loss payee "and/or its successors or assignees as their interests may appear." The insurance policy must be for an amount not less than the full replacement cost of the Mortgaged Property, and must be issued by an insurer reasonably acceptable to Purchaser and qualified to do business in the jurisdiction where the Mortgaged Property is located. The insurance policy must be in a form such that it may be endorsed to Purchaser as loss payee as required hereunder, and there are no facts or circumstances which could provide a basis for revocation of any policies or defense to any claims made thereon. With respect to any Mortgage Loan secured by Mortgaged Property located in a federally designated flood hazard area, as identified by the Federal Emergency Management Agency, such Mortgaged Property is insured by a flood insurance policy which complies with Applicable Law, and where applicable provisions of this Section 4.16 pertaining to hazard and casualty insurance policies. 4.17 APPRAISALS. All real estate appraisals made in connection with the Mortgage Loan have been performed in accordance in all material respects with industry standards in the appraising industry in the area where the appraised property is located, and are completed on forms acceptable to the Agencies. 4.18 NO CONDEMNATION. There is pending no proceeding for total or partial condemnation of the Mortgaged Property or any part thereof and the Mortgaged Property is free of material damage. No improvement encumbered by the Mortgage Loan is in violation of any applicable zoning law or regulation, building code or any valid restrictive or protective covenant or setback line. No improvement on the Mortgaged Property is a mobile home or manufactured home unless specifically approved by Purchaser in writing prior to purchase. 4.19 PROPERTY CONDITION. The Mortgaged Property is free of material damage and waste and is in good repair. 4.20 SENIOR LIENHOLDERS. Where required or customary in the jurisdiction in which the Mortgaged Property is located, Seller has filed for record a request for notice of any action by a senior lienholder under a senior lien, and Seller has notified any senior lienholder in writing of the existence of the Mortgage Loan and requested notification of any action to be taken against the Mortgagor by the senior lienholder. Seller shall, upon request of Purchaser, cooperate in recording a new request for action in favor of Purchaser and in providing senior lienholders with written requests for notification to Purchaser of actions against the Mortgagor. 4.21 PROCEEDS DISBURSED. The proceeds of the Mortgage Loan, including any escrows of such proceeds, have been fully disbursed, and any and all requirements as to completion of on-site and off-site improvements and disbursements of any escrow funds therefor have been complied with. 4.22 MECHANIC'S LIENS. There are no mechanic's liens or similar liens or claims which have been filed for work, labor or material affecting the Mortgaged Property which are or may be liens prior to or equal with the lien of the Mortgage. 10 16 4.23 NO ACCRUED LIABILITIES. There are and shall be no accrued liabilities, including any recording fees, of Seller with respect to the Mortgage Loans, or circumstances which occurred prior to the Closing Date, which could result in such accrued liabilities being asserted against Purchaser as successor to Seller. 4.24 NO ADVERSE SELECTION. Seller did not use any adverse selection procedures in selecting the Mortgage Loans from among the outstanding loans in Seller's portfolio. 4.25 ACCEPTABLE INVESTMENT. Except as disclosed to Purchaser in writing and as accepted by Purchaser, Seller has no knowledge of any circumstances or conditions with respect to any Mortgage Loan, the relative Mortgage, real property, Mortgagor, or Mortgagor's credit standing that can be reasonably expected to cause the Agencies or prudent private investors in the secondary market to regard the Mortgage Loan as an unacceptable investment, increase the likelihood that the Mortgage Loan will become delinquent, or adversely affect the value or marketability of the Mortgage Loan. 4.26 ENVIRONMENTAL CONDITIONS. Seller has not been advised, has received no notice or report of, and has no knowledge that, any hazardous or toxic materials, wastes, products regulated by Applicable Law, asbestos or asbestos products or material, polychlorinated biphenyls or urea formaldehyde insulation have been used or employed in the construction, use or maintenance of the Mortgaged Property or have ever been stored, treated at, or disposed of on the Mortgaged Property, or that there has occurred or that any person or entity has alleged that there has occurred upon the Mortgaged Property any spillage, leakage, discharge or release into the air, soil or groundwater of any hazardous material or regulated wastes. 4.27 FRAUD. No fraud has taken place on the part of the Seller, any Affiliate of the Seller, or any third-party originator in connection with the origination of any Mortgage Loan. 4.28 REVERSE MORTGAGES. None of the Mortgage Loans are reverse mortgage loans. 4.29 QUALIFIED ORIGINATOR. Each Mortgage Loan was originated by the Seller or, as identified on the Mortgage Loan Schedule, by a third-party originator possessing all necessary licenses, qualifications and approvals for the origination of mortgage loans in the jurisdiction in which the related Mortgaged Property is located. 11 17 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PURCHASER As an inducement to Seller to enter into this Agreement, Purchaser represents and warrants as follows, as of each Closing Date: 5.1 DUE ORGANIZATION AND GOOD STANDING. Purchaser is a corporation validly existing and in good standing under the laws of the state of its incorporation. To the extent required by Applicable Law, Purchaser is properly licensed and qualified to transact business in all appropriate jurisdictions. 5.2 AUTHORITY AND CAPACITY. Purchaser has all requisite corporate power, authority and capacity to enter into this Agreement and to perform the obligations required of it hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have each been duly and validly authorized by all necessary corporate action. This Agreement constitutes the valid and legally binding agreement of the Purchaser enforceable in accordance with its terms, subject to bankruptcy laws and other similar laws of general application affecting rights of creditors and subject to the application of the rules of equity, including those respecting the availability of specific performance. 5.3 EFFECTIVE AGREEMENT. The execution, delivery and performance of this Agreement by Purchaser, its compliance with the terms hereof and the consummation of the transactions contemplated hereby will not violate, conflict with, result in a breach of, constitute a default under, be prohibited by or require any additional approval under its certificate of incorporation, bylaws, or any instrument or agreement to which it is a party or by which it is bound. 5.4 LITIGATION. There is no action, suit or proceeding or investigation pending, or to Purchaser's knowledge, threatened, against Purchaser that, if determined adversely to Purchaser, would adversely affect the sale of the Mortgage Loans, the execution, delivery or enforceability of this Agreement. 5.5 CONSENT. No consent, approval, authorization or order of any court or governmental authority is required for the execution and delivery of this Agreement by Purchaser or for the performance by Purchaser of its obligations hereunder, other than such consent, approval, authorization or order as has been or will be obtained prior to each Closing Date. 5.6 AGENCY APPROVAL. Purchaser is an approved seller/servicer for the Agencies in good standing and is a mortgagee approved by the Secretary of the U.S. Department of Housing and Urban Development pursuant to Section 203 of the National Housing Act. 12 18 ARTICLE VI COVENANTS 6.1 FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS. To the extent permitted by Applicable Law, Purchaser and Seller agree that they shall cooperate and assist each other, as reasonably requested, in carrying out the other's covenants, agreements, duties and responsibilities under this Agreement, and, in connection therewith, shall from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such additional instruments, assignments, endorsements, papers and documents as may reasonably be required or appropriate to further express the intention, or to facilitate the performance, of this Agreement during the term hereof. 6.2 TRANSFER OF INSURANCE. Seller shall advise any relevant insurance carrier of the sale of each Mortgage Loan and shall effect an assignment to the Purchaser of the loss payee endorsement for hazard and flood insurance, any credit life and disability insurance, and any and all other insurance respecting the Mortgaged Property and/or the improvements located thereon. 6.3 INSURANCE PREPAYMENT. Insurance refunds or credits of any kind whatsoever shall be the sole responsibility of Seller in the event of prepayment of any Mortgage Loan, cancellation of insurance or any other event requiring refunding or crediting of unearned insurance premiums. Upon Purchaser's demand, Seller shall pay to Purchaser, from Seller's own funds, any required insurance premium rebate resulting from the prepayment, cancellation, refinancing or other termination of any Mortgage Loan. Upon any such payment and upon Seller's request, Purchaser shall assign to Seller any rights of Purchaser against the related insurer for any payment made to the Mortgagor. 6.4 POST-CLOSING PAYMENTS. All monies received by Seller after the Closing Date relating to any Mortgage Loan shall be promptly turned over to Purchaser, and until so remitted shall be held in trust for Purchaser and segregated from all other assets of Seller. 6.5 NO SOLICITATION. Seller agrees that neither Seller nor any Affiliate of Seller shall use information derived from the origination and/or sale of the Mortgage Loans for the purpose of soliciting, or assisting in the solicitation, directly or indirectly, for any purpose including without limitation refinance, home equity or insurance, any of the Mortgage Loans. Seller further agrees to use its best efforts to cause any third-party originator of the Mortgage Loans to refrain from taking any action which is prohibited under this section with respect to the Mortgage Loans and/or Mortgagors. Seller shall not provide a listing of Mortgagors to any third party. Nothing contained in this Section 6.6 shall be construed to prohibit advertising or communications directed to the general public. In the event that any Mortgagor contacts Seller with respect to any new loan to be secured by Mortgaged Property which secures a Mortgage Loan, Seller agrees that Purchaser shall have a right of first refusal with respect to the purchase of such new loan. 6.6 USE OF NAME. Seller shall not engage in any form of advertising whatsoever utilizing either the name of Purchaser or of any affiliate of Purchaser unless specifically authorized by Purchaser in writing to do so. 6.7 LIMITED POWER OF ATTORNEY. Seller hereby appoints Purchaser, its agents, employees, successors and assigns, the true and lawful attorney in fact of Seller with the full power of substitution for and in the place and stead of Seller on behalf and for the benefit of Purchaser, to demand and control 13 19 any and all of the sums due on the Mortgage Loans, and to enforce any and all rights with respect thereto, and to endorse the name of Seller where Seller's name is designated as the payee upon any notes, collateral, security, acceptances, checks, drafts, money orders or other evidences of payment coming into the hands of Purchaser in full or partial payment of any of the Mortgage Loans, and to make "satisfied" and to release or cause to be marked or release, all liens and securities related thereto, when and if Purchaser may reasonably so determine. 6.8 PUBLIC ANNOUNCEMENT. The timing and content of any press release or other public announcement relating to the transactions contemplated by this Agreement shall be subject to the approval of Seller and Purchaser. 6.9 CERTAIN NOTIFICATIONS. (a) Seller shall promptly notify the Purchaser in writing of the occurrence of any event which will or could reasonably be expected to result in the failure to satisfy any of the conditions to the obligations of Purchaser specified in Article VII of the Agreement. (b) Seller shall immediately notify Purchaser should there by any material and/or adverse change to Seller's financial condition, corporate structure or senior management personnel, or to Seller's relationship with or authority from any Agency. In addition, Seller shall immediately notify Purchaser of any threatened or pending lawsuit or of any threatened or pending administrative, judicial, governmental or agency hearing or proceeding involving Seller or any of Seller's principals, the outcome of which may materially and/or adversely affect Seller's ability to do business or to perform under the terms and conditions of this Agreement. 6.10 POST-CLOSING REPORTING. During the term of this Agreement, and any extension or renewal thereof, Seller shall provide Purchaser with the following information: (a) Audited financial statements for Seller shall be submitted annually, within ninety (90) days after the end of Seller's fiscal year. (b) A Uniform Standard Audit Program ("USAP") letter shall be prepared by independent auditors with respect to mortgage loans serviced by Seller. The USAP letter shall be submitted to Purchaser along with Seller's audited financial statements. (c) Unaudited quarterly financial statements for Seller shall be submitted within forty-five (45) days after the end of each quarter, and shall be certified as complete and accurate by an officer of Seller. (d) Seller shall provide Purchaser with immediate written notice of (i) the filing of a petition for relief under the U.S. Bankruptcy Code on behalf of Seller, (ii) institution of any receivership or conservatorship with respect to Seller, (iii) any material change in the senior management of Seller, (iv) any change in material ownership of Seller, (v) any event which effects a material, adverse change in Seller's financial condition, and (vi) any change in Seller's Fidelity Bond/E&O coverage. (e) Evidence of Fidelity Bond/E&O coverage in conformity with Investor requirements shall be submitted to Purchaser annually. 14 20 6.11 ONGOING DUE DILIGENCE REVIEW. From time to time during the term of this Agreement, Purchaser shall, upon reasonable notice and during regular business hours, have access to materials and facilities necessary to conduct an on-site or off-site due diligence review. At Purchaser's option, the pertinent materials may be delivered to Purchaser. In the absence of a material breach of any representation, warranty and/or covenant contained in this Agreement, Purchaser agrees that such reviews may be conducted no more frequently than four (4) times in any calendar year during the term of this Agreement. Purchaser's ongoing due diligence review will include its verification that: (a) The books, records and accounts of Seller with respect to the Mortgage Loans are in order pursuant to Applicable Law and Agency requirements, and the information provided to Purchaser in connection with the Mortgage Loans is true and correct; and (b) The Mortgage Loans meet Purchaser's credit underwriting and quality control standards, and Seller's origination practices are satisfactory to Purchaser. 15 21 ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER The obligations of Purchaser hereunder with respect to each purchase of Mortgage Loans, shall be subject to satisfaction of each of the following conditions: 7.1 REPRESENTATIONS. The representations and warranties made by Seller in this Agreement are true and correct in all material respects and shall continue to be true and correct in all material respects on each Closing Date. 7.2 COMPLIANCE WITH THIS AGREEMENT. All of the terms, covenants, and conditions of this Agreement required to be complied with and performed by Seller at or prior to each Closing Date shall have been duly complied with and performed in all material respects. 7.3 DOCUMENTATION AND FILES; COMPLIANCE. Prior to each Closing Date, Purchaser shall have determined that (a) The books, records and accounts of Seller with respect to the Mortgage Loans are in order pursuant to Applicable Law, and the information provided to Purchaser in connection with the Mortgage Loans is true and correct; (b) The Mortgage Loans meet Purchaser's credit underwriting and quality control standards, and Seller's origination practices are satisfactory to Purchaser; and (c) Any pending class action litigation against Seller, and any settlement or consent decree entered into by Seller with respect to class action litigation, will not have a material adverse effect on the Servicing. 7.4 CORPORATE RESOLUTION. A certified copy of duly adopted board resolutions, in the form attached as Exhibit D to this Agreement, shall be delivered to Purchaser simultaneously with the execution and delivery of this Agreement. 7.5 OPINION. An opinion of counsel of Seller in the form attached as Exhibit E to this Agreement, shall be delivered to Purchaser simultaneously with the execution and delivery of this Agreement. 7.6 OFFICER'S CERTIFICATE. An Officer's Certificate of a senior officer of Seller in the form attached as Exhibit F to this Agreement, shall be delivered to Purchaser simultaneously with the execution and delivery of this Agreement. 7.7 MATERIAL ADVERSE CHANGE. There shall not have occurred, prior to any Closing Date, any event which constitutes a change in the Mortgage Loans and/or Seller's financial condition, which change, in the judgment of Purchaser, materially and adversely affects Seller's ability to perform its obligations under this Agreement, including without limitation Seller's obligation to provide indemnification and/or repurchase pursuant to Article VIII. 16 22 ARTICLE VIII REMEDIES 8.1 INDEMNIFICATION BY SELLER. Seller shall indemnify and hold Purchaser harmless from and shall reimburse Purchaser for any losses, damages, deficiencies, claims, causes of action or expenses of any nature (including reasonable attorneys' fees and expenses) incurred by Purchaser before or after the Closing Date which arise out of, result from, or in any way relate to: (a) Any breach of any representation and/or warranty of Seller contained in this Agreement, or in any exhibit, schedule, statement or certificate furnished by Seller pursuant to this Agreement; (b) Any breach of any covenant or obligation of Seller contained in this Agreement, or in any exhibit, schedule, statement or certificate furnished by Seller pursuant to this Agreement; (c) Any Defect in any Mortgage Loan existing as of the Closing Date (including those Defects subsequently discovered), or as a result of any act or omission of Seller prior thereto; (d) Damage to any Mortgaged Property which is security for a Mortgage Loan, from fire, earthquake, or other casualty, or environmental hazard, or any similar circumstances or conditions occurring prior to the Closing Date, which would cause any Mortgage Loan to become delinquent, or adversely affect the value or marketability of the Mortgage Loan; (e) Errors in originating any of the Mortgage prior to the Closing Date or as a result of Seller's acts or omissions prior thereto. Such errors may include improper action or failure to act when required to do so, and (f) Any litigation pending or threatened against Purchaser arising out of events occurring on or prior to the Closing Date in connection with the Seller's origination or sale of the Mortgage Loans. 8.2 REPURCHASE. (a) Following the purchase of any Mortgage Loan, and notwithstanding the review of the Mortgage Loan Documents by Purchaser, if there is a Defect in any Mortgage Loan, Seller shall cure, to Purchaser's satisfaction, such Defect within thirty (30) days from its receipt of notice of the existence thereof, or such shorter period as may be required by Applicable Law, or by Agency or investor requirements. If the Defect is not cured within such thirty (30) day period, or such shorter period, if applicable, Seller shall, not later than the expiration of the thirty (30) day period or such shorter period, repurchase the related Mortgage Loan or Mortgage Loans for the Repurchase Price. (b) In the event that any Mortgagor fails to make the initial payment due with respect to a Mortgage Loan more than thirty (30) days following the related Closing Date, Purchaser may, at its option, require Seller to repurchase such Mortgage Loan, upon demand, for the Repurchase Price. (c) In the event of repurchase, Purchaser shall, upon receipt of the Repurchase Price, assign and deliver the related Mortgage Documents to Seller without recourse, representation or warranty. 17 23 If Seller fails to repurchase a defective Mortgage Loan or Mortgage Loans at the time and in the manner provided in this Section, Purchaser shall have all other rights and remedies provided in this Agreement or by law or equity. 8.3 INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify and hold Seller harmless from and shall reimburse Seller for any losses, damages, deficiencies, claims, causes of action or expenses of any nature (including reasonable attorneys' fees and expenses) incurred by Seller and arising after the Closing Date which result from any breach of any representation, warranty or covenant made by Purchaser under this Agreement. 8.4 NOTICE OF CLAIM. If any action is brought against any person entitled to indemnification pursuant to Section 8.1 or Section 8.3 (a "Claimant") in respect of a claim under Section 8.1 or Section 8.3, as applicable (an "Indemnifiable Claim"), the Claimant shall promptly notify Purchaser or Seller, as the case may be, in writing of the institution of such action (but the failure so to notify shall not relieve Seller or Purchaser, as the case may be (the "Indemnifying Party") from any liability the Indemnifying Party may have except to the extent such failure materially prejudices the Indemnifying Party). Unless otherwise agreed to by the Seller or Purchaser, as the case may be, the Indemnifying Party shall assume and direct the defense of such action, including the employment of counsel, and all fees, costs and expenses incurred in connection with defending or settling the Indemnifiable Claim shall be borne solely by the Indemnifying Party; provided, however, that such counsel shall be satisfactory to the Claimant in the exercise of its reasonable judgment and that the Indemnifying Party shall not compromise any claim without the prior written consent of the Claimant, which consent shall not be unreasonably withheld. If the Indemnifying Party shall undertake to compromise or defend any such asserted liability, it shall promptly notify the Claimant of its intention to do so, and the Claimant agrees to cooperate fully with the Indemnifying Party and its counsel in the compromise of, defense against, any such asserted liability. Notwithstanding an election by the Indemnifying Party to assume the defense of such action or proceeding, the Claimant shall have the right to employ separate counsel and to participate in the defense of such action or proceeding, and the Indemnifying Party shall bear the reasonable fees, costs and expenses of such separate counsel (and shall pay such fees, costs and expenses at least quarterly), if (a) the use of counsel chosen by the Indemnifying Party to represent the Claimant would present such counsel with a conflict of interest; (b) the defendants in, or targets of, any such action or proceeding include both a Claimant and the Indemnifying Party, and the Claimant shall have reasonably concluded that there may be legal defenses available to it or to other Claimants which are different from or additional to those available to the Indemnifying Party (in which case the Indemnifying Party shall not have the right to direct the defense of such action or proceeding on behalf of the Claimant); or (c) the Indemnifying Party shall authorize the Claimant to employ separate counsel at the expense of the Indemnifying Party. All costs and expenses incurred in connection with a Claimant's cooperation shall be borne by the Indemnifying Party. In any event, the Claimant shall have the right at its own expense to participate in the defense of such asserted liability. 8.5 LIMITATION OF LIABILITY. In no event will either Purchaser or Seller be liable to the other party to this Agreement for incidental or consequential damages, including, without limitation, loss of profit or loss of business or business opportunity, regardless of the form of action whether in contract, tort or otherwise. 18 24 ARTICLE IX TERMINATION 9.1 TERMINATION WITHOUT CAUSE. Either Purchaser or Seller may terminate this Agreement without cause on thirty (30) days prior written notice (such notice in compliance with Section 10.5 below) to the other party. Following the effective date of such termination without cause, Purchaser will purchase Mortgage Loans subject to the terms and conditions of any outstanding Confirmation issued prior to such effective date. 9.2 PURCHASER'S TERMINATION FOR CAUSE. Notwithstanding anything to the contrary contained herein, Purchaser shall have the right to immediately terminate this Agreement for cause. For purposes of this section 9.2, "cause" shall include any of the following: (a) Seller's breach of any of the representations, warranties and/or covenants contained in this Agreement; including without limitation its obligations under Article VIII; (b) the filing of a petition for relief by or against Seller, under the U.S. Bankruptcy Code or any other applicable insolvency or reorganization statute; (c) institution of any receivership or conservatorship with respect to Seller, including without limitation receivership or conservatorship imposed by the FDIC; (d) Seller's admission in writing of its inability to pay its debts generally as they become due; (e) termination of Seller's status as an approved Agency seller/servicer or as an approved FHA mortgagee; (f) any material change in the senior management or ownership of Seller; and/or; (g) any event which, in Purchaser's opinion, constitutes a material, adverse change in Seller's financial condition. 9.3 SELLER'S TERMINATION FOR CAUSE. Notwithstanding anything to the contrary contained herein, Seller shall have the right to immediately terminate this Agreement for cause. For purposes of this section 9.3, "cause" shall include any of the following: (a) Purchaser's material, uncured breach of any of the representations, warranties and/or covenants contained in this Agreement; (b) the filing of a petition for relief by Purchaser, under the U.S. Bankruptcy Code or any other applicable insolvency or reorganization statute; (c) institution of any receivership or conservatorship with respect to Purchaser; 19 25 (d) Purchaser's admission in writing of its inability to pay its debts generally as they become due; or (e) termination of Purchaser's status as an approved Agency seller/servicer or as an approved FHA mortgagee; 9.4 EFFECT OF TERMINATION. Upon termination of this Agreement under section 9.2 above, Purchaser shall have no further obligation to purchase, or accept transfer of mortgage loan servicing from Seller, and this Agreement shall be null and void and have no further force and effect except for those provisions identified in Section 9.4 of this Agreement, which provisions shall survive any such termination and continue in effect thereafter. 9.5 SURVIVAL OF OBLIGATIONS AND COVENANTS. Notwithstanding anything to the contrary expressed in this Agreement, the termination of this Agreement shall not affect any obligations of Seller under this Agreement. The representations, warranties, covenants and indemnification of Seller under Articles III, IV and VI hereof shall continue without regard to any termination hereof. 20 26 ARTICLE X MISCELLANEOUS 10.1 COSTS AND EXPENSES. Except as specifically provided to the contrary in this Agreement, Purchaser and Seller shall each bear its own accounting, legal and related costs and expenses in connection with the negotiation and preparation of this Agreement and the performance by each of Purchaser and Seller of its respective obligations arising under this Agreement. 10.2 CONFIDENTIALITY OF INFORMATION. Seller and Purchaser and their Affiliates shall, and shall cause their respective directors, officers, employees and authorized representatives to, hold in strict confidence and not use or disclose to any other party except their respective Affiliates without the prior written consent of the other party all information concerning customers or proprietary business procedures, servicing fees or prices, policies or plans of the other party or any of its affiliates received by them from the other party in connection with the transactions contemplated hereby. 10.3 BROKER'S FEES. Each party hereto represents and warrants to the other that it has made no agreement to pay any agent, finder, or broker or any other representative, any fee or commission in the nature of a finder's or originator's fee arising out of or in connection with the subject matter of this Agreement, and both the parties hereto covenant with each other and agree to indemnify and hold each other harmless from and against any such obligation or liability and any expense incurred in investigating or defending (including reasonable attorneys' fees and expenses) any claim based upon the other party's actions in connection with such obligation. 10.4 SURVIVAL. Each party hereto covenants and agrees that the representations and warranties, covenants and obligations contained in Articles III through VI, VIII, and Sections 10.2 through 10.4 of this Agreement, and in any document delivered or to be delivered pursuant hereto, shall survive the execution hereof, and the Closing Date, and any inspection, investigation, or determination made by, or on behalf of, either party, and expiration or termination of this Agreement. 10.5 NOTICES. All notices, requests, demands and other communications which are required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if personally delivered, sent by overnight courier, or mailed by certified mail, return receipt requested, postage prepaid, or transmitted by facsimile and confirmed by a similar mailed writing: (a) If to the Purchaser, to: GMAC Mortgage Corporation 100 Witmer Road Horsham, PA 19044 Attention: Chief Financial Officer with a copy to: Glen W. Snyder General Counsel 21 27 GMAC Mortgage Corporation 100 Witmer Road Horsham, PA 19044 (b) If to Seller, to: E-LOAN, INC. 6200 Village Parkway Suite 102 Dublin, CA 94568 Attn: Steven Majerus or to such other address as Purchaser or Seller shall have specified in writing to the other. 10.6 APPLICABLE LAW. The construction of this Agreement and the rights, remedies, and obligations arising by, under, through, or on account of it shall be governed by the internal laws of the Commonwealth of Pennsylvania (without regard to its conflicts of laws principles) except to the extent the same are preempted by the laws of the United States of America. 10.7 JURISDICTION AND VENUE. Purchaser and Seller mutually agree that any legal cause of action arising out of a dispute concerning this Agreement or the enforceability of any part thereof shall be subject to the jurisdiction of the United States District Court in and for the Eastern District of Pennsylvania. 10.8 INTEGRATION. This Agreement constitutes a final and complete integration of the Agreement of the parties respecting the subject matter hereof, thereby superseding all previous oral or written agreements. There are no contemporaneous oral agreements. 10.9 MODIFICATION. This Agreement may not be changed orally but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification, or discharge is sought. Subject to the foregoing, any of the terms or conditions of this Agreement may be waived or modified at any time by the party entitled to the benefit thereof, but no such waiver, express or implied, shall affect or impair the right of the waiving party to require observance, performance, or satisfaction of either (1) the same term or condition as it applies on a subsequent or previous occasion or (2) any other term or condition hereof. 10.10 THIRD PARTY BENEFICIARIES. This Agreement is intended for the benefit of the parties hereto only. There shall be no third party beneficiaries hereof. 10.11 CONSTRUCTION. In construing the words of this Agreement, plural constructions shall include the singular, and singular constructions shall include the plural. The words "herein", "hereof", and other similar compounds of the word "here" shall mean and refer to this entire Agreement, not to any particular provision, section, or subsection of it. 10.12 CAPTIONS. Paragraph captions in this Agreement are for ease of reference only and shall be given no substantive or restrictive meaning or significance whatsoever. 10.13 COUNTERPARTS. This Agreement may be executed in two counterparts, each of which shall be an original regardless of whether all parties sign the same document. Regardless of the number of counterparts, they shall constitute only one agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than one counterpart. 22 28 10.14 ATTORNEYS' FEES. If any action of law or in equity, including an action for declaratory relief, is brought to enforce or interpret the provisions of this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees from the other party. Such fees may be set by the court in the trial of such action or may be enforced in a separate action brought for that purpose. Such fees shall be in addition to any other relief that may be awarded. 10.15 BINDING EFFECT AND ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their successors and assigns. Nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto and their successors and assigns, any rights, obligations, remedies or liabilities. No party may, or shall have the power to, assign this Agreement without the prior written consent of the other, except that Purchaser may assign this Agreement to an affiliated entity having all necessary resources to complete the transactions contemplated herein. 10.16 INCORPORATION OF EXHIBITS. Exhibits A through F attached hereto shall be incorporated herein and shall be understood to be a part hereof as though included in the body of this Agreement. [THIS SPACE INTENTIONALLY LEFT BLANK.] 23 29 IN WITNESS WHEREOF, each of the undersigned parties to this GMAC Mortgage Corporation Seller's Agreement has caused this GMAC Mortgage Corporation Seller's Agreement to be duly executed in its corporate name by one of its duly authorized officers, all as of the date first above written. PURCHASER: ATTEST: GMAC MORTGAGE CORPORATION By: By: /s/ Signature Illegible ----------------------------- Name: Barry Bior Title: Senior Vice President ---------------------- SELLER: ATTEST: E-LOAN, INC. By: /s/ Steve M. Majerus By: /s/ Chris Larsen ----------------------------- Name: Chris Larsen Title: CEO 24 30 EXHIBIT "B" CONTENTS OF MORTGAGE FILES Mortgage Files (where applicable, original microfiche files or hard copy files) shall include, without limitation the following: a) All origination documentation including: - Transmittal Summary FNMA/FHLMC Form 1008 - Loan Application Form 1003 (initial and final signed application) - Credit Report - Final Truth-in-Lending Disclosure Statement - Verification of Employment - IRS Form 4506 for self-employed borrowers (Request for copy of Tax Form) - Verification of Deposit - HUD 1 on previous property, if applicable - HUD 1/Settlement Statement on subject property - Appraisal - Satisfactory Completion Certificate Form 442, if applicable - Executed Sales Contract; b) Original Note endorsed to GMAC Mortgage Corporation; c) Original limited power of attorney, if applicable; d) Original recorded Mortgage/Deed of Trust or copy of the original, certified by the recording agency to be a true and exact copy of the recorded document; e) Original final Title Policy; f) Original PMI Certificate (if applicable); g) Original LGC/MIC (if applicable); h) Original recorded intervening Assignment to GMAC Mortgage Corporation; i) Abstract of Title - in states where required other than those where evidence exists indicating sent to borrower; and j) Previous assumption information, if applicable. 25 31 EXHIBIT "C" PURCHASER'S GUIDELINES ---------------------- Conventional Loans: Must be eligible for sale to the Federal National Mortgage Association (FNMA) through it's Mortgage Backed Securities program and must have been originated, underwritten and closed in conformity with the FNMA Seller's Guide. Government Loans: Must be eligible for sale through the Government National Mortgage Association's Mortgage Backed Security program. All loans must have the required insurance certificate from the VA or FHA as required. Seller will be responsible for providing all documents necessary for initial and final certification of the pools. All loans sold will not be 30 days or greater delinquent prior to the receipt of the first payment. All loan documents will be received in a timely manner. 26 32 EXHIBIT "D" FORM OF SECRETARY'S CERTIFICATE ------------------------------- 27 33 EXHIBIT "E" FORM OF OPINION OF COUNSEL -------------------------- GMAC Mortgage Corporation 100 Witmer Road Horsham, PA 19044-0963 Dear Sirs: You have requested my opinion, as counsel to E-LOAN, INC., a Massachusetts corporation (the "Seller"), with respect to certain matters in connection with the sale by the Seller pursuant to that certain GMAC Mortgage Corporation Seller's Agreement, dated as of ______, 199_ (the "Purchase and Sale Agreement") between you and the Seller, of certain Mortgage Loans as defined in the Purchase and Sale Agreement. Capitalized terms not otherwise defined herein have their respective meanings set forth in the Purchase and Sale Agreement. I have examined the following documents: 1. the Purchase and Sale Agreement; and 2. such other documents, records and papers as I have deemed necessary and relevant as a basis for this opinion. I have assumed that each party other than the Seller had the power and authority to enter into and perform all obligations thereunder and, as to each such party, I also have assumed the due authorization by all requisite corporate action, the due execution and delivery and the validity and binding effect and enforceability of such documents. Based upon the foregoing, and subject to the qualification set forth at the end of this letter, it is my opinion that: 1. The Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida. 2. The Seller has the requisite power to engage in the transactions contemplated by the Purchase and Sale Agreement and all requisite power, authority and legal right to execute and deliver the Purchase and Sale Agreement and to perform and observe the terms and conditions of such instrument. 3. The Purchase and Sale Agreement has been duly authorized, executed and delivered by the Seller and is a legal, valid and binding agreement enforceable in accordance with its terms against the Seller, subject to bankruptcy laws and other similar laws of general application affecting rights of creditors and subject to the application of the rules of equity, including those respecting the availability of specific performance. 28 34 4. No consent, approval, authorization or order of any court or governmental agency or body is required for the execution, delivery and performance by the Seller of, or of compliance by the Seller with, the Purchase and Sale Agreement, or the consummation of the transactions contemplated by the Purchase and Sale Agreement. 5. Neither the consummation of the transactions contemplated by, nor the fulfillment of the terms of the Purchase and Sale Agreement conflicts or will conflict with or results or will result in a breach of or constitutes or will constitute a default under the charter or by-laws of the Seller, the terms of any material indenture or other material agreement or instrument to which the Seller is a party or by which it is bound or to which it is subject, or any statute or order, rule, regulation, writ, injunction or decree of any court, governmental authority or regulatory body to which the Seller is subject or by which it is bound. 6. There is no action, suit, proceeding or investigation pending or, to the best of my knowledge, threatened against the Seller which, in my judgment, either in any one instance or in the aggregate, may reasonably be expected to result in any material adverse change in the business, operations, financial condition, properties or assets of the Seller or in any material impairment of the right or ability of the Seller to carry on its business substantially as now conducted or in any material liability on the part of the Seller or which would draw into question the validity of the Purchase and Sale Agreement or of any action taken or to be taken in connection with the transactions contemplated thereby, or which would be likely to impair materially the ability of the Seller to perform under the terms of the Purchase and Sale Agreement. In rendering this opinion letter, I do not express any opinion concerning any law other than the federal common law of the United States of America (excluding federal securities law) and the law of the ____ of _____. Additionally, I do not express any opinion on any issue not expressly addressed above. I bring to your attention the fact that my legal opinions are an expression of professional judgment and are not a guarantee of a result. I do not undertake to advise you of matters which may come to my attention subsequent to the date hereof which may affect my legal opinions expressed herein. This opinion is delivered to you solely for your use in connection with the execution and delivery of the Purchase and Sale Agreement. This opinion is not to be used, circulated, quoted or otherwise referred to for any other purpose, or to or by any other person, with or without reference to my name, without my prior express written consent. Very truly yours, 29 35 EXHIBIT "F" FORM OF OFFICER'S CERTIFICATE ----------------------------- OFFICER'S CERTIFICATE I, ____________________ hereby certify that I am the duly elected _______________ of E-LOAN, INC. (the "Company"), a corporation organized and existing under the laws of the State of California, and further as follows: 1. Attached hereto is a true and correct copy of the Articles of Incorporation and By-laws of the Company and a Certificate of Good Standing for the Company, all of which are in full force and effect on the date hereof. 2. There are no actions, suits or proceedings pending (nor are any actions, suits or proceedings threatened) against or affecting the Company which if adversely determined, individually or in the aggregate, would adversely affect the Company's obligations under the GMAC Mortgage Corporation Seller's Agreement (the "Purchase and Sale Agreement") dated as of _______________, 199_, between the Company and GMAC Mortgage Corporation. 3. Each person who, as an officer or representative of the Company, signed (a) the Purchase and Sale Agreement, and (b) any other document delivered prior hereto or on the date hereof in connection with the transaction described in the Purchase and Sale Agreement was, at the respective times of such signing and delivery duly elected or appointed, qualified and acting as such officer or representative, and the signatures of such persons appearing on such documents are their genuine signatures. 4. Each of the Mortgage Loans referred to in the Purchase and Sale Agreement was originated or acquired by the Company. 5. The Mortgage Loans referred to in the Purchase and Sale Agreement are not subject to any security interest, pledge or hypothecation for the benefit of any entity, institution or person. 6. Attached hereto is a certified true copy of the resolution of the Board of Directors of the Company with respect to the transactions governed by the Agreement. IN WITNESS WHEREOF, I have hereunto signed my name on behalf of the Company. Dated: ______, 199_ By: ____________________ Name: Title: 30 36 I, ________________, Secretary of E-LOAN, INC., hereby certify that ___________________ is the duly elected, qualified and acting ________________ of the Company and that the signature appearing above is his genuine signature. IN WITNESS WHEREOF, I have hereunto signed my name. Dated: __________, 199_ By:__________________________ Name: Title: 31 EX-10.19 25 MORTGAGE LOAN PURCHASE AND SALE AGREEMENT 1 EXHIBIT 10.19 WHOLE LOANS WHOLE LOAN PURCHASE AND SALE AGREEMENT MORTGAGE LOAN PURCHASE AND SALE AGREEMENT between --------------------------- Seller, and GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. Purchaser 600 Steamboat Road Greenwich, Connecticut 0680 DATED:__________________________________ 2 TABLE OF CONTENTS
PAGE Section 1. Definitions......................................................................1 Section 2. Procedures for Purchases of Mortgage Loans.......................................6 Section 3. Sale of Mortgage Loans to Takeout Investor.......................................7 Section 4. Completion Fee...................................................................9 Section 5. Servicing of the Mortgage Loans.................................................10 Section 6. Trade Assignments...............................................................11 Section 7. Transfers of Beneficial Interest in Mortgage Loans by Purchaser.................11 Section 8. Record Title to Mortgage Loans; Intent of Parties; Security Interest............11 Section 9. Representations and Warranties..................................................12 Section 10. Covenants of Seller............................................................19 Section 11. Term...........................................................................22 Section 12. Exclusive Benefit of Parties; Assignment.......................................22 Section 13. Amendments; Waivers; Cumulative Rights.........................................22 Section 14. Execution in Counterparts......................................................22 Section 15. Effect of Invalidity of Provisions.............................................22 Section 16. Governing Law..................................................................22 Section 17. Notices........................................................................22 Section 18. Entire Agreement...............................................................22 Section 19. Costs of Enforcement...........................................................23 Section 20. Consent to Service.............................................................23 Section 21. Submission to Jurisdiction.....................................................23 Section 22. Jurisdiction Not Exclusive.....................................................23 Section 23. Construction...................................................................23
3 MORTGAGE LOAN PURCHASE AND SALE AGREEMENT This Mortgage Loan Purchase and Sale Agreement ("Agreement"), dated as of the date set forth on the cover page hereof, is by and between GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. ("Purchaser") and the Seller whose name is set forth on the cover page hereof ("Seller"). PRELIMINARY STATEMENT Seller may, in its sole discretion, offer to sell to Purchaser from time to time a 100% undivided ownership interest in certain Mortgage Loans, and Purchaser, in its sole discretion, may agree to purchase such Mortgage Loans from Seller in accordance with the terms and conditions set forth in this Agreement. Seller, subject to the terms hereof, will cause each Mortgage Loan to be purchased by Takeout Investor. During the period from the purchase of a Mortgage Loan to the sale of the Mortgage Loan to Takeout Investor, Purchaser expects to rely entirely upon Seller to service such Mortgage Loan. The parties hereto hereby agree as follows: Section 1. Definitions. Capitalized terms used but not defined herein shall have the meanings set forth in the Custodial Agreement. As used in this Agreement, the following terms shall have the following meanings: "Act of Insolvency": With respect to Seller, (a) the commencement by Seller as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or Seller's seeking the appointment of a receiver, trustee, custodian or similar official for Seller or any substantial part of its property, or (b) the commencement of any such case or proceeding against Seller, or another's seeking such appointment, or the filing against Seller of an application for a protective decree which (1) is consented to or not timely contested by Seller, (2) results in the entry of an order for relief, such an appointment, the issuance of such a protective decree or the entry of an order having a similar effect, or (3) is not dismissed within thirty (30) days, (c) the making by Seller of a general assignment for the benefit of creditors, or (d) the admission in writing by Seller that Seller is unable to pay its debts as they become due or the nonpayment generally by Seller of its debts as they become due. "Agency Guide": The FHLMC Guide, the FNMA Guide or the GNMA Guide, as applicable. "Agency Program": The FHLMC Program, the FNMA Program or the GNMA Program, as applicable. "Applicable Agency": GNMA, FNMA or FHLMC, as applicable. "Assignee": As defined in Section 7. 4 "Business Day": Any day other than (a) a Saturday, Sunday or other day on which banks located in The City of New York, New York are authorized or obligated by law or executive order to be closed or (b) any day on which Purchaser or Seller is closed for business, provided that notice thereof shall have been given not less than seven (7) calendar days prior to such day, and provided further that such closing does not conflict with any business between Seller and Purchaser scheduled for such date prior to the giving of such notice. "Collateral": As defined in Section 8(c). "Commitment Amount": The aggregate outstanding principal amount of Mortgage Loans to be purchased pursuant to a Takeout Commitment. If the Commitment Amount is expressed as a fixed amount plus or minus a percentage in the related Takeout Confirmation, then the amount required to be delivered by Seller shall be the minimum amount of such range and the amount required to be purchased by Takeout Investor shall be the maximum amount of such range. "Commitment Date": The date set forth in a Takeout Confirmation as the commitment date. "Commitment Guidelines": The guidelines, if any, issued by Takeout Investor regarding the issuance of Takeout Commitments, as amended from time to time by Takeout Investor. "Commitment Number": With respect to a Takeout Commitment, the number identified on the Takeout Confirmation as the commitment number. "Completion Fee": With respect to each Mortgage Loan Pool, an amount equal to the Discount plus the Net Carry Adjustment, less any reduction pursuant to Section 4(c), which amount shall be payable to Seller by Purchaser as compensation to Seller for its services hereunder in connection with the purchase of a Mortgage Loan Pool. "Confirmation": A written confirmation of Purchaser's intent to purchase a Mortgage Loan Pool, which written confirmation shall be substantially in the form attached hereto as Exhibit F. "Credit File": All Mortgage Loan papers and documents required to be maintained pursuant to the Sale Agreement, and all other papers and records of whatever kind or description whether developed or originated by Seller or others, required to document or service the Mortgage Loan provided, however, that such Mortgage Loan papers, documents and records shall not include any Mortgage Loan papers, documents or records which are contained in the Custodial File. "Cure Date": With respect to a Mortgage Loan, the date occurring 15 Business Days after the expiration of the Takeout Commitment unless extended in writing by the Purchaser. "Custodial Account": As defined in Section 5(b). "Custodial Agreement": The Custodial Agreement, dated as of the date set forth on the cover sheet thereof, among Seller, Purchaser and Custodian. "Custodial File": As defined in the Custodial Agreement. -2- 5 "Custodian": The Custodian whose name is set forth on the cover page of the Custodial Agreement and its permitted successors thereunder. "Cut-off Date": With respect to a Mortgage Loan, the last day of a month on which the Settlement Date can occur if accrued interest for such month is to be collected by Takeout Investor. "Defective Mortgage Loan": With respect to any Mortgage Loan, either (i) the Document File does not contain a document required to be contained therein, (ii) a document within a Document File is, in the judgment of Takeout Investor, defective or inaccurate in any material respect, as determined upon evaluation of the Document File against the requirements of the Sale Agreement, or (iii) a document in the Document File is not legal, valid and binding. "Discount": With respect to Mortgage Loan Pool sold by Seller to Purchaser, the amount set forth on the related Confirmation as the Discount. "Document File": The Credit File and the Custodial File. "Due Date": The day of the month on which the Monthly Payment is due on a Mortgage Loan. "Exhibit B-1 Letter": As defined in Section 2(a). "Exhibit C-1 Letter": As defined in Section 2(a). "Expiration Date": With respect to any Takeout Commitment, the expiration date thereof. "FDIC": Federal Deposit Insurance Corporation or any successor thereto. "FHLMC": Federal Home Loan Mortgage Corporation or any successor thereto. "FNMA": Federal National Mortgage Association or any successor thereto. "GNMA": Government National Mortgage Association or any successor thereto. "HUD": United States Department of Housing and Urban Development or any successor thereto. "Losses": Any and all losses, claims, damages, liabilities or expenses (including interest and reasonable attorneys' fees) incurred by any person specified; provided, however, that "Losses" shall not include any losses, claims, damages, liabilities or expenses which would have been avoided had such person taken reasonable actions to mitigate such losses, claims, damages, liabilities or expenses. "Monthly Payment": The scheduled monthly payment of principal and interest on a Mortgage Loan. -3- 6 "Mortgage": The mortgage, deed of trust or other instrument creating a lien on an estate in fee simple in real property securing a Mortgage Note. "Mortgage File": Each of the documents identified on Exhibit I hereto. "Mortgage Interest Rate": The annual rate of interest borne on a Mortgage Note. "Mortgage Loan": A mortgage loan which is subject to this Agreement, and which satisfies the requirements of the Sale Agreement as the same may be modified from time to time. "Mortgage Loan Pool": A group of Mortgage Loans purchased by Purchaser hereunder and subject to a single Confirmation. "Mortgage Note": The note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage. "Mortgaged Property": The property subject to the lien of the Mortgage securing a Mortgage Note. "Mortgagor": The obligor on a Mortgage Note. "NCUA": National Credit Union Administration, or any successor thereto. "Net Carry Adjustment": As defined in Section 4(b). "Notice of Rejection of Trade Assignment": With respect to any Mortgage Loan that Purchaser elects not to purchase, a notification by Purchaser to Takeout Investor in the form of Exhibit G. "OTS": Office of Thrift Supervision or any successor thereto. "Parent Company": A corporation or other entity owning at least 50% of the outstanding shares of voting stock of Seller. "Pass-Through Rate": With respect to each Mortgage Loan Pool purchased by Purchaser hereunder, the rate at which interest from the Mortgage is passed through to Purchaser which initially shall be the rate of interest specified in the related Confirmation as the Pass-Through Rate, subject to adjustment in the manner agreed to by Purchaser and Seller. "Price Adjustment": With respect to a Takeout Commitment, the incremental percentage by which the trade price is adjusted by applying the appropriate formula set forth in a price adjustment summary sheet when delivered by Purchaser to Seller which price adjustment summary sheet may be amended from time to time by Purchaser's delivery to Seller of a new price adjustment summary sheet. -4- 7 "Purchase Date": With respect to any Mortgage Loan Pool purchased by Purchaser hereunder, the date of payment thereof by Purchaser to Seller of the Purchase Price. "Purchase Price": With respect to each Mortgage Loan Pool purchased by Purchaser hereunder, an amount equal to the Trade Principal less an amount equal to the product of the Trade Principal and the Discount. "Purchaser": Greenwich Capital Financial Products, Inc. and its successors in interest, including, but not limited to, a party to whom a Trust Receipt is assigned as provided hereunder and in the Custodial Agreement. "Purchaser's Wire Instructions": The wire instructions set forth in a letter in the form of Exhibit E. "RTC": Resolution Trust Corporation or any successor thereto. "Sale Agreement": The agreement providing for the purchase by Takeout Investor of Mortgage Loans from Seller. "Seller": The Seller whose name is set forth on the cover page hereof and its permitted successors hereunder. "Seller's Wire Instructions": The wire instructions set forth in a letter in the form of Exhibit C-2. "Settlement Date": With respect to any Mortgage Loan, the date of payment thereof by Takeout Investor to Purchaser of the Takeout Proceeds. "Settlement Modification Letter": A letter in the form of Exhibit H. "Security": A GNMA Security, a FNMA Security or a FHLMC Security. "Successor Servicer": An entity designated by Purchaser, with notice provided in conformity with Section 17, to replace Seller as issuer and servicer, mortgagee or seller/servicer of the Mortgage Loans evidenced by a Trust Receipt. "Takeout Commitment": A commitment of Seller to sell one or more Mortgage Loans to Takeout Investor and of Takeout Investor to purchase one or more Mortgage Loans from Seller. "Takeout Confirmation": The written notification to Seller from Takeout Investor containing all of the relevant details of the Takeout Commitment, which notification may take the form of a trade confirmation. "Takeout Investor": An Agency or a Conduit, as applicable. -5- 8 "Takeout Proceeds": With respect to any Mortgage Loan Pool, the related Trade Principal plus accrued interest as calculated in accordance with Section 3(a)(2), as amended by any related Settlement Modification Letter accepted by Purchaser. "Third Party Underwriter": Any third party, including but not limited to a mortgage loan pool insurer, who underwrites the Mortgage Loan(s) prior to the purchase by Purchaser of the related Mortgage Loan Pool. "Third Party Underwriter's Certificate": A certificate issued by a Third Party Underwriter with respect to a Mortgage Loan, certifying that such Mortgage Loan complies with its underwriting requirements. "Trade Assignment": The assignment by Seller to Purchaser of Seller's rights under a specific Takeout Commitment, in the form of Exhibit D-1, or of Seller's rights under all Takeout Commitments, in the form of Exhibit D-2. "Trade Price": The trade price set forth on a Takeout Commitment less any applicable Price Adjustment. "Trade Principal": With respect to any Mortgage Loan Pool, the aggregate outstanding principal balance of such Mortgage Loan multiplied by a percentage equal to the Trade Price. "Warehouse Lender": Any lender providing financing to Seller for the purpose of originating or purchasing Mortgage Loans which has a security interest in such Mortgage Loans as collateral for the obligations of Seller to such lender. "Warehouse Lender's Wire Instructions": The wire instructions set forth in a letter in the form of Exhibit B-2. Section 2. Procedures for Purchases of Mortgage Loans (a) Purchaser may, in its sole discretion, from time to time, purchase one or more Mortgage Loan Pools from Seller. Prior to Purchaser's actual purchase of any Mortgage Loan Pool, Purchaser shall have received from Custodian (i) an original Trust Receipt relating to all Mortgage Loans (including the Mortgage Loan Pool being purchased) relating to Cash Window Transactions or Conduit Transactions, as applicable, fully completed and authenticated by Custodian, (ii) a copy of the Takeout Confirmation related to the Mortgage Loan(s) in such Mortgage Loan Pool together with a Trade Assignment in the form of Exhibit D-1 and/or an Acknowledgement of Assignment in the form of Exhibit D-2, executed by Seller and Takeout Investor, and (iii) an original letter in the form of Exhibit B-1 (an "Exhibit B-1 Letter") from the applicable Warehouse Lender (if any), or an original letter in the form of Exhibit C-1 (an "Exhibit C-1 Letter") in the event that there is no Warehouse Lender. Simultaneously with the payment by Purchaser of the Purchase Price, in accordance with the Warehouse Lender's Wire Instructions or Seller's Wire Instructions, as applicable, with respect to a Mortgage Loan pool, Seller hereby conveys to Purchaser all of Seller's right, title and interest in and to the related Mortgage Loan(s) free and clear of any lien, claim or encumbrance. Notwithstanding the -6- 9 satisfaction by Seller of the conditions specified in this Section 2(a), Purchaser is not obligated to purchase any Mortgage Loans offered to it hereunder. (b) If Purchaser elects to purchase any Mortgage Loan Pool, Purchaser shall pay the amount of the Purchase Price for such Mortgage Loan Pool by wire transfer of immediately available funds in accordance with the Warehouse Lender's Wire Instructions or if there is no Warehouse Lender, Seller's Wire Instructions. Upon such payment and not otherwise, Purchaser shall be deemed to have accepted the related Trade Assignment. In the event that Purchaser rejects a Mortgage Loan for purchase for any reason and/or does not transmit the applicable Purchase Price, (i) the Trust Receipt delivered by Custodian to Purchaser in anticipation of such purchase shall automatically be null and void and the previously existing Trust Receipt for that type of transaction shall be in full force and effect, (ii) Purchaser shall not consummate the transactions contemplated in the applicable Takeout Confirmation and shall deliver to Takeout Investor (with a copy to Seller and Custodian) a Notice of Rejection of Trade Assignment, provided, however, that failure of Purchaser to give such notice shall not affect the rejection by Purchaser of the Trade Assignment, and (iii) if Purchaser shall nevertheless receive any portion of the related Takeout Proceeds, Purchaser shall promptly pay such Takeout Proceeds to Seller in accordance with Seller's Wire Instructions. (c) The terms and conditions of the purchase of each Mortgage Loan Pool shall be as set forth in this Agreement. Section 3. Sale of Mortgage Loans to Takeout Investor. (a) With respect to Mortgage Loan(s) that Purchaser has elected to purchase, Purchaser may, at its option, either (i) instruct Custodian to deliver to Takeout Investor, in accordance with Takeout Investor's instructions, the Custodial File in respect of such Mortgage Loans, in the manner and at the time set forth in the Custodial Agreement, or (ii) provide for the delivery of the Custodial File through an escrow arrangement satisfactory to Purchaser and Takeout Investor. Seller shall on or after the Purchase Date, but in no event later than the related Expiration Date, promptly deliver to Takeout Investor the related Credit File and thereafter any and all additional documents requested by Takeout Investor to enable Takeout Investor to purchase such Mortgage Loan(s) on or before the related Cure Date. (b) Except when Purchaser has accepted a Settlement Modification Letter, unless the Takeout Proceeds are received by Purchaser (in immediately available funds in accordance with Purchaser's Wire Instructions) with respect to the Mortgage Loans in a Mortgage Pool, on or before the related Cure Date, the Completion Fee relating to such Mortgage Pool shall not be payable until the earlier to occur of (1) the date of receipt by Purchaser of the Takeout Proceeds and, (2) the satisfaction by Seller of its obligations pursuant to the exercise by Purchaser of any remedial election authorized by this Section 3. Upon receipt by Purchaser, prior to the Cure Date, of a Settlement Modification Letter, duly executed by Takeout Investor and Seller, Purchaser may, at its election, agree to the postponement of the Settlement Date and such other matters as are set forth in the Settlement Modification Letter. If Purchaser elects to accept a Settlement Modification Letter, Purchaser shall, not later than two (2) Business Days after receipt of such Settlement Modification Letter execute the Settlement Modification Letter and send, via facsimile, copies of such fully executed Settlement Modification Letter to Seller and Takeout Investor. Upon execution by Purchaser of a Settlement Modification Letter, Purchaser -7- 10 shall recalculate the amount of the Completion Fee, if any, due to Seller using the new terms included in the Settlement Modification Letter and shall pay to Seller, not later than two (2) Business Days after Purchaser's execution of such Settlement Modification Letter, the amount of such recalculated Completion Fee. (c)(1) If a breach by Seller of this Agreement results in any Mortgage Loan being a Defective Mortgage Loan at the time of the delivery of the related Trust Receipt to Purchaser and in Purchaser's sole judgment the defects in such Mortgage Loan will not be cured (or in fact are not cured) by Seller prior to the Cure Date, Purchaser, at its election, may require that Seller, upon receipt of notice from Purchaser of its exercise of such right, either (i) immediately repurchase Purchaser's ownership interest in such Defective Mortgage Loan by remitting to Purchaser (in immediately available funds in accordance with Purchaser's Wire Instructions) the amount paid by Purchaser for such Defective Mortgage Loan plus interest at the Pass-Through Rate on the principal amount thereof from the date of Purchaser's purchase of the related Mortgage Loan Pool to the date of such repurchase or (ii) deliver to Custodian a Mortgage Loan in exchange for such Defective Mortgage Loan, which newly delivered Mortgage Loan shall be in all respects acceptable to Purchaser in Purchaser's reasonable discretion. If the aggregate principal balance of all Mortgage Loan(s) that are accepted by Purchaser pursuant to clause (ii) of the immediately preceding sentence is less than the aggregate principal balance of all Defective Mortgage Loan(s) that are being replaced by such Mortgage Loan(s), Seller shall remit with such Mortgage Loan to Purchaser an amount equal to the difference between the aggregate principal balance of the new Mortgage Loan(s) accepted by Purchaser and the aggregate principal balance of the Defective Mortgage Loan(s) being replaced thereby. (c)(2) If Seller fails to comply with its obligations in the manner described in Section 3(c)(1), not later than the third day after receipt by Seller of notice from Purchaser, Seller's rights and obligations to service Mortgage Loan(s) as provided in this Agreement, shall terminate. If an Act of Insolvency occurs at any time, Seller's rights and obligations to service the Mortgage Loan(s), as provided in this Agreement, shall terminate immediately, without any notice or action by Purchaser. Upon any such termination, Purchaser is hereby authorized and empowered as the exclusive agent for Seller to sell and transfer such rights to service the Mortgage Loan(s) for such price and on such terms and conditions as Purchaser shall reasonably determine, and Seller shall not otherwise attempt to sell or transfer such rights to service without the prior consent of Purchaser. Seller shall perform all acts and take all action so that the Mortgage Loan(s) and all files and documents relating to such Mortgage Loan(s) held by Seller, together with all escrow amounts relating to such Mortgage Loan(s), are delivered to Successor Servicer. To the extent that the approval of any Third Party Underwriter or any other insurer or guarantor is required for any such sale or transfer, Seller shall fully cooperate with Purchaser to obtain such approval. Upon exercise by Purchaser of its remedies under this Section 3(c)(2), Seller hereby authorizes Purchaser to receive all amounts paid by any purchaser of such rights to service the Mortgage Loan(s) and to remit such amounts to Seller subject to Purchaser's rights of set-off under this Agreement. Upon exercise by Purchaser of its remedies under this Section 3(c)(2), Purchaser's obligation to pay and Seller's right to receive any portion of the Completion Fee relating to such Mortgage Loan(s) shall automatically be canceled and become null and void, provided that such cancellation shall in no way relieve Seller or otherwise affect the obligation of Seller to indemnify and hold Purchaser harmless as specified in Section 3(f). (d) Each Mortgage Loan required to be delivered to Successor Servicer by Section 3(c)(2) shall be delivered free of any servicing rights in favor of Seller and free of any title, interest, -8- 11 lien, encumbrance or claim of any kind of Seller and Seller hereby waives its right to assert any interest, lien, encumbrance or claim of any kind. Seller shall deliver or cause to be delivered all files and documents relating to each Mortgage Loan held by Seller to Successor Servicer. Seller shall promptly take such actions and furnish to Purchaser such documents that Purchaser deems necessary or appropriate to enable Purchaser to cure any defect in each such Mortgage Loan or to enforce such Mortgage Loans, as appropriate. (e) In the event that a Mortgage Loan or Mortgage Pool is not purchased by a Takeout Investor on or before the Cure Date, upon not less than five (5) days notice from Purchaser to Seller, Seller shall either obtain a Takeout Commitment from another Takeout Investor to purchase such Mortgage Loan or Mortgage Pool or issue a Takeout Commitment on its own behalf to purchase such Mortgage Loan or Mortgage Pool. (f) Seller agrees to indemnify and hold Purchaser and its assigns harmless from and against all Losses resulting from or relating to any breach or failure to perform by Seller of any representation, warranty, covenant, term or condition made or to be performed by Seller under this Agreement. (g) No exercise by Purchaser of its rights under this Section 3 shall relieve Seller of responsibility or liability for any breach of this Agreement. (h) Seller hereby grants Purchaser a right of set-off against the payment of any amounts that may be due and payable to Purchaser from Seller, such right to be upon any and all monies or other property of Seller held or received by Purchaser, or due and owing from Purchaser to Seller. Section 4. Completion Fee. (a) With respect to each Mortgage Loan Pool that Purchaser elects to purchase hereunder, Purchaser shall pay to Seller a Completion Fee. The Completion Fee shall be payable by Purchaser as provided in subsection (e) below. (b) For purposes of calculating that portion of the Completion Fee composed of the "Net Carry Adjustment", the Net Carry Adjustment shall be an amount (which may be a negative number) equal to (A) the product obtained by multiplying the number of days in the period beginning on the Purchase Date to but not including the Settlement Date and the difference between (i) the product of the rate of interest to be borne by the related Mortgage Loans in the Mortgage Pool and the aggregate principal amount of such Mortgage Loans and (ii) the daily application of the applicable Pass-Through Rate to the Purchase Price; divided by (B) 360. (c)(i) If a Mortgage Loan Pool is purchased by Purchaser in the month prior to the month in which the related Settlement Date occurs, (A) all interest which accrues on the related Mortgage Loans, on and after the Purchase Date, through the last day of the month prior to the month in which such Settlement Date occurs, shall be paid to Purchaser by Seller, as servicer, on the related Settlement Date and (B) all interest which accrues on the Mortgage Loans in such Mortgage Loan Pool on and after the first day of the month in which such Settlement Date occurs, through the day immediately prior to such Settlement Date, will be paid to Purchaser by Takeout Investor on such Settlement Date unless such Settlement Date occurs after the Cut-off Date of such month in which event -9- 12 Seller, as servicer, shall pay such amount to Purchaser on such Settlement Date. If a Mortgage Loan Pool is purchased by Purchaser in the same month in which the related Settlement Date occurs, (A) all interest, if any, which accrues on such Mortgage Loan(s) from the first day of such month to but not including the related Purchase Date shall be paid by Purchaser to Seller on such Settlement Date, and (B) all interest which accrues on such Mortgage Loan(s), on and after the Purchase Date to but not including the Settlement Date will be paid to Purchaser by Takeout Investor on the Settlement Date unless such Settlement Date occurs after the Cut-off Date or in a month in which interest has been prepaid by the Mortgagor in either of which events Seller, as servicer, shall pay such amount to Purchaser on such Settlement Date. For purposes of this paragraph all interest payments shall be deemed to accrue at the applicable rate set forth in the related Takeout Commitment. (ii) In circumstances where a Mortgage Loan is not purchased by the Takeout Investor on or before the Settlement Date, in the event Purchaser elects not to declare a default hereunder, Purchaser may adjust and reduce the Completion Fee as specified by Purchaser in the Confirmation. Notwithstanding the preceding sentence, Purchaser is under no obligation to waive any default or forebear from exercising its remedies hereunder and one waiver or forebearance shall not constitute evidence of any pattern or create any obligation by Purchaser to waive or forebear in the future. (d) It is understood by Seller and Purchaser that, if Seller requests and Purchaser agrees to pay the Completion Fee prior to the Settlement Date, the amount of such Completion Fee shall be adjusted as mutually agreed by Seller and Purchaser. (e) The Completion Fee relating to each Mortgage Loan Pool is payable on the earlier to occur of (1) the date of receipt by Purchaser of the Trade Price, and (2) the satisfaction by Seller of its obligations pursuant to this Agreement notwithstanding the exercise by Purchaser of any remedial election authorized herein. Section 5. Servicing of the Mortgage Loans. (a) Seller shall service and administer the Mortgage Loan(s) on behalf of Purchaser in accordance with prudent mortgage loan servicing standards and procedures generally accepted in the mortgage banking industry and in accordance with the requirements of Takeout Investor, provided that Seller shall at all times comply with applicable law, and the requirements of any applicable insurer or guarantor including, without limitation, any Third Party Underwriter, so that the insurance in respect of any Mortgage Loan is not voided or reduced. Seller shall at all times maintain accurate and complete records of its servicing of each Mortgage Loan, and Purchaser may, at any time during Seller's business hours on reasonable notice, examine and make copies of such records. In addition, if a Mortgage Loan is not purchased by Takeout Investor on or before the Cure Date, Seller shall at Purchaser's request deliver to Purchaser monthly reports regarding the status of such Mortgage Loan, which reports shall include, but shall not be limited to, a description of each Mortgage Loan in default for more than thirty (30) days, and such other circumstances with respect to any Mortgage Loan (whether or not such Mortgage Loan is included in the foregoing list) that could materially adversely affect any such Mortgage Loan, Purchaser's ownership of any such Mortgage Loan or the collateral securing any such Mortgage Loan. Seller shall deliver such a report to Purchaser every thirty (30) days until (i) the purchase by Takeout Investor of such Mortgage Loan pursuant to the related Takeout Commitment or (ii) the exercise by Purchaser of any remedial election pursuant to Section 3. -10- 13 (b) Within five (5) business days of notice from Purchaser, Seller shall establish and maintain a separate custodial account (the "Custodial Account") entitled "Greenwich Capital Financial Products, Inc. and its assignees under the Mortgage Loan Purchase and Sale Agreement dated [the date of this Agreement]" and shall promptly deposit into such account in the form received with any necessary endorsements all collections received in respect of each Mortgage Loan that are payable to Purchaser as the owner of each such Mortgage Loan. (c) Amounts deposited in the Custodial Account with respect to any Mortgage Loan shall be held in trust for Purchaser as the owner of such Mortgage Loan and shall be released only as follows: (1) Except as otherwise provided in Section 5(c)(2), following receipt by Purchaser or its designee of the Takeout Proceeds for such Mortgage Loan from Takeout Investor, amounts deposited in the Custodial Account related to such Mortgage Loan not otherwise subject to setoff as provided hereunder shall be released to Seller. The amounts paid to Seller (if any) pursuant to this Section 5(c)(1) shall constitute Seller's sole compensation for servicing the Mortgage Loans as provided in this Section 5. (2) If Successor Servicer takes delivery of such Mortgage Loan (either under the circumstances set forth in Section 3 or otherwise), all amounts deposited in the Custodial Account shall be paid to Purchaser promptly upon such delivery. (3) If a Mortgage Loan is not purchased by Takeout Investor on or before the Cure Date, during the period thereafter that Seller remains as servicer, all amounts deposited in the Custodial Account shall be released only in accordance with a Purchaser's written instructions. Section 6. Trade Assignments. Seller hereby assigns to Purchaser, free of any security interest, lien, claim or encumbrance of any kind, Seller's rights, under each Takeout Commitment to deliver the Mortgage Loan(s) specified therein to the related Takeout Investor and to receive the Takeout Proceeds therefor from such Takeout Investor. Purchaser shall not be deemed to have accepted any Trade Assignment unless and until it purchases the related Mortgage Loans, and nothing set forth herein shall be deemed to impair Purchaser's right to reject any Mortgage Loan for any reason, in its sole discretion. Section 7. Transfers of Beneficial Interest in Mortgage Loans by Purchaser. Purchaser may, in its sole discretion, assign all of its right, title and interest in or grant a security interest in any Mortgage Loan sold by Seller hereunder and all rights of Purchaser under this Agreement and the Custodial Agreement, in respect of such Mortgage Loan to a tri-party custody and clearing agent ("Assignee"), subject only to an obligation on the part of Assignee to deliver each such Mortgage Loan to Takeout Investor pursuant to Section 6 or to Purchaser to permit Purchaser or its designee to make delivery thereof to a Takeout Investor pursuant to Section 6. It is anticipated that such assignment to an Assignee will be made by Purchaser, and Seller hereby irrevocably consents to such assignment. No notice of such assignment shall be given by Purchaser to Seller or Takeout Investor. Assignment by -11- 14 Purchaser of the Mortgage Loans as provided in this Section 7 shall not release Purchaser from its obligations under this Agreement. Without limitation of the foregoing, an assignment of the Mortgage Loans to an Assignee, as described in this Section 7, shall be effective upon delivery to the Assignee of a duly executed and authenticated Trust Receipt. Section 8. Record Title to Mortgage Loans; Intent of Parties; Security Interest. (a) From and after the issuance and delivery of the related Trust Receipt, and subject to the remedies of Purchaser in Section 3, Seller shall remain the last named payee or endorsee of each Mortgage Note and the mortgagee or assignee of record of each Mortgage in trust for the benefit of Purchaser, for the sole purpose of facilitating the servicing of such Mortgage Loan. (b) Seller shall maintain a complete set of books and records for each Mortgage Loan which shall be clearly marked to reflect the ownership interest in each Mortgage Loan of the holder of the related Trust Receipt. (c) Purchaser and Seller confirm that the transactions contemplated herein are intended to be sales of the Mortgage Loans by Seller to Purchaser rather than borrowings secured by the Mortgage Loans. In the event, for any reason, any transaction is construed by any court or regulatory authority as a borrowing rather than as a sale, Seller and Purchaser intend that Purchaser or its Assignee, as the case may be, shall have a perfected first priority security interest in the Mortgage Loans, the Custodial Account, and all proceeds thereof, the Takeout Commitments and the proceeds of any and all of the foregoing (collectively, the "Collateral"), free and clear of adverse claims. In such case, Seller shall be deemed to have hereby granted to Purchaser or Assignee, as the case may be, a first priority security interest in and lien upon the Collateral, free and clear of adverse claims. In such event, this Agreement shall constitute a security agreement, the Custodian shall be deemed to be an independent custodian for purposes of perfection of the security interest granted to Purchaser or Assignee, as the case may be, and Purchaser or Assignee, as the case may be, shall have all of the rights of a secured party under applicable law. (d) Upon not less than two Business Days prior written notice, Seller shall deliver to Custodian (or if so requested, directly to Purchaser or its Assignee) a complete Mortgage File containing all of the documents listed in Exhibit I hereto. Section 9. Representations and Warranties. (a) Seller hereby represents and warrants to Purchaser as of the date hereof and as of the date of each issuance and delivery of a Trust Receipt that: (i) Seller is duly organized, validly existing and in good standing under the laws of the state of its organization and has all licenses necessary to carry on its business as now being conducted and is licensed, qualified and in good standing in the state where the Mortgaged Property is located if the laws of such state require licensing -12- 15 or qualification in order to conduct business of the type conducted by Seller. Seller has all requisite power and authority (including, if applicable, corporate power) to execute and deliver this Agreement and to perform in accordance herewith; the execution, delivery and performance of this Agreement (including all instruments of transfer to be delivered pursuant to this Agreement) by Seller and the consummation of the transactions contemplated hereby have been duly and validly authorized; this Agreement evidences the valid, binding and enforceable obligation of Seller; and all requisite action (including, if applicable, corporate action) has been taken by Seller to make this Agreement valid and binding upon Seller in accordance with its terms; (ii) No approval of the transactions contemplated by this Agreement from the OTS, the NCUA, the FDIC or any similar federal or state regulatory authority having jurisdiction over Seller is required, or if required, such approval has been obtained. There are no actions or proceedings pending or affecting Seller which would adversely affect its ability to perform hereunder. The transfers, assignments and conveyances provided for herein are not subject to the bulk transfer or any similar statutory provisions in effect in any applicable jurisdiction; (iii) The consummation of the transactions contemplated by this Agreement are in the ordinary course of business of Seller and will not result in the breach of any term or provision of the charter or by-laws of Seller or result in the breach of any term or provision of, or conflict with or constitute a default under or result in the acceleration of any obligation under, any agreement, indenture or loan or credit agreement or other instrument to which Seller or its property is subject, or result in the violation of any law, rule, regulation, order, judgment or decree to which Seller or its property is subject; (iv) This Agreement, the Custodial Agreement and every document to be executed by Seller pursuant to this Agreement is and will be valid, binding and subsisting obligations of Seller, enforceable in accordance with their respective terms. No consents or approvals are required to be obtained by Seller or its Parent Company for the execution, delivery and performance of this Agreement or the Custodial Agreement by Seller; (v) Seller has not sold, assigned, transferred, pledged or hypothecated any interest in any Mortgage Loan sold hereunder to any person other than Purchaser, and upon delivery of a related Trust Receipt to Purchaser, Purchaser will be the sole owner thereof, free and clear of any lien, claim or encumbrance; and (vi) All information relating to Seller that Seller has delivered or caused to be delivered to Purchaser, including, but not limited to, all documents related to this Agreement, the Custodial Agreement or Seller's financial statements, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made therein or herein in light of the circumstances under which they were made, not misleading. -13- 16 (b) Seller hereby represents and warrants to Purchaser as of the date hereof and as of each Purchase Date the Custodian is an eligible custodian as determined by FNMA, FHMLC and GNMA, and is not an Affiliate of the Seller. (c) Seller hereby represents, warrants and covenants to Purchaser with respect to each Mortgage Loan as of each Purchase Date of the related Mortgage Loan that: (i) The Mortgage Loan conforms in all respects to the requirements of this Agreement, the Sale Agreement, the Commitment Guidelines and the requirements of the related Third Party Underwriter's Certificate; (ii) Seller is the sole owner and holder of the Mortgage Loan free and clear of any and all liens, pledges, charges or security interests of any nature and has full right and authority, subject to no interest or participation of, or agreement with, any other party, to sell and assign the same pursuant to this Agreement; (iii) No servicing agreement has been entered into with respect to the Mortgage Loan, or any such servicing agreement has been terminated and there are no restrictions, contractual or governmental, which would impair the ability of Purchaser or Purchaser's designees from servicing the Mortgage Loan; (iv) The Mortgage is a valid and subsisting lien on the property therein described and the Mortgaged Property is free and clear of all encumbrances and liens having priority over the lien of the Mortgage except for liens for real estate taxes and special assessments not yet due and payable and other liens permitted by Purchaser. In the event that the Mortgage is not a first priority lien on the property described therein, there is no event of default or situation which upon the passage of time would become a default under any obligation secured by a senior lien on the Mortgaged Property. Any pledge account, security agreement, chattel mortgage or equivalent document related to, and delivered to Purchaser with the Mortgage, establishes in Seller a valid and subsisting lien on the property described and the priority provided therein, and Seller has full right to sell and assign the same to Purchaser; (v) Neither Seller nor any prior holder of the Mortgage has modified the Mortgage in any material respect; satisfied, canceled or subordinated the Mortgage in whole or in part; released the Mortgaged Property in whole or in part from the lien of the Mortgage; or executed any instrument of release, cancellation, modification or satisfaction unless such release, cancellation, modification or satisfaction does not adversely affect the value of the Mortgage Loan and is contained in the related Document File; (vi) The Mortgage Loan is not in default, and all Monthly Payments due prior to the Purchase Date and all taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents have been paid. Seller has not advanced funds, or induced or solicited any advance of funds by a party other than the Mortgagor directly or indirectly, for the payment of any amount required by the Mortgage Loan. The collection practices used by each entity which has -14- 17 serviced the Mortgage Loan have been in all respects legal, proper, prudent, and customary in the mortgage servicing business. With respect to escrow deposits and payments in those instances where such were required, there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made and no escrow deposits or payments or other charges or payments have been capitalized under any Mortgage or the related Mortgage Note; (vii) There is no default, breach, violation or event of acceleration existing under the Mortgage or the related Mortgage Note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration; and Seller has not waived any default, breach, violation or event of acceleration; (viii) The Mortgage Loan is not subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury, nor will the operation of any of the terms of 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, or subject to any right of rescission, set-off, counterclaim or defense, including the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto; (ix) The Mortgage Note and the related Mortgage 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 and the Mortgage had legal capacity to execute the Mortgage Note and the Mortgage and each Mortgage Note and Mortgage have been duly and properly executed by the Mortgagor; (x) The Mortgage Loan meets, or is exempt from, applicable state or federal laws, regulations and other requirements pertaining to usury, and the Mortgage Loan is not usurious; (xi) Any and all requirements of any federal, state or local law including, without limitation, 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, and Seller shall deliver to Purchaser upon demand, evidence of compliance with all such requirements; (xii) Either: (A) Seller and every other holder of the Mortgage, if any, were authorized to transact and do business in the jurisdiction in which the Mortgaged Property is located at all times when such party held the Mortgage; or (B) the loan of mortgage funds, the acquisition of the Mortgage (if Seller was not the original lender), the holding of the Mortgage and the transfer of the Mortgage did not constitute the transaction of business or the doing of business in such jurisdiction; (xiii) Not less than 95% of the proceeds of the Mortgage Loan have been fully disbursed, there is no requirement for future advances thereunder greater than 5% of the Mortgage Loan and any and all requirements as to completion of any on site or -15- 18 off-site improvements and as to disbursements of any escrow funds, therefore, have been or will be complied with. All costs, fees and expenses incurred in making, closing or recording the Mortgage Loans were paid; (xiv) The related Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security, including, (i) in the case of a Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise by judicial foreclosure. There is no homestead or other exemption available to the Mortgagor which would interfere with the right to sell the Mortgaged Property at a trustee's sale or the right to foreclose the Mortgage; (xv) The Mortgage Loan was originated free of any "original issue discount" with respect to which the owner of the Mortgage Loan could be deemed to have income pursuant to Sections 1271 et seq. of the Internal Revenue Code; (xvi) Each Mortgage Loan was originated by an institution described in Section 3(a)(41)(A)(ii) of the Securities Exchange Act of 1934, as amended; (xvii) At origination, the Mortgaged Property was free and clear of all mechanics' and materialmen's liens or liens in the nature thereof which are or could be prior to the Mortgage lien except as provided in the Mortgage, and no rights are outstanding that under law could give rise to any such lien; (xviii) All of the improvements which are included for the purpose of determining the appraised value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of such property, and no improvements on adjoining properties encroach upon the Mortgaged Property; (xix) At origination, no improvement located on or being part of the Mortgaged Property was in violation of any applicable zoning law or regulation and all inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property, and with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, had been made or obtained from the appropriate authorities and the Mortgaged Property was lawfully occupied under applicable law. No improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning law or regulation and all inspections, licenses and certificates required to be made or issued with respect to 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 and the Mortgaged Property is lawfully occupied under applicable law; (xx) There is no proceeding pending for the total or partial condemnation of the Mortgaged Property and said property is undamaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty; -16- 19 (xxi) The Custodial File contains and the Credit File contains or shall contain prior to the Cure Date each of the documents and instruments specified to be included therein duly executed and in due and proper form and each such document or instrument is either in form acceptable to the Applicable Agency or is a uniform instrument. Each Mortgage Note and Mortgage are on forms approved by or to the best of the Seller's knowledge would be approved by the Applicable Agency with such riders as have been approved by or to the best of the Seller's knowledge would be approved by the Applicable Agency; Seller is currently in possession of the Custodial File for each Mortgage Loan and is in possession or shall be prior to the Expiration Date of the Credit File for each Mortgage Loan and there are no custodial agreements in effect adversely affecting the rights of Seller to make the deliveries required within the required time. Seller shall not deliver a Credit File to Takeout Investor after the related Commitment Date; (xxii) Each Mortgage Loan is covered by a mortgage title insurance policy acceptable to FNMA, issued by, and the valid and binding obligation of, a title insurer acceptable to FNMA and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring Seller, its successors and assigns, as to the validity and appropriate priority of the lien created by the Mortgage in the original principal amount of the Mortgage Loan, Seller is the named insured and the sole insured of such mortgage title insurance policy, the assignment to Purchaser of Seller's interest in such mortgage title insurance policy does not require the consent of or notification to the insurer, such mortgage title insurance policy is in full force and effect and will be in full force and effect and inure to the benefit of Purchaser upon the consummation of the transactions contemplated by this Agreement and no claims have been made under such mortgage title insurance policy and no prior holder of the related Mortgage, including Seller, has done, by act or omission, anything which would impair the coverage of such mortgage title insurance policy; (xxiii) All buildings upon the Mortgaged Property are insured against loss by fire, hazards of extended coverage and such other hazards as are customary in the area where the Mortgaged Property is located, pursuant to fire and hazard insurance policies with extended coverage or other insurance required by the Sale Agreement, in an amount at least equal to the lesser of (i) the outstanding principal balance of the Mortgage Loan or (ii) the maximum insurable value (replacement cost without deduction for depreciation) of the improvements constituting the Mortgaged Property. If applicable laws limit the amount of such insurance to the replacement cost of the improvements constituting the Mortgaged Property or to some other amount, then such insurance is in an amount equal to the maximum allowed by such laws. Such insurance amount is sufficient to prevent the Mortgagor or the loss payee under the policy from becoming a co-insurer. The insurer issuing such insurance is acceptable pursuant to the Sale Agreement. All individual insurance policies contain a standard mortgagee clause naming Seller, its successors and assigns, as mortgagee and all premiums thereon have been paid. Each Mortgage obligates the Mortgagor thereunder to maintain all such insurance at Mortgagor's cost and expense, and upon the Mortgagor's failure to do so, authorizes the holder of the Mortgage to obtain and maintain such insurance at -17- 20 Mortgagor's cost and expense and to seek reimbursement therefor from the Mortgagor. Any flood insurance required by applicable law has been obtained; (xxiv) The original principal amount of the related Mortgage Note (plus the amount of all other prior obligations for which their is a senior lien on the Mortgaged Property) either (a) was not more than 80% of the lesser of (i) the purchase price of the Mortgaged Property paid by the Mortgagor at the origination of the Mortgage Loan and (ii) the appraised value of the Mortgaged Property, such appraised value being, for the purposes hereof, the amount set forth in an appraisal made in connection with the origination of such Mortgage Loan, or (b) is and will be insured as to payment defaults by a policy of primary mortgage guaranty insurance in accordance with the Sale Agreement and all provisions of such primary mortgage guaranty insurance policy have been and are being complied with, such policy is in full force and effect, and all premiums due thereunder have been paid. Any Mortgage Loan subject to any such policy of primary mortgage guaranty insurance obligates the Mortgagor thereunder to maintain such insurance and pay all premiums and charges in connection therewith. The original principal amount of each Mortgage Note was not more than 95% of the purchase price of the related Mortgaged Property paid by the Mortgagor at the origination of the Mortgage Loan. No action, event or state of facts exists or has existed which, because involving or arising from any dishonest, fraudulent, criminal, negligent or knowingly wrongful act, error or omission by the Mortgagor or the originator or servicer of the Mortgage Loan, would result in the exclusion from, denial of, or defense to coverage which otherwise would be provided by such insurance; (xxv) At the time that the related Mortgage Loan was made the Mortgagor represented that the Mortgagor would occupy such Mortgaged Property as Mortgagor's primary residence; (xxvi) The Mortgaged Property consists of a single parcel of real property; (xxvii) There are no circumstances or conditions with respect to the Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagor's credit standing that can be reasonably expected to cause private institutional investors to regard the Mortgage Loan as an unacceptable investment, cause the Mortgage Loan to become delinquent or adversely affect the value or marketability of the Mortgage Loan; (xxviii) Such Mortgage Loan was, immediately prior to the sale to Purchaser of the related Mortgage Loan Pool, owned solely by Seller, is not subject to any lien, claim or encumbrance, including, without limitation, any such interest pursuant to a loan or credit agreement for warehousing mortgage loans, and was originated and serviced in accordance with all applicable law and regulations, including without limitation the Federal Truth-in-Lending Act, the Real Estate Settlement Procedures Act, regulations issued pursuant to any of the aforesaid, and any and all rules, requirements, guidelines and announcements of the Applicable Agency, and, as applicable, the FHA and VA, as the same may be amended from time to time; -18- 21 (xxix) The improvements on the land securing such Mortgage Loan are and will be kept insured at all times by responsible insurance companies reasonably acceptable to Purchaser against fire and extended coverage hazards under policies, binders or certificates of insurance with a standard mortgagee clause in favor of Seller and its assigns, providing that such policy may not be canceled without prior notice to Seller. Any proceeds of such insurance shall be held in trust for the benefit of Purchaser. The scope and amount of such insurance shall satisfy the rules, requirements, guidelines and announcements of the Applicable Agency, and shall in all cases be at least equal to the lesser of (A) the principal amount of such Mortgage Loan or (B) the maximum amount permitted by applicable law, and shall not be subject to reduction below such amount through the operation of a coinsurance, reduced rate contribution or similar clause; (xxx) Each Mortgage is a valid first lien on the mortgaged property and is covered by an attorney's opinion of title acceptable to GNMA, FNMA or FHLMC, as applicable, or by a policy of title insurance on a standard ALTA or similar lender's form in favor of Seller and its assigns, subject only to exceptions permitted by the GNMA, FNMA or FHLMC Program, as applicable. Seller shall hold in trust for Purchaser such policy of title insurance, and, upon request of Purchaser, shall immediately deliver such policy to Purchaser or to the Custodian on behalf of Purchaser; (xxxi) To the extent applicable, such Mortgage Loan is either insured by the FHA under the National Housing Act, guaranteed by the VA under the Servicemen's Readjustment Act of 1944 or is otherwise insured or guaranteed in accordance with the requirements of the GNMA, FNMA or FHLMC Program, as applicable, and is not subject to any defect that would prevent recovery in full or in part against the FHA, VA or other insurer or guarantor, as the case may be; (xxxii) Such Mortgage Loan is in strict compliance with the requirements and specifications (including, without limitation, all representations and warranties required in respect thereof) set forth in the GNMA Guide, FNMA Guide or FHLMC Guide, as applicable; and (xxxiii) To the extent applicable, each Mortgage Loan is being serviced by a mortgage sub-servicer having all Approvals necessary to make such Mortgage Loan eligible to back a GNMA, FNMA or FHLMC Security, as applicable. (d) Seller hereby represents and warrants to Purchaser as of the date hereof and as of the date of each delivery of a Mortgage Loan Pool that the Custodian is an eligible custodian under the Agency Guide and Agency Program, and is not an Affiliate of the Seller. The representations and warranties of Seller in this Section 9 are unaffected by and supersede any provision in any endorsement of any Mortgage Loan or in any assignment with respect to such Mortgage Loan to the effect that such endorsement or assignment is without recourse or without representation or warranty. -19- 22 Section 10. Covenants of Seller. Seller hereby covenants and agrees with Purchaser as follows: (a) Seller shall deliver to Purchaser: (i) Within one hundred twenty (120) days after the end of each fiscal year of Seller, consolidated balance sheets of Seller and its consolidated subsidiaries and the related consolidated statements of income showing the financial condition of Seller and its consolidated subsidiaries as of the close of such fiscal year and the results of operations during such year, and a consolidated statement of cash flows, as of the close of such fiscal year, setting forth, in each case, in comparative form the corresponding figures for the preceding year, all the foregoing consolidated financial statements to be reported on by, and to carry the report (acceptable in form and content to Purchaser) of an independent public accountant of national standing acceptable to Purchaser; (ii) Within sixty (60) days after the end of each of the first three fiscal quarters of each fiscal year of Seller, unaudited consolidated balance sheets and consolidated statements of income, all to be in a form acceptable to Purchaser, showing the financial condition and results of operations of Seller and its consolidated subsidiaries on a consolidated basis as of the end of each such quarter and for the then elapsed portion of the fiscal year, setting forth, in each case, in comparative form the corresponding figures for the corresponding periods of the preceding fiscal year, certified by a financial officer of Seller (acceptable to Purchaser) as presenting fairly the financial position and results of operations of Seller and its consolidated subsidiaries and as having been prepared in accordance with generally accepted accounting principles consistently applied, in each case, subject to normal year-end audit adjustments; (iii) Promptly upon receipt thereof, a copy of each other report submitted to Seller by its independent public accountants in connection with any annual, interim or special audit of Seller; (iv) Promptly upon becoming aware thereof, notice of (1) the commencement of, or any determination in, any legal, judicial or regulatory proceedings, (2) any dispute between Seller or its Parent Company and any governmental or regulatory body, (3) any event or condition, which, in any case of (1) or (2) if adversely determined, would have a material adverse effect on (A) the validity or enforceability of this Agreement, (B) the financial condition or business operations of Seller, or (C) the ability of Seller to fulfill its obligations under this Agreement or (4) any material adverse change in the business, operations, prospects or financial condition of Seller, including, without limitation, the insolvency of Seller or its Parent Company; (v) Promptly upon becoming available, copies of all financial statements, reports, notices and proxy statements sent by its Parent Company, Seller or any of Seller's consolidated subsidiaries in a general mailing to their respective stockholders and of all reports and other material (including copies of all registration statements under the Securities Act of 1933, as amended) filed by any of them with any securities -20- 23 exchange or with the Securities and Exchange Commission or any governmental authority succeeding to any or all of the functions of said Commission; (vi) Promptly upon becoming available, copies of any press releases issued by its Parent Company or Seller and copies of any annual and quarterly financial reports and any reports on Form H-(b)12 which its Parent Company or Seller may be required to file with the OTS or the RTC or comparable reports which a Parent Company or Seller may be required to file with the FDIC or any other federal banking agency containing such financial statements and other information concerning such Parent Company's or Seller's business and affairs as is required to be included in such reports in accordance with the rules and regulations of the OTS, the RTC, the FDIC or such other banking agency, as may be promulgated from time to time; (vii) Such supplements to the aforementioned documents and such other information regarding the operations, business, affairs and financial condition of its Parent Company, Seller or any of Seller's consolidated subsidiaries as Purchaser may request; (viii) A copy of (1) the articles of incorporation of Seller and any amendments thereto, certified by the Secretary of State of Seller's state of incorporation, (2) a copy of Seller's by-laws, together with any amendments thereto, (3) a copy of the resolutions adopted by Seller's Board of Directors authorizing Seller to enter into this Agreement and the Custodial Agreement and authorizing one or more of Seller's officers to execute the documents related to this Agreement and the Custodial Agreement, and (4) a certificate of incumbency and signature of each officer of Seller executing any document in connection with this Agreement; (ix) Neither Seller nor any affiliate thereof will acquire at any time any economic interest in or obligation with respect to any Mortgage Loan; (x) Under generally accepted accounting principles ("GAAP") and for federal income tax purposes, Seller will report each sale of a Mortgage Loan to the Purchaser hereunder as a sale of the ownership interest in the Mortgage Loan. Seller has been advised by or has confirmed with its independent public accountants that the foregoing transactions will be so classified under GAAP; (xi) The consideration received by Seller upon the sale of each Mortgage Loan Pool will constitute reasonably equivalent value and fair consideration for the ownership interest in the Mortgage Loans included therein; (xii) Seller will be solvent at all relevant times prior to, and will not be rendered insolvent by, any sale of a Mortgage Loan to the Purchaser; and (xiii) Seller will not sell any Mortgage Loan to the Purchaser with any intent to hinder, delay or defraud any of Seller's creditors. -21- 24 (b) Seller shall comply, in all material respects, with all laws, rules and regulations to which it is or may become subject. (c) Seller shall, upon request of Purchaser, promptly execute and deliver to Purchaser all such other and further documents and instruments of transfer, conveyance and assignment, and shall take such other action as Purchaser may require more effectively to transfer, convey, assign to and vest in Purchaser and to put Purchaser in possession of the property to be transferred, conveyed, assigned and delivered hereunder and otherwise to carry out more effectively the intent of the provisions under this Agreement. Section 11. Term. This Agreement shall continue in effect until terminated as to future transactions by written instruction signed by either Seller or Purchaser and delivered to the other, provided that no termination will affect the obligations hereunder as to any of the Mortgage Loans purchased hereunder. Section 12. Exclusive Benefit of Parties; Assignment. This Agreement is for the exclusive benefit of the parties hereto and their respective successors and assigns and shall not be deemed to give any legal or equitable right to any other person, including the Custodian. Except as provided in Section 7, no rights or obligations created by this Agreement may be assigned by any party hereto without the prior written consent of the other parties. Section 13. Amendments; Waivers; Cumulative Rights. This Agreement may be amended from time to time only by written agreement of Seller and Purchaser. Any forbearance, failure or delay by either party in exercising any right, power or remedy hereunder shall not be deemed to be a waiver thereof, and any single or partial exercise by Purchaser of any right, power or remedy hereunder shall not preclude the further exercise thereof. Every right, power and remedy of Purchaser shall continue in full force and effect until specifically waived by Purchaser in writing. No right, power or remedy shall be exclusive, and each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy, whether conferred hereby or hereafter available at law or in equity or by statute or otherwise. Section 14. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. Section 15. Effect of Invalidity of Provisions. In case any one or more of the provisions contained in this Agreement should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby. Section 16. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflict of laws rules. -22- 25 Section 17. Notices. Any notices, consents, elections, directions and other communications given under this Agreement shall be in writing and shall be deemed to have been duly given when telecopied or delivered by overnight courier, personally delivered, or on the third day following the placing thereof in the mail, first class postage prepaid, to the respective addresses set forth on the cover page hereof for Seller and Purchaser, or to such other address as either party shall give notice to the other party pursuant to this Section 17. Notices to any Assignee shall be given to such address as Assignee shall provide to Seller in writing. Section 18. Entire Agreement. This Agreement and the Custodial Agreement contain the entire agreement between the parties hereto with respect to the subject matter hereof, and supersede all prior and contemporaneous agreements between them, oral or written, of any nature whatsoever with respect to the subject matter hereof. Section 19. Costs of Enforcement. In addition to any other indemnity specified in this Agreement, in the event of a breach by Seller of this Agreement, the Custodial Agreement or a Takeout Commitment, Seller agrees to pay the reasonable attorneys' fees and expenses of Purchaser and/or Assignee incurred as a consequence of such breach. Section 20. Consent to Service. Each party irrevocably consents to the service of process by registered or certified mail, postage prepaid, to it at its address given in or pursuant to Section 17. Section 21. Submission to Jurisdiction. With respect to any claim arising out of this Agreement each party (a) irrevocably submits to the nonexclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, and (b) irrevocably waives (i) any objection which it may have at any time to the laying of venue of any suit, action or proceeding arising out of or relating hereto brought in any such court, (ii) any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum and (iii) the right to object, with respect to such claim, suit, action or proceeding brought in any such court, that such court does not have jurisdiction over such party. Section 22. Jurisdiction Not Exclusive. Nothing herein will be deemed to preclude either party hereto from bringing an action or proceeding in respect of this Agreement in any jurisdiction other than as set forth in Section 21. Section 23. Construction. The headings in this Agreement are for convenience only and are not intended to influence its construction. References to Sections, Exhibits and Annexes in this Agreement are to the Sections of and Exhibits to this Agreement. The Exhibits are part of this Agreement, and are incorporated herein by reference. The singular includes the plural, the plural the singular, and the words "and" and "or" are used in the conjunctive or disjunctive as the sense and circumstances may require. -23- 26 IN WITNESS WHEREOF, Purchaser and Seller have duly executed this Agreement as of the date and year set forth on the cover page hereof. GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. By: ---------------------------------------------- Name: Title: ------------------------------------------------- By: ---------------------------------------------- Name: Title: Address (if different from cover page): -24- 27 EXHIBIT A THIS TRUST RECEIPT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). ANY RESALE OR TRANSFER OF THIS TRUST RECEIPT OR ANY INTEREST HEREIN WITHOUT REGISTRATION HEREOF UNDER THE ACT MAY ONLY BE MADE IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT. TRUST RECEIPT RESIDENTIAL MORTGAGE LOANS No.________ Date:________ ______ , as custodian (the "Custodian"), certifies that GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. ("Purchaser") is the registered owner of this Trust Receipt evidencing ownership of certain mortgage loans (the "Mortgage Loans") listed by identifying number on the schedule attached to this Trust Receipt and further identified in the books and records of the Custodian, owned of record and serviced by __________ (the "Seller"). The Mortgage Note and Mortgage for each Mortgage Loan are held by Custodian, pursuant to the terms and conditions of that certain Custodial Agreement dated as of ______ , 199_ (the "Agreement") among Purchaser, Seller and Custodian. To the extent not defined herein, the capitalized terms used herein have the meanings assigned in the Agreement. This Trust Receipt is issued under and is subject to the terms, provisions and conditions of the Agreement, to which Agreement the holder of this Trust Receipt by virtue of the acceptance hereof assents and by which such holder is bound. This Trust Receipt supersedes any Trust Receipt applying to the same transaction type (i.e., Cash Window Transaction or Conduit Transaction) bearing an earlier date. This Trust Receipt shall not be valid or become obligatory for any purpose unless and until the Certificate of Authentication appearing below has been duly executed by the Custodian. 28 IN WITNESS WHEREOF, the Custodian has caused this Trust Receipt to be duly executed under its official seal. -----------------------------, as Custodian By: -------------------------- Authorized Officer (Seal) Attest: By: --------------------------- Authorized Officer CERTIFICATE OF AUTHENTICATION This Trust Receipt is one of the Trust Receipts issued under the above-described Agreement. Dated: By: ----------------------------- Authorized Officer 29 TRUST RECEIPT NO. RESIDENTIAL MORTGAGE LOANS Following are the identifying numbers of the Mortgage Loans subject to this Trust Receipt: 30 EXHIBIT B-1 [WAREHOUSE LENDER'S RELEASE] Greenwich Capital Financial Products, Inc. 600 Steamboat Avenue Greenwich, Connecticut 06830 Ladies and Gentlemen: We hereby release all right, interest or claim of any kind, including any security interest or lien, with respect to the mortgage loan(s) referenced below, such release to be effective automatically without any further action by any party, upon receipt, in one or more installments, from Greenwich Capital Financial Products, Inc., in accordance with the wire instructions which we delivered to you in a letter dated , 199-, in immediately available funds, of an aggregate amount equal to the product of A multiplied by B (such product being rounded to the nearest $0.01) multiplied by C.* Street Loan # Mortgagor Address City State Zip Very truly yours, [WAREHOUSE LENDER] By: ------------------------ Name: --------------------- Title: --------------------- *A = weighted average trade price B = principal amount of the mortgage loan(s) C = 1 minus the discount set forth on the related participation certificate 31 EXHIBIT B-2 [WAREHOUSE LENDER'S WIRE INSTRUCTIONS] Greenwich Capital Financial Products, Inc. 600 Steamboat Avenue Greenwich, Connecticut 06830 Re: Greenwich Capital Financial Products, Inc. Mortgage Loan Purchase Program with [Seller] Ladies and Gentlemen: Set forth below are [Warehouse Lender's] wire instructions applicable to the above-referenced Non-Conforming Purchase Program. Wire Instructions: Bank Name: City, State: ABA #: Account #: Account Name: 32 Please acknowledge receipt of this letter in the space provided below. This letter supersedes and replaces any prior notice specifying the name of [Warehouse Lender] and setting forth wire instructions and shall remain in effect until superseded and replaced by a letter, in the form of this letter, executed by each of us and acknowledged by you. Very truly yours, [SELLER] By: ------------------------------------ Name: Title: [WAREHOUSE LENDER(S)]* By: ------------------------------------ Name: Title: GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. By:__________________________ Name:________________________ Title:_______________________ - ----------------------- * The authorized officer of each warehouse lender executing this letter must be the same authorized officer as signs the Exhibit B-1 Letter. Not applicable if there is no warehouse lender. 33 EXHIBIT C-1 [SELLER'S RELEASE] Greenwich Capital Financial Products, Inc. 600 Steamboat Plaza Greenwich, Connecticut 06830 Ladies and Gentlemen: With respect to the mortgage loan(s) referenced below (a) we hereby certify to you that the mortgage loan(s) is not subject to a lien of any warehouse lender and (b) we hereby release all right, interest or claim of any kind with respect to such mortgage loan, such release to be effective automatically without any further action by any party upon payment from Purchaser to Seller of an aggregate amount equal to the product of A multiplied by B (such product being rounded to the nearest $0.01) multiplied by C* in accordance with our wire instructions in effect on the date of such payment. Street Loan # Mortgagor Address City State Zip Very truly yours, [SELLER] By: ------------------------ Name: --------------------- Title: --------------------- **Confirmed by: [WAREHOUSE LENDER] By: --------------------------- Name: Title: *A = weighted average trade price B = principal amount of the mortgage loan(s) C = 1 minus the discount set forth on the related participation certificate ** If applicable. 34 EXHIBIT C-2 [SELLER'S WIRE INSTRUCTIONS] Greenwich Capital Financial Products, Inc. 600 Steamboat Avenue Greenwich, Connecticut 06830 Re: Custodial Agreement dated as of ________________, 199_, among Greenwich Capital Financial Products, Inc. [Seller] and [Custodian]______________________________ Ladies and Gentlemen: Capitalized terms used herein and not defined herein shall have the meanings ascribed to such terms in the above-referenced Custodial Agreement. Set forth below are Seller's Wire Instructions applicable to the above-referenced Custodial Agreement. Wire Instructions: Bank Name: City, State: ABA #: Account #: Account Name: Please acknowledge receipt of this letter in the space provided below. This letter supersedes and replaces any prior notice specifying the name of Seller and Seller's Wire Instructions and shall remain in effect until superseded and 35 replaced by a letter, in the form of this letter, executed by each of us and acknowledged by you. Very truly yours, [SELLER]* By: ------------------------ Name: --------------------- Title: --------------------- Receipt acknowledged by: GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. By: ------------------------------ Name: Title: - ----------- * The authorized officer executing this letter must be the same authorized officer as signs the Exhibit C-1 Letter. Applicable only if there is no Warehouse Lender. 36 EXHIBIT D-1 [TRADE ASSIGNMENT] ___________ ("Takeout Investor") [Address] Attention: Ladies and Gentlemen: Attached hereto is a correct and complete copy of your confirmation of commitment (the "Commitment"), trade-dated ______ _, 19 , to purchase $ of mortgage loans (the "Mortgage Loans") at a purchase price of . This is to confirm that (i) the Commitment is in full force and effect, (ii) the Commitment is hereby assigned to Greenwich Capital Financial Products, Inc. ("GCFP"), (iii) you will accept delivery of such Mortgage Loans directly from GCFP, (iv) you will pay GCFP for such Mortgage Loans, (v) upon GCFP's acceptance of this assignment, GCFP is obligated to make delivery of such Mortgage Loans to you in accordance with the attached Commitment and (vi) upon GCFP's acceptance of this assignment, you will release Seller from its obligation to deliver the Mortgage Loans to you under the Commitment. Upon GCFP's determination not to accept an assignment, GCFP will notify you that this assignment is rejected. Not later than 2:00 P.M. Eastern Standard Time one business day prior to your satisfaction of the Commitment, you shall fax a purchase confirmation to GCFP at (203) 625-2700, Attention:__________. Payment will be made to GCFP in immediately available funds. Very truly yours, [SELLER] By: ------------------------ Name: --------------------- Title: --------------------- Agreed to, confirmed and accepted: [TAKEOUT INVESTOR] By: ------------------------------ Name: Title: 37 EXHIBIT D-2 [ACKNOWLEDGEMENT OF ASSIGNMENT] Date: ___________ ("Takeout Investor") [Address] Attention: Ladies and Gentlemen: As you are aware, from time to time mortgage loans, which are currently subject to a purchase commitment issued by you to us, are delivered to you under bailment. Please acknowledge that notwithstanding anything to the contrary contained in any agreement between us, we may assign to Greenwich Capital Financial Products, Inc. our rights to sell such mortgage loans to you and our right to receive payment from you on account of such mortgage loans as set forth in the purchase commitment. Nothing herein shall release us from any and all obligations to you under any agreements between us. Very truly yours, [SELLER] By: ------------------------ Name: --------------------- Title: --------------------- Agreed to, confirmed and accepted: [TAKEOUT INVESTOR] By: ------------------------------ Name: Title: 38 EXHIBIT 1 to EXHIBIT D-2 [WITHDRAWAL OF CONSENT TO BLANKET TRADE ASSIGNMENT] [Seller] [Address] Ladies and Gentlemen: The undersigned hereby terminates its agreement to Seller's assignment of Commitments to GCFP, which approval was given pursuant to the Trade Assignment dated . This termination shall be effective as of but shall not affect the assignment of any Commitment which assignment was made prior to the date hereof. Capitalized terms not defined herein shall have the meanings set forth in the Trade Assignment. Very truly yours, [TAKEOUT INVESTOR] By: ------------------------ Name: --------------------- Title: --------------------- Copy to: [Purchaser] 39 EXHIBIT E [PURCHASER'S WIRE INSTRUCTIONS] [Takeout Investor] [Address] Re: Custodial Agreement dated as of , 199_, among Greenwich Capital Financial Products, Inc., [Seller] and [Custodian]_______________________ Ladies and Gentlemen: Capitalized terms used herein and not defined herein shall have the meanings ascribed to such terms in the above-referenced Custodial Agreement. Set forth below are the Purchaser's Wire Instructions applicable to the above-referenced Custodial Agreement. Wire Instructions: Bank Name: City, State: ABA #: Account #: Account Name: Please acknowledge receipt of this letter in the space provided below. This letter supersedes and replaces any prior notice specifying the name of Purchaser and the Purchaser's Wire Instructions and shall remain in effect until superseded and replaced by a letter, in the form of this letter, executed by each of us and acknowledged by you. Very truly yours, GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. By: ------------------------ Name: --------------------- Title: --------------------- Receipt acknowledged by: [TAKEOUT INVESTOR] By: --------------------------- Name: Title: cc: [Seller] 40 [Custodian] 41 EXHIBIT F [FORM OF CONFIRMATION] TO: [NAME AND ADDRESS OF SELLER] DATE: RE: Confirmation of Purchase of Mortgage Loans Greenwich Capital Financial Products, Inc. ("Purchaser") is pleased to confirm its agreement to purchase and your agreement to sell the Mortgage Loans relating to the pool number referred to herein, pursuant to the Mortgage Loan Purchase and Sale Agreement, dated as of , 199 (the "Mortgage Loan Purchase and Sale Agreement"), between Purchaser and Seller, under the following terms and conditions: Pool No.__________________ Check as appropriate: Cash Window Transaction ___Conduit Transaction (Conduit:____) Purchase Date__________ Settlement Date_________________________ Discount________________________________ Purchase Price__________________________ Pass-Through Rate_______________________ Total Principal Amount of the Pool______ Capitalized terms used and not otherwise defined herein shall have the meanings ascribed in the Mortgage Loan Purchase and Sale Agreement. Very truly yours, GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. By: ------------------------ Name: --------------------- Title: --------------------- 42 EXHIBIT G [NOTICE OF REJECTION OF TRADE ASSIGNMENT] ("Takeout Investor") [Address] Attention: Ladies and Gentlemen: Greenwich Capital Financial Products, Inc. ("GCFP") hereby notifies you that it does not intend to purchase a 100% ownership interest in $ in mortgage loans (the "Mortgage Loans") that you committed to purchase from the [Seller] pursuant to your confirmation of commitment (the "Commitment") trade-dated , 19 a copy of which is attached hereto. Accordingly, the assignment of the Commitment by Seller to GCFP is hereby rejected, and GCFP shall have no obligations thereunder. Very truly yours, GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. By: ------------------------ Name: --------------------- Title: --------------------- cc: [Seller] [Custodian] 43 EXHIBIT H [SETTLEMENT MODIFICATION LETTER] Greenwich Capital Financial Products, Inc. [DATE] 600 Steamboat Plaza Greenwich, Connecticut 06830 Attention:_________ [SELLER] [ADDRESS] Re: The Attached Confirmation of Commitment Ladies and Gentlemen: Attached hereto is a correct and complete copy of our confirmation of commitment ("Commitment"). We hereby confirm that we have irrevocably approved the Mortgage Loans subject to the Commitment for purchase by us and we hereby agree to purchase such Mortgage Loan(s) from Greenwich Capital Financial Products, Inc. ("GCFP") in accordance with the terms of the Commitment or, if this letter is executed by GCFP and [SELLER], in accordance with the terms of the Commitment as amended hereby. We hereby request that the Commitment be amended as follows: (i) the Settlement Date set forth in the Commitment shall be ; (ii)the aggregate outstanding principal balance of the Mortgage Loans shall be $ _________________ ; (iii) the aggregate amount of accrued interest on the Mortgage Loans shall be $ ; (iv) the trade price shall be %; and (v) the total amount payable to GCFP shall be $ If we fail to pay you the amount set forth in clause (v) above on the amended Settlement Date, interest shall accrue on such amount at a rate equal to the weighted average of the Pass-Through Rates related to such Mortgage Loans. 44 If the amendments to the Commitment set forth above are acceptable to you, please so indicate by executing this letter in the appropriate space provided below and return it to us via facsimile at [TAKEOUT INVESTOR] By: ------------------------- Title: Agreed to: [SELLER] By: --------------------- Title: Facsimile #:. Agreed to: GREENWICH CAPITAL FINANCIAL PRODUCTS, INC. By: --------------------- Title: ------------------ 45 EXHIBIT I (Mortgage File) I (i) The original Mortgage Note bearing all intervening endorsements with the last endorsement endorsed, "Pay to the order of , without recourse" and signed in the name of Seller by an authorized officer of Seller; (if applicable), and if the Mortgage Note has been signed by a third party on behalf of the Mortgagor, the original power of attorney or other instrument that authorized and empowered such Entity to sign or a copy of such power of attorney together with an officer's certificate (or a certificate from the recorder's office) certifying that such copy presents a true and correct reproduction of the original and that such original has been duly recorded or delivered for recordation in the appropriate records of the jurisdiction in which the related Mortgaged Property is located; (ii) The original of the guarantee executed in connection with the Mortgage Note (if any); (iii) The original Mortgage with evidence of recording indicated thereon, subject to paragraph II below; (iv) If Seller did not originate a Mortgage Loan, all necessary original intervening assignments to show a complete chain of title from the originating mortgagee to Seller; (v) An original Assignment of Mortgage, in blank, in recordable form but unrecorded (which Assignment of Mortgage may be in the form of a blanket assignment of two or more such Mortgages to the extent permitted by applicable law) signed in the name of Seller by an authorized officer; (vi) Any assumption, modification (with evidence of recording thereon), consolidation or extension agreements; (vii) The original policy of title insurance (or a commitment for title insurance, if the policy is being held by the title insurance company pending recordation of the Mortgage); (viii) The original of any security agreement, chattel mortgage or equivalent document executed in connection with the Mortgage Loan; (ix) The original assignment of leases and rents, if any, with evidence of recording thereon, or a copy thereof together with an officer's certificate of the Seller certifying that such copy represents a true and correct copy of the original that has been submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located; (x) The original assignment of assignment of leases and rents, if any, from the Seller in blank, in form and substance acceptable for recording; and (xi) The certificate of primary mortgage guaranty insurance, if any, issued with repsect to such Mortgage Loan. 46 II With respect to all Mortgage Files From time to time, the Seller shall forward to the Custodian additional original documents or additional documents evidencing any assumption, modification, consolidation or extension of a Mortgage Loan approved by the Seller, in accordance with the terms of the Purchase and Sale Agreement, and upon receipt of any such other documents, the Custodian shall hold such other documents for the Purchaser. With respect to any documents which have been delivered or are being delivered to recording offices for recording and have not been returned to the Borrower in time to permit their delivery hereunder at the time required, in lieu of delivering such original documents, Seller shall deliver to Purchaser a true copy thereof with an Officer's Certificate certifying that such copy is a true, correct and complete copy of the original, which has been transmitted for recordation. The Seller shall deliver such original documents to Custodian promptly when they are received. EX-10.20 26 LICENSE, STAFFING, PURCHASE & SALE AGMNT. 10/1/98 1 EXHIBIT 10.20 EXECUTION COPY LICENSE, STAFFING, PURCHASE AND SALE AGREEMENT BETWEEN E-LOAN, INC. AND NET.B@NK Dated as of June 1, 1998 2 THIS LICENSE, STAFFING, PURCHASE AND SALE AGREEMENT (this "Agreement") is made and entered into as of June 1, 1998 between E-LOAN, INC., a California corporation having an office at 540 University Avenue, Palo Alto, CA 94301 ("Licensor"), and NET.B@NK, a Federal savings bank having an office located at 950 North Point Parkway, Suite 350, Alpharetta, Georgia 30005 ("Licensee"). WHEREAS, Licensor owns a unique and distinctive format and system (the "System") relating to the establishment and operation of a proprietary single-family residential mortgage loan origination system utilizing the Internet and telemarketing call centers (the "Program"); WHEREAS, Licensor identifies the System by means of certain trade names, service marks, trademarks, logos, emblems and indicia of origin, including but not limited to the Licensor's name and the marks and logos and such other trade names, service marks, and trademarks as are now designated (and may hereinafter be designated by Licensor in writing) for use in connection with the System (the "Proprietary Marks"); WHEREAS, Licensor continues to develop, use, and control the use of such Proprietary Marks in order to identify for the public its ownership of the System, and to represent the System's high standards of quality and service; WHEREAS, Licensee desires to enter into the business of operating the Program in order to make single-family residential mortgage loans ("Loans") under Licensor's System and wishes to obtain a non-exclusive, non-transferable license (the "License") from Licensor to operate the Program and use the Proprietary Marks in connection therewith, as well as to receive other assistance to be provided by Licensor in connection therewith; WHEREAS, Licensor operates and outsources a telemarketing call center in support of the operations of financial services companies, including mortgage companies, and Licensee desires assistance with its staffing, space and equipment needs on an interim basis as it establishes its Internet and telemarketing call center under the trade name "E-Loan" ("E-Loan Internet Origination Center"). NOW THEREFORE, the parties, in consideration of the undertakings and commitments of each party to the other party set forth herein, hereby agree as follows: 1. GRANT AND LICENSE FEE 1.1 Licensor grants Licensee a non-exclusive license to use the System, including the Program and the Proprietary Marks, solely in regard to those states indicated in that attached Appendix A (as may be modified from time to time by mutual written consent of the parties hereto) and during the term of this Agreement (the 1 3 "License"). Said Appendix A, including any such modifications, is incorporated as part of this Agreement. 1.2 Upon execution of this Agreement, Licensee shall pay to Licensor a one-time fee of One Thousand Dollars and No/100 ($1,000.00) as full compensation to Licensor for its grant of the License hereunder. 2. TERM AND RENEWAL 2.1 Except as otherwise provided herein, the term of this Agreement shall expire one (1) year from the date of this Agreement. 2.2 At its option exercisable by giving written notice to Licensee at least sixty (60) days prior to the first anniversary of the date of this Agreement, Licensor may renew this Agreement for one (1) additional term of one (1) year if Licensor shall have satisfied all monetary obligations owed by Licensor to Licensee and its parent, subsidiaries and affiliates under this Agreement and under any other contract between the parties as of the date of such notice and as of the date of commencement of the renewal term. 2.3 At its option exercisable by giving written notice to Licensor at least sixty (60) days prior to the first anniversary of the date of this Agreement, Licensee may renew this Agreement for one (1) additional term of one (1) year if Licensee shall have satisfied all monetary obligations owed by Licensee to Licensor and its parent, subsidiaries and affiliates under this Agreement and under any other contract between the parties as of the date of such notice and as of the date of commencement of the renewal term. 2.4 This Agreement may be terminated with or without cause by Licensor or Licensee upon thirty (30) days' written notice to the other party. 3. FUNDING, PURCHASE AND SALE OF LOANS 3.1 Licensor agrees to purchase from Licensee, and Licensee agrees to sell to Licensor, in accordance with and subject to the terms and conditions of this Agreement, all Loans made by Licensee under the Program and processed, underwritten and closed under the separate Mortgage Loan Processing Agreement between the parties dated as of even date herewith (the "Processing Agreement"), with each Loan purchase and sale to be consummated (by payment of the Purchase Price for such Loan in accordance with Section 3.2 hereof) within forty-eight (48) hours after Loan settlement and funding to the greatest extent practicable and in all events within seven (7) calendar days after Loan settlement and funding. Such Loans will be sold by Licensee and purchased by Licensor without recourse and on a servicing-released basis, with Licensor undertaking servicing of all Loans so purchased by Licensor. 2 4 3.2 The purchase price ("Purchase Price") to be paid by Licensor and accepted by Licensee for each Loan sold to Licensor pursuant to Section 3.1 hereof shall be equal to the sum of: (1) the Net Funding Amount (as defined in Section 1.1.11 of the Processing Agreement), plus (2) the accrued and unpaid interest (at the interest rate specified in the Loan note) on the Net Funding Amount through and including the date on which the purchase and sale of the Loan is consummated, plus (3) a Loan Administration Fee (as defined in Section 3.3 hereof) per Loan. The Purchase Price for each Loan shall be deposited by Licensor in immediately available funds in an account to be maintained with Licensee in the name of Licensor (the "Licensor's Account") and shall be deemed to have been paid to Licensee upon Licensee's drafting the Licensor's Account for the amount of such Purchase Price. Upon Licensor's deposit (in accordance with this Section 3.2) of the Purchase Price applicable to any Loan which Licensor is obligated to purchase under this Agreement, Licensee (i) shall, at Licensee's expense, deliver to Licensor any and all documents and instruments which evidence, secure, or otherwise relate to such Loan and which are then in Licensee's actual possession, (ii) shall release in Licensor's favor any and all rights of Licensee in, to, and under such documents and instruments, and (iii) shall be entitled to draft the Licensor's Account for the amount of such Purchase Price, whereupon Licensee shall give Licensor written notification that Licensee has so drafted the Licensor's Account. 3.3 As part of the Purchase Price for each Loan, Licensor shall pay a Loan Administration Fee to Licensee in accordance with this Section 3.3. The "Loan Administration Fee" shall be $300.00 per Loan. 3.4 Upon Licensor's delivery of the Purchase Price (including, without limitation, the Loan Administration Fee) applicable to any Loan, Licensee (1) shall deliver to Licensor any and all documents and instruments which evidence, secure, or otherwise relate to such Loan and which are then in Licensee's actual possession and (2) shall release in Licensor's favor any and all rights of Licensee in, to, and under such documents and instruments; provided that no later than the first business day following Licensee's receipt of the Purchase Price from Licensor for any Loan sold by Licensee to Licensor pursuant to this Agreement, Licensee shall duly endorse the original promissory note evidencing such Loan and shall deliver same to Licensor. 3.5 If Licensor fails to deliver the Purchase Price (including, without limitation, the Loan Administration Fee) for any Loan within seven (7) calendar days after notification by Licensee that Licensee is in possession of the original promissory note evidencing such Loan or if Licensor otherwise fails to consummate the purchase of such Loan in accordance with this Section 3, Licensee, in its sole discretion, shall be entitled to exercise any and all rights and remedies, at law or in equity or otherwise, with respect to any and all such failures by Licensor and any and all Loans subject to such failures by Licensor, including, without limitation, the following: 3 5 (1) Licensee shall be entitled to effect the sale of any and all such Loans to any other person(s) or entity(ies) at any commercially reasonable price(s) (any such sale being an Alternative Sale"), with Licensor being obligated to indemnify Licensee for any and all losses, damages, liabilities, claims, legal fees, and other expenses incurred by Licensee as a direct or indirect consequence of any and all Alternative Sales, including, without limitation, (i) the Loan Administration Fee which is due for any such Loan under this Agreement and which has not been paid to Licensee and (ii) any positive difference between the Purchase Price due under this Agreement for any such Loan and the price actually received by Licensee through the Alternative Sale of such Loan; and (2) Licensee shall be entitled to specific performance of Licensor's obligation to purchase any and all such Loans, together with monetary relief for any and all losses, damages, liabilities, claims, legal fees, and other expenses incurred by Licensee as a direct or indirect consequence of Licensor's breach of this Agreement. 3.6 If Licensor delivers the Purchase Price (including, without limitation, the Loan Administration Fee) for any Loan within seven (7) calendar days after notification by Licensee that Licensee is in possession of the original promissory note evidencing such Loan, and if Licensee nonetheless fails to consummate the sale of such Loan in accordance with this Section 3, Licensor, in its sole discretion, shall be entitled to exercise any and all rights and remedies, at law or in equity or otherwise, with respect to any and all such failures by Licensee and any and all Loans subject to such failures by Licensee, including, without limitation, the remedy of specific performance of Licensee's obligation to sell any and all such Loans, together with monetary relief for any and all losses, damages, liabilities, claims, legal fees, and other expenses incurred by Licensor as a direct [or indirect] consequence of Licensee's breach of this Agreement. 3.7 Each party hereto agrees to reimburse the other party hereto (the "Damaged Party") for up to $1,000.00 per Loan in actual losses and damages incurred by the Damaged Party as a direct result of any error, mistake, negligent act or omission, or breach of this Agreement or the Processing Agreement in the course of the reimbursing party's performance of its obligations under this Agreement or the Processing Agreement. 4. DUTIES OF LICENSOR 4.1 Licensor shall provide to Licensee technical and administrative support, including the service of contract employees and the rental of requisite space and equipment, as set forth in Section 9 below. 4.2 Licensor shall provide periodic and continuing advisory assistance to Licensee as to the operation and promotion of the Program as Licensor deems advisable. 4 6 4.3 Licensor shall market and promote the Program, as set forth in Section 10 below. 5. DUTIES OF LICENSEE 5.1 Licensee shall operate the Program, under a separate division of Licensee to be known as "E-Loan, a division of Net.B@nk," or as otherwise denominated by Licensee after consultation with Licensor. Such division shall be operated and managed separately from the mortgage lending operations of Licensee. 5.2 Licensee will prominently use the Proprietary Marks, subject to specific prior review and approval by Licensor, in all aspects of the Program and otherwise, including, without limitation, in the operation of the Program in relation to prospective borrowers. 5.3 Licensee acknowledges the proprietary interest of Licensor in all information with respect to the System and Program. Licensee undertakes to comply with its obligations under the Agreement with respect to all Licensor Confidential Information, as defined in Section 8.4 below, and at no time to divulge, disclose, reference, or transfer to any other person such Licensor Confidential Information, including the identities of customers and related information or to use the same for any purpose other than its operations under the License, without the written consent of Licensor. 5.4 Except as otherwise required by law, all statements of any kind whatsoever by Licensee with regard to the System and Program shall identify Licensor as the sole owner and developer the System and Program. Licensee shall at no time or in any manner whatsoever claim or represent itself to have any rights or interest in the development or ownership of the System or Program, except as explicitly provided by this Agreement. 5.5 Licensee understands and acknowledges that the rights and duties set forth in this Agreement are solely related to Licensee, and that Licensor has granted this License in reliance on Licensee's business skill, financial capacity, and personal character. Accordingly, Licensee shall not, without prior written consent of Licensor, transfer, pledge, or in any way encumber either the rights and obligations of Licensee under this Agreement or any interest in the System or Program hereunder, except to a permitted assignee under Section 16.1 hereof. 5.6 Licensee covenants to operate in compliance with the System and shall use best efforts to maintain the highest degree of quality and services. Licensee shall operate the Program in strict conformity with such methods, standards, and specifications as Licensor may from time to time prescribe in the Manual of Operation, as mutually agreed in writing. 5 7 5.7 Licensee acknowledges that, subject to Licensor's compliance with its obligations under this Agreement and subject to compliance of the System and the Program with all applicable laws, rules and regulations: (1) Licensor has the full, exclusive authority over the information presented in the Program and over all rules and standards included therein; and (2) in its sole discretion, Licensor may change such content at any time and from time to time; provided that any material changes that would affect Licensee's Program operations or product information will require prior notification of at least three (3) business days to Licensee. 6. PROPRIETARY MARKS 6.1 Licensor represents and warrants to Licensee that Licensor is the owner of all right, title, and interest in and to the Proprietary Marks, free and clear of all liens, encumbrances and claims of any kind. 6.2 With respect to Licensee's use of the Proprietary Marks designated by Licensor, Licensee shall use them only in the manner authorized and permitted by Licensor. 6.3 Licensee shall use the Proprietary Marks designated only for the operation of the Program licensed hereunder. 6.4 Unless otherwise authorized or required by Licensor, Licensee shall operate the Program only under the name permitted under Section 5.1 hereof, without prefix or suffix. 6.5 During the term of this Agreement and renewal thereof, Licensee shall identify Licensor (in a manner reasonably acceptable to Licensor) as the owner of the System and Program in conjunction with any use of the Proprietary Marks. 6.6 Licensee's right to use the Proprietary Marks is limited to such uses as are designated by Licensor or authorized under this Agreement, and any unauthorized use thereof shall constitute an infringement of Licensor's rights if Licensee continues such use on or after the tenth (10th) calendar day following Licensee's receipt of written notice from Licensor to cease such unauthorized use. 6.7 Licensee expressly understands and acknowledges that: 6.7.1 Licensor is the owner of all rights, title and interests in and to the Proprietary Marks and the goodwill associated with and symbolized by them. 6.7.2 The Proprietary Marks are valid and serve to identify the System and Program and those who are authorized to operate under the System. 6.7.3 Neither Licensee nor any affiliate of Licensee shall directly or indirectly contest the validity of Licensor's ownership of the Proprietary Marks, nor 6 8 shall Licensee, directly or indirectly, seek to register the Proprietary Marks with any government agency, except with Licensor's express written permission. 6.7.4 Licensee's use of the Proprietary Marks does not give Licensee any ownership interest or other interest in or to the Proprietary Marks, except the License granted by this Agreement. 6.7.5 Any and all goodwill arising from Licensee's use of the Proprietary Marks shall inure solely and exclusively to Licensor's benefit, and upon expiration or termination of this Agreement and the License herein granted, no monetary amount shall be assigned as attributable to any goodwill associated with Licensee's use of the System or the Proprietary Marks. 6.7.6 The right and license to use the Proprietary Marks granted hereunder to Licensee is non-exclusive, and Licensor thus has and retains the rights, among others: to use the Proprietary Marks itself in connection with selling products and services; to grant other licenses for the Proprietary Marks; and to develop and establish other systems using the same or similar Proprietary Marks, or any other proprietary marks, and to grant licenses or franchises thereto without providing any rights therein to Licensee. 6.7.7 Licensor reserves the right to substitute different proprietary marks for use in identifying the System and Program and the businesses operating thereunder if Licensor's currently owned Proprietary Marks no longer can be used, or if Licensor, in its sole discretion, determines that substitution of different proprietary marks is desirable. 6.8 Licensee shall require all signs and other materials and documentation which may be designated by Licensor to bear the Proprietary Marks in the form, color, location and manner prescribed by Licensor. 7. (SECTION INTENTIONALLY DELETED) 8. CONFIDENTIAL INFORMATION 8.1 Licensor retains all rights of ownership and copyright in the System and Program and Proprietary Marks except as provided for temporary use by the Licensee under the terms of this Agreement. 8.2 As between Licensor and Licensee, the System and Program, including its design, structure, operation, programming, output, content, graphics, and all derivative works thereof (other than the proprietary logos and graphics of Licensee), are the 7 9 sole and exclusive property of Licensor to be licensed under the terms of this Agreement for use by Licensee. 8.3 Except for the non-exclusive, non-transferable License to use the System and operate the Program, Licensee has no, and shall not acquire any, ownership or other rights or interest in the System or Program as a result of this Agreement or any business relationship with the Licensor, unless the parties hereafter agree to the contrary. 8.4 Licensee understands and acknowledges that the System and Program contain and embody valuable trade secrets of Licensor. Licensee shall keep confidential the Program and all other information provided by Licensor to Licensee or otherwise acquired by Licensee through the operation of the Program as referred to in Section 10.1 hereof (collectively, the "Licensor Confidential Information") and all copies or physical embodiments thereof in its possession, and shall limit access to the Licensor Confidential Information to those of its personnel. Licensee shall not use any part of the Licensor Confidential Information in any manner other than as expressly permitted under this Agreement. Licensee shall secure and protect the Licensor Confidential Information and any and all copies thereof in its possession through security measures at least as protective as those used by Licensee to maintain the security of its valuable confidential and proprietary information. Upon termination of this Agreement for any reason, Licensee shall upon request return to Licensor all tangible embodiments of Licensor Confidential Information in its possession or under its control, or destroy all such tangible embodiments and certify such destruction in writing. The obligations provided in this Section 8.4 shall not apply to any information which (1) is generally known to the public or in the trade or becomes so generally known without breach of this Agreement by Licensee; (2) is shown by written record to have been known to Licensee prior to its disclosure by Licensor hereunder; (3) is disclosed to Licensee without restriction of confidentiality by a third party who is not in breach of an obligation of confidentiality to Licensor in making such disclosure; or (4) is disclosed by Licensee pursuant to judicial, administrative, or other legally binding order. The obligations of this Section 8.4 shall survive any termination of this Agreement. The parties hereto further acknowledge that they are bound by that certain Nondisclosure Agreement dated September 9, 1998, as duly executed by the parties hereto. 8.5 Licensee acknowledges that any failure to comply with the requirements of this Section 8 will cause Licensor irreparable injury, and Licensee agrees to pay all court costs and reasonable attorney's fees incurred by Licensor in any successful action or proceeding to obtain specific performance of, or an injunction against violation of, the requirements of this Section 8. 8 10 9. STAFFING, SPACE AND EQUIPMENT 9.1 In order to enable Licensee to utilize the License and make Loans thereunder, Licensor will provide personnel to Licensee on an "as needed" basis and in sufficient number to support the telemarketing functions of the E-Loan Internet Origination Center (the "Support Work"). Such employees shall be assigned to the Support Work on a full-time basis (40 hours per week). All personnel provided for the Support Work shall be selected and trained by Licensor under standards that are consistent with the Program and are not less than those used by Licensor for its own call center operations. 9.2 Each assigned employee is and shall remain an employee of Licensor and shall not be considered an employee of Licensee. Although it is the responsibility of Licensee to supervise and review the Support Work of each Licensor employee, Licensee will also be entitled to review such Support Work. Any questions or problems with assigned employees shall be communicated to Licensor immediately by Licensee. All contact with an assigned Licensor employee regarding assignment scheduling for Support Work must be coordinated through Licensor. 9.3 Licensor guarantees satisfaction with each Licensor employee assigned to Support Work for Licensee. If, for any reason, Licensee is dissatisfied with any such Licensor employee's performance, a different Licensor employee will immediately be assigned to the Support Work. 9.4 Licensor represents and warrants that its employees are adequately covered by workers' compensation insurance and that Licensor assumes total responsibility to pay the employees' salary, all related federal, state, and local payroll taxes and any other applicable charges required by law, and applicable employee benefits, such as health insurance, retirement, etc., if any. 9.5 Licensor agrees to provide all necessary space to Licensee for the E-Loan Internet Origination Center, as well as the use of telephone, computer and other equipment on an "as needed" basis for the operation of Licensee's E-Loan Internet Origination Center during the term of this Agreement. Licensor and Licensee will review monthly the space and equipment needs of Licensee. Licensee is authorized to utilize reasonable signage or other marks to indicate to the public Licensee's presence in operating its E-Loan Internet Origination Center. 9.6 As compensation for the staffing, space and equipment provided to Licensee by Licensor in accordance with this Section 9, Licensee shall, with respect to each calendar month during the term hereof, pay Licensor the Staffing Fee and the Facility Fee (as both are hereinafter defined) due for such calendar month, in arrears, on or before the seventh (7th) calendar day of the next succeeding calendar month. All Staffing Fees and Facility Fees shall be paid in immediately available Funds. 9 11 9.7 The "Staffing Fee" shall be $75.00 per Loan funded by Licensee pursuant to the Processing Agreement and purchased by Licensor pursuant to this Agreement. 9.8 The "Facility Fee" shall be: (1) $25.00 per Loan with respect to the first 100 Loans funded by Licensee pursuant to the Processing Agreement and purchased by Licensor pursuant to this Agreement during any calendar month during the term of this Agreement; and (2) $50.00 per Loan with respect to the 101st and subsequent Loans so funded and purchased during any calendar month during the term of this Agreement. 9.9 It is the intent of the parties that all compensation received by Licensor in the form of Staffing Fees and Facility Fees shall not exceed the reasonable value of the services rendered or goods or facilities furnished within the meaning of the Real Estate Settlement Procedures Act, 12 U.S.C. Section 2601 et seq. as amended from time to time and the regulations which are promulgated thereunder. 10. MARKETING AND PROMOTION 10.1 Licensor shall have sole responsibility for the marketing of the Program on behalf of Licensee, including, without limitation, television, radio, print, or electronic advertising and other promotion. 10.2 Licensee shall at no time advertise, promote, or in any manner whatsoever publish or communicate its role in operation of the System or Program, without the prior written approval of Licensor, except as required by law or regulation. 11. DEFAULT, TERMINATION, AND OBLIGATIONS THEREAFTER; ARBITRATION 11.1 If either party or any person holding a controlling interest (direct or indirect) in Licensee becomes a debtor in proceedings under the U.S. Bankruptcy Code or any similar law in the United States or elsewhere, it is the parties' understanding and agreement that any transfer of the License, or any obligations and/or rights hereunder, shall be subject to written approval of the transfer or termination of the Agreement at the sole discretion of the Licensor. 11.2 Licensee shall be deemed to be in default and Licensor may, at its option, terminate this Agreement and all rights granted hereunder, without affording Licensee any opportunity to cure the default, effective immediately upon the delivery of written notice to Licensee by Licensor, upon the occurrence of any of the following events, provided that Licensor shall have remitted to Licensee, prior to any such termination being effective, any and all amounts due Licensee from Licensor under this Agreement as of the date of such termination: 11.2.1 If Licensee at any time ceases to operate or otherwise abandons use of the System and operation of the Program; 10 12 11.2.2 If Licensee or any senior policy making officer thereof is convicted of a felony, a crime involving moral turpitude, or any other crime or offense that is reasonably likely to have a material adverse effect on the System, the Proprietary Marks, the goodwill associated therewith, or Licensor's interest therein; 11.2.3 If Licensee purports to transfer any rights or obligations under this Agreement or any interest to any third party in a manner that is contrary to the terms of this Agreement; or 11.2.4 If, contrary to the terms hereof, Licensee discloses or divulges the Licensor Confidential Information provided to Licensee by Licensor without the written approval of Licensor. 11.3 Subject to the provisions of Section 11.4 hereof, this Agreement may be terminated by either party during the existence of any of the following conditions. 11.3.1 If the other party ("Other Party") is the subject of any of the following: (1) a court having jurisdiction shall have entered a decree or order constituting an order for relief in respect of the Other Party under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy law or other similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator, or similar official of the Other Party or any substantial part of its properties, or ordering the winding-up or liquidation of the affairs of the Other Party, or any petition seeking such relief or appointment shall have been filed in such a court and shall not have been dismissed within a period of forty-five (45) days (2) the Other Party shall have filed a petition, answer, or consent seeking relief under Title 11 of the United States Code, as now constituted or hereafter amended, or any other applicable federal or state bankruptcy law or other similar law, or the Other Party shall consent to the institution of proceedings thereunder or to the filing of any such petition or to the appointment or taking of possession of a receiver, liquidator, assignee, trustee, custodian, sequestrator, or other similar official of the Other Party or of any substantial part of properties, or the Other Party shall fail generally to pay its debts as such debts become due, or the Other Party shall take any corporate action in furtherance of any such action; (3) any admission by the Other Party of its insolvency or inability to pay its debts as they fall due; or (4) the adjudication of the Other Party as bankrupt or insolvent; 11.3.2 If the Other Party fails to pay the terminating party any amount within sixty (60) days after the date on which such amount was first due the terminating party in accordance with this Agreement or, if a due date is 11 13 not specified herein or therein, within sixty (60) days after the Other Party's receipt of an invoice for such amount. 11.3.3 If the Other Party is in material breach of or material default under this Agreement. 11.3.4 If the Other Party engages in any dishonest or fraudulent conduct; or 11.3.5 If it becomes unlawful for the parties hereto to do business in accordance with this Agreement. 11.4 Upon either party's issuance of proper notice of termination of this Agreement pursuant to this Section 11 or Section 2.4 hereof: 11.4.1 The parties agree to continue their cooperation in order to effect an orderly termination of their relationship. Each party shall immediately cease accepting Loan applications under the Program, provided, however, that Licensor shall, at Licensee's option, continue the Support Work under the terms and conditions of this Agreement in order to consummate any Loan(s) for which an application has been received by Licensor or Licensee on or prior to the date of termination. All compensation due any party in connection with any such Loan(s) shall be paid in accordance with this Agreement, and Licensor's obligation to purchase any such Loan(s) shall be in full force and effect in accordance with and subject to the terms and conditions of this Agreement. 11.4.2 Licensee shall comply with Section 11.8 hereof. 11.5 Any controversy arising in conjunction with or relating to this Agreement, and any amendment hereof, shall be determined and settled by arbitration in a location mutually agreed upon by the parties, in accordance with the rules of the American Arbitration Association. Any arbitration award rendered hereunder shall be final and binding on each of the parties hereto and their respective successors and assigns, and judgment may be entered thereon by any court having jurisdiction. The parties shall continue their performance under this Agreement while the arbitration proceeding is pending. 11.6 Licensee agrees, if at any time it operates or begins hereafter to operate any other similar System or Program, not to use any reproduction, counterfeit copy, or colorable imitation of the Proprietary Marks, either in connection with such other System or Program or the promotion thereof, which is likely to cause confusion, mistake or deception or which is likely to dilute Licensor's rights in and to the Proprietary Marks, and further agrees not to utilize any designation of origin, description, trademark, service mark, or representation which suggests or represents a present or past association or connection with Licensor, the System, or the Proprietary Marks. 12 14 11.7 Licensee shall pay Licensor all damages, costs, and expenses (including reasonable attorney's fees) incurred by Licensor, subsequent to the termination of this Agreement pursuant to Section 11.2 hereof, in any successful action or proceeding to obtain injunctive or other relief for the enforcement of any provisions of this Section 11. 11.8 Licensee shall immediately upon expiration or termination of this Agreement deliver to Licensor all manuals, records, and instructions containing Licensor Confidential Information (including without limitation any copies thereof, even if such copies were made in violation of this Agreement), all of which are acknowledged to be the property of Licensor. 11.9 Licensor shall provide such access to any copies of records delivered pursuant to Section 11.8, or any reports prepared by Licensee hereunder for any federal or state regulator asserting authority over the activities of Licensee as shall be required by law or regulation or as shall be requested in writing by Licensee. 12. INDEPENDENT CONTRACTOR AND INDEMNIFICATION 12.1 It is understood and agreed by the parties that: (1) neither this Agreement nor the Processing Agreement creates a fiduciary relationship between them; (2) Licensee shall be an independent contractor in its use of the License; (3) Licensor shall be an independent contractor in performing its obligations under Section 9 hereof; and (4) nothing in this Agreement or the Processing Agreement is intended to constitute either party an agent, legal representative, subsidiary, joint venturer, partner, employee, or servant of the other for any purpose whatsoever. 12.2 It is understood and agreed that nothing in this Agreement authorizes either party to make any contract, agreement, warranty, or representation on the other party's behalf, or to incur any debt or other obligation in the other party's name; and that the other party shall in no event assume liability for, or be deemed liable hereunder as a result of, any such action. 12.3 Licensor shall indemnify and hold Licensee harmless from and against any and all losses, damages, costs, expenses, liabilities, obligations and claims of any kind (collectively, "Liabilities"), and agrees to promptly defend Licensee from, and reimburse Licensee for, all such Liabilities, including, without limitation, reasonable attorney's fees, arising or resulting from: (1) any challenge by another person to any patent, trademark or intellectual property interest used by Licensee under this Agreement; or (2) Licensor's negligence or wrongdoing in any related proceeding; or (3) any failure of the System, the Program or Licensor to comply, and to cause all Loans to be in compliance, with any applicable Federal or state law, rule or regulation (including without limitation the Consumer Credit Protection Act, the Fair Credit Reporting Act, the Real Estate Settlement Procedures Act, the Federal Trade Commission Act, and state statutes purporting 13 15 to regulate or license the origination of or terms and conditions of Loans generated by the Program); (4) any challenge to Licensee's authority to use the System and operate the Program; (5) any breach of Licensor's representations and warranties under this Agreement; or (6) any and all claims by borrowers relating to any matters referenced under foregoing clauses (1) through (5), inclusive. This Section 12.3 shall survive the expiration or termination of this Agreement. 12.4 Licensee shall indemnify and hold Licensor harmless against any and all claims arising directly from or as a result of: (1) Licensee's use of the System and operation of the Program (as well as the costs, including reasonable attorney's fees, of defending against them) in violation of this Agreement; or (2) any breach of Licensee's representations and warranties under this Agreement. This Section 12.4 shall survive the expiration or termination of this Agreement. 13. APPROVALS AND WAIVERS 13.1 No delay, waiver, omission, or forbearance on the part of either party to exercise any right, option, duty, or power arising out of any breach or default by the other party under any of the terms, provisions, covenants, or conditions hereof, shall constitute a waiver by such first party to enforce any such right, option, duty or power against the other party, or as to subsequent breach or default by the other party. 14. SEVERABILITY AND CONSTRUCTION 14.1 Each portion, section, part, term, and/or provision of this Agreement shall be considered severable; and if, for any reason, any section, part, term, and/or provision herein is determined to be invalid and contrary to, or in conflict with, any existing or future law or regulation by a court or agency asserting jurisdiction, such shall not impair the operation of, or have any other effect upon, such other portions, sections, parts, and/or provisions of this Agreement as may remain otherwise intelligible; and the latter shall continue to be given full force and effect and bind the parties hereto; and said invalid portions, sections, parts, terms and/or provisions shall be deemed not to be part of this Agreement. 14.2 All captions in this Agreement are intended solely for the convenience of the parties, and shall not be deemed to affect the meaning or construction of any provision hereof. 14.3 All provisions of this Agreement which, by their terms or intent, are designed to survive the expiration or termination of this Agreement, shall so survive the expiration and/or termination of the this Agreement. Without limiting the immediately preceding sentence, all warranties and indemnities by either party under this Agreement shall survive the expiration or termination of this Agreement. 14 16 14.4 No right or remedy conferred upon or reserved to Licensor or Licensee by this Agreement is intended to be, nor shall be deemed, exclusive of any other right. 15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF LICENSOR AND LICENSEE. 15.1 Licensor hereby represents, warrants and covenants to Licensee as follows: 15.1.1 Licensor is a corporation duly organized, validly existing, and in good standing under the laws of the State of California and that it has all requisite corporate power and authority necessary to make and perform its obligations under this Agreement. The execution and delivery of this Agreement and all documents, instruments and agreements required to be executed by Licensor pursuant hereto, and the consummation of the transactions contemplated hereby, have each been duly and validly authorized by all necessary action of Licensor. This Agreement constitutes a valid, legal and binding agreement of Licensor enforceable by Licensee in accordance with its terms, subject to bankruptcy, insolvency, reorganization, receivership or other laws affecting rights of creditors generally and subject to general equity principles. 15.1.2 Licensor is qualified to do business in all states and in any other jurisdiction in which such qualification is required or where Licensor maintains an office or does substantial business. 15.1.3 The execution, delivery and performance of this Agreement by Licensor, its compliance with the terms hereof and consummation of the transactions contemplated hereby will not violate, conflict with, result in a breach of, give to any right of termination, cancellation or acceleration under, constitute a default under, be prohibited by or require any additional approval under: (1) Licensor's charter, by-laws, or other organizational documents, or any other material instrument or agreement to which Licensor is a party or by which Licensor is bound or which affects this Agreement, or (2) any and all laws, orders, injunctions or decrees applicable to Licensor. 15.1.4 Licensor possesses and will maintain at all times while this Agreement is in effect any and all necessary licenses and permits required by any and all laws necessary to conduct the business contemplated by the terms of this Agreement. Licensee's obligations under this Agreement and the Processing Agreement do not require Licensee to obtain or maintain any such state or local licenses or permits. 15.1.5 Neither Licensor nor its agents know of, or with the exercise of reasonable diligence, would know of any suit, action, arbitration or legal or administrative or other proceeding pending or threatened against Licensor 15 17 which would affect is ability to perform its obligations under this Agreement. 15.2 Licensee hereby represents, warrants and covenants to Licensor as follows: 15.2.1 Licensee is a federal savings bank duly chartered, validly existing, and in good standing under the laws of the United States and that it has all requisite corporate power and authority necessary to make and perform this Agreement. The execution and delivery of this Agreement and all documents, instruments and agreements required to be executed by Licensee pursuant hereto, and the consummation of the transactions contemplated hereby, have each been duly and validly authorized by all necessary action of Licensee. This Agreement constitutes a valid, legal and binding agreement of Licensee enforceable by Licensor in accordance with its terms, subject to bankruptcy, insolvency, reorganization, receivership or other laws affecting rights of creditors generally and subject to general equity principles. 15.2.2 Subject to Licensor's full compliance with Licensor's representations and warranties under this Agreement: (1) The execution, delivery and performance of this Agreement by Licensee, its compliance with the terms hereof and consummation of the transactions contemplated hereby will not violate, conflict with, result in a breach of, give rise to any right of termination, cancellation or acceleration under, constitute a default under, be prohibited by or require any additional approval under: (i) Licensee's charter, by-laws, or other organizational documents, or any other material instrument or agreement to which Licensee is a party or by which Licensee is bound or which affects this Agreement, or (ii) any and all laws, orders, injunctions or decrees applicable to Licensee. (2) Licensee possesses and will maintain its federal savings bank charter at all times while this Agreement is in effect. (3) Neither Licensee nor its agents know of, or with the exercise of reasonable diligence, would know of any suit, action, arbitration or legal or administrative or other proceeding pending or threatened against Licensee which would affect its ability to perform its obligations under this Agreement. 15.2.3 Each party agrees that it will not use the trademarks, service marks, logo, name or any other proprietary descriptions of the other party or the other party's parent or affiliates, whether registered or unregistered, without the other party's prior written consent. 16 18 15.2.4 Each party agrees to notify the other as soon as practicable of any formal request by a governmental agency to examine records pertaining to the other party or its customers, if the party being subjected to such examination is permitted to so notify the other party. Each party agrees that the other party is authorized to fully cooperate with any such examination, and that such cooperation will not constitute a breach of this Agreement, including, without limitation, a breach of the confidentiality provisions in Section 10.13 hereof. 16. MISCELLANEOUS. 16.1 This Agreement may not be assigned, in whole or in part, by any party hereto without the prior written consent of the other party, except to: (1) a parent company or wholly owned subsidiary of the assigning party, (2) a person or entity that purchases in excess of fifty percent (50%) of either party's voting stock, or (3) any entity which purchases substantially all assets of the assigning party. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 16.2 All notices required to be given hereunder will be considered delivered when placed in the United States Mail, certified mail, return receipt requested, properly addressed, or when delivered by courier, to the parties at their respective addresses as set forth on the signature page of this Agreement; provided that a party may change its address for notices hereunder by giving the other party written notice of such change. 16.3 This Agreement constitutes the entire agreement of the parties and supersedes all prior understandings, whether written or oral, between the parties thereto. This Agreement will not be modified except by written instrument duly executed by Licensor and Licensee. Any approvals or consents required by either party by the terms of this Agreement shall not be unreasonably withheld. Notwithstanding the above, in the event either party expressly waives a default or breach of the other party, this waiver will not be considered a waiver of a later default or breach of the same or any other provision of this Agreement. If either party fails to object or take affirmative action with respect to any conduct of the other party which is in violation of the terms of this Agreement, this failure shall not be construed as a waiver of such terms between the parties hereto. 16.4 This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. 16.5 Neither party shall be liable to the other party for any loss or damage due to delays or failure to perform resulting from an event of "Force Majeure," which shall mean and include: an act of God; accident; war; fire; lockout; strike or labor dispute; riot 17 19 or civil commotion; act of public enemy; enactment, rule, order or act of civil or military authority; acts or omissions of the other party; judicial action; inability to secure adequate materials, labor, or facilities; the inability of carriers to make scheduled deliveries; or any other event beyond the reasonable control of such party. Notwithstanding the foregoing, Force Majeure shall not excuse either party from making payments when due. 16.6 This Agreement shall be construed fairly as to both parties and not in favor of or against either party, regardless of which party prepared this Agreement. 16.7 This Agreement will be interpreted and construed in accordance with, and will be governed by, the laws of the State of Georgia. The parties hereto irrevocably submit themselves to the jurisdiction of the courts of the State of Georgia. Any suit or action arising out of this Agreement may be brought in the court of competent jurisdiction in the County of Fulton, State of Georgia. Service of process may be made, in addition to any other method permitted by law, by certified mail, return receipt requested, sent to the applicable address set forth herein. 16.8 Notwithstanding anything to the contrary in this Agreement, Licensee may enter into any agreement with third parties for similar services or otherwise directly offer, originate or make mortgage loans in any states. 16.9 In the event Licensor makes secondary market commitments in the name of Licensee to sell Loans on behalf of Licensee and pursuant to this Agreement, Licensor agrees to sell and deliver such Loans in accordance with the secondary market commitments made in the name of and on behalf of Licensee with respect to such Loans; provided that nothing in this Agreement shall authorize Licensor to make such commitments in the name of or on behalf of Licensee. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 18 20 IN WITNESS WHEREOF, the parties hereto have duly executed, sealed and delivered this Agreement in duplicate on the day and year first above written. NET.B@NK E-LOAN, INC. LICENSEE LICENSOR By: /s/ illegible By: /s/ Doug Galen ----------------------------- ------------------------------ Name: Illegible Name: Doug Galen --------------------------- ---------------------------- Title: President Title: VP -------------------------- --------------------------- [BANK SEAL] [CORPORATE SEAL] Address for Notices: NET.B@NK E-LOAN, Inc. 950 North Point Parkway 540 University Avenue Suite 350 Palo Alto, CA 94301 Alpharetta, GA 30005 Fax: (770) 753-1403 Fax: (650) 617-0410 Attn: Jeff Watson Attn: Doug Galen 19 21 APPENDIX A List of Applicable States EX-10.21 27 MORTGAGE LOAN PROCESSING AGMNT. 10/1/98 1 EXHIBIT 10.21 EXECUTION COPY MORTGAGE LOAN PROCESSING AGREEMENT THIS AGREEMENT (the "Agreement") is made as of the 1st day of June, 1998 by and between E-LOAN, INC. ("PROCESSOR"), a California corporation having an office 540 University Avenue, Palo Alto, CA 94301, and NET.B@NK ("LENDER"), a Federal savings bank having an office located at 950 North Point Parkway, Suite 350, Alpharetta, Georgia 30005. RECITALS PROCESSOR operates a program that is characterized by borrower convenience features such as direct on-line Internet access, a 24-hour toll-free interest rate hotline, toll-free telephone access, speed of commitment, and nationwide availability. PROCESSOR will establish a loan processing service bureau (the "Loan Processing Program") to allow LENDER to offer residential mortgage products in certain states through its Internet and telemarketing call center facilities operated by LENDER under the trade name "E-Loan" ("E-Loan Internet Origination Center") pursuant to a separate License, Staffing, Purchase and Sale Agreement between the parties, dated as of even date herewith (the "License Agreement"). In consideration of the above recitals, the terms and covenants of this Agreement, and other valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows: AGREEMENT 1. Loan Processing Program. 1.1 Duties of PROCESSOR. PROCESSOR will perform the following loan processing and underwriting services on behalf of LENDER in connection with all loans originated through LENDER's E-Loan Internet Origination Center with respect to certain states as identified in the attached Appendix A (as may be modified from time to time by mutual written consent of the parties hereto). Said Appendix A, including any such modifications, is incorporated as part of this Agreement. 1.1.1 PROCESSOR will provide information on loan products and interest rate pricing information to LENDER, to be updated each business day. 1.1.2 PROCESSOR will provide support and counseling services to assist with the completion of loan applications and will receive loan applications transmitted by LENDER or LENDER's customers by electronic mail or other means. PROCESSOR will handle all aspects of loan processing and underwriting, including verification of borrower information, loan approval, closing, shipping and post-closing. PROCESSOR will underwrite the loans in conformity with underwriting standards adopted by the LENDER. 2 All loans made under the Loan Processing Program will be closed in the name of the LENDER and be funded by LENDER. PROCESSOR will issue instructions to LENDER for funding and will supervise the closing of loans. 1.1.3 PROCESSOR will make all disclosures required by federal or state law to loan applicants, including disclosures required by the Real Estate Settlement Procedures Act, Truth in Lending Act, and Equal Credit Opportunity Act. PROCESSOR warrants that it will issue all disclosures within the applicable legal time period. 1.1.4 Pursuant to the License Agreement, the PROCESSOR shall purchase, on a non-recourse basis, all loans closed and funded by LENDER under the Loan Processing Program. 1.1.5 PROCESSOR will assist LENDER in compiling information required by federal or state regulatory agencies, including information required by LENDER for compliance with the Home Mortgage Disclosure Act and Community Reinvestment Act. 1.1.6 PROCESSOR will provide LENDER with status reports of the Loan Processing Program upon demand of LENDER, which reports will include information on Program usage and comments by users. 1.1.7 PROCESSOR will respond promptly and professionally to questions, comments, complaints and other reasonable requests regarding loans from LENDER's customers or on request by LENDER and shall cooperate and assist in promptly answering same. 1.1.8 PROCESSOR shall promptly provide copies to LENDER of all written correspondence related to the Loan Processing Program or any loan originated thereunder which could reasonably lead to a claim or demand against LENDER and/or its affiliates by any third party or any liability of LENDER and/or its affiliates to a third party. 1.1.9 At its sole discretion, PROCESSOR shall use commercially reasonable efforts to market the Loan Processing Program and shall, at a minimum, cooperate with and reasonably assist LENDER by supplying material, advice and information for LENDER's marketing and promotional activities which relate to the Loan Processing Program. 1.1.10 PROCESSOR hereby represents and warrants to LENDER, and covenants in favor of LENDER, that all loans originated on LENDER's behalf pursuant to this Agreement and the License Agreement will be underwritten, processed, originated, and closed (i) in conformity with all conditions and requirements necessary for sale of such loans in the secondary market for single-family residential mortgage loans and (ii) in compliance with all applicable federal, state and local laws, rules and regulations, including, without limitation, the Real Estate Settlement Procedures Act, Truth in Lending Act, Flood Disaster Protection Act, Equal Credit Opportunity Act, applicable usury limitations, and applicable lending laws (all conditions, requirements, laws, rules and regulations referenced in clauses (i) and (ii) of this Section 1.1.10 being herein collectively referred to as the "Applicable Requirements"). PROCESSOR further represents and warrants to LENDER, and covenants in favor of LENDER, that PROCESSOR (and its agents and 2 3 employees performing work pursuant to this Agreement and the License Agreement) have such familiarity and experience with the Applicable Requirements as is necessary to ensure the accuracy of the foregoing representation and warranty under this Section 1.1.10 and the fulfillment of the foregoing covenant under this Section 1.1.10. 1.1.11 LOAN FUNDINGS No later than 4:00 p.m. (prevailing Atlanta, Georgia time) on the business day immediately preceding the business day on which funding for any Loan will be due from LENDER in accordance with Section 1.2.7 hereof, PROCESSOR shall deliver to LENDER true, correct and complete copies of (1) a nationally recognized title insurance company's insured closing letter covering the applicable closing attorney with respect to such Loan, (2) the pertinent borrower's loan application and transmittal summary, (3) the PROCESSOR's "Net Check Letter to Escrow Agent" (including, without limitation, itemization of settlement fees) with respect to such Loan, which Net Check Letter shall specify the net amount to be funded by LENDER for closing of such Loan (the "Net Funding Amount"), and (4) wiring instructions. Within three (3) business days after closing of each Loan pursuant to this Agreement and the License Agreement, PROCESSOR shall cause delivery to LENDER of (i) the fully executed original promissory note evidencing such Loan (LENDER agrees to notify PROCESSOR of receipt of such note) and (ii) true, correct and complete copies of the security instrument (i.e., mortgage, deed of trust, or deed to secure debt) securing such Loan and of the closing settlement statement for such Loan. Each Loan funded by LENDER pursuant to this Agreement shall be the sole and exclusive property of LENDER until such Loan is duly sold by LENDER. So long as any such Loan is the property of LENDER: (a) all documents evidencing, securing, or otherwise relating to such Loan shall likewise be the sole and exclusive property of LENDER and shall specify LENDER as sole holder of such Loan; and (b) any such documents remaining in the possession of PROCESSOR or its closing attorney or other agent shall be deemed to be held by PROCESSOR as custodian for LENDER, with PROCESSOR hereby being charged with all reasonable due care in safeguarding such documents on behalf of LENDER and hereby being authorized to take only those actions (with respect to such documents) which LENDER hereafter authorizes in writing. LENDER shall not, without PROCESSOR's prior consent, incorporate any fees into any Loan transaction except as contemplated by this Agreement, the License Agreement, and the terms and conditions of such Loan. 1.2 Duties of LENDER. LENDER will use the Loan Processing Program as its exclusive mortgage lending program for loans originated by it through its E-Loan Internet Origination Center with respect to those states identified in Appendix A. In connection with the Loan Processing Program, LENDER will perform the following functions: 1.2.1 LENDER will originate and deliver to PROCESSOR applications for mortgage loans in accordance with all applicable mortgage loan specifications and guidelines agreed upon by LENDER and PROCESSOR. 3 4 1.2.2 LENDER will transmit to PROCESSOR, by electronic mail or other means, any mortgage loan application received from its customers by LENDER through the E-Loan Internet Origination Center with respect to the states identified in Appendix A. The complete application packages must be transmitted to PROCESSOR for processing within 24 hours of receipt. 1.2.3 Underwriting standards utilized by LENDER will be in conformity with applicable law and with guidelines of secondary market investors, including the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, and the Government National Mortgage Association, and/or the guidelines of private investors, as applicable. 1.2.4 LENDER will retain ultimate responsibility for underwriting decisions and will review and approve or deny each loan, including PROCESSOR's recommended credit and underwriting decisions for each loan. LENDER shall have the opportunity to provide a "second review" of all denied or incomplete loan application files. 1.2.5 LENDER will be named as the payee on all loans and all disclosures will be given to borrowers in the name of the LENDER. 1.2.6 LENDER will fund all loans originated through the Loan Processing Program, using its own funds or funds obtained through a warehouse line of credit, which funds shall be disbursed by LENDER to PROCESSOR or its agent in accordance with funding instructions from PROCESSOR for the loan closing. 1.2.7 LENDER agrees to sell to PROCESSOR all loans made by LENDER under the Loan Processing Program under terms and conditions set forth in the License Agreement. Such loans will be sold on a non-recourse basis. 1.3 Exclusive Agreement. During the term of this Agreement, PROCESSOR will have the exclusive right to perform the duties outlined above as part of the Loan Processing Program and LENDER will not enter into any agreement with third parties for similar services (whether in the aggregate or singly) with respect to the operation of the E-Loan Internet Origination Center. PROCESSOR retains the right to offer residential mortgage loans to any customer who applies to PROCESSOR through another of the PROCESSOR's mortgage loan programs or through a loan offer made to the public by PROCESSOR. PROCESSOR also retains the right to offer similar Loan Processing Programs to other lenders. 1.3.1 LENDER retains the right to offer residential mortgage loans to any customer who applies to LENDER through another of the LENDER's mortgage loan programs or through a loan offer made to the public by LENDER. 4 5 2. Compensation. 2.1 For its efforts, PROCESSOR will be paid by LENDER all loan related fees paid to LENDER by borrowers (other than fees passed-through to third parties), including without limitation, any and all fees charged to borrowers and designated as underwriting fees, processing fees, document preparation fees, lock-in fees, commitment fees, and other types of closing-related fees. Payment will be made in the form of PROCESSOR's retention of such fees in respect of all loans sold to PROCESSOR by LENDER under the License Agreement. 2.2 It is the intent of the parties that all compensation received by PROCESSOR shall not exceed the reasonable value of the services rendered within the meaning of the Real Estate Settlement Procedures Act, 12 U.S.C. Section 2601 et seq. as amended from time to time and the regulations which are promulgated thereunder. 3. Term. 3.1 Except as otherwise provided herein, the term of this Agreement shall expire one (1) year from the date of this Agreement. 3.2 At its option exercisable by giving written notice to LENDER at least sixty (60) days prior to the first anniversary of the date of this Agreement, PROCESSOR may renew this Agreement for one (1) additional term of (1) year if PROCESSOR shall have satisfied all monetary obligations owed by PROCESSOR to LENDER and its parent, subsidiaries, and affiliates under this Agreement and any other contract between the parties as of the date of such notice and as of the date of commencement of the renewal term. 3.3 At its option exercisable by giving written notice to PROCESSOR at least sixty (60) days prior to the first anniversary of the date of this Agreement, LENDER may renew this Agreement for one (1) additional term of (1) year if LENDER shall have satisfied all monetary obligations owed by LENDER to PROCESSOR and its parent, subsidiaries, and affiliates under this Agreement and any other contract between the parties as of the date of such notice and as of the date of commencement of the renewal term. 3.4 This Agreement may be terminated with or without cause by PROCESSOR or LENDER upon sixty (60) days' written notice to the other party. 3.5 In the event this Agreement is terminated by either party, PROCESSOR will continue to process, underwrite and close any complete loan application that has been received from LENDER (as of the date of notification of termination) under the same terms and conditions of this Agreement. In addition, LENDER shall continue to be obligated under the same terms and conditions of this Agreement to fund all such loans and pay for the services provided by PROCESSOR. 5 6 4. Legal Fees. In the event action is taken by either party to enforce the provisions of this Agreement, whether suit is brought or not, the prevailing party shall be entitled to reasonable attorney's fees and costs from the nonprevailing party. 5. Indemnity. 5.1 Each party hereby indemnifies and agrees to hold harmless the other party against liabilities, damages, costs, charges, legal fees, judgments, expenses (including attorneys' fees) or any other losses (collectively, the "Liabilities") incurred as a result of a third party's use of LENDER's E-Loan Internet Origination Center to the extent such Liabilities result from any negligent acts or omissions, bad faith, or willful misconduct of the indemnifying party or its employees, agents or affiliates. 5.2 PROCESSOR will indemnify and hold LENDER harmless against, and will at its own expense defend, any action brought against LENDER to the extent such action is based upon a breach of this Agreement by PROCESSOR; provided that PROCESSOR is promptly notified in writing by LENDER of any such action; and provided, further, that PROCESSOR shall have the exclusive right to control such defense. In no event shall LENDER settle any such claim, lawsuit or proceeding without PROCESSOR's prior written approval. 5.3 LENDER will indemnify and hold PROCESSOR harmless against, and will at its own expense defend, any action brought against PROCESSOR to the extent such action is based upon a breach of this Agreement by LENDER; provided that LENDER is promptly notified in writing by PROCESSOR of any such action; and provided, further that LENDER shall have the exclusive right to control such defense. In no event shall PROCESSOR settle such claim, lawsuit or proceeding without LENDER's prior written approval. 6. Liability. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY DAMAGES (SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS) ARISING FROM THE USE OR INABILITY TO USE THE E-LOAN INTERNET ORIGINATION CENTER AND THE LOAN PROCESSING PROGRAM OR ARISING FROM THE USE OF ANY LINKED UP INTERNET SITE (EVEN IF THAT PARTY HAS BEEN ADVISED OF, OR HAS FORESEEN THE POSSIBILITY OF, SUCH DAMAGES). 7. Miscellaneous. 7.1 PROCESSOR represents that it is a corporation duly organized, validly existing, and in good standing under the laws of the State of California, and that it has all corporate power necessary to make and perform its obligations under this Agreement. 6 7 7.2 LENDER represents that it is a federal savings bank duly chartered, validly existing, and in good standing under the laws of the United States and that it has all corporate power necessary to make and perform this Agreement. 7.3 LENDER represents and warrants that it has not entered into any other agreement, whether written or oral, or engaged in any course of conduct, that is currently binding or continuing that would prohibit it from entering into this Agreement. 7.4 Each party agrees that it will not use the trademarks, service marks, logo, name or any other proprietary descriptions of the other party or the other party's parent or affiliate(s), whether registered or unregistered, without the other party's prior written consent. 7.5 Each party agrees to notify the other as soon as practicable of any formal request by a governmental agency to examine records pertaining to the other party or its customers, if the party being subjected to such examination is permitted to so notify the other party. Each party agrees that the other party is authorized to fully cooperate with any such examination, and that such cooperation will not constitute a breach of this Agreement, including, without limitation, a breach of the confidentiality provisions in paragraph 7.15. 7.6 Nothing in this Agreement or the License Agreement will be deemed to constitute a partnership, joint venture, employment, affiliated business arrangement, or agency relationship between the parties. 7.7 This Agreement may not be assigned, in whole or in part, by any party hereto without the prior written consent of the other party, except to: (1) a parent company or wholly owned subsidiary of the assigning party, (2) a person or entity that purchases in excess of fifty percent (50%) of either party's voting stock, or (3) any entity which purchases substantially all assets of the assigning party. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 7.8 All notices required to be given hereunder shall be made by regular mail, facsimile or express courier to the addresses as set forth at the beginning of this Agreement. 7.9 This Agreement constitutes the entire agreement of the parties and supersedes all prior understandings, whether written or oral, between the parties thereto. This Agreement will not be modified except by written instrument executed by PROCESSOR and LENDER. Any approvals required by either party by the terms of this Agreement shall not be unreasonably withheld. Notwithstanding the above, in the event either party expressly waives a default or breach of the other party, this waiver will not be considered a waiver of a later default or breach of the same or any other provision of the Agreement. If either party fails to object or take affirmative action with respect to any conduct of the other party which is in violation of the terms of this Agreement, this failure shall not be construed as a waiver of such understanding or representations, between the parties hereto, whether oral or written. 7 8 7.10 This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same agreement. 7.11 Neither party shall be liable to the other party for any loss or damage due to delays or failure to perform resulting from an event of "Force Majeure," including without limitation: an act of God; accident; war; fire; lockout; strike or labor dispute; riot or civil commotion; act of public enemy; enactment, rule, order or act of civil or military authority; acts or omissions of the other party; defaults of subcontractors or suppliers; the inability of carriers to make scheduled deliveries; or any other event beyond the reasonable control of such party. Notwithstanding the foregoing, such Force Majeure shall not excuse either party from making payments when due. 7.12 The invalidity, in whole or in part, of any term of this Agreement does not affect the validity of the remainder of the Agreement. 7.13 This Agreement will be interpreted and construed in accordance with, and will be governed by, the laws of the State of Georgia. The parties hereto irrevocably submit themselves to the jurisdiction of the courts of the State of Georgia. Any suit or action arising out of this Agreement may be brought in the court of competent jurisdiction in the County of Fulton, State of Georgia. Service of process may be made, in addition to any other method permitted by law, by certified mail, return receipt requested, sent to the applicable address set forth herein. 7.14 The parties acknowledge and agree that the Loan Processing Program is not intended to permit the access or transmission of LENDER's customer names, screen names, addresses or any information concerning LENDER's customers ("Customer Information"), other than that required to be accessed or transmitted in connection with a Mortgage Loan application. 7.15 The parties agree to maintain the terms and conditions of this Agreement confidential during the term of this Agreement. In addition, each party acknowledges that in performing under this Agreement it may gain access to confidential information belonging to the other party and its customers, including but not limited to business, financial and technological information (collectively, "Confidential Information"), which Confidential Information constitutes and shall constitute valuable assets and trade secrets. Accordingly, when a party (the "Receiving Party") receives Confidential Information from another party (the "Owning Party"), the Receiving Party shall, both during the term of this Agreement and following the termination thereof, (i) keep secret and retain in strict confidence any Confidential Information received from the Owning Party, (ii) not disclose to any third party any Confidential Information received from the Owning Party for any reason whatsoever, (iii) not disclose any Confidential Information received from the Owning Party to the Receiving Party's employees, except on a need-to-know basis, and (iv) not make use of any Confidential Information received from the Owning Party for its own purposes or for the benefit of any third party except as authorized by this Agreement. Notwithstanding the foregoing, the parties' duty regarding Confidential Information shall not apply when disclosure is made pursuant to (i) any state or federal 8 9 law or regulation, or (ii) the order of any state or federal court or agency, provided the party disclosing such Confidential Information provides prior written notice, wherever practicable, to the other party. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 9 10 IN WITNESS WHEREOF, the parties have executed this Agreement under seal as of the date and year first set forth above. E-LOAN, INC. By: /s/ Douglas Galen ------------------------------------- Name: Doug Galen ----------------------------------- Title: VP ---------------------------------- [CORPORATE SEAL] NET.B@NK By: /s/ illegible ------------------------------------- Name: Illegible ----------------------------------- Title: President ---------------------------------- [BANK SEAL] 10 11 APPENDIX A List of Applicable States EX-10.22 28 WHOLESALE MORTGAGE PURCHASE AGMNT. 6/1/98 1 EXHIBIT 10.22 WHOLESALE MORTGAGE PURCHASE AGREEMENT BETWEEN E-LOAN INC. ---------------------------------------- (Fill in Seller's Licensed Name) AND PHH MORTGAGE SERVICES CORPORATION Tier VI Revised Date: 12/30/97 2 TIER VI WHOLESALE MORTGAGE PURCHASE AGREEMENT This Wholesale Mortgage Purchase Agreement ("Agreement") is entered into as of the 1st day of June, 1998, between PHH MORTGAGE SERVICES CORPORATION ("PHH"), a New Jersey Corporation having an office at 6000 Atrium Way, Mt. Laurel, New Jersey 08054, and E-Loan Inc. (the "Seller"), a California Corporation having an office at 6200 Village Parkway, #102, Dublin. CA 94568. WHEREAS the Seller desires to originate, process and close both government and conventional first mortgage loans ("Loans") with PHH and PHH desires to purchase such Loans, pursuant to the terms of this Agreement, as amended in writing from time to time. NOW THEREFORE, in consideration of the mutual promises above and covenants contained hereinafter, the parties agree as follows: I. Manuals: The Seller acknowledges that it has received and read the PHH Sales Manual and the PHH Wholesale Operations Manual ("Manuals"). All provisions of the Manuals, as amended from time to time, are incorporated by reference into this Agreement and shall be binding upon both parties. All terms used herein shall have the same meaning as such terms have in the Manuals, unless the context clearly requires otherwise. II. Mortgage Defined: It is understood that the word "mortgage", as used herein, includes Notes, Bond, Mortgage/Deed of Trust, Extension Agreement, Assumption of Indebtedness, and any other documents constituting the basic instruments for a Loan secured by real and personal property in the state in which the mortgaged premises is located. III. Eligible Loans: Only those loans complying with standards for Conforming Conventional, Jumbo Conventional and Government Mortgage Loan Programs as set forth in the Manuals are eligible for purchase under this Agreement. All Loans shall be originated, processed, closed and registered in conformance with the procedures set forth in the Manuals. IV. Loan Pricing: A. Interest Rates/Points: The Seller shall sell Loans in accordance with the price reflected on the daily PHH rate sheet. PHH shall transmit, via electronic facsimile, the PHH Rate Sheet to the Seller by 10:30 am Eastern Time every business day. Seller may call PHH between the hours of 8:30 am and 10:00 pm Eastern Time to obtain the latest price quotes. Prices are subject to change without notice. 1 3 B. Rate Lock Options: The Seller shall abide by all interest rate lock options and provisions as outlined in the Manuals. C. Best Efforts Delivery: All Loans purchased under this Agreement shall be on a Best Efforts Basis, unless specifically negotiated otherwise. Best Efforts delivery shall mean a mandatory delivery of Loans registered with PHH if the Loan closes. All locked Loans which are not declined by PHH shall be delivered to PHH, if closed by the Seller. Seller shall not deliver the Loan to any other lender and shall not assist in closing the loan with any other lender. The Best Efforts Delivery Policy will be closely monitored by the Quality Control Department at PHH. In the event of the settlement of any locked Loan by Seller and subsequent non-delivery to PHH, Seller shall be subject to fees as described in the Manuals. V. Reciprocal Representations and Warranties Made by Each Party to This Agreement: A. Such party is duly organized, validly existing and in good standing under the laws of its jurisdiction or organization. In addition, such party has the requisite power and authority to enter into this Agreement and all other agreements which are contemplated hereunder and to carry out its obligations under this Agreement. B. This Agreement has been duly authorized, executed and delivered by such party and constitutes a validly and legally binding agreement of such party enforceable in accordance with its terms. C. There is no action, proceeding or investigation pending or threatened, nor any basis therefor known to such party, that questions the validity or prospective validity of this Agreement. D. Such party is not in violation of any charter, articles of incorporation, by-laws, mortgage, indenture, indebtedness, agreement, instrument, judgment, decree, order, statute, rule or regulation and no such obligation adversely affects its capacity to fulfill any of its promises or duties under this Agreement. The execution of and performance pursuant to this Agreement will not result in a violation of any of the foregoing. Failure by either party to comply with the aforementioned representations and warranties shall be deemed a breach of this Agreement and both parties hereby agree to indemnify and hold harmless the other from any and all claims or damages arising out of such breach. VI. Seller's Obligations, Representations and Warranties with Respect to Each Loan Sold Under This Agreement: A. Each Loan shall be insured by an ALTA title insurance policy acceptable to PHH evidencing that the Loan is a valid first lien on the mortgaged property, and the mortgaged property is free and clear of all encumbrances, including all mechanic's or materialman's liens, except liens for real estate taxes and special assessments not yet due and payable. All taxes due within 30 days of purchase by PHH shall be paid by Seller. B. All parties to the mortgage have the legal capacity to execute the same. 2 4 C. Each Loan shall be accompanied by an appraisal of the property provided by a properly licensed and certified appraiser which indicates that said property is free of substantial damage (including but not limited to, any damage by fire, windstorm, vandalism or other casualty) and is in good repair. D. All federal and state laws, rules and regulations applicable to the Loans have been complied with including but not limited to: Regulation Z (Truth-in-Lending Act), Fair Credit Reporting Act; Flood Disaster Protection Act of 1973; Real Estate Settlement Procedures Act of 1974 (RESPA) and Regulation X, as amended and Regulation B (Equal Credit Opportunity Act), as amended. E. Seller agrees, within 120 days of the Loan closing date to execute, transmit and/or obtain any and all Final Documentation over which said Seller can be reasonably expected to have control and which PHH deems necessary to properly complete a sale of any Loan, and/or to perfect a first lien. F. The Loan documents have been duly executed by the mortgagor, acknowledged and sent for recordation by the closing agent; and each Loan complies with the Underwriting Guidelines contained in the Manuals. Provided, however, the Seller does not make any representations or warranties regarding the underwriting decision. G. Seller is the sole owner of the Loan and has authority to sell, transfer and assign the Loan on the terms set forth in this Agreement. H. The full principal amount of the Loan has been advanced to the mortgagor, either by payment directly to such person or by payment made on such person's request or approval. The unpaid balance is as stated. All costs, fees and expenses incurred in making, closing and recording the Loan have been paid. No part of the mortgaged property has been released from the lien of the Loan and the terms of the Loan have in no way been changed or modified, and the Loan is current and not in default. I. Each Loan requiring insurance or a guaranty is properly insured or guaranteed. Any premiums, required to be paid under such policies within 30 days of purchase by PHH, shall be paid by Seller. J. There is in force a hazard insurance policy and flood insurance policy, where applicable, meeting the requirements of PHH. Any premiums, required to be paid under such policies within 30 days of purchase by PHH, shall be paid by Seller. K. Seller shall submit a certified true copy of a completed Assignment in the name of PHH Mortgage Services Corporation with the Loan package prior to PHH funding the Loan. Once the Loan is funded by PHH, the Seller shall have forty-eight (48) hours to send the original Assignment for recordation. All endorsements and assignments by Seller of promissory notes and security interest shall be without recourse. 3 5 L. The Seller has no knowledge of the borrower having any set-offs, counter-claims or defenses to the Promissory Note or Deed of Trust or Mortgage securing the Promissory Note arising from the acts and/or omissions of Seller in the origination of the Loan. M. Seller has no knowledge of any improvement located on or being part of the mortgaged property which is in violation of any applicable zoning laws or regulations. N. Seller has no knowledge of any circumstances or conditions with respect to the Loan, mortgaged property, mortgagor or mortgagor's credit standing that could be expected to cause a reasonable investor to regard the Loan as an unacceptable investment, cause the Loan to become delinquent or adversely affect the value or marketability of the Loan. O. All documents submitted to PHH are genuine, true, correct and proper. All other representations, for which the Seller has responsibility under this Agreement, are true and correct and meet the requirements and specifications of this Agreement and the Sales Manual. P. The Seller states that the warranties and representations required under Section III of this Agreement have been satisfied. Provided, however, Seller does not make any warranties or representations regarding the underwriting decision, which is the responsibility of PHH, made on the Loans. All of the aforementioned warranties shall survive and inure to the benefit of any person, partnership, firm or entity to which PHH may assign or sell any of such Loans or Servicing Rights under this Agreement. Upon discovery of any breach of any of these representations and warranties, PHH shall give prompt, written notice to the Seller. If the breach is not cured within thirty (30) days of written notice, Seller shall be in default under the terms of this Agreement and become subject to repurchase of such Loan(s) as described in Section IX. VII. Quality Control: A. Seller shall maintain a Quality Control function acceptable to PHH, FNMA, FHLMC and/or GNMA and shall, upon request, supply the results of such Quality Control activities to PHH. B. Seller agrees to supply to PHH copies of Quality Control audits performed by Seller or the agencies listed in Paragraph A of this Section and hereby indemnifies PHH against any adverse action taken by these agencies that may affect PHH in any way. If, in PHH's sole discretion, the Agency audits determine the Quality Control function to be unacceptable, the Seller shall be in default under this contract and PHH may exercise any of the remedies described in Section VIII and IX. C. At any time, PHH shall have the right to conduct quality control audits to verify all documentation submitted by Seller including full documentation of Loans closed as "no income" Loans. Seller agrees to cooperate fully with these audits. If it is discovered that there 4 6 was improper documentation or documentation that does not support the information supplied with the Loan submission, PHH may exercise those remedies set forth in Sections VIII and IX. If a Loan is determined to be fraudulent, Seller agrees to indemnify and hold PHH harmless from all claims, liabilities, losses, damages, expenses and lawsuits (including attorney's fees), in connection therewith. VIII. Seller's Repurchase Obligations: Seller agrees to repurchase any Loan(s) sold to PHH under this Agreement within ten (10) business days of written notice from PHH of any of the following: A. Seller fails to observe or perform, or breaches, in any material respect, any of the representations, warranties or covenants contained in this Agreement and/or the Manuals with respect to a particular Loan and such failure continues for thirty (30) days following PHH's written notification of such failure to Seller. B. Seller fails to deliver to PHH within 270 calendar days from the date each Loan was purchased, all of the Final Documents as set forth in the Manuals. C. PHH determines that there is evidence of fraud or misrepresentation in the origination of the Loan or any matter in the mortgage loan file is not true and correct. D. Seller fails to observe or perform or breaches, in any material respect, any of the representations, warranties or agreements set forth in this Agreement. IX. Repurchase Price: The price to be paid by Seller to PHH in the event of a repurchase of a mortgage loan shall be an amount equal to the sum PHH was required to pay in order to repurchase the loan from its investor plus interest accrued but unpaid on the principal balance of the Loan from the date of settlement through the date of repurchase plus any premiums paid to Seller and any and all costs and expenses incurred by PHH in connection with the repurchase. Upon any such repurchase of Loans by Seller, PHH shall endorse the Promissory Note(s) (without recourse) and shall forward an assignment (without recourse and in recordable form) in any security interest to Seller. X. Delivery of Final Documents: Seller shall deliver all of the documents listed on the Final Document Transmittal Form within 120 calendar days from the date the Loan is purchased by PHH. However, failure by Seller to deliver to PHH within 150 calendar days from the date a Loan was purchased, one or more of the original documents listed on the Final Document Transmittal Form shall result in assessment by PHH of a fee of $50 per 30 days per loan for each 30 days, after the 150 day period, during which one or more of such documents is outstanding. Such fees shall be $50 regardless of the number of loan documents outstanding. Seller shall be billed for such penalty. In the event Seller odes not pay the penalty within thirty (30) days of receipt of invoice, then such penalty shall be deducted out of the Seller's funds on the next loan sold to PHH following expiration of the thirty (30) day period. Provided, however, if Seller fails to deliver to PHH the Final Documents within the 150 day period because such documents have not been received from the applicable recorder's officer or the title company respectively, and not because of any delay within Seller's control, then PHH shall extend the 5 7 150 day period for any reasonable time necessary for Seller to deliver the documents and no penalty shall be assessed. XI. Seller's Compensation: PHH shall purchase closed Loans for which it has received full and correct Loan documentation. PHH shall disburse funds to the Seller using the following calculations: A. The Unpaid Principal Balance of the Loan at the price quoted by PHH; B. Plus, any accrued interest owed to the Seller; C. Less, any accrued interest or fees owed to PHH; D. Less, any other fees or costs as set forth in this Agreement or in the Fee Structure contained in the Manuals. XII. Servicing Rights: PHH shall own the Servicing Rights of all Loans closed under this Agreement and is entitled to all escrow fees, buydown funds and rights thereof. Such funds shall be netted out of the funds paid to Seller as described in Section XI. XIII. Termination: A. This Agreement shall terminate upon the occurrence of any one of the following events: (1) In the event either party is required to discontinue its performance of this Agreement because of an order of any appropriate state or federal Court or regulatory body to do so. (2) To the extent permitted by applicable law, upon the filing by a party of any action under any reorganization, insolvency or moratorium law, or upon the appointment of any receiver, trustee or conservator to take possession of the properties of such party. (3) In the event PHH commits any breach of its terms, conditions, representations or warranties under this Agreement, and such breach is not cured within thirty (30) days of PHH's receipt of written notice of such breach. (4) In the event Seller commits any breach of its terms, conditions, representations or warranties under this Agreement, and such breach is not cured within thirty (30) days of Seller's receipt of written notice of the breach. (5) In the event of fraud on the part of Seller in performing its duties hereunder, immediately upon receipt by Seller of notice of termination. (6) Upon thirty (30) days written notice by either party to the other. B. In the event of a breach of the representations and warranties set forth in Section V and VI either party may terminate this Agreement immediately upon providing written notice to the other. In addition, such breach shall void all rate locks on applicable loans. 6 8 XIV. Fair Lending Compliance: A. Seller agrees with and fully support the fair lending laws including: the Equal Credit Opportunity Act, Fair Housing Act and the Home Mortgage Disclosure Act. Specifically, Seller shall not collect overages or price loans in violation of applicable fair housing laws. To that end. Seller shall ensure that all customers are reviewed and treated on the basis of their qualifications as a borrower regardless of any non-merit factors (i.e., race, religion or gender). Upon request, PHH agrees to provide its own procedures which it utilizes in fulfilling its fair lending goals. In addition, in the spirit of promoting fair lending, the Seller agrees to make their best efforts to maintain an employment staff that reflects the racial, cultural and gender makeup of its local area. B. In furtherance of its fair lending commitment, PHH and Seller also agree to use their best efforts to utilize minority and women owned businesses when selecting vendors and outside services. XV. Assignment: This Agreement may not be assigned or transferred, in whole or in part, by the Seller without the prior written consent of PHH. XVI. Notices: All notices required or permitted by this Agreement shall be in writing and shall be given by certified mail, return receipt requested or via overnight mail and sent to the address at the head of the Agreement or such other address that a party specifies in writing in accordance with this paragraph. XVII. IRS Designation Clause: Pursuant to the requirements of the Internal Revenue Procedures and in accordance with the applicable provisions of the IRS Code, the Parties hereby desire to clarify the 1098 reporting responsibilities of PHH and Seller. PHH will provide a 1098 return for the amount of interest it actually collects in each transaction. This reporting shall be limited to the interest collected by PHH as servicer of the subject Loan. Seller shall provide a 1098 return to the borrower for the amount of interest and points collected by it prior to PHH taking over the servicing of the Loan. The total of these two returns will equal the total fees paid by the customer on each Loan. The Parties agree that these provisions shall cover all loans sold by Seller to PHH for the term of this Agreement. PHH and Seller agree that individual designation agreements will not be drawn up on each individual loan closing or on an annual basis covering Seller's volume. XVIII. Non-Solicitation: The Seller agrees, for a period of 270 calendar days from the date of purchase of a Loan by PHH from Seller, that Seller shall be prohibited from refinancing such Loans. A refinancing shall have occurred if the Loan closes within such 270 day period. In the event Seller refinances any Loans closed within such 270 calendar days, Seller shall pay to PHH a penalty equal to the service release premium (calculated as 1% of the principal loan amount at closing on adjustable rate loans and 1 1/2% on fixed rate loans) paid to Seller on the original loan closing. A. Provided, however, in the event a customer contacts Seller for refinance and Seller can improve the customer's current interest rate by at least 1/2% or an equivalent benefit in points paid by the customer, Seller shall contact PHH's Pricing Department for approval to refinance such Loan. If such approval is granted, no penalty will be assessed. 7 9 XIX. Indemnification: Seller agrees to defend, indemnify and hold harmless PHH, its successors, assigns, stockholders, officers, directors, employees, agents, attorneys, affiliates and subsidiaries from and against any and all liabilities, damages or expenses whatsoever, including, without limitation, attorney's fees, resulting, directly or indirectly, from any actual or threatened claim or demand arising, directly or indirectly, under, from or out of or in connection with (i) any failure by Seller to perform its obligations under this Agreement, (ii) Seller's negligence or willful misconduct in the performance of its obligations under this Agreement, or (iii) Seller's failure to comply fully with any and all federal, state and local laws, rules and regulations governing the origination of mortgage loans. PHH agrees to defend, indemnify and hold harmless Seller, its successors, assigns, stockholders, officers, directors, employees, agents, attorneys, affiliates and subsidiaries from and against any and all liabilities, damages or expenses whatsoever, including, without limitation attorneys' fees, resulting, directly or indirectly, from any actual or threatened claim or demand arising, directly or indirectly, under, from or out of or in connection with (i) any failure by PHH to perform its obligations under this Agreement, (ii) PHH's negligence or willful misconduct in the performance of its obligations under this Agreement, or (iii) PHH's failure to comply fully with any and all federal, state and local laws, rules and regulations governing the processing, underwriting, closing or servicing of mortgage loans. XX. Miscellaneous Provisions: A. PHH makes no representation or warranty to Seller or its members regarding the effect that this Agreement and the consummation of the transactions contemplated hereby may have upon their foreign, federal, state or local tax liabilities. B. Seller shall promptly advise PHH of any changes of ownership, financial condition or principal officers of the Company and/or Senior Management. C. In the case that any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired. D. If any party hereto shall bring suit against the other as a result of any alleged breach or failure by the other party to fulfill or perform any covenants or obligations under this Agreement, then the prevailing party obtaining final judgment in such action shall be entitled to receive from the non-prevailing party reasonable attorneys' fees incurred by reason of such action and all costs of suit and preparation thereof at both trial and appellate levels. This Agreement shall be governed by, and construed and enforced in accordance with applicable federal law and the laws of the State of New Jersey without reference to conflict of law provisions hereof. E. This Agreement sets forth the complete terms of the Agreement between PHH and Seller. No terms or conditions of this Agreement may be waived or modified unless in writing by each party hereto. 8 10 XXI. Force Majuer. Neither party shall be deemed to be in violation of this Agreement if such party is prevented from performing its obligations hereunder for any reason beyond its reasonable control, including, without limitation, Acts of God or any public enemy, elements, floods or strikes. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed this 1st day of June, 1998. E. Loan, Inc. PHH MORTGAGE SERVICES CORPORATION - -------------------------------------------- SELLER'S LICENSED NAME Signature: /s/ Steve M. Majerus Signature: /s/ Signature Illegible By: Steven M. Majetus By: William Brown ---------------------------------------- ----------------------------- Title: Director, Mortgage Banking Operations Title: Vice President ------------------------------------- ------------------------ 9 EX-10.23 29 UNDERWRITING SERVICES AGMNT. 6/12/98 1 EXHIBIT 10.23 UNDERWRITING SERVICES AGREEMENT PMI OFFICE AND ON-SITE This Agreement (the "Agreement") is entered between E-LOAN, a California corporation, located at 6200 Village Parkway, Dublin, CA 94568 ("E-Loan"), and PMI MORTGAGE SERVICES CO., a California corporation, located at 601 Montgomery Street, San Francisco, CA 94111 ("PMI"). 1. DEFINITIONS AGENCY UNDERWRITING GUIDELINES - The underwriting guidelines of the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"), as the case may be (collectively, the "Agencies"), as may be amended or modified by the Agencies from time to time pursuant to Paragraph 5A. AUTHORIZED REPRESENTATIVE OF E-LOAN - Those individuals designated in writing from time to time by E-Loan as persons authorized to make revisions to the Platinum Plus Underwriting Guidelines as defined below. BUSINESS DAY - Any day other than (i) Saturday or Sunday, (ii) a day on which banking institutions in every state where there is a Review Office are authorized or obligated by law or executive order to be closed, and (iii) a day observed as a holiday by PMI. COMPLIANCE - The conformance of a Mortgage Loan to the applicable set of underwriting guidelines as requested pursuant to the procedures as set forth at Paragraph 2A. CONDITIONAL COMPLIANCE - The conformance of a Mortgage Loan to the applicable underwriting guidelines, pursuant to a Credit Review Underwriting. CORRESPONDENT - A mortgage lender, mortgage broker or credit union who has entered into an agreement with E-Loan for the purchase by E-Loan of the Correspondent's Mortgage Loans. CREDIT REVIEW UNDERWRITING - The underwriting review of a Mortgage Loan with regard to the applicable underwriting guidelines, pursuant to the procedures set forth at Paragraph 2C but without a review of the appraisal report relating to the Mortgage Loan. MATERIAL ERROR - Any material act, failure to act, error, mistake, or omission (the "Material Error") committed by PMI in rendering the services described in Paragraph 2 of this Agreement that (i) materially restricts or impairs the salability of a mortgage loan or causes the repurchase of a mortgage loan by E-Loan from a third party investor, (ii) constitutes gross negligence and (iii) results from PMI's failure to apply a specific underwriting requirement or standard set forth under any of the applicable underwriting guidelines. A Mortgage Loan in respect to which E-Loan asserts a Material Error is hereinafter referred to as a "Disputed Mortgage Loan". Notwithstanding the foregoing, no Page 1 of 12 2 Material Error can be asserted with respect any underwriting error relating to a Mortgage Loan for which PMI has conducted a Credit Review Underwriting, or any Mortgage Loan which has been designated an accepted Mortgage by either Fannie Mae's Desktop Underwriter(R) or Freddie Mac's Loan Prospector(R). MORTGAGE INSURANCE - Mortgage guaranty insurance issued by either (i) PMI Mortgage Insurance Co., ("PMI MIC"), an affiliate of PMI, with respect to an eligible Mortgage Loan pursuant to the PMI MIC's Underwriting Guidelines; or (ii) CMG, with respect to an eligible Mortgage Loan submitted by a credit union pursuant to CMG's Underwriting Guidelines, collectively defined below as the PMI Underwriting Guidelines and ascribed a certificate number. MORTGAGE INSURANCE UNDERWRITING - The underwriting of a Mortgage Loan to determine if it meets the PMI Underwriting Guidelines. MORTGAGE LOAN - An individual residential mortgage loan which is secured by a first lien or charge, and which is underwritten pursuant to this Agreement. MORTGAGE LOAN DOCUMENTS - With respect to a Mortgage Loan, the documents required by the applicable underwriting guidelines. MORTGAGE LOAN PACKAGE - With respect to a Mortgage Loan, a copy of the Mortgage Loan Documents, a completed and executed application for mortgage guaranty insurance in form specified by PMI which has been executed by E-Loan (for those loans for which Mortgage Insurance is requested), and such other additional information or documents that PMI or E-Loan may provide or add. MORTGAGE LOAN PACKAGE REVIEW - The initial review of a Mortgage Loan Package by PMI to determine whether all Mortgage Loan Documents have been received by PMI so as to allow it to conduct the Mortgage Loan Underwriting. MORTGAGE LOAN UNDERWRITING - The underwriting review of a Mortgage Loan Package by PMI to determine whether it is in Compliance. NOTICE OF APPROVAL - A notice, in substantially the form attached hereto as Exhibit B, completed by PMI and delivered to E-Loan, with respect to each Mortgage Loan determined by PMI to be in Compliance. NOTICE OF DECLINATION - A notice, substantially in the form attached hereto as Exhibit D, delivered to E-Loan, with respect to each Mortgage Loan determined by PMI to not be in Compliance. NOTICE OF PEND - A notice, in substantially the form attached hereto as Exhibit C, and delivered to E-Loan, which shows that it has been placed in a pended status pursuant to Paragraph 2B, 2C(ii), or 2E(ii). ON-SITE REVIEW - Underwriting services provided by PMI underwriters at one or more locations designated by E-Loan, pursuant to the written request of E-Loan and agreement by PMI to provide On-Site Reviews, subject to the terms and conditions contained in this Agreement. Page 2 of 12 3 PLATINUM PLUS UNDERWRITING GUIDELINES - The underwriting guidelines of E-Loan, attached hereto as Exhibit A, as may be amended or modified by E-Loan from time to time pursuant to Paragraph 5B. PMI UNDERWRITING GUIDELINES - The underwriting guidelines of either PMI MIC or CMG for the appropriate geographic area, as may be amended or modified by either PMI MIC or CMG from time to time pursuant to Paragraph 5C. Any reference to "PMI MIC", "PMI Underwriting Guidelines", "PMI Certificate Number" or "PMI identification number" in this Agreement pertaining to the issuance of Mortgage Insurance shall, in the event and each time a Mortgage Loan is submitted to PMI by a credit union that requests Mortgage Insurance on a Mortgage Loan, shall be deemed to be a reference to "CMG", "CMG Underwriting Guidelines", "CMG Certificate Number" or "CMG identification number", as the case may be. REVIEW FEE - The amounts to be paid by E-Loan to PMI pursuant to Paragraph 3 and specified on Exhibit G of this Agreement. REVIEW LOCATIONS - Such location or locations designated in writing by PMI from time to time. The Review Location(s) designated at the time of execution of this Agreement are the locations listed on Exhibit E. TRANSMITTAL - A transmittal form, in the form attached hereto as Exhibit F, as may be amended or modified by PMI and E-Loan from time to time, used in connection with the submission of any Mortgage Loan Documents by E-Loan under this Agreement. 2. SERVICES PROVIDED BY PMI A. MORTGAGE LOAN PACKAGE SUBMISSION. To submit a Mortgage Loan for review under this Agreement, E-Loan [or the Correspondent, as the case may be] shall attach a PMI Transmittal which requests review under one of the following: (i) the Agency Underwriting Guidelines for the particular Agency or Agencies designated in the PMI Transmittal and, if the appropriate conditions are met, issuance of an Agency Underwriting Certificate ("AUC"); or, (ii) the Platinum Plus Underwriting Guidelines and, if the appropriate conditions are met, issuance of a Platinum Plus Cert sm; or, (iii) Desktop Underwriter (R) or Loan Prospector (R), as the case may be, to determine whether a Mortgage Loan has been approved and is eligible for delivery to Fannie Mae, or may be sold to Freddie Mac, respectively. Mortgage Loans submitted for review under Desktop Underwriter (R) shall be reviewed in accordance with Rider A, and Mortgage Loans submitted for review under Loan Prospector (R) shall be reviewed in accordance with Rider B attached to this Agreement. Page 3 of 12 4 In addition, each transmittal should request, if desired, issuance of Mortgage Insurance. B. MORTGAGE LOAN PACKAGE REVIEW. With respect to each Mortgage Loan, PMI shall conduct a Mortgage Loan Package Review to determine whether all Mortgage Loan Documents necessary for PMI to conduct the Mortgage Loan Underwriting or Credit Review Underwriting, and, if appropriate, the Mortgage Insurance Underwriting, are contained in the Mortgage Loan Package. If a Mortgage Loan Package does not contain any required Mortgage Loan Document or any other information which PMI may determine in its reasonable discretion is necessary to conduct the Mortgage Loan Underwriting or the Mortgage Insurance Underwriting, PMI shall place such loan in a pend status and provide E-Loan with notice of such action by completing and transmitting by facsimile a Notice of Pend. Upon receipt of the complete Mortgage Loan Package, PMI shall conduct the appropriate underwriting. If such documents or information are not received by PMI within fifteen (15) days after delivery of the Notice of Pend, PMI shall provide a Notice of Declination to E-Loan. C. MORTGAGE LOAN AND CREDIT REVIEW UNDERWRITING. With respect to each Mortgage Loan which is not subject to a Notice of Pend, PMI shall conduct a Mortgage Loan Underwriting, or Credit Review Underwriting, as requested, and notify E-Loan as follows: (i) if the Mortgage Loan is in Compliance, PMI shall provide E-Loan a Notice of Approval by facsimile or as otherwise directed, before the close of the following Business Day; (ii) with respect to each Mortgage Loan Package that does not contain an appraisal, PMI shall conduct a Credit Review Underwriting to determine whether the Mortgage Loan is in Conditional Compliance. If the Mortgage Loan is in Conditional Compliance, PMI shall provide E-Loan a Notice of Approval by facsimile or as otherwise directed, before the close of the following Business Day; (iii) if the Mortgage Loan is not in Compliance or Conditional Compliance, but compliance could, in PMI's reasonable determination, be achieved by having additional information or documentation, PMI shall provide E-Loan with a Notice of Pend. Upon receipt of the requested additional information or documentation, PMI shall complete the appropriate underwriting. If such documents or information are not received by PMI within fifteen (15) days after delivery of the Notice of Pend, PMI shall provide a Notice of Declination; or (iv) if the Mortgage Loan is not in Compliance or Conditional Compliance, and PMI determines not to proceed as provided in Paragraph 2(C)(ii), PMI shall notify E-Loan by facsimile or as otherwise directed, by transmitting a Notice of Declination. If additional documentation or information, as noted in the Notice of Declination, is submitted within fifteen (15) days of the date of such notice, PMI shall conduct an additional Mortgage Loan Underwriting or Credit Review Underwriting, as the case may be, of such Mortgage Loan Package in accordance with Paragraph 2(C) without the charge of an additional Review Fee. Page 4 of 12 5 D. CERTIFICATE ISSUANCE. Each Mortgage Loan which is determined to be in Compliance shall be issued an underwriting certificate as follows: (i) For a Mortgage Loan submitted with a request for review under the Agency Underwriting Guidelines which so conforms, PMI will issue a AUC, or; (ii) For a Mortgage Loan submitted with a request for review under the Platinum Plus Underwriting Guidelines which so conforms, PMI will issue a Platinum Plus Cert sm. (iii) With respect to each Mortgage Loan submitted to PMI without an appraisal and for which PMI has conducted a Credit Review Underwriting to determine that the Mortgage Loan is in Conditional Compliance, no Certificate shall be issued, and the Notice of Approval shall serve as PMI's review decision. E. MORTGAGE INSURANCE UNDERWRITING. With respect to each Mortgage Loan for which Mortgage Insurance has been requested, PMI shall conduct a Mortgage Insurance Underwriting to determine if the loan meets the PMI Underwriting Guidelines, and take the following actions: (i) if the Mortgage Loan meets the PMI Underwriting Guidelines, in the notice sent to E-Loan and/or the Correspondent, as directed, PMI shall assign a PMI MIC Certificate Number or other PMI MIC identifying number; (ii) if the Mortgage Loan does not meet the PMI Underwriting Guidelines, but could, in PMI's reasonable determination, by having E-Loan or the Correspondent provide additional information or documentation, PMI shall provide E-Loan and/or the Correspondent, as directed, with a Notice of Pend. If additional documentation or information is submitted within fifteen (15) days of the date of such notice, PMI shall conduct an additional Mortgage Insurance Underwriting of such Mortgage Loan Package in accordance with Paragraph 2E; or (iii) if the Mortgage Loan does not meet the PMI Underwriting Guidelines and PMI determines not to proceed as provided in Paragraph 2E(ii), PMI shall provide E-Loan and/or the Correspondent, as directed, by facsimile or as otherwise directed, with information as to why the Mortgage Loan does not meet the PMI Underwriting Guidelines. If additional documentation or information is submitted within fifteen (15) days of the date of such notice, PMI shall conduct an additional Mortgage Insurance Underwriting of such Mortgage Loan Package in accordance with Paragraph 2E. (iv) With respect to each Mortgage Loan (a) for which Mortgage Insurance has been requested and (b) that PMI determines meets the PMI Underwriting Guidelines, E-Loan authorizes PMI and any contract underwriter to complete and sign an application or other specified transmittal form for Mortgage Insurance (the "Application") on behalf of E-Loan, and E-Loan acknowledges that such signature shall constitute E-Loan's signature as if an employee or representative of E-Loan had signed such Application. E-Loan agrees that the representations and warranties contained in any Application signed by Page 5 of 12 6 4. SUBCONTRACTING A. SUBCONTRACTING PERMITTED. E-Loan acknowledges that it understands that the services performed by PMI hereunder may be performed either by employees of PMI or by contract underwriters hired by PMI, at the discretion of PMI. If services are provided by contract underwriters hired by PMI, all provisions of this Agreement shall continue to apply with respect to such services, and no additional amounts or costs shall be charged to E-Loan with respect to the work done by contract underwriters. 5. GUIDELINE CHANGES AND REVIEW STANDARDS A. AGENCY UNDERWRITING GUIDELINES. Revisions to the Agency Underwriting Guidelines shall be effective on the effective date specified in the notice of revision by the applicable Agency. B. PLATINUM PLUS UNDERWRITING GUIDELINES. The parties agree that any request by E-Loan for review under Platinum Plus Underwriting Guidelines shall commence five (5) Business Days following the receipt by PMI of such guidelines forming part of Exhibit A hereto from an Authorized Representative of E-Loan. Revisions to the Platinum Plus Underwriting Guidelines shall be effective on the later of (i) five (5) Business Days following the receipt by PMI of such revisions from an Authorized Representative of E-Loan, or (ii) the effective date specified in the notice of revision. C. PMI UNDERWRITING GUIDELINES. Revisions to the PMI Underwriting Guidelines shall be effective on the later of (i) five (5) Business Days following notice by PMI of such revisions to E-Loan, or (ii) the effective date specified in the notice of revision. D. STANDARD OF CARE. PMI shall use reasonable efforts and due diligence in carrying out PMI's duties hereunder. E-Loan represents and warrants that the information set forth in each Mortgage Loan Package is true and correct, and PMI shall be entitled to rely upon and will incur no liability respecting the correctness thereof in fulfilling its obligations under this Agreement. In addition, PMI shall not have any obligation to verify any information provided to it, nor shall the terms of this Agreement infer any duty upon PMI to determine whether such information is false. E. STATUTORY COMPLIANCE. PMI shall have no duty hereunder to either: (i) ensure that any Mortgage Loan Package complies with or (ii) review any Mortgage Loan Package for compliance with any state, federal or local laws or regulations relating to consumer credit protection, truth-in-lending or equal credit opportunity, including but not limited to the Consumer Credit Protection Act and Regulation Z promulgated thereunder, the Equal Credit Opportunity Act and Regulation B promulgated thereunder, Title VIII of the Fair Housing Act of 1968, the Real Estate Settlement Procedures Act, and the Fair Credit Reporting Act. E-Loan shall comply, or instruct its designee that submitted a Mortgage Loan Package to comply, with the Equal Credit Opportunity Act notification requirements and all other requirements under state or federal law for notification to applicants for Mortgage Loans with respect to each Mortgage Loan Package reviewed by PMI. PMI shall also have no duty to provide any Mortgage Loan borrower or other third party with any disclosure required under any of the foregoing laws or regulations, it being understood that E-Loan shall provide such disclosures or cause its designee that submitted the Mortgage Page 7 of 12 7 Loan Package to provide such disclosures. 6. LIABILITY A. SUBJECTIVE INTERPRETATION. E-Loan and PMI recognize and agree that the application of underwriting guidelines to a particular Mortgage Loan Package entails a certain degree of subjective interpretation and necessarily involves subjective analysis of certain data where the judgement of prudent underwriters could differ. Accordingly, PMI does not guarantee or warrant that any third party, including but not limited to any reviewing authority or investor, will agree with PMI's determination that a Mortgage Loan Package does or does not comply with the Agency Underwriting Guidelines, the Platinum Plus Underwriting Guidelines, or the PMI Underwriting Guidelines, as applicable. B. FAILURE TO FOLLOW PROCEDURES. The actual damages that E-Loan may sustain by reason of any deviation by PMI from review and approval procedures set forth in Paragraph 2 are uncertain and difficult to ascertain. Consequently, PMI shall be liable only for material deviations from such review and approval procedures. E-Loan and PMI agree that E-Loan's total damages resulting from such material deviation shall be limited to the Review Fee received by PMI with respect to the Mortgage Loan. C. LIABILITY IN CONNECTION WITH UNDERWRITING. The actual damages that may result from a Material Error under this Agreement are uncertain and difficult to ascertain. Therefore, PMI shall be liable only for damages attributable to Material Errors and calculated in accordance with Paragraph 6C(iii) herein. Notwithstanding the foregoing, PMI shall not be liable for damages attributable to a Material Error unless (i) PMI receives written notice from E-Loan that it intends to assert the occurrence of a Material Error within fifteen (15) days after E-Loan discovers it, and (ii) further provided that not more than twelve (12) months have elapsed from the time PMI has completed its underwriting of the Disputed Mortgage Loan. In all cases where E-Loan proposes to assert a Material Error, PMI may elect, at its sole discretion, any one of the following remedies: (i) PMI may, within thirty (30) days after receiving written notice from E-Loan, cure the Material Error, or; (ii) If the Disputed Mortgage Loan is a loan which is legally insurable, PMI may request PMI MIC to issue a PMI Certificate (a "Policy"), (coverage under which will be endorsed in favor of the then-owner of the Disputed Mortgage Loan) such that, when coupled with any existing primary mortgage insurance policy, the aggregate coverage on the Disputed Mortgage Loan shall be equal to up to 35% of the then-outstanding principal balance of the Disputed Mortgage Loan, or up to such higher coverage as may be required by either Fannie Mae or Freddie Mac for the Disputed Mortgage Loan, if it will become the owner of such loan. The Policy shall remain in effect for a period equal to the then-remaining term of the promissory note relating to the Disputed Mortgage Loan, or until the promissory note is paid off, whichever is shorter. Notwithstanding anything set forth herein, in any Policy, or elsewhere to the contrary, it is understood and agreed that coverage under any Policy shall not be denied or terminated if the cause for denial or termination arises out of, or is related to, a Material 8 Error. Any Policy issued by PMI MIC under this Paragraph 6C(ii) shall be supplemental and secondary to any other policy of mortgage insurance in force with respect to the Disputed Mortgage Loan. If any other such policy is in force at the time the Material Error is discovered, any action or inaction of E-Loan or owner of the affected Mortgage Loan to cancel such policy shall relieve PMI of its responsibility to cause to be issued a Policy under this Paragraph 6C(ii). (iii) PMI may, within ten (10) days after making a determination of the appropriate amount, pay to E-Loan an amount equal to the lesser of (i) Three Thousand Five Hundred ($3,500.00) or (ii) the actual damages suffered by E-Loan as a direct and proximate result of the Material Error in connection with selling, re-selling, or re-acquiring the Disputed Mortgage Loan. PMI shall have the right to assist E-Loan in finding a buyer for the Disputed Mortgage Loan, and PMI may require E-Loan to sell the Disputed Mortgage Loan to a buyer selected by PMI if that results in the mitigation of the amount of the payment payable by PMI to E-Loan hereunder. In the event neither E-Loan nor PMI is able to obtain an offer to purchase the Mortgage Loan within thirty (30) days from the time E-Loan has asserted the occurrence of a Material Error, PMI shall elect one of the other remedies set forth in this Paragraph 6C and provide E-Loan with such remedy. D. LIMITATION OF LIABILITY. PMI shall not have liability under this Agreement to any entity other than E-Loan, and E-Loan acknowledges and agrees that the remedies set forth in this Paragraph 6 shall be E-Loan's sole and exclusive remedies with respect to Material Errors under this Agreement. Notwithstanding the provisions of Paragraphs 6B and C: (i) PMI will not be liable for any indirect, special, incidental or consequential damages arising out of the services to be rendered to E-Loan under this Agreement, with respect to a Disputed Mortgage Loan or otherwise. (ii) If PMI MIC issues a Policy covering a Disputed Mortgage Loan, E-Loan shall have no remedy against PMI or PMI MIC under this Agreement for any breach of this Agreement and shall be limited to its rights, if any, under the Policy. (iii) In no event shall the liability of PMI under this Agreement exceed the total amount of Review Fees billed by PMI for services rendered under this Agreement during the calendar year in which the services were rendered with respect to the Disputed Mortgage Loan which is the subject of a remedy under this Paragraph 6. (iv) Notwithstanding the foregoing, in no event shall the liability of PMI under this Agreement with respect to any Material Errors resulting from or in connection with any Mortgage Loan with respect to which PMI has conducted a Credit Review Underwriting and has determined that said Mortgage Loan is in Conditional Compliance exceed the Review Fee received by PMI with respect to said Mortgage Loan. 9 (v) In no event shall the liability of PMI under this Agreement with respect to Mortgage Loan Packages underwritten during On-Site Reviews for which Mortgage Insurance is not issued, exceed the Review Fee received by PMI with respect to the Disputed Mortgage Loan which is the subject of a remedy under this Paragraph 6. E. INDEMNIFICATION. E-Loan agrees to indemnify and hold PMI, CMG and their respective affiliates, and each of their directors, officers, employees and agents ("Indemnities"), harmless from all losses, damages, penalties, fines, expenses (including attorneys' fees) and costs ("Losses"), incurred by each Indemnitee resulting or arising, directly or indirectly, from: (i) any breach by E-Loan of any covenant, representation or warranty contained in this Agreement, (ii) any failure by E-Loan to provide any disclosures set forth at Paragraph 5E above, and (iii) any claim, demand, suit or other proceeding based upon or arising out of this Agreement, including the application by PMI of the applicable Guidelines to the Mortgage Loan Packages, provided the provision of the Agreement which gives rise to the claim for Indemnification inures to the benefit of CMG, except for Losses resulting or arising under Paragraph 6 herein. 7. TERMINATION A. This Agreement shall commence on the date of its execution and shall remain in full force and effect until either party shall give the other thirty (30) days prior written notice of its intention to terminate this Agreement. B. Any provision of this Agreement may be amended by PMI upon thirty (30) days prior written notice to E-Loan (the "Amending Notice"). Upon receipt of the Amending Notice, E-Loan shall have thirty (30) days (the "Prescribed Period") to elect to either accept or refuse the proposed amendment. In the event E-Loan refuses to accept the proposed amendment and indicates said refusal to PMI in writing, said refusal shall be deemed to be a notice of termination by E-Loan pursuant to subparagraph 7A herein. Should E-Loan fail to respond to the Amending Notice within the Prescribed Period, E-Loan shall be deemed to have accepted the proposed amendment. C. PMI may terminate this Agreement at any time for failure by E-Loan to pay the Review Fees due hereunder if such failure is not cured within ten (10) days of transmittal of written notice of such failure to pay. D. This Agreement shall be deemed to have been terminated if at any time during its term, E-Loan fails to submit any Mortgage Loan Packages for review hereunder for a period of six (6) months. E. In case of termination in accordance with this Paragraph 7, the provisions of Paragraphs 2F, 6 and 8 shall survive termination and continue in full force and effect to bind the parties, as applicable. 8. CONFIDENTIAL INFORMATION 10 Each party agrees that any information disclosed to it by the other party in connection with this Agreement shall be used only in furtherance of the purposes of this Agreement, and that such restrictions will be placed upon all persons, employees, agents, representatives and any other third parties who are permitted access to any information disclosed in connection with this Agreement. 9. MISCELLANEOUS PROVISIONS A. NOTICES. Any notice required or permitted under this Agreement shall be in writing addressed to the appropriate party at the addresses listed below and shall be sent via overnight courier service, U.S. Express Mail or facsimile telephone transmission and shall be deemed to have been received the next business day after delivery to an overnight courier, deposit with U.S. Express Mail service, or sent by facsimile transmission. Notices shall be sent to the following addresses or to such address as a party may notify the other of in writing in accordance with this notice provision: E-Loan:E-Loan, Inc. Dublin, CA 94568 Attn: Steve Majerus Telephone Number: (925) 271-2407 Facsimile Telephone Number: (925) 556-2643 PMI: PMI MORTGAGE SERVICES CO. Contract Underwriting Services 601 Montgomery Street San Francisco, California 94111 Telephone Number: (800) 288-1970 Facsimile Telephone Number: (415) 393-6420 B. ENTIRE AGREEMENT AND AMENDMENTS. This Agreement and all exhibits hereto, all of which are expressly incorporated into this Agreement, constitute the entire agreement between the parties with respect to the subject matter hereto. There are no oral agreements or understandings affecting this instrument and any future alteration, modification or waiver (other than amendments or modifications to the Agency Underwriting Guidelines, the Platinum Plus Underwriting Guidelines, or the PMI Underwriting Guidelines, which may be amended as set forth herein) must be in writing and signed by both parties. C. WAIVER. No waiver of a breach of any provision hereof will be deemed a waiver of any subsequent breach of the same or similar nature. D. ASSIGNMENT. Neither party may assign its rights or obligations hereunder to another party without the prior written consent of the other party, which consent may be denied in the other party's sole discretion, provided, however, that PMI may, without the prior consent of E-Loan, assign this agreement to any entity owned 80% by PMI, or which has the same parent corporation as PMI. 11 E. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on and enure to the benefit of the parties hereto and their respective successors and permitted assigns. Nothing herein express or implied, is intended to confer on any person, other than the parties hereto and their respective successors and assigns, any right, remedies, obligations or liabilities under or by reason of this Agreement. F. RELATIONSHIP OF PARTIES. Nothing contained in this Agreement shall be deemed to create a joint venture or partnership between PMI and E-Loan. All acts undertaken by PMI pursuant to this Agreement shall be done as an independent contractor or as an agent of E-Loan. G. APPLICABLE LAW. The laws of the State of California will govern with respect to all matters and controversies arising under this Agreement. H. DISPUTES. In the event of disputes concerning this Agreement, the prevailing party shall be entitled to payment of all its costs, including reasonable attorney's fees. I. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which so executed shall be deemed to be an original, and such counterparts together shall constitute but one and the same instrument. J. EFFECTIVE DATE. This Agreement shall become effective as of the date of execution of the last party to sign. IN WITNESS WHEREOF, the parties have caused their duly authorized officers to execute this instrument on the date set forth below. E-LOAN PMI MORTGAGE SERVICES CO. /s/ Steve M. Majerus /s/Signature Illegible By: Steven M. Majerus By: Gene Campion Its: Director, Mortgage Banking Its: National Underwriting Vice President Date: June 9 , 1998 Date: June 12, 1998 Page 12 of 12 12 EXHIBITS Exhibit A Platinum Plus Underwriting Guidelines Exhibit B Notice of Approval Exhibit C Notice of Pend Exhibit D Notice of Declination Exhibit E Review Locations Exhibit F Transmittal Exhibit G Review Fees 13 EXHIBIT A PLATINUM PLUS UNDERWRITING GUIDELINES FOR THE FOLLOWING INVESTORS: FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FANNIE MAE") FEDERAL HOME LOAN MORTGAGE CORPORATION ("FREDDIE MAC") CITICORP MORTGAGE INC. ("CITICORP") TO BE PROVIDED BY E-LOAN PURSUANT TO PARAGRAPH 2A OF THE UNDERWRITING SERVICES AGREEMENT 14 APPROVAL NOTICE PMI Mortgage Services Co. Investor Loan Id: Date: Correspondent Loan Id: PMI Control: Correspondent: PMI U/W: Borrower(s): Property Address: Loan Purpose: Loan Amount: Loan Term: Sales Price: Appraised Value: LTV/CLTV: Qualifying Rate: Note Rate: Property Type: Occupancy: Application: Credit Doc Expired: This loan has been underwritten to the following guidelines: Underwriting Conditions: EXHIBIT B The captioned loan is approved with the rate and terms as submitted subject to the above conditions if applicable. These conditions must be met prior to funding/settlement. Any changes in these conditions, interest rate or loan terms must be submitted and approved in writing prior to funding/settlement of this loan. 15 SUSPEND NOTICE PMI Mortgage Services Co. Investor Loan Id: Date: Correspondent Loan Id: PMI Control: Correspondent: PMI U/W: Borrower(s): Property Address: Loan Purpose: Loan Amount: Loan Term: Sales Price: Appraised Value: LTV / CLTV: Qualifying Rate: Note Rate: Property Type: Occupancy: Application: Credit Doc Expired: This loan has been underwritten to the following guidelines: Required prior to underwriting decision: EXHIBIT C 16 DECLINE NOTICE PMI Mortgage Services Co. Investor Loan Id: Date: Correspondent Loan Id: PMI Control: Correspondent: PMI U/W: Borrower(s): Property Address: Loan Purpose: Loan Amount: Loan Term: Sales Price: Appraised Value: LTV / CLTV: Qualifying Rate: Note Rate: Property Type: Occupancy: Application: Credit Doc Expired: This loan has been underwritten to the following guidelines: Reason(s) for Decline: EXHIBIT D 17 PMI MORTGAGE INSURANCE CO. PMI MORTGAGE SERVICES CO. UNDERWRITING OFFICES CENTRAL STATES TEXAS [northern]* DU / LP Sharon Wilson, Senior Regional Underwriting Manager OKLAHOMA Lynelle Ragsdale, Senior Account Underwriter LOUISIANA* 1341 West Mockingbird Lane, Suite 400E Dallas, TX 75247 phone-(800) 533-4764 fax-(214) 891-9743 TEXAS [southern]* DU / LP Emily Falkenburg, Regional Underwriting Manager Deanna Arnold, Senior Account Underwriter 1415 North Loop West, Suite 260 Houston, TX 77008 phone-(800) 392-2238 fax-(713) 863-8742 DU Deborah Fannie, Account Underwriter 9130 Jollyville, Suite 185 Austin, TX 78759 phone - (800) 236-6449 fax - (512) 231-0972 Judy Baum, Account Underwriter 901 NE Loop, Suite 410 San Antonio, TX 78209 phone - (210) 826-4015 fax - (210) 826-6873 Toni Manno, Account Underwriter 13317 South Choctaw, Suite C-4 Baton Rouge, LA 70815 phone - (504) 275-1079 fax - (504) 275-1086 ILLINOIS* DU / LP Stephen Hoepfner, Senior Regional Underwriting Manager Larry Poirier, Senior Account Underwriter Two Mid-America Plaza, Suite 1000 Oakbrook Terrace, IL 60181 phone - (800) 759-4764 fax - (630) 571-3008 WISCONSIN* DU Tom Grenell, Account Underwriter 125 North Executive Drive Brookfield, WI 53005 phone - (414) 821-8668 fax - (414) 821-1681 KANSAS* DU / LP Wendy Smith, Regional Underwriting Manager MISSOURI* 6900 College Boulevard, Suite 565 Overland Park, KS 66211 phone - (800) 382-8880 fax - (913) 661-0728 Dan Jestic, Account Underwriter 1215 Fernridge Parkway, Suite 109 St. Louis, MO 63131 phone - (314) 579-7498 fax - (314) 579-7465
1 18 MINNESOTA* DU / LP Stephen Hoepfner, Senior Regional Underwriting Manager IOWA Barbara Robinson, Senior Account Underwriter NEBRASKA 7760 France Avenue South, Suite 280 SOUTH DAKOTA Bloomington, MN 55435-5833 NORTH DAKOTA phone - (800) 766-4764 fax - (612) 835-9609 MICHIGAN* DU / LP Renate O'Keefe, Regional Underwriting Manager Somerset Place, Tower 1 2301 West Big Beaver Road, Suite 623 Troy, MI 48084 phone - (800) 627-4764 fax - (800) 727-8976 OHIO* DU / LP Jerri Thedford, Regional Underwriting Manager KENTUCKY Nicholas Franzese, Senior Account Underwriter INDIANA 100 Old Wilson Bridge Road, Suite 316 WEST VIRGINIA Worthington, OH 43085 phone - (800) 765-4764 fax - (614) 846-4805 DU Robin Lien, Account Underwriter 6450 Rockside Woods Boulevard South, Suite 100 Independence, OH 44131 phone - (216) 328-2013 fax - (216) 901-1689
* state with an underwriting office 2 19 PMI MORTGAGE INSURANCE CO. PMI MORTGAGE SERVICES CO. UNDERWRITING OFFICES EASTERN STATES FLORIDA* DU / LP Diana Del Campo, Regional Underwriting Manager Elaine McCall, Senior Account Underwriter 1715 North Westshore Boulevard, Suite 266 Tampa, FL 33607 phone - (800) 950-4764 fax - (813) 289-8560 Michael Vinson, Account Underwriter 13550 SW 88th Street, Suite 206 Miami, FL 33186 hone - (305) 380-8771fax - (305) 380-6298 Debbie Edmundson, Account Underwriter 2090 NW 107th Terrace Sunrise, FL 33323 phone - (954) 749-1252 fax - (954) 749-1253 GEORGIA* DU / LP Linda Jenacaro, Regional Underwriting Manager ALABAMA Karen Piercy, Senior Account Underwriter Six Concourse Parkway, Suite 385 Atlanta, GA 30328-6111 phone - (800) 399-4764 fax - (770) 393-2759 MASSACHUSETTS* DU / LP Julie Lyons, Regional Underwriting Manager CONNECTICUT Susan Cerceillo, Senior Account Underwriter MAINE 50 Braintree Hill Park, Suite 101 NEW HAMPSHIRE Braintree, MA 02184 VERMONT phone - (800) 933-4764 fax - (617) 848-6534 RHODE ISLAND NEW YORK* DU / LP Jackie Vunk, Regional Underwriting Manager Becky Webster, Senior Account Underwriter 20 Madison Avenue Extension, Suite 125 Albany, NY 12203-5326 phone - (800) 374-4764 fax - (518) 464-1687 NORTH CAROLINA* DU / LP Joann Kaiser, Regional Underwriting Manager SOUTH CAROLINA 6302 Fairview Road, Suite 320 TENNESSEE Charlotte, NC 28210 ARKANSAS phone - (800) 695-4764 fax - (704) 364-1086 MISSISSIPPI VIRGINIA* DU / LP Sue Johnson, Regional Underwriting Manager DISTRICT OF COLUMBIA Vickie Madden, Senior Account Underwriter MARYLAND 3975 Fair Ridge Drive, Suite 450 Fairfax, VA 22033 phone - (800) 876-4764 fax - (703) 691-8638
1 20 PENNSYLVANIA* DU / LP Marty Selgrath, Senior Regional Underwriting Manager NEW JERSEY Doug Gray, Senior Account Underwriter DELAWARE 1018 West 9th Avenue, Suite 207 King of Prussia, PA 19406-1225 phone - (800) 395-4764 fax - (610) 337-3297 DU Paul Prybolsky, Account Underwriter Joseph Swatsky, Account Underwriter 2030 Tilghman Street Allentown, PA 18104 phone - (610) 774-9666 fax - (610) 774-9907
* state with an underwriting office 2 21 PMI MORTGAGE INSURANCE CO.(R) PMI MORTGAGE SERVICES CO. UNDERWRITING OFFICES WESTERN STATES ARIZONA * DU/LP Pam Tucker, Regional Underwriting Manager NEW MEXICO 2025 North Third Street, Suite 157 NEVADA Phoenix, AZ 85004-1425 phone - (800) 321-8411 fax - (602) 254-7828 Steve Hartung, Account Underwriter 6117 East Grant Road Tucson, AZ 85712 phone - (520) 733-0470 fax - (520) 733-0467 CALIFORNIA [northern] *DU / LP Jennifer Huntley, Senior Regional Underwriting Manager HAWAII Cathy Varni, Senior Account Underwriter ADP Plaza II 2000 Crow Canyon Place, Suite 350 San Ramon, CA 94583 phone - (800) 678-4243 fax - (925) 244-7265 Bruce Moseley, Account Underwriter 2377 Gold Meadow Way, Suite 100 Sacramento, CA 95670 phone - (916) 526-8316 fax - (916) 526-8318 CALIFORNIA [southern] *DU / LP Mike Wirtz, Senior Regional Underwriting Manager Rick Carlson, Senior Account Underwriter 4 Hutton Centre Drive, Suite 500 Santa Ana, CA 92707 phone - (800) 488-4764 fax - (714) 979-4814 DU Patty Quinn, Account Underwriter 5060 Shoreham Place, Suite 200 San Diego, CA 92122 phone - (619) 458-5848 fax - (619) 458-5963 Wendy Murnane, Account Underwriter 6320 Canoga Avenue, Suite 1550 Woodland Hills, CA 91367 phone - (818) 227-5070 fax - (818) 227-5067 COLORADO * DU / LP Patty Ruwoldt, Regional Underwriting Manager UTAH 6300 South Syracuse Way, Suite 590 WYOMING Englewood, CO 80111-6724 phone - (800) 444-1594 fax - (800) 847-5481
1 22 WASHINGTON * DU / LP Sue Nakata, Senior Regional Underwriting Manager OREGON Diane Colistro, Senior Account Underwriter ALASKA 3420 Carillon Point MONTANA Kirkland, WA 98033-7354 IDAHO phone - (800) 426-0626 fax - (800) 625-4194 OREGON * Bob Schoenman, Manager (both Kirkland and Tigard U/W for Oregon) Mortgage Lending Services, Inc. 11830 SW Kerr Parkway Lake Oswego, OR 97034 phone - (503) 977-5380 fax - (503) 977-5379
* state with an underwriting office 2 23 EXHIBIT F TRANSMITTAL TO BE PROVIDED BY E-LOAN AND APPROVED BY PMI 24 EXHIBIT G REVIEW FEES The Review Fee for each Mortgage Loan Package submitted hereunder shall be as follows: (i) for those Mortgage Loan Packages underwritten under the Agency Underwriting Guidelines for which Mortgage Insurance is not issued, the Review Fee shall be Seventy-Five Dollars ($75.00), and the Review Fee for those Mortgage Loan Packages underwritten under the Agency Underwriting Guidelines for which Mortgage Insurance is requested from PMI MIC shall be Twenty-Five Dollars ($25.00). (ii) for those Mortgage Loan Packages underwritten under the Platinum Plus Underwriting Guidelines for which Mortgage Insurance is not issued, the Review Fee shall be Seventy-Five Dollars ($75.00), and the Review Fee for those Mortgage Loan Packages underwritten under the Platinum Plus Underwriting Guidelines for which Mortgage Insurance is requested from PMI MIC shall be Twenty-Five Dollars ($25.00). 25 RIDER A to the UNDERWRITING SERVICES AGREEMENT for Fannie Mae's Desktop Underwriter(R) PMI will submit certain Mortgage Loans designated by E-Loan under the Underwriting Services Agreement ("Agreement") through Fannie Mae's Desktop Underwriter(R) subject to the Agreement and the following terms and conditions of this Rider A. 1. Definitions: In general, as used in this Rider, capitalized terms defined in the Agreement shall have the respective meanings thereby provided as well as the meanings ascribed in the Fannie Mae Software License Subscription Agreement. DESKTOP UNDERWRITER(R) - The current release of Fannie Mae's software product designed to support and facilitate the electronic underwriting of mortgage loans and/or the performance of Prequalification Analyses in production by PMI at the time of submission. ELIGIBILITY - The designation of a Mortgage Loan as an "Approve Eligible Mortgage" under Fannie Mae's Desktop Underwriter(R) criteria. RESPONSE DOCUMENT - A document generated by Desktop Underwriter(R) and delivered by PMI to E-Loan indicating a response to each Mortgage Loan reviewed under the Desktop Underwriter(R) criteria, as may be amended or replaced by PMI from time to time. 2. Services provided by PMI: A. PMI's duties hereunder shall be limited to ascertaining whether the documents in the Mortgage Loan Package conform to the Desktop Underwriter(R) criteria and to submit each Mortgage Loan to Desktop Underwriter(R) to obtain a Response Document, and notify E-Loan as follows: (i) if the Mortgage Loan is Eligible, PMI shall notify E-Loan by facsimile or as otherwise directed, before the close of the following Business Day; (ii) if the Mortgage Loan is not Eligible, as evidenced by a Refer or Refer with Caution notice (the "Refer Notice") from Desktop Underwriter(R), E-Loan shall (i) obtain any additional information or documentation needed to have PMI resubmit the Mortgage Loan to Desktop Underwriter(R) in order to obtain an "Approve Mortgage" designation; or (ii) submit the Mortgage Loan Package for review by PMI under the Agreement; or (iii) notify PMI that PMI shall have no further obligations or liability in connection with the underwriting of said Mortgage Loan. B. If E-Loan instructs PMI to complete the appropriate underwriting of the Mortgage Loan, PMI Page 1 of 3 26 shall conduct a Mortgage Loan Underwriting of such Mortgage Loan Package in accordance with Paragraph 2C of the Agreement. C. With respect to each Mortgage Loan requiring Mortgage Insurance, PMI shall conduct a Mortgage Insurance Underwriting to determine if the loan meets the PMI Underwriting Guidelines, in accordance with the procedures set forth at Paragraph 2E of the Agreement. D. PMI will, in addition to the reports provided pursuant to Paragraph 2H of the Agreement, provide to E-Loan a monthly activity report detailing the number of Mortgage Loans submitted to Desktop Underwriter(R). 3. Desktop Underwriter (R) Loan Submission Charges. A. The Access Fee for each Mortgage Loan PMI submits to Desktop Underwriter (R) at a PMI review location on behalf of E-Loan will be $50.00 unless (i) E-Loan is billed directly by Fannie Mae, in which case PMI shall not charge the Access Fee or (ii) PMI will charge E-Loan an Access Fee in such other amount indicated by Fannie Mae with respect to said E-Loan. The Access Fee payable pursuant to this section 3A shall be in addition to any Review Fee or Data Input Fee payable under section 3B below, or the Agreement. The Access Fees for Desktop Underwriter (R) are further subject to change by Fannie Mae as may be set forth in any subsequent notice by Fannie Mae to PMI, and PMI specifically reserves the right to change the Access Fees at any time upon written notice to E-Loan. No additional Access Fee shall be charged for the resubmission of a Mortgage Loan provided E-Loan shall not have exceeded the maximum number of included submissions per Mortgage Loan as established by Desktop Underwriter (R) from time to time. B. In addition to the Access Fee, a Data Input Fee in the amount of $25.00 shall be charged for each Mortgage Loan PMI submits to Desktop Underwriter (R) respecting the input of data only and excluding any data validation or Mortgage Loan Underwriting. C. No Access Fee shall be charged for the submission of the Mortgage Loan on-site at E-Loan's location using E-Loan's direct Desktop Underwriter (R) access. D. The Review Fee, Access Fee and Data Input Fee for Desktop Underwriter (R) Loan Submissions excludes any additional services or products offered by Desktop Underwriter (R) that are not specifically covered by the Agreement or this Rider. 4. Consumer Reports. In connection with the processing and evaluation of Consumer Credit Data by PMI for purposes of obtaining an underwriting recommendation or performing a Prequalification Analysis through Desktop Underwriter (R) on behalf of E-Loan, E-Loan expressly appoints PMI as its agent, as that term is defined in the FCRA. For purposes of this section: "Consumer Credit Data" shall mean any information obtained by PMI, either directly or indirectly (including from E-Loan), which bears on a consumer's creditworthiness, credit Page 2 of 3 27 standing, credit capacity, character, general reputation, personal characteristics, or mode of living and which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in underwriting a Mortgage Loan or performing a Prequalification Analysis. "FCRA" shall mean the federal Fair Credit Reporting Act, codified at 15 U.S.C. '1681 et seq., and the Federal Trade Commission's Official Staff Commentary to the Fair Credit Reporting Act. "Prequalification Analysis" shall mean the evaluation of Consumer Credit Data with respect to a prospective mortgage loan applicant for the purpose of evaluating such prospective applicant's qualification for mortgage financing, other than in connection with a Mortgage Loan application. 5. Notice Requirements. E-Loan acknowledges and understands that it may be required to provide certain disclosures to the mortgage loan applicant when E-Loan's decision whether to extent credit is, in certain respects, affected by information contained in a consumer report. Such disclosure obligations may be imposed under the FCRA, the Equal Credit Opportunity Act, and the latter's implementing regulation, Regulation B, and other federal and/or state statutes and regulations. E-Loan expressly understands and agrees that it bears sole responsibility for complying with such disclosure obligations and that such obligations shall in no event be considered imposed upon or shared by PMI by virtue of its electronic processing of mortgage loan application data through Desktop Underwriter (R) under this Rider A or the Agreement. 6. Verification of Information PMI shall be entitled to rely upon and will incur no liability respecting the correctness of any data contained in any Mortgage Loan submitted under this Rider. In addition, PMI shall not have any obligation to verify any information provided to it, nor shall the terms of this Rider or the Agreement infer any duty upon PMI to determine whether such information is true. E-Loan acknowledges that unverified Mortgage Loan data provided to PMI for submission to Desktop Underwriter (R) must be fully supported and verifiable in order for the Response Document, including any waiver of representations and warranties, to be enforceable. Page 3 of 3 EX-10.24 30 MORTGAGE PURCHASE AGMNT. 5/1/98 1 EXHIBIT 10.24 ADDENDUM TO MORTGAGE PURCHASE AGREEMENT FOR AUTOMATED UNDERWRITING SERVICES This Addendum to Mortgage Purchase Agreement for Automated Underwriting Services (the "Addendum") is made and entered into this 13th day of August, 1998, by and between RESOURCE BANCSHARES MORTGAGE GROUP, INC. (hereinafter referred to as "Buyer") and E-Loan Inc. (hereinafter referred to as "Seller"). WHEREAS, Buyer and Seller have previously entered into a Mortgage Purchase Agreement (the "Agreement"), dated May 1, 1998, pursuant to which Seller has agreed to sell and Buyer has agreed to purchase certain Mortgage Loans on the terms and conditions contained in such Agreement; and WHEREAS, Seller desires that Buyer or a third party contract underwriter satisfactory to the Buyer (the "Third Party Underwriter") perform the underwriting of certain conventional Mortgage Loans intended for sale to Buyer, pursuant to the terms and conditions of this Addendum (the "Underwriting Function"); and WHEREAS, Buyer is willing to accept loans in which the Underwriting Function has been performed by The Third Party Underwriter. NOW, THEREFORE, in consideration of the benefits flowing to each party hereunder, Buyer and Seller agree as follows: 1. Seller agrees that it will submit to the Third Party Underwriter via facsimile the documentation required for Underwriting Function to be performed through an automated underwriting system, in accordance with Buyer's procedures, which Seller acknowledges receiving. Seller further agrees that if the underwriting decision is other than Loan Prospector "accept", or Desktop Underwriter "approve/eligible" the Third Party Underwriter will perform a subsequent underwriting review through a nonautomated procedure. 2. Seller agrees that its representations and warranties in the agreement concerning compliance with Buyer's underwriting contingencies for each Mortgage Loan in the Agreement will remain in effect even though the underwriting is performed by the Third Party Underwriter. 3. Seller agrees that Buyer is entitled to rely on the underwriting decision of the Third Party Underwriter. 4. Buyer agrees that if the Third Party Underwriter denies the Mortgage Loan, Buyer will send to Seller the adverse action statement required by the Equal Credit Opportunity Act. If no credit is offered to the applicant by any lender, or if credit is not accepted by the applicant, Seller shall deliver Buyer's adverse action notice to the related applicant. 5. Seller agrees that if Buyer performs the Underwriting Function, and denies the loan, its decision will govern, and Seller will not subsequently submit the mortgage credit package to the Third Party Underwriter. Page 1 of 2 2 6. Seller agrees that it is obligated to pay to the Third Party Underwriter the underwriting fee that is charged for each Mortgage Loan, as set forth in Buyer's procedures, as may be amended from time to time, for each Mortgage Loan reviewed by the Third Party Underwriter pursuant to the terms of this Addendum, and Seller indemnifies Buyer against any claim, loss, damages, costs and expenses in connection with or resulting from Seller's failure to pay the underwriting fee. Seller further agrees that Buyer may apply any service release premiums due Seller with respect to a Mortgage Loan, to any underwriting fees owed to Buyer by Seller pursuant to this Amendment and Buyer's procedures, and outstanding. 7. Buyer reserves the right to suspend or terminate Seller's participation under the terms of this Addendum upon written notice to Seller, sent by registered or certified mail, postage prepaid, or by express courier service. 8. Except as expressly amended hereby, the terms of the Agreement shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be duly executed and sealed as of the day and year first above written. (CORPORATE SEAL) SELLER: ATTEST: [ILLEGIBLE] E-LOAN, INC. - ---------------------------------- ----------------------------------------- Its: Sr. Underwriter By: [ILLEGIBLE] ----------------------------- ------------------------------------- Name and Title: [ILLEGIBLE] ------------------------- Director, Mortgage Banking BUYER: (CORPORATE SEAL) RESOURCE BANCSHARES MORTGAGE GROUP, INC. ATTEST: [ILLEGIBLE] By: JUDY B. SCHNEIDER - ---------------------------------- ----------------------------------------- Its: VP Name and Title: Judy B. Schneider ------------------------------ ------------------------- [Title ILLEGIBLE] Page 2 of 2 3 RESOURCE BANCSHARES MORTGAGE GROUP, INC. MORTGAGE PURCHASE AGREEMENT THIS AGREEMENT (the "Agreement") is made and entered into this 1st day of [ILLEGIBLE], 199[ILLEGIBLE], by and between RESOURCE BANCSHARES MORTGAGE GROUP, INC. (hereinafter referred to as "Buyer") and E-Loan Inc.,(hereinafter referred to as "Seller") in consideration of the mutual premises and conditions hereinafter set forth. 1. Purchase and Sale of Mortgage Loans. From time to time pursuant to this Agreement, Seller shall sell and Buyer shall buy mortgage loans on real estate (hereinafter collectively called the "Mortgage Loans" and individually the "Mortgage Loan"). This Agreement shall govern the sale and transfer of such Mortgage Loans by Seller to Buyer and each such Mortgage Loan shall be subject to the warranties, representations, and agreements set forth herein, subject, however, to the terms and conditions of any separate written offering or commitment letters applying to the Mortgage Loans. All future purchases of Mortgage Loans by Buyer from Seller shall be governed by the terms contained herein unless the parties shall agree in writing before or at the time such purchases are made that the purchases shall be governed by a different agreement. The purchase price and service release premiums paid for each Mortgage Loan shall be established by written agreement between the parties. The terms and conditions of any separate offering or commitment letters signed by the parties hereto and pursuant to which the Buyer shall agree to buy and the Seller shall agree to sell any Mortgage Loans shall survive and be deemed to be part of this Agreement. To the extent that the terms of this Agreement conflict with the terms and conditions of any such offering or commitment letter, the terms and conditions of the offering or commitment letter shall supersede the terms and conditions of this Agreement and this Agreement shall be deemed modified and amended to conform to the terms and conditions of such offering or commitment letter with respect to the Mortgage Loans purchased thereunder. However, such modification and amendment shall be made only to the extent of the non-conformity and all other terms and conditions of this Agreement shall apply. 2. Definitions. Unless the context requires otherwise, the following terms shall, for all purposes of this Agreement, have the meanings hereinafter specified. (a) The term "Mortgage Note" shall mean a valid and enforceable note or evidence of indebtedness secured by a Mortgage (as hereinafter defined). (b) The term "Mortgage" shall mean a valid and enforceable mortgage, deed of trust or other security instrument creating a first lien upon described real property that secures a Mortgage Note. -1- 4 (c) The term "Mortgage Loan" shall mean (i) a Mortgage Note and Mortgage; (ii) all documents, agreements, or instruments relating to the Mortgage Note and Mortgage and Seller's rights and benefits therein; and (iii) Seller's rights and benefits as owner of the Mortgage Note and Mortgage including, without limitation, its right to receive payments thereunder. 3. Seller's Representations, Warranties, and Covenants. Seller represents, warrants, and covenants as follows: A. With respect to Seller: (a) Seller is and will continue to be duly organized, validly existing, and in good standing under the laws of the United States or under the laws of the jurisdiction in which it was incorporated or organized, as applicable, and has and will continue to maintain all licenses, registrations, and certifications necessary to carry on its business as now being conducted, and is and will continue to be licensed, registered, qualified, and in good standing in each state where property securing a Mortgage Loan is located if the laws of such state require licensing, registration, or qualification in order to conduct business of the type conducted by Seller. (b) Seller has and will maintain the full corporate or partnership power and authority to execute and deliver the documents contemplated by this Agreement and to perform in accordance with each of the terms thereof and the terms of the Correspondent Manual. The execution, delivery, and performance of this Agreement by Seller and the consummation of the transactions contemplated hereby, have been duly and validly authorized. This Agreement is a legal valid, binding, and enforceable obligation of Seller, and all requisite corporate or partnership action has been taken by Seller to make this Agreement valid and binding upon Seller, and enforceable in accordance with its terms. (c) The consummation of the transactions contemplated by this Agreement are in the ordinary course of business of Seller, and the transfer, assignment, and conveyance of the Mortgage Notes and Mortgages by Seller are not subject to the bulk transfer laws or any similar statutory provisions in effect in any applicable jurisdiction. (d) Neither the execution and delivery of this Agreement, the acquisition and/or making of the Mortgage Loans by Seller, the sale of the Mortgage Loans to Buyer or the transactions contemplated thereby, nor the fulfillment of or compliance with the terms and conditions of this Agreement, will conflict with or result in a breach of any of the terms, conditions, or provisions of Seller's articles of incorporation, charter, by-laws, partnership agreement, or other organizational documents, or of any legal restriction or regulatory directive or any agreement or instrument to which Seller is a party or by which it is bound. (e) Seller has the ability to perform each and every obligation of and/or satisfy each and every requirement imposed on Seller pursuant to this Agreement, and no offset, counterclaim, or defense exists to the full performance by Seller of the requirements of this Agreement. -2- 5 (f) There is no action, suit, proceeding, inquiry, review, audit, or investigation pending or threatened by or against Seller that, either in any one instance or in the aggregate, may result in any material adverse change in the business, operations, financial condition, properties, or assets of Seller, or in any material liability on the part of Seller, or that would draw into question the validity or enforceability of this Agreement or the Mortgage Loans or of any action taken or to be taken in connection with the obligations of Seller contemplated in this Agreement, or that would be likely to impair materially the ability of Seller to perform under the terms of this Agreement. (g) No consent, approval, authority, or order of any court or governmental agency or body is required for the execution and performance by Seller of, or compliance by Seller with, this Agreement, the sale of any of the Mortgage Loans, or the consummation of any of the transactions contemplated by this Agreement. (h) Neither the Correspondent Application, this Agreement, nor any statement, report, or other document furnished or to be furnished by Seller pursuant to this Agreement contains any untrue statement of material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading. (i) Seller has complied with, and has not violated any law, ordinance, requirement, regulation, rule or other order applicable to its business or properties, the violation of which might adversely affect the operations or financial condition of Seller to consummate the transactions contemplated by this Agreement. (j) Seller will comply with all provisions of this Agreement and the Correspondent Manual and will promptly notify Buyer of any occurrence, act, or omission regarding Seller, the Mortgage Loan, the property securing the Mortgage Loan, or the mortgagor of which Seller has knowledge, which occurrence, act or omission may materially affect Seller, the Mortgage Loan, the property securing the Mortgage Loan, or the mortgagor. B. With respect to each Mortgage Loan offered for sale under this Agreement: (a) The Mortgage and the Mortgage Note have been duly executed by the mortgagor and create valid and legally binding obligations of the mortgagor, and the Mortgage has been duly acknowledged and recorded and is a valid and prior first lien on the real property securing the Mortgage Note that is superior to all other liens or other claims. (b) The Seller is the sole owner of the Mortgage Loan and has absolute authority to sell, transfer, and assign the same on the terms set forth herein, and there has been no prior assignment, sale, or hypothecation of the Mortgage Loan by the Seller. (c) There are no actions, suits, or proceedings pending or threatened against Seller in any court or before any administrative agency the adverse outcome of which -3- 6 would have an effect on its title to any Mortgage Loan and servicing rights that may be sold or purchased hereunder. (d) As to each Mortgage Loan purchased by Buyer, (i) the full principal amount of the Mortgage Loan has been advanced to the mortgagor, either by payment directly to him or by payment made on his request or approval; (ii) the unpaid principal balance is as set forth on that certain statement to be provided by Seller to Buyer pursuant to Section 4(g) hereof; (iii) all costs, taxes, fees, and expenses incurred in making and closing the Mortgage Loan and in recording and assigning the Mortgage have been paid; (iv) no part of the mortgaged property has been released from the lien of the Mortgage; (v) the terms of the Mortgage Loan have in no way been changed or modified; (vi) all payments required under the terms of the Mortgage Loan are current and are not in default including, but not limited to, payments of principal and interest and escrow payments for mortgage insurance, taxes, and hazard insurance; and (vii) unless otherwise negotiated, on the date of delivery of the Mortgage Loan to Buyer, no more than ten (10) months shall have elapsed following the closing of the Mortgage Loan or recordation of the Mortgage, whichever shall have occurred last. (e) The Seller has not made or knowingly received from others any direct or indirect advance of funds in connection with the Mortgage Loan on behalf of the mortgagor. This warranty does not cover payment of interest from the earlier of: (i) the date of the Mortgage Note; or (ii) the date on which the Mortgage Loan proceeds were disbursed; or (iii) the date one month before the first installment of principal and interest on the Mortgage Loan is due. (f) Each Mortgage Loan that Seller represents to be insured by a private mortgage insurance company is so insured with an insurer that has either been approved by the Federal National Mortgage Association ("FNMA") or by the Federal Home Loan Mortgage Corporation ("FHLMC") or otherwise has been approved by the Buyer. Each Mortgage Loan that Seller represents to be insured by the Federal Housing Administration ("FHA") or to be guaranteed by the Veterans Administration ("VA") is so insured by FHA under the National Housing Act or Title V of the Housing Act of 1949 or other applicable laws or regulations or is so guaranteed by the VA under the Servicemen's Readjustment Act of 1944 or Chapter 37 of Title 38 of the United States Code or other applicable laws or regulations, and such insurance or guaranty is valid and enforceable in accordance with its terms. (g) There is in force a paid-up mortgagee title insurance policy on the Mortgage Loan (in an amount that is at least equal to the outstanding principal balance of the Mortgage Loan) issued by a title insurance company that has been approved by the Buyer, and there is an insured closing agreement for each Mortgage Loan issued by the title insurance company that issued the mortgagee title insurance policy. If the Mortgage Loan is a graduated payment mortgage, the policy shall be for an amount at least equal to -4- 7 the highest anticipated outstanding principal balance of the Mortgage Loan. If the Mortgage Loan provides for or permits negative amortization, the policy shall be for an amount that is not less than the highest allowable outstanding principal balance of the Mortgage Loan. If the Mortgage Loan is a variable rate mortgage loan, the policy shall contain a variable rate endorsement. If the property secured by the Mortgage is located in a condominium or planned unit development ("PUD"), the policy shall contain an appropriate condominium or PUD endorsement. If the improvements on the property secured by the Mortgage include a manufactured home, the policy shall contain an ALTA 7 or equivalent endorsement. (h) There is a valid paid-up hazard insurance policy in force at the time of the purchase of the Mortgage Loan by Buyer issued or written by an insurance company approved by Buyer and with a Best's Key Rating Guide financial size category of Class III and at least a "B" general policyholder's rating. The hazard insurance policy shall be for an amount at least equal to the full replacement value of the improvements on the property secured by the Mortgage. Unless a higher maximum amount is required by state law, the maximum deductible should be the lesser of $1,000.00 or 1% of the policy face amount. The policy shall be of a type at least as protective as fire and extended coverage and shall contain a mortgagee clause and loss payable clause to the Buyer in the form of the standard New York mortgagee clause, and shall contain suitable provisions for payment on all present and future mortgages on such premises in order of precedence. For properties in special flood hazard areas, there is in force a flood insurance policy as required under applicable federal law and regulations, the maximum available coverage has been obtained, and the application for flood insurance or the original flood insurance policy will be provided. If property securing the Mortgage Loan is located in a condominium or PUD project, a certificate of insurance naming Buyer as the insured plus a certified true copy of the Master Hazard and Liability Policy will be provided. (i) All applicable federal, state, and local laws, rules and regulations have been complied with including, but not limited to, the Real Estate Settlement Procedures Act and Regulation X, the Equal Credit Opportunity Act and Regulation B, the Federal Truth-in-Lending Act and Regulation Z, the Fair Credit Reporting Act, the Flood Disaster Protection Act, the Fair Housing Act, and federal, state, and local laws, rules or regulations, including, but not limited to, those relating to licensing and those that prohibit or limit fees, charges, or costs that lenders may impose on borrowers. (j) There are no defenses, counterclaims, or rights of setoff affecting any Mortgage Loan or affecting the validity or enforceability of any private mortgage insurance or FHA insurance applicable to any Mortgage Loan or any VA guaranty with respect to any Mortgage Loan. (k) The assignment of the Mortgage Loan from the Seller to Buyer is valid and sufficient to assign to and perfect in Buyer all of Seller's right, title, and interest in and to the Mortgage Loan. The Mortgage Loan is freely assignable and transferable by Buyer and the sale and transfer of the Mortgage Loan from Seller to Buyer is free and clear of any and all claims or encumbrances. -5- 8 (l) The real property secured by the Mortgage has been improved as a single-family (1-4 unit) dwelling or by a condominium/PUD unit that is approved by the FHA, VA, FNMA, or FHLMC, as applicable to the related Mortgage Loan. (m) All documents submitted by Seller pursuant to this Agreement are genuine; the Mortgage, the Mortgage Note and any other documents submitted by Seller to Buyer that Buyer requires to be original documents are original documents; all certified copies of original documents are true copies of the originals; and all other representations by Seller as to each Mortgage Loan are true and correct and meet the applicable requirements and specifications of this Agreement. (n) Nothing involving the Mortgage Loan, the real property secured by the Mortgage, the mortgagor, or the mortgagor's credit standing can reasonably be expected to: (i) cause private institutional investors to regard the Mortgage Loan as an unacceptable investment; or (ii) cause the Mortgage Loan to become delinquent; or (iii) adversely affect the Mortgage Loan's value or marketability; or (iv) if the Mortgage Loan is an FHA or VA loan, render the Mortgage Loan ineligible for inclusion in a GNMA or FNMA pool. (o) No Mortgage Loan sold and purchased pursuant to this Agreement shall have a payment past due more than thirty (30) days. (p) As demonstrated by a survey of the real property secured by the Mortgage, all improvements secured by the Mortgage are wholly within the boundaries and comply with all building restriction laws or the mortgagee's title insurance policy insuring the Mortgage affirmatively insures against loss or damage by reason of any violation, variation, encroachment, or other adverse circumstance disclosed by the survey. (q) No Mortgage Loan sold and purchased pursuant to this agreement shall have real estate taxes, assessments, etc. due within sixty (60) days of the loan closing. In the event that real estate taxes, assessments, etc. due within sixty (60) days of closing have not been paid, Seller shall be liable to Buyer for an amount equal to any interest and penalty charged for late payment. (r) The property securing the Mortgage Loan is not damaged by fire, wind or other cause of loss. There are no proceedings pending for the partial or total condemnation of the property. (s) The Mortgage Loan complies with any special investor requirements and/or underwriting contingencies communicated to Seller prior to closing. -6- 9 (t) In the event that FHA or VA loans are sold hereunder, Seller is an approved mortgagee in good standing with FHA or VA, as the case may be, and Seller also has any further FHA or VA approvals required for origination, closing, and sale to Buyer of the Mortgage Loans. (u) There is no mechanic's or similar lien or claim that has been filed for work, labor, or material (and no rights are outstanding that under applicable law could give rise to such a lien or claim), affecting the related property, which is or may be a lien prior to, or equal with, the lien of the related Mortgage. 4. Delivery of Documents. Seller agrees to do all acts necessary to perfect title to the Mortgage Loans in Buyer and shall sell, assign, and deliver to Buyer, with respect to the purchase of each such Mortgage Loan, the documents set forth hereinafter, all subject to the approval of Buyer and its legal counsel as to proper form and execution. No later than ten (10) business days following the closing and disbursement (or at such earlier time as may be required by Buyer in the Correspondent Manual), Seller shall forward to Buyer the Mortgage Loan file including: (a) The original Mortgage Note properly endorsed by Seller. (b) The Mortgage, duly recorded and accompanied by a properly executed assignment of the Mortgage and the Mortgage Note appropriate in the jurisdiction in which the real property described in the Mortgage is located and in recordable form or a certified "clocked-in" copy thereof. The assignment is to be recorded at Seller's expense to perfect Buyer's interest in the Mortgage. (c) A signed copy of the most recently conducted report of appraisal or certification of valuation of the property secured by the Mortgage. In addition, if the Mortgage Loan is not an FHA insured loan or a loan guaranteed at least 25% by the VA, Seller shall obtain and deliver to Buyer a valid appraisal report of the real estate securing the Mortgage Loan, which appraisal shall be made by a qualified appraiser approved by Buyer who has no direct or indirect interest in the real estate securing the Mortgage Loan. (d) A mortgage title insurance binder, including copies of exceptions, issued by a title insurance company approved by Buyer and in such form and subject to such exceptions as are approved by Buyer and the Buyer's legal counsel. (e) A survey of the property secured by the Mortgage to the extent required by applicable state law or required in order to enable Buyer to sell the Mortgage to or place the Mortgage with the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC"), or the Government National Mortgage Association ("GNMA"). (f) A hazard insurance policy with paid receipt issued or written by an insurance company that has been approved by Buyer and meeting the requirements set forth in Section 3(h) hereof. -7- 10 (g) A statement showing the unpaid principal balance of the Mortgage Loan, the amount of periodic installments, and the date(s) to which principal, interest, and any escrows have been paid; and, if requested by Buyer, a ledger card or ledger history reflecting all receipts and disbursements from the inception of the Mortgage Loan including the date of each receipt or disbursement. (h) A flood insurance policy or copy of the application, if applicable, with a copy of letter requesting an endorsement naming Buyer as mortgagee. (i) With respect to any Mortgage Loan that is also secured by a junior lien or second mortgage, such documentation as is required by Buyer to indicate that the liens on the property securing the Mortgage do not exceed applicable loan-to-value ratio requirements imposed by Buyer or any other requirement relating to secondary financing as determined by FHA, VA, FNMA, FHLMC, or by any other subsequent investor or purchaser of the Mortgage Loan. (j) A completed tax information sheet together with a copy of the paid receipt. (k) A copy of the Settlement Statement (HUD-1) and Truth-in-Lending Disclosure Statement prepared in connection with the Mortgage Loan indicating that the mortgagor has received the disclosures required by the Truth-in-Lending Act and Real Estate Settlement Procedures Act and, when applicable, any required adjustable rate mortgage disclosures. (l) Seller shall deliver to Buyer such other follow-up documentation as reasonably requested. Buyer shall, within three (3) business days after receipt of the above referenced documents, fund the purchase price of the Mortgage Loan being purchased, net of any applicable discount points, purchase fees, escrow items, or interim interest but including service release premiums and accrued interest, by wire transfer of funds as directed by Seller. No later than ninety (90) days following the purchase of the Mortgage Loan by Buyer, Seller shall deliver to Buyer the following: (a) The original recorded Mortgage. (b) The original recorded assignments of the Mortgage and the Mortgage Note. (c) The final title insurance policy insuring the lien of the Mortgage and including an indemnity from Seller against any changes in the final title insurance policy. (d) Any and all documents, agreements or instruments related to the Mortgage or the Mortgage Note and Seller's right and benefits therein (including but not -8- 11 limited to the FHA Mortgage Insurance Certificate or the VA Loan Guaranty Certificate), all documents relating to the making and closing of the Mortgage Loan and any other documents, agreements, or instruments related to the Mortgage Loan or required by Buyer in order to perfect its right, title, and interest in and to the Mortgage Loan or required by Buyer in order to enable Buyer to sell the Mortgage Loan to or place the Mortgage Loan with GNMA, FNMA, FHLMC, or a private investor. In the event Seller shall fail to deliver a fully documented loan package as specified hereinabove, Seller shall be subject to a delinquency penalty of Twenty-Five and no/100 Dollars ($25.00) per missing document per week, which penalty shall be paid by Seller within 30 days of Buyer's request. In addition, Buyer reserves the right to withhold service release premiums if required documentation is not received in a timely manner or if the penalty described above is not paid in a timely manner. Buyer's rights to demand payment of such a penalty and to withhold payment of service release premiums shall be in addition to and not in lieu of Buyer's other remedies hereunder (including the remedy of repurchase as provided in Section 6), and Buyer's exercise of such rights shall not be deemed an election of remedies or a waiver of such other remedies. Buyer shall be entitled to offset against service release premiums or other amounts payable to Seller any costs or expenses incurred by Buyer in resolving Seller's documentation deficiencies. Seller acknowledges and agrees: (1) that all documents in the mortgage file and all other documents and records of whatever kind or description (whether prepared by Seller or by others on behalf of Seller) that are related to the origination, processing, closing, delivery, sale, or servicing of any Mortgage Loan sold by Seller to Buyer hereunder (the "Documents") will be, and will remain at all times, the property of Buyer; (2) that any such Documents in the possession of Seller are retained by Seller in a custodial capacity only; (3) that (except as required in the ordinary course of business) Seller shall not transfer the Documents to a party other than Buyer without Buyer's written permission; (4) that Seller will permit Buyer, at any time, to inspect the Documents in the possession of Seller; (5) that Seller shall transfer the Documents to Buyer (or Buyer's designee) promptly upon Buyer's request; and (6) that Seller shall be liable to Buyer for and shall indemnify Buyer and hold Buyer harmless for any loss, damage, or expense (including court costs and reasonable attorney fees) that Buyer may incur as a result of Seller's retention of such Documents. 5. Escrow Deposits. Seller hereby transfers, assigns, and conveys to Buyer all of Seller's right, title, and interest in and to all escrow deposits and other trusts or escrowed funds held in connection with all Mortgage Loans and related agreements, and all unreimbursed advances made by the Seller for principal, interest, taxes, hazard insurance, mortgage insurance or similar items in connection with the Mortgage or related agreements, and all of Seller's right to collect, recover, and be reimbursed for the same. 6. Repurchase of Mortgage Loans. Seller agrees to repurchase any Mortgage Loan subject to this Agreement upon the terms and conditions hereinafter set forth in the event that: -9- 12 (a) Any misstatement of material fact is discovered by Buyer or its representative or assigns or disclosed to Buyer or its representative or assigns by inspection by Buyer or its representatives, or otherwise; or (b) Any term of this Agreement is breached by the Seller; or (c) Any representation or warranty of the Seller under Section 3 is determined by Buyer to have been false; or (d) Any FHA insurance, VA guaranty, or private mortgage insurance insuring or guaranteeing the loan secured by the Mortgage lapses as a result of any act or omission by Seller or the failure by Seller to obtain such insurance or guaranty within ninety (90) days from the date of funding; or (e) Buyer is required to repurchase any Mortgage Loan sold to GNMA, FNMA, FHLMC, or other investor, due to a deficiency in or omission with respect to the documents, instruments, and agreements pertaining to any Mortgage Loan; or (f) Seller does not comply with all of Buyer's underwriting contingencies. (g) Any material third party fraud or misrepresentation is determined to exist through the post-closing quality control review by Buyer or another investor. This includes, but is not limited to, any misrepresentation of income, funds on deposit, or employment. Except as provided below, the repurchase price for any Mortgage Loan that Seller is required to repurchase from Buyer shall be an amount equal to the then unpaid principal balance of the Mortgage Loan plus accrued interest through the date of repurchase (plus any premium paid to Seller by Buyer for servicing), and the costs and expenses (including attorney's fees) incurred by Buyer in connection with the repurchase. In the event that Buyer is required to repurchase a Mortgage Loan sold by Buyer to GNMA, FNMA, FHLMC, or any other investor, or pledged or placed by Buyer in a mortgage pool for any of the reasons set forth in Subsections (a) through (g) of this Section 6, the price to be paid by Seller to Buyer on repurchase of the Mortgage Loan by Seller shall be an amount equal to the sum Buyer was required to pay in order to repurchase the Mortgage Loan plus accrued interest from the date of the repurchase of the Mortgage Loan by Buyer through the date of the repurchase of the Mortgage Loan by Seller plus any service release premium paid to Seller by Buyer plus any costs and expenses (including reasonable attorney's fees) incurred by Buyer in connection with the transaction. 7. Option to Repurchase or Indemnify as to Delinquent Loans. In the event that a Mortgage Loan purchased hereunder (other than a Mortgage Loan underwritten by Buyer -10- 13 prior to purchase) becomes sixty (60) calendar days or more delinquent during the first four (4) months following the first payment due to Buyer and is subsequently recommended for foreclosure within twelve (12) months following the first payment due to Buyer, then Seller shall either-- (i) repurchase such Mortgage Loan and the servicing rights related thereto in the manner described in Section 6 above, or (ii) indemnify Buyer in lieu of repurchase as follows: Seller shall deposit with Buyer a foreclosure expense deposit of $2,500.00 and a foreclosure processing fee of $500.00 and shall reimburse Buyer for the price paid for the servicing rights for the related Mortgage Loan. Buyer will complete the foreclosure process and file the claim with FHA, VA, or the applicable Private Mortgage Insurance company. Seller shall be responsible for all losses, costs, and expenses resulting from foreclosure and/or disposition of the property, including but not limited to all of Buyer's out-of-pocket costs, Buyer's unreimbursed cost of funds, and any losses resulting from any VA "no-bid" loan. Upon determination of the final settlement amount, Buyer will furnish to Seller an accounting of the claim and shall either (a) refund any unused portion of the foreclosure expense deposit or (b) bill the Seller for payment of the excess of all losses, costs and expenses over the foreclosure expense deposit. Seller shall pay any amount billed within ten days of the billing date. It is expressly understood and agreed that the foreclosure processing fee of $500.00 is designed to compensate Buyer for its internal administrative costs in processing the foreclosure and shall not be applied against other amounts for which Seller is responsible. In the event that a VA Mortgage Loan becomes a "no-bid" loan, Buyer will so advise Seller and will work with Seller to mitigate any eventual loss. 8. Refund of Service Release Premiums. If any Mortgage Loan is prepaid within six (6) months following the date of purchase by Buyer, Seller shall refund to Buyer all service release premiums received from Buyer with respect to that Mortgage Loan. 9. Eligibility of Mortgage Loans for Sale or Transfer. Seller agrees to take such action and to prepare, execute, assign, and deliver to Buyer such documents, including but not limited to the Mortgage, assignment of the Mortgage and Mortgage Note to Buyer, and Mortgage Note properly endorsed, in such form as shall enable Buyer at Buyer's option to place or pledge any FHA insured or VA guaranteed Mortgage Loan in a mortgage pool under the Government National Mortgage Association's Mortgage-Backed Securities Program or to place or pledge any conventional Mortgage Loan in a mortgage pool under the Federal National Mortgage Association's Conventional Mortgage-Backed Securities Program or to sell the Mortgage Loans to GNMA, FNMA, FHLMC, or a private investor. 10. Indemnification. Seller will indemnify, defend, and hold Buyer harmless from and against any and all claims, losses, costs, or damages, including, but not limited to, reasonable attorney's fees and expenses (i) arising out of any act or omission of Seller or any employee or agent of Seller; (ii) arising in connection with or out of the failure of Seller to comply with any applicable statutes, rules, or regulations; or (iii) arising out of Seller's failure to perform any of its obligations hereunder; or (iv) arising out of or in connection with any falsity, -11- 14 incorrectness, or incompleteness in any material respect of any representation or warranty made by Seller herein. Buyer may bill Seller for, and Seller shall pay within ten days of billing, any amounts due to Buyer in connection with transactions under this Agreement (including but not limited to amounts determined to be due as a result of errors or adjustments in the funding of loans), and Buyer shall be entitled to offset against service release premiums or other amounts payable to Seller any such amounts due to Buyer. Seller understands that Buyer may enter into commitments to sell mortgage-backed securities to be based on or backed by the Mortgage Loans deliverable by Seller to Buyer under this Agreement, or that Buyer otherwise may enter into commitments to sell such Mortgage Loans to investors, and that Buyer may incur claims, losses, expenses, and other liabilities if it repudiates, breaches, or defaults under such commitments to sell mortgage-backed securities or to sell such Mortgage Loans. If Seller enters into any agreement or commitment for the sale of Mortgage Loans to Buyer hereunder, Seller agrees to indemnify Buyer and hold Buyer harmless against any such claims, losses, expenses, and liabilities that arise from Seller's failure to deliver any such Mortgage Loans, if closed, to Buyer, in accordance with the provisions of the Correspondent Manual. Buyer shall be entitled to offset against service release premiums or other amounts payable to Seller any amounts due to Buyer as described above. 11. Financial Statements. Seller shall furnish to Buyer for as long as this Agreement is in effect, as soon as available, and in any event within ninety (90) days after the end of each fiscal year of Seller, audited financial statements of Seller consisting of a balance sheet as of the end of such fiscal year together with related statements of income or loss and reinvested earnings and changes in financial position of Seller for such fiscal year, prepared by independent certified public accountants in accordance with generally accepted accounting principles. In addition, Seller shall also provide to Buyer, from time to time, upon reasonable request and sixty (60) days notice, any other financial reports or statements required by Buyer. 12. Insurance. Seller shall maintain in full force Errors and Omissions and Fidelity Bond insurance coverage in such amounts as Buyer may reasonably require to indemnify it from any loss or damage incurred in connection with the transactions contemplated by this Agreement. 13. Assignment. Buyer shall have the right to assign this Agreement and its duties, obligations, or rights hereunder upon written notice to Seller. In the event that Buyer sells or assigns all or part or its interest in any Mortgage Loans that are subject to this Agreement to a third party, such third party shall succeed to all of the rights of Buyer hereunder with respect to such Mortgage Loans. Seller shall not have the right to assign this Agreement or any of its duties, obligations, or rights hereunder without the prior written consent of Buyer. 14. Events of Default. Each of the following shall constitute an Event of Default on the part of Seller under this Agreement: (i) any breach by Seller of any of Seller's representations, warranties, or covenants set forth in this Agreement; (ii) the failure of Seller to perform any of its obligations under this Agreement; (iii) the occurrence of an act of insolvency or bankruptcy concerning Seller; and (iv) Seller's failure to meet any capital, leverage, or other -12- 15 financial standard imposed by any applicable regulatory authority, or in Buyer's sole discretion, any material adverse change occurs in the financial condition of Seller. 15. Amendment/Termination. Buyer shall have the right to amend this Agreement with written notice to the Seller. At Buyer's request, Seller shall acknowledge changes to the Agreement in writing, but Seller's failure to provide written acknowledgment of any amendment shall not impair the enforceability of such amendment. This Agreement may also be terminated with respect to future purchases of Mortgage Loans by either party at any time by giving written notice of termination to the other party. In addition, upon the occurrence of any Event of Default as described in Section 14, and without affecting any other rights or remedies available to Buyer under this Agreement or at law or in equity, Buyer may immediately suspend all registrations and lock-ins and may refuse to fund any or all Mortgage Loans, pending the cure, to Buyer's satisfaction, of such Event of Default. Termination of this Agreement shall not in any respect change, alter, or modify the obligations of Buyer and Seller with respect to Mortgage Loans that have been purchased by Buyer from Seller prior to the date of such termination or (except as provided in the preceding sentence) with respect to Mortgage Loans that are the subject of then outstanding written commitments or agreements between Buyer and Seller at the time of such termination. 16. Notices. Any notice or demand that is required or permitted to be given by a provision of this Agreement shall be deemed to have been sufficiently given if either served personally or sent by prepaid first class, registered, or certified mail, addressed to the party at its address set forth below: Seller: E-Loan, Inc. 540 University Ste. #356 Palo Alto, CA 94301 Attn: STEVE [ILLEGIBLE] Buyer: Resource Bancshares Mortgage Group, Inc. Post Office Box 7486 Columbia, SC 29202-7486 Attn: MARK [ILLEGIBLE] With Copy to: Resource Bancshares Mortgage Group, Inc. Post Office Box 7486 Columbia, SC 29202-7486 Attn: David W. Johnson Either party may change its address by written notice to the other. 17. Correspondent Manual. In addition to all of the obligations and agreements specifically set forth herein, Seller hereby agrees to comply with all of the provisions -13- 16 of the Correspondent Manual (including any policies and procedures contained in program announcements, memoranda, or other similar communications) delivered to Seller, as may be modified or amended from time to time. Notwithstanding the provisions of Section 18, modifications and additions to the Correspondent Manual by Buyer shall not require the signature of Seller to be effective and shall become effective upon receipt. 18. Entire Agreement. This Agreement and the Correspondent Manual contain the entire agreement of the parties with respect to the subject matter hereof, and there are no representations, inducements, or other provisions other than those expressed in writing and therein. All changes, additions, or deletions to this Agreement must be made in writing and signed by each of the parties hereto. This Agreement restates, amends, and supersedes any and all prior Mortgage Purchase Agreements between the parties. 19. Survival of Provisions; Severability. All of the covenants, agreements, representations, and warranties made herein by the parties hereto shall survive and continue in effect after the termination of the Agreement or the consummation of the transactions contemplated hereby. All section headings contained herein are for convenience only and shall not be construed as part of this Agreement. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining portions hereof or affecting the validity or enforceability of such provision in any other jurisdiction, and, to this end, the provisions hereof are severable. This Agreement may be executed in counterparts, all of which taken together shall constitute one and the same instrument. 20. Governing Law, Jurisdiction, and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of South Carolina and any applicable federal laws. Each of the parties irrevocably submits to the jurisdiction of any state or federal court located in Richland County, South Carolina, over any action, suit or proceeding to enforce or defend any right under this Agreement or otherwise arising from any transaction existing in connection with this Agreement, and each of the parties irrevocably agrees that all claims in respect of any such action or proceeding shall be heard or determined in such state or federal court. Each of the parties irrevocably waives the defense of an inconvenient forum to the maintenance of any such action or proceeding and any other substantive or procedural objection it may have with respect to the maintenance of any such action or proceeding in any such forum. Each of the parties agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in any other jurisdiction by suit on the judgment or in any other manner provided by law. Each of the parties further agrees not to institute any legal actions or proceedings against the other party or any director, officer, employee, attorney, agent or property of the other party, arising out of or relating to this Agreement, in any court other than as hereinabove specified in this Section 20. 21. Attorney's Fees. In the event Seller defaults in any of its warranties, representations, or obligations under this Agreement or in any document or obligation relating to this Agreement, Seller shall pay Buyer its reasonable attorney's fees incurred in enforcing its rights hereunder. -14- 17 22. No Agency. This Agreement and transactions entered into pursuant hereto shall not create between Seller and Buyer a relationship of agency, legal representation, joint venture, partnership, or employment, and Seller and Buyer agree that neither party is in any way authorized to make any contract, agreement, warranty, or representation, or to create any obligation, express or implied, on behalf of the other. 23. Change in Ownership of Seller. A sale or other transfer of a substantial portion of the assets of Seller or any change in the ownership of a majority interest in Seller, whether by sale of assets, merger, consolidation, sale of stock interest in Seller, or any other circumstances where the effect is to pass ownership of a majority interest in Seller, shall be deemed an assignment for purposes of Section 13. 24. Waiver. No modification or waiver of any provision of this Agreement, nor any consent to any departure by Seller therefrom shall in any event be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to nor demand on the Seller in any case shall entitle the Seller to any other or further notice or demand in the same, similar, or other circumstances. Neither any failure nor any delay on the part of the Buyer in exercising any right, power, or privilege hereunder shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. 25. Endorsement of Instruments. Seller hereby irrevocably authorizes and empowers Buyer, without notice to Seller, whether in its name or in the name of Seller, to endorse in the name of Seller any checks, drafts or other orders payable to Seller for application to the respective Mortgage Loan, and this authority shall be irrevocable until the Mortgage Loan has been fully paid and discharged. 26. Acceptance. This Agreement shall become binding upon acceptance by Buyer at its home office in Columbia, South Carolina. -15- 18 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and sealed as of the day and year first above written. SELLER: (CORPORATE SEAL) NO CORP SEAL [ILLEGIBLE] By: [ILLEGIBLE] - ---------------------------------- -------------------------------------- Its: Senior Underwriter Its:[ILLEGIBLE] ----------------------------- ------------------------------------- BUYER: (CORPORATE SEAL) RESOURCE BANCSHARES MORTGAGE GROUP, INC. ATTEST: [ILLEGIBLE] By: [ILLEGIBLE] - ---------------------------------- ------------------------------------- Its: Vice President Its: [ILLEGIBLE] ----------------------------- ------------------------------------ -16- EX-10.25 31 MORTGAGE SELLING AND SERVICING CONTRACT 2/12/99 1 Exhibit 10.25 ADDENDUM TO MORTGAGE SELLING AND SERVICING CONTRACT (Seller Only) This Addendum modifies the Mortgage Selling and Servicing Contract (the "Contract") dated February 12, 1999 between the Federal National Mortgage Association ("Fannie Mae", "we", "our", "us"), and E-Loan, Inc. (the "Lender"). This Addendum modifies the Contract to establish the Lender only as an approved seller of mortgages and participation interests to us and not as an approved servicer of such mortgages and participation interests in accordance with the following terms and conditions: 1. Section I.A. of the Contract, "Purpose of Contract," is modified to delete the following phrases: - - to establish the Lender as an approved servicer of mortgages we have purchased or in which we have purchased a participation interest; and - - to provide the terms and conditions of servicing. 2. Section II.A.1.of the Contract, "Meet Fannie Mae Standards," is amended to read as follows: "The Lender, in our judgment, must have at all times the capacity to sell to us mortgages and participation interests that meet our purchase standards and the standards generally imposed by private institutional mortgage investors." 3. Notwithstanding any other provisions of the Contract to the contrary, the Lender shall not service any mortgages we purchase or in which we purchase a participation interest. 4. Before we purchase any mortgage or any participation interest in any mortgages, the Lender shall arrange for the servicing of those mortgages or participation interests to be transferred to another lender that is acceptable to us and has signed a Mortgage Selling and Servicing Contract with us. The transferee servicer must, among other things, accept the origination and servicing obligations for all mortgages sold to Fannie Mae by the Lender. The Lender and the transferee servicer must sign documents acceptable to Fannie Mae and take other reasonable steps as may be required by Fannie Mae to perfect the assignment of such mortgages to the transferee servicer and to otherwise protect Fannie Mae's interests. 5. The Lender agrees to sell mortgages to us only on a negotiated basis through our Western Regional Office. Without Fannie Mae's prior written authorization, the Lender cannot use Fannie Mae's Desktop Trader or cash commitment window. 2 -2- 6. Notwithstanding anything to the contrary in the Fannie Mae Selling and Servicing Guides, the Lender shall be required to maintain an acceptable net worth (as determined by Fannie Mae in its sole discretion) of at least $2.5 million, plus .1 percent (.001) of the cumulative mortgage deliveries by the Lender to Fannie Mae. For example:
Deliveries Minimum Adjusted Net Worth ---------- -------------------------- $ 0 $ 2.5 million 500 million 3.0 million 1 billion 3.5 million
In addition, the Lender agrees to the following: - The Lender must obtain sufficient additional capital infusion to maintain adequate working capital (as determined by Fannie Mae in its sole discretion) to meet the Lender's ongoing business obligations, liabilities, and risks. The Lender understands that the Lender's insufficient capital and/or negative earnings (as determined by Fannie Mae in its sole discretion) may be deemed a breach of the Contract. - The Lender must submit interim monthly financial statements to Fannie Mae within 30 days of the effective date of such financial statements. - The Lender must promptly submit monthly quality control reports to Fannie Mae. 7. Notwithstanding anything to the contrary in the Fannie Mae Selling and Servicing Guides, the Lender has agreed that it will only deliver to Fannie Mae, and Fannie Mae will only accept, mortgages that are processed through Desktop Underwriter ("DU") and on which DU displays the recommendation "Approved/Eligible." 8. Fannie Mae may terminate, with or without cause, the provisions of the Contract, as amended, by giving notice to the Lender pursuant to the terms of the Contract. 9. All other terms of the Contract, including any previous modification made to it, remain in effect. 3 -3- By executing this Addendum, the Lender and we agree to the terms hereof. This Addendum takes effect on the date we sign this Addendum. E-LOAN, INC. By: /s/ Steve M. Majerus -------------------------- (Authorized Signature) V.P. Secondary Marketing ------------------------ (Type Name and Title) Date: 2/23/99 ------- FEDERAL NATIONAL MORTGAGE ASSOCIATION By: /s/ Laddie A. Schmidtbauer -------------------------------- (Authorized Signature) -------------------------------- (Type Name and Title) Date: FEB 12 1999 -------------------------------- 4 FANNIEMAE MORTGAGE SELLING AND SERVICING CONTRACT This contract establishes your contractual relationship with Fannie Mae and states the terms and conditions of selling and servicing mortgages on our behalf. Your application package must include two signed originals of this form: one for us to keep and the other for us to complete and return to you upon approving your application. INSTRUCTIONS Once you have read this contract to ensure your understanding of its terms, you are ready to complete the "signature page" (page 22), as follows: - - Complete all fields above the line "Federal National Mortgage Association." - - For "Lender," enter your company name exactly as you entered it on the Application for Fannie Mae Approval to avoid confusion. (i.e., If you abbreviate it on the application form, use the same abbreviation on this form.) - - Have this form signed by an individual who is listed as a principal of your company on the Authorization for Verification of Credit and Business References (Form 1001). 5 FannieMae Contents --------- Contract Page ---- MORTGAGE SELLING AND SERVICING CONTRACT I General Information 1 II Eligibility Requirements for Lenders 2 III Sale of Mortgages and Participation Interests 3 IV Sale of Mortgages and Participation Interests- Lender's Warranties 4 V Servicing Mortgages 8 VI Assignment, Consideration and Continuance 10 VII Assigning Mortgage Servicing 11 VIII Breaches of Contract 11 IX Termination of Contract 14 X Continuance of Responsibilities or Liabilities 17 XI Participation Interests--Special Provisions 18 XII Notice 20 XIII Prior Agreements 21 XIV Severability and Enforcement 21 XV Captions 21 XVI Scope of Contract 21 XVII Signatures and Date 22 ------------------ 08/86 ------------------ 6 ------------------- FANNIEMAE GENERAL INFORMATION ------------------- CONTRACT MORTGAGE SELLING AND SERVICING CONTRACT This contract for selling and servicing mortgages (the "Contract") is between the Mortgage Lender (the "Lender") that signs this document and the Federal National Mortgage Association ("Fannie Mae", "we", "our", "us"), a corporation organized and existing under the laws of the United States. I GENERAL INFORMATION This section contains important basic information about the Contract, which we are permitted to enter into under authority of Title III of the National Housing Act (12 U.S.C. 1716, et. seq.), which is also known as the Federal National Mortgage Association Charter Act. A. PURPOSE OF CONTRACT The purpose of this Contract is: - to establish the Lender as an approved seller of mortgages and participation interests to us; - to provide the terms and conditions of the sales; - to establish the Lender as an approved servicer of mortgages we have purchased or in which we have purchased a participation interest; and - to provide the terms and conditions of servicing. B. CONSIDERATION In consideration of the purpose of this Contract and of all the provisions and mutual promises contained in it, the Lender and Fannie Mae agree to all that this Contract contains. C. OUR GUIDES We issue Fannie Mae's Guides to Lenders (our "Guides") and furnish them to the Lender. These Guides are: - Selling; - Servicing; and - Multifamily. Whenever there is a reference to the Guides in this Contract, it means the Guides as they exist now and as they may be amended or supplemented in writing. We may amend or supplement them, at our sole discretion, by furnishing amendments or supplementary matter to the Lender. The term "Guides" also includes anything that, in whole or in part, supersedes or is a substituted for the Guides. D. IMPORTANT DEFINITIONS Anywhere the words that appear below are used in this Contract, the following definitions apply: 1. "MORTGAGE" -- A loan, evidenced by a note, bond or other instrument of indebtedness. The loan is secured by a mortgage, deed of trust, deed to secure debt or other instrument of security that applies to property. "Mortgage" includes such instruments of indebtedness and security, together with - the evidence of title; - the chattel mortgage or security agreement and financing statement; and 7 - all other documents, instruments and papers pertaining to the loan. --------------- Page 1 of 22 --------------- 08/86 --------------- 8 - ----------------------- ELIGIBILITY REQUIREMENTS FOR LENDERS - ----------------------- CONTRACT 2. "FHA/VA MORTGAGE" -- A mortgage insured or guaranteed in whole or in part by the Federal Housing Administration or Veterans Administration. 3. "CONVENTIONAL MORTGAGE" -- A mortgage other than an FHA/VA mortgage, which Fannie Mae is authorized to purchase under the Federal National Mortgage Association Charter Act. 4. "PROPERTY" OR "MORTGAGED PROPERTY" -- The property that is now subject to a mortgage, or was subject to such mortgage, where the mortgage has been foreclosed or possession or title to the property has been taken by Fannie Mae or on our behalf. 5. "PARTICIPATION INTEREST" or "PARTICIPATION INTEREST IN MORTGAGES" -- An undivided interest in mortgages, specified in the applicable participation certificate that is evidence of such interest. A "participation interest" or "participation interest in mortgages" consists of a specified percentage of the principal (and a like percentage of all rights and benefits of the mortgagee or equivalent party under such mortgage) together with a specified yield on it. II ELIGIBILITY REQUIREMENTS FOR LENDERS For us to purchase mortgages or participation interests from a Lender, the Lender must meet the eligibility requirements specified in this section. A. GENERAL REQUIREMENTS These are the general requirements the Lender must meet to be eligible to sell us mortgages or participation interests or service mortgages for us: 1. MEET FANNIE MAE STANDARDS. The Lender must have as two of its principal business purposes: - making mortgages of the type that we will purchase entirely or purchase a participation interest in under this Contract; and - servicing such mortgages. In addition, the Lender, in our judgment, must have at all times the capacity to originate and sell to us mortgages and participation interests that meet our purchase standards and the standards generally imposed by private institutional mortgage investors, and must at all times have the capacity to service such mortgages for us under those standards. 2. HAVE QUALIFIED STAFF AND ADEQUATE FACILITIES. The Lender must, at all times, have employees who are well trained and qualified to perform the functions required of the Lender under this Contract. In addition, the Lender must maintain facilities that are adequate to perform its functions under this Contract. 3. MAINTAIN FIDELITY BONDS AND ERRORS AND OMISSIONS COVERAGE. The Lender must maintain, at its own expense, a fidelity bond and errors and omissions insurance, as required by our Guides. 4. REPORT BASIC CHANGES. The Lender must notify us promptly in writing of any changes that occur in its principal purpose, activities, staffing or facilities. ----------------- Page 2 of 22 ----------------- 08/86 ----------------- 9 --------------------- SALE OF MORTGAGES AND FANNIEMAE PARTICIPATION INTERESTS ---------------------- CONTRACT B. OWNERSHIP AND STATUS OF LENDER When we approve a Lender, one of the major considerations is the And information the Lender has provided about the eligibility, qualifications and financial status of the Lender and its owners. Consequently, the Lender must give us immediate notice of a change in its status or ownership, including any: - sale or transfer of a majority interest in it; - merger; - consolidation; or - change in legal structure. C. FINANCES In order to remain an approved Lender under this Contract, the Lender must meet our current net worth requirements. These requirements are contained in our Guides. The required net worth must be maintained in the form of assets acceptable to us. The Lender must give us a copy of its annual financial statements and any other related information that we may require. D. ACCESS TO LENDER'S RECORDS The Lender agrees to permit our employees or designated representatives to examine or audit records or accounts relating to mortgages or participation interests sold or serviced under this Contract. All records relative to the Lender's continued eligibility to sell or service mortgages under this Contract may also be examined or audited. Any examination or audit made on our behalf will be conducted during regular business hours unless the Lender agrees otherwise. III SALE OF MORTGAGES AND PARTICIPATION INTERESTS This section contains the basic rules governing our purchase of mortgages and participation interests. A. WHAT GOVERNS PURCHASES Purchases of mortgages and participation interests will be governed by: - our written commitment to purchase; - our Guides, including all amendments in effect on the day we make our written commitment; and - this Contract. B. WHAT WE PURCHASE The mortgages or participation interests that we purchase must meet the requirements found in our Guides on the day we make our written commitment. C. LENDER'S OBLIGATION TO PURCHASE FANNIE MAE STOCK If our Guides require, the Lender will promptly purchase our common stock each time it delivers a mortgage or participation interest to us. The amount of stock to be purchased and the procedures for buying it are also found in our Guides. D. FANNIE MAE HAS NO OBLIGATION TO PURCHASE The fact that we have signed this Contract does not mean that we must make a commitment to purchase any mortgage or participation interest from the Lender. -------------------- Page 3 of 22 -------------------- 10 - --------------------------- SALE OF MORTGAGES AND PARTICIPATION INTERESTS LENDER'S WARRANTIES - -------------------------- CONTRACT IV SALE OF MORTGAGES AND PARTICIPATION INTERESTS -- LENDER'S WARRANTIES The Lender makes certain warranties to us. These warranties: - apply to each mortgage sold to us in its entirety; - apply to each mortgage in which a participation interest is sold to us; - are made as of the date transfer is made to us; - continue after the purchase of the mortgage or participation interest; - continue after payment by us of the purchase price to the Lender; and - are for our benefit as well as the benefit of our successors and assigns. Warranties may be waived, but only by us in writing. A. SPECIFIC WARRANTIES Following are the specific warranties made by the Lender. 1. MORTGAGE MEETS REQUIREMENTS. The mortgage conforms to all the applicable requirements in our Guides and this Contract. 2. LENDER AUTHORIZED TO DO BUSINESS. The Lender and any other party that held the mortgage were, at all times during which the holder held the mortgage, authorized to transact business in the jurisdiction where the property is located. However, if the Lender or any other party that held the mortgage was not authorized to do business in the jurisdiction where the property is located, then the warranty is made that none of the following activities of the Lender or other parties constituted doing business in that jurisdiction: - lending the mortgage funds; - acquiring the mortgage; - holding the mortgage; or - transferring the mortgage in whole or to the extent of a participation interest. 3. LENDER HAS FULL RIGHT TO SELL AND ASSIGN. The Lender is the sole owner and holder of the mortgage and has full right and authority to sell and assign it, or a participation interest in it, to us. In addition, the Lender's right to sell or assign is not subject to any other party's interest or to an agreement with any other party. 4. LENDER'S LIEN ON PROPERTY. The mortgage, whether represented by the Lender as the first lien or as the second lien, is a valid and subsisting lien on the property described in it. If the mortgage is represented by the Lender as the first lien, the property is free and clear of all encumbrances and liens having priority over it except for liens for real estate taxes, and liens for special assessments, that are not yet due and payable. - --------------------- Page 4 of 22 - --------------------- 08/86 - --------------------- 11 ----------------------- SALE OF MORTGAGES AND FANNIEMAE PARTICIPATION INTERESTS LANDER'S WARRANTIES ---------------------- CONTRACT If the mortgage is represented by the Lender as the second lien, the property is free and clear of all encumbrances and liens having priority over it except for one properly recorded first mortgage lien, real estate taxes and liens of special assessments not yet due and payable. Any security agreement, chattel mortgage or equivalent document that is related to the mortgage and that is held by the Lender or delivered to us, is a valid and subsisting lien on the property described in such document, of the same priority as the mortgage. The Lender has full right and authority to sell or assign each lien to us or to an extent that is proportionate to our participation interest. 5. DOCUMENTS ARE VALID AND ENFORCEABLE. The mortgage and any security agreements, chattel mortgages, or equivalent documents relating to it have been properly signed, are valid, and their terms may be enforced by us, our successors and assigns, subject only to bankruptcy laws, Soldiers' and Sailors' Relief Acts, laws relating to administering decedents' estate, and general principles of equity. 6. PROPERTY NOT SUBJECT TO LIENS. The Property is free and clear of all mechanics' liens, materialmen's liens or similar types of liens. There are no rights outstanding that could result in any of such liens being imposed on the property. This warranty is not made if the Lender furnishes us with title insurance that gives us substantially the same protection as this warranty. 7. TITLE INSURANCE. There is a mortgage title insurance policy, or other title evidence acceptable to us, on the property. The title insurance policy is on a current ALTA form (or other generally acceptable form) issued by a generally acceptable insurance company. The title insurance insures (or the other title evidence protects) us or the Lender and its successors and assigns, as holding a lien of the priority warranted in "4. Lender's Lien On Property." 8. MODIFICATION OR SUBORDINATION OF MORTGAGE. The Lender has not done any of the following: - materially modified the mortgage; - satisfied or cancelled the mortgage in whole or in part; - subordinated the mortgage in whole or in part, unless it is represented to us as a second mortgage; - released the property in whole or in part from the mortgage lien; or - signed any release, cancellation, modification or satisfaction of the mortgage. This warranty is not made if any of the things just mentioned have been done but have been expressly brought to our attention in a letter before we make payment to the Lender. The letter must be acknowledged by us in writing. --------------------- Page 5 of 22 --------------------- 06/96 --------------------- 12 - ------------------------ SALE OF MORTGAGES AND PARTICIPATION INTERESTS LENDER'S WARRANTIES - ------------------------ CONTRACT 9. Mortgage In Good Standing. There are no defaults under the mortgage, and all of the following that have become due and payable have been paid or an escrow of funds sufficient to pay them has been established: - taxes; - government assessments; - insurance premiums; - water, sewer and municipal charges; - leasehold payments; or - ground rents. 10. Advances. The Lender has not made or knowingly received from others, any direct or indirect advance of funds in connection with the loan transaction on behalf of the borrower except as provided in our Guides. This warranty does not cover payment of interest from the earlier of: - the date of the mortgage note; or - the date on which the mortgage proceeds were disbursed to - the date one month before the first installment of principal and interest on the mortgage is due. 11. Property Conforms To Zoning Laws. The Lender has no knowledge that any improvement to the property is in violation of any applicable zoning law or regulation. 12. Property Intact. The property is not damaged by fire, wind or other cause of loss. There are no proceedings pending for the partial or total condemnation of the property. 13. Improvements. Any improvements that are included in the appraised value of the property are totally within the property's boundaries and building restriction lines. No improvements on adjoining property encroach on the mortgaged property unless FHA or VA regulations or our Guides permit such an encroachment. 14. Mortgage Not Usurious. The mortgage is not usurious and either meets or is exempt from any usury laws or regulations. 15. Compliance With Consumer Protection Laws. The Lender has complied with any applicable federal or state laws, regulations or other requirements on consumer credit, equal credit opportunity and truth-in-lending. 16. Property Is Insured. A casualty insurance policy on the property is in effect. It is written by a generally acceptable insurance company and provides fire and extended coverages for an amount at least equal to the amount required by our Guides. - -------------- Page 6 of 22 - -------------- 08/86 - -------------- 13 ------------------------ SALE OF MORTGAGES AND FANNIEMAE PARTICIPATION INTERESTS- LENDER'S WARRANTIES ----------------------- CONTRACT A flood insurance policy is in effect on the property if any part of it is in an area listed in the Federal Register by the Federal Emergency Management Agency as an area with special flood hazards, and if insurance is available. The flood insurance is written by a generally acceptable insurance company, meets current guidelines of the Federal Insurance Administration, and is for an amount at least equal to the amount required by our Guides. The Lender will make sure the required insurance is maintained as long as it services the mortgage. Any policy mentioned in this warranty contains a standard mortgage clause that names us or the Lender and its successors and assigns as mortgagee. 17. Mortgage Is Acceptable Investment. The Lender knows of nothing involving the mortgage, the property, the mortgagor or the mortgagor's credit standing that can reasonably be expected to: - cause private institutional investors to regard the mortgage as an unacceptable investment; - cause the mortgage to become delinquent; or - adversely affect the mortgage's value or marketability. 18. Mortgage Insurance Or Guaranty In Force. If the Lender represents that the mortgage is insured or guaranteed under the National Housing Act as amended, or under the Servicemen's Readjustment Act of 1944 as amended, or by a contract with a mortgage insurance company, the insurance or guaranty is in full force. In addition, the Lender has complied with all applicable provisions and related regulations of the Act, or the insurance contract, that covers the mortgage. 19. Adjustable Mortgages. If the mortgage provides that the interest rate or the principal balance of the mortgage may be adjusted, all of the terms of the mortgage may be enforced by us, our successors and assigns. These adjustments will not affect the priority of the lien warranted in "4. Lender's Lien On Property." 20. Participation Information Is Correct. All the information and statements in any participation certificate that the Lender delivers to us are complete, correct and true. B. CONSEQUENCES OF UNTRUE WARRANTIES --REPURCHASE We may require the Lender to repurchase a mortgage or participation interest sold to us if any warranty made by the Lender about the mortgage or participation interest is untrue (whether the warranty is in this Contract or was made at our specific request). We may require repurchase whether or not the Lender had actual knowledge of the untruth. We may also enforce any other available remedy. The Lender must pay us the repurchase price within 30 days of our demand. The repurchase price, as provided in our Guides, will not be adjusted because the Lender paid us fees or charges or subscribed to our capital stock. --------------------- Page 7 of 22 -------------------- 08/86 -------------------- 14 - -------------------- SERVICING MORTGAGES - -------------------- CONTRACT C. CONSEQUENCES OF UNTRUE WARRANTIES TERMINATION OF CONTRACT While untrue warranties about a particular mortgage or participation interest may be the basis for requiring repurchase of the particular mortgage or participation interest, there can be additional consequences. They may also give rise to responsibilities of the Lender under "D. Indemnification For Breach Of Warranty; Holding Us Harmless." In addition, untrue warranties can, under certain circumstances, be treated as a breach of contract that could result in the withdrawal of our approval of a Lender and the termination of this Contract (details are contained in Sections VIII and IX). D. INDEMNIFICATION FOR BREACH OF WARRANTY; HOLDING US HARMLESS If there is a breach of warranty under this Contract, the Lender, at our request, will indemnify us and hold us harmless against any related losses, damages, judgments or legal expenses. V SERVICING MORTGAGES This section contains the basic rules governing the servicing of mortgages that we purchase, or in which we purchase a participation interest. A. SERVICING DUTIES OF THE LENDER The servicing duties of the Lender are: 1. Scope Of Duties. The Lender will diligently perform all duties that are necessary or incident to the servicing of: - - all mortgages it is servicing for us on the date this Contract takes effect; and - - all other mortgages that the Lender is required to service by the terms of this Contract or any other existing or future agreement between us and the Lender. 2. Mortgages To Be Serviced. Any mortgage we have purchased from the Lender, or in which we have purchased a participation interest from the Lender. will be serviced by the Lender for us according to the terms of this Contract, unless: - the mortgage is not within any category of those that are required by our Guide to be serviced; or - we give the Lender written notification or consent that a mortgage to be purchased by us will not be serviced by the Lender. 3. Service According To Guides. Any mortgage serviced under this Contract, which we own or in which we have purchased a participation interest, must be serviced by the Lender according to the provisions in our Guides that are in effect on the date of this Contract or as amended in the future. This is true regardless of when: - the mortgage was originated; - the mortgage or a participation interest in it was transferred to us; or - the Lender began servicing the mortgage. The Lender will also follow other reasonable instructions we give it and must strictly follow accepted industry standards when servicing a mortgage for us. - -------------------- Page 8 of 22 - -------------------- 08/86 - -------------------- 15 -------------------- FANNIEMAE SERVICING MORTGAGES -------------------- CONTRACT 4. Service At Lender's Own Expense. The cost of servicing will be the Lender's unless our Guides expressly provide otherwise. 5. Special Responsibilities In Foreclosures. Among the other duties that may be assigned to the Lender through our special instructions or under the terms of our Guides is the responsibility to manage and appropriately dispose of property when a mortgage it is servicing for us has been foreclosed, or possession or title has been taken by us or on our behalf. The Lender must manage and dispose of the property according to the terms of the mortgage and our Guides. 6. Service Until Need Ends. The Lender must service each mortgage continuously from the date its servicing duties begin until: - the mortgage's principal and interest have been paid in full; - the mortgage has been liquidated and the mortgaged property properly disposed of (if the Lender is required to do these things); or - the Lender's servicing duties are terminated according to Section IX of this Contract. B. COMPENSATION The Lender's compensation for servicing mortgages, including the management and disposal of properties, under this Contract is specified in our Guides. We may change the Lender's compensation by modifying our Guides at any time. However, such a change will not affect mortgages that we have purchased or committed to purchase before the date of the change. C. OWNERSHIP OF RECORDS All mortgage records reasonably required to document or properly service any mortgage we own in its entirety are our property at all times. This is true whether or not the Lender developed or originated them. The following are considered mortgage records: - all mortgage documents; - tax receipts; - insurance policies; - insurance premium receipts; - ledger sheets; - payment records; - insurance claim files and correspondence; - foreclosure files and correspondence; - current and historical data files; and - all other papers and records. ------------------- Page 9 of 22 ------------------- 08/86 ------------------- 16 - ------------------------- ASSIGNMENT, CONSIDERATION AND CONTINUANCE - ------------------------- CONTRACT 1. Lender As Custodian. The mortgage records belong to us. The Lender can have possession of the mortgage records only with our approval, and the Lender is acting as our custodian. This is true whether the Lender receives the mortgage records from an outside source or prepares them itself. 2. Delivery. When we ask for any mortgage records in writing, the Lender will deliver them to us or someone we choose. The Lender must also send us a list that identifies each mortgage, and must give us other information we request to identify the mortgages delivered. We will not be required to sign or deliver any trust receipts before the Lender delivers the mortgage records we have requested. If we ask the Lender in writing for reproductions of any mortgage records the Lender microfilmed or condensed, the Lender will reproduce them promptly at no cost to us or the party to whom we want them delivered. 3. Joint Ownership. If we own a participation interest in a mortgage, the other owners and we own the mortgage records jointly. For these mortgages, the Lender possesses the mortgage records as a custodian for the joint owners. If we ask for copies of the mortgage records and servicing information about any such mortgages, the Lender will furnish them. Or, if we need any mortgage records for legal evidence or other purposes, the Lender will release them to us for a reasonable time. D. AGREEMENT TO INDEMNIFY AND HOLD HARMLESS The Lender will indemnify us and hold us harmless against all losses, damages, judgments or legal expenses that result from its failure in any way to perform services and duties in connection with servicing mortgages or managing or its disposing of property according to this Contract or our Guides. If any private entity or governmental agency sues us, makes a claim against us or starts a proceeding against us based on the Lender's acts or omissions in servicing mortgages or managing or disposing of property, the Lender's obligation to indemnify and hold us harmless must be met regardless of whether the suit, claim or proceeding has merit or not The Lender's obligation does not apply, however, if during a suit, claim or proceeding, we give the Lender express written instructions and as a result of the Lender following them we suffer losses, damages, judgments or legal expenses. E. OWNERSHIP OF OUR STOCK If our Guides require, the Lender will continuously own our common stock in connection with all mortgages it services under this Contract. The amount of stock to be owned will be established by our Guides as they were in existence on the date the Lender started servicing the applicable mortgages. VI ASSIGNMENT, CONSIDERATION AND CONTINUANCE This section describes our requirements covering assignment of, consideration for and continuance of this Contract. - ------------------- Page 10 of 22 - ------------------- 08/88 - ------------------- 17 --------------------- ASSIGNING MORTGAGE FANNIEMAE SERVICING --------------------- CONTRACT A. ASSIGNMENT Because the relationships created by this Contract are personal, the Lender not, may without our prior written approval, assign: - - this Contract under any circumstances, either voluntarily or involuntarily, by operation of law, or otherwise; or - - its responsibility for servicing individual mortgages we own or in which we have a participation interest. (See Section VII of this Contract for required procedures governing assignments of servicing). B. LIMITED VALUE OF CONTRACT TO LENDER The Lender acknowledges that it has paid us no monetary consideration for making it an approved mortgage seller or servicer, except an application fee to reimburse us for the expenses of reviewing its application. The Lender also agrees that, except for the purchase of mortgages, the servicing of mortgages, or any fee for the termination of this Contract, this Contract has no value to the Lender. C. REQUIREMENTS FOR CONTINUANCE The Lender's right to continue selling and servicing mortgages under this Contract depends on, among other things, its continuing to meet the eligibility requirements in Section II of this Contract. VII ASSIGNING MORTGAGE SERVICING The Lender may not assign its responsibility for servicing all or any part of the mortgages that it is servicing for us without first obtaining our written consent. Any Lender to which servicing is assigned must: - be acceptable to us; and - sign a Mortgage Selling and Servicing Contract with us. We may require that the Lender and transferee lender sign documents and take other reasonable steps to perfect the assignment. VIII BREACHES OF CONTRACT The Lender's taking certain actions, or failing to take certain actions, can be treated by us as a breach of contract. A breach of contract can lead to a termination of the Contract. Termination is provided for in detail in Section IX. A. SPECIFIC BREACHES OF CONTRACT Breaches of this Contract include the following: 1. HARM, DAMAGE, LOSS OR UNTRUE WARRANTIES. It is a breach if any act or omission of the Lender in connection with the origination and sale to us of any mortgage or participation interest causes us harm, damage or loss. It is also a breach if the Lender sells us any mortgage or participation interest knowing that any of the mortgage warranties are untrue (these warranties are listed in Section IV A). ------------------------ Page 11 of 22 ------------------------ 08/86 ------------------------ 18 - -------------------------- BREACHES OF CONTRACT - -------------------------- CONTRACT 2. FAILURE TO COMPLY WITH THIS CONTRACT OR OUR GUIDES. It is a breach if the Lender does not comply with this Contract or our Guides through any act or omission, including, without limitation, the following: - failure to establish and maintain accounts for our funds or mortgagors' funds as required by our Guides; - use of our or mortgagors' funds in any manner other than that permitted by our Guides, including the Lender's failure to deposit all mortgage funds if, when, and to the extent required by our Guides; - failure to remit all funds due to us within the time periods required by our Guides; - failure to make or ensure, according to the provisions of each mortgage or of applicable laws or regulations, proper and timely payment of all: -- taxes; -- assessments; -- leasehold payments; -- ground rents; -- insurance premiums (including premiums of casualty, liability and mortgage insurance and other forms of required insurance); -- required interest on escrow funds; and -- other required payments with respect to any mortgage (including mortgaged property) serviced; unless the Lender is relieved of these responsibilities by the express provisions of our Guides, or by our written instructions that relate to a particular mortgage or property; - failure to renew or ensure renewal of any required insurance policy on any mortgage (including mortgaged property) serviced under this Contract; - failure to maintain adequate and accurate accounting records and mortgage servicing records for the mortgages, or to maintain proper identification of the applicable loan files and mortgage records that prove our outstanding participation interests; - failure to submit adequate and accurate accounting and mortgage servicing reports within the time required by our Guides; or - failure to take prompt and diligent action under applicable law or regulation to collect past due sums on mortgages, or to take any other diligent action described in our Guides that we reasonably require for mortgages in default. - --------------------- Page 12 of 22 - -------------------- 08/96 - --------------------- 19 ---------------------- FANNIEMAE BREACHES OF CONTRACT ---------------------- CONTRACT 3. FAILURE TO PROPERLY FORECLOSE OR LIQUIDATE. Where a mortgage is in default and the Lender is required or has decided to foreclose or liquidate it, it is a breach if the Lender fails to take prompt and diligent action consistent with applicable law or regulations to foreclose on or otherwise appropriately liquidate such mortgage and to perform all incident actions. It is a breach whether or not the failure results from the acts or omissions of an attorney, trustee or other person or entity the Lender chooses to effect foreclosure or liquidation. 4. FAILURE TO PROPERLY MANAGE, DISPOSE OF, OR EFFECT PROPER CONVEYANCE OF TITLE. It is a breach if any mortgage serviced under this Contract has been foreclosed or the possession or title to the property has been taken by us or on our behalf, or on behalf of other owners of a participation interest in the mortgage, and the Lender: - fails to properly manage, dispose of or effect proper conveyance of title to the mortgaged property; or - fails to do the above in accordance with this Contract, our Guides, and any pertinent laws, regulations, or mortgage insurance policies or contracts. 5. LENDER'S FINANCIAL ABILITY IMPAIRED. It is a breach if there is a change in the Lender's financial status that, in our opinion, materially and adversely affects the Lender's ability to satisfactorily service mortgages. Changes of this type include: - the Lender's insolvency; - adjudication of the Lender as a bankrupt; - appointment of a receiver for the Lender; or - the Lender's execution of a general assignment for the benefit of its creditors. If any such change does take place: - no interest in this Contract will be considered an asset or liability of the Lender or of its successors or assigns; and - no interest in this Contract will pass by operation of law without our consent. 6. FAILURE TO OBTAIN OUR PRIOR WRITTEN CONSENT. It is a breach if the Lender fails to obtain our prior written consent for: - a sale of the majority interest in the Lender; or - a change in its corporate status or structure. 7. FAILURE TO COMPLY WITH THIS CONTRACT OR OUR GUIDES. It is a breach if the Lender fails at any time to meet our standards for eligible mortgage sellers or servicers so that, in our opinion, the Lender's ability to comply with this Contract or our Guides is adversely affected. ------------------ Page 13 of 22 ----------------- 08/86 ----------------- 20 - --------------------- TERMINATION OF CONTRACT - ------------------------ CONTRACT 8. COURT FINDINGS AGAINST LENDER OR PRINCIPAL OFFICERS. It is a breach if: - a court of competent jurisdiction finds that the Lender or any of its principal officers has committed an act of civil fraud; or - the Lender or any of its principal officers is convicted of any criminal act related to the Lender's lending or mortgage selling or servicing activities or that, in our opinion, adversely affects the Lender's reputation or our reputation or interests. B. ACTIONS TO CORRECT A BREACH If there is a breach of contract by the Lender, we will have the right to take any reasonable action to have any breach corrected by the Lender before we exercise any right we have to terminate this Contract in whole or in part; however, we are not required to try to have a breach corrected before termination. Any forbearance by us in exercising our right to terminate this Contract in whole or in part will not be a waiver of any present or future right we have under this Contract to so terminate it. IX TERMINATION OF CONTRACT The reason why this Contract may be terminated and the ways in which this may be done are outlined in this section. When the Contract is terminated, the entire relationship between the Lender and us ends (with certain exceptions that are explained in this section). A. TERMINATION BY EITHER PARTY OF MORTGAGE SELLING ARRANGEMENTS The provisions of this Contract covering the sale of mortgages or participation interests under this Contract may be terminated by the Lender or by us, with or without cause, by giving notice to the other party. Notice of termination may be given at any time but must conform to Section XII of this Contract. Termination is effective immediately upon notice of termination, unless the notice specifies later termination. Termination will not affect any outstanding commitments we have made to purchase mortgages or participation interests from the Lender. However, if the Lender has breached this Contract, we may declare any or all outstanding commitments void. B. TERMINATION BY LENDER OF MORTGAGE SERVICING ARRANGEMENTS FOR WHOLLY-OWNED MORTGAGES The Lender may terminate the provisions of this Contract covering the servicing of mortgages we entirely own by giving us notice at any time. Notice must conform to Section XII of this Contract. Termination is effective the last day of the third calendar month after the calendar month in which notice is given. If the Lender terminates this Contract in whole or in part, we will not pay the Lender a termination fee. - -------------------- Page 14 of 22 - -------------------- 08/86 - -------------------- 21 ----------------------- FANNIEMAE TERMINATION OF CONTRACT ---------------------- CONTRACT C. We may terminate the provisions of this Contract covering the TERMINATION servicing under this Contract of any or all mortgages that we BY US OF entirely own. This may be done by following the procedures SERVICING outlined below. ARRANGEMENTS FOR WHOLLY-OWNED MORTGAGES 1. Termination Without Cause. We may terminate servicing for any reason, by giving the Lender notice of the termination. If we do so, the provisions of this Contract covering the servicing of the affected mortgages will automatically terminate on the thirtieth day following the day our notice is given. Whenever we do this (and the termination is not because of any breach by the Lender as described in Section IX C2) we will pay the Lender, for each mortgage on which servicing is terminated, a lump-sum termination fee as provided in a below. However, whenever we terminate solely in order to transfer the servicing to another Lender, and there has been no sale of our interest in the affected mortgages, the provisions of b below will apply. a. Termination Fee. The termination fee will be an amount equal to twice the Lender's annualized servicing compensation, at the rate of compensation that is in effect for the mortgage as of the date of the termination, applied against the unpaid principal balance of the mortgage as of such date. For purposes of determining the termination fee: - The Lender's servicing compensation consists of the servicing fee at the Applicable Servicing Rate plus any previously agreed upon excess yield that the Lender is permitted to retain on the applicable mortgage. - "Applicable Servicing Rate" means the rate of the servicing fee for the servicing of the mortgage, expressed as an annualized fractional percentage. [Refer to appropriate sections of our Guides for more detailed information regarding the computation of termination fees.] b. Termination To Effect Transfer. Whenever we terminate servicing solely in order to transfer servicing of the mortgages to another Lender, and there has been no sale of our interest in the mortgages, we will give the Lender notice of the required transfer. Within the 90-day period immediately following the date our notice is given, the Lender may arrange for the sale of the servicing to another Fannie Mae-approved Lender in good standing that, in our judgment, will properly service the mortgages to be transferred. Within that 90-day period, the Lender will give notice of any proposed sale to us, together with all related information. The sale of servicing is conditioned upon our approval, which will not be unreasonably withheld. Any resulting transfer of servicing will be completed not later than 60 days after our approval of the transfer; and - the Lender will be entitled to the proceeds of the sale of servicing, and will bear all costs and expenses related to the sale and transfer of servicing; - the Lender will not pay us a transfer fee; - we will not pay the Lender a termination fee; ---------------------- Page 15 of 22 ---------------------- 22 - ----------------------- Termination Of Contract - ----------------------- CONTRACT - we may require the purchaser of the servicing to assume any or all warranties that were made to us in connection with the sale to us of the affected mortgages; and - the purchaser of the servicing will succeed to the Lender's obligations, rights and servicing compensation, under the provisions of this Contract covering the servicing of the affected mortgages. For all of the affected mortgages that we purchased under a net-yield contract, the servicing compensation will include the specified minimum servicing fee, plus the Lender's share of that portion of the yield which exceeds the stated net yield, as provided under the commitment contract. [Refer to appropriate sections of our Guides for more detailed information regarding the computation of the Lender's servicing compensation.] If at the end of the 90-day period following our notice, the Lender has not arranged to sell and transfer the servicing of the affected mortgages to another Lender acceptable to us and given us the required notice, the provisions of this Contract covering the servicing of the mortgages will automatically terminate on the fifteenth day following the end of the 90-day period, and we will transfer the servicing to a Lender of our choice. In such a case, we will pay the Lender, for each mortgage on which servicing is terminated, a termination fee computed as provided under a. above. We will deduct from the termination fee paid to the Lender a transfer fee that is the greater of $500.00 or 1/100 of 1% of the aggregate unpaid principal balance of all of the affected mortgages on which servicing is transferred. c. General Criteria For Termination Fees. Notwithstanding anything to the contrary in this Contract, we may change the amount of termination fee that we pay, or other provisions of this Section IX C1, from time to time, by changing the appropriate provisions of our Guides. However, such a change will not affect mortgages that we have purchased or that we have committed to purchase before the date of the change. Our written tender of the termination fee to the Lender, or its successors or assigns, is complete compensation for each mortgage serviced by the Lender on which servicing is terminated. Any sums we owe the Lender for servicing prior to the termination date are not included in the termination fee. When we pay a termination fee, the Lender will not be entitled to the proceeds for any sale of the servicing involved. 2. TERMINATION WITH CAUSE. We may terminate if the Lender breaches any agreement in this Contract, including, without limitation, any of those breaches listed in Section VIII A. This may be done by giving the Lender notice of termination. Notwithstanding anything in this Contract to the contrary, if we terminate for breach, we may make it effective immediately, and we will not pay the Lender a termination fee or proceeds from any sale of the servicing involved. Furthermore, we will not pay a servicing termination fee if a mortgage is repurchased by the Lender because a warranty is untrue. - ------------------ Page 16 of 22 - ------------------ 08/86 - ------------------ 23 ----------------------- Continuance Of FannieMae Responsibilities Or Liabilities ----------------------- CONTRACT D. If the Lender breaches any agreement in this TERMINATION Contract, including, without limitation, any breach BY US OF listed in Section VIII A, we may terminate the SERVICING provisions of this Contract covering the servicing of ARRANGEMENTS any or all mortgages in which we own a participation FOR MORTGAGES interest. This may be done by giving notice of IN WHICH WE termination. Such termination may be effective HAVE A immediately, and we will not pay the Lender a PARTICIPATION termination fee. INTEREST 1. TRANSFER OF LENDER'S POWERS. Upon termination, we will automatically succeed to all the Lender's rights in and responsibilities for servicing of the affected mortgages. We will also have the option to exercise all the Lender's powers relating to these mortgages, and to designate any person or firm to exercise those powers. However, exercise of the Lender's powers must be consistent with the Lender's and our respective participation interests. The mortgage instruments for these mortgages and all related mortgage records will be delivered to us or a party we designate. The Lender will also deliver necessary assignments, transfers and documents of authority. 2. TRANSFER OF SERVICING. If we terminate the Lender's servicing of any such mortgages, we are authorized to transfer the servicing of the mortgages to new servicers and pay the new servicers a fee. The fee will apply to the total outstanding principal balance on each mortgage, including our participation interest in each mortgage as well as the participation interest of the Lender and of any other owner. 3. LIABILITY FOR FEES. The Lender and all additional owners of a participation interest will be liable for their respective shares of the servicing fee we pay. They will also be liable for their respective shares of advances that, in our sole discretion, are required. Advances may be required for insurance, taxes, maintenance, improvements or other necessary outlays. If the Lender or other owners fail to promptly provide their share of funds for advances, or for any other necessary expenses, during any period, we may supply the funds. The fact that we do this does not release the Lender or other owners from their liability. We may deduct any amount we advance the next time we owe money to the Lender or other owners. E. The exercise of a right of termination under any RIGHTS OF provision of this Contract will not impair any TERMINATION further right of termination under another provision. NOT IMPAIRED X CONTINUANCE OF RESPONSIBILITIES OR LIABILITIES Responsibilities or liabilities of the Lender that exist before the termination of this Contract will continue to exist after termination unless we expressly release the Lender from any of them in writing. This is true whether the Contract was terminated by the Lender or by us. ------------------------ Page 17 of 22 ------------------------ 08/86 ------------------------ 24 - ------------------------- Participation Interests- Special Provisions - ------------------------- CONTRACT XI PARTICIPATION INTERESTS-SPECIAL PROVISIONS This section contains special provisions that govern participation interests. A. Listed below are the consequences of the sale of a participation interest. AFTER THE SALE OF A PARTICIPATION INTEREST 1. TRANSFER OF UNDIVIDED INTEREST. When the Lender sells and conveys to us a participation interest in one or more mortgages, this is a transfer of an undivided interest in each mortgage. The sale and conveyance of the participation interest will have the same force and effect as: - a separate assignment of each mortgage executed and delivered to us by the Lender; and - a promissory note separately endorsed or transferred to us. 2. ASSURANCE OF OUR LEGAL RIGHTS. If federal or state laws or regulations now, or later, provide that the purchase of a participation interest is an extension of credit, the Lender will take whatever additional steps we may require to assure our legal rights as a purchaser of participation interests. Such steps may include: - placing legends on promissory notes; - endorsing promissory notes in blank and delivering them to us; and - executing mortgage assignments in a form acceptable to us and delivering them to us. 3. NO PARTNERSHIP OR JOINT VENTURE. Neither the simultaneous ownership of interests in one or more mortgages nor any provision of this Contract will mean that a partnership or joint venture exists between the Lender and us. B. The Lender will make the following payments to us, according to our Guides, for mortgages in which both the Lender and we own an interest: PAYMENTS TO US 1. RATABLE SHARING OF PRINCIPAL. The Lender will ratably share with us all mortgage principal payments. 2. PARTICIPATION SHARE OF INTEREST. The Lender will pay us our participation share of interest payments up to: - an amount sufficient for us to earn our yield on each mortgage; plus - any amounts due us pursuant to this section. C. As required by our Guides, the Lender will enforce the ENFORCEMENT OF due-on-sale provisions and call options in the mortgages it DUE-ON-SALE services for us. AND CALL OPTIONS - ---------------------- Page 18 of 22 - ---------------------- 08/86 - ---------------------- 25 - ----------------------- -- Participation Interests- FannieMae Special Provisions - ----------------------- -- CONTRACT D. The Lender will have the option to repurchase our interest in REPURCHASE a mortgage if: OPTION - the Lender is required by our Guides to enforce a due-on-sale clause of a mortgage in which the Lender and we own an interest; or - we elect to exercise a call option provision of such a mortgage. If the Lender wishes to repurchase our interest in such a mortgage, it may do so by: - giving us notice of its intention to repurchase; and - paying us an amount calculated according to the provisions of our Guides. E. The note rate of a mortgage is stated in the participation NOTE RATE certificate or attached loan schedule. INCREASE, FORECLOSURE EXPENSES AND PREPAYMENT CHARGES 1. NOTE RATE INCREASE. If, for any reason, there is an increase of the note rate of a mortgage in which we hold a participation interest, the Lender will pay us, according to our Guides, a percentage of the increase equal to the percentage represented by our participation interest in the mortgage. This amount will be in addition to our yield on the mortgage. 2. FORECLOSURE EXPENSES. The Lender will ratably share with us any reasonable foreclosure and related expenses in connection with a mortgage in which we own a participation interest. 3. PREPAYMENT CHARGES. The Lender will ratably share with us any prepayment charges collected for mortgages in which we own a participation interest. F. The Lender will not make any optional or voluntary advances to ADVANCES the borrower under an open-end mortgage in which we own a participation interest. G. Participation interests may be assigned either by the Lender ASSIGNMENT or us, as follows: OR SALE OF PARTICIPATION INTERESTS 1. BY US. Without the Lender's consent we may assign: - our participation interest in any mortgage; and - all rights in the mortgage we own under this Contract or under any other instruments. 2. BY LENDER TO TRANSFEREE. The Lender may sell or transfer all or part of any participation interest that it owns in any mortgage under this Contract unless expressly prohibited from doing so by our Guides. This sale or transfer of participation interests is subject to the conditions below, as well as to our Guides as they are in effect on the date of our commitment to purchase. For every sale or transfer, the Lender must obtain and furnish us with a properly executed instrument by which the transferee: - agrees to be bound by the terms of this Contract: and - acknowledges our rights and interests under this Contract with respect to the mortgage. ------------------ Page 19 of 22 ------------------ 08/86 ------------------ 26 - ---------------------- Notice - ---------------------- CONTRACT Our rights and interests that must be acknowledged include, without limitation, the right to assess a servicing fee against the owner of each participation interest if we: - assume the servicing of the mortgage; or - transfer the servicing to a new servicer under Section IX D of this Contract. The sale or transfer of a participation interest does not relieve the Lender of any responsibility or liability under this Contract. For example, the Lender continues to be liable for any fees and other amounts charged under Section IX D3 of this Contract against the participation interest that is transferred. We may collect these amounts from the Lender or from the transferee. 3. BY LENDER TO BANK. The Lender may be a member of, or be required to maintain reserves with a Federal Home Loan Bank or Federal Reserve Bank. If so, and the Lender transfers its participation interests in any mortgage under this Contract to such a bank to secure one or more advances, then the bank will not be deemed to have assumed the mortgage warranties found in Section IV A. Also, such a transfer to the bank will not relieve the Lender of any responsibility or liability under this Contract. XII NOTICE Whenever notice is required under this Contract, it must be given as described in this section. A. Any notice of termination given under this Contract must be: NOTICE OF TERMINATION - in writing; - delivered in person or sent by registered or certified mail, with a return receipt requested; and - addressed to the party to which notice is being given. Delivery and notice is given when we or the Lender mail or register the notice with any post office. B. Our Guides, including any amendments or supplements, and any OUR GUIDES other notices, demands or requests under this Contract or AND OTHER applicable law will be: DOCUMENTS - in writing; - delivered in person or mailed from any post office, substation, or letter box; - enclosed in a postage prepaid envelope; and - addressed to the Lender to which the matter is directed. C. For purposes of notice, the following rules apply: ADDRESS 1. Our address is the address of our regional office given in this Contract. 2. The Lender's address is that of its principal place of business given in this Contract. Any change of address must be given in writing. - ------------------- Page 20 of 22 - ------------------- 08/86 - ------------------- 27 ----------------------- FannieMae Prior Agreements ----------------------- CONTRACT XIII PRIOR AGREEMENTS This Contract supersedes any prior agreements between the Lender and us that govern selling or servicing of mortgages and participation interests to which this Contract relates. However, this section will not release the Lender from any responsibility or liability under any prior agreements and understandings. XIV SEVERABILITY AND ENFORCEMENT If any provision of this Contract conflicts with applicable law, the other provisions of this Contract that can be carried out without the conflicting provision will not be affected. All rights and remedies under this Contract are distinct and cumulative not only as to each other but as to any rights or remedies afforded by law or equity. They may be exercised together, separately or successively. These rights and remedies are for our benefit and that of our successor and assigns. XV CAPTIONS This Contract's captions and headings are for convenience only and are not part of the Contract. XVI SCOPE OF CONTRACT The following provisions apply, whether or not they are contrary to other provisions in this Contract. A. We reserve the right to restrict the Lender's sale or RESTRICTION servicing of mortgages or of participation interests to the OF LENDER type that the Lender and its employees have the experience and ability to originate, sell or service. B. This Contract covers only the sale of mortgages and TYPES OF participation interests and the servicing of mortgages, within MORTGAGES the following categories: COVERED SEE ATTACHED ADDENDUM -------------------- Page 21 of 22 -------------------- 08/86 -------------------- 28 - ------------------------ Signatures And Date - ------------------------ CONTRACT XVII SIGNATURES AND DATE By executing this Contract, the Lender and we agree to all of this Contract's terms and provisions. Both the Lender and we have signed and dated this Contract below. This Contract takes effect on the date we sign it. Lender: E LOAN, Inc. ------------ 5875 Arnold Road ---------------- (Address) Dublin, CA 94568 ---------------- ---------------------------------------------- By: /s/ Signature Illegible (Authorized Signature) Christian Larsen, CEO --------------------- (Type Name and Title) Date: 12/22/98 -------- Federal National Mortgage Association 135 N. Los Robles, Suite 300 Pasadena, CA 91101-1707 ----------------------- (Address) ---------------------------------------------- ---------------------------------------------- By: /s/ Signature Illegible (Authorized Signature) for LADDIE A. SCHMIDTBAUER Vice President, Quality Control/Operations ------------------------------------------ ---------------------------------------------- (Type Name and Title) Date: FEB 12 1999 ----------- - ---------------------- Page 22 of 22 - ---------------------- 08/86 - ---------------------- EX-10.26 32 MULTI-TENANT OFFICE TRIPLE NET LEASE 8/19/98 1 EXHIBIT 10.26 MULTI-TENANT OFFICE TRIPLE NET LEASE Effective Date: August 19, 1998 (The date set forth below Landlord's signature.) BASIC LEASE INFORMATION Landlord: CREEKSIDE SOUTH TRUST, a Maryland business trust Landlord's Address Carlyle Realty For Notice: 4675 MacArthur Court Newport Beach, California 92660 Attn: Paul Brady Telephone: (714) 757-0535 Fax: (714) 757-0720 with copies to: ZKS Real Estate Partners 3697 Mt. Diablo Boulevard, Suite 100 Lafayette, California 94549 Attn: David A. Kingery Telephone: (925) 283-8280 Fax: (925) 283-7638 Allen, Matkins, Leck, Gamble and Mallory LLP 333 Bush Street, Suite 1700 San Francisco, California 94104 Attn: Richard C. Mallory, Esq., Telephone: (415) 837-1515 Fax: (415) 837-1516 Landlord's Address Creekside South Trust For Payment of Rent: c/o CB Richard Ellis Department No. 01685 San Francisco, California 94139-1685 Tenant: E-LOAN, INC. a, California corporation 2 Tenant's Address E-Loan, Inc. For Notice: 540 University Avenue, Suite 350 Palo Alto, California 94301 Attn: Doug Galen Telephone: (650) 847-3700 Fax: (650) 617-0410 Project: Southern parcel of Creekside Business Park Building: Building "C" Premises: Approximately 42,789 Rentable Square Feet as shown in Exhibit A. Premises Address: Street: 5875 Arnold Drive City and State: Dublin, California Term: Five (5) years Estimated Commencement October 15, 1998 Date: Base Rent Per Month:
Monthly Base Rent Year of Term Per Rentable Square Foot ------------ ------------------------ 1 $1.25 2 $1.29 3 $1.33 4 $1.37 5 $1.41
Tenant's Share of Fifty percent (50%) Operating Expenses: Security Deposit: Fifty Thousand Dollars ($50,000) plus the Letter or Credit pursuant to Section 3.3 Broker: Landlord's Broker: Colliers Parrish International, Inc. Tenant's Broker: John Robbins & Associates -ii- 3 Lease Year: Shall refer to each three hundred sixty-five (365) day period during the Term commencing on the Commencement Date and on each anniversary thereof. Rentable Square Feet: Shall mean the total square footage of the Premises measured from drip line to drip line. Permitted Uses: General office use and no other uses shall be permitted without the prior written consent of Landlord Options: One (1) option to renew for five (5) years ADDENDUM EXHIBITS A Premises B Work Letter C Commencement Date Memorandum D Rules and Regulations E Estoppel Certificate The Basic Lease Information set forth above and the Addendum and Exhibits attached hereto are incorporated into and made a part of the following Lease. Each reference in this Lease to any of the Basic Lease Information shall mean the respective information above and shall be construed to incorporate all of the terms provided under the particular Lease paragraph pertaining to such information. In the event of any conflict between the Basic Lease Information and the provisions of the Lease, the latter shall control. LANDLORD (_______) AND TENANT (_______) AGREE. initial initial -iii- 4 Table of Contents Page ---- 1. PREMISES...............................................................1 1.1 Premises......................................................1 1.2 Common Area...................................................1 1.3 Reserved Rights...............................................1 2. TERM...................................................................2 2.1 Commencement Date.............................................2 2.2 Possession....................................................2 3. RENT...................................................................2 3.1 Rent..........................................................2 3.2 Late Charge and Interest......................................3 3.3 Security Deposit..............................................4 4. UTILITIES..............................................................6 5. TAXES..................................................................6 5.1 Real Property Taxes...........................................6 5.2 Definition of Real Property Taxes.............................6 5.3 Personal Property Taxes.......................................7 6. OPERATING EXPENSES.....................................................7 6.1 Operating Expenses............................................7 6.2 Definition of Operating Expenses..............................7 7. ESTIMATED EXPENSES.....................................................9 7.1 Payment.......................................................9 7.2 Adjustment....................................................9 8. INSURANCE..............................................................9 8.1 Landlord......................................................9 8.2 Tenant.......................................................10 8.3 General......................................................11 8.4 Indemnity....................................................12 8.5 Exemption of Landlord from Liability.........................12 9. REPAIRS AND MAINTENANCE...............................................13 9.1 Tenant.......................................................13 9.2 Landlord.....................................................13 10. ALTERATIONS...........................................................14 10.1 Trade Fixtures; Alterations..................................14 -iv- 5 10.2 Damage; Removal..............................................15 10.3 Liens........................................................15 10.4 Standard of Work.............................................15 11. USE...................................................................15 12. ENVIRONMENTAL MATTERS.................................................16 12.1 Hazardous Materials..........................................16 12.2 Indemnification..............................................17 13. DAMAGE AND DESTRUCTION................................................18 13.1 Casualty.....................................................18 13.2 Tenant's Fault...............................................19 13.3 Uninsured Casualty...........................................19 13.4 Waiver.......................................................20 13.5 Force Majeure................................................20 14. EMINENT DOMAIN........................................................20 14.1 Total Condemnation...........................................20 14.2 Partial Condemnation.........................................20 14.3 Award........................................................21 14.4 Temporary Condemnation.......................................21 15. DEFAULT...............................................................21 15.1 Events of Defaults...........................................21 15.2 Remedies.....................................................22 15.3 Cumulative...................................................23 16. ASSIGNMENT AND SUBLETTING.............................................24 17. ESTOPPEL, ATTORNMENT AND SUBORDINATION................................25 17.1 Estoppel.....................................................25 17.2 Subordination................................................26 17.3 Attornment...................................................26 18. MISCELLANEOUS.........................................................26 18.1 General......................................................26 18.2 Signs........................................................28 18.3 Waiver.......................................................28 18.4 Financial Statements.........................................28 18.5 Limitation of Liability......................................28 18.6 Notices......................................................29 18.7 Brokerage Commission.........................................29 18.8 Authorization................................................29 18.9 Holding Over; Surrender......................................29 18.10 Joint and Several............................................30 -v- 6 18.11 Covenants and Conditions.....................................30 18.12 Addenda......................................................30 19. OPTION TO EXTEND......................................................30 19.1 Option Right.................................................30 19.2 Option Rent..................................................30 19.3 Exercise of Options..........................................31 19.4 Determination of Option Rent.................................31 20. PARKING...............................................................32 21. RIGHT OF FIRST OFFER..................................................32 -vi- 7 1. PREMISES. 1.1 Premises. Landlord hereby leases to Tenant the Premises as shown on Exhibit A attached hereto, but excluding the Common Area (defined below) and any other portion of the Project. Tenant has determined that the Premises are acceptable for Tenant's use and Tenant acknowledges that, except as set forth in the Work Letter, if any, neither Landlord nor any broker or agent has made any representations or warranties in connection with the physical condition of the Premises or their fitness for Tenant's use upon which Tenant has relied directly or indirectly for any purpose. By taking possession of the Premises, Tenant accepts the Premises "AS-IS" and waives all claims of defect in the Premises, except as set forth in the Work Letter. 1.2 Common Area. Tenant may, subject to rules made by Landlord, use the following areas ("Common Area") in common with Landlord and other tenants of the Project: refuse facilities, landscaped areas, driveways necessary for access to the Premises, parking spaces and other common facilities designated by Landlord from time to time for the common use of all tenants of the Project. Landlord shall have the right, in Landlord's sole discretion, from time to time (i) to make changes to the Common Area, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscape areas, and walkways; (ii) to close temporarily any of the Common Area for maintenance purposes so long as reasonable access to the Premises remains available; (iii) to designate other land outside the boundaries of the Project to be part of the Common Area; (iv) to install, use, maintain, repair, alter, relocate or replace any Common Area or to add additional buildings and improvements to the Common Area; (v) to use the Common Area while engaged in making additional improvements, repairs or alterations to the Project, or any portion thereof; and (vi) to do and perform such other acts and make such other changes in, to or with respect to the Common Area and the Project as Landlord may, in the exercise of sound business judgment, deem to be appropriate or prudent. 1.3 Reserved Rights. Landlord reserves the right to enter the Premises for any reason upon reasonable notice to Tenant (except in case of an emergency) and/or to undertake the following all without abatement of rent or liability to Tenant: inspect the Premises and/or the performance by Tenant of the terms and conditions hereof; make such alterations, repairs, improvements or additions to the Premises as required hereunder; change boundary lines of the Common Areas; install, use, maintain, repair, alter, relocate or replace any pipes, ducts, conduits, wires, equipment and other facilities in the Building; grant easements on the Project, dedicate for public use portions thereof and record covenants, conditions and restrictions ("CC&Rs") affecting the Project and/or amendments to existing CC&Rs which do not unreasonably interfere with Tenant's use of the Premises or impose additional material monetary obligations on Tenant; change the name of the Project; affix reasonable signs and displays; and, during the last nine (9) months of the Term, show the Premises to prospective tenants. 2. TERM. 2.1 Commencement Date. The Term of the Lease shall commence ("Commencement Date") on the first day of the first full month following the date on which the Premises are 8 Substantially Complete (as hereinafter defined), subject to any Tenant Delays, as provided in Section 3 of the Work Letter attached hereto as Exhibit B (the "Work Letter") except that if Substantial Completion occurs on the first day of a month, that date shall be the Commencement Date, and the Lease shall continue in full force and effect for the period of time specified as the Term or until this Lease is terminated as otherwise provided herein. The Premises shall be deemed to be "Substantially Complete" on the earliest of the date on which: (1) Landlord files or causes to be filed with the City in which the Premises are located (if required) and delivers to Tenant an architect's notice of substantial completion, or similar written notice that the Premises are substantially complete, (2) Tenant commences business operations in the Premises, or (3) a certificate of occupancy (or a reasonably substantial equivalent such as a signoff from a building inspector or a temporary certificate of occupancy) is issued for the Premises. Landlord shall arrange for the construction of certain Tenant Improvements (as defined in the Work Letter), if any, in accordance with and subject to the terms of the Work Letter . Tenant shall, upon demand after delivery of the Premises to Tenant, execute and deliver to Landlord a Commencement Date Memorandum in the form attached hereto as Exhibit C acknowledging (i) the Commencement Date, (ii) the final square footage of the Premises and (iii) Tenant's acceptance of the Premises. If the Premises are not Substantially Complete on the Estimated Commencement Date as extended by Force Majeure events and Tenant Delays (as defined in the Lease or Work Letter, if any), this Lease shall remain in effect, Landlord shall not be subject to any liability, and the Commencement Date shall be delayed until the date the Premises are Substantially Complete. 2.2 Possession. Tenant's possession of the Premises during the period of time, if any, from the date on which Landlord tenders possession of the Premises to Tenant in a Substantially Completed condition (the "Possession Date") to the Commencement Date, shall be subject to all the provisions of this Lease and shall not advance the expiration date. Rent shall be paid for such period at the rate stated in the Basic Lease Information, prorated on the basis of a thirty (30) day month, and shall be due and payable to Landlord on or before the Commencement Date. Tenant shall upon demand acknowledge in writing the Possession Date in the form attached hereto as Exhibit C. 3. RENT. 3.1 Rent. Prior to the Commencement Date, Landlord will cause its architect to measure and certify in writing to Landlord the Rentable Square Feet (as defined in the Basic Lease Information) of the Premises, following which time the Base Rent and other figures based upon the Rentable Square Feet contained in the Premises shall be determined in accordance with the rental rates set out in the Basic Lease Information. Except in the case of manifest error, the certification from Landlord's architect of the Rentable Square Feet of the Premises shall be binding upon Landlord and Tenant. Tenant shall pay to Landlord, at Landlord's Address for Payment of Rent designated in the Basic Lease Information, or at such other address as Landlord may from time to time designate in writing to Tenant for the payment of Rent, the Base Rent, without notice, demand, offset or deduction, in advance, on the first day of each calendar month. Landlord shall have no obligation to notify Tenant of any increase in Rent and Tenant's obligation to pay all Rent (and any increases) when due shall not be modified or altered by such -2- 9 lack of notice from Landlord. Acceptance of a payment of Rent which is less than the amount then due shall not be a waiver of Landlord's rights to the balance of such Rent, regardless of Landlord's endorsement of or deposit of any check so stating. It is intended that this Lease be a "triple net lease," and that the Rent to be paid hereunder by Tenant will be received by Landlord without any deduction or offset whatsoever by Tenant, foreseeable or unforeseeable. Except as expressly provided to the contrary in this Lease, Landlord shall not be required to make any expenditure, incur any obligation, or incur any liability of any kind whatsoever in connection with this Lease or the ownership, construction, maintenance, operation or repair of the Premises or the Project. Upon the execution of this Lease, Tenant shall pay to Landlord the first month's Base Rent. If the Term commences (or ends) on a date other than the first (or last) day of a month, Base Rent shall be prorated on a per diem basis with respect to the portion of the first month and/or last month within the Term. All sums other than Base Rent which Tenant is obligated to pay under this Lease shall be deemed to be additional rent due hereunder, whether or not such sums are designated "additional rent" and shall be due and payable to Landlord commencing on the Possession Date. The term "Rent" means the Base Rent and all additional rent payable hereunder. Notwithstanding the foregoing, Tenant shall only pay Base Rent on 20,000 Rentable Square Feet of the Premises for the first six (6) months of the Term and shall only pay Base Rent on 30,000 Rentable Square Feet of the Premises for months seven (7) through nine (9) of the Term; provided, however, if Tenant is actually using any more space during such applicable months, then Tenant shall pay Base Rent on the total amount of Rentable Square Feet being used by Tenant. Beginning with the tenth (10th) month and continuing throughout the remainder of the Term, Tenant shall pay Base Rent on the total Rentable Square Feet of the Premises whether or not Tenant is occupying the total space. 3.2 Late Charge and Interest. The late payment of any Rent will cause Landlord to incur additional costs, including administration and collection costs and processing and accounting expenses and increased debt service ("Delinquency Costs"). If Landlord has not received any installment of Rent within five (5) business days after such amount is due more than two (2) times in any year of the Term, Tenant shall pay a late charge of ten percent (10%) of the delinquent amount, which is agreed to represent a reasonable estimate of the Delinquency Costs incurred by Landlord. In addition, all such delinquent amounts shall bear interest from the date such amount was due until paid in full at a rate per annum ("Applicable Interest Rate") equal to the lesser of (a) the maximum interest rate permitted by law or (b) five percent (5%) above the rate publicly announced by Bank of America, N.A. (or if Bank of America, N.A. ceases to exist, the largest bank then headquartered in the State of California) ("Bank") as its "Reference Rate." If the use of the announced Reference Rate is discontinued by the Bank, then the term Reference Rate shall mean the announced rate charged by the Bank which is, from time to time, substituted for the Reference Rate. Landlord and Tenant recognize that the damage which Landlord shall suffer as a result of Tenant's failure to pay such amounts is difficult to ascertain and said late charge and interest are the best estimate of the damage which Landlord shall suffer in the event of late payment. If a late charge becomes payable for any three (3) installments of Rent within any twelve (12) month period, then the Rent shall automatically become due and payable quarterly in advance. -3- 10 3.3 Security Deposit and Letter of Credit. 3.3.1 Security Deposit. Upon the execution of this Lease, Tenant shall pay to Landlord the Security Deposit . The Security Deposit shall secure the full and faithful performance of each provision of this Lease to be performed by Tenant. Landlord shall not be required to pay interest on the Security Deposit or to keep the Security Deposit separate from Landlord's own funds. If Tenant fails to perform fully and timely all or any of Tenant's covenants and obligations hereunder, Landlord may, but without obligation, apply all or any portion of the Security Deposit toward fulfillment of Tenant's unperformed covenants and/or obligations. If Landlord does so apply any portion of the Security Deposit, Tenant shall immediately pay Landlord sufficient cash to restore the Security Deposit to the amount of the then current Base Rent per month. After Tenant vacates the Premises, upon the expiration or sooner termination of this Lease, if Tenant is not then in default, Landlord shall return to Tenant any unapplied balance of the Security Deposit. Should the Permitted Use be amended to accommodate a change in the business of Tenant or to accommodate a subtenant or assignee, Landlord shall have the right to increase the Security Deposit to the extent necessary, in Landlord's reasonable judgment, to account for any increased risk to the Premises or increased wear and tear that the Premises may suffer as a result thereof. If a change in control of Tenant occurs during this Lease and following such change the financial condition of Tenant is, in Landlord's reasonable judgment, materially reduced, Tenant shall deposit such additional monies with Landlord as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on said change in financial condition. 3.3.2 Letter of Credit. By no later than 4:00 p.m. on August 21, 1998, Tenant shall deliver to Landlord an irrevocable standby letter of credit in the amount of Nine Hundred Thousand Dollars ($900,000.00) ("Letter of Credit") as additional security for the faithful performance by Tenant of its obligations under this Lease. Notwithstanding anything to the contrary provided herein, if Tenant has not received its venture capital contribution by August 31, 1998 pursuant to that certain letter dated August 6, 1998 from Douglas Galen to David A. Kingery, then Tenant shall increase the Additional Security Deposit to One Million Five Hundred Thousand Dollars ($1,500,000.00) by September 15, 1998. The Letter of Credit shall be upon the terms and subject to the following provisions of this Section 3.3.2. 3.3.2.1 Application of Letter of Credit. If Tenant defaults with respect to any provision of this Lease during the Lease Term, in addition to any other rights held by Landlord, Landlord may draw upon and apply all or any part of the Letter of Credit to the payment of any Rent or Operating Expenses or other Event of Default as defined in Section 15.1 below, the payment of any other amount which Landlord may spend or become obligated to spend by reason of such default, and/or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of such default, to the full extent permitted by law and contemplated by this Lease. If any portion of the Letter of Credit is so applied, Tenant shall, within ten (10) business days after written demand therefor, deposit cash with Landlord in an amount sufficient to restore the Letter of Credit to its then required amount or provide a replacement Letter of Credit to bring the face amount of the then available letter of credit to its -4- 11 then required amount, and Tenant's failure to do so shall be a non-curable default under this Lease. 3.3.2.2 Terms of Letter of Credit. The Letter of Credit shall have a term commencing upon the date of execution of this Lease, and continuing until the expiration of the initial Lease Term. The Letter of Credit shall be (i) issued by Silicon Valley Bank ("Bank") and (ii) in a form containing the required provisions set forth in Sections (a) through (d) below. Notwithstanding the foregoing, Tenant shall have the right to transfer the Letter of Credit to another bank approved by Landlord. The premium or purchase price of, or any other Bank fees associated with, such Letter of Credit shall be paid by Tenant. The Letter of Credit shall, without limiting the foregoing, provide that: (a) Such Letter of Credit shall be transferable, irrevocable and unconditional, so that Landlord, or its successor(s) in interest, may at any time "call" for any portion of the then uncalled upon amount thereof without regard to and without the Bank inquiring as to the right or lack of right of the holder of the Letter of Credit to effect such calls or the existence or lack of existence of any defenses by Tenant with respect thereto; (b) Landlord agrees not to draw upon the Letter of Credit unless Landlord claims default by Tenant under the Lease after giving notice thereof to Tenant in accordance with the terms of this Lease and the expiration of any applicable cure period set forth in this Lease, but if Landlord does effect such a "draw," such "draw" amount may, at Landlord's option, be in the full amount of the Letter of Credit or a partial draw as necessary to compensate Landlord for such default. (c) Any failure or delay of Landlord to "draw" any portion of the Letter of Credit shall not act as a waiver of Landlord's right to do so at any time thereafter or constitute a waiver of any default with respect to the Lease. (d) Tenant agrees not to interfere in any way with payment to Landlord of the proceeds of the Letter of Credit, either prior to or following a "draw" by Landlord of any portion of the Letter of Credit, regardless of whether any dispute exists between Tenant and Landlord as to Landlord's right to "draw" from the Letter of Credit. No condition or term of this Lease shall be deemed to render the Letter of Credit conditional upon this Lease or to justify the issuer of the Letter of Credit in failing to honor a draw upon such Letter of Credit in a timely manner. In the event Landlord is determined through any dispute resolution procedure agreed upon by the parties or by a court of competent jurisdiction to have improperly drawn on the Letter of Credit, then Tenant shall be entitled to receive a prompt refund of such amount from Landlord. Tenant hereby waives the provisions of Section 1950.7 of the California Civil Code, and all other provisions of law, now or hereafter in force, which provide that Landlord may claim from a security deposit (including the Letter of Credit) only those sums reasonably necessary to remedy defaults in the payment of rent or other Event of Default, it being agreed that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord for any other loss or damage, foreseeable or unforeseeable, caused by the act or omission of Tenant or any officer, employee, agent or invitee of Tenant which is an Event of Default. -5- 12 3.3.2.3 Release of Letter of Credit. Commencing on the first day of the twenty-fifth month of the Term and continuing every three (3) months thereafter throughout the remaining Term until the amount of the Letter of Credit reaches Zero Dollars ($0.00) , Tenant shall have the right to have the amount of the Letter of Credit reduced by Seventy-Five Thousand Dollars ($75,000.00) of the Additional Security Deposit as long as Tenant is not in default under the terms of this Lease. Notwithstanding the foregoing, if Tenant's net income reaches One Million Dollars ($1,000,000.00) for three (3) consecutive quarters after the anniversary of the Commencement Date and provided Tenant is not in default under the terms of this Lease, then Tenant shall have the right to cancellation of the Letter of Credit in its entirety . 4. UTILITIES. Landlord shall provide the utility service connections into the Premises as required in the Working Drawings as part of the Tenant Improvement work. Tenant shall pay all charges for heat, water, gas, electricity, telephone and any other utilities used on or provided to the Premises. Landlord shall not be liable to Tenant for interruption in or curtailment of any utility service, nor shall any such interruption or curtailment constitute constructive eviction or grounds for rental abatement. In the event the Premises is not separately metered, Tenant shall have the option, subject to Landlord's prior written consent and the terms of this Lease, to cause the Premises to be separately metered at Tenant's cost and expense. If Tenant does not elect to cause the Premises to be separately metered, Tenant shall pay a reasonable proration of utilities, as determined by Landlord. 5. TAXES. 5.1 Real Property Taxes. Tenant shall pay to Landlord Tenant's Share of the Real Property Taxes in each calendar year; provided, however, Landlord may, at its election, require that Tenant pay any increase in the assessed value of the Project based upon the value of the Tenant Improvements (as defined in the Work Letter) relative to the value of the other improvements on or to the other buildings in the Project, as reasonably determined by Landlord. Upon Tenant's request, Landlord shall endeavor to provide Tenant with a breakdown of Landlord's determination of Tenant's increased share of Real Property Taxes resulting from the Tenant Improvements. 5.2 Definition of Real Property Taxes. "Real Property Taxes" shall be the sum of the following: all real property taxes, possessory-interest taxes, business or license taxes or fees, service payments in lieu of such taxes or fees, annual or periodic license or use fees, excises, transit and traffic charges, housing fund assessments, open space charges, childcare fees, school, sewer and parking fees or any other assessments, levies, fees, exactions or charges, general and special, ordinary and extraordinary, unforeseen as well as foreseen (including fees "in-lieu" of any such tax or assessment) which are assessed, levied, charged, conferred or imposed by any public authority upon the Project (or any real property comprising any portion thereof) or its operations, together with all taxes, assessments or other fees imposed by any public authority upon or measured by any Rent or other charges payable hereunder, including any gross receipts tax or excise tax levied by any governmental authority with respect to receipt of rental income, or -6- 13 upon, with respect to or by reason of the development, possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion thereof, or documentary transfer taxes upon this transaction or any document to which Tenant is a party creating or transferring an interest in the Premises, together with any tax imposed in substitution, partially or totally, of any tax previously included within the aforesaid definition or any additional tax the nature of which was previously included within the aforesaid definition, together with any and all costs and expenses (including, without limitation, attorneys, administrative and expert witness fees and costs) of challenging any of the foregoing or seeking the reduction in or abatement, redemption or return of any of the foregoing, but only to the extent of any such reduction, abatement, redemption or return. All references to Real Property Taxes during a particular year shall be deemed to refer to taxes accrued during such year, including supplemental tax bills regardless of when they are actually assessed and without regard to when such taxes are payable. The obligation of Tenant to pay for supplemental taxes shall survive the expiration or early termination of this Lease. Nothing contained in this Lease shall require Tenant to pay any franchise, corporate, estate or inheritance tax of Landlord, or any income, profits or revenue tax or charge upon the net income of Landlord. 5.3 Personal Property Taxes. Prior to delinquency, Tenant shall pay all taxes and assessments levied upon trade fixtures, alterations, additions, improvements, inventories and other personal property located and/or installed on the Premises by Tenant; and Tenant shall provide Landlord copies of receipts for payment of all such taxes and assessments. To the extent any such taxes are not separately assessed or billed to Tenant, Tenant shall pay the amount thereof as invoiced by Landlord. 6. OPERATING EXPENSES. 6.1 Operating Expenses. Tenant shall pay to Landlord Tenant's Share of the Operating Expenses in each calendar year. Notwithstanding the foregoing, Tenant shall only pay Tenant's Share of Operating Expenses on 20,000 Rentable Square Feet of the Premises which shall be Twenty-three and 27/100 percent (23.27%) for the first six (6) months of the Term and shall only pay Tenant's Share of Operating Expenses on 30,000 Rentable Square Feet of the Premises which shall be Thirty-Five and 06/100 percent (35.06%) for months seven (7) through nine (9) of the Term; provided, however, if Tenant is actually using any more space during such applicable months, then Tenant shall pay Tenant's Share of Operating Expenses on the total amount of Rentable Square Feet being used by Tenant. Beginning with the tenth (10th) month and continuing throughout the remainder of the Term, Tenant shall pay Tenant's Share of Operating Expenses on the total Rentable Square Feet of the Premises whether or not Tenant is occupying the total space. 6.2 Definition of Operating Expenses. "Operating Expenses" shall include all reasonable and necessary expenses incurred by Landlord in the ownership, operation, maintenance, repair and management of the Project, the Common Area and/or the Building, including, but not limited to, (a) non-structural repairs to and maintenance of the roof (and roof membrane), skylights and exterior walls of the Building (including painting) except for latent -7- 14 defects; (b) repair, maintenance, utility costs and landscaping of the Common Area, including, but not limited to, any and all costs of maintenance, repair and replacement of all parking areas (including bumpers, sweeping, striping and slurry coating), loading and unloading areas, trash areas, common driveways, sidewalks, outdoor lighting, signs, directories, walkways, parkways, landscaping, irrigation systems, fences and gates and other costs which are allocable to the real property of which the Premises are a part; (c) insurance deductibles (subject to Section 13.3 below) and the costs relating to the insurance maintained by Landlord with respect to the Project (including, without limitation, the Building), including, without limitation, Landlord's cost of any self insurance deductible or retention; (d) maintenance contracts for heating, ventilation and air-conditioning (HVAC) systems and elevators, if any; (e) maintenance, monitoring and operation of the fire/life safety and sprinkler system; (f) trash collection, security services and the costs of any environmental inspections; (g) Real Property Taxes; (h) capital improvements made to or capital assets acquired for the Project after the Commencement Date that are intended to reduce Operating Expenses or are reasonably necessary for the health and safety of the occupants of the Project or are required under any governmental law or regulation, which capital costs, or an allocable portion thereof, shall be amortized over its reasonably anticipated useful life according to Federal income tax guidelines, together with interest on the unamortized balance at the Applicable Interest Rate; (i) to the extent used, commercially reasonable reserves set aside for maintenance and repair; and (j) any other costs incurred by Landlord related to the Project. Operating Expenses shall also include an administrative fee to Landlord for accounting and project management services relating to the Project in an amount equal to ten percent (10%) of the sum of Operating Expenses not including Real Property Taxes and insurance costs (other than the administrative fee). Operating Expenses shall also include all costs and fees incurred by Landlord in connection with the management of this Lease and the Premises including the cost of those services which are customarily performed by a property management services company. In no event will Landlord or its property manager be required to keep separate accounting records for the components of the Operating Expenses or to create any ledgers or schedules not already in existence. Notwithstanding the foregoing, all costs Landlord incurs that are solely attributable to the Premises shall be borne by Tenant, such that Tenant shall reimburse Landlord for one hundred percent (100%) of same as additional rent. 6.3 Operating Expense Exclusions. Notwithstanding the provisions of Section 6.2 above, in no event shall Operating Expenses include any of the following: (i) replacement of or structural repairs to the roof or the exterior walls; (ii) repairs to the extent covered by insurance proceeds, or paid by Tenant or other third parties; (iii) alterations solely attributable to tenants of the Project other than Tenant; (iv) the costs for any utilities which are separately metered to the Premises or to another Tenant's premises, (v) except as provided in Section 6.2 above, capital improvements to the Project, (vi) expenses related to the management and operation of Landlord as an entity to the extent they do not relate to the operation, ownership and maintenance or the Project, except for the management fee permitted above, (vii) any fines or penalties due to any failure by Landlord to remit timely payments and/or violation by Landlord of any governmental rule or authority or Legal Requirements (excepting Tenant's specific compliance obligations hereunder), (viii) profit increment paid to subsidiaries or affiliates of Landlord for services on or to the Project, to the extent only that the costs of such services exceed competitive costs of such -8- 15 services were they not so rendered by a subsidiary or affiliate, (ix) any advertising and promotional expenditures, (x) costs and expenses incurred in connection with repairs or alteration, for defects (including latent defects) in the design or construction of the Project or arising from the failure of the Project to comply with governmental rules or regulations as of the Commencement Date, (xi) items and services for which Tenant or any other tenant in the Project directly reimburses Landlord and costs reimbursed by insurance proceeds, condemnation proceeds or otherwise, (xii) financing and interest charges, and (xiii) salaries of employees not related to the management or maintenance of the Project. 7. ESTIMATED EXPENSES. 7.1 Payment. "Estimated Expenses" for any particular year shall mean Landlord's estimate of Operating Expenses and Real Property Taxes for a calendar year. Tenant shall pay Tenant's Share of the Estimated Expenses with installments of Base Rent in monthly installments of one-twelfth (1/12th) thereof on the first day of each calendar month during such year. If at any time Landlord determines that Operating Expenses and Real Property Taxes are projected to vary from the then Estimated Expenses, Landlord may, by notice to Tenant, revise such Estimated Expenses, and Tenant's monthly installments for the remainder of such year shall be adjusted so that by the end of such calendar year Tenant has paid to Landlord Tenant's Share of the revised Estimated Expenses for such year. 7.2 Adjustment. "Operating Expenses and Real Property Taxes Adjustment" (or "Adjustment") shall mean the difference between Tenant's Share of Estimated Expenses and Tenant's Share of Operating Expenses and Real Property Taxes for any calendar year. After the end of each calendar year, Landlord shall deliver to Tenant a statement of Tenant's Share of Operating Expenses and Real Property Taxes for such calendar year, accompanied by a computation of the Adjustment. If Tenant's payments are less than Tenant's Share, then Tenant shall pay the difference within twenty (20) days after receipt of such statement. Tenant's obligation to pay such amount shall survive the termination of this Lease. If Tenant's payments exceed Tenant's Share, then (provided that Tenant is not in default), Landlord shall credit such excess amount to future installments of Tenant's Share for the next calendar year. If Tenant is in default, Landlord may, but shall not be required to, credit such amount to Rent arrearages. 8. INSURANCE. 8.1 Landlord. Landlord shall maintain insurance through individual or blanket policies insuring the Building against fire and extended coverage (including, if Landlord elects, "all risk" coverage, earthquake/volcanic action, flood and/or surface water insurance) for the full replacement cost of the Building, with deductibles and the form and endorsements of such coverage as selected by Landlord, together with rental abatement insurance against loss of Rent in an amount equal to the amount of Rent for a period of at least twelve (12) months commencing on the date of loss. Landlord may also carry such other insurance as Landlord may deem prudent or advisable, including, without limitation, liability insurance in such amounts and on such terms as Landlord shall determine; provided, however, that such insurance shall be in a form and for an amount as carried by other landlord's of buildings with comparable age, size, -9- 16 specifications, location and quality of construction in the Dublin, California area. Tenant shall pay to Landlord, as a portion of the Operating Expenses, the costs of the insurance coverages described herein, including, without limitation, Landlord's cost of any self-insurance deductible or retention. 8.2 Tenant. Tenant shall, at Tenant's expense, obtain and keep in force at all times the following insurance: 8.2.1 Liability Insurance. A commercial general liability insurance policy or an equivalent thereto, written on an occurrence form that includes personal injury coverage, advertising injury coverage, and contractual liability coverage, at Tenant's expense, insuring against liability arising out of the ownership, use, occupancy or maintenance of the Premises, and the business operated by Tenant and any subtenants of Tenant in the Premises. The initial amount of such insurance shall be Two Million Dollars ($2,000,000.00) each occurrence/ Two Million Dollars ($2,000,000.00) general aggregate on a per location basis, Two Million Dollars ($2,000,000) for personal injury and advertising injury coverage and Five Hundred Thousand Dollars ($500,000.00) for property damage. However, the amount of such insurance shall not limit Tenant's liability nor relieve Tenant of any obligation hereunder. Tenant shall, at Tenant's expense, maintain such other liability insurance as Tenant deems necessary to protect Tenant. 8.2.2 Casualty Insurance. A policy or policies of standard fire, extended coverage and special extended coverage insurance ("All Risks"), including energy systems coverage and a vandalism and malicious mischief endorsement, coverage for water damage to contents, sprinkler leakage coverage and, if required by Landlord, earthquake sprinkler leakage with extended coverage and naming Landlord as an additional insured, in an amount adequate to cover the cost of replacement of all equipment, furniture, fixtures, trade fixtures, and personal property of Tenant or which may be located in, upon or about the Premises in the event of fire or extended coverage loss. 8.2.3 Workers' Compensation and Employer's Liability Insurance. Workers' compensation insurance having limits not less than those required by state statute and federal statute, if applicable, and covering all persons employed by Tenant in the conduct of its operations on the Premises (including the all states endorsement and, if applicable, the volunteers endorsement), together with employer's liability insurance coverage in the amount of at least One Million Dollars ($1,000,000); and 8.2.4 Business Interruption. Tenant shall obtain and maintain loss of income and extra expense insurance in amounts as will reimburse Tenant for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent lessees in the business of Tenant or attributable to prevention of access to the Premises as a result of such perils. 8.2.5 Additional Insurance Obligations. Such other reasonable types of insurance coverage, including, without limitation, loss of earnings insurance, and in such reasonable amounts covering the Premises and Tenant's operations therein, as may be reasonably requested by Landlord. -10- 17 8.3 General. 8.3.1 Insurance Companies. Insurance required to be maintained by Tenant shall be written by companies licensed to do business in the state in which the Premises are located and having a "General Policyholders Rating" of at least "A - VIII" (or such higher rating as may be required by a lender having a lien on the Premises) as set forth in the most current issue of "Best's Insurance Guide." 8.3.2 Certificates of Insurance. Tenant shall deliver to Landlord certificates of insurance for all insurance required to be maintained by Tenant in a form acceptable to Landlord in its sole discretion, no later than seven (7) days prior to the date of possession of the Premises. Tenant shall, at least ten (10) days prior to expiration of the policy, furnish Landlord with certificates of renewal or "binders" thereof. Each certificate shall expressly provide that such policies shall not be cancelable or otherwise subject to modification except after sixty (60) days prior written notice to the parties named as additional insureds in this Lease (except in the case of cancellation for nonpayment of premium in which case cancellation shall not take effect until at least ten (10) days' notice has been given to Landlord). If Tenant fails to maintain any insurance required in this Lease, Tenant shall be liable for all losses and cost resulting from said failure. 8.3.3 Additional Insureds. Landlord, Landlord's lender, if any, and any property management company of Landlord for the Premises shall be named as additional insureds on a form approved by Landlord under all of the policies required by Section 8.2.1. The policies required under Section 8.2.1 shall provide for severability of interest. 8.3.4 Primary Coverage. All insurance to be maintained by Tenant shall, except for workers' compensation and employer's liability insurance, be primary, without right of contribution from insurance of Landlord. Any umbrella liability policy or excess liability policy (which shall be in "following form") shall provide that if the underlying aggregate is exhausted, the excess coverage will drop down as primary insurance. The limits of insurance maintained by Tenant shall not limit Tenant's liability under this Lease. 8.3.5 Waiver of Subrogation. Landlord and Tenant each hereby waive any and all rights of recovery against the other or against the officers, employees, agents and representatives of the other, on account of loss or damage occasioned to such waiving party or its property or the property of others under its control, to the extent that such loss or damage is insured against under any fire and extended coverage insurance policy which either may have in force at the time of such loss or damage. Tenant shall, if required, for each of the policies of insurance required under this Lease, give notice to the insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Lease. 8.3.6 Notification of Incidents. Tenant shall notify Landlord within twenty-four (24) hours after the occurrence of any accidents or incidents in the Premises, the Building, Common Areas or the Project which could give rise to a claim under any of the insurance policies required under this Section 8. -11- 18 8.4 Indemnity. Tenant shall indemnify, protect, defend (by counsel reasonably acceptable to Landlord) and hold harmless Landlord and its partners, directors, officers, employees, shareholders, lenders, agents, contractors and each of their successors and assigns (collectively, "Landlord Indemnities") from and against any and all claims, judgments, causes of action, damages, penalties, costs, liabilities, and expenses, including all costs, attorneys' fees, expenses and liabilities incurred in the defense of any such claim or any action or proceeding brought thereon (collectively, "Claims"), arising at any time during or after the Term as a result (directly or indirectly) of or in connection with (i) any default in the performance of any obligation on Tenant's part to be performed under the terms of this Lease, or (ii) Tenant's use of the Premises, the conduct of Tenant's business or any activity, work or things done, permitted or suffered by Tenant in or about the Premises, the Building, the Common Area or other portions of the Project, except for claims caused solely by Landlord's gross negligence or willful misconduct (such excluded Claims shall be referred to herein as "Landlord Caused Claims"), but specifically including Landlord's negligence (other than gross negligence). The obligations of Tenant under this Section 8.4 shall survive the termination of this Lease with respect to any claims or liability arising prior to such termination. Landlord hereby agrees to protect, defend and indemnify and hold harmless Tenant and Tenant's partners, officers, directors, shareholders, agents and employees (collectively, "Tenant Indemnitees") against and save the Tenant Indemnified Parties harmless from any such Landlord Caused Claims, but only to the extent the Landlord Caused Claims have not otherwise been waived by Tenant pursuant to Section 8.5 below, and are not covered by Tenant's insurance maintained pursuant to this Section 8 (and would not have been covered by such insurance had Tenant obtained the same as required in this Section 8). Notwithstanding anything to the contrary contained in this Lease, including the indemnities set forth in this Section 8.4, nothing in this Lease (including this Section 8) shall impose any obligations on Tenant or Landlord to be responsible or liable for, and each hereby releases the other from, all liability for consequential damages, including, without limitation, in the case of Tenant, any claim relating to any interruption of or interference with the conduct of Tenant's business. If any action or proceeding is brought against the indemnified party for any Claim against which the indemnifying party is obligated to indemnify the indemnified party hereunder, the indemnifying party upon notice from the indemnified party shall defend such action or proceeding at the indemnifying party's sole expense by counsel reasonably acceptable to the indemnified party. 8.5 Exemption of Landlord from Liability. Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property including, but not limited to, Tenant's fixtures, equipment, furniture and alterations or injury to persons in, upon or about the Premises, the Building, the Common Area or other portions of the Project arising from any cause, and Tenant hereby waives all claims in respect thereof against Landlord, except to the extent such claims are caused by Landlord's gross negligence or willful misconduct. Tenant hereby agrees that Landlord shall not be liable for injury to Tenant's business or any loss of income therefrom or for damage to the property of Tenant, or injury to or death of Tenant, Tenant's employees, invitees, customers, agents or contractors or any other person in or about the Premises, the Building, the Common Area or the Project, whether such damage or injury is caused by fire, steam, electricity, gas, water or rain, or from the breakage, leakage or other -12- 19 defects of sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether said damage or injury results from conditions arising upon the Premises, upon other portions of the Building or from other sources or places, and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Tenant, except to the extent caused by Landlord's gross negligence or willful misconduct. Landlord shall not be liable for any damages arising from any act or neglect of any other tenant, if any, of the Building or the Project or Landlord's failure to enforce the terms of any agreements with parties other than Tenant. It is expressly understood and agreed that Tenant's waivers under this section shall apply to all costs, liabilities, damages, deaths and injuries caused by Landlord's negligence (other than its gross negligence). 9. REPAIRS AND MAINTENANCE. 9.1 Tenant. Tenant, at Tenant's sole cost and expense, shall keep and maintain the Premises (interior and exterior), including loading docks, doors and ramps, floors, subfloors and floor coverings, walls and wall coverings, doors, windows, glass, plate glass, ceilings, skylights, lighting systems, interior plumbing, electrical and mechanical systems and wiring, appliances and devices using or containing refrigerants, fixtures and equipment in good repair and in a clean and safe condition, and repair and/or replace any and all of the foregoing in a clean and safe condition, in good order, condition and repair; provided, however, that Tenant shall not be responsible for any such maintenance caused by any latent defects. Without limiting the foregoing, Tenant shall, at Tenant's sole expense, (a) immediately replace all broken glass in the Premises with glass equal to or in excess of the specification and quality of the original glass; and (b) repair any area damaged by Tenant, Tenant's agents, employees, invitees and visitors, including any damage caused by any roof penetration, whether or not such roof penetration was approved by Landlord. In the event Tenant fails, in the reasonable judgment of Landlord, to maintain the Premises in accordance with the obligations under the Lease, which failure continues at the end of ten (10) days following Tenant's receipt of written notice from Landlord stating with particularity the nature of the failure, Landlord shall have the right to enter the Premises and perform such maintenance, repairs or refurbishing at Tenant's sole cost and expense. Tenant shall maintain written records of maintenance and repairs, as required by any applicable law, ordinance or regulation, and shall use certified technicians to perform such maintenance and repairs, as so required. Tenant shall deliver full and complete copies of all service or maintenance contracts entered into by Tenant for the Premises to Landlord within sixty (60) days after the Commencement Date. 9.2 Landlord. Landlord shall, subject to the following limitations, repair damage to the roof, foundation and exterior portions of exterior walls (excluding wall coverings, interior painting, glass and doors) of the Building; provided, if such damage is caused by an act or omission of Tenant, Tenant's employees, agents, invitees, subtenants, or contractors, then such repairs shall be at Tenant's sole expense. Landlord shall not be required to make any repair resulting from (i) any alteration or modification to the Building or to mechanical equipment within the Building performed by, for or because of Tenant or to special equipment or systems installed by, for or because of Tenant, (ii) the installation, use or operation of Tenant's property, -13- 20 fixtures and equipment, (iii) the moving of Tenant's property in or out of the Building or in and about the Premises, (iv) Tenant's use or occupancy of the Premises in violation of Section 11 of this Lease or in the manner not contemplated by the parties at the time of the execution of this Lease, (v) the acts or omissions of Tenant and Tenant's employees, agents, invitees, subtenants, licensees or contractors, (vi) fire and other casualty, except as provided by Section 13 of this Lease or (vii) condemnation, except as provided in Section 14 of this Lease. Landlord shall have no obligation to make repairs under this Section 9.2 until thirty (30) days after receipt of written notice from Tenant of the need for such repairs. There shall be no abatement of Rent during the performance of such work. Landlord shall not be liable to Tenant for injury or damage that may result from any defect in the construction or condition of the Premises, nor for any damage that may result from interruption of Tenant's use of the Premises during any repairs by Landlord, except as a result of Landlord's gross negligence or willful misconduct. Tenant waives any right to repair the Premises, the Building and/or the Common Area at the expense of Landlord under any applicable governmental laws, ordinances, statutes, orders or regulations now or hereafter in effect which might otherwise apply. 9.3 Tenant's Right to make Repairs. If Tenant provides notice to Landlord of an event or circumstance which requires the action of Landlord with respect to the provision of repairs and/or maintenance as set forth in this Article 9, and Landlord fails to respond to Tenant's notice regarding such action as required by the terms of this Lease, then Tenant may proceed to take the required action upon delivery of an additional ten (10) business days notice to Landlord specifying that Tenant is taking such required action, and if such action was required under the terms of this Lease to be taken by Landlord, then Tenant shall be entitled to prompt reimbursement by Landlord of Tenant's reasonable costs and expenses in taking such action plus interest at the Applicable Interest Rate. In the event Tenant takes such action, and such work will affect the roof or the Building systems and equipment, Tenant shall use only those contractors used by Landlord in the Building for such work. 10. ALTERATIONS. 10.1 Trade Fixtures; Alterations. Tenant may install necessary trade fixtures, equipment and furniture in the Premises, provided that such items are installed and are removable without structural or material damage to the Premises, the Building, the Common Area or the Project. Tenant shall not construct, nor allow to be constructed, any alterations or physical additions in, about or to the Premises costing more than Twenty-Five Thousand Dollars ($25,000) and which do not affect the Building structure without obtaining the prior written consent of Landlord, which consent shall not be unreasonably withheld or delayed but shall be conditioned upon Tenant's compliance with Landlord's reasonable requirements regarding construction of improvements and alterations; provided, however, that Tenant shall notify Landlord of its intent to make such alterations even if Landlord's consent is not required. Tenant shall submit plans and specifications to Landlord with Tenant's request for approval and shall reimburse Landlord for all third party costs which Landlord may incur in connection with granting approval to Tenant for any such alterations and additions, including any costs or expenses which Landlord may incur in electing to have outside architects and engineers review -14- 21 said matters. For those alterations requiring Landlord's approval, If Landlord does not respond to a written request from Tenant within fifteen (15) business days, then Landlord shall be deemed to approve such request. In the event Tenant makes any alterations to the Premises that trigger or give rise to a requirement that the Building or the Premises come into compliance with any governmental laws, ordinances, statutes, orders and/or regulations (such as ADA requirements), Tenant shall be fully responsible for complying, at its sole cost and expense, with same. Tenant shall file a notice of completion after completion of such work and provide Landlord with a copy thereof. Tenant shall provide Landlord with a set of "as-built" drawings for any such work whether or not Landlord's approval is required. 10.2 Damage; Removal. Tenant shall repair all damage to the Premises and/or the Building caused by the installation or removal of Tenant's fixtures, equipment, furniture and alterations. Upon the termination of this Lease, except for Tenant Improvements, Tenant shall remove any or all trade fixtures, alterations, additions, improvements and partitions made or installed by Tenant and restore the Premises to its condition existing prior to the construction of any such items, ordinary wear and tear excepted; provided, however, Landlord has the absolute right to require Tenant to have all or any portion of such items designated by Landlord to remain on the Premises, in which event they shall be and become the property of Landlord upon the termination of this Lease. All such removals and restoration shall be accomplished in a good and workmanlike manner and so as not to cause any damage to the Premises, the Building, the Common Area or the Project whatsoever. 10.3 Liens. Tenant shall promptly pay and discharge all claims for labor performed, supplies furnished and services rendered at the request of Tenant and shall keep the Premises free of all mechanics' and materialmen's liens in connection therewith. Tenant shall provide at least ten (10) days prior written notice to Landlord before any labor is performed, supplies furnished or services rendered on or at the Premises and Landlord shall have the right to post on the Premises notices of non-responsibility. If any lien is filed, Tenant shall cause such lien to be released and removed within ten (10) days after the date of filing, and if Tenant fails to do so, Landlord may take such action as may be necessary to remove such lien and Tenant shall pay Landlord such amounts expended by Landlord together with interest thereon at the Applicable Interest Rate from the date of expenditure. 10.4 Standard of Work. All work to be performed by or for Tenant pursuant hereto shall be performed diligently and in a first class, workmanlike manner, and in compliance with all applicable laws, ordinances, regulations and rules of any public authority having jurisdiction over the Premises and/or Tenant and Landlord's insurance carriers. Landlord shall have the right, but not the obligation, to inspect periodically the work on the Premises. 11. USE. The Premises shall be used only for the Permitted Uses set forth in the Basic Lease Information and for no other uses. Tenant's use of the Premises shall be in compliance with and subject to all applicable governmental laws, ordinances, statutes, orders and regulations and any CC&Rs (including payments thereunder, if any) or any supplement thereto recorded in any official or public records with respect to the Project or any portion thereof. Tenant, at Tenant's -15- 22 sole cost and expense, shall comply with the rules and regulations attached hereto as Exhibit D, together with such additional rules and regulations as Landlord may from time to time prescribe of which Landlord shall provide Tenant with written notice. Tenant shall not commit waste, overload the floors or structure of the Building, subject the Premises, the Building, the Common Area or the Project to any use which would damage the same or increase the risk of loss or violate any insurance coverage, permit any unreasonable odors, smoke, dust, gas, substances, noise or vibrations to emanate from the Premises, take any action which would constitute a nuisance or would disturb, obstruct or endanger any other tenants, take any action which would abrogate any warranties, or use or allow the Premises to be used for any unlawful purpose. Tenant further agrees that Landlord shall not be responsible for enforcing any parking rights in the Project or non-compliance by any other tenant or occupant of the Project with, or Landlord's failure to enforce, any of the rules or regulations or CC&Rs or any other terms or provisions of such tenant's or occupant's lease. Tenant shall promptly comply with the reasonable requirements of any board of fire insurance underwriters or other similar body now or hereafter constituted. Tenant shall not do any act which shall in any way encumber the title of Landlord in and to the Premises, the Building or the Project. 12. ENVIRONMENTAL MATTERS. 12.1 Hazardous Materials. Tenant shall not cause nor permit, nor allow any of Tenant's employees, agents, customers, visitors, invitees, licensees, contractors, assignees or subtenants (collectively, "Tenant's Parties") to cause or permit, any Hazardous Materials to be brought upon, stored, manufactured, generated, blended, handled, recycled, treated, disposed or used on, under or about the Premises, the Building, the Common Area or the Project, except for routine office and janitorial supplies in usual and customary quantities stored, used and disposed of in accordance with all applicable Environmental Laws. As used herein, "Hazardous Materials" means any chemical, substance, material, controlled substance, object, condition, waste, living organism or combination thereof which is or may be hazardous to human health or safety or to the environment due to its radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity, mutagenicity, phytotoxicity, infectiousness or other harmful or potentially harmful properties or effects, including, without limitation, petroleum and petroleum products, asbestos, radon, polychlorinated biphenyls (PCBs), refrigerants (including those substances defined in the Environmental Protection Agency's "Refrigerant Recycling Rule," as amended from time to time) and all of those chemicals, substances, materials, controlled substances, objects, conditions, wastes, living organisms or combinations thereof which are now or become in the future listed, defined or regulated in any manner by any Environmental Law based upon, directly or indirectly, such properties or effects. As used herein, "Environmental Laws" means any and all federal, state or local environmental, health and/or safety-related laws, regulations, standards, decisions of courts, ordinances, rules, codes, orders, decrees, directives, guidelines, permits or permit conditions, currently existing and as amended, enacted, issued or adopted in the future which are or become applicable to Tenant, the Premises, the Building, the Common Area or the Project. Tenant and Tenant's Parties shall comply with all Environmental Laws and promptly notify Landlord of the violation of any Environmental Law or presence of any Hazardous Materials, other than office and janitorial supplies as permitted above, on the -16- 23 Premises. Landlord shall have the right with prior notice to Tenant except in the case of emergencies to enter upon and inspect the Premises and to conduct tests, monitoring and investigations. If such tests indicate the presence of any environmental condition which occurred during the Term of this Lease other than underground migration from a site outside of the Premises or from the use or operation of the business of any other tenant of the Building, Tenant shall reimburse Landlord for the cost of conducting such tests. The phrase "environmental condition" shall mean any adverse condition relating to any Hazardous Materials or the environment, including surface water, groundwater, drinking water supply, land, surface or subsurface strata or the ambient air and includes air, land and water pollutants, noise, vibration, light and odors caused by Tenant or Tenant's Parties. In the event of any such environmental condition, Tenant shall promptly take any and all steps necessary to rectify the same to Landlord's reasonable satisfaction or shall, at Landlord's election, reimburse Landlord, upon demand, for the cost to Landlord of performing rectifying work. The reimbursement shall be paid to Landlord in advance of Landlord's performing such work, based upon Landlord's reasonable estimate of the cost thereof; and upon completion of such work by Landlord, Tenant shall pay to Landlord any shortfall within thirty (30) days after Landlord bills Tenant therefor or Landlord shall within thirty (30) days refund to Tenant any excess deposit, as the case may be. 12.2 Indemnification. Tenant shall indemnify, protect, defend (by counsel acceptable to Landlord) and hold harmless Landlord and its partners, directors, officers, employees, shareholders, lenders, agents, contractors and each of their respective successors and assigns (individually and collectively, "Indemnitees") from and against any and all claims, judgments, causes of action, damages, penalties, fines, taxes, costs, liabilities, losses and expenses arising at any time during or after the Term as a result (directly or indirectly) of or in connection with (a) Tenant and/or Tenant's Parties' breach of any prohibition or provision of the preceding section, or (b) the presence of Hazardous Materials on, under or about the Premises or other property as a result (directly or indirectly) of Tenant's and/or Tenant's Parties' activities, or failure to act, in connection with the Premises. This indemnity shall include the cost of any required or necessary repair, cleanup or detoxification, and the preparation and implementation of any closure, monitoring or other required plans, whether such action is required or necessary prior to or following the termination of this Lease. Neither the written consent by Landlord to the presence of Hazardous Materials on, under or about the Premises, nor the strict compliance by Tenant with all Environmental Laws, shall excuse Tenant from Tenant's obligation of indemnification pursuant hereto. Tenant's obligations pursuant to the foregoing indemnity shall survive the termination of this Lease. 12.3 Landlord Warranty. Landlord warrants and represents that Landlord has no actual knowledge of any Hazardous Materials which are not disclosed in the Phase I Environmental Analysis of the Property (the "Phase I Report"), or the soil sampling which Landlord has provided to Tenant. As used herein, the phrase "actual knowledge" shall mean the actual knowledge of David A. Kingery without investigation or inquiry or duty of investigation or inquiry. David A. Kingery is making such representation and warranty on behalf of Landlord and not in his individual capacity and, as a result, Landlord (and not such individual) shall be liable in the event of a breach of this representation. Tenant acknowledges that, other than the -17- 24 Phase I Report, Landlord has not conducted any other investigations regarding the environmental condition of the Property. 13. DAMAGE AND DESTRUCTION. 13.1 Casualty. If the Premises or Building should be damaged or destroyed by fire or other casualty, Tenant shall give immediate written notice to Landlord. Within thirty (30) days after receipt from Tenant of such written notice, Landlord shall notify Tenant whether the necessary repairs can reasonably be made: (a) within ninety (90) days; (b) in more than ninety (90) days but in less than one hundred twenty (120) days; or (c) in more than one hundred twenty (120) days after the date of the issuance of permits for the necessary repair or reconstruction of the portion of the Building or Premises which was damaged or destroyed. 13.1.1 Less Than 90 Days. If the Premises or Building should be damaged only to such extent that rebuilding or repairs can reasonably be completed within ninety (90) days after the issuance of permits for the necessary repair or reconstruction of the portion of the Building or Premises which was damaged or destroyed, this Lease shall not terminate and, provided that insurance proceeds are available to fully repair the damage, Landlord shall repair the Premises, except that Landlord shall not be required to rebuild, repair or replace Tenant's Property which may have been placed in, on or about the Premises by or for the benefit of Tenant. If Tenant is required to vacate all or a portion of the Premises during Landlord's repair thereof, the Base Rent payable hereunder shall be abated proportionately on the basis of the size of the area of the Premises that is damaged (e.g., the number of square feet of floor area of the Premises that is damaged compared to the total square footage of the floor area of the Premises) from the date Tenant vacates all or a portion of the Premises that was damaged only to the extent rental abatement insurance proceeds are received by Landlord and only during the period the Premises are unfit for occupancy. 13.1.2 Greater Than 90 Days. If the Premises or Building should be damaged only to such extent that rebuilding or repairs can reasonably be completed in more than ninety (90) days but in less than one hundred twenty (120) days after the issuance of permits for the necessary repair or reconstruction of the portion of the Building or Premises which was damaged or destroyed, then Landlord shall have the option of: (a) terminating the Lease effective upon the occurrence of such damage, in which event the Rent shall be abated from the date Tenant vacates the Premises; or (b) electing to repair the Premises, provided insurance proceeds are available to fully repair the damage (except that Landlord shall not be required to rebuild, repair or replace Tenant's Property which may have been placed in, on or about the Premises by or for the benefit of Tenant). If Tenant is required to vacate all or a portion of the Premises during Landlord's repair thereof, the Base Rent payable hereunder shall be abated proportionately on the basis of the size of the area of the Premises that is damaged (e.g., the number of square feet of floor area of the Premises that is damaged compared to the total square footage of the floor area of the Premises) from the date Tenant vacates all or a portion of the Premises that was damaged only to the extent rental abatement insurance proceeds are received by Landlord and only during the period the Premises are unfit for occupancy. In the event that Landlord should fail to -18- 25 substantially complete such repairs within one hundred twenty (120) days after the issuance of permits for the necessary repair or reconstruction of the portion of the Building or Premises which was damaged or destroyed, (such period to be extended for delays caused by Tenant or because of any items of Force Majeure, as hereinafter defined) and Tenant has not re-occupied the Premises, Tenant shall have the right, as Tenant's exclusive remedy, within ten (10) days after the expiration of such one hundred twenty (120) day period, to terminate this Lease by delivering written notice to Landlord as Tenant's exclusive remedy, whereupon all rights hereunder shall cease and terminate thirty (30) days after Landlord's receipt of such notice. 13.1.3 Greater Than 120 Days. If the Premises or Building should be so damaged that rebuilding or repairs cannot be completed within one hundred twenty (120) days after the issuance of permits for the necessary repair or reconstruction of the portion of the Building or Premises which was damaged or destroyed, either Landlord or Tenant may terminate this Lease by giving written notice within ten (10) days after notice from Landlord specifying such time period of repair; and this Lease shall terminate and the Rent shall be abated from the date Tenant vacates the Premises. In the event that neither party elects to terminate this Lease, Landlord shall promptly commence and diligently prosecute to completion the repairs to the Building or Premises, provided insurance proceeds are available to repair the damage (except that Landlord shall not be required to rebuild, repair or replace Tenant's Property which may have been placed in, on or about the Premises by or for the benefit of Tenant). If Tenant is required to vacate all or a portion of the Premises during Landlord's repair thereof, the Base Rent payable hereunder shall be abated proportionately on the basis of the size of the area of the Premises that is damaged (e.g., the number of square feet of floor area of the Premises that is damaged compared to the total square footage of the floor area of the Premises), from the date Tenant vacates all or a portion of the Premises that was damaged only to the extent rental abatement insurance proceeds are received by Landlord and only during the period that the Premises are unfit for occupancy. 13.2 Tenant's Fault. If the Premises or any portion of the Building is damaged resulting from the negligence or breach of this Lease by Tenant or any of Tenant's Parties, Rent shall not be reduced during the repair of such damage and Tenant shall be liable to Landlord for the cost of the repair caused thereby to the extent such cost is not covered by insurance proceeds from policies of insurance required to be maintained pursuant to the provisions of this Lease. 13.3 Uninsured Casualty. Tenant shall be responsible for and shall pay to Landlord any deductible amount payable under the property insurance for the Building; provided, however, that Tenant shall only pay its prorata share of any deductible which prorata share shall not exceed Ten Thousand Dollars ($10,000). In the event that the Premises or any portion of the Building is damaged to the extent Tenant is unable to use the Premises and such damage is not covered by insurance proceeds received by Landlord or in the event that the holder of any indebtedness secured by the Premises requires that the insurance proceeds be applied to such indebtedness, then Landlord shall have the right at Landlord's option either (i) to repair such damage as soon as reasonably possible at Landlord's expense, or (ii) to give written notice to Tenant within thirty (30) days after the date of the occurrence of such damage of Landlord's -19- 26 intention to terminate this Lease as of the date of the occurrence of such damage. In the event Landlord elects to terminate this Lease, Tenant shall have the right within ten (10) days after receipt of such notice to give written notice to Landlord of Tenant's intention to pay the cost of repair of such damage, in which event, following the securitization of Tenant's funding commitment in a form acceptable to Landlord, this Lease shall continue in full force and effect, Landlord shall make such repairs as soon as reasonably possible and Tenant shall reimburse Landlord for such repairs within fifteen (15) days after receipt of an invoice from Landlord. If Tenant does not give such notice within the ten (10) day period, this Lease shall terminate automatically as of the date of the occurrence of the damage. 13.4 Waiver. With respect to any damage or destruction which Landlord is obligated to repair or may elect to repair, Tenant waives all rights to terminate this Lease pursuant to rights otherwise presently or hereafter accorded by law. 13.5 Force Majeure. "Force Majeure," as used in this Section 13 only and shall not apply elsewhere unless otherwise specified, means delays resulting from causes beyond the reasonable control of Landlord, including, without limitation, any delay caused by any action, inaction, order, ruling, moratorium, regulation, statute, condition or other decision of any private party or governmental agency having jurisdiction over any portion of the Project, over the construction anticipated to occur thereon or over any uses thereof, or by delays in inspections or in issuing approvals by private parties or permits by governmental agencies, or by fire, flood, inclement weather, strikes, lockouts or other labor or industrial disturbance (whether or not on the part of agents or employees of Landlord engaged in the construction of the Premises), civil disturbance, order of any government, court or regulatory body claiming jurisdiction or otherwise, act of public enemy, war, riot, sabotage, blockage, embargo, failure or inability to secure materials, supplies or labor through ordinary sources by reason of shortages or priority, discovery of hazardous or toxic materials, earthquake, or other natural disaster, delays caused by any dispute resolution process, or any cause whatsoever beyond the reasonable control (excluding financial inability) of the party whose performance is required, or any of its contractors or other representatives, whether or not similar to any of the causes hereinabove stated. 14. EMINENT DOMAIN. 14.1 Total Condemnation. If all of the Premises is condemned by eminent domain, inversely condemned or sold under threat of condemnation for any public or quasi-public use or purpose ("Condemned"), this Lease shall terminate as of the earlier of the date the condemning authority takes title to or possession of the Premises, and Rent shall be adjusted to the date of termination. 14.2 Partial Condemnation. If any portion of the Premises or the Building is Condemned and such partial condemnation materially impairs Tenant's ability to use the Premises for Tenant's business as reasonably determined by Landlord, Landlord shall have the option of either (i) relocating Tenant to comparable space within the Project or (ii) terminating this Lease as of the earlier of the date title vests in the condemning authority or as of the date an -20- 27 order of immediate possession is issued and Rent shall be adjusted to the date of termination. If such partial condemnation does not materially impair Tenant's ability to use the Premises for the business of Tenant, Landlord shall promptly restore the Premises to the extent of any condemnation proceeds recovered by Landlord, excluding the portion thereof lost in such condemnation, and this Lease shall continue in full force and effect except that after the date of such title vesting Rent shall be adjusted as reasonably determined by Landlord. 14.3 Award. If the Premises are wholly or partially Condemned, Landlord shall be entitled to the entire award paid for such condemnation, and Tenant waives any claim to any part of the award from Landlord or the condemning authority; provided, however, Tenant shall have the right to recover from the condemning authority such compensation as may be separately awarded to Tenant in connection with costs in removing Tenant's merchandise, furniture, fixtures, leasehold improvements and equipment to a new location. No condemnation of any kind shall be construed to constitute an actual or constructive eviction of Tenant or a breach of any express or implied covenant of quiet enjoyment. 14.4 Temporary Condemnation. In the event of a temporary condemnation not extending beyond the Term, this Lease shall remain in effect, Tenant shall continue to pay Rent and Tenant shall receive any award made for such condemnation except damages to any of Landlord's property. If a temporary condemnation is for a period which extends beyond the Term, this Lease shall terminate as of the date of initial occupancy by the condemning authority and any such award shall be distributed in accordance with the preceding section. If a temporary condemnation remains in effect at the expiration or earlier termination of this Lease, Tenant shall pay Landlord the reasonable cost of performing any obligations required of Tenant with respect to the surrender of the Premises. 15. DEFAULT. 15.1 Events of Defaults. The occurrence of any of the following events shall, at Landlord's option, constitute an "Event of Default": 15.1.1 Vacation without providing a commercially reasonable level of security or abandonment of the Premises for a period of thirty (30) consecutive days; 15.1.2 Failure to pay Rent on the date when due more than two (2) times per year and the failure continuing for a period of five (5) days after such payment is due; 15.1.3 Failure to perform Tenant's covenants and obligations hereunder (except default in the payment of Rent) where such failure continues for a period of thirty (30) days after written notice from Landlord; provided, however, if the nature of the default is such that more than thirty (30) days are reasonably required for its cure, Tenant shall not be deemed to be in default if Tenant commences the cure within the thirty (30) day period and diligently and continuously prosecutes such cure to completion; -21- 28 15.1.4 The making of a general assignment by Tenant for the benefit of creditors; the filing of a voluntary petition by Tenant or the filing of an involuntary petition by any of Tenant's creditors seeking the rehabilitation, liquidation or reorganization of Tenant under any law relating to bankruptcy, insolvency or other relief of debtors and, in the case of an involuntary action, the failure to remove or discharge the same within sixty (60) days of such filing; the appointment of a receiver or other custodian to take possession of substantially all of Tenant's assets or this leasehold; Tenant's insolvency or inability to pay Tenant's debts or failure generally to pay Tenant's debts when due; any court entering a decree or order directing the winding up or liquidation of Tenant or of substantially all of Tenant's assets; Tenant taking any action toward the dissolution or winding up of Tenant's affairs; the cessation or suspension of Tenant's use of the Premises; or the attachment, execution or other judicial seizure of substantially all of Tenant's assets or this leasehold; 15.1.5 The making of any material misrepresentation or omission by Tenant or any successor in interest of Tenant in any materials delivered by or on behalf of Tenant to Landlord or Landlord's lender pursuant to this Lease; or 15.1.6 Intentionally Deleted. 15.1.7 The occurrence of an Event of Default as otherwise designated as an Event of Default in the Lease. 15.2 Remedies. 15.2.1 Termination. In the event of the occurrence of any Event of Default, Landlord shall have the right to give a written termination notice to Tenant (which notice may be the notice given under Section 15.1 above, if applicable, and which notice shall be in lieu of any notice required by California Code of Civil Procedure Section 1161, et seq.) and, on the date specified in such notice, this Lease shall terminate unless on or before such date all arrears of Rent and all other sums payable by Tenant under this Lease and all costs and expenses incurred by or on behalf of Landlord hereunder shall have been paid by Tenant and all other Events of Default at the time existing shall have been fully remedied to the satisfaction of Landlord, as required by law and the terms of this Lease. 15.2.1.1 Repossession. Following termination, without prejudice to other remedies Landlord may have, Landlord may (i) peaceably re-enter the Premises upon voluntary surrender by Tenant or remove Tenant therefrom and any other persons occupying the Premises, using such legal proceedings as may be available; (ii) repossess the Premises or relet the Premises or any part thereof for such term (which may be for a term extending beyond the Term), at such rental and upon such other terms and conditions as Landlord in Landlord's sole discretion shall determine, with the right to make reasonable alterations and repairs to the Premises; and (iii) remove all personal property therefrom. 15.2.1.2 Unpaid Rent. Landlord shall have all the rights and remedies of a landlord provided by applicable law, including the right to recover from Tenant: (a) the worth, -22- 29 at the time of award, of the unpaid Rent that had been earned at the time of termination, (b) the worth, at the time of award, of the amount by which the unpaid Rent that would have been earned after the date of termination until the time of award exceeds the amount of loss of rent that Tenant proves could have been reasonably avoided, (c) the worth, at the time of award, of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of the loss of rent that Tenant proves could have been reasonably avoided, and (d) any other amount, and court costs, necessary to compensate Landlord for all detriment proximately caused by Tenant's default. The phrase "worth, at the time of award," as used in (a) and (b) above, shall be computed at the Applicable Interest Rate, and as used in (c) above, shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). 15.2.2 Continuation. Even though an Event of Default may have occurred, this Lease shall continue in effect for so long as Landlord does not terminate Tenant's right to possession; and Landlord may enforce all of Landlord's rights and remedies under this Lease, including the remedy described in California Civil Code Section 1951.4 ("lessor" may continue Lease in effect after "lessee's" breach and abandonment and recover Rent as it becomes due, if "lessee" has the right to sublet or assign, subject only to reasonable limitations) to recover Rent as it becomes due. Landlord, without terminating this Lease, may, to the extent allowed by applicable law during the period Tenant is in default, enter the Premises and relet the same, or any portion thereof, to third parties for Tenant's account and Tenant shall be liable to Landlord for all costs Landlord incurs in reletting the Premises, including, without limitation, brokers' commissions, expenses of remodeling the Premises and like costs. Reletting may be for a period shorter or longer than the remaining Term. Tenant shall continue to pay the Rent on the date the same is due. No act by Landlord hereunder, including acts of maintenance, preservation or efforts to lease the Premises or the appointment of a receiver upon application of Landlord to protect Landlord's interest under this Lease, shall terminate this Lease unless Landlord notifies Tenant that Landlord elects to terminate this Lease. In the event that Landlord elects to relet the Premises, the rent that Landlord receives from reletting shall be applied to the payment of, first, any indebtedness from Tenant to Landlord other than Base Rent and Tenant's Share of Operating Expenses and Real Property Taxes; second, all costs, including maintenance, incurred by Landlord in reletting; and, third, Base Rent and Tenant's Share of Operating Expenses and Real Property Taxes under this Lease. After deducting the payments referred to above, any sum remaining from the rental Landlord receives from reletting shall be held by Landlord and applied in payment of future Rent as Rent becomes due under this Lease. In no event, and notwithstanding anything in Section 16 to the contrary, shall Tenant be entitled to any excess rent received by Landlord. If, on the date Rent is due under this Lease, the rent received from the reletting is less than the Rent due on that date, Tenant shall pay to Landlord, in addition to the remaining Rent due, all costs, including maintenance, which Landlord incurred in reletting the Premises that remain after applying the rent received from reletting as provided hereinabove. So long as this Lease is not terminated, Landlord shall have the right to remedy any default of Tenant, to maintain or improve the Premises, to cause a receiver to be appointed to administer the Premises and new or existing subleases and to add to the Rent payable hereunder all of -23- 30 Landlord's reasonable costs in so doing, with interest at the Applicable Interest Rate from the date of such expenditure. 15.3 Cumulative. Each right and remedy of Landlord provided for herein or now or hereafter existing at law, in equity, by statute or otherwise shall be cumulative and shall not preclude Landlord from exercising any other rights or remedies provided for in this Lease or now or hereafter existing at law or in equity, by statute or otherwise. No payment by Tenant of a lesser amount than the Rent nor any endorsement on any check or letter accompanying any check or payment as Rent shall be deemed an accord and satisfaction of full payment of Rent; and Landlord may accept such payment without prejudice to Landlord's right to recover the balance of such Rent or to pursue other remedies. 16. ASSIGNMENT AND SUBLETTING. 16.1 Assignment and Subletting. . Tenant shall not assign, sublet or otherwise transfer, whether voluntarily or involuntarily or by operation of law (collectively, "Transfer"), the Premises or any part thereof, except as provided in Section 16.2 below, without Landlord's prior written approval, which shall not be unreasonably withheld; provided, however, Tenant agrees it shall be reasonable for Landlord to disapprove of a requested Transfer , if the sublessee or assignee does not have a tangible net worth (as determined in accordance with generally accepted accounting principles consistently applied) equal to or greater than that of Tenant as of the date of the Lease as shown in the financial information provided to Landlord. Except as provided in Section 16.2 below, the merger of Tenant with any other entity or the transfer of any controlling or managing ownership or beneficial interest in Tenant, or the assignment of a substantial portion of the assets of Tenant, whether or not located at the Premises, shall constitute an assignment hereunder. If Tenant desires to Transfer any or all of the Premises, Tenant shall give Landlord written notice thereof with copies of all related documents and agreements associated with the Transfer , including without limitation, the financial statements of any proposed assignee or subtenant, twenty (20) days prior to the anticipated effective date of the Transfer . Tenant shall pay Landlord's reasonable attorneys' fees incurred in the review of such documentation plus an administrative fee of Five Hundred Dollars ($500.00) for each proposed transfer. Landlord shall have a period of ten (10) business days following receipt of such notice and all related documents and agreements to notify Tenant in writing of Landlord's approval or disapproval of the proposed Transfer . If Landlord fails to notify Tenant in writing of such election, Landlord shall be deemed to have disapproved such Transfer . This Lease may not be assigned by operation of law. Any purported Transfer contrary to the provisions hereof shall be void and shall constitute an Event of Default hereunder. If Tenant receives rent or other consideration for any such transfer in excess of the Rent, or in case of the sublease of a portion of the Premises, in excess of such Rent that is fairly allocable to such portion, after appropriate adjustments to assure that all other payments required hereunder are appropriately taken into account, Tenant shall pay Landlord fifty percent (50%) of the difference between each such payment of rent or other consideration and the Rent required hereunder. Landlord may, without waiving any rights or remedies, collect rent from the assignee, subtenant or occupant and apply the net amount collected to the Rent herein reserved and apportion any excess rent so collected in accordance -24- 31 with the terms of the preceding sentence. Such acceptance of Rent shall in no event be deemed to imply that Landlord is approving a subtenant or assignee which Landlord has not approved in writing pursuant to the requirements of this Section 16. Tenant shall continue to be liable as a principal and not as a guarantor or surety to the same extent as though no Transfer had been made. Landlord may consent to subsequent Transfer of this Lease or amendments or modifications to the Lease by assignees of Tenant without notifying Tenant or any successor of Tenant and without obtaining their consent. No permitted Transfer shall be effective until there has been delivered to Landlord a counterpart of the transfer instrument in which the transferee agrees to be and remain jointly and severally liable with Tenant for the payment of Rent pertaining to the Premises and for the performance of all the terms and provisions of this Lease relating thereto arising on or after the date of the transfer. 16.2 Non-Transfers. Notwithstanding anything to the contrary in Section 16, Tenant shall have the right, without prior consent of Landlord, to assign this Lease or sublet the whole or any part of the Premises to a "Tenant Affiliate" (as defined below), and such assignment or sublease shall not be deemed a Transfer under this Section 16, provided that any transfer to a Tenant Affiliate shall be subject to the following conditions: (a) at least twenty (20) days prior to the effective date of the Transfer, Tenant shall deliver to Landlord written notice thereof and any documents or information, including financial information reasonably requested by Landlord regarding such Tenant Affiliate and such assignment or sublease, (b) Tenant shall remain fully liable during the unexpired term of the Lease, including renewal options; (c) such Transfer is not used as a subterfuge by Tenant to avoid its obligations under this Lease or the restrictions on Transfers pursuant to this Section 16, (d) any such Transfer shall be subject to all of the terms, covenants and conditions of the Lease, and (e) the Tenant Affiliate shall expressly assume the obligations of Tenant under the Lease as confirmed in a written assumption agreement reasonably satisfactory to Landlord which shall be consistent with the terms of this Lease. As used in this Lease, "Tenant Affiliate" shall mean and refer to a corporation or entity which (i) is Tenant's parent organization; or (ii) is a wholly-owned subsidiary of Tenant or Tenant's parent corporation; or (iii) is a corporation which Tenant or Tenant's parent owns in excess of twenty-five percent (25%) of the outstanding capital stock; or (iv) is a corporation or entity, resulting from the consolidation or merger with Tenant and/or Tenant's parent corporation, or (v) is a corporation or entity to which substantially all of Tenant's assets may be transferred. 17. ESTOPPEL, ATTORNMENT AND SUBORDINATION. 17.1 Estoppel. Within ten (10) days after written request by Landlord, Tenant shall deliver an estoppel certificate duly executed (and acknowledged if required by any lender), in the form attached hereto as Exhibit E, or in such other form as may be acceptable to the lender, which form may include some or all of the provisions contained in Exhibit E, to any proposed mortgagee, purchaser or Landlord. Tenant's failure to deliver said statement in such time period shall be an Event of Default hereunder and shall be conclusive upon Tenant that (a) this Lease is in full force and effect, without modification except as may be represented by Landlord; (b) there are no uncured defaults in Landlord's performance and Tenant has no right of offset, counterclaim or deduction against Rent hereunder; and (c) no more than one month's Base Rent -25- 32 has been paid in advance. If any financier should require that this Lease be amended (other than in the description of the Premises, the Term, the Permitted Use, the Rent or as will substantially, materially and adversely affect the rights of Tenant), Landlord shall give written notice thereof to Tenant, which notice shall be accompanied by a Lease supplement embodying such amendments. Tenant shall, within ten (10) days after the receipt of Landlord's notice, execute and deliver to Landlord the tendered Lease supplement. 17.2 Subordination. This Lease shall be subject and subordinate to all ground leases, master leases and the lien of all mortgages and deeds of trust which now or hereafter affect the Premises or the Project or Landlord's interest therein, and all amendments thereto, all without the necessity of Tenant's executing further instruments to effect such subordination. If requested, Tenant shall execute and deliver to Landlord within ten (10) days after Landlord's request whatever documentation that may reasonably be required by Landlord or any lender of Landlord to further effect the provisions of this paragraph including, without limitation, a subordination, nondisturbance and attornment agreement in a form as may be acceptable to the lender. 17.3 Attornment and Non-disturbance. In the event of a foreclosure proceeding, the exercise of the power of sale under any mortgage or deed of trust or the termination of a ground lease, Tenant shall, if requested, attorn to the purchaser thereupon and recognize such purchaser as Landlord under this Lease; provided, however, Tenant's obligation to attorn to such purchaser shall be conditioned upon Tenant's receipt of a non-disturbance agreement. 18. MISCELLANEOUS. 18.1 General. 18.1.1 Entire Agreement. This Lease sets forth all the agreements between Landlord and Tenant concerning the Premises; and there are no agreements either oral or written other than as set forth herein. 18.1.2 Time of Essence. Time is of the essence of this Lease. 18.1.3 Attorneys' Fees. In any action or proceeding which either party brings against the other to enforce its rights hereunder, the unsuccessful party shall pay all costs incurred by the prevailing party, including reasonable attorneys' fees, which amounts shall be a part of the judgment in said action or proceeding. 18.1.4 Severability. If any provision of this Lease or the application of any such provision shall be held by a court of competent jurisdiction to be invalid, void or unenforceable to any extent, the remaining provisions of this Lease and the application thereof shall remain in full force and effect and shall not be affected, impaired or invalidated. 18.1.5 Law. This Lease shall be construed and enforced in accordance with the laws of the state in which the Premises are located. -26- 33 18.1.6 No Option. Submission of this Lease to Tenant for examination or negotiation does not constitute an option to lease, offer to lease or a reservation of, or option for, the Premises; and this document shall become effective and binding only upon the execution and delivery hereof by Landlord and Tenant. 18.1.7 Successors and Assigns. This Lease shall be binding upon and inure to the benefit of the successors and assigns of Landlord and, subject to compliance with the terms of Section 16, Tenant. 18.1.8 Third Party Beneficiaries. Nothing herein is intended to create any third party benefit. 18.1.9 Memorandum of Lease. Tenant shall not record this Lease or a short form memorandum hereof without Landlord's prior written consent which Landlord can withhold in its sole discretion. 18.1.10 Agency, Partnership or Joint Venture. Nothing contained herein nor any acts of the parties hereto shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint venture by the parties hereto or any relationship other than the relationship of landlord and tenant. 18.1.11 Merger. The voluntary or other surrender of this Lease by Tenant or a mutual cancellation thereof or a termination by Landlord shall not work a merger and shall, at the option of Landlord, terminate all or any existing subtenancies or may, at the option of Landlord, operate as an assignment to Landlord of any or all of such subtenancies. 18.1.12 Headings. Section headings have been inserted solely as a matter of convenience and are not intended to define or limit the scope of any of the provisions contained therein. 18.1.13 Auctions. Tenant shall not conduct, nor permit to be conducted, any auction upon the Premises without Landlord's prior written consent. Landlord shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction. 18.1.14 Consents. Except as otherwise provided elsewhere in this Lease, Landlord's actual reasonable costs and expenses (including but not limited to architects', attorneys', engineers' and other consultants' fees) incurred in the consideration of, or response to, a request by Tenant for any Landlord consent, including but not limited to consents to an assignment, a subletting or the presence or use of a Hazardous Substance, shall be paid by Tenant upon receipt of an invoice and supporting documentation therefor. Landlord's consent to any act, assignment or subletting shall not constitute an acknowledgment that no Event of Default or breach by Tenant of this Lease exists, nor shall such consent be deemed a waiver of any then existing Event of Default or breach, except as may be otherwise specifically stated in writing by Landlord at the time of such consent. Except as otherwise set forth herein, the failure to specify herein any particular condition to Landlord's consent shall not preclude the imposition by -27- 34 Landlord at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. 18.1.15 Intentionally Deleted. 18.1.16 Security Measures. Tenant hereby acknowledges that Landlord shall have no obligation to provide a guard service or other security measures whatsoever. Tenant assumes all responsibility for the protection of the Premises, Tenant, its agents and invitees and their property from the acts of third parties. 18.2 Signs. All signs and graphics of every kind visible in or from public view or corridors, the Common Areas or the exterior of the Premises shall be subject to Landlord's prior written approval and shall be subject to any applicable governmental laws, ordinances, and regulations and in compliance with Landlord's signage program. Tenant shall remove all such signs and graphics prior to the termination of this Lease. Such installations and removals shall be made in such manner as to avoid injury or defacement of the Premises; and Tenant shall repair any injury or defacement, including without limitation, discoloration caused by such installation or removal. Notwithstanding the foregoing, Tenant shall be entitled to exterior signage on the Building in a location as approved by Landlord. All fabrication, installation, maintenance, repair, restoration and removal of such signage shall be at Tenant's sole cost and expense. All of Tenant's signage shall comply with all applicable governmental regulations and any CC&Rs applicable to the Project. 18.3 Waiver. No waiver of any default or breach hereunder shall be implied from any omission to take action on account thereof, notwithstanding any custom and practice or course of dealing. No waiver by either party of any provision under this Lease shall be effective unless in writing and signed by such party. No waiver shall affect any default other than the default specified in the waiver and then such waiver shall be operative only for the time and to the extent therein stated. Waivers of any covenant shall not be construed as a waiver of any subsequent breach of the same. 18.4 Financial Statements. Tenant shall provide to any lender, purchaser or Landlord, within ten (10) days after request, a current, accurate, certified financial statement for Tenant and Tenant's business and financial statements for Tenant and Tenant's business for each of the three (3) years prior to the current financial statement year prepared under generally accepted accounting principles consistently applied; provided, however, that Tenant shall not be required to produce a financial statement for any year prior to 1996. Tenant shall also provide within said 10-day period such other certified financial information or tax returns as may be reasonably required by Landlord, purchaser or any lender of either. All such financial statements shall be confidential and used only for the purposes set forth herein. 18.5 Limitation of Liability. The obligations of Landlord under this Lease are not personal obligations of the individual partners, directors, officers, shareholders, agents or employees of Landlord; and Tenant shall look solely to the Building for satisfaction of any liability of Landlord and shall not look to other assets of Landlord nor seek recourse against the -28- 35 assets of the individual partners, directors, officers, shareholders, agents or employees of Landlord. Whenever Landlord transfers its interest, Landlord shall be automatically released from further performance under this Lease and from all further liabilities and expenses hereunder and the transferee of Landlord's interest shall assume all liabilities and obligations of Landlord hereunder from the date of such transfer. 18.6 Notices. All notices to be given hereunder shall be in writing and mailed postage prepaid by certified or registered mail, return receipt requested, or delivered by personal or courier delivery, or sent by facsimile (immediately followed by one of the preceding methods), to Landlord's Address and Tenant's Address, or to such other place as Landlord or Tenant may designate in a written notice given to the other party. Notices shall be deemed served upon the earlier of receipt or three (3) days after the date of mailing. 18.7 Brokerage Commission. Landlord shall pay a brokerage commission to Landlord's Broker specified in the Basic Lease Information in accordance with a separate agreement between Landlord and Landlord's Broker. Landlord shall have no further or separate obligation for payment of any commissions or fees to any other broker or finder. Tenant warrants to Landlord that Tenant's sole contact with Landlord or with the Premises in connection with this transaction has been directly with Landlord, Landlord's Broker and Tenant's Broker specified in the Basic Lease Information, and that no other broker or finder can properly claim a right to a commission or a finder's fee based upon contacts between the claimant and Tenant. Any commissions or fees payable to Tenant's Broker with respect to this transaction shall be paid by Landlord's Broker or Tenant, and Landlord shall have not obligation with respect thereto. Subject to the foregoing, Tenant agrees to indemnify and hold Landlord harmless from any claims or liability, including reasonable attorneys' fees, in connection with a claim by any person for a real estate broker's commission, finder's fee or other compensation based upon any statement, representation or agreement of Tenant, and Landlord agrees to indemnify and hold Tenant harmless from any such claims or liability, including reasonable attorneys' fees, based upon any statement, representation or agreement of Landlord. 18.8 Authorization. Each individual executing this Lease on behalf of Tenant represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of Tenant and that such execution is binding upon Tenant. 18.9 Holding Over; Surrender. 18.9.1 Holding Over. If Tenant holds over the Premises or any part thereof after expiration of the Term, such holding over shall, at Landlord's option, constitute a month-to-month tenancy, at a rent equal to one hundred fifty percent (150%) of the Base Rent in effect immediately prior to such holding over and shall otherwise be on all the other terms and conditions of this Lease. This paragraph shall not be construed as Landlord's permission for Tenant to hold over. Acceptance of Rent by Landlord following expiration or termination shall not constitute a renewal of this Lease or extension of the Term except as specifically set forth above. If Tenant fails to surrender the Premises upon expiration or earlier termination of this Lease, Tenant shall indemnify and hold Landlord harmless from and against all loss or liability -29- 36 resulting from or arising out of Tenant's failure to surrender the Premises, including, but not limited to, any amounts required to be paid to any tenant or prospective tenant who was to have occupied the Premises after the expiration or earlier termination of this Lease and any related attorneys' fees and brokerage commissions. 18.9.2 Surrender. Upon the termination of this Lease or Tenant's right to possession of the Premises, Tenant will surrender the Premises broom clean, together with all keys, in good condition and repair, reasonable wear and tear excepted. Tenant shall patch and fill all holes within the Premises and all penetrations of the roof shall be resealed to a watertight condition. In no event may Tenant remove from the Premises any mechanical or electrical systems or any wiring or any other aspect of any systems within the Premises. Conditions existing because of Tenant's failure to perform maintenance, repairs or replacements shall not be deemed "reasonable wear and tear." 18.10 Joint and Several. If Tenant consists of more than one person, the obligation of all such persons shall be joint and several. 18.11 Covenants and Conditions. Each provision to be performed by Tenant hereunder shall be deemed to be both a covenant and a condition. 18.12 Addenda. The Addenda attached hereto, if any, and identified with this Lease are incorporated herein by this reference as if fully set forth herein. 19. OPTION TO EXTEND. 19.1 Option Right. Landlord hereby grants Tenant one (1) option to extend the initial Term of the Lease for the entire Premises for a period of five (5) years (the "Option Term"), which option shall be exercisable only by written Exercise Notice (as defined below) delivered by Tenant to Landlord as provided below, provided that, as of the date of delivery of such Exercise Notice, Tenant is not in a state of uncured monetary or other default following the expiration of the applicable cure periods under the Lease. Upon the proper exercise of such option to extend, and provided that, as of the end of the initial Term, Tenant is not in default, as described above, under the Lease, the initial Term shall be extended for the Option Term. The rights contained in this Section 19 shall be personal to the original Tenant executing the Lease and any Tenant Affiliate and may only be exercised by the original Tenant or Tenant Affiliate, as the case may be, (not any other assignee, sublessee or other transferee of Tenant's interest in the Lease) if the original Tenant or Tenant Affiliate, as the case may be, occupies the entire Premises as of the date of the Exercise Notice. 19.2 Option Rent. The annual basic rent payable by Tenant during the Option Term (the "Option Rent") shall be equal to ninety-five percent (95%) of the "Fair Market Rent" which for purposes hereof means the annual basic rent, taking into account whether the then current market is using leases based on a base year, an expense stop, or a triple net, at which tenants, as of the commencement of the Option Term, are leasing non-sublease space comparable in size, location and quality to the Premises for a comparable term, which comparable space is located in -30- 37 the Building and in comparable first-class office "flex" buildings with prudent ownership (with management practices comparable with institutional ownership), in the Dublin, California area, taking into consideration all concessions and inducements generally being granted at such time. All other terms and conditions of the Lease shall apply throughout the Option Term; however, any obligation of Landlord to construct Tenant Improvements or provide an allowance shall not apply during the Option Term, except to the extent such provisions are included in the definition of Fair Market Rent, and Tenant shall, in no event, have the option to extend the initial Term of the Lease beyond the Option Term described in Section 19.1 above. 19.3 Exercise of Options. The option contained in this Section 19 shall be exercised by Tenant, if at all, on or before the date (the "Exercise Date") which is at least one hundred eighty (180) days prior to the expiration of the initial Term, as the case may be, by delivering written notice ("Exercise Notice") thereof to Landlord. Tenant may notify Landlord earlier than the Exercise Date of its intent to exercise its option and Landlord will work with Tenant to establish the Fair Market Rent at that time. After the Exercise Date, the parties shall follow the procedure and the Fair Market Rent shall be determined as set forth in Section 19.4 below. Tenant's failure to deliver the Exercise Notice on or before the Exercise Date shall be deemed to constitute Tenant's waiver of its extension right hereunder. 19.4 Determination of Option Rent. In the event Tenant timely and appropriately objects in writing to the Fair Market Rent initially determined by Landlord, Landlord and Tenant shall attempt to agree upon the Fair Market Rent, using their best good-faith efforts. If Landlord and Tenant fail to reach agreement within ten (10) business days following Tenant's objection to the Fair Market Rent (the "Outside Agreement Date"), then each party shall submit to the other party a separate written determination of the Fair Market Rent within fifteen (15) business days after the Outside Agreement Date, and such determinations shall be submitted to arbitration in accordance with Sections 19.4.1 through 19.4.7 below. Failure of Tenant or Landlord to submit a written determination of the Fair Market Rent within such fifteen (15) business day period shall conclusively be deemed to be the non-determining party's approval of the Fair Market Rent submitted within such ten (10) business day period by the other party. 19.4.1 Landlord and Tenant Arbitrators. Landlord and Tenant shall each appoint one arbitrator who shall by profession be an independent real estate broker who shall have no ongoing business relationship with Tenant or Landlord and who shall have been active over the five (5) year period ending on the date of such appointment in the leasing of first-class office buildings in the Dublin, California area. The determination of the arbitrators shall be limited solely to the issue of whether Landlord's or Tenant's submitted Fair Market Rent is the closest to the actual Fair Market Rent as determined by the arbitrators, taking into account the requirements of Section 19.2. Each such arbitrator shall be appointed within thirty (30) days after the Outside Agreement Date. 19.4.2 Third Arbitrator. The two (2) arbitrators so appointed shall within ten (10) days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third -31- 38 arbitrator who shall be qualified under the same criteria as set forth hereinabove for qualification of the initial two (2) arbitrators. 19.4.3 Arbitrator's Decision. The three (3) arbitrators shall within thirty (30) days after the appointment of the third arbitrator reach a decision as to whether Landlord's or Tenant's submitted Fair Market Rent is the closest to the actual Fair Market Rent, and shall use the closest of Landlord's or Tenant's submitted Fair Market Rent as the Fair Market Rent for purposes of calculating the Option Rent, and shall notify Landlord and Tenant thereof. 19.4.4 Binding Decision. The decision of the majority of the three (3) arbitrators shall be binding upon Landlord and Tenant. 19.4.5 Failure to Appoint Arbitrator. If either Landlord or Tenant fails to appoint an arbitrator within thirty (30) days after the Outside Agreement Date, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator's decision shall be binding upon Landlord and Tenant. 19.4.6 Failure of Arbitrators to Agree. If the two (2) arbitrators fail to agree upon and appoint a third arbitrator within the time period provided in Section 19.2 above, then the parties shall mutually select the third arbitrator. If Landlord and Tenant are unable to agree upon the third arbitrator within ten (10) days, then either party may, upon at least five (5) days' prior written notice to the other party, request the Presiding Judge of the Alameda County Superior Court, acting in his private and nonjudicial capacity, to appoint the third arbitrator. Following the appointment of the third arbitrator, the panel of arbitrators shall within thirty (30) days thereafter reach a decision as to whether Landlord's or Tenant's submitted Fair Market Rent shall be used and shall notify Landlord and Tenant thereof. 19.4.7 Arbitration Costs. The cost of the arbitrators and the arbitration proceeding shall be paid by the non-prevailing party. 20. PARKING. Landlord shall provide, for the initial term of the Lease and any extensions thereof, a minimum of three and seven-tenths (3.7) parking spaces per each one thousand (1,000) Rentable Square Feet of space in the Building then leased by Tenant, including any space leased by Tenant pursuant to Section 21 below, which, based upon the initial Rentable Square Feet of the Premises, is equal to one hundred forty-eight (148) parking spaces. There shall be no charge for parking during the initial Term and any such charge during the Option Term, if any, shall be based on ninety-five percent (95%) of the then current market for the vicinity surrounding the Project. 21. RIGHT OF FIRST OFFER. Landlord and Tenant hereby acknowledge and agree that in the event any space in the Building which is contiguous to the Premises (an "Additional Space") becomes available for leasing to third parties after expiration of the lease of the then existing tenant thereof, Landlord shall notify Tenant in writing ("Landlord's Notice") of the availability of the Additional Space and the terms upon which Landlord is willing to rent such Additional Space to Tenant, including, but not limited to, the commencement date, term, the base for the -32- 39 Additional Space, and Tenant improvements to be constructed at Tenant's cost therein, if any. For a period of five (5) business days following receipt of Landlord's Notice, Tenant shall have a right of first offer to lease such Additional Space upon the lease terms and conditions set forth in Landlord's Notice. If Tenant fails to timely exercise the right of first offer set forth herein, the Landlord shall be entitled to place the Additional Space on the open market for lease to third parties and Tenant's right of first offer with respect to such Additional Space shall expire and be of no further force or effect. If Tenant exercise such right of first offer, Tenant shall take possession of the Additional Space and the Lease Term therefor shall commence upon the date specified in Landlord's Notice. Notwithstanding anything to the contrary contained herein, Tenant must elect to exercise its right of first offer, if at all, with respect to the entire Additional Space then offered by Landlord to Tenant, and Tenant may not elect to lease only a portion thereof. If Tenant timely exercises Tenant's right to lease the Additional Space as set forth herein, Landlord and Tenant shall within fifteen (15) business days thereafter execute an amendment to this Lease memorializing Tenant's lease of such Additional Space. IN WITNESS WHEREOF, the parties have executed this Lease as of the date set forth above. "Landlord" "Tenant" CREEKSIDE SOUTH TRUST, E-LOAN, INC., a Maryland business trust a California corporation By: /s/ Daniel D'Aniello By: Janina Pawlowski ------------------------------ -------------------------------- Name: Daniel D'Aniello Name: Janina Pawlowski ------------------------- -------------------------- Its: Managing Director Its: President -------------------------- --------------------------- Date: Date: 8/18/98 ---------------------------- ----------------------------- By: -------------------------------- Name: --------------------------- Its: ---------------------------- Date: ------------------------------ -33- 40 EXHIBIT A PREMISES [LANDLORD TO PROVIDE.] A-1 41 EXHIBIT B WORK LETTER Tenant acknowledges and agrees that the Premises is satisfactory and shall be accepted by Tenant in its "AS IS" condition as of the date of execution of this Lease and on the Lease Commencement Date; provided, however, that Landlord shall construct certain modifications to the interior of the Premises pursuant to the Approved Working Drawings in accordance with the following provisions of this Tenant Work Letter. SECTION 1 CONSTRUCTION DRAWINGS FOR THE PREMISES Landlord and Tenant will approve a detailed space plan for the construction of certain improvements in the Premises, which space plan will be prepared by MGRT Architects and submitted to Landlord not later than August 24, 1998(the "Final Space Plan"). Based upon and in conformity with the Final Space Plan, Landlord shall cause its architect and engineers to prepare and deliver to Tenant, for Tenant's approval, detailed specifications and engineered working drawings for the tenant improvements shown on the Final Space Plan (the "Working Drawings"). The Working Drawings shall incorporate modifications to the Final Space Plan as necessary to comply with the floor load and other structural and system requirements of the Building. To the extent that the finishes and specifications are not completely set forth in the Final Space Plan for any portion of the tenant improvements depicted thereon, the actual specifications and finish work shall be in accordance with the specifications for the Building's standard improvement package items, as determined by Landlord. Within three (3) business days after Tenant's receipt of the Working Drawings, Tenant shall approve or disapprove the same, which approval shall not be unreasonably withheld; provided, however, that Tenant may only disapprove the Working Drawings to the extent such Working Drawings are inconsistent with the Final Space Plan and only if Tenant delivers to Landlord, within such three (3) business days period, specific changes proposed by Tenant which are consistent with the Final Space Plan and do not constitute changes which would result in any of the circumstances described in items (i) through (iv) below. If any such revisions are timely and properly proposed by Tenant, Landlord shall cause its architect and engineers to revise the Working Drawings to incorporate such revisions and submit the same for Tenant's approval in accordance with the foregoing provisions, and the parties shall follow the foregoing procedures for approving the Working Drawings until the same are finally approved by Landlord and Tenant. Upon Landlord's and Tenant's approval of the Working Drawings, the same shall be known as the "Approved Working Drawings". Once the Approved Working Drawings have been approved by Landlord and Tenant, Tenant shall make no changes, change orders or modifications thereto without the prior written consent of Landlord, which consent may be withheld in Landlord's sole discretion if such change or modification would: (i) directly or indirectly delay the Substantial Completion of the Premises; (ii) increase the cost of designing or constructing the Tenant Improvements above the cost of the tenant improvements depicted in the Final Space Plan; (iii) be of a quality lower than the quality of the standard improvement package items for the Building; and/or (iv) require any B-1 42 changes to the base, shell and core work or structural improvements or systems of the Building. The Final Space Plan, Working Drawings and Approved Working Drawings shall be collectively referred to herein as, the "Construction Drawings". The tenant improvements shown on the Approved Working Drawings shall be referred to herein as the "Tenant Improvements". SECTION 2 CONSTRUCTION AND COSTS Landlord shall cause Webcon (the "Contractor") to (i) obtain all applicable building permits for construction of the Tenant Improvements, and (ii) construct the Tenant Improvements as depicted on the Approved Working Drawings, in compliance with such building permits and all applicable laws in effect at the time of construction, including all environmental laws and the Americans with Disabilities Act, and in good workmanlike manner. Landlord shall pay for the cost of the design and construction of the Tenant Improvements, including space planning, engineering, construction drawings, signage, construction supervision, and any necessary permits, in an amount up to, but not exceeding, One Million Two Hundred Thousand Dollars ($1,200,000.00) which is equal to Thirty Dollars ($30.00) per Rentable Square Foot of the Premises (the "Tenant Improvement Allowance"); provided, however, that the Tenant Improvement Allowance shall not be used to pay the traffic impact fee which shall be paid separately by Landlord. Tenant shall pay for all costs in excess of the Tenant Improvement Allowance, which payment shall be made to Landlord in cash within ten (10) days after Tenant's receipt of invoice therefor from Landlord. In no event shall Landlord be obligated to pay for any of Tenant's furniture, computer systems, telephone systems, equipment or other personal property which may be depicted on the Construction Drawings; such items shall be paid for by Tenant. Tenant shall be entitled to receive as a credit against Rent any portion of the Tenant Improvement Allowance not used to pay for the cost of the design and construction of the Tenant Improvements. SECTION 3 DELAY IN SUBSTANTIAL COMPLETION OF THE TENANT IMPROVEMENTS Delay of the Substantial Completion of the Premises. If there shall be a delay or there are delays in the Substantial Completion, as defined in Section 2.1 of the Lease, of the Premises as a direct, indirect, partial, or total result of any of the following (collectively, "Tenant Delays"): 3.1 Tenant's failure to timely approve the Final Space Plan and the Working Drawings or any other matter requiring Tenant's approval; 3.2 A breach by Tenant of the terms of this Work Letter or the Lease; 3.3 Tenant's request for changes in any of the Construction Drawings; B-2 43 3.4 Tenant's requirement for materials, components, finishes or improvements which are not available in a commercially reasonable time given the estimated date of Substantial Completion of the Premises, as set forth in the Lease, or which are different from, or not included in, Landlord's standard improvement package items for the Building; 3.5 Changes to the base, shell and core work, structural components or structural components or systems of the Building required by the Approved Working Drawings; or 3.6 Any other acts or omissions of Tenant, or its agents, or employees; then, notwithstanding anything to the contrary set forth in the Lease and regardless of the actual date of Substantial Completion, the Lease Commencement Date (as set forth in the Basic Lease Information) shall be deemed to be the date the Lease Commencement Date would have occurred if no Tenant Delay or Delays, as set forth above, had occurred. SECTION 4 MISCELLANEOUS Provided that Tenant and its agents do not interfere with Contractor's work in the Building and the Premises, Contractor shall allow Tenant access to the Premises prior to the Substantial Completion of the Premises for the purpose of Tenant installing overstandard equipment, furniture or fixtures (including Tenant's data and telephone equipment) in the Premises. Prior to Tenant's entry into the Premises as permitted by the terms of this Section 4, Tenant shall submit a schedule to Landlord and Contractor, for their approval, which schedule shall detail the timing and purpose of Tenant's entry. Tenant shall hold Landlord harmless from and indemnify, protect and defend Landlord against any loss or damage to the Premises or Property and against injury to any persons caused by Tenant's actions pursuant to this Section 4. B-3 44 EXHIBIT C COMMENCEMENT DATE MEMORANDUM With respect to that certain lease ("Lease") dated August ___, 1998, between E-LOAN, INC., a California corporation ("Tenant"), and CREEKSIDE SOUTH TRUST, a Maryland business trust ("Landlord"), whereby Landlord leased to Tenant and Tenant leased from Landlord approximately 40,000 rentable square feet of the building located at Creekside Business Park, Dublin, California ("Premises"), Tenant hereby acknowledges and certifies to Landlord as follows: (1) Landlord delivered possession of the Premises to Tenant in a Substantially completed condition on _____________________ ("Possession Date"); (2) The Lease commenced on _______________________ ("Commencement Date"); (3) The Premises contain _________ square feet of space; and (4) Tenant has accepted and is currently in possession of the Premises and the Premises are acceptable for Tenant's use. IN WITNESS WHEREOF, this Commencement Date Memorandum is executed this ___ day of ______________________, 1998. "Tenant" E-LOAN, INC., a California corporation By:________________________________ Name:___________________________ Its:____________________________ By:________________________________ Name:___________________________ Its:____________________________ C-1 45 EXHIBIT D RULES AND REGULATIONS [LANDLORD TO PROVIDE.] D-1 46 EXHIBIT E TENANT ESTOPPEL CERTIFICATE The undersigned, as Tenant under that certain Multi-Tenant Office Triple Net Lease (the "LEASE") made and entered into as of _________________, 19__ and between _________________________________, a ________________________ as Landlord, and the undersigned as Tenant, for Premises on the ___________ floor(s) of the Building located at _________________________, Dublin, California hereby certifies as follows: 1. Attached hereto as Exhibit A is a true and correct copy of the Lease and all amendments and modifications thereto. The documents contained in Exhibit A represent the entire agreement between the parties as to the Premises. 2. The undersigned has commenced occupancy of the Premises described in the Lease, currently occupies the Premises, and the Lease Term commenced on _________. 3. The Lease is in full force and effect and has not been modified, supplemented or amended in any way except as provided in Exhibit A. 4. Tenant has not transferred, assigned, or sublet any portion of the Premises nor entered into any license or concession agreements with respect thereto except as follows: 5. Tenant shall not modify the documents contained in Exhibit A or prepay any amounts owing under the Lease to Landlord in excess of thirty (30) days without the prior written consent of Landlord's mortgagee. 6. Base Rent became payable on _______________. 7. The Lease Term expires on _________________. 8. All conditions of the Lease to be performed by Landlord necessary to the enforceability of the Lease have been satisfied and Landlord is not in default thereunder. 9. No rental has been paid in advance and no security has been deposited with Landlord except as provided in the Lease. 10. As of the date hereof, there are no existing defenses or offsets that the undersigned has, which preclude enforcement of the Lease by Landlord. 11. All monthly installments of Base Rent, all Additional Rent and all monthly installments of estimated Additional Rent have been paid when due through _________________. The current monthly installment of Base Rent is $__________. E-1 47 12. The undersigned acknowledges that this Estoppel certificate may be delivered to Landlord's prospective mortgagee, or a prospective purchaser, and acknowledges that it recognizes that if same is done, said mortgagee, prospective mortgagee, or prospective purchaser will be relying upon the statements contained herein in making the loan or acquiring the property of which the Premises are a part, and in accepting an assignment of the Lease as collateral security, and that receipt by it of this certificate is a condition of making of the loan or acquisition of such property. 13. If Tenant is a corporation or partnership, each individual executing this Estoppel Certificate on behalf of Tenant hereby represents and warrants that Tenant is a duly formed and existing entity qualified to do business in California and that Tenant has full right and authority to execute and deliver this Estoppel Certificate and that each person signing on behalf of Tenant is authorized to do so. Executed at __________________ on the _____ day of ______________, 19___. "Tenant": E-LOAN, INC., a California corporation By:____________________________________ Name:_______________________________ Its:________________________________ E-2 48 FIRST AMENDMENT TO LEASE This FIRST AMENDMENT TO LEASE ("First Amendment") is made and entered into as of the 11th day of September, 1998, by and between CREEKSIDE SOUTH TRUST, a Maryland business trust ("Landlord"), and E-LOAN, INC., a California corporation ("Tenant"). R E C I T A L S : A. Landlord and Tenant entered into that certain Multi-Tenant Office Triple Net Lease dated as of August 19, 1998 (the "Lease"), pursuant to which Landlord leased to Tenant and Tenant leased from Landlord certain "Premises" as described in the Lease and located in that certain office building located at 5875 Arnold Drive, Dublin, California (the "Building"). B. Landlord and Tenant now desire to amend the Lease in certain respects, including to provide for an additional tenant improvement allowance, all upon the terms and conditions as hereinafter provided. NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. Capitalized Terms. All capitalized terms when used herein shall have the same meanings given such terms in the Lease unless expressly superseded by the terms of this First Amendment. 2. Additional Allowance. In addition to the Tenant Improvement Allowance provided by Landlord to Tenant pursuant to Section 2 of Exhibit B attached to the Lease (the "Work Letter"), Landlord shall provide to Tenant an additional allowance in the amount up to, but not exceeding, Two Hundred Thirteen Thousand Nine Hundred Forty-Five Dollars ($213,945.00) (which is Five Dollars ($5.00) per Rentable Square Foot of the Premises)(the "Additional Allowance") to pay for the Tenant Improvement work pursuant to Section 2 of the Work Letter, which Additional Allowance shall be amortized over the initial term of the Lease at an interest rate of twelve percent (12%) per annum by increasing the monthly Base Rent Per Rentable Square Foot payable under the Lease each year by Two point Two Two Four Cents ($0.02224) for every One Dollar ($1.00) per Rentable Square Foot of the Premises of Additional Allowance drawn by Tenant. For example, if Tenant draws the maximum amount of Additional Allowance, then the initial monthly Base Rent Per Rentable Square Foot payable under the Lease on the Commencement Date shall increase by Eleven point One Two Two Cents ($0.11122) from One and 25/100 Dollars ($1.25) per Rentable Square Foot of the Premises to One Dollar and Thirty-Six point One Two Two Cents ($1.36122) per Rentable Square Foot of the Premises for a total of Fifty-Eight Thousand Two Hundred Forty-Five and 24/100 Dollars ($58,245.24) 49 and each subsequent year of the Lease Term, the monthly Base Rent Per Rentable Square Foot shall be increased by Eleven point One Two Two Cents ($0.11122). 3. No Further Modification. Except as set forth in this First Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect. IN WITNESS WHEREOF, this First Amendment has been executed as of the day and year first above written. "LANDLORD" CREEKSIDE SOUTH TRUST, a Maryland business trust By: ------------------------ Daniel D'Aniello Its: Managing Director "TENANT" E-LOAN, INC., a California corporation By: /s/ Janina Pawlowksi ------------------------ Name: Janina Pawlowksi ------------------ Its: President By: ----------------------- Name: ------------------- Its: ------------------- -2- EX-10.27 33 ALLIANCE AGREEMENT 1 EXHIBIT 10.27 ALLIANCE AGREEMENT This Alliance Agreement (the "AGREEMENT") is made and entered into as of this 19th day of March, 1999 (the "EFFECTIVE DATE") by and among E-Loan, Inc., a corporation organized and existing under the laws of the State of Delaware, United States of America, having its principal place of business at 5875 Arnold Rd., Suite 100, Dublin, California 94568, United States of America ("E-LOAN"); Stater BV, a private company with limited liability, organized and existing under the laws of The Netherlands, having its principal place of business at De Brand 40, 3823 LL Amersfoort, The Netherlands ("STATER"); and E-Loan Europe BV, a private company with limited liability organized and existing under the laws of The Netherlands ("E-LOAN EUROPE"). BACKGROUND A. E-Loan is engaged in an Internet-based marketing business in the United States in which E-Loan acts as an on-line mortgage originator, offering automated loan application processes that allow Internet users to apply for and obtain residential mortgage loans and related services quickly and without a traditional loan agent; and B. Stater is engaged in the creation and provision of integrated systems and back-office services related to origination, automated lending decision management, documentation, payment, loan management, debtor management, collections, arrears management, default management and related services, all relating to mortgages and related products; and C. E-Loan and Stater desire to cooperate to support E-Loan Europe, in establishing and operating a Multi-Lender Site (as defined below) that offers, over the Internet, residential mortgage loans for which the underlying real property is located in the Territory (as defined below) and insurance and other related services ancillary to such mortgages; and D. Partly in consideration of such cooperation and assistance by Stater as outlined below, E-Loan Europe and Stater wish to make Stater the preferred provider to E-Loan Europe Bank (as defined below) of certain services related to loans funded by E-Loan Europe Bank, all as described more fully below. NOW THEREFORE, in consideration of the promises and mutual covenants contained herein, the parties hereto agree as follows: ARTICLE 1 -- DEFINITIONS 1.1 "AFFILIATE" of an entity means any company that controls, is controlled by or is under common control with such entity, where "control" means beneficial ownership (direct or indirect) of at least fifty percent (50%) of the shares of such entity entitled to vote in the election of directors (or in the case of an entity that is not a corporation, for the election of the corresponding managing authority). 1.2 "BROKERAGE FUNCTIONALITY" means technology and/or services to allow a user to compare, select and apply for residential mortgage loans. 2 1.3 "MORTGAGE MANAGEMENT SERVICES" means the automated lending decision management, documentation, payment, loan management, debtor management, collections, arrears management, default management and other similar mortgage management services, in each case to the extent customarily provided by Stater or its Affiliates. Mortgage Management Services exclude services including or related to Brokerage Functionality. 1.4 "MULTI-LENDER SITE" means a service by which residential mortgage loans are offered directly to the public, through the Internet, World Wide Web, commercial on-line service, interactive broadcast, or any other electronic on-line means, and that offers or intermediates residential mortgage loans for multiple lenders, in a format that allows the user to compare, select and apply for residential mortgage loans through such service. 1.5 "ON LINE RESIDENTIAL MORTGAGE LOAN SITE" means a service by which residential mortgage loans are offered directly to the public, through the Internet, World Wide Web, commercial on-line service, interactive broadcast, or any other electronic on-line means. 1.6 "SECURITIZATION MANAGEMENT SERVICES" means the offering and sale of securities, which securities consist primarily of a pool of residential mortgage loans originated by E-Loan Europe Bank through the operation by E-Loan Europe of a Multi-Lender Site, and the related consulting, due diligence and other portfolio management activities and services, in each case to the extent commonly associated with the offering and sale of mortgage-backed securities in the Territory. 1.7 "STATER SERVICES" means the Mortgage Management Services and the Securitization Management Services provided by Stater pursuant to this Agreement. 1.6 "TERRITORY" means the countries identified in EXHIBIT A. ARTICLE 2 -- COOPERATION AND ASSISTANCE BY STATER 2.1 SERVICES IN SUPPORT OF E-LOAN EUROPE. Stater agrees to use commercially reasonable efforts to provide to E-Loan Europe, upon E-Loan Europe's request from time to time, services and facilities to assist E-Loan Europe in establishing and operating a Multi-Lender Site for residential mortgage loans on properties located in the Territory. Such services and facilities shall include, among other things: (a) Preparation of a business plan ("BUSINESS PLAN") for the initial activities of E-Loan Europe, with input and assistance from E-Loan, which Business Plan shall include: (i) a study assessing the feasibility of the successful establishment and operation of a Multi-Lender Site by E-Loan Europe in the Territory; (ii) an analysis of the legal, tax and regulatory implications associated with the operation of a Multi-Lender Site by E-Loan Europe in the Territory; 2 3 (iii) projections of revenue and income (or loss) over a five-year period, commencing on the Effective Date, in connection with the operation of a Multi-Lender Site by E-Loan Europe in the Territory; (iv) an annual business plan and budget for E-Loan Europe for the fiscal years ending December 31, 1999, and December 31, 2000, which shall include, but not be limited to, a balance sheet, an income statement, a statement of cash flows, cash management and a detail of product development and personnel costs; (v) a proposed time-table under which E-Loan Europe shall make a Multi-Lender Site operational in each of the countries included in the Territory; (vi) a summary of the terms and conditions under which E-Loan Europe shall be managed and under which the operations of E-Loan Europe, including its product development and personnel costs, shall be financed; (vii) a summary of the terms and conditions under which E-Loan shall license its proprietary information, including proprietary software, trademark, tradename, or other intellectual property, to E-Loan Europe for the purpose of operating a Multi-Lender Site in the Territory; (viii) a detailed description of the Mortgage Management Services and Securitization Management Services that Stater shall provide E-Loan Europe Bank pursuant to the terms of this Agreement; (ix) a detailed description of the other services and assistance that shall be provided by Stater pursuant to the terms of this Agreement; (x) a detailed description of the services and assistance that shall be provided by E-Loan pursuant to the terms of this Agreement; and (xi) a detailed description of the terms under which Stater could participate in the equity of E-Loan Europe. (b) Providing facilities for the offices of E-Loan Europe, and E-Loan Europe Bank (as defined below); (c) Consulting regarding regulatory approvals, requirements for localization and modification of E-Loan's technology for use by E-Loan Europe, and the like. 2.2 PAYMENT. (a) BY STATER. Within thirty (30) days after the Effective Date, in consideration of the covenants and obligations of E-Loan and E-Loan Europe herein, Stater agrees to pay to E-Loan Europe the sum of five hundred fifty thousand (550,000) Euros ("EXPENSE ADVANCE"). The parties agree that this amount will be applied by E-Loan Europe toward the establishment by 3 4 E-Loan Europe of a Multi-Lender Site in the Territory, beginning with the preparation of the Business Plan for such Multi-Lender Site, and other steps to establish the Multi-Lender Site. (b) BY E-LOAN EUROPE. In support of the facilities and services to be provided by Stater under Section 2.1, E-Loan Europe agrees to reimburse Stater for the direct costs reasonably incurred by Stater in providing such services and facilities, up to a maximum amount to be agreed upon in writing by E-Loan Europe and Stater from time to time prior to the time such facilities and services are provided. E-Loan Europe agrees to pay such costs monthly in arrears, within thirty (30) days after the date of Stater's invoice therefor. 2.3 BOARD OF DIRECTORS. The business and affairs of E-Loan Europe shall be managed by its Board of Directors. For the purpose of this Agreement, the "Board of Directors" shall mean the Supervisory Board of E-Loan Europe, to the extent E-Loan Europe is required by law to have a Supervisory Board; otherwise, the Board of Directors shall be deemed to be the Management Board of E-Loan Europe. Stater shall be entitled to appoint at least one member of the Board of Directors of E-Loan Europe. 2.4 INITIAL CAPITALIZATION OF E-LOAN EUROPE. Within thirty (30) days after the Effective Date, E-Loan shall subscribe for and purchase four hundred fifty thousand (450,000) shares of capital stock of E-Loan Europe and shall deliver to E-Loan Europe, in connection with such subscription and purchase, four hundred fifty thousand (450,000) Euros. ARTICLE 3 -- STATER SERVICES 3.1 STATER SERVICES TO E-LOAN BANK. The parties anticipate that E-Loan Europe may organize an entity (or group of entities), or a division of E-Loan Europe, that will itself (or themselves) fund residential mortgage loans in the Territory (the "E-LOAN EUROPE BANK"). To the extent that E-Loan Europe Bank requires Mortgage Management Services, E-Loan agrees to cause E-Loan Europe Bank to purchase such Mortgage Management Services from Stater, and Stater agrees to provide such Mortgage Management Services to the E-Loan Europe Bank, all subject to the terms and conditions of this Article 3. (a) PRICING AND TERMS. Stater agrees to provide such Mortgage Management Services, and any other technology and services described in (b) below, to E-Loan Europe Bank (i) at prices that are no higher than the prices at which Stater or its Affiliates provide the same or similar services or technology to any party (including without limitation any Affiliate); and (ii) upon other terms and conditions no less favorable, in any material respect, than those under which Stater provides any such services or technology to any party (including without limitation any Affiliate). In addition, the parties anticipate that Stater will provide such technology and services to E-Loan Europe Bank at prices that are discounted from the prices charged for such services and technology to any party that is not an Affiliate of Stater; however, due to the complexity of pricing for the variety of services offered by Stater, such discounts must be negotiated in good faith by Stater and E-Loan Europe taking into account the country in which such technology or services will be provided, the volume of such technology or services to be provided, and the time period during which such technology or services will be provided. 4 5 (b) TIME TO MARKET ADVANTAGE. In the event that Stater introduces technology or services specifically designed for use in operating an On Line Residential Mortgage Loan Site, (i) Stater agrees to offer such technology or services to E-Loan Europe Bank, and (ii) if E-Loan Europe Bank wishes to use such technology or services, Stater agrees not to provide such technology and services to any third party that is not an Affiliate of Stater, for use in an On Line Residential Mortgage Loan Site, until six (6) months after providing such technology or services to E-Loan Europe Bank. Notwithstanding the foregoing, Stater's commitment in clause (ii) above shall not apply to the extent that such technology or services are developed specifically for a particular customer under a contract between Stater and such customer and such contract precludes Stater from providing E-Loan Europe with the time advantage described in (ii) above. 3.2 SECURITIZATION MANAGEMENT SERVICES. To the extent that E-Loan Europe Bank requires Securitization Management Services, E-Loan agrees to cause E-Loan Europe Bank to purchase such Securitization Management Services from Stater, and Stater agrees to provide Securitization Management Services to the E-Loan Europe Bank, all subject to the terms and conditions of this Article 3. Stater agrees to provide such Securitization Management Services to E-Loan Europe Bank upon such terms and conditions no less favorable, in any material respect, than those under which Stater provides any such Securitization Management Services to any party (including without limitation any Affiliate). 3.3 EXCLUSIVITY OF STATER SERVICES. The parties intend that Stater will be the preferred provider of Mortgage Management Services and Securitization Management Services to E-Loan Europe Bank as set forth below. (a) Accordingly, E-Loan agrees to not contract with (and agrees to cause E-Loan Europe Bank not to contract with) any party other than Stater or its Affiliates to provide Mortgage Management Services or Securitization Management Services to E-Loan Europe Bank; and E-Loan and E-Loan Europe agree (and shall cause E-Loan Europe Bank to agree) not to provide such services for their own account, unless (i) the price, availability, service level, terms, or other aspects of the Mortgage Management Services or Securitization Management Services offered by Stater to E-Loan Europe Bank are, on the whole, materially less favorable than those available from a third party (or in the case of services that E-Loan Europe and E-Loan Europe Bank propose to provide for their own account, on the whole, materially less favorable than those available to E-Loan Europe Bank through such means), or (ii) Stater is otherwise not then able to meet the reasonable requirements of E-Loan Europe Bank. (b) E-Loan agrees to cause E-Loan Europe Bank to provide Stater with at least one hundred eighty (180) days notice prior to first obtaining Mortgage Management Services or Securitization Management Services for residential mortgage loans on properties in each particular country of the Territory other than The Netherlands, Luxembourg, Germany or Belgium. (c) In the event of a dispute as to whether E-Loan Europe or E-Loan Europe Bank has the right to obtain any services from a third party (or to provide such services for their own account), E-Loan Europe or E-Loan Europe Bank may proceed to obtain such services from a third party, or provide them for their own account, and will not be deemed in breach of this 5 6 Section 3.3 during the period prior to a determination under Section 7.2(b) that E-Loan Europe or E-Loan Europe Bank is obligated to obtain such services from Stater. (d) Nothing in this Section 3.3 will be deemed to restrict E-Loan Europe or E-Loan Europe Bank from performing, itself (i.e. in lieu of obtaining such services from Stater or a third party), any services currently provided by E-Loan in the United States as of the Effective Date. 3.4 LIMITATION. Any provision contained in this Agreement to the contrary notwithstanding, in no event shall Stater be required to provide the Mortgage Management Services or Securitization Management Services in any country within the Territory in which Stater is not engaged in the business of providing the same or similar services to other customers of Stater or in which Stater is prohibited from providing such services by applicable law, rule or regulation. 3.5 SERVICING AGREEMENTS. It is anticipated that the terms and conditions under which Stater shall perform the Stater Services described in this Article 3 will be set forth in detail in one or more agreements ("SERVICING AGREEMENTS") between Stater (or an Affiliate of Stater) and E-Loan Europe (or E-Loan Europe Bank); provided, however, that the terms and conditions of any such Servicing Agreements shall not vary in any material respect from the provisions of this Article 3, unless otherwise agreed in writing by E-Loan Europe and Stater. ARTICLE 4 -- EXCLUSIVITY OF EFFORTS 4.1 PROTECTION OF CONFIDENTIAL INFORMATION. The parties acknowledge that by virtue of their activities under this Agreement, they will each receive confidential and proprietary information of E-Loan Europe that would assist the other parties to unfairly compete with E-Loan Europe. To protect such confidential information, the parties agree as follows: (a) STATER. During the term of this Agreement, Stater shall not, directly or indirectly, through any Affiliate: (i) purchase or hold any equity interest in any company that operates, as its principal line of business, a Multi-Lender Site that includes residential mortgage loans on properties located in the Territory, or (ii) provide Brokerage Functionality for use in a Multi-Lender Site (other than a Multi-Lender Site operated by E-Loan Europe) with respect to properties in the Territory. (b) E-LOAN. During the term of this Agreement, E-Loan shall not, directly or indirectly, through any Affiliate other than the E-Loan Europe: (i) purchase or hold any equity interest in any company that operates, as its principal line of business, a Multi-Lender Site that includes residential mortgage loans on properties located in the Territory, or (ii) provide Brokerage Functionality for use in a Multi-Lender Site (other than a Multi-Lender Site operated by E-Loan Europe) with respect to properties in the Territory. 4.2 EVENTS UPON CHANGE OF CONTROL. (a) As used herein, "CHANGE OF CONTROL" means (i) a merger or reorganization of any party to this Agreement (such party, the "SELLING PARTY") into any other corporation or 6 7 corporations pursuant to which the Selling Party's stockholders immediately prior to such transaction own, immediately after and as a result of such transaction, less than fifty percent (50%) of the equity securities of the surviving corporation; or (ii) a sale of all or substantially all of the assets of the Selling Party's business relating to residential mortgage loans on properties in the Territory, or all or substantially all of the outstanding stock of the Selling Party, pursuant to which transaction the Selling Party's stockholders immediately prior to such transaction own, immediately after and as a result of such transaction, less than fifty percent (50%) of the equity securities of the surviving corporation; provided, however, that in no event will a public offering of a Selling Party's capital stock in which the purchasers are not acting together as a group be deemed a Change of Control. (b) TERMINATION. Upon a Change of Control, the Selling Party agrees to promptly give notice to all other parties of such Change of Control, and the Selling Party, or any other party to this Agreement may, in its sole discretion, either (i) terminate this Agreement upon written notice within ninety (90) days following the closing of such Change of Control, and such termination will be without penalty to any party to this Agreement or the party who has obtained control of Selling Party, or (ii) allow the Agreement to continue in full force and effect in which case, all of Selling Party's rights and obligations under this Agreement will be assumed in accordance with Section 7.3 below. ARTICLE 5 -- TERMINATION 5.1 TERM. The term of this Agreement will commence on the Effective Date, and, unless terminated earlier as described in Section 4.2 above or Section 5.2 below, will continue in effect for five (5) years thereafter. 5.2 BREACH AND REMEDIES. In the event of a material breach by any party of a material provision hereof, which breach is not cured within ninety (90) days after written notice thereof by the other party, then the nonbreaching party may, effective ninety (90) days after written notice of failure to cure to the breaching party, terminate this Agreement. The parties agree that such termination will be the terminating party's sole remedy for breach of this Agreement by any other party, except for any liability that arises under Article 6 (Non-Disclosure). 5.3 EFFECT OF TERMINATION. The termination of this Agreement will not in any way operate to impair or destroy any of the rights or remedies of any party, or to relieve any party of its obligations to comply with any of the provisions of this Agreement which accrue prior to the date of termination, and the provisions of Articles 1, 6, and 7 will survive the expiration and any termination of this Agreement. In the event that this Agreement is terminated by Stater due to breach by E-Loan or E-Loan Europe under Section 5.2, E-Loan Europe shall promptly return to Stater the Expense Advance, less any amount that E-Loan Europe (a) shall have expended in connection with the establishment by E-Loan Europe of a Multi-Lender Site in the Territory, up to a maximum amount to be agreed upon in writing by E-Loan Europe and Stater from time to time prior to the time any such expenses are incurred, or (b) shall have reimbursed to Stater in accordance with the provisions of Section 2.2(b) above. 7 8 ARTICLE 6 -- NONDISCLOSURE 6.1 DEFINITION. "CONFIDENTIAL INFORMATION" means any information disclosed by any party to any other party, either directly or indirectly, in writing, orally or by inspection of tangible objects (including without limitation documents, prototypes, samples, plant and equipment), which is designated as "Confidential, " "Proprietary" or some similar designation. Information communicated orally will be considered Confidential Information if such information is confirmed in writing as being Confidential Information within a reasonable time after the initial disclosure. Confidential Information may also include information disclosed to a disclosing party by other parties. Confidential Information will not, however, include any information which (i) was publicly known and made generally available in the public domain prior to the time of disclosure by the disclosing party; (ii) becomes publicly known and made generally available after disclosure by the disclosing party to the receiving party through no action or inaction of the receiving party; (iii) is already in the possession of the receiving party at the time of disclosure by the disclosing party as shown by the receiving party's files and records immediately prior to the time of disclosure; (iv) is obtained by the receiving party from another party without a breach of such other party's obligations of confidentiality; (v) is independently developed by the receiving party without use of or reference to the disclosing party's Confidential Information, as shown by documents and other competent evidence in the receiving party's possession; or (vi) is required by law to be disclosed by the receiving party, provided that the receiving party gives the disclosing party prompt written notice of such requirement prior to such disclosure and assistance in obtaining an order protecting the information from public disclosure. 6.2 NON-USE AND NON-DISCLOSURE. As used in this Article 6, "E-LOAN COMPANIES" refers to E-Loan and E-Loan Europe together. The E-Loan Companies (on the one hand) and Stater (on the other hand) each agree not to use any Confidential Information of the other for any purpose except to exercise its rights and perform its obligations under this Agreement. The E-Loan Companies and Stater each agree not to disclose any Confidential Information of the other to third parties or to such party's employees, except to those employees of the receiving party with a need to know. The E-Loan Companies and Stater each agree not to reverse engineer, disassemble or decompile any prototypes, software or other tangible objects which embody the other's Confidential Information and which are provided hereunder. 6.3 MAINTENANCE OF CONFIDENTIALITY. Each party agrees to take reasonable measures to protect the secrecy of and avoid disclosure and unauthorized use of the Confidential Information of the other parties. Without limiting the foregoing, each party agrees to take at least those measures that it takes to protect its own most highly confidential information and agrees to ensure that its employees who have access to Confidential Information of any other party have signed a non-use and non-disclosure agreement in content similar to the provisions hereof, prior to any disclosure of Confidential Information to such employees. No party shall make any copies of the Confidential Information of any other party unless the same are previously approved in writing by the other party. Each party agrees to reproduce any other party's proprietary rights notices on any such approved copies, in the same manner in which such notices were set forth in or on the original. 8 9 6.4 RETURN OF MATERIALS. Upon the termination of this Agreement, each party agrees to deliver to each other party all of such other party's Confidential Information that such party may have in its possession or control. ARTICLE 7 -- MISCELLANEOUS 7.1 GOVERNING LAW. This Agreement will be governed by and interpreted in accordance with the laws of California, U.S.A., without reference to conflict of laws principles. 7.2 ARBITRATION DISPUTES. (a) If the parties are unable to resolve any dispute, controversy, or claim arising out of or relating to the validity, construction, enforceability, or performance of this Agreement (a "DISPUTE") between or among them arising out of this Agreement, any party may, by written notice to the other, have such Dispute referred to the Chief Executive Officers of all parties for attempted resolution by good faith negotiations within thirty (30) days after such notice is received. (b) FULL ARBITRATION. Any Dispute, including Disputes relating to alleged breach or termination of this Agreement that is not resolved pursuant to Section 7.2(a) above, will be settled by binding arbitration in the manner described in this Section 7.2. The arbitration will be conducted pursuant to the Commercial Rules and Supplementary Procedures for Large, Complex Disputes of the American Arbitration Association then in effect. Notwithstanding those rules, the following provisions will apply to the arbitration hereunder: (i) ARBITRATORS. The arbitration will be conducted by a single arbitrator; provided that at the request of either party, the arbitration will be conducted by a panel of three (3) arbitrators, chosen according to the Rules of the American Arbitration Association. In any event, the arbitrator or arbitrators selected in accordance with this Section 7.2 are referred to herein as the "PANEL." (ii) PROCEEDINGS. Except as otherwise provided herein, the parties and the arbitrators shall use their best efforts to complete the arbitration within one (1) year after the appointment of the Panel under Section 7.2(b)(i) above, unless a party can demonstrate to the Panel that the complexity of the issues or other reasons warrant the extension of one or more of the time tables. In such case, the Panel may extend such time table as reasonably required. The Panel shall, in rendering its decision, apply the substantive law of California, U.S.A., without regard to its conflicts of laws provisions. The proceeding will be conducted in English and will take place in New York, New York. All pleadings and written evidence will be in the English language. Any written evidence in a language other than English will be submitted in English translation accompanied by the original or true copy thereof. The fees of the Panel will be paid by the losing party or parties, if deemed appropriate by the Panel. If the Panel does not designate otherwise, the fees will be split equally between the parties. Each party will bear the costs of its own attorneys' and experts' fees; provided that the Panel may in its discretion award the prevailing party or parties all or part of the costs and expenses incurred by the prevailing party or parties in connection with the arbitration proceeding. No party may initiate an arbitration hereunder unless it has attempted to resolve the matter in accordance with Section 7.2(a). 9 10 7.3 ASSIGNMENT. No party may assign this Agreement without the prior written consent of the other parties, except that each party may assign this Agreement to a person or entity into which it has merged or which has otherwise succeeded to all or substantially all of its business or assets relating to residential mortgage loan business and which has assumed in writing or by operation of law the assigning party's obligations under this Agreement. Each party agrees that in any merger in which it is not the surviving company, the surviving company will assume, in writing or by operation of law, such party's obligations under this Agreement. Any purported assignment in violation of the foregoing will be null and void. Subject to the foregoing, the provisions of this Agreement will apply to and bind the successors and permitted assigns of the parties. Upon a permitted assignment of this Agreement, all references to the assigning party herein will be deemed references to the assignee. 7.4 INTELLECTUAL PROPERTY. If at any time either Stater or E-Loan (the "DISCLOSING PARTY") discloses or provides any technology or intellectual property, including without limitation modifications or additions to E-Loan Europe's or the Disclosing Party's technology or intellectual property, the Disclosing Party agrees to describe such technology or intellectual property to E-Loan Europe in writing prior to such disclosure. Following receipt of such description, E-Loan Europe and the Disclosing Party agree to confer concerning the nature of the proposed technology or intellectual property and agree in writing upon the terms, if any, under which such modifications or additions should be made. The parties acknowledge that the Business Plan shall be the property of E-Loan Europe. 7.5 LANGUAGE. This Agreement is in the English language only, which language will be controlling in all respects, and all versions hereof in any other language will be for accommodation only and will not be binding upon the parties hereto. All communications and notices to be made or given pursuant to this Agreement will be in the English language. 7.6 CONSTRUCTION. All parties have been represented by legal counsel during the negotiation and drafting of this Agreement. Accordingly, any rule of construction relating to the author of specific language will not apply. 7.7 NOTICES. Any notice or other communications required or permitted hereunder must be in writing and must be mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand, or by commercial express courier service, addressed as follows: To E-Loan: E-Loan, Inc. 5875 Arnold Rd., Suite 100 Dublin, California 94568 Attention: President 10 11 with a copy to: Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, California 94304 Attn: Kenneth A. Clark To Stater: Stater BV De Brand 40 3823 LL, Amersfoort The Netherlands Attn: President with a copy to: Akin, Gump, Strauss, Hauer & Feld, L.L.P. 816 Congress Avenue, Suite 1900 Austin, Texas 78701 Attention: John Strickland To E-Loan Europe: E-Loan Europe BV c/o E-Loan, Inc. 5875 Arnold Rd., Suite 100 Dublin, California 94568 Attention: President with a copy to: Wilson Sonsini Goodrich & Rosati, P.C. 650 Page Mill Road Palo Alto, California 94304 Attn: Kenneth A. Clark Such notices will be deemed to have been served when delivered or, if delivery is not accomplished by reason of some fault of the addressee, when tendered. 7.8 PARTIAL INVALIDITY. If any paragraph, provision, or clause hereof in this Agreement is found or held to be invalid or unenforceable in any jurisdiction in which this Agreement is being performed, the remainder of this Agreement will be valid and enforceable and the parties shall use their respective best efforts to negotiate a substitute, valid and 11 12 enforceable provision which most nearly effects the parties' intent in entering into this Agreement. In the event a party to this Agreement seeks to avoid a provision of this Agreement by asserting that such provision is invalid, illegal or otherwise unenforceable (or by prompting a governmental authority to make such an assertion), then whichever party did not make such an assertion (or prompt such governmental assertion) will have the right to terminate this Agreement upon sixty (60) days notice, unless such assertion is eliminated within such sixty (60) day period. 7.9 COUNTERPARTS. This Agreement may be executed in two (2) or more counterparts, all of which, taken together, will be regarded as one and the same instrument. 7.10 WAIVER. The failure of any party to enforce at any time the provisions of this Agreement will in no way be construed to be a present or future waiver of such provisions, nor in any way affect the validity of any party to enforce each and every such provision thereafter. 7.11 ENTIRE AGREEMENT. The terms and conditions herein contained constitute the entire agreement between the parties and supersede all previous agreements and understandings, whether oral or written, between the parties hereto with respect to the subject matters hereof and thereof and no agreement or understanding varying or extending the same will be binding upon any party hereto unless in a written document signed by the party to be bound thereby. 7.12 SECTION HEADINGS. The Section headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. 7.13 PUBLICITY. Each of the parties hereto agrees not to disclose the terms of this Agreement to any other party, without the prior written consent of all other parties hereto, except to advisors, investors and others on a need-to-know basis under circumstances that reasonably ensure the confidentiality thereof, or the extent required by law. 12 13 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by duly authorized officers or representatives as of the date first above written. E-LOAN, INC. STATER BV By: __________________________________ By: __________________________________ Name: ________________________________ Name: ________________________________ Title: _______________________________ Title: _________________________________ E-LOAN EUROPE BV By: __________________________________ Name: ________________________________ Title: _______________________________ 13 14 EXHIBIT A TERRITORY Austria Belgium Denmark Finland France Germany Greece Hungary Italy Luxembourg Monaco Poland Portugal Republic of Ireland Spain The Netherlands Sweden EX-10.28 34 LEASE AGREEMENT DATED 6/20/96 1 EXHIBIT 10.28 LEASE THIS LEASE is made and entered into this 20th day of June 1996, by and between JTC, a California general partnership (hereinafter called "Lessor"), and Palo Alto Funding Group, Inc. a California Corporation (hereinafter called "Lessee"), for the promises and on the terms and conditions described herein. 1. SCHEDULE: A. PREMISES: Lessor hereby leases to Lessee and Lessee hereby leases from Lessor, that certain office space (herein called "Premises") outlined on Exhibit "A" which is incorporated herein by this reference, known as Suite number 300 situated on the 1st floor of that certain office building commonly known as University Court, 540 University Avenue, Palo Alto, CA 94301. The parties hereto agree that said letting and hiring is upon and subject to the terms, covenants and conditions herein set forth and Lessee covenants as a material part of the consideration for this Lease to keep and perform each and all of said terms, covenants and conditions by it to be kept and performed and that this Lease is made upon the condition of such performance. B. TERM: Twelve (12) months commencing August 1, 1996, and ending at 5:00 P.M. on July 31, 1997, subject to the provisions herein. C. BASE RENT: $6,850.20 per month, payable in equal installments in said amount in advance on the 1st day of each month, commencing August 1, 1996 and continuing on the same day of each month until the end of the lease. Rent shall be payable to the Lessor at 540 University Avenue Suite 105, Palo Alto, California or at such other place as Lessor may designate in writing. Lessor acknowledges receipt of $6,850.20 rent for the month of August. D. RENTAL INCREASE: see paragraph 30. E. SECURITY DEPOSIT: $6,850.20, receipt of which is hereby acknowledged. Security deposit payable upon signging of this lease is $2,390.60 which is calculated as follows: $6,850.20 less $1,450.00 the deposit on account from Suite 150 and less $3,009.60 the deposit on account from Suite 350. F. USE OF PREMISES: General office and related activities. G. REPRESENTATIONS RECONDITION OF PREMISES: There shall be no lessee improvements. H. SERVICES TO BE PROVIDED BY LESSOR: Five-day-a-week janitor, common area heating, ventilating and water shall be provided by Lessor. Electricity, heat and air-conditioning to the Premises shall be separately metered and paid by Lessee. I. LEASEHOLD IMPROVEMENTS TO BE PROVIDED BY LESSOR: Building Standard" improvements as specified on Exhibit "A", "A-1" hereof. J. REMOVAL OF PROPERTY: At any time Lessee may, and prior to the end of the lease term Lessee shall, remove from the Premises furniture, equipment, and other personal property installed by Lessee or at Lessee's expense. Lessee shall not remove any fixtures or leasehold improvements without Lessor's prior written consent, except fixtures installed by Lessee which can be removed without damage to the premises. Lessee shall repair any damage to the Premises caused by removal of any property, and shall restore the Premises to its condition at the commencement of the LEASE 1 SUITE 300 2 the commencement of the term, less reasonable wear and tear. All of such removal and restoration shall be accomplished at Lessee's expense prior to the end of the lease term. K. LESSEE'S INSURANCE: Bodily Injury and Property Damage Liability insurance of not less than One Million Dollars ($1,000,000) combined each occurrence and as further specified in paragraph 11 hereof. L. TAXES: Base Tax Year N/A Percent of Building occupied by Lessee N/A Percent of land occupied by Lessee N/A. M. BROKER None 2. TERM AND RENT: The term of this lease and the rent which Lessee agrees to pay to Lessor are specified in the Schedule. Lessee agrees to pay the rent to Lessor in lawful money of the United States of America, without deduction or offset. Rent for partial months shall be prorated. Lessee additionally agrees to pay to Lessor, concurrent with the Base Rent unless otherwise provided herein, all other sums of money that may become due and payable hereunder, which sums shall be deemed additional rental. 3. DEPOSIT: Upon the execution of this lease, Lessee will pay to Lessor as a security the sum specified as "Deposit" in the schedule. If Lessee shall pay all rent and observe and perform all of the terms, covenants, and conditions of this lease during the term and all extensions and renewals thereof, Lessor will repay the deposit to Lessee, without interest, within five (5) business days after Lessee vacates the premises. If Lessee defaults in the payment of rent or other sums due hereunder, damages the Premises, fails to leave the Premises clean upon termination of the tenancy, or defaults in any of the other terms, covenants, or conditions of this lease, Lessor may use or apply so much of the security deposit as is reasonably necessary to remedy such default. Lessee agrees to restore the security deposit to the full original amount immediately upon receipt of demand from Lessor therefor. 4. POSSESSION: If Lessor is unable to deliver possession of the Premises to Lessee at the commencement of the term for any reason whatsoever, the lease shall not be void or voidable for a period of forty-five (45) days thereafter, nor shall Lessor be liable to Lessee for any loss or damage resulting therefrom, but the rent shall abate until Lessor delivers possession of the Premises to Lessee. If Lessor is unable to deliver possession of the Premises within forty-five (45) days after the commencement date, this lease may be terminated by either Lessor or Lessee by a written notice to the other at any time thereafter prior to the date possession is delivered to Lessee. 5. USE: The Premises shall be used for the purpose specified in the Schedule, and for no other purpose without the prior written consent of Lessor. Lessee shall not do or permit anything to be done in or about the Premises nor bring or keep anything therein which will in any way increase the existing rate of or affect any fire or other insurance upon the Building or any of its contents, cause cancellation of any insurance policy covering said Building or any part thereof or any of its contents. Lessee shall not do or permit anything to be done in or about the Premises which will in an way obstruct or interfere with the LEASE 2 SUITE 300 3 rights of other tenants or occupants of the Building or injure or annoy them or use of allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Lessee cause, maintain or permit any nuisance in, on or about the Premises. Tenants shall not commit or suffer to be committed any waste in or upon the Premises. 6. ABANDONMENT: Lessee will not vacate, abandon, or surrender the Premises during the term, and if Lessee does, or is dispossessed by process of law, or otherwise, any personal property belonging to Lessee left on the Premises shall be deemed to be abandoned at the option of Lessor. 7. CONDITION OF PREMISES: Lessee's taking possession of the Premises and occupying the same for thirty (30) days without giving written notice to Lessor within said period of any defect in the Premises shall be conclusive evidence as against Lessee that the Premises were in good order and satisfactory condition when Lessee took possession. No promise to alter, remodel, or improve the Premises or the Building and no representation respecting the condition of the Premises or the Building have been made by Lessor to Lessee, unless the same is set forth in the Schedule. Lessee waives all right to make repairs at the expense of Lessor, or to deduct the cost thereof from the rent, and Lessee waives all rights under Sections 1941 and 1942 of the Civil Code of the State of California. At the termination of this lease by lapse of time or otherwise, Lessee shall surrender the Premises in as clean and good a condition as when Lessee took possession, ordinary wear or loss by fire or other natural force excepted, failing which Lessor may restore the Premises to such condition and Lessee shall pay the cost thereof to Lessor upon demand. 8. ALTERATIONS AND REPAIRS: Lessee shall not make or permit to be made any alterations, additions, improvements, or changes in the Premises without the prior written consent of Lessor, which consent Lessor shall not unreasonably withhold, provided that Lessor may make such consent subject to reasonable conditions. Subject to the services to be rendered by Lessor as set forth in the Schedule, Lessee shall, at Lessee's own expense, keep the Premises in good order, condition, and repair during the term, including the replacement of all broken glass with glass of the same size and quality under the supervision and with the approval of Lessor. If Lessee does not make repairs promptly and adequately, Lessor may, but need not, make repairs and Lessee shall pay promptly the reasonable cost thereof. At any time or times, Lessor, either voluntarily or pursuant to governmental requirements, may, at Lessor's own expense, make repairs, alterations, or improvements in or to the Building or any part thereof, including the Premises, and, during such operations Lessor may close entrances, doors, corridors, elevators, or other facilities, all without any liability to Lessee by reason of interference, inconvenience, or annoyance; provided that Lessee shall have access to the Premises sufficient for conduct of Lessee's business. Lessor shall not be liable to Lessee for any expense, injury, loss, or damage resulting from work done in or upon, or the use of, any adjacent or nearby building, land, street, or alley, provided that Lessor makes a reasonable effort to minimize the disruption to Lessee's business. In the event Lessee requests that repairs, alterations, decorating, or other work in the Premises be made during periods other than ordinary business hours, Lessee shall pay Lessor for overtime and other additional expenses incurred because of such request. 9. LIENS: Lessee agrees to keep the Premises and the property on which the Premises are located free from any liens arising out of any work performed, materials furnished, or obligations incurred by Lessee. 10. INDEMNIFICATION: Lessee waives all claims against Lessor for damages to property, or to goods, wares and merchandise stored in, upon, or about the Premises, and for injuries to persons in, upon or about the Premises from any cause arising at any time, except as may be caused by the act, omission, or negligence of Lessor, and Lessee agrees to indemnify and hold Lessor exempt and harmless for and on account of any damage or injury to any person or LEASE 3 SUITE 300 4 property arising from the use of the Premises by Lessee or from the failure of Lessee to keep the Premises in good condition as herein provided. Lessor shall not be liable to Lessee for any damage because of any act or negligence of any covenant or other occupant of the same Building, or by any owner or occupant of adjourning or contiguous property, nor for overflow, breakage, or leakage of water, steam, gas, or electricity from pipes, wires, or otherwise. Lessee will pay for all damage to the Building and to the tenants and occupants thereof caused by the misuse or neglect of the Premises by Lessee or its invitees. Lessee's obligations to indemnify and defend shall include, without limitation, the obligation to pay Lessor's reasonable attorney fees and other costs incurred after Lessor's first notice of each such claim. 11. LESSEE'S INSURANCE OBLIGATION: Lessee further covenants and agrees that from and after substantial completion of the premises Lessee will carry and maintain, at its sole cost and expense, the following types of insurance, in the amounts specified and in the form hereinafter provided for: A. PUBLIC LIABILITY AND PROPERTY DAMAGE. Bodily injury and property damage liability insurance with coverage limits of not less than One Million Dollars ($1,000,000) combined each occurrence and in the aggregate insuring against any and all liability of the insured with respect to said premises or arising out of the maintenance, use or occupancy thereof. All such bodily injury liability insurance and property damage liability insurance shall specifically insure the performance by Lessee of the indemnity agreement as to liability for injury or death of persons and damage to property in this Article 11 contained. B. PLATE GLASS: Insurance covering all plate glass on the premises. Lessee shall have the option to either insure the risk or to self-insure. C. EQUIPMENT: Machinery insurance on all air conditioning equipment and systems exclusively serving the premises. If said equipment and the damage that it may cause are not covered by Lessee All Risk insurance, then the insurance specified in this subparagraph C, shall be in an amount not less than One Hundred Thousand Dollars ($100,000). If Lessee requires boilers or other pressure vessels to serve the premises, they should also be insured in the amount required by this subparagraph. D. LESSEE IMPROVEMENTS: Insurance covering Lessee's fixtures, merchandise, and personal property from time to time in, on or upon the premises, in an amount not less than ninety (90%) percent of their full replacement cost from time to time after the Effective Date providing protection against any peril included within the classification "All Risk," together with insurance against sprinkler damage. Any policy proceeds shall be used for the repair or replacement of the property damaged or destroyed unless this Lease shall cease and terminate under the provisions of Article 15. C. POLICY FORM. C.1. All policies of insurance provided for herein shall be issued by insurance companies with general policyholder's rating of not less than A and a financial rating of not less than Class X as rating in the most current available "Best's" Insurance Reports, qualified to do business in the State where the Premises are situated. All such policies shall be issued in the names of Lessor and Lessee, and if requested by Lessor, Lessor's first mortgagee or beneficiary, which policies shall be for the mutual and joint benefit and protection of Lessor, Lessee and Lessor's first mortgagee or beneficiary. Executed copies of such policies of insurance or certificates thereof shall be delivered to Lessor within (10) ten days after substantial completion of the premises, and thereafter executed copies of renewal policies or certificates thereof shall be delivered to Lessor within thirty (30) days prior to the expiration of the term of each such policy. All public liability damage and property damage policies shall contain a provision that Lessor, although LEASE 4 SUITE 300 5 named as an insured, shall nevertheless be entitled to recover under said policies for any loss occasioned to it, its servants, agents and employees by reason of the negligence of Lessee. As often as any such policy shall expire or terminate, renewal or additional policies shall be procured and maintained by Lessee in like manner and to like extent. All policies of insurance delivered to Lessor must contain a provision that the company writing said policy will give to Lessor twenty (20) days' notice in writing in advance of any cancellation, lapse or reduction in the amounts of insurance. All public liability, property damage and other casualty policies shall be written as primary policies, not contributing with or in excess of coverage which Lessor may carry. C.2. Notwithstanding anything to the contrary contained within this Article 11, Lessee's obligations to carry the insurance provided for herein may be brought within the coverage of a so-called blanket policy or policies of insurance carried and maintained by Lessee, provided, however, that Lessor and Lessor's first mortgage or beneficiary shall be named as an additional insured thereunder as their interests may appear and that the coverage afforded Lessor will not be reduced or diminished by reason of the use of such blanket policy insurance, and provided further that the requirements set forth herein are otherwise satisfied. Lessee agrees to permit Lessor at all reasonable times to inspect any policies of insurance of Lessee which policies or copies thereof are not delivered to Lessor. C.3. If Lessor's insurance rates for the Premises are increased at any time during the term as a result of the nature of Lessee's use and occupancy of the Premises, Lessee agrees to reimburse Lessor for the full amount of such increase immediately upon receipt of demand from Lessor thereof. Such increase shall be prorated as of the expiration of the term, if applicable. 12. MUTUAL WAIVER OF SUBROGATION RIGHTS: Lessor and Lessee hereby waive any rights each may have against the other and Lessee hereby waives any rights it may have against any of the parties to the Agreement referred to in Article 10 on account of any loss or damage occasioned to Lessor or Lessee, as the case may be, to their respective property, the premises, its contents or to other portions of the premises, arising from any risk generally covered by All Risk insurance; and the parties each, on behalf of their respective insurance companies insuring the property of either Lessor or Lessee against any such loss, waive any right of subrogation that either may have against the other, as the case may be. Lessee, on behalf of its insurance companies insuring the premises, of its contents, Lessee's other property or other portions of the office building, waives any right of subrogation which such insurer or insurers may have against any of the parties to the Agreement. The foregoing waivers of subrogation shall be operative only so long as available in the State where the office building is situated and provided further that no such policy is invalidated thereby. 13. Taxes: Lessee will pay before delinquency any and all taxes, assessments and license fees, and public charges levied, assessed, or imposed and which become payable during the term hereof upon Lessee's fixtures, furniture, and personal property installed or located in the Building. Lessee shall pay his/its pro rata share of any increase in the parking assessment fees, charges or bond amortization levied by the University Avenue Parking Assessment District or the University Avenue Parking Lot Maintenance Assessment or the City of Palo Alto or any other authorized or successor authority during the term of this lease. Lessee's pro rata share shall be based upon the portion that Lessee's Premises bears to the leased space of the entire building. Lessee shall be considered the owner during the term of any leasehold improvements installed at Lessee's expense, and any such leasehold improvements may be assessed to Lessee for property tax purposes. Except as otherwise provided in the Schedule, Lessee shall not remove from the Premises any leasehold improvements installed by Lessee without Lessor's prior written LEASE 5 SUITE 300 6 consent, and the ownership of any such leasehold improvements shall revert to Lessor upon the expiration of the term or upon sooner termination of the tenancy. 14. SERVICES: So long as Lessee is not in default hereunder, Lessor will furnish the Premises with such services as are specified in the Schedule and Exhibit "B," and Lessee will pay for all other services supplied to the Premises. Lessor shall not be liable to Lessee or to any other party for any claim, injury, damage, rebate, or charge of any, kind whatsoever which may arise or accrue in case of the interruption of the supply of water, heat, electricity, elevator service, air conditioning, gas, compressed air, or refrigeration caused by conditions beyond Lessor's control, or by accident, failure of power supply, repairs, strikes, fire, flood, act of God, or on account of any defect of the Building or the Premises, nor shall any such interruption be grounds for termination of this lease provided Lessor exercises reasonable diligence to remedy such interruption. 15. DESTRUCTION: In the event of a partial destruction of the Building or appurtenances during the term from a cause which is insured under Lessor's fire and extended coverage insurance, Lessor shall forthwith repair the same, provided such repairs can be made within ninety (90) days under the laws and regulations of the state, county, federal, or municipal authorities, but such partial destruction shall not annul or void this lease, except that Lessee shall be entitled to a proportionate reduction of rent while such repairs are being made, such proportionate reduction to be based upon the extent to which the making of repairs interferes with the business carried on by Lessee in the Premises. If the partial destruction is caused by a casualty which is not insured under Lessor's fire and extended covered insurance or if such repairs cannot be made in ninety (90) days, either Lessor or Lessee may terminate this lease by giving written notice to the other party within thirty (30) days after the damage occurs. If the lease is not terminated, Lessor shall make such repairs within a reasonable time with this lease continuing in full force and effect and the rent proportionately reduced while the repairs are being made. In the event the Building in which the Premises are located is destroyed to the extent of not less than 33 1/3% of the then current replacement cost thereof, Lessor may elect to terminate this lease by giving written notice of termination to Lessee within thirty (30) days after damage occurs, regardless of whether the Premises are damaged, whether the partial destruction is caused by a casualty covered by insurance, or whether the repairs can be made within ninety (90) days. A total destruction of the Building in which the Premises are located shall terminate this lease. In respect to any partial destruction which Lessor is obligated to repair or may elect to repair under the terms of this paragraph and which can be made within ninety (90) days the provisions of Section 1932, Subdivision 2, and of Section 1933, Subdivision 4, of the Civil Code of the State of California are waived by Lessee. In the event of termination of this lease pursuant to any of the provisions of this paragraph, rent and Lessee's portion of any parking assessment fee increase shall be apportioned on a per diem basis and shall be paid to the date of the casualty. In no event shall Lessor be liable to Lessee for any damages resulting to Lessee from the happening of such casualty or from the repairing or reconstruction of the Premises or of the Building, or from the termination of this lease as herein provided, nor shall Lessee be relieved thereby or in any such event from Lessee's obligations hereunder except to the extent and upon the conditions expressly stated in this paragraph. 16. EMINENT DOMAIN: If the whole or any substantial part of the Building or appurtenant real property shall be taken or condemned by any competent authority for any public use or purpose, the term of this lease shall end upon, and not before, the date when the possession of the part so taken shall be required for such use or purpose. Rent shall be apportioned as of the LEASE 6 SUITE 300 7 date of such termination. Lessee shall be entitled to receive any damages awarded by the court for leasehold improvements installed at Lessee's expense. The entire balance of the award shall be the property of Lessor. 17. ASSIGNMENT AND SUBLETTING: Lessee shall not assign this lease, or any interest herein, and shall not sublet the Premises or any part thereof, or any right or privilege appurtenant thereto, or suffer any other person (the agents or employees of Lessee excepted) to occupy or use the Premises, or any portion thereof, without the prior written consent of Lessor, and a consent to one assignment, subletting, occupation, or use by any other person shall not be deemed to be a consent to any subsequent assignment, subletting, occupation, or use by any other person. Any such assignment or subletting without such consent shall be void, and shall, at the option of Lessor, terminate this lease. Any transfer or assignment of this lease by operation of law without the consent of Lessor shall make this lease voidable at the option of Lessor. Lessor will not unreasonably withhold its consent to an assignment or subletting by Lessee, provided that (a) the assignee or sublessee is financially responsible and proposes to use the Premises for the same purpose or a purpose which is permitted by applicable zoning ordinances and regulations; (b) the proposed use is not injurious to the Premises and will not disturb the other tenants of Lessor in the Building or immediate vicinity; and (c) the assignee or sublessee executes and delivers to Lessor a written assumption of this lease in form acceptable to Lessor. Every assignment of sublease shall recite that it is and shall be subject and subordinate to the provisions of this lease, and the termination of this lease shall constitute a termination of every such assignment of sublease. 18. SUBORDINATION: The rights of Lessee under this lease shall be and they are subject and subordinate at all times to the lien of any mortgage or deed of trust now or hereafter in force against the property, and to all advances made or hereafter to be made upon the security thereof, and Lessee shall execute such further instruments subordinating this lease to the lien of any such encumbrance, as shall be requested by Lessor, provided the holder of such encumbrance agrees to recognize Lessee's interest hereunder if Lessee is not then in default. Lessee hereby irrevocably appoints Lessor as attorney in fact for Lessee with full power and authority to execute and deliver in the name of Lessee any such instrument. If any mortgagee or beneficiary elects to have this lease superior to its mortgage or deed of trust and gives notice of such fact to Lessee, then this lease shall be deemed superior to the lien of any such encumbrance, whether this lease or a memorandum thereof is dated or recorded before or after said encumbrance. 19. SIGNS: Lessee shall not place any signs, lettering, marks, photographs, or any other material whatsoever, on the interior or exterior of the doors, windows, hallways, or any other place, in, on, or about the Premises, the Building, or its appurtenances, without Lessor's prior written approval of the size, style, design, color, material, manner of applying of fastening, and location thereof. All signs shall be strictly in accordances with the Lessor's Building standards and illuminated signs of any nature are prohibited. 20. REMOVAL OF PROPERTY: Lessee hereby irrevocably appoints Lessor as agent and attorney in fact of Lessee, to enter upon the Premises, in the event of default by Lessee in the payment of any rent herein reserved, or in the performance of any term, covenant, or condition herein contained to be kept or performed by Lessee, and to remove any and all furniture and personal property whatsoever situated upon the Premises, and to place such property in storage for the account of and at the expense of Lessee. In the event that Lessee shall not pay the cost of storing any such property after the property has been stored for a period of ninety (90) days or more, Lessor may sell any or all such property, at public or private sale, in such manner and at LEASE 7 SUITE 300 8 such times and places as Lessor in its sole discretion may deem proper, without notice to Lessee or any demand upon Lessee for the payment of any part of such charges or the removal of any of such property, and shall apply the proceeds of such sale first to the cost and expenses of such sale, including reasonable attorney's fees actually incurred; second, to the payment of the costs of or charges for storing any such property; third, to the payment of any other sums of money which may then or thereafter be due to Lessor from Lessee under any of the terms hereof; and fourth, the balance, if any, to Lessee. 21. SURRENDER: The voluntary or other surrender of this lease by Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Lessor, terminate all or any existing subleases or subtenancies, or may, at the option of Lessor, operate as an assignment to Lessor of any or all such subleases or subtenancies. 22. TRANSFER OF SECURITY: Lessor may transfer or deliver any security given by Lessee to secure the faithful performance of any of the covenants of this lease to the purchaser or successor of Lessor's interest in the Premises, and thereupon Lessor shall be discharged from any further liability in reference thereto. 23. WAIVER: The waiver by Lessor or Lessee of any breach of any term, covenant, or condition herein contained shall not be deemed to be a waiver of such term, covenant, or condition or and subsequent breach of the same or any other term, covenant, or condition herein contained. The subsequent acceptance of rent hereunder by Lessor shall not be deemed to be a waiver of any preceding breach by Lessee at any term, covenant, or condition of this lease, other than the failure of Lessee to pay the particular rent so accepted, regardless of Lessor's knowledge of such preceding breach at the time of acceptance of such rent. 24. HOLDING OVER: Any holding over after the expiration of the term, with the consent of Lessor, shall be construed to be a tenancy from month to month on the same terms and conditions specified herein as far as applicable. 25. ATTORNEY'S FEES: If any action at law or in equity shall be brought to recover any rent under this lease, or for or on account of any breach of or to enforce or interpret any of the terms, covenants, agreements, or conditions of this lease, or for the recovery of the possession of the Premises, the prevailing party shall be entitled to recover from the other party as a part of the prevailing party's costs a reasonable attorney's fees and costs, the amount of which shall be fixed by the court and shall be made a part of any judgment rendered. 26. NOTICES: All notices to be given to Lessee may be given in writing personally or by depositing the same in the United States mail, postage prepaid certified mail return receipt requested, and addressed to Lessee at Dallas Semiconductor, 4401 S. Beltwood Parkway, Dallas Texas 75244 and at property address. Notice to Lessor may be given in writing personally or by depositing the same in the United States mail, postage prepaid, and addressed to Lessor at the address to which the rent is paid. 27. GENERAL PROVISIONS: This lease contains all of the terms, covenants, and conditions agreed to by Lessor and Lessee and it may not be modified orally or in any manner other than by an agreement in writing signed by all of the parties to this lease or their respective successors in interest. Each term and each provision of this lease performable by Lessee shall be construed to be both a covenant and a condition. The covenants and conditions hereof, subject to the provisions as to subletting and assignment, shall apply to and bind the heirs, successors, executor, administrators, sublessees, and assigns of the parties. All persons who have signed this lease shall be jointly and severally liable hereunder. LEASE 8 SUITE 300 9 When the context of this lease requires, the masculine gender includes the feminine, a corporation, or a partnership, and the singular number includes the plural. The captions of this lease are for convenience only and are not a part of this lease and do not in any way limit or amplify the terms and provisions of this lease. This lease shall be governed by and construed in accordance with the laws of the State of California. Time is of the essence as to all of the provisions of this lease. 28. RULES: The following rules and regulations in addition to those set forth in Exhibit "C" hereof, relating to the safety, care and cleanliness of the Premises and the preservation of good order thereon, are hereby expressly made a part hereof, and Lessee agrees to obey all such rules and regulations. A. PEACEFUL ENJOYMENT: Lessee, its employees, and visitors shall not interfere with the peaceful enjoyment of the Premises by other lessees, if any, or those having business with them. Lessee shall not permit the placing of litter in or upon the Building and grounds and shall not permit any animal, bicycle, motorcycle, or vehicle to be brought into or kept in the Building. Bicycle parking is provided in the basement only. B. MOVING HEAVY OBJECTS: Lessee shall be responsible to repair any damage occasioned by the moving of freight, furniture, or other objects into, within, or out of the Building. No heavy objects of any nature shall be placed upon any floor without Lessor's prior written approval as to the adequacy of the allowable floor loading at the point where the objects are intended to be moved or stored. Lessor may specify the time of moving to minimize inconvenience to other lessees, if any. C. OBSTRUCTIONS, WASTE, MARKINGS: No drapes or sunscreens of any nature shall be installed without Lessor's prior approval. The sash doors, sashes, windows, glass doors, lights, and skylights that reflect or admit light into the Building shall not be covered or obstructed. The toilets and urinals shall not be used for any purpose other than those for which they were constructed, and no rubbish, newspapers or other substances of any kind shall be thrown into them. Waste and excessive or unusual use of water shall not be allowed. Lessee shall not mark, drive nails, screw or drill into, paint, nor in any way deface any surface or part of the Building except that Lessee may hang pictures, blackboards, or similar objects, providing that prior to end of the term Lessee shall restore the Premises to its condition at the commencement of the term, less reasonable wear and tear. The expense of repairing any breakage, stoppage, or damage resulting from a violation of this rule shall be borne by the Lessee who has caused such breakage, stoppage, or damage. D. LOCKS: No additional lock or locks shall be placed by Lessee on any door unless written consent of Lessor shall first be obtained. Two keys shall be surrendered to Lessor upon termination or expiration of the lease term. E. JANITORIAL SERVICES: If Lessor supplies janitorial services, Lessee shall not, without Lessor's prior consent, employ any person or persons, other than the janitor of Lessor, for the purposes of cleaning the leased Premises. Lessor shall not be responsible for the loss of property from the leased Premises, however occurring, or for any damage to any Lessee occasioned by any of Lessee's employees or subcontractors or by any other person. F. OUTSIDE STORAGE: No materials, supplies, equipment, finished products, or semi-finished products, raw materials, or articles of any nature shall be stored upon or permitted to remain on any portion of the leased Premises outside of the Building constructed thereon, except with the prior written consent of the Lessor. LEASE 9 SUITE 300 10 G. OTHER RULES: Lessor reserves the right to make such other rules and regulations, including parking regulations, as in Lessor's judgment may from time to time be necessary for the safety, cleanliness, and orderly operation of the Premises. Lessee agrees to require its employees to abide by any such rules and regulations, including parking regulations. H. RULES AND REGULATIONS: Lessee shall faithfully observe and comply with the "Rules and Regulations," a copy of which is attached hereto and marked Exhibit "C," and those set forth herein above and all reasonable and nondiscriminatory modifications thereof and additions thereto from time to time put into effect by Lessor. Lessor shall not be responsible to Lessee for the violation or non-performance by any other lessee or occupant of the Building of any of said Rules and Regulations. 29. DEFINITIONS: A) BUILDING STANDARD WORK: All the work to be done, or which has been done, at Lessor's expense in the Premises pursuant to the Provisions of the Work Letter Agreement attached hereto as Exhibit "B"; B) BUILDING NON-STANDARD WORK: All the work to be done, or which has been done in the Premises by Lessor pursuant to the provisions of the Work Letter Agreement other than the Building Standard Work; C) LEASEHOLD IMPROVEMENTS: The aggregate of the Building Standard Work and the Building Non-Standard Work; D) COMMENCEMENT DATE: The earlier of the following dates: (i) The date upon which the Lessee takes possession of or commences the operation of its business in the Premises, possible after the issuance of the Certificate of Occupancy or temporary Certificate of Occupancy for the Premises. (ii) The date upon which the Leasehold Improvements have been substantially completed as determined by Lessor's architect or space planner (except that if completion of the Leasehold Improvements is delayed by Lessee's design decisions, revisions, or additional work of Lessee or its agents, then the Commencement Date which would otherwise be established shall be accelerated by the number of days of said delay. 30. ANNUAL RENT INCREASE DURING THE OPTION YEARS: The rent payable during second and third year of this lease (option terms and/or the extended term) as stated in Paragraph 46 shall be increased for each year ("Subsequent Year") of the extended term of this Lease following the first year if the Consumer Price Index for All Urban Consumers (San Francisco Bay Area; Base: 1982-84=100) ("Index"), as published by the United States Department of Labor Statistics, for the "Comparison Month" (described below) increases over the Index for the calendar month ("Base Month" in which the extended term commences. The Base Month Index shall be compared with the Index for the same calendar month for each Subsequent Year ("Comparison Month"). If the Index for the Comparison Month is higher than the Base Month Index for the year immediately preceding, then the rent payable for the Subsequent Year following the Comparison Month shall be increased with the first month of such Subsequent Year by an identical percentage as such increase. In no event shall the rent for a Subsequent Year be less than the rent for the year immediately preceding. Should the Bureau discontinue the publication of the above Index or publish the same less frequently, or alter the same, then Lessor shall adopt a substitute procedure which reasonably reflects and monitors consumer prices. LEASE 10 SUITE 300 11 Notwithstanding the foregoing the rent for each Subsequent Year of this Lease shall increase by not less than 4% nor more than 8% percent of the rent in effect for the lease year immediately preceding each Subsequent Year. 31. LATE CHARGES: In the event Lessee fails to pay any installment of rent when due or in the event Lessee fails to make any other payment to be made by it under this Lease when due, then Lessee shall pay to Lessor a late charge equal to five (5%) percent per month of the amount due to compensate Lessor for the extra costs incurred as a result of such late payment, but in no event shall the late charges exceed the maximum allowed by law. 32. PROPERTY TAX INCREASE: Notwithstanding any language to the contrary, in the event that after July 15, 1996, the property taxes on the leased Premises are increased as a result of action by the State Legislature and/or the State Initiative process, which action amends the tax rate and/or the valuation for the purpose of levying property taxes, Lessee agrees to pay Lessor, not less than ten (10) days prior to delinquency, its pro rata share of any such tax increase (over and above the amount of property taxes that would have been paid without such action) from the effective date thereof through the balance of the lease term or any renewal period. Lessor agrees to furnish Lessee with appropriate documentation relating thereto. 33. BROKERS: The parties recognize that the brokers who negotiated this Lease are the brokers whose names are stated in Paragraph 1(M), and agree that Lessor shall be solely responsible for the payment of brokerage commissions to said brokers, and that Lessee shall have no responsibility therefor. Lessee warrants that Lessee has not had any dealings with any realtor, broker, or agent, other than as specified in the Schedule hereto, in connection with negotiating or securing this lease. If Lessee has dealt with any other person or real estate broker with respect to leasing or renting space in the Building, Lessee shall be solely responsible for the payment of any fee due said person or firm and Lessee shall hold Lessor free and harmless against any liability in respect thereto, including attorney's fees and costs. 34. DAMAGE TO LESSEE'S PROPERTY: Lessor or its said agents shall not be liable for any damage to property entrusted to employees of the Building, not for loss of or damage to any property by theft or otherwise, not for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Building or from the pipes, appliances or plumbing works therein or from the roof, street or sub-surface or from any other place or resulting from dampness or any other cause whatsoever. Lessor or its agents shall not be liable for interference with light or other incorporeal herediments, nor shall Lessor be liable for any latent defect in the Premises or in the Building. Lessee shall give prompt notice to Lessor in case of fire or accidents in the Premises or in the Building or of defects therein or in the fixtures or equipment. 35. ESTOPPEL CERTIFICATE: (a) Within ten (10) days following any written request which Lessor may make from time to time, Lessee shall execute and deliver to Lessor a statement certifying: (i) The date of commencement of this Lease; (ii) the fact that this lease is unmodified and in full force and effect (or, if there have been modifications hereto, that this lease is in full force and effect, and stating the date and nature of such modifications); LEASE 11 SUITE 300 12 (iii) the date to which the rental and other sums payable under this lease have been paid. (iv) that there are no current defaults under this lease by either Lessor or Lessee except as specified in Lessee's statement; and (v) such other matters requested by Lessor. Lessor and Lessee intend that any statement delivered pursuant to this Paragraph 36 may be relied upon by any mortgage, beneficiary, purchaser or prospective purchaser of the Building or any interest therein. (b) Lessee's failure to deliver such statement within such time shall be conclusive upon Lessee: (i) That this lease is in full force and effect, without modification except as may be represented by Lessor, (ii) that there are no uncured defaults in Lessor's performance, and (iii) that not more than one (1) month's rental has been paid in advance. 36. MORTGAGE PROTECTION: In the event of any default on the part of Lessor, Lessee will give notice by registered or certified mail to any beneficiary of a deed of trust or mortgage covering the Premises whose address shall have been furnished to Lessee, and shall offer such beneficiary or mortgagee a reasonable opportunity to cure the default, including time to obtain possession of the Premises by power of sale or a judicial foreclosure, if such should prove necessary to effect a cure. 37. DEFINITION OF LESSOR: The term "Lessor" as used in this lease, so far as covenants or obligations on the part of Lessor are concerned, shall be limited to mean and include only the owner or owners, at the time in question, of the fee title or any Lessees under ground lease, if any of the Premises. In the event of any such transfer, assignment or other conveyance or transfer of any such title, Lessor's herein named (and in case of any subsequent transfers or conveyances, the then grantor) shall be automatically freed and relieved from and after the date of such transfer, assignment of conveyance of all liability as respects the performance of any covenants or obligations on the part of Lessor contained in this lease thereafter to be performed. Without further agreement, the transferee of such title shall be deemed to have assumed and agreed to observe and perform any and all obligations of Lessor hereunder, during its ownership of the Premises. Lessor may transfer it interest in the Premises without the consent of Lessee and such transfer or subsequent transfer shall not be deemed a violation on Lessor's part of any of the terms and conditions of this lease. 38. INDEMNIFICATION OF LESSEE: If more than one person executes this Lease as Lessee: (a) each of them is jointly and severally liable for the keeping, observing and performing of all of the terms, covenants, conditions, provisions and agreements of this lease to be kept, observed and performed by Lessee, and (b) the term "Lessee" as used in this lease shall mean and include each of them jointly and severally. LEASE 12 SUITE 300 13 The act of or notice from, or notice or refund to, or the signature of, any one or more of them, with respect to the tenancy of this lease, including, but not limited to, any renewal, extension, expiration, termination or modification of this Lease, shall be binding upon each and all of the persons executing this lease as Lessee with the same force and effect as if each and all of them had acted so given or received such notice or refund or so signed. 39. AUTHORITY OF PARTIES: (a) CORPORATE AUTHORITY. If Lessee is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation, in accordance with a duly adopted resolution of the board of directors of said corporation or in accordance with the by-laws of said corporation in accordance with its terms. (b) LIMITED PARTNERSHIP. If the Lessor herein is a limited partnership, it is understood and agreed that any claims by Lessee on Lessor shall be limited to the assets of the limited partnership, and furthermore, Lessee expressly waives any and all rights to proceeds against the individual partners or the officers, directors or shareholders of any corporate partner, except to the extent of their interest in said limited partnership. 40 RIDERS: Clauses, plats and riders, if any, signed by Lessor and Lessee and affixed to this lease are a part hereof. 41. MODIFICATION FOR LENDER: If, in connection with obtaining construction, interim or permanent financing for the Building, the lender shall request reasonable modifications in this lease as a condition to such financing, Lessee will not unreasonably withhold, delay or defer its consent thereto, provided that such modifications do not increase the obligations of Lessee hereunder or materially adversely affect the leasehold interest hereby created or Lessee's rights hereunder. 42. ACCORD AND SATISFACTION: No payment by Lessee or receipt by Lessor of a lesser amount than the rent payment herein stipulated shall be deemed to be other than on account of the rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent be deemed an accord and satisfaction, and Lessor may accept such check or payment without prejudice to Lessor's right to recover the balance of such rent or pursue any other remedy provided in this lease. Lessee agrees that each of the foregoing covenants and agreements shall be applicable to any covenant or agreement either expressly contained in this lease or imposed by any statute or at common law. 43. FINANCIAL STATEMENTS: At any time during the term of this lease, Lessee shall, upon ten (10) days prior written notice from Lessor, provide Lessor with a current financial statement and financial statements of the two (2) years prior to the current financial statement year. Such statement shall be prepared in accordance with generally accepted accounting principles and, if such is the normal practice of Lessee, shall be audited by an independent certified public accountant. 44. SEPARABILITY: Any provision of this lease which shall prove to be invalid, void or illegal in no way affects, impairs or invalidates any other provisions hereof and such other provisions shall remain in full force and effect. 45. DEFAULTS AND REMEDIES: LEASE 13 SUITE 300 14 (a) The occurrence of any one or more of the following events shall constitute a default hereunder by Lessee: (i) The vacation or abandonment of the Premises by Lessee. Abandonment is herein defined to include, but it is not limited to, any absence by Lessee from the Premises for five (5) days or longer while in default of any provision of this lease. (ii) The failure by Lessee to make any payment required to be made by Lessee hereunder, as and when due, where such failure shall continue for a period of three (3) days after written notice thereof from Lessor to Lessee; provided, however, that any such notice shall be in lieu of, and not in addition to, any notice required under California Code of Civil Procedure Section 1161 regarding unlawful detainer actions. (iii) The failure by Lessee to observe or perform any of the express or implied covenants or provisions of this lease to be observed or performed by Lessee, other than as specified in Subparagraph 45(a)(i) and (ii) above, where such failure shall continue for a period of ten (10) days after written notice thereof from Lessor to Lessee; provided, however, that any such notice shall be in lieu of, and not in addition to, any notice required under California Code of Civil Procedure Section 1161 regarding unlawful detainer actions; provided, further, that if the nature of Lessee's default is such that more than ten (10) days are reasonably required of its cure, then Lessee shall not be deemed to be in default of Lessee shall commence such cure within said ten-day period and thereafter diligently prosecute such cure to completion, which completion shall not occur later than sixty (60) days from the date of such notice from Lessor. (iv) (1) The making by Lessee of any general assignment for the benefit of creditors; (2) the filing by or against Lessee of a petition to have Lessee adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy (unless, in the case of a petition filed against Lessee, the same is dismissed within thirty (30) days; (3) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this lease, where possession is not restored to Lessee within thirty (30) days; or (4) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease where such seizure is not discharged within thirty (30) days. (b) In the event of any such default by Lessee, in addition to any other remedies available to Lessor at law or in equity, Lessor shall have the option to immediately terminate this Lease and all rights of Lessee hereunder. In the event that Lessor shall elect to so terminate this Lease then Lessor may recover from Lessee: (i) The worth at the time of award of any unpaid rent which had been accrued at the time of such termination; plus (ii) the worth at the time of award of the amount by which the unpaid rent which would have been accrued after termination until the time of award exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided; plus LEASE 14 SUITE 300 15 (4) the attachment, execution or other judicial seizure of substantially all of Lessee's assets located at the Premises or of Lessee's interest in this Lease where such seizure is not discharged within thirty (30) days. (b) In the event of any such default by Lessee, in addition to any other remedies available to Lessor at law or in equity, Lessor shall have the option to immediately terminate this Lease and all rights of Lessee hereunder. In the event that Lessor shall elect to so terminate this Lease then Lessor may recover from Lessee: (i) The worth at the time of award of any unpaid rent which had been accrued at the time of such termination; plus (ii) the worth at the time of award of the amount by which the unpaid rent which would have been accrued after termination until the time of award exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided; plus (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that Lessee proves could be reasonably avoided; plus (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by Lessee's failure to perform his obligations under this lease or which in the ordinary course of things would be likely to result therefrom. As used in Subparagraphs 45(b)(ii) above, the "worth at the time of award" is computed by allowing interest at the maximum rate permitted by law per annum. As used in Subparagraph 45(b)(iii) above, the "worth at the time of award" is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one (1%) percent. (c) In the event of any default by Lessee, Lessor shall also have the right, with or without terminating this lease, to re-enter the Premises and remove all persons and property from the Premises; such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of this Subparagraph 45(c) shall be construed as an election to terminate this lease unless a written notice of such intention to be given to Lessee unless the termination thereof be decreed by a court of competent jurisdiction. (d) All rights, options, and remedies of Lessor contained in this lease shall be construed and held to be cumulative, and no one of them shall be exclusive of the other, and Lessor shall have the right to pursue any one or all of such remedies or any other remedy or relief which may be provided by law, whether or not stated in this lease. No waiver of any default of Lessee hereunder shall be implied from any acceptance by Lessor of any rent or other payments due hereunder or any omission by Lessor to take any action on account of such default if such default persists or is repeated, and no express waiver shall affect defaults other than as specified in said waiver. The consent or approval of Lessor to or of any act by Lessee requiring Lessor's consent or approval shall not be deemed to waive or render unnecessary Lessor's consent or approval to or of any subsequent similar acts by Lessee. 46. RENEWAL OPTION: Provided that Lessee is not in default under any of the terms, covenants or conditions of this lease at the conclusion of the initial term or any extended term, Lessee shall have the option to renew this lease for two additional periods of one year each, (hereinafter "extended term" following expiration of the original term upon giving notice to Lessor at least 90 days before the expiration of the original term of this lease of Lessee's election to exercise this renewal option. The LEASE 15 SUITE 300 16 extended term shall be upon all of the terms and conditions contained in this lease, except rent shall be adjusted to the fair market rent for comparable office in the Palo Alto-downtown University Avenue area with the minimum increase being in accordance with provisions of paragraph 30 of this lease, but in no event shall the rent be less than the rent in effect at the end of the lease term which is in effect at the time the option is exercised. EXECUTED this 21ST day of June, 1986 at Palo Alto, of California. LESSEE: LESSOR: Palo Alto Funding Group JTC (a California General Partnership) BY: s Signature Illegible BY: -------------------------- ------------------------------------ Chris Larson Steve Jarvis, Partner BY: s Signature Illegible -------------------------- Janina Pawlowski LEASE 16 SUITE 300 17 EXHIBIT "A" OUTLINE OF TENANTS FLOOR PLAN UNIVERSITY COURT, 540 University Ave., Palo Alto, California Suite 300. LEASE: Att. 1 Suite 300 18 EXHIBIT "A-1" LESSEE IMPROVEMENTS Lessor shall, at Landlord's sole cost and expense, provide the following interior improvements to the premises: 1- Walls touch-up painted. 2- Steam Clean the carpets. 3- Replace soiled or damaged ceiling tiles. LEASE: Att. 2 Suite 300 19 EXHIBIT "B" SERVICES PROVIDED BY LESSOR The following services will be provided by Lessor to Lessee at no additional cost: 1. Five day a week janitorial service. 2. Exterior and interior window washing (maximum two times per year.) 3. Heating and air conditioning maintenance. Air conditioning operating hours are as follows: Weekdays: 8:00 AM to 8:00 PM Saturdays: 8:00 AM to 2:00 PM Sundays: OFF ALL DAY 4. Elevator maintenance. Lessor /s/ Signature Illegible (Initial) Lessee /s/ Signature Illegible (Initial) LEASE: Att. 3 Suite 300 20 EXHIBIT "C" RULES AND REGULATIONS 1. No sign, placard, picture, advertisement, name or notice shall be installed or displayed on any part of the outside or inside of the Building without the prior written consent of the Lessor. Lessor shall have the right to remove, at Lessee's expense and without notice, any sign installed or displayed in violation of this rule. All approved signs or lettering on doors and walls shall be printed, painted, affixed or inscribed at the expense of Lessee by a person chosen by Lessor. 2. If Lessor objects in writing to any curtains, blinds, shades, screens or hanging plants or other similar objects attached to or used in connection with any window or door of the Premises, Lessee shall immediately discontinue such use. No awning shall be permitted on any part of the Premises. Lessee shall not place anything against or near glass partitions or doors or windows which may appear unsightly from outside the Premises. 3. Lessee shall not obstruct any sidewalks, halls, passages, exits, entrances, elevators, escalators, or stairways of the Building. The halls, passages, exits, entrances, shopping malls, elevators, escalators and stairways are not open to the general public. Lessor shall in all cases retain the right to control and prevent access thereto of all persons whose presence in the judgment of Lessor would be prejudicial to the safety, character, reputation and interest of the Building and its tenants; provided that nothing herein contained shall be construed to prevent such access to persons with whom any lessee normally deals in the ordinary course of its business, unless such persons are engaged in illegal activities. No lessee and no employee or invitee of any lessee shall go upon the roof of the Building. 4. The directory of the Building will be provided exclusively for the display of the name and location of Tenants only and Lessor reserves the right to exclude any other names therefrom. 5. All cleaning and janitorial services for the Building and the Premises shall be provided exclusively through Lessor, and except with the written consent of Lessor, no person or persons other than those approved by Lessor shall be employed by Lessee or permitted to enter the Building for the purpose of cleaning the same. Lessee shall not cause any unnecessary labor by carelessness or indifference to the good order and cleanliness of the Premises. Lessor shall not in any way be responsible to any Lessee for any loss of property on the Premises, however occurring, or for any damage to any Lessee's property by the janitor or any other employee or any other person. 6. Lessor will furnish Lessee, free of charge, with two keys to each door lock in the Premises. Lessor may make a reasonable charge for any additional keys. Lessee shall not make or have made additional keys, and Lessee shall not alter any lock, or install a new additional lock or bolt on any door of its Premises. Lessee, upon the termination of its tenancy, shall deliver to Lessor the keys of all doors which have been furnished to Lessee, and in the event of loss of any keys so furnished, shall pay Lessor thereafter. 7. If Lessee requires telegraphic, telephonic, burglar alarm or similar services, it shall first obtain, and comply with, Landlord's instructions in their installation. LEASE: Att. 4 Suite 300 21 8. Any freight elevator shall be available for use by all tenants in the Building, subject to such reasonable scheduling as Lessor in its discretion shall deem appropriate. No equipment, materials, furniture, packages, supplies, merchandise or other property will be received in the Building or carried in the elevators except between such hours and in such elevators as may be designated by Lessor. 9. Lessee shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry and which is allowed by law. Lessor shall have the right to prescribe the weight, size, and position of all equipment, materials, furniture or other property brought into the Building. Heavy objects shall, if considered necessary by Lessor, stand on such platforms as determined by Lessor to be necessary to properly distribute the weight. Business machines and mechanical equipment belonging to Lessee, which cause noise or vibration that may be transmitted to the structure of the Building or to any space therein to such a degree as to be objectionable to Lessor or to any tenants in the Building shall be placed and maintained by Lessee, at Lessee's expense, on vibration eliminators or other devices sufficient to eliminate noise or vibration. The persons employed to move such equipment in or out of the Building must be acceptable to Lessor. Lessor will not be responsible for loss of or damage to any such equipment or other property from any cause, and all damage done to the Building by maintaining or moving such equipment or other property shall be repaired at the expense of Lessee. 10. Lessee shall not use of keep in the Premises any kerosene, gasoline or other flammable or combustible fluid or material other than those limited quantities necessary for the operation or maintenance of office equipment. Lessee shall not use or permit to be used in the Premises any foul or noxious gas or substance, or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Lessor or other occupants of the Building by reason of noise, odors, or vibrations, nor shall Lessee bring into or keep in or about the Premises any birds or animals. 11. Lessee shall not use any method of heating or air-conditioning other than that supplied by Lessor. 12. Lessee shall not waste electricity, water or air conditioning and agrees to cooperate fully with Lessor to assure the most effective operation of the Building's heating and air-conditioning and to comply with any governmental energy-saving rules, laws or regulations of which Lessee has actual notice, and shall refrain from adjusting controls. Lessee shall keep corridor doors closed, and shall close window coverings at the end of each business day. 13. Lessor reserves the right to exclude from the Building between the hours of 6 p.m. and 7 a.m. the following day, or such other hours as may be established from time to time by Lessor, and on Sundays and legal holidays, any person unless that person is know to the person or employee in charge of the Building and has a pass or is properly identified. Lessee shall be responsible for all persons for whom it requests passes and shall be liable to Lessor for all acts of such persons. Lessor shall not be liable for damages for any error with regard to the admission to or exclusion from the Building of any person. Lessor reserves the right to prevent access to the Building in case of invasion, mob, riot, public excitement or other commotion by closing the doors or by other appropriate action. 15. Lessee shall close and lock the doors of its Premises and entirely shut off all water faucets or other water apparatus, and electricity, gas or air outlets before lessee and its employees leave the Premises. Lessee shall be responsible for any damage or injuries LEASE: Att. 5 Suite 300 22 sustained by other tenants or occupants of the Building or by Lessor for noncompliance with this rule. 16. Lessee shall not obtain for use on the Premises ice, drinking water, food, beverage, towel or other similar services or accept barbering or bootblacking service upon the Premises, except at such hours and under such regulations as may be fixed by Lessor. 17. The toilet rooms, toilets, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from the violation of this rule shall be borne by the Lessee who, or whose employees or invitees shall have caused. 18. Lessee shall not sell, or permit the sale at retail, of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise to the general public in or on the Premises. Lessee shall not make any room-to-room solicitation of business from other tenants in the Building. Lessee shall not use the Premises for any business or activity other than that specifically provided for in Lessee's Lease. 19. Lessee shall not install any radio or television antenna, loudspeaker or other device on the roof or exterior walls of the Building. Lessee shall not interfere with radio or television broadcasting or reception from or in the Building or elsewhere. 20. Lessee shall not mark, drive nails, screw or drill into the partitions, woodwork or plaster or in any way deface the Premises or any part thereof. Lessor reserves the right to direct electricians as to where and how telephone and telegraph wires are to be introduced to the Premises. Lessee shall not cut or bore holes for wires. Lessee shall not affix any floor covering to the floor of the Premises in any manner except as approved by Lessor. Lessee shall repair any damage resulting from noncompliance with this rule. 21. Lessee shall not install, maintain or operate upon the Premises any vending machine without the written consent of Lessor. 22. Canvassing, soliciting and distribution of handbills or any other written material, and peddling in the Building are prohibited, and each lessee shall cooperate to prevent same. 23. Lessor reserves the right to exclude or expel from the building any person who, in Landlord's judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of any of the Rules and Regulations of the Building. 24. Lessee shall store all its trash and garbage within its Premises. Lessee shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made in accordance with directions issued from time to time by Lessor. 25. The Premises shall not be used for lodging or for manufacturing of any kind, nor shall the Premises be used for any improper, immoral or objectionable purpose. No cooking shall be done or permitted by any lessee on the Premises, except that use by Lessee of Underwriter's Laboratory approved equipment for brewing coffee, tea, hot chocolate and similar beverages shall be permitted, provided that such equipment and use in accordance with all applicable federal, state, county and city laws, codes, ordinances rules and regulations. LEASE: Att. 6 Suite 300 23 26. Lessee shall not use in any space or in the public halls of the Building any hand trucks except those equipped with rubber tires and side guards or such other material-handling equipment as Lessor may approve. Lessee shall not bring in any other vehicle of any kind into the Building. 27. Without the written consent of Lessor, Lessee shall not use the name of the Building in connection with or in promoting or advertising the business of Lessee except as Lessee's address. 28. Lessee shall comply with all safety, fire protection and evacuation procedures and regulations established by Lessor or any governmental agency. 29. Lessee assumes any and all responsibility for protecting its Premises from theft, robbery and pilferage, which includes keeping doors locked and other means of entry to the Premises closed. 30. The requirements of Lessee will be attended to only upon appropriate application to the office of the Building by an authorized individual. Employees of Lessor shall not perform any work or do anything outside of their regular duties unless under special instructions from Lessor, and no employee of Lessor will admit any person (Lessee or otherwise) to any office without specific instructions from Lessor. 31. Lessor may waive any one or more of these rules and Regulations for the benefit of Lessee or any other Lessee but no such waiver by Lessor shall be construed as a continuous waiver of such Rules and Regulations in favor of Lessee or any other Lessee, nor prevent Lessor from thereafter enforcing any such Rules and Regulations against any or all of the tenants of the Building. 32. These Rules and Regulations are in addition to, and shall not be construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of premises in the Building. 33. Lessor reserves the right to make such other reasonable Rules and Regulations as, in its judgment, may from time to time be needed for safety and security, for care and cleanliness of the Building and for preservation of good order therein. Lessee agrees to abide by all such Rules and Regulations hereinabove stated and any additional rules and regulations which are adopted. 34. Lessee shall be responsible for the observance of all the foregoing rules by Lessee's employees, agents, clients, customers, invitees and guests. Lessor:/s/ Signature Illegible (Initial) Lessee /s/ Signature Illegible (Initial) LEASE: Att. 7 Suite 300 24 ATTACHMENT PERSONAL GUARANTEE: OF CHRIS LARSEN, OF THE LEASE FOR PREMISES LOCATED AT 540 UNIVERSITY SUITE 300, PALO ALTO, CALIFORNIA 94301, WHICH LEASE WAS EXECUTED ON JUNE 20, 1996 BY PALO ALTO FUNDING GROUP, A CALIFORNIA CORPORATION. CHRIS LARSEN ("Guarantor"), whose address is 201 Hudson Street #400, San Francisco, CA 94105 and who is President of Palo Alto Funding Group, a California corporation, as a material inducement to and in consideration of JTC Development, a California General Partnership ("Lessor") entering into a written Lease with PALO ALTO FUNDING GROUP, a California corporation, ("Lessee"), dated June 20, 1996, unconditionally guarantees and promises to and for the benefit of Lessor that Lessee shall perform the provisions of the Lease that Lessee is to perform. Not withstanding any other provisions of the guarantee, this guarantee shall remain in force and effect during the term of the original Lease. Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability under this Guarantee. The provisions of the Lease may be changed by agreement between Lessor and Lessee at any time, or by course or conduct, without the consent of the Guarantor. This guarantee shall guarantee the performance of the Lease as changed. Assignment of the Lease (as permitted by the Lease) shall not affect this Guarantee. This guarantee shall not be affected by Lessor's failure or delay to enforce any of its rights. If Lessee defaults under the Lease, Lessor can proceed immediately against Guarantor or Lessee, or both, or Lessor can enforce against Guarantor or Lessee, or both, any rights that it has under the Lease, or pursuant to applicable laws. If the Lease terminated and Lessor has any rights it can enforce against Lessee after termination, Lessor can enforce those rights against Guarantor without giving previous notice to Lessee or Guarantor, or without making any demands on either of them. Guarantor waives the right to require Lessor to (1) proceed against Lessee; (2) proceed against or exhaust any security that Lessor holds from Lessee; or (3) pursue any other remedy in Lessor's power. Guarantor waives any defense by reason or any disability of Lessee, and waives any other defense based on the termination of Lessee's liability from any cause. Until all Lessee's obligation to Lessor have been discharged in full, Guarantor has no right of subrogation against Lessee. Guarantor waives its right to enforce any remedies that Lessee now has, or later may have, against Lessor. Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of protect, notices of dishonor, and notices of acceptance of this Guarantee, and waives all notices of the existence, creation or incurring of new or additional obligations. If an action is brought to interpret or enforce this guaranty, the prevailing party shall be entitled to recover all costs incurred, including, without limitation, reasonable attorney's fees. Guarantor's obligations under this Guarantee shall be binding on Guarantor's successors. 25 Lessee and Guarantor shall have the right at any time during the term of the Lease to Lease the Lease subject only to Lessor's prior written consent which consent shall not be unreasonably withheld and; provided the rent is maintained current Lessor shall give Guarantor sixty days (60) from day of default to Lease or release the premises. As used in this Guarantee, the following words are defined as follow: LAW - any judicial decision, statute, constitution, ordinance, regulation, rule, administrative order, or other requirement of any municipal, county, state, federal, or other government agency or authority having jurisdiction over the parties of the premises, or both, in effect either at the time of execution of the Lease or at any time during the term, including without limitation, any regulation or order of a quasi-official entity or body (e.g., Board of Fire Examiner or public utilities). PROVISION - any term, agreement, covenant, condition, clause, qualification, restriction, reservation, or other stipulation in the Lease that defines or otherwise controls, establishes, or limits the performance required or permitted by either party. SUCCESSOR - assigned, transferred, personal representative, heir, or other person or entity succeeding lawfully, and pursuant to the provisions of this Lease to the rights or obligations of either party. DATED: 6/21/96 /s/ Signature Illegible ------- ---------------------------- CHRIS LARSEN 26 ATTACHMENT PERSONAL GUARANTEE: OF JANINA PAWLOWSKI, OF THE LEASE FOR PREMISES LOCATED AT 540 UNIVERSITY SUITE 300, PALO ALTO, CALIFORNIA 94301, WHICH LEASE WAS EXECUTED ON JUNE 20, 1996 BY PALO ALTO FUNDING GROUP, A CALIFORNIA CORPORATION. JANINA PAWLOWSKI ("Guarantor"), whose address is 1125 Lafayatte Drive, Sunnyvale, CA and who is CEO of Palo Alto Funding Group, a California corporation, as a material inducement to and in consideration of JTC Development, a California General Partnership ("Lessor") entering into a written Lease with PALO ALTO FUNDING GROUP, a California corporation, ("Lessee"), dated June 20, 1996, unconditionally guarantees and promises to and for the benefit of Lessor that Lessee shall perform the provisions of the Lease that Lessee is to perform. Not withstanding any other provisions of the guarantee, this guarantee shall remain in force and effect during the term of the original Lease. Guarantor waives the benefit of any statute of limitations affecting Guarantor's liability under this Guarantee. The provisions of the Lease may be changed by agreement between Lessor and Lessee at any time, or by course or conduct, without the consent of the Guarantor. This guarantee shall guarantee the performance of the Lease as changed. Assignment of the Lease (as permitted by the Lease) shall not affect this Guarantee. This guarantee shall not be affected by Lessor's failure or delay to enforce any of its rights. If Lessee defaults under the Lease, Lessor can proceed immediately against Guarantor or Lessee, or both, or Lessor can enforce against Guarantor or Lessee, or both, any rights that it has under the Lease, or pursuant to applicable laws. If the Lease terminated and Lessor has any rights it can enforce against Lessee after termination, Lessor can enforce those rights against Guarantor without giving previous notice to Lessee or Guarantor, or without making any demands on either of them. Guarantor waives the right to require Lessor to (1) proceed against Lessee; (2) proceed against or exhaust any security that Lessor holds from Lessee; or (3) pursue any other remedy in Lessor's power. Guarantor waives any defense by reason or any disability of Lessee, and waives any other defense based on the termination of Lessee's liability from any cause. Until all Lessee's obligation to Lessor have been discharged in full, Guarantor has no right of subrogation against Lessee. Guarantor waives its right to enforce any remedies that Lessee now has, or later may have, against Lessor. Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of protect, notices of dishonor, and notices of acceptance of this Guarantee, and waives all notices of the existence, creation or incurring of new or additional obligations. If an action is brought to interpret or enforce this guaranty, the prevailing party shall be entitled to recover all costs incurred, including, without limitation, reasonable attorney's fees. Guarantor's obligations under this Guarantee shall be binding on Guarantor's successors. 27 Lessee and Guarantor shall have the right at any time during the term of the Lease to Lease the Lease subject only to Lessor's prior written consent which consent shall not be unreasonably withheld and; provided the rent is maintained current Lessor shall give Guarantor sixty days (60) from day of default to Lease or release the premises. As used in this Guarantee, the following words are defined as follow: LAW - any judicial decision, statute, constitution, ordinance, regulation, rule, administrative order, or other requirement of any municipal, county, state, federal, or other government agency or authority having jurisdiction over the parties of the premises, or both, in effect either at the time of execution of the Lease or at any time during the term, including without limitation, any regulation or order of a quasi-official entity or body (e.g., Board of Fire Examiner or public utilities). PROVISION - any term, agreement, covenant, condition, clause, qualification, restriction, reservation, or other stipulation in the Lease that defines or otherwise controls, establishes, or limits the performance required or permitted by either party. SUCCESSOR - assigned, transferred, personal representative, heir, or other person or entity succeeding lawfully, and pursuant to the provisions of this Lease, to the rights or obligations of either party. DATED: 6-21-96 /s/ Signature Illegible ------- -------------------------- JANINA PAWLOWSKI EX-10.29 35 MORTGAGE LOAN ORIGINATION AGREEMENT 11/30/92 1 [CHASE LOGO] EXHIBIT 10.29 MORTGAGE LOAN ORIGINATION AGREEMENT [An Option 1 Correspondent] This Agreement is made on the 30 day of November 1992, between CHASE HOME MORTGAGE CORPORATION ("CHMC"), a Delaware corporation whose principal office is located at 4915 Independence Parkway, Tampa, Florida 33634-7540, its successors and assigns, and PALO ALTO FUNDING GROUP ("Correspondent"), whose principal office is located at 540 University Ave., #350, Palo Alto, CA 94301. BACKGROUND Correspondent aids in origination of residential mortgage loans for licensed lenders. CHMC originates and acquires residential mortgage loans. Correspondent wishes to assign residential mortgage loan application packages ("Loan Packages') to CHMC, which Loan Packages meet CHMC requirements. The parties agree as follows: TERMS 1. LOAN PACKAGES. Correspondent may, from time to time, submit Loan Packages to CHMC on terms specified by CHMC. Current origination procedures are set forth in the CHMC Manual or CHMC issued notices or bulletins (collectively referred to as the "CHMC Manual"). The CHMC Manual is the manual provided to Correspondent by CHMC which establishes CHMC guidelines and procedures. Correspondent is under no obligation to submit a specific number of Loan Packages to CHMC. 2. ACCEPTANCE/REJECTION OF LOAN PACKAGE. Based on applicable underwriting and origination guidelines as interpreted by CHMC, CHMC may accept or reject a Loan Package. If the Loan Package is rejected, CHMC shall return same to the Correspondent. 2 Correspondent may, at any time after receipt of a written application for an eligible loan, request a rate and rate reservation for a period in accordance with CHMC policy set forth in the CHMC Manual. Within the period specified by CHMC (usually a minimum of fifteen business days before the expiration date of the rate reservation period), CHMC must receive a complete Loan Package and any required fee. CHMC reserves the right to require additional information concerning the property and/or the applicant. Correspondent agrees to execute, transmit and/or obtain any and all additional documentation which CHMC may reasonably deem necessary to properly complete any Loan Package. 3. REVISION OF REQUIREMENTS. CHMC may from time to time amend or revise its documentation requirements, underwriting criteria or other requirements pertaining to any residential mortgage loan program. Any Loan Package already submitted by the Correspondent will not be adversely affected by such amendment or revision. 4. COMPENSATION AND EXPENSES. Unless CHMC agrees, no fees, commissions or any other consideration shall be paid by CHMC to Correspondent for any Loan Package, regardless of whether a loan is approved, funded or closed by CHMC. On the closing date, CHMC shall instruct the closing agent to remit to the Correspondent any compensation due Correspondent from CHMC or the applicant for its loan services, including unreimbursed, qualified out-of-pocket expenses. If CHMC elects, such sums due from CHMC shall be paid to the Correspondent by CHMC directly. Final settlement of all amounts due Correspondent shall be made at the closing or, if applicable, after the rescission period has elapsed for rescindable loans. No amounts will be payable to Correspondent by CHMC or applicant thereafter. Qualified out-of-pocket expenses shall consist of reasonable fees paid to third parties including, but not limited to, any credit report fee, appraisal fee or survey fee. The Correspondent's compensation shall conform to the amount disclosed on the Good Faith Estimate of Closing Costs. If the amounts differ, Correspondent shall reconcile any discrepancy with appropriate explanation and documentation submitted with the Loan Package. Correspondent represents that the compensation received by Correspondent shall not exceed the fair market value of its services and that it will accept no additional compensation from applicant except as described in this Section 4. Correspondent shall not accept any fee or other compensation except as permitted by applicable law and disclosed in writing to the applicant. 3 5. COMPLIANCE. Correspondent will submit Loan Packages that, to the best of its knowledge, after reasonable diligence, are true, correct, complete and genuine. With regard to both Correspondent's activities in general and each Loan Package in particular, Correspondent shall comply with all State and Federal laws, rules and regulations, including, but not limited to (i) the Federal Truth in Lending Act of 1969, as amended, and Federal Reserve Regulation Z thereunder; (ii) the Federal Equal Credit Opportunity Act ("ECOA") and Federal Reserve Regulation B thereunder; (iii) the Federal Fair Credit Reporting Act; (iv) the Federal Real Estate Settlement Procedures Act of 1974, as amended, and Regulation X thereunder; (v) the Flood Disaster Protection Act of 1973 (as if Correspondent were an entity subject to such statute and/or regulations, regardless of whether Correspondent is specifically subject to such statute and/or regulations); (vi) the Fair Housing Act; (vii) the Home Mortgage Disclosure Act; and (viii) the Financial Institutions Reform Recovery and Enforcement Act of 1989. Correspondent shall timely deliver to each applicant a completed Regulation Z disclosure statement, Good Faith Estimate of Closing Costs, Federally mandated ARM disclosures and HUD booklets. Correspondent shall be responsible for compliance with ECOA concerning notification of adverse action to an applicant whose Loan Package CHMC does not accept (CHMC may, at its option, deliver notice of adverse action to Correspondent for further delivery to applicant). Correspondent shall comply with Regulation Z concerning return of all monies paid by the applicant to Correspondent should the applicant rescind and Correspondent shall not seek reimbursement from CHMC for such refund. Upon request, Correspondent shall furnish to CHMC evidence, in a form satisfactory to CHMC, of any section taken by Correspondent to comply with such laws, including copies of any notice or disclosure form furnished to an applicant. 6. REPRESENTATIONS AND WARRANTIES. Correspondent represents and warrants to CHMC that it has all necessary licenses, qualifications and registrations needed to engage in the business conducted by Correspondent and the activities contemplated by this Agreement. Correspondent further represents and warrants that this Agreement does not conflict with the provisions of any other agreement to which Correspondent is a party and that this Agreement is a legal, valid and binding obligation of Correspondent. Correspondent shall notify CHMC immediately of any material changes in its ownership, financial condition or management. 7. INDEMNIFICATION. Correspondent shall indemnify and hold harmless CHMC from any loss, damage, cost or expense, including all attorneys fees, resulting from (i) the breach by the Correspondent of any of its covenants or agreements or (ii) the inaccuracy of any representation or warranty made by Correspondent. This indemnification shall survive any termination or cancellation of this Agreement. 4 8. RELATIONSHIP BETWEEN PARTIES. No exclusive relationship between Correspondent and CHMC shall result from this Agreement. Correspondent is an independent contractor and not an agent of CHMC. Correspondent shall not make any statement which leads a third party to reasonably believe that it is an agent of CHMC. Correspondent shall not use or refer to CHMC's name in any form of advertising, written materials or circulars, except as may be required by law. 9. NO THIRD PARTY BENEFITS. This Agreement is made for the express benefit of Correspondent and CHMC, not for the benefit or interest of any other persons or entities, and accordingly, no third party shall obtain or acquire any rights or interest in this Agreement or by reason of the performance or failure of performance of either of the parties hereto or of their respective rights, privileges, duties or obligations arising hereunder. 10. TERMINATION. This Agreement may be terminated, as to the future submission of any Loan Packages to CHMC, by either party upon written notice of termination. If, before such termination, CHMC has provided a rate reservation to the Correspondent in connection with a Loan Package, then CHMC shall accept such Loan Package if (i) such Loan Package conforms to CHMC's customary underwriting and origination guidelines and (ii) CHMC did not terminate this Agreement for cause. In connection with any such Loan Package, Correspondent's responsibility to supply outstanding documentation on a timely basis, its representations and warranties and its obligation to indemnify, shall survive such termination. 11. ENTIRE AGREEMENT. This Agreement and the CHMC Manual constitute the whole understanding of the parties regarding the subject matter hereof, and any other agreements, oral or written, are superseded and of no effect. Any amendments or modifications of this Agreement shall not be valid unless they are in writing and executed by each of the parties. 12. NOTICE. Any notice required to be given to a party hereto under the provisions of this Agreement must be in writing and delivered either personally or by mail to the other party at the addresses indicated herein above. 13. ASSIGNMENT. Correspondent may not assign nor delegate any rights or duties hereunder without the written consent of CHMC. CHMC reserves the right to reject assignment in its sole discretion. 5 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written. CHASE HOME MORTGAGE CORPORATION By: /s/ [Signature Illegible] ----------------------------------------------------- Title: [Title Illegible] -------------------------------------------------- PALO ALTO FUNDING GROUP -------------------------------------------------------- [CORRESPONDENT] By: /s/ [Signature Illegible] /[s] [Signature Illegible] ----------------------------------------------------- Title: Principal / Principal -------------------------------------------------- EX-10.30 36 CORRESPONDENT AGREEMENT DATED 6/15/98 1 Exhibit 10.30 CORRESPONDENT This Agreement is dated the 15th day of June, 1998, AGREEMENT between Citicorp Mortgage, Inc. ("Citicorp") and E Loan, Inc. ("Correspondent"). FORM 200 In consideration of the terms contained in this Agreement, Citicorp and Correspondent agree as follows: 1. PURCHASE AND SALE OF MORTGAGE LOANS From time to time, Correspondent may sell to Citicorp and Citicorp may purchase from Correspondent one or more mortgage loans in accordance with the procedures and on the terms and conditions set forth in Citicorp's Correspondent Manual ("Manual"), Citicorp's requirements ("Program Requirements") as amended from time to time for each type of loan, and this Agreement. Regarding each mortgage loan proposed to be sold by Correspondent to Citicorp, Correspondent will deliver to Citicorp loan documentation in accordance with the procedures and requirements set forth in the Manual and Program Requirements. Citicorp may purchase mortgage loans with or without a complete review of the loan documentation. Citicorp's review of, or failure to review, the loan documentation shall not affect Citicorp's rights to demand repurchase of a mortgage loan or other relief provided by this Agreement. For each mortgage loan Citicorp agrees to purchase, Citicorp shall pay the amount agreed upon by Citicorp and Correspondent in accordance with the procedure set forth in the Manual ("Purchase Price"). Citicorp may offset against the Purchase Price any outstanding fees or other amounts owing from Correspondent to Citicorp in connection with the particular purchase or other transactions. As of the date Citicorp purchases each mortgage loan, Correspondent hereby transfers to Citicorp all of its rights and interest in and to the mortgage loan, including without limitation all documents held or subsequently acquired by Citicorp relating to the loan. 2. REPRESENTATIONS AND WARRANTIES Correspondent makes the following representations and warranties: (a) That it is a (corporation)/(banking association)/(partnership)/(proprietorship)/(limited liability company/partnership) [cross out inapplicable choices] duly organized, validly existing and in good standing under the laws of the state of its incorporation or domicile or under Federal law; that it is authorized to do business in each state where it makes mortgage loans or where a property securing any of its mortgage loans is located; that all corporate or other actions and approvals necessary for the execution and performance of this Agreement have been taken and/or received; and that no consent from any third party is required for the execution and performance of this Agreement. (b) That, if required by applicable law, it is the holder of a valid lender, broker or other applicable license or licenses bearing number(s) __________________ issued by the State(s) of California, which Correspondent shall maintain in good standing throughout the term of this Agreement, and is in compliance with any mortgage lender or broker or other laws applicable to its activities under this Agreement. 2 Correspondent agrees to provide Citicorp with copies of all such license(s) upon request by Citicorp. (c) If the Correspondent is a partnership, proprietorship or limited liability company or partnership, that the owners and senior officers of Correspondent consent to allow Citicorp to periodically investigate their backgrounds. The scope of background checks will include but not be limited to obtaining credit bureau reports. Correspondent acknowledges and shall notify all such owners and senior officers of Citicorp's right to obtain updates to all such background information on a periodic basis and the aforesaid individual(s) will, upon written request by Citicorp, execute all documents necessary to obtain such updates. (d) That it is thoroughly familiar with and will comply with all applicable Federal, State and local laws and regulations directly or indirectly relating to its activities under this Agreement (including but not limited to involvement of individuals convicted of crimes involving dishonesty or breach of trust). 3 CORRESPONDENT AGREEMENT FORM 200 (e) That Correspondent is an approved seller/servicer of conventional residential adjustable and fixed-rate mortgage loans for FNMA, FHLMC or FHA; that Correspondent is duly qualified, licensed, registered and otherwise authorized under all applicable laws and regulations and is in good standing to endorse, originate, sell mortgage loans to, and service mortgage loans in the jurisdiction(s) where the properties securing its mortgage loans are located for FNMA, FHLMC or FHA, and no event has occurred that would make Correspondent unable to comply with FNMA, FHLMC or FHA eligibility requirements or that would require notification to FNMA, FHLMC or FHA. (f) That Correspondent does not believe, nor does it have any reason or cause to believe, it cannot perform every covenant contained in this Agreement or continue to carry on its business substantially as now conducted; that it is solvent and the sale of mortgage loans will not cause it to become insolvent; that no action, suit, proceeding or investigation pending or threatened against Correspondent, either alone or in the aggregate, may result in its inability to carry on its business substantially as now conducted; and that the sale of mortgage loans under this Agreement is not undertaken with the intent to hinder, delay or defraud any of its creditors. (g) That Correspondent does not currently and will not in the future employ any entity or individual on the FHLMC exclusionary list. (h) That neither this Agreement nor any statement, report or other information provided or to be provided pursuant to this Agreement (including but not limited to the statements and information contained in the documentation for each mortgage loan purchased by Citicorp) contains or will contain any misrepresentation or untrue statement of fact or omits or will omit to state a fact necessary to make the information not misleading. The provisions of this sub-section shall not apply to information obtained from (i) appraisers, escrow agents, title companies, closers, credit reporting agencies or any other entity approved by Citicorp ("Approved Entity") unless Correspondent knows or has reason to believe that any information provided by such Approved Entity is not true, correct or valid in any material respect and (ii) the mortgage loan applicant(s) unless Correspondent knows, has reason to believe or, after performing its normal due diligence and quality control review, should have known that any information provided by the mortgage loan applicant(s) is not true, correct or valid in any material respect. (i) That the documentation for each mortgage loan sold to Citicorp shall be duly executed by the mortgagor and create a valid and legally binding obligation of the mortgagor and first lien on the property securing the loan; that the mortgage loan shall be fully enforceable and originated in accordance with the Manual and Program Requirements and all amendments and bulletins thereto which are in effect as of the mortgage loan closing date, serviced in accordance with FNMA, FHLMC or FHA requirements and industry standards, and subject to no defects, including but not limited to damage to the property securing the loan, lien imperfections or environmental risk. (j) That any third-party originators referring, or in any way involved with, any mortgage loan shall be at a minimum approved by Correspondent according to FNMA and FHLMC guidelines for approving third-party originators, as further described in the Manual. 4 (k) That Correspondent has obtained the Manual and Program Requirements and all amendments and bulletins thereto and has reviewed, or upon execution of this Agreement will promptly obtain and review them, and will comply with all instructions and criteria contained in such Manual and Program Requirements and all amendments and bulletins thereto. Both parties agree that the aforesaid Manual and Program Requirements and all amendments and bulletins to such Manual and Program Requirements shall be incorporated by reference herein and shall form part of this Agreement. (l) That Correspondent will immediately notify Citicorp if it (i) fails to maintain any license in violation of (b) above and/or (ii) becomes subject to any enforcement and/or investigative proceeding by any licensing or regulatory authority or agency. (m) That Correspondent will promptly respond to or otherwise comply with Citicorp's reasonable request(s) for periodic financial statements of Correspondent and/or any of its principal owner(s). 2 of 6 5 CORRESPONDENT AGREEMENT FORM 200 3. COSTS Correspondent shall pay all costs and expenses incurred in connection with the transfer and delivery of mortgage loans, including but not limited to assignment preparation and recording fees, fees for title policy endorsements and continuations, and Correspondent's attorneys' fees. 4. ADVERTISING Correspondent may advertise to the public the availability of lending programs, but may not in any way identify Citicorp in any advertising unless otherwise required by applicable law and Citicorp has given its advance written approval. During the first twelve (12) months after the date any mortgage loan is purchased by Citicorp, Correspondent represents and warrants that Correspondent, Correspondent's employees, agents and/or affiliates will not, without the prior written permission of Citicorp, (i) use targeted advertising, solicit or otherwise directly encourage or incent the loan borrower(s) to refinance the mortgage loan that was purchased by Citicorp or (ii) sell or distribute any customer list incorporating the names of such loan borrower(s) to any outside party. Lender and Correspondent agree that nothing contained herein shall prohibit advertising or solicitation by Correspondent that is directed to the general public in the area where the mortgage loan borrower(s) reside(s). 5. TERM This Agreement is for an initial one-year term and shall automatically renew for successive one-year terms, unless terminated pursuant to Section 7 of this Agreement. 6. RELATIONSHIP BETWEEN CITICORP AND CORRESPONDENT This Agreement will not create any agency between Correspondent and Citicorp. Correspondent shall conduct its business under this Agreement as an independent contractor and shall have the rights and responsibilities of an independent contractor. Citicorp shall not be responsible for any actions or omissions by Correspondent. Correspondent agrees it will not represent, orally, in writing, by implication or otherwise, that it can act in any capacity on behalf of Citicorp. Citicorp is prescribing no marketing plan for Correspondent and exercises no control over the methods, operations and practices of Correspondent except as provided in this Agreement and the Manual and Program Requirements. Correspondent acknowledges it is not selling or distributing Citicorp's services, and Citicorp has made no promise, representation or warranty regarding the profitability of any arrangement with Correspondent. Correspondent acknowledges Citicorp will be providing Correspondent with valuable proprietary information ("Confidential Information"), including but not limited to information regarding Citicorp's products, programs, underwriting policies, procedures and customers. Except as necessary to perform its obligations under this Agreement or as required by law, Correspondent will not disclose any Confidential Information to any person outside Correspondent's 6 organization and will limit access to this information within its organization on a strict "need to know" basis. Correspondent will require all of its employees and other agents to meet its obligations under this Agreement regarding Confidential Information. 7. TERMINATION Citicorp may immediately terminate this Agreement without notice and Citicorp then will have no further obligations under this Agreement upon: (1) the failure of Correspondent to perform or abide by any term or obligation contained in this Agreement; (2) any representation or warranty made by Correspondent being found by Citicorp to be false or incorrect in any material respect; (3) commencement by or against Correspondent of any bankruptcy, insolvency or similar proceedings; (4) Citicorp's determination that Correspondent's actions contravene the terms of this Agreement or adversely impact Citicorp's activities or reputation; or (5) the failure of loans sold by Correspondent to Citicorp pursuant to this Agreement to satisfy Citicorp's expectations regarding loan quality and/or performance. Either party may terminate this Agreement for any other reason upon 10 days 3 of 6 7 CORRESPONDENT AGREEMENT FORM 200 prior written notice to the other. In the event of termination, Correspondent shall fully cooperate with and assist Citicorp in obtaining the documentation necessary to complete the processing and full resolution of all matters (including but not limited to the delivery of all application and/or closed loan documents) relating to registered applications eligible for closing and all closed loans. In the event of termination, Citicorp will process loan registrations made on or before the termination date provided all such registrations comply in all material respects with Citicorp's loan origination and/or closing requirements related to each such loan registration. 8. ASSIGNMENT Correspondent may not assign this Agreement or any of its responsibilities under this Agreement. Citicorp reserves the right, upon notice, to assign its obligations and responsibilities under this Agreement to any affiliated entity engaged in the business of residential financing. 9. NON-EXCLUSIVE AGREEMENT Correspondent's rights under this Agreement are on a non-exclusive basis. Citicorp shall be free to market its products and services to, and to contract with, other parties and customers as it deems appropriate. Correspondent is under no obligation to submit mortgage loans for purchase by Citicorp. 10. INDEMNIFICATION Correspondent agrees to indemnify and hold Citicorp harmless from any and all claims, actions and costs, including reasonable attorneys' fees and costs, arising from Correspondent's performance or failure to perform under the terms of this Agreement, or arising from any fraud, misrepresentation or breach of warranty or covenant under this Agreement or arising from Correspondent's advertisements, promotions or other activities. This indemnification shall extend to any action or inaction by employees, officers, agents, independent contractors or other representatives of Correspondent and shall survive the expiration and termination of this Agreement. 11. GOVERNING LAW This Agreement shall be governed by the laws of the State of Missouri and applicable federal law. 12. NOTICE All notices shall be in writing and shall be sent by registered, certified or first-class mail, postage fully prepaid. All notices addressed to Citicorp should be sent to: Citicorp Mortgage, Inc. 12855 North Outer Forty Drive, MT-904 St. Louis, MO 63141 Attn.: Ms. Linda Schmersahl or another address designated in writing by Citicorp from time to time. All notices addressed to Correspondent should be sent to its office at: E-Loan, Inc. 6200 Village Parkway #102 8 Dublin CA 94568 Attn: Steve Majerus or another address designated in writing by Correspondent from time to time. 13. ADVERSE ACTION NOTICE REQUIREMENTS Correspondent agrees to provide adverse action notices as appropriate in accordance with the requirements of the Federal Equal Credit Opportunity Act and Federal Reserve Regulation B. In accordance with Regulation B 202.9(g), Correspondent agrees that in the event Citicorp reviews a mortgage loan application prior to closing by Correspondent and the application is not approved by Citicorp or Correspondent, Correspondent shall provide an adverse action and identify each creditor, including Citicorp, on whose behalf the notice is given. 4 of 6 9 CORRESPONDENT AGREEMENT FORM 200 14. MODIFICATION, MERGER, NO WAIVER OF RIGHTS This Agreement may not be modified except in a writing signed by Citicorp and Correspondent. This Agreement (including the Manual and Program Requirements and all amendments and bulletins thereto) contains the entire agreement of the parties and supersedes all previous agreements (including all amendments thereto) between the parties hereto. Any representations, promises or agreements not contained in this Agreement shall have no effect. The failure of either party to exercise any right given to it under this Agreement or to insist on strict compliance of any obligation under this Agreement shall not constitute a waiver of any right, including the right to insist on strict compliance in the future. 15. CUSTOMER CONTACT Prior to the purchase of the related mortgage loan, Citicorp may contact any loan borrower if Citicorp considers such contact reasonably necessary and appropriate for processing the loan purchase request. 16. CURE OR REPURCHASE If Citicorp, in its sole and exclusive discretion, determines any mortgage loan purchased pursuant to this Agreement: (i) was underwritten and/or originated in violation of any term or condition of this Agreement, the Manual and/or Program Requirements and all amendments and bulletins thereto which was (or were) in effect as of the mortgage loan closing date; (ii) was or is capable of being rescinded by the applicable borrower(s) pursuant to the provisions of any applicable federal or state law or regulation including but not limited to the federal Truth-In-Lending Act; and/or (iii) must be repurchased from any secondary market investor (including but not limited to the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation) due to a breach by Correspondent of any representation or warranty contained in this Agreement, the Manual and/or Program Requirements and all amendments and bulletins thereto. Correspondent will, upon notification by Citicorp and/or such secondary market investor, (i) immediately correct or cure such defect within the time prescribed by Citicorp and/or any such secondary market investor to the full and complete satisfaction of Citicorp and/or any such secondary market investor or (ii) repurchase such defective loan from Citicorp or such secondary market investor at the price required by Citicorp or such secondary market investor ("Repurchase Price"). If Citicorp or such secondary market investor requests such repurchase, Correspondent shall, within ten (10) business days of Correspondent's receipt of such repurchase request, pay to Citicorp and/or such secondary market investor the Repurchase Price by cashier's check or wire transfer of immediately available federal funds. If such defective loan is owned by Citicorp at the time of repurchase by Correspondent, Citicorp shall, upon receipt of the Repurchase Price, release to Correspondent the related mortgage file and shall execute and deliver such instruments of transfer or assignment, in each case without recourse or warranty, as shall be necessary to vest in Correspondent or its designee title to the repurchased loan. 10 Correspondent agrees and acknowledges that the provisions of this Section 16 do not, in any way, eliminate, diminish or impair Correspondent's indemnification obligations contained in Section 10. 17. ON-SITE REVIEW Correspondent shall permit any employee or designated representative of Citicorp, at any reasonable time during regular business hours and upon reasonable advance written notice by Citicorp, to examine and make audits of any of the processes implemented and documents kept by Correspondent regarding any loan purchased by Citicorp pursuant to this Agreement and to reproduce and take copies of any such documents. 5 of 6 11 CORRESPONDENT AGREEMENT FORM 200 18. AUTHORITY TO EXECUTE AGREEMENT Correspondent represents and warrants that it has all requisite power, authority and capacity to enter into this Agreement and to perform all obligations required of it hereunder. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have each been duly and validly authorized by all necessary action(s). Correspondent shall, upon request by Citicorp, execute such supplemental resolutions, acknowledgments and/or certifications as may be reasonably necessary to evidence such power, authority and capacity. IN WITNESS WHEREOF, the parties have signed this Agreement. CITICORP MORTGAGE, INC. E - Loan, Inc. (CORRESPONDENT) By:/s/ Robert Wetherell By:/s/ Steve Majerus ------------------------------- -------------------------------- Title Vice President Title Director, Mortgage Banking ----------------------------- ------------------------------ Date 7/31/98 Date 6/15/98 ------------------------------ ------------------------------- NOTE THE TEXT OF THIS AGREEMENT MAY NOT BE CHANGED IN ANY MANNER WHATSOEVER WITHOUT THE PRIOR WRITTEN PERMISSION OF CITICORP. 6 of 6 12 Correspondent Program RESOLUTION OF BOARD OF DIRECTORS FORM 102 of E Loan, Inc. (Name of Correspondent) RESOLVED that Chris Larsen the CEO, and (Name) (Title) Jarina Pawlowski the President, and (Name) (Title) Steven M. Majerus the Director, Mortgage Banking, and (Name) (Title) Frank Murnane the CFO, and (Name) (Title) of this corporation, or any one or more of them or their duly elected or appointed successors in office, be and each of them is hereby authorized and empowered in the name of and on behalf of this corporation and under its corporate seal, from time to time while this resolution is in effect, to execute any and all agreements, contracts, assignments, endorsements and issuance of checks or drafts, reports, mortgage documents, and other papers in connection with documents, and furnish any information required or deemed necessary or proper by Citicorp Mortgage, Inc., in connection with the foregoing. CERTIFICATION I HEREBY CERTIFY that the foregoing is a true and correct copy of a resolution presented to and adopted by the Board of Directors of E Loan Inc. at a meeting duly called and held at Palo Alto, CA on the 15th day of June, 1998, at which a quorum was present and voted, and that such resolution is duly recorded in the minute book of this corporation; that the officers named in said resolution have been duly elected or appointed to, and are the present incumbents of, the respective offices set after their respective names. (Corporate Seal) /s/ Signature Illegible Assistant Secretary 1 of 1 EX-10.31 37 CONVENTIONAL WHOLESALE MORTGAGE PURCHASE AGMNT. 1 Exhibit 10.31 CONVENTIONAL WHOLESALE MORTGAGE PURCHASE Colonial Mortgage Company AGREEMENT CONVENTIONAL WHOLESALE MORTGAGE PURCHASE AGREEMENT Effective Sept. 1, 1998, COLONIAL MORTGAGE COMPANY (hereinafter referred to as CMC), and E. Loan, Inc, (hereinafter referred to as CORRESPONDENT), agree to the following: CORRESPONDENT warrants that it is a duly organized and validly existing entity for the primary purpose of originating, for fee Income, single family residential mortgages for sale to various Secondary Market Lenders for marketing gains and that it is in good standing under applicable laws, licensing requirements (if any), and regulations of the United States and of the State of California. CORRESPONDENT and CMC have the requisite corporate authority and capacity to enter Into this LOAN CORRESPONDENT AGREEMENT (hereinafter referred to as AGREEMENT). CORRESPONDENT's and CMC's compliance with terms and conditions of this Agreement will not violate any provisions of CORRESPONDENT's or CMC's articles of Incorporation or by-laws, any Instrument relating to the conduct of its business, or any other agreement to which either may be a party. CORRESPONDENT intends, from time to time, to offer for sale to CMC conventional mortgage loans that it has originated, and for which it has obtained appraisal and credit documentation. All loans submitted to CMC must be originated and processed by the CORRESPONDENT. No third party loans will be accepted. CMC warrants that it is a duly organized and validly existing entity which, as part of its normal business operation, purchases loans from various Correspondents for the purpose of sale into the Secondary Market and servicing of said loans, and it is in good standing under the applicable laws and regulations of the United States and of the State of Alabama. CORRESPONDENT and CMC are acting as Independent contractors and neither party shall be deemed an agent, employee, partner, joint venturer, franchised or other associate of the other party. CORRESPONDENT and CMC each understand and agree that neither party is authorized to make any agreements or commitments on behalf of the other party. Until this AGREEMENT is canceled by either CMC or CORRESPONDENT, CMC will make available to CORRESPONDENT FHA/VA loan programs at terms and interest rates subject to change by CMC from time to time. The following are the terms and conditions under which CMC will register, underwrite, and purchase eligible loan applications offered by CORRESPONDENT: 1. From time to time, CMC will publish a list of types of loans it will accept, including interest rates, loan limits, terms, loan-to-value ratios, and discount points (CMC's required net yield) and fees. Loan registrations and approvals will be issued to CORRESPONDENT in accordance with CMC's current lending policies and procedures. Registration and approval will be issued in writing covering only the particular loan or loans submitted by CORRESPONDENT for approval. 2. CORRESPONDENT warrants that any loan it submits to CMC for approval will be in compliance with all applicable federal, state, and local statutes, ordinances, and regulations, including, but not limited to, the Rent Estate Procedures 2 Act, the Equal Credit Opportunity Act, the Tenth in Lending Act, the Fair Credit Reporting Act, the Flood Disaster Protection Act (National Flood Insurance Program), and with regulations issued pursuant thereto. CMC will also comply with the inforementioned federal, state, and local statutes, ordinances, and regulations. It is understood that CORRESPONDENT will be responsible for providing loan applicants with timely and correct GOOD FAITH ESTIMATES OF SETTLEMENT CHARGES, AND SETTLEMENT COST BOOKLETS, TRUTH IN LENDING DISCLOSURE STATEMENTS, SERVICING TRANSFER DISCLOSURE STATEMENTS (AT APPLICATION), ADJUSTABLE RATE MORTGAGE DISCLOSURES, CONSUMER HANDBOOKS ON ADJUSTABLE RATE MORTGAGES, AND ANY DISCLOSURES REQUIRED BY STATE LAW. 3. CORRESPONDENT understands CMC intends to sell closed loans to Investors and into the Secondary Market. CORRESPONDENT warrants that in submitting loan applications to CMC it is in full compliance with all pertinent requirements and warranties of the investor, or Mortgage-Based Security (MBS) program, to which CMC Intends to sell the loan(s), in accordance with program guidelines supplied by CMC. CMC agrees to provide CORRESPONDENT access to pertinent program guidelines for Its various loan programs as they are provided to CMC. However, It is the responsibility of the CORRESPONDENT to insure full compliance with the said requirements and guidelines. CORRESPONDENT understands that some loans must be approved by CMC's Investor prior to loan closing, and the decision of the Investor is final. 4. CORRESPONDENT agrees to Indemnify and hold CMC harmless for any act or omission, whether international or unintentional during the origination process by CORRESPONDENT or any agent of CORRESPONDENT. 5. CMC will purchase approved loans that close in the CORRESPONDENT's name. CORRESPONDENT will immediately endorse the Mortgage Note to CMC, "without recourse" and execute an Assignment of the Security Instrument to CMC. 6. CORRESPONDENT agrees that the responsibility for reporting all amounts considered to be points to be reported on Federal Form 1098 (as described in Internal Revenue code Section 605011(6)(z)(c) shall rest solely with CMC. CORRESPONDENT further agrees to execute a separate Designation Agreement with CMC which sets forth the responsibility for reporting points. 7. CORRESPONDENT shall use real estate appraisers and closing agents approved by CMC. CMC shall provide CORRESPONDENT with printed listings, from time to time, of appraisers and closing agents that are acceptable to CMC. CMC reserves the right to refuse credit reports from certain credit reporting agencies. CORRESPONDENT shall be notified in writing of any such unacceptable agencies. In the event that CORRESPONDENT shall submit an appraisal or credit report from a person or entity not acceptable to CMC. CMC, at its sole discretion, may reject or accept the loan package. 8. CORRESPONDENT authorizes CMC to obtain a personal and/or business credit report with respect to CORRESPONDENT upon mutual execution of this AGREEMENT. 9. CORRESPONDENT agrees to release to CMC all interest in the servicing rights for loans closed under this AGREEMENT. CORRESPONDENT further acknowledges that any value attributed to such servicing rights shall be incorporated in the interest rate and discount points (CMC's net yield) quoted to CORRESPONDENT. It is further agreed that for any loan(s) that closes in the name of CORRESPONDENT which produces a net yield greater than CMC's required net yield, the yield differential (secondary marketing/service release fee) shall accrue to CORRESPONDENT as discount on the HUD-1 and shall be disbursed to CORRESPONDENT at loan closing. In the event the yield differential is greater than discount collected at closing the additional amount due CORRESPONDENT shall be paid as a secondary market/service release fee. CMC shall remit to CORRESPONDENT any amount due within five (5) working days of receipt of mortgage documents in CMC's designated office. CORRESPONDENT agrees that for any loan(s) which CMC does not receive a discount at closing in an amount necessary to produce its required yield the amount due CMC shall be paid as a secondary marketing fee. The CORRESPONDENT shall remit the amount due CMC with the loan closing documents. 3 10. At CORRESPONDENT's request, CMC will review and approve the Title Binder/Commitment and Survey prior to loan closing. If CORRESPONDENT elects to assume responsibility for these documents, CORRESPONDENT will be held fully liable for any damages that may arise and could be asked to repurchase the loan as described in Section 11 of this AGREEMENT. 11. CORRESPONDENT agrees that upon request, it will immediately purchase at the current outstanding loan balance, any closed loan that is not in compliance with: the above-mentioned statutes, ordinances or regulations (see paragraph 2 above) and/or any and all covenants and warranties contained elsewhere in this AGREEMENT. Further, the CORRESPONDENT shall purchase any closed loan that is the subject of any misrepresentation or fraudulent. 2 of 3 4 documentation. In the event that CORRESPONDENT does not immediately comply with CMC's request for purchase, CMC shall have no further obligation to CORRESPONDENT to fund any other loans that may have been submitted by CORRESPONDENT, whether or not approved by CMC. Further, CORRESPONDENT shall be responsible for may and a loss, cost or other damages Incurred by CMC, Including CMC's attorney's fees, with respect to the CORRESPONDENT failure to comply with the requirements of this paragraph. 12. CORRESPONDENT understands that all loans submitted to CMC pursuant to this AGREEMENT will be underwritten accordance with investor requirements. CMC will approve to decline loan applications in accordance with its current underwriting policies. CMC, and/or the private investor, at its sole discretion, shall make underwriting determinations, and its decision is final. 13. CORRESPONDENT understands that CMC routinely conducts quality control audits to reverify credit documentation and appraisals submitted by Correspondents. CORRESPONDENT understands such audits may be conducted prior to loan being closed. CMC may conduct an on-site audit at the CORRESPONDENT's place of business and CORRESPONDENT agrees to fully cooperate therewith. 14. CORRESPONDENT will provide to CMC a Transfer of Property and Servicing Rights letter, in the format provided by CMC, on each loan to be purchased by CMC under this AGREEMENT. 15. This AGREEMENT to sell or purchase loans may be canceled, with or without cause, by either CMC or CORRESPONDENT. Cancellation shall be effective Immediately upon issuance of written notice. 16. This AGREEMENT is non-transferable. 17. CMC reserves the right to amend or change the terms of this AGREEMENT with written notification to CORRESPONDENT, and said amendments and/or changes will be effective immediately upon CMC's written notification with respect to all loans including those submitted to and approved by CMC. 18. CORRESPONDENT acknowledges and agrees that the CORRESPONDENT POLICY AND PROCEDURES MANUAL provided CORRESPONDENT by CMC is an addendum to and part of this AGREEMENT. CORRESPONDENT agrees to adhere to the policies and procedures as stated in the MANUAL, and with any future changes or amendments that may occur. 19. INDEMNIFICATION: Without limiting any of CMC's rights continued in this AGREEMENT, CORRESPONDENT shall Indemnify, defend, and hold CMC, its successors and assigns, and its officers, agents, and employees harmless against any claim, action, liability, cost or expense, Including judgments, court costs and attorneys fees related to any breach any warranty, representation, or covenant continued in the AGREEMENT or set forth in any program offered pursuant this AGREEMENT. This Indemnification shall survive the terms of this AGREEMENT for all loans purchased until the sooner of: a) written release by CMC and any successor or assign; b) payoff of the loan; or c) the lapse of any applicable statute of limitations. 20. All aforementioned warranties, conditions, representations and indemnifications shall survive the delivery and purchase of any mortgage loan(s) offered for sale under the AGREEMENT and shall insure to the benefit of all future successors and assigns of CMC; any cancellation of this AGREEMENT, and/or any change in management or ownership in CMC or CORRESPONDENT. CORRESPONDENT understands and accepts the terms of this AGREEMENT, as evidenced by the signature of its duly authorized corporate officer. FOR E-Loan, Inc FOR COLONIAL MORTGAGE COMPANY BY /s/ J. Pawlowski BY /s/ Signature Illegible TITLE President TITLE /s/ Signature Illegible 5 DATE 9/1/98 DATE 9/10/98 3 of 6 ADDENDUM This Addendum made and entered into this 1 day of September, 1998, by Colonial Mortgage Company, an Alabama Corporation, hereinafter referred to as ("Colonial") and E-Loan Inc, hereinafter referred to as ("Correspondent"). WITNESSETH 1. This Addendum is hereby incorporated into the Loan Correspondent Agreement between the above referenced parties dated 9/1/98 as if the same was set forth therein. In the event there is a conflict in the terms of this Addendum and the terms of the Loan Correspondent Agreement, the terms and conditions of this Addendum shall control and be given priority. 2. The parties to this Addendum agree that certain loan programs offered by Colonial require that the loans be closed in the name of Colonial. Should that be the case, the terms and conditions of this Addendum shall control as to those items of the Loan Correspondent Agreement relating to the closing of a loan in the Correspondents name. However, each party agrees that all of the other representations, warranties and requirements of the Loan Correspondent Agreement will remain in full force and effect. 3. As is contemplated in the Loan Correspondent Agreement, the specific conditions of any loan program must be followed both by the Correspondent and Colonial and will be controlling for that particular loan. In Witness Whereof, this Addendum was executed on the day and year above first written. Colonial Mortgage Company By: /s/ Signature Illegible Its: /s/ Signature Illegible Correspondent By: /s/ J. Pawlowski Its: President 7 COLONIAL MORTGAGE COMPANY DESIGNATION AGREEMENT This agreement is in accordance with Internal Revenue Service Revenue Procedure 92-11, for purposes of making information returns for points, as described in Internal Revenue Code Section 6050H(b)(2)(C). Under the terms of this agreement, the lender of record Identified below shall not report to any borrower on Federal Form 1098 any points paid In connection with mortgage loans purchased by Colonial Mortgage Company. The responsibility for reporting all amounts considered to be points, for purposes of Federal Form 1098, rests solely with the designee, Colonial Mortgage Company, for mortgage loans that it purchases. The lender of record represents to the designee that he did not, as a part of any overall mortgage transaction, lend to any borrower any of the amounts indicated on a settlement statement that would otherwise be treated as paid directly by the borrower, for the purpose of allowing these amounts to be treated as paid directly by the borrower. The lender of record makes this representation for any and all loans purchased by Colonial Mortgage Company. The lender of record understands that the must retain a copy of this agreement for four years following the close of the calendar year in which the last loan covered under this agreement is purchased by Colonial Mortgage Company. LENDER OF RECORD DESIGNEE COLONIAL MORTGAGE COMPANY P.O. Box 250C One Commerce Street Montgomery, Alabama 36142 /s/ J. Pawlowski /s/ Signature Illegible Signature Signature President President Title Title 9/1/98 3/23/92 Date Date CMC APPROVAL NUMBER: __________________ EX-10.32 38 LENDER ASSOCIATE AGMNT. DATED 11/9/98 1 Exhibit 10.32 GREENPOINT MORTGAGE LENDER ASSOCIATE AGREEMENT THIS LENDER ASSOCIATE AGREEMENT ("Agreement"), made this the 9th day of November 1998, by and between E-LOAN, Inc. a California Corporation duly organized and validly existing under the laws of California with its principal place of business at 540 University, Ave, Suite 350, Palo Alto, CA 94301 ("Associate"), and GreenPoint Mortgage Corp., ("GreenPoint") a corporation duly organized and validly existing under the laws of New York, with its principal place of business at 5032 Parkway Plaza Boulevard, Charlotte, North Carolina 28217. WHEREAS, Associate intends from time to time to originate conventional mortgage loans ("loans" or, individually, a "loan") and to offer, servicing released, to GreenPoint such loan applications that meet GreenPoint's underwriting standards in effect at time of each assignment and delivery; and WHEREAS, GreenPoint, as part of its business, from time to time makes loans meeting specific requirements, and GreenPoint intends to take assignment and delivery from Associate certain loan applications, and the servicing rights relating thereto, that the Associate originates and that GreenPoint, in its sole discretion, deems advisable. NOW, THEREFORE, in consideration of the above named premises and the terms and conditions herein contained, the Associate and GreenPoint hereby agree as follows: 1. DEFINITIONS: Originate means to take a loan application and process it. Originate, as used herein, NEVER includes underwriting or closing: Mortgage and mortgages, as used herein, mean mortgage(s), security deed(s), trust deed(s), and deeds(s) of trust. Mortgagor and mortgagors, as used herein, mean mortgagor(s), trustor(s) of trust deed(s) or deed(s) of trust, and grantor(s) or security deed(s). Trustees under trust deeds or deeds of trust are subject to GreenPoint approval. To take an application means to obtain information and signature(s) from applicant(s) by thoroughly completing an application form and supplement AND to obtain authorization signature(s) on forms necessary to verify application information AND to obtain miscellaneous items that are obtainable at application, all in accordance with the requirements of the Manual. Manual or Guide, as used herein, is a description of GreenPoint's Wholesale Guide, including applicable procedures, policies and loan products, and each provision of the Manual, together with all revisions to it, is incorporated into this Agreement for all purposes. 2 2. REPRESENTATIONS AND WARRANTIES: Associate and GreenPoint each represent to the other that as to itself it is a duly organized and validly existing entity and that it is in good standing under applicable laws and regulations of the United States and of the State of its organization; that it and its officers acting on its behalf have the requisite corporate authority and capacity to enter 8/96 3 GREENPOINT MORTGAGE into this Agreement and engage in the transactions contemplated hereby; and that its compliance with the terms and conditions of this Agreement do not violate any provisions of its Charter or Articles of Incorporation or by-laws or any instrument relating to the conduct of its business or any other agreement to which it may be a part. Associate further represents and warrants that it is duly qualified and in good standing under the laws of each jurisdiction where its ownership or lease of property or the conduct of its business requires such qualification. Associate represents and warrants that it complies and will continue to comply with the Real Estate Settlement Procedures Act, the Equal Credit Opportunity Act, the Truth In Lending Act, the Fair Credit Report Act, the Flood Disaster Protection Act, and all other applicable federal, state, and local laws and regulations to the extent that they apply to the Associate's undertaking herein. Associate further represents and warrants that applications submitted to GreenPoint will not contain misrepresentations or material inaccuracies and will not involve fraud. Associate acknowledges that certain loans and loan applications may be subject to guidelines issued by the Federal National Mortgage Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC") or other investors whose guidelines may be provided to Associate by GreenPoint from time to time. Associate represents and warrants that in submitting applications to GreenPoint, Associate is in compliance with all applicable guidelines relating to the processing and the submission of such applications. 3. GENERAL DESCRIPTION: With the signing of this Agreement by Associate and GreenPoint, a relationship is formed as follows: Associate takes application, prepares and provides applicant with Good Faith Estimate and initial Truth In Lending disclosures, provides applicant with Settlement Cost Booklet and, if applicable, ARM booklet and disclosure, collects deposit for appraisal and credit report and underwriting and accounts for same, processes the application, obtains mortgage insurance when applicable, and otherwise complies with the requirements of the Manual. Associate forwards to GreenPoint a copy of application, a copy of Good Faith Estimate and initial Truth In Lending disclosures, a copy of sales contract, and all other documents required by the Manual. GreenPoint underwrites the application and provides the Associate with underwriting decision. Associate advises applicant of loan approval, provides GreenPoint with information necessary for preparing closing instructions, and performs all other duties as outlined in the Manual. GreenPoint is responsible for servicing thereafter. GreenPoint pays to Associate, at loan closing, ONE HUNDRED percent (100.00%) of the origination fee plus any discount in excess of that required by GreenPoint. 4. LOCK-INS: In accordance with the Manual, Associate can obtain from GreenPoint pricing information and can lock a loan. Associate may issue a lock-in letter to an applicant using the form approved by state regulators but said lock letter shall not be binding on GreenPoint. 8/96 4 GREENPOINT MORTGAGE Upon issuance of a lock-in confirmation and receipt of all required documentation by GreenPoint, GreenPoint is obligated to underwrite the loan, and if the application package is approved, GreenPoint is obligated to close the loan in accordance with the lock confirmation, provided that all requirements contained in GreenPoint's closing instructions are met. Associate will provide its best efforts to process the loan application in a timely manner and submit same for underwriting. GreenPoint will use its best efforts to underwrite and approve (or decline) all such applications in a timely manner. It is expressly agreed that neither product availability nor interest rate nor discount is guaranteed until issuance of a lock-in confirmation by GreenPoint. 6/98 5 GREENPOINT MORTGAGE 5. REQUIRED DELIVERY: All loan applications locked with GreenPoint or underwritten by GreenPoint must be assigned and delivered to GreenPoint unless reasons for non-assignment and non-delivery are beyond reasonable control of the Associate. To evidence the reason for non-delivery and non-assignment, Associate will furnish GreenPoint a copy of the Equal Credit Opportunity Act adverse action notice that it provided to the applicant and/or such other information and documentation as GreenPoint may require. If an applicant cancels his or her application after such application has been locked in with or underwritten by GreenPoint, and such applicant subsequently applies to Associate for a loan type offered by GreenPoint, Associate must offer such loan application to GreenPoint for assignment and delivery. 6. LOAN TYPES: From time to time GreenPoint will provide Product Description Sheets to Associate as part of the Manual. These sheets represent loan types available to the Associate and may provide information concerning, but not limited to, fees, maximum loan-to-value, private mortgage insurance, underwriting, income ratios, and assumptions. Any or all of said types and the processing and closing requirements for said types may be changed or canceled at any time; however, such change or cancellation does not affect existing lock-in commitments. GreenPoint will notify Associate of changes and/or cancellations by Associate Program Announcements and/or by revisions to the Manual. Approvals of individual loans by GreenPoint will take the form of a written approval letter if the loan involves proposed construction and written closing instructions if the loan involves existing construction. 7. TERMINATION OR MODIFICATION: This Agreement will continue until terminated by either GreenPoint or Associate. Said termination will be effective fifteen (15) days after written termination notice is received by the other party. Applications locked-in with GreenPoint at time of termination will thereafter be delivered by Associate to GreenPoint under terms of this Agreement as if it had not been terminated. All representations, warranties, rights to audits, repurchase obligations, and other remedies will survive said termination. This Agreement may be modified only if done so in writing and signed by both Associate and GreenPoint. Associate acknowledges that GreenPoint may at any time modify the provisions of the Manual, including descriptions of the loan types offered by GreenPoint. 8. REPURCHASE: Subject to the right to cure described below, Associate agrees to repurchase from GreenPoint within thirty business days after GreenPoint's demand any closed loan: (1) if Associate has failed to fully comply in its activities relating to the loan with any applicable laws and regulations or with any applicable provisions relating to the secondary market; (2) if the loan documentation for which Associate is responsible is incomplete, incorrect, or improperly prepared; (3) if a loan in default has a material misrepresentation by the mortgagor and such misrepresentation was a material cause for the default; or (4) if any representation or warranty by Associate was otherwise breached. If Associate cures to GreenPoint's satisfaction the defect or deficiency identified by GreenPoint within the thirty day period described above, Associate shall not be obligated to repurchase the loan in question. 8/96 6 GREENPOINT MORTGAGE The repurchase price shall be as follows: (1) if the loan has been assigned to a secondary market investor by GreenPoint, the repurchase price shall be equal to the net amount paid by GreenPoint to such assignee to repurchase such loan, plus accrued but unpaid interest on such loan from date of repurchase by GreenPoint through date of repurchase by Associate, less borrower's current escrow/impound balance, if any, deposited with GreenPoint; or (2) if the loan has never been assigned by GreenPoint, the repurchase price shall be equal to the unpaid balance of the loan, less borrower's current escrow/inpound balance, if any, deposited with GreenPoint, plus GreenPoint's cost to carry the loan for the period from date of loan closing by GreenPoint through the date of repurchase by Associate. 9. DEFAULT AND REMEDIES: Associate will be in default under this Agreement if it breaches any of the terms of this Agreement, including but not limited to: (a) any obligation contained in Section 8 hereof; (b) failing to deliver all applications locked-in except if excused under provisions of Section 5 hereof; (c) failing to deliver to GreenPoint any loan application for a loan type offered by GreenPoint relating to the same applicant, and secured by the same property that was the subject of a previously locked in or underwritten loan application that was not delivered; (d) failing to make best efforts in loan origination responsibilities; and (e) failing to follow any policy or procedure contained in the Manual as may be revised from time to time. If Associate is in default under this Agreement, GreenPoint will be entitled to elect any remedy that may be available to it at law. All remedies provided in this Agreement are cumulative and non-exclusive. If GreenPoint engages an attorney to enforce this Agreement and prevails, GreenPoint will be entitled to be reimbursed by Associate for all court costs, expenses and attorney fees associated with such an enforcement action. 10. LOAN DENIALS: GreenPoint alone shall make its underwriting determinations in accordance with its underwriting guidelines. If GreenPoint declines a loan application, it shall prepare and send an adverse action notice to the Lender Associate. If GreenPoint declines a loan application and the Lender Associate is unable to make or arrange for an offer of credit with another creditor or if the applicant does not expressly accept or use any credit offered, Lender Associate shall deliver to the applicant the adverse action notice provided by GreenPoint as required by applicable law. 11. PREPAYMENT IN FULL: GreenPoint shall provide Associate with written notice should GreenPoint, or its successors or assigns, receive funds sufficient to prepay in full any Loan within Ninety (90) calendar days following the date GreenPoint purchases such a Loan from Associate. Within thirty (30) calendar days following the date of such notice, Associate shall forward to GreenPoint an amount equal to the total of all compensation paid, directly or indirectly, to Associate by GreenPoint in connection with such a Loan. 12. MISCELLANEOUS PROVISIONS: A. GreenPoint's failure to enforce a provision of this Agreement does not constitute a waiver of that or any other provision of this Agreement. B. This Agreement shall be construed and governed by the laws of the State of North Carolina. 8/98 7 GREENPOINT MORTGAGE C. Concerning each and every term, condition and provision of this Agreement and the commitments entered pursuant thereto, time is of the essence. D. Associate's rights and obligations hereunder are not assignable without GreenPoint's written consent. GreenPoint has the right to assign this Agreement and its duties, obligations or rights hereunder upon written notice to Associate. E. Associate will promptly advise GreenPoint of any substantial change in its ownership, financial condition, or senior management. In addition to GreenPoint 's rights to terminate this Agreement as provided above, GreenPoint may refuse to lock in Associate's loans if GreenPoint reasonably determines that Associate will be unable to fulfill any of its obligations under this Agreement. F. GreenPoint will have access to books and records of Associate as it may reasonably require in order to verify that locked in loans not delivered by Associate were not closed because of reason permitted under Section 5 above. G. Associate shall cooperate with GreenPoint in furnishing documents and information as requested from time to time by GreenPoint. IN WITNESS WHEREOF, GreenPoint and Associate hereto execute this Agreement as evidenced by the signatures of the duly authorized officers of each. GreenPoint Mortgage Corp. (GreenPoint) (Associate) BY: BY: /s/ Janina Pawlowski TITLE: TITLE: President DATE: DATE: 11/9/98 ATTEST: ATTEST: (SEAL) (SEAL) 8/98 EX-10.33 39 CORRESPONDENT BROKER AGMNT. 1 Exhibit 10.33 CORRESPONDENT BROKER AGREEMENT This agreement is entered into between NEW AMERICA FINANCIAL, INC. ("New America"), whose address is 3131 Turtle Creek Boulevard, Suite 700, Dallas, Texas 75219, and the broker identified on the signature page (the "Broker"). 1. New America and Broker hereby agree that, on a non-exclusive basis as to both parties, Broker may locate and qualify potential borrowers for conventional residential mortgage loans which New America will underwrite, close, and sell into the secondary mortgage market. Broker shall be an independent contractor and not the agent of New America or a partner or joint venturer of New America. 2. Broker warrants that all information about Broker submitted to New America by Broker is and will be accurate. Broker acknowledges that New America is relying upon such information as an inducement to entering into this agreement and will be relying on such information in connection with the funding of loans submitted to New America. If there should be any material adverse change in such information, Broker will promptly advise New America of such fact. Upon request from New America, Broker shall furnish New America copies of Broker's most recent financial statements (audited if available). 3. Broker shall not represent itself to be the agent of New America or in any relationship with New America other than that of independent contractor. Broker has no authority to commit New America or bind it to any contract. 4. If the law applicable to Broker requires that Broker be licensed to conduct its business as loan broker, Broker represents that Broker has all of the necessary licenses and shall furnish New America copies of such licenses and keep such licenses in effect during the term of this Agreement. 5. Broker agrees to obtain information about the loan programs offered by New America, explain such programs to its customers, qualify prospects at New America's then-current rates, and prepare a preliminary Good Faith Estimate of Settlement Charges including any fees to be paid to Broker. 6. By submitted a loan application to New America, Broker shall warrant and represent the following: a. Broker will have verified all information on loan applications submitted by Broker in accordance with prudent underwriting standards. b. All documents submitted to New America are genuine. c. All representations with respect to the application are true. d. All appraisals and credit reports have been obtained from sources which have been approved in writing by New America. Page 1 of 4 2 e. Broker has disclosed all information known to or suspected by Broker with respect to the application, the prospective borrower, and the security for the loan, and agrees to immediately disclose to New America any additional such information Broker may obtain between the time of submission of the loan to New America and the funding of the loan. f. Broker has full authority to submit such loan application to New America without violating any agreement, law, or order relating to Broker. g. The procedures, eligibility requirements, forms, and other aspects of the loan application shall be in accordance with the requirements of Federal National Mortgage Association or Federal Home Loan Mortgage Corporation, and in compliance with all applicable federal, state, and local laws, regulations, and ordinances including, without limitation the Truth-in- Lending Act, the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, the Home Mortgage Disclosure Act, the Community Reinvestment Act, and the Equal Credit Opportunity Act. Every loan submitted to New America by Broker shall include written evidence of such compliance. 7. No loan application submitted to New America shall be approved by New America except by written notification to Broker. Such approval may be granted or withheld by New America in its sole discretion, and New America is not obligated to approve any application. 8. Broker will submit to New America all information New America may request with respect to an application. New America may verify any information with respect to an applicant or Broker, including, without limitation, obtaining credit reports on Broker and the applicants. No such verification and no quality control audits or reviews by New America will relieve Broker from responsibility for Broker's warranties and representations made hereunder or a waiver of any claim New America may have for the incorrectness of any such representations or warranties. 9. Neither New America nor Broker shall be responsible for the other's compliance or failure to comply with any applicable laws, regulations, or ordinance. 10. No rate quotations, lock-ins, or commitments will be binding upon New America unless in writing and signed by an authorized representative of New America. 11. Broker will not share Broker's compensation with any other party, and the loan proceeds will not be paid (except for payment to a lender to satisfy an existing loan on the subject property) to any party who compensates or is compensated by Broker, is under common ownership or control with Broker, or shares profits or losses with Broker. 12. This Agreement shall continue until terminated, with or without cause, by either party by giving written notice of termination to the other. The termination shall be immediate upon the giving of such notice but shall not affect any representation or warranty by Broker with respect to an application or loan which has funded and will not affect any commitment which New America has previously issued in writing. Page 2 of 4 3 13. Broker hereby agrees to indemnify New America against and hold New America harmless from all liability, loss, cost, and expense, including, without limitation, reasonable attorneys' fees and costs of investigation, resulting from any breach of Broker's warranties, representations, or covenants herein or from any acts or omissions of Broker or its agents or employees. Broker agrees to promptly reimburse New America for any loss, cost, or expense New America may incur as a result of the liquidation of any loan or the security for any loan submitted to New America by Broker. 14. New America shall have a contractual right to set off any money New America owes to Broker against any obligation of Broker to New America, but any such setoff shall not constitute an accord and satisfaction unless agreed to in writing by the parties. If Broker collects any funds in connection with any loan submitted to New America, Broker shall hold such funds in trust for New America in a separate account. 15. No failure to act or exercise any remedy for any violation of this Agreement by either party shall constitute a waiver of such violation or consent to any future violation. 16. This Agreement may not be assigned by either party hereto but is personal between New America and Broker. Neither party will reveal any confidential information about the other which it may receive in connection with this Agreement except pursuant to subpoena or other court order. 17. Broker has no authority to make any representations on behalf of New America except to quote loan rates and terms which have been quoted by New America in writing. 18. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors. 19. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. Any action to enforce or interpret this Agreement shall be brought in Dallas County, Texas. All disputes under this Agreement shall be resolved by binding arbitration conducted in Dallas, Texas under the rules of the American Arbitration Association then in force. The prevailing party in any such proceeding shall be entitled to recover its reasonable attorneys' fees as part of any award. 20. All notices hereunder shall be in writing and deemed delivered when delivered in person or three days after depositing in the United States mails, properly addressed, postage prepaid, registered or certified mail, return receipt requested, addressed to New America at the address shown above or to Broker at the address shown below Broker's signature. Page 3 of 4 4 21. This Agreement contains the entire agreement of the parties with respect to the subject matter hereof, supersedes all prior understandings or agreements, and can be amended only by written instrument signed by the party to be bound by such amendment. There are no unwritten or oral agreements between the parties with respect to the subject matter hereof. If any part of this Agreement is unenforceable, the unenforceable provision shall be disregarded and the balance of the Agreement shall be enforced in accordance with its terms. Executed ________________, 199____. NEW AMERICA: NEW AMERICA FINANCIAL, INC. By: -------------------------------------- Authorized Officer BROKER: E-LOAN, INC. ----------------------------------------- (Name) By: /s/ Janina Pawlowski -------------------------------------- Name: Janina Pawlowski ----------------------------------- Title: President ----------------------------------- Address: 6200 Village Parkway, Ste. 102 -------------------------------- Dublin, CA 94568-3004 -------------------------------- Page 4 of 4 EX-10.34 40 CORRESPONDENT MORTGAGE SERVICES AGMNT. 5/20/98 1 Exhibit 10.34 CORRESPONDENT MORTGAGE SERVICES AGREEMENT This Mortgage Services Agreement ("Agreement") is made as of the 20th day of May, 1998 by and between PHH MORTGAGE SERVICES CORPORATION, a New Jersey corporation having an office at 6000 Atrium Way, Mt. Laurel, New Jersey ??54 ("PHH"), and E-Loan (the "Correspondent"), a California corporation having an office at 540 University Avenue, #350, Palo Alto, CA 94301. WITNESSETH: WHEREAS, PHH is an experienced provider, on a nationwide basis, of residential mortgage services and products to its clients and customers, including financial institutions; WHEREAS, Correspondent desires to engage PHH to provide certain government and conventional residential mortgage services and products to Correspondent and its customers as described in and in accordance with the terms specified in this Agreement. NOW, THEREFORE, in consideration of mutual promises hereinafter set forth, the parties hereto agree as follows: PROCEDURES Eligible Loans. As of the loan closing date, Correspondent shall ensure that all loans are in full compliance with the Federal National Mortgage Association Conventional Selling Contract Supplement, the Federal Home Loan Mortgage Corporation Sellers Guide, the Government National Mortgage Association Seller/Servicing Guide and the Veterans Administration Guidelines, as may be applicable or comply with those modifications that PHH may authorize in writing from time to time. Interest Rates and Program Terms. The Correspondent shall originate loans that bear interest in accordance with the price quoted by PHH and have origination terms, fees and other program features that conform fully to PHH guidelines. PHH shall close all loans in accordance with the program options, interest rates and fees provided in the PHH pricing policy, as well as current price change notices in effect on the registration date. Any change in the pricing policy shall be provided by PHH immediately to Correspondent and shall be considered to be effective upon telephone notification. PHH shall verify all such changes in writing. 2 Loan Origination Procedures. Correspondent shall originate, register and process all loans in conformance with the procedures and policies described in the PHH Operations Bulletin, which is incorporated herein by reference. Correspondent shall submit the documents required in the Operations Bulletin to PHH for underwriting. PHH shall accept or reject all loans within forty-eight (48) hours of receipt of a complete underwriting submission package using the underwriting guidelines described in the Operations Bulletin and shall close all acceptable loans in accordance with its normal procedures. Such guidelines may be amended from time to time by PHH. PHH shall notify Correspondent in writing of any such changes. Title and Lien Requirements. Correspondent shall ensure that each loan is securable by a first mortgage or deed of trust creating a valid first lien and shall be insurable by an ALTA title policy acceptable to PHH. PMI Insurance. On conventional loans with a loan-to-value ratio in excess of 80%, either Correspondent or PHH shall order private mortgage insurance and obtain approval that is acceptable to PHH. The private mortgage insurance required on mortgage programs for relocation buyers shall be ordered by PHH. Written approval from the private mortgage insurance company must be received by PHH prior to PHH closing the loan. A. Correspondent shall submit an additional copy of the appraisal and application (Form 1003) for all PMI and Pool Insurance loans. Prior Approval. Any loan utilizing a program which requires prior approval by an investor must receive that approval prior to closing. PHH will submit such loan for any investor approval. I. Documentation. Correspondent agrees, within a reasonable time, to execute, transmit and/or obtain any and all documentation over which they can be reasonably expected to have control and which PHH, FNMA, FHLMC or GNMA may deem necessary to properly complete the sale of any loan; and/or to perfect a first lien. All required documentation shall be delivered to PHH within thirty (30) days of the closing date or Correspondent shall, at PHH's option, be required to repurchase the loan upon demand in accordance with the provisions of this Agreement. The right to process loans under this Agreement is contingent upon FNMA, FHLMC and/or GNMA approving Correspondent should such approval be required by any agency at the time of signing this Agreement or at any time subsequent. II. Quality Control. At any time PHH shall have the right to conduct quality control audits to verify all documentation submitted by Correspondent including full documentation of loans closed as "no income" loans. Correspondent agrees to cooperate fully with these audits including the procurement or verification of any requested information and with the verification of any audit findings. Correspondent acknowledges that the findings of these audits could lead to a request for repurchase of loans or termination of this Agreement in the event of the discovery of improper documentation, documentation which does not support the information supplied with the loan submission, or breach of any warranty contained herein. -2- 3 Failure to comply with this Section is a default under this Agreement and PHH, upon such default, may terminate this Agreement and is entitled to request the repurchase of any improper loans and any damages suffered as a result of such breach. Correspondent Warranty. A. Correspondent hereby warrants the following to PHH with respect to all loans submitted under this Agreement: 1. That the mortgagor understands the mortgage will not be subordinated, in whole or in part, and the mortgaged premises will not be released from the lien of the mortgage, in whole or in part until the debt is paid in full; 2. That the property will be subject to a valid, subsisting and enforceable first lien, and there shall be no simultaneous secondary financing unless prior approved by PHH; 3. That any assistance necessary to conform with any and all requirements as to completion of any on-site or off-site improvements and as to disbursement of any escrow funds will be performed in a timely manner; 4. That as of the date of warranty correspondent has no knowledge of damage to the mortgaged premises that would adversely affect the value thereof; 5. That the mortgage loan was processed by Correspondent in compliance with all applicable federal, state and local laws in existence at the time of closing, including but not limited to: Regulation Z (Truth-in-Lending Act); Fair Credit Reporting Act; Flood Disaster Protection Act of 1973; Regulation X (Real Estate Settlement Procedures Act of 1974) (RESPA), as amended, and Regulation B (Equal Credit Opportunity Act), as amended. 6. All documents submitted to PHH are genuine, true and proper. All other representations are true and correct and meet the requirements and specifications of this Agreement. 7. Correspondent further makes all FNMA, FHLMC and GNMA warranties and representations, as may be applicable, required at the time of closing of the loans. All of the aforementioned warranties shall survive and inure to the benefit of any person, partnership, firm or entity to which PHH may assign or sell any such loans under this Agreement. In the event of a breach of warranty as described in this paragraph or failure to deliver the required documentation described in Paragraph VII, Correspondent agrees to immediately repurchase said loan upon demand by PHH and shall indemnify and hold PHH harmless from all claims, liabilities, losses, damages, expenses and lawsuits (including attorney's fees), in connection therewith. -3- 4 Compensation for Correspondent's Services. Upon receipt of the documents required in Paragraph VII, including clearance of any approval conditions, PHH shall close the loan. PHH shall compensate Correspondent at the closing table (unless PHH, in its sole discretion, notifies Correspondent from the mortgage rate or fees Correspondent charges the applicant which differ from the that compensation will be paid after conditions are cleared) based upon the difference between the mortgage interest rate and/or fees charged the mortgage and that charged by PHH, less $225 which represents a PHH underwriting fee. The total Broker compensation paid to the Correspondent (excluding any closing fees) from the customer, PHH or Seller, shall not exceed 325 basis points of the original principal balance of each loan. Rate Locks. All Loans brokered under this Agreement shall be on a Best Efforts Basis, unless specifically negotiated otherwise. Best Efforts delivery shall mean a mandatory delivery of Loans registered with PHH if the Loan closes. All locked Loans which are not declined by PHH shall be delivered to PHH. Correspondent shall not broker the Loan to any other lender and shall not assist in closing the loan with any other lender. The Best Efforts Delivery Policy will be closely monitored by the Quality Control Department at PHH. In the event Correspondent brokers any locked Loan to a lender other than PHH, Correspondent shall be subject to a pair off fee. I. Cancellations: In the event the Correspondent requests a loan file returned from PHH after PHH has underwritten and approved the loan, the Correspondent will be charged an underwriting fee of $225. II. Disclaimer. PHH makes no representation or warranty to Correspondent or its members regarding the effect that this Agreement and the consummation of the transaction contemplated hereby may have upon their Foreign, Federal, State or local tax liabilities. V. Severability. In case any one or more of the provisions contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired. V. Servicing. PHH shall own the servicing rights of all loans closed under this Agreement and is entitled to all escrow fees, buydown funds and rights thereof. Any escrow or buydown fees shall be submitted to PHH via separate check(s). The check(s) shall be made payable to "PHH Mortgage Services Corporation", and shall be submitted with the final closed loan package. VI. Assignability. A. Subject to Section VI(B), neither Correspondent nor PHH may assign its rights or obligations hereunder without the prior written consent of the other party and any attempted assignment without such consent shall be void. B. Notwithstanding the provisions of VI(A), PHH may assign this Agreement and/or delegate its responsibilities hereunder to any majority-owned subsidiary without obtaining the consent of Correspondent. -4- 5 VII. Indemnification. A. Correspondent agrees to defend, indemnify and hold harmless PHH, its successors, assigns, stockholders, officers, directors, employees, agents, attorneys, affiliates and subsidiaries from and against any and all liabilities, damages or expenses whatsoever, including, without limitation, attorney's fees, resulting, directly or indirectly, from any actual or threatened claim or demand arising, directly or indirectly, under, from or out of or in connection with (i) any failure by Correspondent to perform its obligations under this Agreement, (ii) Correspondent's negligence or willful misconduct in the performance of its obligations under this Agreement, or (iii) Correspondent's failure to comply fully with any and all federal, state and local laws, rules and regulations governing the origination of mortgage loans. B. PHH agrees to defend, indemnify and hold harmless Correspondent, its successors, assigns, stockholders, officers, directors, employees, agents, attorneys, affiliates and subsidiaries from and against any and all liabilities, damages or expenses whatsoever, including, without limitation attorney's fees, resulting, directly or indirectly, from any actual or threatened claim or demand arising, directly or indirectly, under, from or out of or in connection with (i) any failure by PHH to perform its obligations under this Agreement, (ii) PHH's negligence or willful misconduct in the performance of its obligations under this Agreement, or (iii) PHH's failure to comply fully with any and all federal, state and local laws, rules and regulations governing the processing, underwriting, closing or servicing of mortgage loans. VIII. Compliance with Laws. Correspondent hereby agrees to comply fully with all Federal, State and local laws governing the origination and processing of mortgage loans. Correspondent further agrees to indemnify and hold PHH harmless from any and all claims or damages arising out of Correspondent's failure to comply with such laws. IX. Fair Lending Compliance. A. Correspondent agrees with and fully supports the Fair Lending laws including: the Equal Credit Opportunity Act, Fair Housing Act and the Home Mortgage Disclosure Act. To that end, Correspondent agrees to implement procedures to ensure that all customers are reviewed on the basis of their qualifications as a borrower regardless of any non-merit factors (i.e., race, religion or gender). Upon request, PHH agrees to provide its own procedures which it utilizes in fulfilling its fair lending goals. In addition, in the spirit of promoting fair lending, the Correspondent agrees to make their best efforts to maintain an employment staff that reflects the racial, cultural and gender makeup of its local area. B. In furtherance of its fair lending commitment, PHH and Correspondent also agree to use their best efforts to utilize minority and women owned businesses when selecting vendors and outside services. -5- 6 X. Termination. A. This Agreement shall terminate upon the occurrence of any one of the following events: (1) In the event either party is required to discontinue its performance of this Agreement because of an order of any appropriate state or federal Court or regulatory body to do so. (2) To the extent permitted by applicable law, upon the filing by a party of any action under any reorganization, insolvency or moratorium law, or upon the appointment of any receiver, trustee or conservator to take possession of the properties of such party. (3) In the event PHH commits any breach of its terms, conditions, representations or warranties under this Agreement, and such breach is not cured within thirty (30) days of PHH's receipt of written notice of such breach. (4) In the event Correspondent commits any breach of its terms, conditions, representations or warranties under this Agreement, and such breach is not cured within thirty (30) days of Correspondent's receipt of written notice of the breach. (5) In the event of fraud on the part of Correspondent in performing its duties hereunder, immediately upon receipt by Correspondent of notice of termination. (6) Upon thirty (30) days written notice by either party to the other. B. Notwithstanding the termination of this Agreement, the obligation of PHH to pay Correspondent any outstanding fees and the indemnification provisions under Section XVII hereunder shall survive such termination and continue in full force and effect until fully performed or satisfied. XI. Notices. All notices and other communications under this Agreement shall be in writing and shall be deemed to have been duly submitted when received by the respective party at the address set forth above, or at such other address as that party may specify to the other by written notice. XII. Non-Solicitation. The Correspondent agrees, for a period of 270 calendar days from the date of closing of a Loan, that Correspondent shall be prohibited from refinancing such Loan. A refinancing shall have occurred if the Loan closes within such 270 day period. In the event Correspondent refinances any Loans closed within such 270 calendar days, Correspondent shall pay PHH a penalty in the amount of the compensation paid to Correspondent on the original loan closing. Provided, however, in the event a customer contracts Correspondent for refinance and Correspondent improves the customer's current interest rate by at least 1/2% or an equivalent benefit in points paid by the customer. Correspondent shall contact PHH's Pricing Department for approval to refinance such Loan. If such approval is granted, no penalty shall be assessed. XIII. Complete Agreement. This letter sets forth the complete terms of the Agreement between PHH and Correspondent. No terms or conditions of the Agreement may be waived or modified unless in writing by each party hereto. -6- 7 IV. Force Majeure. Neither party shall be deemed to be in violation of this Agreement if such party is prevented from performing its obligations hereunder for any reason beyond its reasonable control, including, without limitation, Acts of God or any public enemy, elements, floods or strikes. V. Governing Laws. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of New Jersey without reference to conflict of law provisions thereof. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed the and year first above written. E-Loan, Inc PHH MORTGAGE SERVICES CORPORATION CORRESPONDENT'S LICENSE NAME Chris Larsen By: /s/ Signature Illegible Title: President Title: Vice President -7- EX-10.35 41 CORRESPONDENT PURCHASE AGREEMTNT DATED 3/22/98 1 EXHIBIT 10.35 Prism Mortgage Company Correspondent Purchase Agreement This Agreement is made this 22nd day of March 1998 between, E-Loan, Inc. a Corporation duly organized and in good standing under the laws of the State of California with its principal place of business at 540 University Ave. #350/Palo Alto, CA 94301 (Seller) and Prism Mortgage Company (Purchaser), a corporation duly organized and validly existing under the laws of the State of Colorado with its principal place of business at 350 West Hubbard, Ste. 222, Chicago, Illinois 60610 (Purchaser). This Agreement shall govern the sale and transfer of mortgage loans from Seller to Purchaser and such sale shall be subject to the warranties, representations, terms and conditions contained herein. The purchase price and any other additional terms of purchase for each such sale will be established from time to time either by written agreement between the parties hereto or by Seller's full compliance with all of the policies and procedures outlined by Purchaser from time to time in writing (Manual), which may be modified from time to time in accordance with procedures specified in the Manual. Seller is and shall remain an independent contractor and agrees that it is not an employee, servant, agent, partner or joint venture/partner of Prism Mortgage Company. Other than those application packages registered, Purchaser is not obligated to accept nor is Seller obligated to submit any application packages for underwriting. Except as expressly stated in the Agreement, neither the Seller nor Purchaser shall have any control over the operation of the other's business. Seller shall not advertise Purchaser's loan products under Purchaser's name nor represent to anyone that it is authorized to represent Purchaser in any manner not specifically authorized by this Agreement without Purchaser's prior written consent. IN CONSIDERATION OF THE MUTUAL COVENANTS HEREIN, THE PARTIES AGREE AS FOLLOWS: REPRESENTATIONS AND WARRANTIES: As to each mortgage loan offered to Purchaser for sale under this Agreement, Seller hereby makes the following representations and warranties, each of which is true, survives loan closing and all deliveries made hereunder, and is material and is being relied upon by Purchaser: A. Seller and any other entity that held the mortgage loan are, and were at all relevant times, authorized to transact business in the jurisdiction where the real estate securing the mortgage loan is located unless the activities performed by Seller or such other entity in originating, selling, and/or holding the mortgage loans did not require such authorization pursuant to the laws of the jurisdiction where said real estate is located. B. Seller is the sole unencumbered owner of the mortgage loan and has full right and authority to sell, transfer and assign same to Purchaser free and clear of all liens, claims and encumbrances whatsoever. C. All mortgage loans have been originated in accordance with requirements set forth in the Manual. All documents related to the mortgage loan are genuine and have been duly executed by the mortgagor and properly acknowledged where necessary; the mortgage (or Deed of Trust or other acceptable security instrument hereafter referred to as the Mortgage) has been recorded in the appropriate recorder's office or registered with the registrar of titles so as to create a valid and subsisting lien against the real estate securing the loan pursuant to all applicable laws of the jurisdiction where the real estate is located. D. The full principal amount of the mortgage has been advanced to the mortgagor, either by payment direct to the mortgagor or by payment made on mortgagor's request or approval; the unpaid principal balance is as stated; all costs, fees and expenses incurred in making, closing and recording the mortgage have been paid; no part of the mortgaged property has been released from the lien of the mortgage the terms of the mortgage have in no way been changed or modified, canceled, satisfied, subordinated or 2 rescinded; and the mortgage is current and not in default on the date of delivery to Purchaser Page 1 3 E. Seller has obtained and shall deliver to Purchaser a written report of appraisal on Federal National Mortgage Association/Federal Home Loan Mortgage Corporation (FNMA/FHLMC) approved forms of the real estate securing the mortgage loan, signed by a qualified appraiser who is currently licensed and is in accordance with the Purchaser's approval process, and who has no interest, direct or indirect, in the real estate or in any loan secured by the real estate and whose compensation is not affected by the approval or rejection of the mortgage loan. F. Seller has carefully reviewed and verified the appraisal report, employment verification, credit standing and other documentation submitted by the mortgagor as if Seller were originating the loan for its own portfolio and based on said review, no fact or circumstance exists which is known or should be known by Seller to cause FNMA, FHLMC or a private institutional investor to regard the mortgage loan as an unacceptable investment or which would adversely affect the value or marketability of the mortgage loan. G. There is in force a paid-up ALTA mortgage title insurance policy or other title evidence satisfactory to Purchaser insuring the mortgage and issued by an accredited title company acceptable to FNMA and Purchaser, in an amount at least equal to the outstanding principal of the mortgage loan. Said mortgage title policy insets Purchaser, its successors and assigns that the mortgage loan is a first lien against the real estate subject only to those exceptions to title which are customary in the jurisdiction where such real estate is located and which do not affect the marketability of title of the mortgage loan, Said title policy also insures Purchaser against loss of lien priority due to the adjustments to the interest rate or principal balance of the loan, if any, pursuant to the terms of the mortgage documents. H. If private mortgage insurance is required on the loan pursuant to the Manual, Seller has obtained and will deliver to Purchaser a standard mortgage insurance policy, issued by a private mortgage insurance company acceptable to Purchaser. ASSIGNMENT OF APPLICATION PACKAGE The submission of an application package to Purchaser for underwriting shall constitute Seller assignment of all it right, title and interest therein to Purchaser and Purchaser's approval of an application package as set forth in paragraph 6 shall constitute Purchaser's acceptance of the assignment. No further or separate documentation shall be required to evidence as accepted assignment. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE SELLER REGARDING LOANS Seller represents, warrants, and covenants to Purchaser that in connection with each loan transaction: a. All signatures, names, addresses, amounts, credit information, property appraisal, and other statements of fact contained in and associated with the loan transaction are complete, accurate, true, correct, and genuine, in all material respects; b. There are no bankruptcy, foreclosure, or litigation suits pending or threatened against the borrower; c. There will be no claims or defenses as to the loan by reason of any act or omission of Seller or its directors, officers, agents, or employees; d. The loan has not been refereed or brokered to Seller by another lender or third party; e. There is no undisclosed secondary financing involved in this transaction; Page 2 4 f. Seller has complied with all material respects with all applicable federal, state, and local laws and regulations including, but not limited to, Real Estate Settlement and Procedures Act, the Flood Insurance Protection Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Consumer Credit Protection Act, and Truth in Lending Act. Seller, by signing and accepting this Agreement, does hereby warrant that all loans delivered under this Agreement were so originated and do comply with all applicable state and federal laws and regulations. Sufficient documentary evidence to substantiate such compliance shall be contained in each respective loan file; g. The loans shall be qualified in all material respects to FNMA and FHLMC unless specifically waive by Purchaser during the underwriting process. COMPENSATION Seller's compensation for performing under this Agreement shall: a. Be paid by applicant. b. Be disclosed, agreed to, and signed by the applicant in writing at the tie of application, which agreement shall (i) clearly state the amount (or the way the amount in which the amount will be determined) (ii) the fact that payment is solely the obligation of the applicant (iii) any conditions pursuant to which payment will be waived or a refund will be made in whole or part, (iv) the time at and manner in which payment is due and (v) the specific services to be performed by Seller and the estimated date(s) by which they will be performed. c. Be lawful. d. Be disclosed in accordance with the requirements of applicable law. e. Be reasonable in amount and solely for services actually performed and not include, in whole or part, anything of value paid pursuant to any agreement or understanding that business be referred to or by it. f. Seller has neither said nor done anything in its dealings with any other borrower or otherwise that give rise to any fiduciary duty to any borrower, and the documentation between Seller and each borrower contains an acknowledgment by borrower that no such duty exists. g. Seller has not made any representations to any borrower with regard to the comparison of the market lending rates offered by Purchaser to the market lending rate of any other lender and Seller has not made any representations or promises to any borrower to the effect that the market lending rates offered by Purchaser are lower than the market rates offered by all other mortgage lenders. h. Seller and each of its directors, officers, agents, and employees maintain all licenses required of them; i. The execution and delivery of the Agreement by Seller and the obligations which it will perform hereunder do not, and will not, violate any provision of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award having applicability to Seller or the Articles of Incorporation or Bylaws of Seller; j. Seller agrees it will not use for its own benefit or will not disclose to any person or entity confidential information relating to Purchaser which it may acquire during the term of this Agreement. k. Seller has in full force and effect an errors and omissions policy or policies and mortgage bankers blanket bond covering all its activities hereunder. Seller hereby agrees to provide Purchaser evidence that both policies are in full force and effect upon renewal each year. l. Seller will not, during the term of this Agreement, either directly or indirectly, promote, solicit, or otherwise contact in any manner, any borrower of a loan sold hereunder for the purpose of offering to refinance or assist in the refinancing of such loan. Page 3 5 m. Seller will not, during the term of this Agreement, either directly or indirectly, promote, solicit, or otherwise contact in any manner, any borrower of loan sold, hereunder, for the purpose of offering insurance services including, but not limited to, hazard insurance or mortgage credit insurance. n. There is in force a paid-up fire and extended coverage hazard insurance policy issued by a company acceptable to Purchaser and in an amount at least equal to the outstanding principal balance of the mortgage loan or the full insurable value of the improvements whichever is less, containing a standard mortgage clause and providing for at least 10 days prior written notice of cancellation to the mortgagee. o. There is in force such flood insurance policy as is required under the Flood Disaster Protection Act of 1973, as amended and its implementing regulations regardless of whether Seller is specifically subject to such statute or regulations. p. All documentation containing all required up-front disclosures for fixed rate mortgage loan programs and for loan programs which provide for adjustments to the interest rate, principal balance, payment amount and/or loan term shall be provided by Seller to borrower in a timely manner. If the mortgage loan documents provide for adjustments to the interest rates and/or principal balance of the loan, all terms of the mortgage loan may be enforced by Purchaser or its successors and assigns and any such adjustments will not affect the first lien status of the mortgage loan. q. There are no defaults under the terms of the mortgage loan documents as of the date of sale of the loans to the Purchaser. r. Seller has no knowledge that any improvements located on the real estate securing the mortgage loan: 1) violate any applicable zoning laws or regulations 2) have been damaged by fire, wind or other casualty: 3) are subject to condemnation proceedings: or 4) encroach on any property lot lines or building lines unless such encroachment has been approved in writing by Purchaser s. With regard to both Seller's activities in general and each mortgage loan in particular, Seller shall comply with all loan disclosure rules and regulations issued by the Office of Thrift Supervision, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation and with all applicable State and Federal laws, rules and regulations, enacted or adopted now and in the future, including but not limited to: licensing requirements, usury limitations, the Real Estate Settlement Procedures Act, the Fair Housing Act, the Equal Credit Opportunity Act, the Flood Disaster Protection Act (as if it were a covered entity), the Truth-In-Lending Act of 1969, the Fair Credit Reporting Act, the Home Mortgage Disclosure Act, the Financial Institutions Reform Recovery and Enforcement Act of 1989, and all regulations issued pursuant thereto. Seller shall timely deliver to each applicant a completed Regulation Z disclosure statement, Good Faith Estimate of Closing Costs, Federally mandated ARM disclosures and HUD booklets. Seller shall be responsible for compliance with ECOA concerning notification of adverse action to an applicant whose mortgage loan application Purchaser does not accept Purchaser may, at its option, deliver notice of adverse action to Seller for further delivery to applicant.) Seller shall comply with Regulation Z concerning return of all monies paid by the applicant to Seller should the applicant rescind and Seller shall not seek reimbursement from Purchaser for such refund. Seller shall deliver evidence of such compliance upon demand by Purchaser. t. All taxes governmental assessments, condominium assessments, planned unit development and similar homeowner association assessments, insurance premiums, water, sewer and municipal charges have been paid. u. Seller has no knowledge of any facts which could cause the mortgage note or the mortgage to be subject to any set off, counterclaim or defense. v. There are no proceedings pending affecting the Seller or any loan or mortgage which would adversely affect its ability to perform herein. w. There are no mortgage brokers or other consultants or finders that were consulted or contacted in connection with or in bringing about the mortgage or this mortgage sale transaction, that would be due a fee. Page 4 6 SERVICES OF SELLER a. Seller will assist prospective borrowers in completing credit applications and such other documents in the form designated by Purchaser and as may be required for residential mortgage loans that meet the then current underwriting standards and loan policies of either FNMA, FHLMC, or Purchaser. Seller will promptly submit all information generated pursuant to such application to Purchaser for its review and approval. b. Seller shall make no credit commitments on behalf of Purchaser since Purchaser shall have the sole discretion to determine whether a loan will be granted and under what terms and conditions. c. Seller shall obtain real estate appraisals only from Purchaser approved appraisers as determined in the Seller Manual provided by Purchaser. All appraisers must meet state or national licensing requirements. d. Seller, at its own expense, shall furnish to Purchaser all credit data, financial statements, real estate information, and such additional items as Purchaser, from time to time, may require. In addition, Seller, at its own expense, shall perform such other functions as Purchaser may require to close, fund, and complete the loan transaction. e. Immediately after funding of the loan by Purchaser, Seller agrees to execute such assignments, endorsements, or other documentation as necessary to transfer ownership of the loan to Purchaser and/or assignee as may be designated by Purchaser concurrent with the closing of such loan or as Purchaser may otherwise direct. ORIGINATION, REGISTRATION, PROCESSING AND SUBMISSION FOR APPROVAL Seller may originate, register, process and submit application packages to Purchaser for underwriting in accordance with the following procedures and requirements: a. Seller must register each application. Registration may be accomplished by either of the following: (i) faxing to Purchaser's lock-in desk a forward lock during normal business hours or (ii) by presenting to the underwriting office (as designated in the Seller Manual) a completed loan credit application package fully processed as industry standards from FNMA. Upon registration of either of the above the Seller will be assigned a Purchaser loan number via either (1) a lock confirmation or (2) an underwriting transmittal indicating the status of the loan. It is the Seller's responsibility to notify immediately upon receipt in the event that: 1. the terms in the confirmation conflict with Seller's understanding of the registration terms 2. Seller becomes aware of any mistake, misunderstanding, error or inconsistency regarding the registration 3. the loan terms applied for changed subsequent to registration; or 4. the application is withdrawn or canceled by the applicant, or Seller becomes aware that the loan applied for will fail to close for any other reason. b. Each application package must evidence that the property to be secured by the mortgage is improved acceptable real estate, such as defined in the loan program materials supplied periodically in writing by Purchaser. Each loan shall be fully secured by a mortgage. Each loan shall be eligible by FNMA, FHLMC or other specific secondary market investor approved by Purchaser. Credit of the borrower and the condition and location of the property shall be subject to approval of Purchaser prior to purchase. Page 5 7 c. The following documentation, in form and substance and, as applicable, from a source acceptable to Purchaser, which acceptance shall not be unreasonably withheld (the "application package"), must accompany each request to Purchaser for credit and property underwriting: 1. Purchaser's loan submission form. 2. Transmittal Summary 1008 or the equivalent FHLMC form, or the most current version of either of them as subsequently revised by FNMA or FHLMC. 3. Signed and dated Residential Loan Application and Statement of Assets and Liabilities, if necessary (FNMA 1003 and 1003A or the equivalent FHLMC form or the most current versions of them if they are subsequently revised by FNMA or FHLMC), including monitoring information, unless collection of such information is prohibited by law. 4. Credit reports for each borrower who will be personally obliged to repay the loan with three (3) major credit repositories and credit scores. 5. Verification(s) of Employment and Deposit (FNMA forms 1005 and 1006 or the equivalent FHLMC form, or the most current versions of them if they are subsequently revised by FNMA or FHLMC). 6. Uniform Residential Appraisal Form (appropriate to the subject property type by FNMA or the equivalent FHLMC form) signed by an Appraiser acceptable to Purchaser per the Seller Manual with a copy of the Appraiser's current license. 7. Interest rate and discount point commitment between Seller and applicant(s) that meets all requirements of applicable laws. 8. Written evidence that the applicant(s) has been notified of the right to freely select the provider(s) of certain insurance services, and the right to select a private mortgage insurance premium payment plan, if required by applicable law. 9. Written evidence that a copy of the Dept. of Housing and Urban Development (HUD) booklet "Settlement Costs" and a properly completed Good Faith Estimate of settlement costs were either delivered or placed in the mail to the applicant(s) no later than three (3) business days following the date of the application, if required by the Real Estate Settlement Procedures Act (RESPA) or the regulations promulgated pursuant to it. 10. For each adjustable rate mortgage (ARM) loan application, proof that all disclosure requirements of applicable law have been timely met. 11. Written evidence that all loan program information was timely disclosed in accordance with the requirements of applicable law. 12. Written evidence that a properly completed Truth-in-Lending disclosure statement was personally delivered or placed in the mail to the applicant(s) no later than three (3) business days following the Seller's receipt of the application. 13. Written evidence of the applicant's timely receipt of any escrow related disclosures or forms required by law. 14. Written evidence that the applicant(s) has been provided with all disclosures required pursuant to any applicable law, including without limitation, each federal, state and local consumer protection statute, regulation, ordinance, rule or ruling, as for example and again without limitation, RESPA, any non-discriminatory regulations, the Equal Credit Opportunity Act (ECOA), and the Truth-in-Lending Act (TIL). 15. Written evidence that the Seller has complied with the requirements of Section K (Compensation). 16. Any additional document(s) which Purchaser reasonably determines are necessary to (I) aid it in evaluating the credit worthiness of the applicant(s) or (ii) meet the requirements of FNMA or FHLMC, of its underwriting standards or of the applicable loan program, and all correspondence or other items received by Seller in connection with the application. d. Each application must be for a loan program that has expressly been made available to Seller by Purchaser and which is in effect on the date of application. All applications must comply with Purchaser's underwriting standards and lending requirements in effect on the date of application. Page 6 8 c. All documents must meet either FNMA or FHLMC aging requirements, unless specified otherwise by Purchaser at the time of closing as well as at the time of Purchaser's underwriting approval. f. From time to time throughout the term of this Agreement, Purchaser will make available its current interest rate and discount point requirements available to Seller, by telephone, facsimile reproduction, or in another mutually acceptable means. Purchaser's rates and discount points shall be subject to change at any time, at the sole discretion of Purchaser and without notice. DELIVERY OF DOCUMENTS. Seller agrees to do all acts necessary to perfect title to each mortgage in the Purchaser, and shall sell, assign, and deliver to the Purchaser prior to the purchase of each such mortgage, the following supporting documents, all subject to the approval and reverification by the Purchaser and its legal counsel as to proper form and execution: 1. Mortgage note properly endorsed to Purchaser without recourse. 2. Copies of the recorded mortgage and assignment of mortgage certified as true and correct by the title company insuring the lien status of the mortgage loan. 3. Signed appraisal report. 4. Commitment for Mortgage title insurance policy. Exceptions listed on such policy shall be subject to the Purchaser's approval. 5. A current (six months) survey of the real estate identifying the property by legal description and common address and showing all improvements to be within lot lines and applicable building lines, except for such encroachments approved in writing by Purchaser, or in the alternative, title insurance (including a location note endorsement where available), insuring over survey defects, if any. 6. Hazard insurance policy meeting the requirements of this Agreement 7. Private mortgage insurance policy, if required. 8. Any other documents required by the Purchaser pursuant to its Manual, as amended from time to time. The original recorded mortgage and assignment of mortgage shall be delivered to the Purchaser as soon as possible following the purchase but not later than 60 days following purchase of the mortgage loan unless the delay is caused solely by the local recorder/registrar, in which case documents shall be forwarded immediately upon registration. INDEMNIFICATION The representations and warranties set forth herein shall survive and continue in force for the full remaining life of the loan and are made for the benefit of Purchaser and its successors and assigns. Seller, upon Purchaser's request, shall promptly indemnify and hold harmless Purchaser from and against any and all losses, damages, costs or expenses of any nature, including loss of marketability and attorneys' fees resulting from (a) breach of any representation or warranty, covenant or agreement made by Seller with respect to each mortgage loan; or (b) any misstatement or omission of material fact in each mortgage loan file or credit file, whether such misstatement or omission is intentional or not, whether disclosed by actual inspection by Purchaser or its representative, or otherwise. This indemnification shall survive any termination or cancellation of this Agreement. This Agreement is intended to require Seller to indemnify Purchaser to the fullest permitted by law, regardless of whether a claim against Purchaser is based on tort, breach of contract, strict liability intentional misconduct or violation of federal or state statute or regulation, and regardless of whether such claim arises out of the conduct of Purchaser. If the law does not permit Seller to indemnify Purchaser for any judgment rendered against Purchaser, Seller shall nonetheless indemnify Purchaser for all expenses of litigation, including but not limited to all attorney fees reasonable and necessarily incurred in defense of any such claim. Page 7 9 REPURCHASE OF MORTGAGE LOANS Seller agrees to repurchase, upon Purchaser's request, any mortgage loan covered by this Agreement if: I. there is a breach of any warranty or representation set forth in Section I (Representations and Warranties) or any other provision of this Agreement; II. any misstatement or omission of material fact is made by the Seller or the Seller's agents, representatives or Sellers; III. any loan file contains fraudulent documentation, which is executed or submitted by or on behalf of the borrower respect to any material matter; IV. any loan documentation is not delivered pursuant to the terms set forth in Section II of this Agreement; or 5) any loan that becomes ninety days or more delinquent with the delinquency having originated within the first six months after purchase by Purchaser or subsequently becomes ineligible for sale to FNMA, FHLMC or a private investor, or whose repurchase is requested by FNMA, FHLMC or the private investor who owns it due to a delinquency that originated within the first six months after purchase by Purchaser regardless of whether or not a foreclosure is instituted in connection with such delinquency. Such repurchase shall be for an amount equal to the then unpaid principal of the mortgage loan plus accrued interest, the consideration originally paid by the Purchaser to Seller for the servicing rights of such mortgage and costs including reasonable attorney's fees incurred by the Purchaser for action taken. In the event the Purchaser sells all or any part of or this Agreement; or V. any loan that becomes ninety days or more delinquent with the delinquency having originated within the first six months after purchase by Purchaser or subsequently becomes ineligible for sale to FNMA, FHLMC or a private investor, or whose repurchase is requested by FNMA, FHLMC, or the private investor which owns it due to a delinquency that originated within the first six months after purchase by Purchaser regardless of whether or not a foreclosure is instituted in connection with said delinquency. Such repurchase shall be for an amount equal to the then unpaid principal of the mortgage loan plus accrued interest, the consideration originally paid by Purchaser to Seller for the servicing rights of such mortgage, and costs including reasonable attorney's fees incurred by the Purchaser for action taken. In the event the Purchaser sells all or any parts of its interest in the mortgages covered by this Agreement to a third party or parties including the sale of participating interest therein, such third parties shall succeed to all of the rights of the Purchaser hereunder and this agreement shall remain in full force and effect. Seller shall repurchase any such loan within 10 days after notice from Purchaser if Purchaser discovers, in its sole discretion that a loan purchased pursuant to the terms of this Agreement were not closed and documented in strict conformity under each and every requirement of this Agreement or any loan in which the first payment due Purchaser or its assigns is not made and becomes delinquent. TERMINATION. This Agreement may be terminated without cause as to the future acceptance of mortgages by either party at any time upon thirty days written notice of termination to the other party, but such termination shall not change or modify the rights, duties and obligations of Purchaser and Seller hereunder with respect to either mortgages previously purchased by Purchaser, or mortgages which are the subject of the then outstanding written commitments and/or Agreements between Purchaser and Seller. In addition, Purchaser shall have the right to terminate this Agreement immediately by notice in writing to Seller in the event of any of the following: 1. Sellers defaults in any of its obligations under this Agreement or any other agreements between the parties and such default is not cured within ten (10) business days after notice to Seller of such default: 2. Seller fails to deliver acceptable loans to Purchaser under the terms and conditions of any commitment agreement; 3. Seller shall initiate or suffer any proceedings of insolvency or reorganization under the Bankruptcy Code or other Federal or state receivership laws, or make common law assignment for the benefit of creditors, or be unable to pay its debts as the same become due; 4. Seller assigns or attempts to assign its rights and obligations hereunder; 5. Seller by operation of law becomes unable to faithfully perform its duties pursuant to this Agreement; 6. Purchaser suffers any involuntary sale or execution upon any interest in any loan purchased hereunder and such is the result of any act or omission on the part of the Seller. Page 8 10 Termination shall not affect the obligations of Seller with respect to any event occurring before termination. However, termination of this Agreement, shall be deemed to be for or with cause, and Purchaser at its option shall have the right to cancel any open commitment agreement(s) issued on the date of termination. Seller agrees that in the event of a breach of this Agreement or any other agreement between Purchaser and Seller, or upon the default of Seller under any instrument payable to Purchaser, or upon failure of Seller to pay any amounts due Purchaser, Purchaser shall have the immediate right of set-off from and against any amounts otherwise due and payable to Seller. DEFINITIONS The terms mortgage and mortgages as used herein shall include mortgages, security deeds, trust deeds, and deeds of trust, and the words mortgagor and mortgagors shall be deemed to mean mortgagors, trustors of trust deeds and the deeds of trust, and grantors of any security deeds it being agreed that the appointment of any trustees under any trust deeds of trust shall be subject to the approval of the Purchaser. SERVICING All mortgage loans sold hereunder shall be sold with servicing released to Purchaser. The consideration to be paid by Purchaser for the servicing rights of such mortgage loans shall be published from time to time in writing by Purchaser, or shall be quoted by Purchaser as part of the purchase price of the mortgage loan pursuant to Purchaser's Manual. ATTORNEYS' FEES AND EXPENSES. If any party to this Agreement brings legal action against the other as a result of an alleged breach or failure by the other party to fulfill or perform any covenant or obligation under this Agreement the prevailing party obtaining final judgment shall be entitled to receive, from the non-prevailing party reasonable attorneys fees incurred by reason of such action and all other costs of suit and preparation thereof at both trial and appellate levels. MISCELLANEOUS PROVISIONS A. Purchaser's failure to enforce any provision of this Agreement shall not be deemed a waiver of that or any other provision of this Agreement. B. Seller's rights and obligations hereunder shall not be assignable without Purchaser's prior written consent. C. This agreement is entered into, maintained in, and shall be governed by, and construed and enforced in accordance with the laws of the State of Illinois. The parties hereby consent to service of process, personal jurisdiction, and venue in the courts of general jurisdiction of Chicago, Illinois or Cook County, Illinois, and any federal court with concurrent jurisdiction, with respect to any action or proceeding brought to enforce any liability or obligation under this Agreement. D. This Agreement contains all of the terms and conditions agreed to by the parties and shall supersede all prior Agreements, and any modification of the terms of the Agreement must be in writing, executed by the parties hereto. E. In the event that any provision of this Agreement is held to be invalid or unenforceable by a court of law, such provisions may be stricken from the Agreement and such findings skit have no effect as to the validity or enforceability of any other provisions of this Agreement. Page 9 11 F. Time is of the essence with respect to each and every term, condition and provision of this Agreement and the commitments entered into pursuant thereto. G. Seller shall notify Purchaser immediately of any material changes in its ownership, financial condition or management. H. Seller agrees to provide its most recent audited financial statement, on yearly basis, alone with a resolution by its Board of Directors, with specimen signatures, authorizing the individual signing this Agreement to enter into contracts on behalf of the Seller and authorizing the specific individuals who may accept Purchasers pricing of individual loans to be purchased hereunder. Seller also agrees to provide to the Purchaser on an annual basis, proof of the Seller's renewal of its fidelity and errors and omission insurance coverage in an amount acceptable to the Purchaser. 1. All representations and warranties hereunder are made directly from Seller to Purchaser for the mortgage loans originated by Seller and all such representations and warranties shall survive this Agreement. j. Purchaser may, from time, to time, review, at Seller's place of business, or at Purchaser's place of business, Seller's loan files, policies, procedures and records, in order to determine whether Seller meets Purchaser's quality control standards set forth in the Manual. K. No exclusive relationship between the Seller and the Purchaser shall result from this Agreement. Seller is and shall remain an independent contractor and agrees that it is not an employee, servant agent or partner of Purchaser and shall not hold itself out as an agent of the Purchaser. Seller shall not make any statement which leads any third party to reasonably believe that it is an agent of Purchaser. Seller shall not use or refer to Purchaser's name in any form of advertising written materials or circulars except as may be required by law. L. Seller shall be responsible for obtaining the Manual from Purchaser at or immediately after the execution of this' Agreement IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year indicated below: Purchaser SELLER Prism Mortgage Company E-Loan, Inc. By: /s/ David Fisher By: /s/ Christian A. Larsen Name: David Fisher Name: Christian A. Larsen Title: Vice President Title: President ATTEST: ATTEST: By: /s/ Kurt Bokenkump By: /s/ Janina Pawlowski Name: Kurt Bokenkump Name: Janina D. Pawlowski Title: Vice President Title: CEO (SEAL) (SEAL) N/A Page 10 EX-10.36 42 WHOLESALE LENDING AGMNT. DATED 3/22/98 1 EXHIBIT 10.36 WHOLESALE LENDING AGREEMENT THIS AGREEMENT is made and entered into as of March 6, 1998, between UNION FEDERAL SAVINGS BANK OF INDIANAPOLIS, a federally chartered savings bank with its principal offices located in Indianapolis, Indiana (hereinafter "UFSB"), and E - Loan, Inc. with its principal offices located at Palo Alto, California (hereinafter "Client Mortgage Company" or "CMC") under the following circumstances: A. UFSB is engaged in the business of, among other activities, purchasing and/or funding mortgage loans on residential real estate ("Mortgage Loans") and reselling such loans in the secondary mortgage market. CMC is engaged in the business of negotiating Mortgage Loans and performing certain residential mortgage application functions on behalf of Mortgagors in exchange for a fee or other consideration. B. During the term of this Agreement, UFSB will advise CMC of UFSB's various FHA, VA, and Conventional Mortgage Loan products as well as select Bond Program Mortgage Loan products, and CMC intends, from time to time, to offer to UFSB for purchase and/or funding certain FHA, VA, and Conventional Mortgage Loans as well as select Bond Program Mortgage Loans which fall within the parameters of UFSB's said Mortgage Loan products. NOW, THEREFORE, in consideration of the mutual agreements and covenants hereinafter set forth, the parties agree as follows: ARTICLE I Definitions All words and phrases defined in this Article 1 (except as herein otherwise expressly provided or unless the context otherwise requires) shall, for the purposes of this Agreement, have the respective meanings specified in this Article: 1.01. "Agreement" means this Wholesale Lending Agreement and any written and agreed to amendments or modifications hereto signed by both UFSB and CMC. 1.02. "Bond Authority" means a federal, state or local authority established for the purpose of making residential mortgage loans to low and moderate income borrowers at below market interest rates and/or upon other terms and conditions favorable to the borrowers and issuing bonds or other obligations to fund such loans. 1.03. "Bond Program" means a qualified single family residential mortgage loan program of a local, state or federal housing authority under which residential mortgage loans are made available to low and moderate income borrowers at below market interest rates and/or upon other terms and conditions favorable to the borrowers. 1.04. "Business Day" or "Day" means any day of the week other than a Saturday, Sunday, or a legal holiday or a bank holiday in the State of Indiana. 1.05. "Defect" means a breach in any respect of any representation or warranty herein contained with respect to a Mortgage Loan or any failure by CMC to comply with any covenant herein contained with respect to a Mortgage Loan which could reasonably be expected to result in a loss or damage to UFSB or a subsequent purchaser of such Mortgage Loan. 1 2 1.06. "Defective Loan" means any Mortgage Loan that contains a Defect. 1.07. "FHLMC" means Federal Home Loan Mortgage Corporation. 1.08. "FIRREA" means the Financial Institutions Reform, Recovery and Enforcement Act of 1989. 1.09. "FNMA" means the Federal National Mortgage Association or any successor thereto. 1.10. "GNMA" means the Government National Mortgage Association or any successor thereto. 1.11. "Mortgage" means a valid and enforceable Mortgage, Deed of Trust, or other Security Instrument creating a first lien upon described real property improved by a one-to-four family dwelling which secures a Mortgage Note. 1.12. "Mortgage Documents" means all documents specified in the Wholesale Seller Guide pertaining to a particular Mortgage Loan. 1.13. "Mortgage Loan" means an individual mortgage loan which is the subject to this Agreement. 1.14. "Mortgage Loans" means the mortgage loans which are the subject of this Agreement. 1.15. "Mortgage Loan Application" or "Mortgage Loan Applications" means an application for a Mortgage Loan processed by CMC in accordance with the provisions of the Wholesale Seller Guide and the terms of this Agreement. 1.16. "Mortgage Note" means a written promise to pay a sum of money at a stated interest rate during a specified term that is secured by a Mortgage Loan. 1.17. "Mortgagor" means the obligor on a Mortgage Note. 1.18. "Repurchase" means CMC's purchase of a Mortgage Loan from UFSB that was previously sold to UFSB from CMC. 1.19. "RESPA" means the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601, et seq.), as amended from time to time. 1.20. "Servicing Rights" or "Servicing" means the right, title, and interest in and to the servicing of the Mortgage Loans and the maintenance and servicing of the escrow accounts, along with the right to receive the servicing fee income and any and all ancillary income arising from or connected to any Mortgage Loan. 1.21. "Wholesale Seller Guide" means a manual prepared by UFSB, and amended from time to time, which contains the terms and conditions under which UFSB has agreed to purchase and/or fund Mortgage Loans from CMC as well as practices and procedures which UFSB will require CMC to implement and follow with respect to those Mortgage Loans offered for sale and/or funding to UFSB. 2 3 ARTICLE II Purchase and/or Funding of Loans 2.01. PURCHASE AND/OR FUNDING OF LOANS BY UFSB. UFSB agrees to purchase and/or fund certain Mortgage Loans from CMC; provided the following requirements are met: (a) Immediately upon payment by UFSB of the purchase price of each such Mortgage Loan so purchased and/or funded, all rights, title and interest (including all Servicing Rights) in said Mortgage Loans shall be assigned from CMC to UFSB; (b) All FHA, VA, Conventional and select Bond Program Mortgage Loans shall have been closed in the name of CMC unless another name is specifically authorized by UFSB; and (c) All such Mortgage Loans shall meet the UFSB's lending requirements as set forth herein or in the Wholesale Seller Guide. 2.02. UFSB LOAN REQUIREMENTS. UFSB will advise CMC from time to time regarding the types of FHA, VA and conventional Mortgage Loan products ("Qualified Products") it is interested in purchasing and/or funding, including, without limitation, information concerning interest rates, loan limits, loan-to-value ratios, points, fees, and underwriting requirements. Any commitment from UFSB to CMC to purchase and/or fund any Mortgage Loan or Mortgage Loans or Mortgage Loan Applications will be issued in accordance with UFSB's current lending policy. Such commitment will be in writing and the terms of such commitment will be applicable only to the Mortgage Loan or Mortgage Loans specified therein. UFSB may, at its sole discretion, cancel or discontinue any of the Qualified Products, with or without notice to CMC. UFSB will attempt to give reasonable advance notice of such changes but shall have no obligation to do so. CMC agrees to follow the practices and procedures set forth in the Wholesale Seller's Guide. The terms and provisions contained in the Wholesale Seller Guide are incorporated herein as though set out in full. 2.03. PRICING OF LOANS; LOCK-IN RATES. UFSB will provide price protection for the Mortgage Loans it agrees to purchase and/or fund hereunder in the form of a lock-in according to its lock-in policies set forth in the Wholesale Seller Guide. The time at which the interest rate for a Mortgage Loan is locked-in shall be solely at CMC's option. However, a Mortgage Loan with a lock-in interest rate must be presented to UFSB for purchase and/or funding at the locked-in price within the lock-in period. For purposes of this Agreement, the "lock-in period" shall be determined in accordance with the provisions of the Wholesale Seller Guide. If such Mortgage Loan is not presented to UFSB's Wholesale Branch at the address noted in the Wholesale Seller Guide within the lock-in period, Said Loan will be re-priced at UFSB's option. Transfer by CMC of a locked-in Mortgage Loan during the lock-in period to an entity other than UFSB shall constitute a violation of this Agreement, and CMC shall be liable for any loss sustained as a result thereof by UFSB. In addition, CMC shall notify UFSB immediately should any commitment for a locked-in Mortgage Loan be canceled, withdrawn, or otherwise determined not to be set for purchase and/or funding by UFSB. 3 4 Article III Warranties and Representations 3.01. CMC'S WARRANTIES AND REPRESENTATIONS. CMC hereby warrants, represents and covenants to UFSB with regard to each Mortgage Loan submitted to UFSB for underwriting, purchase and/or funding that the following are true, complete and correct as of the date of such submission as if such warranties, representations and covenants are again made by CMC on those dates: (a) CMC is duly organized, validly existing and in good standing under the laws of each jurisdiction in which it originates Mortgage Loans delivered to UFSB pursuant to this Agreement and has complied with all applicable statutes, laws, rules and regulations, orders and decrees of all federal, state, county and municipal authorities. CMC further has qualified, registered and obtained all licenses and taken all other requisite action required in order to originate any Mortgage Loans delivered to UFSB pursuant to this Agreement. The execution and delivery of this Agreement and the transactions contemplated hereby are duly authorized and binding on CMC; (b) All Mortgage Loans CMC submits to UFSB have met all requirements of federal, state, or local laws, including, but not limited to, Usury, Truth-In-Lending, Real Estate Settlement Procedures, Consumer Credit Protection, Equal Credit Opportunity, Loan Disclosure Laws, the Flood Disaster Protection Act, and the Fair Credit Reporting Act and CMC shall maintain in its possession, available for UFSB's inspection, and shall deliver to UFSB upon demand, evidence of compliance with all such requirements; (c) CMC has no knowledge of any circumstances or conditions with respect to the Mortgage Loan submitted to UFSB for underwriting, purchase and/or funding, the mortgaged property, the mortgagor or the mortgagor's credit standing that can be reasonably expected to cause institutional investors to regard the Mortgage Loan as an unacceptable investment, cause the Mortgage Loan to become delinquent or adversely affect the value or marketability of the Mortgage Loan; (d) With regard to FHA or VA insured Mortgage Loans, the Federal Housing Commissioner or VA, as applicable, has or will issue his Mortgage Insurance Certificate or Loan Guaranty Certificate; and payment due on the mortgage insurance premium has been paid to the insuring authority; nothing has been done or omitted, and no circumstances exist, the effect of which act, omission or circumstance would invalidate the contract of insurance with the FHA or VA as applicable; and the Mortgage Loan complies with the regulations of the FHA or VA as applicable; (e) All of the appraisers selected by CMC who have performed appraisals in connection with the Mortgage Loans submitted to UFSB for purchase and/or funding have been properly licensed and are currently approved in accordance with the provisions of the Wholesale Seller Guide; (f) The appraisal submitted in connection with each Mortgage Loan meets the requirements of FIRREA and USPAP; (g) The underwriting for each Mortgage Loan, if performed by CMC, has been performed in accordance with the provisions of the Wholesale Seller Guide and the terms of this Agreement; (h) No legal actions are pending or threatened which might affect the Mortgage Loan or CMC's ability to transfer it or otherwise perform hereunder; 4 5 (i) CMC is not in default with respect to any material agreement to which it is party or by which it is bound, and the execution and performance of this Agreement will not violate any law, or term of its association documents or bylaws, as amended, or instrument to which CMC is a party or by which it is bound and will not violate or conflict with any other restriction of any kind of character to which it is subject; (j) All information submitted by CMC to UFSB with regard to the Mortgage Loan, including all written materials, are presented and warranted by CMC to be true, correct, currently valid and genuine; (k) All FHA and VA insured and Bond Program Mortgage Loans submitted to UFSB for purchase are eligible for inclusion in GNMA or FNMA pools; (l) The Mortgage Loan and all documentation and other materials submitted to UFSB in connection therewith do not contain any fraudulent statement or any misstatement or omission of material fact, and the Mortgage Loan has been originated in a manner consistent with prudent mortgage banking practices and consistent with the guidelines and policies established by UFSB, GNMA, FNMA, FHLMC, a Bond Authority, the FHA, or the VA, as applicable; (m) To the best of CMC's knowledge, there are no undisclosed agreements between the Mortgagor and the seller or CMC or any other party concerning any facts or conditions, whether past, present or future, which might in any way affect the obligations of the Mortgagor to make timely payments or make the Mortgage Loan unsalable in the secondary market; (n) CMC shall promptly advise UFSB of any material change relating to CMC including, but not limited to, a change in ownership, financial condition or senior management; (o) All Mortgage Loan Applications and/or Mortgage Loans presented to UFSB by CMC for underwriting, purchase and/or funding have been originated by CMC, and no such Mortgage Loan Applications and/or Mortgage Loans have been originated by a third party unless UFSB specifically authorizes CMC to present such third party loans to UFSB for purchase and/or funding; and (p) With respect to subsections (a) through (o), inclusive of this Section 3.01, CMC will promptly notify UFSB if CMC becomes aware that any terms, conditions, warranties, representations or covenants hereunder become untrue or incomplete in the future. 3.02. UFSB'S WARRANTIES AND REPRESENTATIONS. UFSB represents and warrants that UFSB possesses all necessary licenses from any applicable regulatory authority to engage in the activities contemplated by this Agreement. Article IV Post-Closing Documentation 4.01. CMC'S OBLIGATIONS REGARDING POST-CLOSING DOCUMENTATION. CMC agrees that it is responsible for obtaining and delivering post-closing documents required to complete closed Mortgage Loan packages within the time frames established by UFSB in its Wholesale Seller Guide or otherwise. Should UFSB incur loss due to CMC's failure to deliver documents in a timely manner (i.e., in keeping with commitment deadlines and post-closing documentation deadlines), then, at UFSB's option, CMC will either reimburse UFSB for such loss within twenty (20) days of written notice thereof, or CMC will immediately repurchase the Mortgage Loan in question in accordance with the provisions contained in Article V regarding repurchase of Mortgage Loans. 5 6 Article V Indemnification; Repurchase by CMC. 5.01. INDEMNIFICATION BY CMC. CMC agrees to indemnify and hold UFSB harmless from any and all liability, claims, loss or damage resulting from any act or omission of CMC. If any claim, action or proceeding shall be asserted or brought against UFSB by reason of any such act or omission of CMC, CMC shall, upon demand, obtain representation by legal counsel acceptable to UFSB to defend UFSB against any such action and/or claim and CMC shall pay all costs incurred in such defense. Furthermore, CMC agrees to defend, indemnify and hold UFSB harmless with respect to any damages arising from or in connection with CMC's use, for any Mortgage Loan, of any form not provided or approved by UFSB. CMC further agrees to defend, indemnify and hold UFSB harmless from miscalculations and other errors which results from CMC's independent application, processing and closing procedures and for its misuse of forms required by UFSB. CMC also agrees to defend, indemnify and hold UFSB harmless from claims asserted against UFSB under provisions of RESPA, including, without limitation, claims based upon, or arising as a result of, any payments received by CMC in the nature of yield spread premium, service released premium, back points, discount points, broker rebates, and the like. All of the aforementioned representations and warranties shall survive the closing of each Mortgage Loan transaction, and shall inure to the benefit of UFSB, and its successors and future assignees. 5.02. INDEMNIFICATION BY UFSB. UFSB agrees to indemnify and hold CMC harmless from any and all liability, claims, loss or damage (including, without limitation, attorney fees and other litigation expense) incurred by CMC resulting solely from the negligence or misconduct of UFSB. 5.03. REPURCHASE OBLIGATION. CMC agrees to repurchase on UFSB's demand, any Mortgage Loans subject to this Agreement upon the terms and conditions hereinafter set forth in the event that: (a) Any misstatement of material fact, fraud or breach of any warranty contained herein or other material breach of this Agreement, is discovered by UFSB or its representatives or by CMC; or (b) UFSB is required to purchase any Mortgage Loan which it has sold to an investor, or which it has placed in or pledged to a mortgage pool, which purchase requirement is as a result of the Mortgage Loan being a Defective Loan, or as the result of any act or omission of CMC; or (c) The mortgagor(s) fails to make the first payment due UFSB within 30 days of payment due date on any Mortgage Loan purchased and/or funded by UFSB; or (d) If the CMC made the credit underwriting decision, the Mortgage Loan becomes 90 days or more delinquent on any of the first six (6) monthly payments due UFSB. 5.04. REPURCHASE PRICE. With respect to any Mortgage Loan required to be repurchased pursuant to this Article V, the repurchase price to be paid by CMC to UFSB shall be an amount equal to the outstanding principal balance at par of such Mortgage Loan plus accrued interest to the date of repurchase plus any costs or expenses incurred by UFSB relating to the repurchase. Notwithstanding the foregoing, in the event UFSB paid a premium to CMC for the Mortgage Loan at the time of the original purchase and/or funding, CMC's repurchase price shall also include a premium which is the same percentage of the then outstanding principal balance as the original premium was of the principal balance at the time of the original purchase of the Mortgage Loan. In the event CMC is required to repurchase a loan from UFSB, CMC agrees to repurchase such loan not later than thirty (30) days from receipt of written notice for repurchase from UFSB. 5.05. RIGHT OF SET-OFF. CMC grants UFSB the right of set-off, and UFSB may deduct any fees, penalties or other sums owed by CMC to UFSB hereunder from the purchase price or loan funding of any Mortgage Loans purchased and/or funded by UFSB. 6 7 Article VI Miscellaneous Provisions 6.01. AMENDMENT OF AGREEMENT. This Agreement may not be amended except in writing executed by both parties. 6.02. WAIVER NONBINDING. The failure of UFSB to insist in any one or more instances upon strict performance of any of the covenants, agreements or conditions of this Agreement or to exercise any rights hereunder, shall not be construed as a waiver or a relinquishment for the future of such covenants, agreements, conditions or rights. 6.03. NO OBLIGATION TO MAKE LOANS. Nothing contained in this Agreement shall be construed to require UFSB to approve, purchase and/or fund any Mortgage Loan or Mortgage Loans submitted by CMC pursuant to the terms hereof. Approval and funding of any such Mortgage Loan or Mortgage Loans shall be in the sole discretion of UFSB, and said decision will be made on a loan by loan basis. 6.04. NO AGENCY OR EMPLOYMENT RELATIONSHIP. Both parties understand and agree that it is not intended that this Agreement create or establish a relationship of employer / employee between UFSB and CMC, nor is it intended that CMC is designated as agent for UFSB. CMC is an independent contractor, and is hereby expressly prohibited from holding itself out as an agent, representative or employee of UFSB or of having any endorsement from or affiliation with UFSB. 6.05. TERMINATION. This Agreement may be terminated by either party for any reason, with or without cause, breach or other justification, upon thirty (30) calendar days prior written notice, and may be terminated immediately for breach of any covenant, obligation or duty herein contained or for violation of any law, ordinance, statute, rule or regulation governing the conduct of either party hereto. Termination shall not affect the obligations with respect to any Mortgage Loans submitted prior to such termination, except that UFSB shall not be obligated to purchase and/or fund any such Mortgage Loans approved prior to termination if UFSB terminates this Agreement for breach by CMC on the basis of fraud or negligence of CMC. 6.06. ENTIRE AGREEMENT. The arrangements and relationships contemplated in this Agreement are the sole understandings and agreements of the parties. No further arrangements between the parties will be considered valid unless they are in writing and executed by each of the parties. 6.07. SEVERABILITY. In case any one or more of the provisions contained in this Agreement shall be invalid, illegal or unenforceable in any respect, the validity, legality, and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired. 6.08. BINDING EFFECT. The provisions of this Agreement shall be binding upon, and shall inure to the benefit of the successors and assigns of UFSB and CMC. 6.09. GOVERNING LAW. This Agreement shall be construed in accordance with, and governed by the laws of the State of Indiana. 6.10. ATTORNEYS' FEES. In the event a dispute arises under this Agreement between CMC and UFSB, which disputes result in legal action being taken by one or both of the parties, the prevailing party shall be entitled to recover its reasonable attorney fees, costs and other expenses associated with the enforcement of its rights under this Agreement. 7 8 6.11. NOTICES. Any notices necessary to be given under the provisions of this Agreement will be sufficient if in writing and delivered personally, by U.S. certified mail, return receipt requested or by courier service to the addresses set forth below: If to UFSB: Union Federal Savings Bank of Indianapolis 7500 West Jefferson Boulevard Fort Wayne, Indiana 46804 Attention: Sr. Vice President, Wholesale Lending If to CMC: E-Loan Inc. 540 University Avenue Suite #350 Palo Alto, CA 94301 Attention: Elaine Barnkos IN WITNESS WHEREOF, the parties hereto have executed the above and foregoing Agreement as of the day and year first above written. "UFSB" UNION FEDERAL SAVINGS BANK OF INDIANAPOLIS By /s/ Signature Illegible ----------------------- Its Asst Vice President ------------------- "CMC" E-Loan, Inc. By /s/ Chris Larsen ----------------------- Its President --------- 8 EX-10.37 43 MASTER LEASE AGREEMENT DATED 3/4/98 1 EXHIBIT 10.37 MASTER LEASE AGREEMENT MASTER LEASE AGREEMENT(the "Master Lease") dated March 4, 1998 by and between COMDISCO, INC. ("Lessor") and E-Loan, Inc. ("Lessee"). IN CONSIDERATION of the mutual agreements described below, the parties agree as follows (all capitalized terms are defined in Section 14.18): 1. PROPERTY LEASED. Lessor leases to Lessee all of the Equipment described on each Summary Equipment Schedule. In the event of a conflict, the terms of the applicable Schedule prevail over this Master Lease. 2. TERM. On the Commencement Date, Lessee will be deemed to accept the Equipment, will be bound to its rental obligations for each item of Equipment and the term of a Summary Equipment Schedule will begin and continue through the Initial Term and thereafter until terminated by either party upon prior written notice received during the Notice Period. No termination may be effective prior to the expiration of the Initial Term. 3. RENT AND PAYMENT. Rent is due and payable in advance on the first day of each Rent Interval at the address specified in Lessor's invoice. Interim Rent is due and payable when invoiced. If any payment is not made when due, Lessee will pay a Late Charge on the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay Lessor the Advance specified on the Schedule. The Advance will be credited towards the final Rent payment if Lessee is not then in default. No interest will be paid on the Advance. 4. SELECTION; WARRANTY AND DISCLAIMER OF WARRANTIES. 4.1 SELECTION. Lessee acknowledges that it has selected the Equipment and disclaims any reliance upon statements made by the Lessor, other than as set forth in the Schedule. 4.2 WARRANTY AND DISCLAIMER OF WARRANTIES. Lessor warrants to Lessee that, so long as Lessee is not in default, Lessor will not disturb Lessee's quiet and peaceful possession, and unrestricted use of the Equipment. To the extent permitted by the manufacturer, Lessor assigns to Lessee during the term of the Summary Equipment Schedule any manufacturer's warranties for the Equipment. LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability, claim, loss, damage or expense of any kind (including strict liability in tort) caused by the Equipment except for any loss or damage caused by the willful misconduct or negligent acts of Lessor. In no event is Lessor responsible for special, incidental or consequential damages. 5. TITLE; RELOCATION OR SUBLEASE; AND ASSIGNMENT. 5.1 TITLE. Lessee holds the Equipment subject and subordinate to the rights of the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor, as Lessee's agent, and at Lessor's expense, to prepare, execute and file in Lessee's name precautionary Uniform Commercial Code financing statements showing the interest of the Owner, Lessor, and any Assignee or Secured Party in the Equipment and to insert serial numbers in Summary Equipment Schedules as appropriate. Lessee will, at its expense, keep the Equipment free and clear from any liens or encumbrances of any kind (except any caused by Lessor) and will indemnify and hold the Owner, Lessor, any Assignee and Secured Party harmless from and against any loss caused by Lessee's failure to do so, except where such is caused by Lessor. 5.2 RELOCATION OR SUBLEASE. Upon prior written notice, Lessee may relocate Equipment to any location within the continental United States provided (i) the Equipment will not be used by an entity exempt from federal income tax, and (ii) all additional costs (including any administrative fees, additional taxes and insurance coverage) are reconciled and promptly paid by Lessee. Lessee may sublease the Equipment upon the reasonable consent of the Lessor and the Secured Party. Such consent to sublease will be granted if: (i) Lessee meets the relocation requirements set out above, (ii) the sublease is expressly subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its rights in the sublease to Lessor and the Secured Party as additional collateral and security, (iv) Lessee's obligation to maintain and insure the Equipment is not altered, (v) all financing statements required to continue the Secured Party's prior perfected security interest are filed, and (vi) Lessee executes sublease documents acceptable to Lessor. No relocation or sublease will relieve Lessee from any of its obligations under this Master Lease and the relevant Schedule. 5.3 ASSIGNMENT BY LESSOR. The terms and conditions of each Schedule have been fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its interest or grant a security interest in each Schedule and/or the Equipment to a Secured Party or Assignee. In that event, the term Lessor will mean the Assignee and any Secured Party. However, any assignment, sale, or other transfer by Lessor will not relieve Lessor of its obligations to Lessee and will not materially change Lessee's duties or materially increase the burdens or risks imposed on Lessee. The Lessee consents to and will acknowledge such assignments in a written notice given to Lessee. Lessee also agrees that: (a) The Secured Party will be entitled to exercise all of Lessor's rights, but will not be obligated to perform any of the obligations of Lessor. The Secured Party will not disturb Lessee's quiet and peaceful possession and unrestricted use of the Equipment so long as Lessee is not in default and the Secured Party continues to receive all Rent payable under the Schedule; and (b) Lessee will pay all Rent and all other amounts payable to the Secured Party, despite any defense or claim which it has against Lessor. Lessee reserves its right to have recourse directly against Lessor for any defense or claim; (c) Subject to and without impairment of Lessee's leasehold rights in the Equipment, Lessee holds the Equipment for the Secured Party to the extent of the Secured Party's rights in that Equipment. 6. NET LEASE; TAXES AND FEES. 6.1 NET LEASE. Each Summary Equipment Schedule constitutes a net lease. Lessee's obligation to pay Rent and all other amounts due hereunder is absolute and unconditional and is not subject to any abatement, reduction, set-off, defense, counterclaim, interruption, deferment or recoupment for any reason whatsoever. 6.2 TAXES AND FEES. Lessee will pay when due or reimburse Lessor for all taxes, fees or any other charges (together with any related interest or penalties not arising from the negligence of Lessor) accrued for or arising during the term of each Summary Equipment Schedule against Lessor, Lessee or the Equipment by any governmental authority (except only Federal, state, local and franchise taxes on the capital or the net income of Lessor). Lessor will file all personal property tax returns for the Equipment and pay all such property taxes due. Lessee will reimburse Lessor for property taxes within thirty (30) days of receipt of an invoice. 7. CARE, USE AND MAINTENANCE; INSPECTION BY LESSOR. 7.1 CARE, USE AND MAINTENANCE. Lessee will maintain the Equipment in good operating order and appearance, protect the Equipment from deterioration, other than normal wear and tear, and will not use the Equipment for any purpose other than that for which it was designed. If commercially available and considered common business practice for each item of Equipment, Lessee will maintain in force a standard maintenance contract with the manufacturer of the Equipment, or another party acceptable to Lessor, and will provide Lessor with a complete copy of that contract. If Lessee has the Equipment maintained by a party other than the manufacturer or self maintains, Lessee agrees to pay any costs necessary for the manufacturer to bring the Equipment to then current release, revision and engineering change levels, and to re-certify the Equipment as eligible for manufacturer's maintenance at the expiration of the lease term, provided re-certification is available and is required by Lessor. The lease term will continue upon the same terms and conditions until recertification has been obtained. 7.2 INSPECTION BY LESSOR. Upon reasonable advance notice, Lessee, during reasonable business hours and subject to Lessee's security requirements, will make the Equipment and its related log and maintenance records available to Lessor for inspection. 8. REPRESENTATIONS AND WARRANTIES OF LESSEE. Lessee hereby represents, warrants and covenants that with respect to the Master Lease and each Schedule executed hereunder: (a) The Lessee is a corporation duly organized and validly existing in good standing under the laws of the jurisdiction of its incorporation, is duly qualified to do business in each jurisdiction (including the jurisdiction where the Equipment is, or is to be, located) where its ownership or lease of property or the conduct of its business requires such qualification, except for where such lack of qualification would not have a material adverse effect on the Company's business; and has full corporate power and authority to hold property under the Master Lease and each Schedule and to enter into and perform its obligations under the Master Lease and each Schedule. (b) The execution and delivery by the Lessee of the Master Lease and each Schedule and its performance thereunder have been duly authorized by all necessary corporate action on the part of the Lessee, and the Master Lease and each Schedule are not inconsistent with the Lessee's Articles of Incorporation or Bylaws, do not - 1 - 2 contravene any law or governmental rule, regulation or order applicable to it, do not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument to which it is a party or by which it is bound, and the Master Lease and each Schedule constitute legal, valid and binding agreements of the Lessee, enforceable in accordance with their terms, subject to the effect of applicable bankruptcy and other similar laws affecting the rights of creditors generally and rules of law concerning equitable remedies. (c) There are no actions, suits, proceedings or patent claims pending or, to the knowledge of the Lessee, threatened against or affecting the Lessee in any court or before any governmental commission, board or authority which, if adversely determined, will have a material adverse effect on the ability of the Lessee to perform its obligations under the Master Lease and each Schedule. (d) The Equipment is personal property and when subjected to use by the Lessee will not be or become fixtures under applicable law. (e) The Lessee has no material liabilities or obligations, absolute or contingent (individually or in the aggregate), except the liabilities and obligations of the Lessee as set forth in the Financial Statements and liabilities and obligations which have occurred in the ordinary course of business, and which have not been, in any case or in the aggregate, materially adverse to Lessee's ongoing business. (f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has access to, or can become licensed on reasonable terms under all patents, patent applications, trademarks, trade names, inventions, franchises, licenses, permits, computer software and copyrights necessary for the operations of its business as now conducted, with no known infringement of, or conflict with, the rights of others. (g) All material contracts, agreements and instruments to which the Lessee is a party are in full force and effect in all material respects, and are valid, binding and enforceable by the Lessee in accordance with their respective terms, subject to the effect of applicable bankruptcy and other similar laws affecting the rights of creditors generally, and rules of law concerning equitable remedies. 9. DELIVERY AND RETURN OF EQUIPMENT. Lessee hereby assumes the full expense of transportation and in-transit insurance to Lessee's premises and installation thereat of the Equipment. Upon termination (by expiration or otherwise) of each Summary Equipment Schedule, Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense (including, without limitation, expenses of transportation and in-transit insurance), return the Equipment to Lessor in the same operating order, repair, condition and appearance as when received, less normal depreciation and wear and tear. Lessee shall return the Equipment to Lessor at 6111 North River Road, Rosemont, Illinois 60018 or at such other address within the continental United States as directed by Lessor, provided, however, that Lessee's expense shall be limited to the cost of returning the Equipment to Lessor's address as set forth herein. During the period subsequent to receipt of a notice under Section 2, Lessor may demonstrate the Equipment's operation in place and Lessee will supply any of its personnel as may reasonably be required to assist in the demonstrations. 10. LABELING. Upon request, Lessee will mark the Equipment indicating Lessor's interest with labels provided by Lessor. Lessee will keep all Equipment free from any other marking or labeling which might be interpreted as a claim of ownership. 11. INDEMNITY. With regard to bodily injury and property damage liability only, Lessee will indemnify and hold Lessor, any Assignee and any Secured Party harmless from and against any and all claims, costs, expenses, damages and liabilities, including reasonable attorneys' fees, arising out of the ownership (for strict liability in tort only), selection, possession, leasing, operation, control, use, maintenance, delivery, return or other disposition of the Equipment during the term of this Master Lease or until Lessee's obligations under the Master Lease terminate. However, Lessee is not responsible to a party indemnified hereunder for any claims, costs, expenses, damages and liabilities occasioned by the negligent acts of such indemnified party. Lessee agrees to carry bodily injury and property damage liability insurance during the term of the Master Lease in amounts and against risks customarily insured against by the Lessee on equipment owned by it. Any amounts received by Lessor under that insurance will be credited against Lessee's obligations under this Section. 12. RISK OF LOSS. Effective upon delivery and until the Equipment is returned, Lessee relieves Lessor of responsibility for all risks of physical damage to or loss or destruction of the Equipment. Lessee will carry casualty insurance for each item of Equipment in an amount not less than the Casualty Value. All policies for such insurance will name the Lessor and any Secured Party as additional insured and as loss payee, and will provide for at least thirty (30) days prior written notice to the Lessor of cancellation or expiration, and will insure Lessor's interests regardless of any breach or violation by Lessee of any representation, warranty or condition contained in such policies and will be primary without right of contribution from any insurance effected by Lessor. Upon the execution of any Schedule, the Lessee will furnish appropriate evidence of such insurance acceptable to Lessor. Lessee will promptly repair any damaged item of Equipment unless such Equipment has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss, Lessee will provide written notice of that loss to Lessor and Lessee will, at Lessee's option, either (a) replace the item of Equipment with Like Equipment and marketable title to the Like Equipment will automatically vest in Lessor or (b) pay the Casualty Value and after that payment and the payment of all other amounts due and owing with respect to that item of Equipment, Lessee's obligation to pay further Rent for the item of Equipment will cease. 13. DEFAULT, REMEDIES AND MITIGATION. 13.1 DEFAULT. The occurrence of any one or more of the following Events of Default constitutes a default under a Summary Equipment Schedule: (a) Lessee's failure to pay Rent or other amounts payable by Lessee when due if that failure continues for five (5) business days after written notice; or (b) Lessee's failure to perform any other term or condition of the Schedule or the material inaccuracy of any representation or warranty made by the Lessee in the Schedule or in any document or certificate furnished to the Lessor hereunder if that failure or inaccuracy continues for ten (10) business days after written notice; or (c) An assignment by Lessee for the benefit of its creditors, the failure by Lessee to pay its debts when due, the insolvency of Lessee, the filing by Lessee or the filing against Lessee of any petition under any bankruptcy or insolvency law or for the appointment of a trustee or other officer with similar powers, the adjudication of Lessee as insolvent, the liquidation of Lessee, or the taking of any action for the purpose of the foregoing; or (d) The occurrence of an Event of Default under any Schedule, Summary Equipment Schedule or other agreement between Lessee and Lessor or its Assignee or Secured Party. 13.2 REMEDIES. Upon the occurrence of any of the above Events of Default, Lessor, at its option, may: (a) enforce Lessee's performance of the provisions of the applicable Schedule by appropriate court action in law or in equity; (b) recover from Lessee any damages and or expenses, including Default Costs; (c) with notice and demand, recover all sums due and accelerate and recover the present value of the remaining payment stream of all Rent due under the defaulted Schedule (discounted at the same rate of interest at which such defaulted Schedule was discounted with a Secured Party plus any prepayment fees charged to Lessor by the Secured Party or, if there is no Secured Party, then discounted at 6%) together with all Rent and other amounts currently due as liquidated damages and not as a penalty; (d) with notice and process of law and in compliance with Lessee's security requirements, Lessor may enter on Lessee's premises to remove and repossess the Equipment without being liable to Lessee for damages due to the repossession, except those resulting from Lessor's, its assignees', agents' or representatives' negligence; and (e) pursue any other remedy permitted by law or equity. The above remedies, in Lessor's discretion and to the extent permitted by law, are cumulative and may be exercised successively or concurrently. 13.3 MITIGATION. Upon return of the Equipment pursuant to the terms of Section 13.2, Lessor will use its best efforts in accordance with its normal business procedures (and without obligation to give any priority to such Equipment) to mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise dispose of all or any part of the Equipment at a public or private sale for cash or credit with the privilege of purchasing the Equipment. The proceeds from any sale, lease or other disposition of the Equipment are defined as either: (a) if sold or otherwise disposed of, the cash proceeds less the Fair Market Value of the Equipment at the expiration of the Initial Term less the Default Costs; or - 2 - 3 (b) if leased, the present value (discounted at three percent (3%) over the U.S. Treasury Notes of comparable maturity to the term of the re-lease) of the rentals for a term not to exceed the Initial Term, less the Default Costs. Any proceeds will be applied against liquidated damages and any other sums due to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may recover, the amount by which the proceeds are less than the liquidated damages and other sums due to Lessor from Lessee. 14. ADDITIONAL PROVISIONS. 14.1 BOARD ATTENDANCE. Upon invitation of Lessee, one representative of Lessor will have the right to attend Lessee's corporate Board of Directors meetings and Lessee will give Lessor reasonable notice in advance of any special Board of Directors meeting, which notice will provide an agenda of the subject matter to be discussed at such board meeting. Lessee will provide Lessor with a certified copy of the minutes of each Board of Directors meeting within thirty (30) days following the date of such meeting held during the term of this Master Lease. 14.2 FINANCIAL STATEMENTS. As soon as practicable at the end of each month (and in any event within thirty (30) days), Lessee will provide to Lessor the same information which Lessee provides to its Board of Directors, but which will include not less than a monthly income statement, balance sheet and statement of cash flows prepared in accordance with generally accepted accounting principles, consistently applied (the "Financial Statements"). As soon as practicable at the end of each fiscal year, Lessee will provide to Lessor audited Financial Statements setting forth in comparative form the corresponding figures for the fiscal year (and in any event within ninety (90) days), and accompanied by an audit report and opinion of the independent certified public accountants selected by Lessee. Lessee will promptly furnish to Lessor any additional information (including, but not limited to, tax returns, income statements, balance sheets and names of principal creditors) as Lessor reasonably believes necessary to evaluate Lessee's continuing ability to meet financial obligations. After the effective date of the initial registration statement covering a public offering of Lessee's securities, the term "Financial Statements" will be deemed to refer to only those statements required by the Securities and Exchange Commission. 14.3 OBLIGATION TO LEASE ADDITIONAL EQUIPMENT. Upon notice to Lessee, Lessor will not be obligated to lease any Equipment which would have a Commencement Date after said notice if: (i) Lessee is in default under this Master Lease or any Schedule; (ii) Lessee is in default under any loan agreement, the result of which would allow the lender or any secured party to demand immediate payment of any material indebtedness; (iii) there is a material adverse change in Lessee's credit standing; or (iv) Lessor determines (in reasonable good faith) that Lessee will be unable to perform its obligations under this Master Lease or any Schedule. 14.4 MERGER AND SALE PROVISIONS. Lessee will notify Lessor of any proposed Merger at least sixty (60) days prior to the closing date. Lessor may, in its discretion, either (i) consent to the assignment of the Master Lease and all relevant Schedules to the successor entity, or (ii) terminate the Master Lease and all relevant Schedules. If Lessor elects to consent to the assignment, Lessee and its successor will sign the assignment documentation provided by Lessor. If Lessor elects to terminate the Master Lease and all relevant Schedules, then Lessee will pay Lessor all amounts then due and owing and a termination fee equal to the present value (discounted at 6%) of the remaining Rent for the balance of the Initial Term(s) of all Schedules, and will return the Equipment in accordance with Section 9. Lessor hereby consents to any Merger in which the acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially acceptable equivalent measure of creditworthiness as reasonably determined by Lessor. 14.5 ENTIRE AGREEMENT. This Master Lease and associated Schedules and Summary Equipment Schedules supersede all other oral or written agreements or understandings between the parties concerning the Equipment including, for example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT IS SOUGHT TO BE ENFORCED. 14.6 NO WAIVER. No action taken by Lessor or Lessee will be deemed to constitute a waiver of compliance with any representation, warranty or covenant contained in this Master Lease or a Schedule. The waiver by Lessor or Lessee of a breach of any provision of this Master Lease or a Schedule will not operate or be construed as a waiver of any subsequent breach. 14.7 BINDING NATURE. Each Schedule is binding upon, and inures to the benefit of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS. 14.8 SURVIVAL OF OBLIGATIONS. All agreements, obligations including, but not limited to those arising under Section 6.2, representations and warranties contained in this Master Lease, any Schedule, Summary Equipment Schedule or in any document delivered in connection with those agreements are for the benefit of Lessor and any Assignee or Secured Party and survive the execution, delivery, expiration or termination of this Master Lease. 14.9 NOTICES. Any notice, request or other communication to either party by the other will be given in writing and deemed received upon the earlier of (1) actual receipt or (3) three days after mailing if mailed postage prepaid by regular or airmail to Lessor (to the attention of "the Comdisco Venture Group") or Lessee, at the address set out in the Schedule, (3) one day after it is sent by courier or (4) on the same day as sent via facsimile transmission, provided that the original is sent by personal delivery or mail by the sending party. 14.10 APPLICABLE LAW. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE. 14.11 SEVERABILITY. If any one or more of the provisions of this Master Lease or any Schedule is for any reason held invalid, illegal or unenforceable, the remaining provisions of this Master Lease and any such Schedule will be unimpaired, and the invalid, illegal or unenforceable provision replaced by a mutually acceptable valid, legal and enforceable provision that is closest to the original intention of the parties. 14.12 COUNTERPARTS. This Master Lease and any Schedule may be executed in any number of counterparts, each of which will be deemed an original, but all such counterparts together constitute one and the same instrument. If Lessor grants a security interest in all or any part of a Schedule, the Equipment or sums payable thereunder, only that counterpart Schedule marked "Secured Party's Original" can transfer Lessor's rights and all other counterparts will be marked "Duplicate." 14.13 LICENSED PRODUCTS. Lessee will obtain no title to Licensed Products which will at all times remain the property of the owner of the Licensed Products. A license from the owner may be required and it is Lessee's responsibility to obtain any required license before the use of the Licensed Products. Lessee agrees to treat the Licensed Products as confidential information of the owner, to observe all copyright restrictions, and not to reproduce or sell the Licensed Products. 14.14 SECRETARY'S CERTIFICATE. Lessee will, upon execution of this Master Lease, provide Lessor with a secretary's certificate of incumbency and authority. Upon the execution of each Schedule with a purchase price in excess of $1,000,000, Lessee will provide Lessor with an opinion from Lessee's counsel in a form acceptable to Lessor regarding the representations and warranties in Section 8. 14.15 ELECTRONIC COMMUNICATIONS. Each of the parties may communicate with the other by electronic means under mutually agreeable terms. 14.16 LANDLORD/MORTGAGEE WAIVER. Lessee agrees to provide Lessor with a Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be in a form satisfactory to Lessor. 14.17 EQUIPMENT PROCUREMENT CHARGES/PROGRESS PAYMENTS. Lessee hereby agrees that Lessor shall not, by virtue of its entering into this Master Lease, be required to remit any payments to any manufacturer or other third party until Lessee accepts the Equipment subject to this Master Lease. 14.18 DEFINITIONS. ADVANCE - means the amount due to Lessor by Lessee upon Lessee's execution of each Schedule. ASSIGNEE - means an entity to whom Lessor has sold or assigned its rights as owner and Lessor of Equipment. CASUALTY LOSS - means the irreparable loss or destruction of Equipment. CASUALTY VALUE - means the greater of the aggregate Rent remaining to be paid for the balance of the lease term or the Fair Market Value of the Equipment immediately prior to the Casualty Loss. However, if a Casualty Value Table is attached to the relevant Schedule its terms will control. COMMENCEMENT DATE - is defined in each Schedule. DEFAULT COSTS - means reasonable attorney's fees and remarketing costs resulting from a Lessee default or Lessor's enforcement of its remedies. DELIVERY DATE - means date of delivery of Inventory Equipment to Lessee's address. EQUIPMENT - means the property described on a Summary Equipment Schedule and any replacement for that property required or permitted by this Master Lease or a Schedule. EVENT OF DEFAULT - means the events described in Subsection 13.1. - 3 - 4 FAIR MARKET VALUE - means the aggregate amount which would be obtainable in an arm's-length transaction between an informed and willing buyer/user and an informed and willing seller under no compulsion to sell. INITIAL TERM - means the period of time beginning on the first day of the first full Rent Interval following the Commencement Date for all items of Equipment and continuing for the number of Rent Intervals indicated on a Schedule. INTERIM RENT - means the pro-rata portion of Rent due for the period from the Commencement Date through but not including the first day of the first full Rent Interval included in the Initial Term. LATE CHARGE - means the lesser of five percent (5%) of the payment due or the maximum amount permitted by the law of the state where the Equipment is located. LICENSED PRODUCTS - means any software or other licensed products attached to the Equipment. LIKE EQUIPMENT - means replacement Equipment which is lien free and of the same model, type, configuration and manufacture as Equipment. MERGER - means any consolidation or merger of the Lessee with or into any other corporation or entity, any sale or conveyance of all or substantially all of the assets or stock of the Lessee by or to any other person or entity in which Lessee is not the surviving entity. NOTICE PERIOD - means not less than ninety (90) days nor more than twelve (12) months prior to the expiration of the lease term. OWNER - means the owner of Equipment. RENT - means the rent Lessee will pay for each item of Equipment expressed in a Summary Equipment Schedule either as a specific amount or an amount equal to the amount which Lessor pays for an item of Equipment multiplied by a lease rate factor plus all other amounts due to Lessor under this Master Lease or a Schedule. RENT INTERVAL - means a full calendar month or quarter as indicated on a Schedule. SCHEDULE - means either an Equipment Schedule or a Licensed Products Schedule which incorporates all of the terms and conditions of this Master Lease. SECURED PARTY - means an entity to whom Lessor has granted a security interest for the purpose of securing a loan. SUMMARY EQUIPMENT SCHEDULE - means a certificate provided by Lessor summarizing all of the Equipment for which Lessor has received Lessee approved vendor invoices, purchase documents and/or evidence of delivery during a calendar quarter which will incorporate all of the terms and conditions of the related Schedule and this Master Lease and will constitute a separate lease for the equipment leased thereunder. IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as of the day and year first above written. E-LOAN, INC. COMDISCO, INC., as Lessee as Lessor By: /s/ Chris Larsen By: /s/ Illegible -------------------------------- --------------------------- Title: President Title: President, Comdisco ----------------------------- Ventures Division ------------------------ -4- 5 ADDENDUM TO THE MASTER LEASE AGREEMENT DATED AS OF MARCH 4, 1998 BETWEEN E-LOAN, INC., AS LESSEE AND COMDISCO, INC., AS LESSOR The undersigned hereby agree that the terms and conditions of the above-referenced Master Lease Agreement are hereby modified and amended as follows: 1) SECTION 4.2 "WARRANTY AND DISCLAIMER OF WARRANTIES." First Sentence, line 2, delete the words "Lessee is not in default" and insert "no Event of Default has occurred and is continuing, neither Lessor nor any person or entity claiming by or through Lessor". 2) SECTION 5.1 "TITLE." Delete the first sentence in its entirety and replace with: "Lessee shall have no right, title or interest in the Equipment except as set forth in this Master Lease or in any Schedule." Third Sentence, line 3, after the words "caused by Lessor", insert "or parties claiming by or through Lessor". 3) SECTION 5.3 "ASSIGNMENT BY LESSOR." In Paragraph (a), second sentence, lines 3 and 4, delete the words "Lessee is not in default and the Secured Party continues to receive all Rent payable under the Schedule." and replace with "no Event of Default has occurred and is continuing". In Paragraph (b), insert the following clause at the beginning thereof: "Upon written notice from Lessor,". 4) SECTION 6.1 "NET LEASE." At the end of second sentence insert the following, ";provided, however, that Lessee's ability to bring suit against Lessor for breach of this Master Lease shall not be affected by this Section 6.1.". 5) SECTION 6.2 "TAXES AND FEES." First Sentence, line 3 delete "accrued for or arising" and replace with "attributable to periods". -1- 6 6) SECTION 7.1 "CARE, USE AND MAINTENANCE; INSPECTION BY LESSOR." Delete the fourth sentence in its entirety and replace with: "With Lessor's prior written consent, Lessee may have the Equipment maintained by a party other than the manufacturer. Lessor approves Lessee as such maintenance contractor.". 7) SECTION 8. "REPRESENTATIONS AND WARRANTIES OF LESSEE." Paragraph (f) insert the following at the end thereof: ", except where the failure to do so would not reasonably be expected to have a material adverse effect.". 8) SECTION 9. "DELIVERY AND RETURN OF EQUIPMENT." Second sentence, line 3, after the words "to Lessor's" insert the word "reasonable". Fourth sentence, line 1, after the words "under Section 2" insert ", subject to Lessee's security requirements,". Insert the following sentence at the end of Section 9: "All such demonstrations will be conducted in such manner as to minimize any interference with Lessee's operations.". 9) SECTION 11. "INDEMNITY." Second sentence, in line 3, after the words "negligent acts" insert "or willful conduct.". 10) SECTION 13.1 "DEFAULT." Paragraph (c), insert the following at the end thereof: "(and any such involuntary event has not been dismissed or vacated within 30 days)". 11) SECTION 13.2 "REMEDIES." Paragraph (c), line 5, delete "6%" and insert "U.S. Treasury Notes of comparable maturity to the remaining term of the defaulted Schedule". 12) SECTION 13.3 "MITIGATION" Paragraph (b), lines 2 and 3, delete "3 percent (3%) over the U.S. Treasury Notes of comparable maturity to the term of" and insert, "the same interest rate implicit in". -2- 7 13) 14.1., "BOARD ATTENDANCE" Delete this section in its entirety. 14) 14.2., "FINANCIAL STATEMENTS" In the first sentence, delete the phrase "the same information which Lessee provides to its Board of Directors, but which will include not less than" and change the words "month" and "monthly" to "quarter" and "quarterly". At the end of the second sentence, insert the phrase "if required by the Lessee's Board of Directors". 15) SECTION 14.3 "OBLIGATION TO LEASE ADDITIONAL EQUIPMENT." In line 3, delete "Lessee is in default" and replace with "an Event of Default has occurred or is continuing". In line 6 after the words "material indebtedness" insert "for borrowed money in an amount in excess of $75,000". 16) SECTION 14.4 "MERGER AND SALE PROVISIONS." In line 2, delete "sixty (60)" and replace with "ten (10)". In the fourth sentence, change "6%" to "7%". 17) SECTION 14.6 "NO WAIVER." First sentence, insert the following at the beginning thereof: "Except for a written waiver,". 18) SECTION 14.7 "BINDING NATURE." Second sentence, insert the following at the end thereof: "EXCEPT IN ACCORDANCE WITH SECTION 14.4.". 19) SECTION 14.9 "NOTICES." Line 3, delete "three (3)" and insert "five (5)"; delete "postage prepaid by regular or air mail" and insert "certified mail, return receipt requested". -3- 8 20) SECTION 14.13 "LICENSED PRODUCTS." After the first sentence insert: "To the extent that Lessor, by reason of its ownership of the Equipment, holds any license to a Licensed Product, Lessor shall obtain the right for Lessee to use any such Licensed Product for the duration of the lease term.". Third sentence, line 2, after the word "owner" insert "of such Licensed Product". 21) SECTION 14.18 "DEFINITIONS." "Delivery Date" revise the word "Inventory" to read "inventory". "Like Equipment" delete the words "of the same model, type, configuration, and manufacture as Equipment." and replace with "of the same manufacture and of a type, model and feature configuration having a capability and value equal to or greater than the Equipment being replaced.". Except as amended hereby, all other terms and conditions of the Master Lease Agreement remain in full force and effect. E-LOAN, INC. COMDISCO, INC. as Lessee as Lessor By: /s/ Chris Larsen By: /s/ Illegible ------------------------------ --------------------------- Title: President Title: President, Comdisco --------------------------- Ventures Division Date: 3/1/98 ------------------------ ---------------------------- Date: March 6, 1998 ------------------------- -4- 9 EQUIPMENT SCHEDULE VL-1 DATED AS OF MARCH 4, 1998 TO MASTER LEASE AGREEMENT DATED AS OF MARCH 4, 1998 (THE "MASTER LEASE") LESSEE: E-LOAN, INC. LESSOR: COMDISCO, INC. ADMIN. CONTACT/PHONE NO.: ADDRESS FOR ALL NOTICES: Controller 6111 North River Road Phone: (650) 617-0400 Rosemont, Illinois 60018 Fax: (650) 617-0410 Attn.: Venture Group Address for Notices: 540 University Av. Suite 150 Palo Alto, CA 94301 Central Billing Location: Rent Interval: Monthly same as above Attn.: Lessee Reference No.: (24 digits maximum) Location of Equipment: Initial Term: 48 months 540 University Av. Suite 150 (Number of Rent Intervals) Palo Alto, CA 94301 6200 Village Parkway, Suite 102 Dublin, CA 95468 Lease Rate Factor: Months 1-6: 0% Months 7-48: 2.771% Exodus Communications 2650 San Tomas Expressway Santa Clara, CA 95051 EQUIPMENT (as defined below): Advance: $18,011.50 Equipment specifically approved by Lessor, which shall be delivered to and accepted by Lessee during the period March 4, 1998 through March 4, 1999 ("Equipment Delivery Period"), for which Lessor receives vendor invoices approved for payment, up to an aggregate purchase price of $650,000.00 ("Commitment Amount"); excluding custom use equipment, leasehold improvements, installation costs and delivery costs, rolling stock, special tooling, "stand-alone" software, application software bundled into computer hardware, hand held items, molds and fungible items. - 1 - 10 1. EQUIPMENT PURCHASE This Schedule contemplates Lessor's acquisition of Equipment for lease to Lessee, either by one of the first three categories listed below or by providing Lessee with Equipment from the fourth category, in an aggregate value up to the Commitment Amount referred to on the face of this Schedule. If the Equipment acquired is of category (i), (ii) , (iii) below, the effectiveness of this Schedule as it relates to those items of Equipment is contingent upon Lessee's acknowledgment at the time Lessor acquires the Equipment that Lessee has either received or approved the relevant purchase documentation between vendor and Lessor for that Equipment. (i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is obtained from a vendor by Lessee for its use subject to Lessor's prior approval of the Equipment, which approval shall not be unreasonably withheld. (ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at Lessee's site and to which Lessee has clear title and ownership may be considered by Lessor for inclusion under this Lease (the "Sale-Leaseback Transaction"). Any request for a Sale-Leaseback Transaction must be submitted to Lessor in writing (along with accompanying evidence of Lessee's Equipment ownership satisfactory to Lessor for all Equipment submitted) no later than April 4, 1998 *. Lessor will not perform a Sale-Leaseback Transaction for any request or accompanying Equipment ownership documents which arrive after the date marked above by an asterisk (*). Further, any sale-leaseback Equipment will be placed on lease subject to: (1) Lessor prior approval of the Equipment; and (2) if approved, at Lessor's actual net appraised Equipment value pursuant to the schedule below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S DATE NET EQUIPMENT COST PAID BY LESSOR -------------------------- ---------------------------------- Between 12/04/97 and 3/4/98 (90 days) 100% Between 10/04/97 and 12/03/97 (60 days) 80% Between 7/05/97 and 10/03/97(90 days) 70%
Lessee represents that it has paid all California sales tax due on the cost of that portion of Equipment to be installed in California and agrees to provide evidence of such payment to Lessor, if specifically requested. As a result of the election, Lessor agrees that it will not invoice Lessee for use tax on the monthly rental rate. Lessee understands that this is an irrevocable election to measure the tax by the Equipment cost and cannot be changed except prior to installation of the Equipment. (iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which is obtained from a third party by Lessee for its use subject to Lessor's prior approval of the Equipment , which approval shall not be unreasonably withheld, and at Lessor's appraised value for such used Equipment. (iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct Service, Lessor will purchase new or used Equipment from a third party or Lessor will supply new or used Equipment from its inventory for use by Lessee at rates provided by Lessor. 2. COMMENCEMENT DATE The Commencement Date for each item of new on-order or used on-order Equipment will be the install date as confirmed in writing by Lessee as set forth on the vendor invoice of which a facsimile transmission will constitute an original document. The Commencement Date for sale-leaseback Equipment shall be the date Lessor tenders the purchase price. The Commencement Date for 800 Number Equipment shall be fifteen (15) days from the ship date, such ship date to be set forth on the vendor invoice or if unavailable on the vendor invoice the ship date will be determined by Lessor upon other supporting shipping documentation. Lessor will summarize all approved invoices, purchase documentation and evidence of delivery, as applicable, received in the same calendar quarter into a Summary Equipment Schedule in the form attached to this Schedule as Exhibit 1, and the Initial Term will begin the first day of the calendar quarter thereafter. Each Summary Equipment Schedule will contain the Equipment location, description, serial number(s) and cost and will incorporate the terms and conditions of the Master Lease and this Schedule and will constitute a separate lease. - 2 - 11 3. OPTION TO EXTEND So long as no Event of Default has occurred and is continuing hereunder, and upon written notice no earlier than twelve (12) months and no later than ninety (90) days prior to the expiration of the Initial Term of a Summary Equipment Schedule, Lessee will have the right to extend the Initial Term of such Summary Equipment Schedule for a period of one (1) year. In such event, the rent to be paid during said extended period shall be mutually agreed upon and if the parties cannot mutually agree, then the Summary Equipment Schedule shall continue in full force and effect pursuant to the existing terms and conditions until terminated in accordance with its terms. The Summary Equipment Schedule will continue in effect following said extended period until terminated by either party upon not less than ninety (90) days prior written notice, which notice shall be effective as of the date of receipt. 4. PURCHASE OPTION So long as no Event of Default has occurred and is continuing hereunder, and upon written notice no earlier than twelve (12) months and no later than ninety (90) days prior to the expiration of the Initial Term or the extended term of the applicable Summary Equipment Schedule, Lessee will have the option at the expiration of the Initial Term of the Summary Equipment Schedule to purchase all, but not less than all, of the Equipment listed therein for a purchase price not to exceed 15% of the Equipment cost and upon terms and conditions to be mutually agreed upon by the parties following Lessee's written notice, plus any taxes applicable at time of purchase. Said purchase price shall be paid to Lessor no later than the expiration date of the Initial Term or extended term. Title to the Equipment shall automatically pass to Lessee upon payment in full of the purchase price but, in no event, earlier than the expiration of the fixed Initial Term or extended term, if applicable. If the parties are unable to agree on the purchase price or the terms and conditions with respect to said purchase, then the Summary Equipment Schedule with respect to this Equipment shall remain in full force and effect. Notwithstanding the exercise by Lessee of this option and payment of the purchase price, until all obligations under the applicable Summary Equipment Schedule have been fulfilled, it is agreed and understood that Lessor shall retain a purchase money security interest in the Equipment listed therein and the Summary Equipment Schedule shall constitute a Security Agreement under the Uniform Commercial Code of the state in which the Equipment is located. In the event Lessee gives less than 90 days notice as required in Section 3 and Section 4, any Rent due after the expiration of the Initial Term of the Summary Equipment Schedule or extended term shall be at the Lease Rate Factor based on an amount equal to 15% of the Summary Equipment Schedule cost. 5. TECHNOLOGY EXCHANGE OPTION If Lessee is not in default, and there is no material adverse change in Lessee's credit, on or after the expiration of the 12th month of any Summary Equipment Schedule, Lessee shall have the option to replace any of the Equipment subject to such summary Equipment Schedule with new technology equipment ("New Technology Equipment") utilizing the following guidelines: A. Equipment being replaced with New Technology Equipment shall have an aggregate original cost equal to or greater than $20,000 and be comprised of full configurations of equipment. B. This technology Exchange Option shall be limited to a maximum in the aggregate of fifty percent (50%) of the original equipment cost and shall not apply to software. C. The cost of the New Technology Equipment must be equal to or greater than the original equipment cost of the replaced equipment, but in no event shall exceed 150% of the original equipment cost. D. The remaining lease payments applicable to the equipment being replaced by the New Technology Equipment will be discounted to present value at 7%. The wholesale market value of the equipment being replaced will be established by Comdisco based upon then current market conditions. Upon the return of the replaced equipment, the wholesale price will be deducted from the present value of the remaining rentals and the differential will be added to the cost of the New Technology Equipment in calculating the new rental. The lease for the New Technology Equipment will contain terms and conditions substantially similar to those for the replaced equipment and will have an Initial Term not less than the balance of the remaining Initial Term for the replaced equipment. - 3 - 12 6. SPECIAL TERMS The terms and conditions of the Lease as they pertain to this Schedule are hereby modified and amended as follows: Master Lease: This Schedule is issued pursuant to the Lease identified on page 1 of this Schedule. All of the terms and conditions of the Lease are incorporated in and made a part of this Schedule as if they were expressly set forth in this Schedule. The parties hereby reaffirm all of the terms and conditions of the Lease (including, without limitation, the representations and warranties set forth in Section 8) except as modified herein by this Schedule. This Schedule may not be amended or rescinded except by a writing signed by both parties. E-LOAN, INC. COMDISCO, INC. AS LESSEE AS LESSOR By: /s/ Chris Larsen By: /s/ Illegible -------------------------------- --------------------------- Title: President Title: President, Comdisco ----------------------------- Ventures Division Date: 3/1/98 ------------------------ ------------------------------ Date: ------------------------- - 4 - 13 EXHIBIT 1 SUMMARY EQUIPMENT SCHEDULE This Summary Equipment Schedule dated XXXX is executed pursuant to Equipment Schedule No. X to the Master Lease Agreement dated XXXX between Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions, representations and warranties of the Master Lease Agreement and Equipment Schedule No. X are incorporated herein and made a part hereof, and this Summary Equipment Schedule constitutes a Schedule for the Equipment on the attached invoices. 1. For Period Beginning: And Ending: 2. Initial Term Starts on: Initial Term: (Number of Rent Intervals) 3. Total Summary Equipment Cost: 4. Lease Rate Factor: 5. Rent: 6. Acceptance Doc Type: - 5 - 14 EQUIPMENT SCHEDULE VL-2 DATED AS OF MARCH 4, 1998 TO MASTER LEASE AGREEMENT DATED AS OF MARCH 4, 1998 (THE "MASTER LEASE") LESSEE: E-LOAN, INC. LESSOR: COMDISCO, INC. ADMIN. CONTACT/PHONE NO.: ADDRESS FOR ALL NOTICES: Controller 6111 North River Road Phone: (650) 617-0400 Rosemont, Illinois 60018 Fax: (650) 617-0410 Attn.: Venture Group Address for Notices: 540 University Av. Suite 150 Palo Alto, CA 94301 Central Billing Location: Rent Interval: Monthly same as above Attn.: Lessee Reference No.: (24 digits maximum) Location of Equipment: Initial Term: 48 months 540 University Av. Suite 150 (Number of Rent Intervals) Palo Alto, CA 94301 6200 Village Parkway, Suite 102 Dublin, CA 94568 Lease Rate Factor: Months 1-6: 0% Exodus Communications Months 7-48: 2.771% 2650 San Tomas Expressway Santa Clara, CA 95051 EQUIPMENT (as defined below): Advance: $9,698.50 Software and tenant improvements specifically approved by Lessor, which shall be delivered to and accepted by Lessee during the period March 4, 1998 through March 4, 1999 ("Equipment Delivery Period") for which Lessor receives vendor invoices approved for payment, up to an aggregate purchase price of $350,000.00 ("Commitment Amount"); excluding custom use equipment, installation costs and delivery costs, rolling stock, special tooling, hand held items, molds and fungible items. - 1 - 15 1. EQUIPMENT PURCHASE This Schedule contemplates Lessor's acquisition of Equipment for lease to Lessee, either by one of the first three categories listed below or by providing Lessee with Equipment from the fourth category, in an aggregate value up to the Commitment Amount referred to on the face of this Schedule. If the Equipment acquired is of category (i), (ii) , (iii) below, the effectiveness of this Schedule as it relates to those items of Equipment is contingent upon Lessee's acknowledgment at the time Lessor acquires the Equipment that Lessee has either received or approved the relevant purchase documentation between vendor and Lessor for that Equipment. (i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is obtained from a vendor by Lessee for its use subject to Lessor's prior approval of the Equipment, which approval shall not be unreasonably withheld. (ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at Lessee's site and to which Lessee has clear title and ownership may be considered by Lessor for inclusion under this Lease (the "Sale-Leaseback Transaction"). Any request for a Sale-Leaseback Transaction must be submitted to Lessor in writing (along with accompanying evidence of Lessee's Equipment ownership satisfactory to Lessor for all Equipment submitted) no later than April 4, 1998 *. Lessor will not perform a Sale-Leaseback Transaction for any request or accompanying Equipment ownership documents which arrive after the date marked above by an asterisk (*). Further, any sale-leaseback Equipment will be placed on lease subject to: (1) Lessor prior approval of the Equipment; and (2) if approved, at Lessor's actual net appraised Equipment value pursuant to the schedule below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S DATE NET EQUIPMENT COST PAID BY LESSOR -------------------------- ---------------------------------- Between 12/04/97 and 3/4/98 (90 days) 100% Between 10/04/97 and 12/03/97 (60 days) 80% Between 7/05/97 and 10/03/97(90 days) 70%
Lessee represents that it has paid all California sales tax due on the cost of that portion of Equipment to be installed in California and agrees to provide evidence of such payment to Lessor, if specifically requested. As a result of the election, Lessor agrees that it will not invoice Lessee for use tax on the monthly rental rate. Lessee understands that this is an irrevocable election to measure the tax by the Equipment cost and cannot be changed except prior to installation of the Equipment. (iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which is obtained from a third party by Lessee for its use subject to Lessor's prior approval of the Equipment, which approval shall not be unreasonably withheld, and at Lessor's appraised value for such used Equipment. (iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct Service, Lessor will purchase new or used Equipment from a third party or Lessor will supply new or used Equipment from its inventory for use by Lessee at rates provided by Lessor. 2. COMMENCEMENT DATE The Commencement Date for each item of new on-order or used on-order Equipment will be the install date as confirmed in writing by Lessee as set forth on the vendor invoice of which a facsimile transmission will constitute an original document. The Commencement Date for sale-leaseback Equipment shall be the date Lessor tenders the purchase price. The Commencement Date for 800 Number Equipment shall be fifteen (15) days from the ship date, such ship date to be set forth on the vendor invoice or if unavailable on the vendor invoice the ship date will be determined by Lessor upon other supporting shipping documentation. Lessor will summarize all approved invoices, purchase documentation and evidence of delivery, as applicable, received in the same calendar quarter into a Summary Equipment Schedule in the form attached to this Schedule as Exhibit 1, and the Initial Term will begin the first day of the calendar quarter thereafter. Each Summary Equipment Schedule will contain the Equipment location, description, serial number(s) and cost and will incorporate the terms and conditions of the Master Lease and this Schedule and will constitute a separate lease. - 2 - 16 3. MISCELLANEOUS In consideration of Lessor financing software and tenant improvements hereunder, Lessee agrees in addition to its last Monthly Rent Payment to remit to Lessor an amount equal to 15% of Lessor's aggregate cost of software and tenant improvements provided hereunder. 4. SPECIAL TERMS The terms and conditions of the Lease as they pertain to this Schedule are hereby modified and amended as follows: (a) Section 9, Delivery and Return of Equipment Delete second, third and fourth sentences in their entirety. Master Lease: This Schedule is issued pursuant to the Lease identified on page 1 of this Schedule. All of the terms and conditions of the Lease are incorporated in and made a part of this Schedule as if they were expressly set forth in this Schedule. The parties hereby reaffirm all of the terms and conditions of the Lease (including, without limitation, the representations and warranties set forth in Section 8) except as modified herein by this Schedule. This Schedule may not be amended or rescinded except by a writing signed by both parties. E-LOAN, INC. COMDISCO, INC. AS LESSEE AS LESSOR By: /s/ Chris Larsen By: /s/ Illegible -------------------------------- --------------------------- Title: President Title: President, Comdisco ----------------------------- Ventures Division Date: 3/1/98 ------------------------ ------------------------------ Date: March 6, 1998 ------------------------- - 3 - 17 EXHIBIT 1 SUMMARY EQUIPMENT SCHEDULE This Summary Equipment Schedule dated XXXX is executed pursuant to Equipment Schedule No. X to the Master Lease Agreement dated XXXX between Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions, representations and warranties of the Master Lease Agreement and Equipment Schedule No. X are incorporated herein and made a part hereof, and this Summary Equipment Schedule constitutes a Schedule for the Equipment on the attached invoices. 1. For Period Beginning: And Ending: 2. Initial Term Starts on: Initial Term: (Number of Rent Intervals) 3. Total Summary Equipment Cost: 4. Lease Rate Factor: 5. Rent: 6. Acceptance Doc Type: - 4 - 18 THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL) REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS. WARRANT AGREEMENT TO PURCHASE SHARES OF THE SERIES C PREFERRED STOCK OF E-LOAN, INC. DATED AS OF MARCH 4, 1998 (THE "EFFECTIVE DATE") WHEREAS, E-Loan, Inc., a California corporation (the "Company") has entered into a Master Lease Agreement dated as of March 4, 1998, Equipment Schedules No. VL-1 and VL-2 dated as of March 4, 1998, and related Summary Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a Delaware corporation (the "Warrantholder"); and WHEREAS, the Company desires to grant to Warrantholder, in consideration for such Leases, the right to purchase shares of its Series C Preferred Stock; NOW, THEREFORE, in consideration of the Warrantholder executing and delivering such Leases and in consideration of mutual covenants and agreements contained herein, the Company and Warrantholder agree as follows: 1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK. For value received, the Company hereby grants to the Warrantholder, and the Warrantholder is entitled, upon the terms and subject to the conditions hereinafter set forth, to subscribe for and purchase from the Company that number of fully paid and assessable shares of the Company's Series C Preferred Stock ("Preferred Stock") equal to Thirty Thousand Dollars ($30,000.00) ("Aggregate Purchase Price") divided by the exercise price as set forth below ("Exercise Price"). Notwithstanding the foregoing, the Exercise Price shall equal $2.00 per share if Company raises a round of equity financing of at least $1,000,000.00 (the "Next Round") or issues additional warrants within 120 days from the date hereof. In the event the Next Round or a warrant issuance does not occur within such 120 day period, the Exercise Price shall equal to the sum of $1.22852 per share (the "Last Round") plus the product of (a) the difference between the price per share of the Next Round and the Last Round, multiplied by (b) the fraction resulting from dividing (x) the number of days from the date of closing of the Last Round to the date of execution of the Leases, by (y) the number of days from the date of the closing of the Last Round to the date of closing of the Next Round; provided however, if the Next Round is not successfully completed within twenty-four (24) months of the date hereof, then the Exercise Price shall be equal to $1.22852 per share. The number and purchase price of such shares are subject to adjustment as provided in Section 8 hereof. 2. TERM OF THE WARRANT AGREEMENT. Except as otherwise provided for herein, the term of this Warrant Agreement and the right to purchase Preferred Stock as granted herein shall commence on the Effective Date and shall be exercisable for a period of (i) seven (7) years or (ii) three (3) years from the effective date of the Company's initial public offering, whichever is shorter. 3. EXERCISE OF THE PURCHASE RIGHTS. The purchase rights set forth in this Warrant Agreement are exercisable by the Warrantholder, in whole or in part, at any time, or from time to time, prior to the expiration of the term set forth in Section 2 above, by tendering to the Company at its principal office a notice of exercise in the form attached hereto as Exhibit I (the "Notice of - 1 - 19 Exercise"), duly completed and executed. Promptly upon receipt of the Notice of Exercise and the payment of the purchase price in accordance with the terms set forth below, and in no event later than twenty-one (21) days thereafter, the Company shall issue to the Warrantholder a certificate for the number of shares of Preferred Stock purchased and shall execute the acknowledgment of exercise in the form attached hereto as Exhibit II (the "Acknowledgment of Exercise") indicating the number of shares which remain subject to future purchases, if any. The Exercise Price may be paid at the Warrantholder's election either (i) by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as determined below. If the Warrantholder elects the Net Issuance method, the Company will issue Preferred Stock in accordance with the following formula: X = Y(A-B) ------ A Where: X = the number of shares of Preferred Stock to be issued to the Warrantholder. Y = the number of shares of Preferred Stock requested to be exercised under this Warrant Agreement. A = the fair market value of one (1) share of Preferred Stock. B = the Exercise Price. For purposes of the above calculation, current fair market value of Preferred Stock shall mean with respect to each share of Preferred Stock: (i) if the exercise is in connection with an initial public offering of the Company's Common Stock, and if the Company's Registration Statement relating to such public offering has been declared effective by the SEC, then the fair market value per share shall be the product of (x) the initial "Price to Public" specified in the final prospectus with respect to the offering and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; (ii) if this Warrant is exercised after, and not in connection with the Company's initial public offering, and: (a) if traded on a securities exchange, the fair market value shall be deemed to be the product of (x) the average of the closing prices over a twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; or (b) if actively traded over-the-counter, the fair market value shall be deemed to be the product of (x) the average of the closing bid and asked prices quoted on the NASDAQ system (or similar system) over the twenty-one (21) day period ending three days before the day the current fair market value of the securities is being determined and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise; (iii) if at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the current fair market value of Preferred Stock shall be the product of (x) the highest price per share which the Company could obtain from a willing buyer (not a current employee or director) for shares of Common Stock sold by the Company, from authorized but unissued shares, as determined in good faith by its Board of Directors and (y) the number of shares of Common Stock into which each share of Preferred Stock is convertible at the time of such exercise, unless the Company shall become subject to a merger, acquisition or other consolidation pursuant to which the Company is not the surviving party, in which case the fair market value of Preferred Stock shall be deemed to be the value received by the holders of the Company's Preferred Stock on a common equivalent basis pursuant to such merger or acquisition. Upon partial exercise by either cash or Net Issuance, the Company shall promptly issue an amended Warrant Agreement representing the remaining number of shares purchasable hereunder. All other terms and - 2 - 20 conditions of such amended Warrant Agreement shall be identical to those contained herein, including, but not limited to the Effective Date hereof. 4. RESERVATION OF SHARES. (a) Authorization and Reservation of Shares. During the term of this Warrant Agreement, the Company will at all times have authorized and reserved a sufficient number of shares of its Preferred Stock to provide for the exercise of the rights to purchase Preferred Stock as provided for herein. (b) Registration or Listing. If any shares of Preferred Stock required to be reserved hereunder require registration with or approval of any governmental authority under any Federal or State law (other than any registration under the Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any similar Federal statute then enforced, or any state securities law, required by reason of any transfer involved in such conversion), or listing on any domestic securities exchange, before such shares may be issued upon conversion, the Company will, at its expense and as expeditiously as possible, use its best efforts to cause such shares to be duly registered, listed or approved for listing on such domestic securities exchange, as the case may be. 5. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of the Warrant, but in lieu of such fractional shares the Company shall make a cash payment therefor upon the basis of the Exercise Price then in effect. 6. NO RIGHTS AS SHAREHOLDER. This Warrant Agreement does not entitle the Warrantholder to any voting rights or other rights as a shareholder of the Company prior to the exercise of the Warrant. 7. WARRANTHOLDER REGISTRY. The Company shall maintain a registry showing the name and address of the registered holder of this Warrant Agreement. 8. ADJUSTMENT RIGHTS. The purchase price per share and the number of shares of Preferred Stock purchasable hereunder are subject to adjustment, as follows: (a) Merger and Sale of Assets. If at any time there shall be a capital reorganization of the shares of the Company's stock (other than a combination, reclassification, exchange or subdivision of shares otherwise provided for herein), or a merger or consolidation of the Company with or into another corporation whether or not the Company is the surviving corporation, or the sale of all or substantially all of the Company's properties and assets to any other person (hereinafter referred to as a "Merger Event"), then, as a part of such Merger Event, lawful provision shall be made so that the Warrantholder shall thereafter be entitled to receive, upon exercise of the Warrant, the number of shares of preferred stock or other securities of the successor corporation resulting from such Merger Event, equivalent in value to that which would have been issuable if Warrantholder had exercised this Warrant immediately prior to the Merger Event. In any such case, appropriate adjustment (as determined in good faith by the Company's Board of Directors) shall be made in the application of the provisions of this Warrant Agreement with respect to the rights and interest of the Warrantholder after the Merger Event to the end that the provisions of this Warrant Agreement (including adjustments of the Exercise Price and number of shares of Preferred Stock purchasable) shall be applicable to the greatest extent possible. (b) Reclassification of Shares. If the Company at any time shall, by combination, reclassification, exchange or subdivision of securities or otherwise, change any of the securities as to which purchase rights under this Warrant Agreement exist into the same or a different number of securities of any other class or classes, this Warrant Agreement shall thereafter represent the right to acquire such number and kind of securities as would have been issuable as the result of such change with respect to the securities which were subject to the purchase rights under this Warrant Agreement immediately prior to such combination, reclassification, exchange, subdivision or other change. - 3 - 21 (c) Subdivision or Combination of Shares. If the Company at any time shall combine or subdivide its Preferred Stock, the Exercise Price shall be proportionately decreased in the case of a subdivision, or proportionately increased in the case of a combination. (d) Stock Dividends. If the Company at any time shall pay a dividend payable in, or make any other distribution (except any distribution specifically provided for in the foregoing subsections (a) or (b)) of the Company's stock, then the Exercise Price shall be adjusted, from and after the record date of such dividend or distribution, to that price determined by multiplying the Exercise Price in effect immediately prior to such record date by a fraction (i) the numerator of which shall be the total number of all shares of the Company's stock outstanding (on an as-converted basis) immediately prior to such dividend or distribution, and (ii) the denominator of which shall be the total number of all shares of the Company's stock outstanding (on an as-converted basis) immediately after such dividend or distribution. The Warrantholder shall thereafter be entitled to purchase, at the Exercise Price resulting from such adjustment, the number of shares of Preferred Stock (calculated to the nearest whole share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Preferred Stock issuable upon the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. (e) Antidilution Rights. Additional antidilution rights applicable to the Preferred Stock purchasable hereunder are as set forth in the Company's Certificate of Incorporation, as amended through the Effective Date, a true and complete copy of which is attached hereto as Exhibit IV (the "Charter"). The Company shall promptly provide the Warrantholder with any restatement, amendment, modification or waiver of the Charter. The Company shall provide Warrantholder with prior written notice of any issuance of its stock or other equity security to occur after the Effective Date of this Warrant, which notice shall include (a) the price at which such stock or security is to be sold, (b) the number of shares to be issued, and (c) such other information as necessary for Warrantholder to determine if a dilutive event has occurred. (f) Notice of Adjustments. If: (i) the Company shall declare any dividend or distribution upon its stock, whether in cash, property, stock or other securities; (ii) the Company shall offer for subscription prorata to the holders of any class of its Preferred or other convertible stock any additional shares of stock of any class or other rights; (iii) there shall be any Merger Event; (iv) there shall be an initial public offering; or (v) there shall be any voluntary dissolution, liquidation or winding up of the Company; then, in connection with each such event, the Company shall send to the Warrantholder: (A) at least twenty (20) days' prior written notice of the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution, subscription rights (specifying the date on which the holders of Preferred Stock shall be entitled thereto) or for determining rights to vote in respect of such Merger Event, dissolution, liquidation or winding up; (B) in the case of any such Merger Event, dissolution, liquidation or winding up, at least twenty (20) days' prior written notice of the date when the same shall take place (and specifying the date on which the holders of Preferred Stock shall be entitled to exchange their Preferred Stock for securities or other property deliverable upon such Merger Event, dissolution, liquidation or winding up); and (C) in the case of a public offering, the Company shall give the Warrantholder at least twenty (20) days written notice prior to the effective date thereof. Each such written notice shall set forth, in reasonable detail, (i) the event requiring the adjustment, (ii) the amount of the adjustment, (iii) the method by which such adjustment was calculated, (iv) the Exercise Price, and (v) the number of shares subject to purchase hereunder after giving effect to such adjustment, and shall be given by first class mail, postage prepaid, addressed to the Warrantholder, at the address as shown on the books of the Company. (g) Timely Notice. Failure to timely provide such notice required by subsection (f) above shall entitle Warrantholder to retain the benefit of the applicable notice period notwithstanding anything to the contrary contained in any insufficient notice received by Warrantholder. The notice period shall begin on the date Warrantholder actually receives a written notice containing all the information specified above. 9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. (a) Reservation of Preferred Stock. The Preferred Stock issuable upon exercise of the Warrantholder's rights has been duly and validly reserved and, when issued in accordance with the provisions of this Warrant Agreement, will be validly issued, fully paid and non-assessable, and will be free of any taxes, liens, charges or encumbrances of any nature whatsoever; provided, however, that the Preferred Stock issuable pursuant to this Warrant Agreement may be subject to restrictions on transfer under state and/or Federal securities laws. The Company has made available to the Warrantholder true, correct and complete copies of its Charter and Bylaws, as amended. The issuance of certificates for shares of Preferred Stock upon exercise of the Warrant Agreement shall - 4 - 22 be made without charge to the Warrantholder for any issuance tax in respect thereof, or other cost incurred by the Company in connection with such exercise and the related issuance of shares of Preferred Stock. The Company shall not be required to pay any tax which may be payable in respect of any transfer involved and the issuance and delivery of any certificate in a name other than that of the Warrantholder. (b) Due Authority. The execution and delivery by the Company of this Warrant Agreement and the performance of all obligations of the Company hereunder, including the issuance to Warrantholder of the right to acquire the shares of Preferred Stock, have been duly authorized by all necessary corporate action on the part of the Company, and the Leases and this Warrant Agreement are not inconsistent with the Company's Charter or Bylaws, do not contravene any law or governmental rule, regulation or order applicable to it, do not and will not contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument to which it is a party or by which it is bound, and the Leases and this Warrant Agreement constitute legal, valid and binding agreements of the Company, enforceable in accordance with their respective terms. (c) Consents and Approvals. No consent or approval of, giving of notice to, registration with, or taking of any other action in respect of any state, Federal or other governmental authority or agency is required with respect to the execution, delivery and performance by the Company of its obligations under this Warrant Agreement, except for the filing of notices pursuant to Regulation D under the 1933 Act and any filing required by applicable state securities law, which filings will be effective by the time required thereby. (d) Issued Securities. All issued and outstanding shares of Common Stock, Preferred Stock or any other securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. All outstanding shares of Common Stock, Preferred Stock and any other securities were issued in full compliance with all Federal and state securities laws. In addition: (i) The authorized capital of the Company consists of (A) 10,000,000 shares of Common Stock, of which 4,113,750 shares are issued and outstanding, and (B) 450,000 shares of Series A preferred stock, of which 428,635 shares are issued and outstanding and are convertible into 428,635 shares of Common Stock at $1.00 per share, 450,207 shares of Series B preferred stock, of which 430,207 shares are issued and outstanding and are convertible into 430,207 shares of Common Stock at $1.00 per share, 4,467,912 shares of Series C preferred stock, of which 4,061,738 shares are issued and outstanding and are convertible into 4,061,738 shares of Common Stock at $1.00 per share and 4,467,912 shares of Series C-1 preferred stock, of which no shares are issued and outstanding. (ii) The Company has reserved (A) 890,000 shares of Common Stock for issuance under its Incentive/Nonqualified Stock Option Plan, under which 425,378 options are outstanding. There are no other options, warrants, conversion privileges or other rights presently outstanding to purchase or otherwise acquire any authorized but unissued shares of the Company's capital stock or other securities of the Company. (iii) In accordance with the Company's Articles of Incorporation, no shareholder of the Company has preemptive rights to purchase new issuances of the Company's capital stock. (e) Insurance. The Company has in full force and effect insurance policies, with extended coverage, insuring the Company and its property and business against such losses and risks, and in such amounts, as are customary for corporations engaged in a similar business and similarly situated and as otherwise may be required pursuant to the terms of any other contract or agreement. (f) Other Commitments to Register Securities. Except as set forth in this Warrant Agreement, the Company is not, pursuant to the terms of any other agreement currently in existence, under any obligation to register under the 1933 Act any of its presently outstanding securities or any of its securities which may hereafter be issued. (g) Exempt Transaction. Subject to the accuracy of the Warrantholder's representations in Section 10 hereof, the issuance of the Preferred Stock upon exercise of this Warrant will constitute a transaction exempt from (i) the registration requirements of Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the qualification requirements of the applicable state securities laws. (h) Compliance with Rule 144. At the written request of the Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise of the Warrant in compliance with Rule 144 promulgated by the Securities and Exchange Commission, the Company shall furnish to the Warrantholder, within ten days after receipt - 5 - 23 of such request, a written statement confirming the Company's compliance with the filing requirements of the Securities and Exchange Commission as set forth in such Rule, as such Rule may be amended from time to time. 10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER. This Warrant Agreement has been entered into by the Company in reliance upon the following representations and covenants of the Warrantholder: (a) Investment Purpose. The right to acquire Preferred Stock or the Preferred Stock issuable upon exercise of the Warrantholder's rights contained herein will be acquired for investment and not with a view to the sale or distribution of any part thereof, and the Warrantholder has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption. (b) Private Issue. The Warrantholder understands (i) that the Preferred Stock issuable upon exercise of this Warrant is not registered under the 1933 Act or qualified under applicable state securities laws on the ground that the issuance contemplated by this Warrant Agreement will be exempt from the registration and qualifications requirements thereof, and (ii) that the Company's reliance on such exemption is predicated on the representations set forth in this Section 10. (c) Disposition of Warrantholder's Rights. In no event will the Warrantholder make a disposition of any of its rights to acquire Preferred Stock or Preferred Stock issuable upon exercise of such rights unless and until (i) it shall have notified the Company of the proposed disposition, and (ii) if requested by the Company, it shall have furnished the Company with an opinion of counsel (which counsel may either be inside or outside counsel to the Warrantholder) satisfactory to the Company and its counsel to the effect that (A) appropriate action necessary for compliance with the 1933 Act has been taken, or (B) an exemption from the registration requirements of the 1933 Act is available. Notwithstanding the foregoing, the restrictions imposed upon the transferability of any of its rights to acquire Preferred Stock or Preferred Stock issuable on the exercise of such rights do not apply to transfers from the beneficial owner of any of the aforementioned securities to its nominee or from such nominee to its beneficial owner, and shall terminate as to any particular share of Preferred Stock when (1) such security shall have been effectively registered under the 1933 Act and sold by the holder thereof in accordance with such registration or (2) such security shall have been sold without registration in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been issued to the Warrantholder at its request by the staff of the Securities and Exchange Commission or a ruling shall have been issued to the Warrantholder at its request by such Commission stating that no action shall be recommended by such staff or taken by such Commission, as the case may be, if such security is transferred without registration under the 1933 Act in accordance with the conditions set forth in such letter or ruling and such letter or ruling specifies that no subsequent restrictions on transfer are required. Whenever the restrictions imposed hereunder shall terminate, as hereinabove provided, the Warrantholder or holder of a share of Preferred Stock then outstanding as to which such restrictions have terminated shall be entitled to receive from the Company, without expense to such holder, one or more new certificates for the Warrant or for such shares of Preferred Stock not bearing any restrictive legend. (d) Financial Risk. The Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment, and has the ability to bear the economic risks of its investment. (e) Risk of No Registration. The Warrantholder understands that if the Company does not register with the Securities and Exchange Commission pursuant to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to Section 15(d), of the 1934 Act", or if a registration statement covering the securities under the 1933 Act is not in effect when it desires to sell (i) the rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii) the Preferred Stock issuable upon exercise of the right to purchase, it may be required to hold such securities for an indefinite period. The Warrantholder also understands that any sale of its rights of the Warrantholder to purchase Preferred Stock or Preferred Stock which might be made by it in reliance upon Rule 144 under the 1933 Act may be made only in accordance with the terms and conditions of that Rule. (f) Accredited Investor. Warrantholder is an "accredited investor" within the meaning of the Securities and Exchange Rule 501 of Regulation D, as presently in effect. 11. REQUESTS FOR REGISTRATION Warrantholder and Company agree that all shares of Preferred Stock subject to the Warrant Agreement shall have the same registration rights and be subject to the same terms and conditions with respect to the registration and sale - 6 - 24 of such stock as possessed by the Series C Shareholders as provided for in the Investor Rights Agreement dated December 19, 1997, by and among the Company and those certain Purchasers identified therein, attached hereto as Exhibit V. 12. TRANSFERS. Subject to the terms and conditions contained in Section 10 hereof, this Warrant Agreement and all rights hereunder are transferable in whole or in part by the Warrantholder and any successor transferee, provided, however, in no event shall the number of transfers of the rights and interests in all of the Warrants exceed three (3) transfers. The transfer shall be recorded on the books of the Company upon receipt by the Company of a notice of transfer in the form attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices and the payment to the Company of all transfer taxes and other governmental charges imposed on such transfer. 13. MISCELLANEOUS. (a) Effective Date. The provisions of this Warrant Agreement shall be construed and shall be given effect in all respects as if it had been executed and delivered by the Company on the date hereof. This Warrant Agreement shall be binding upon any successors or assigns of the Company. (b) Attorney's Fees. In any litigation, arbitration or court proceeding between the Company and the Warrantholder relating hereto, the prevailing party shall be entitled to attorneys' fees and expenses and all costs of proceedings incurred in enforcing this Warrant Agreement. (c) Governing Law. This Warrant Agreement shall be governed by and construed for all purposes under and in accordance with the laws of the State of California. (d) Counterparts. This Warrant Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (e) Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, facsimile transmission (provided that the original is sent by personal delivery or mail as hereinafter set forth) or seven (7) days after deposit in the United States mail, by registered or certified mail, addressed (i) to the Warrantholder at 6111 North River Road, Rosemont, Illinois 60018, Attention: Venture Lease Administration, cc: Legal Department, Attention.: General Counsel, (and/or, if by facsimile, (847) 518-5465 and (847)518-5088) and (ii) to the Company at 540 University Av., Suite 150, Palo Alto, CA 94301, Attention:______ (and/or if by facsimile, (650) 617-0410) or at such other address as any such party may subsequently designate by written notice to the other party. (f) Remedies. In the event of any default hereunder, the non-defaulting party may proceed to protect and enforce its rights either by suit in equity and/or by action at law, including but not limited to an action for damages as a result of any such default, and/or an action for specific performance for any default where Warrantholder will not have an adequate remedy at law and where damages will not be readily ascertainable. The Company expressly agrees that it shall not oppose an application by the Warrantholder or any other person entitled to the benefit of this Agreement requiring specific performance of any or all provisions hereof or enjoining the Company from continuing to commit any such breach of this Agreement. (g) No Impairment of Rights. The Company will not, by amendment of its Charter or through any other means, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate in order to protect the rights of the Warrantholder against impairment. (h) Survival. The representations, warranties, covenants and conditions of the respective parties contained herein or made pursuant to this Warrant Agreement shall survive the execution and delivery of this Warrant Agreement. (i) Severability. In the event any one or more of the provisions of this Warrant Agreement shall for any reason be held invalid, illegal or unenforceable, the remaining provisions of this Warrant Agreement shall be unimpaired, and the invalid, illegal or unenforceable provision shall be replaced by a mutually acceptable valid, legal and enforceable provision, which comes closest to the intention of the parties underlying the invalid, illegal or unenforceable provision. - 7 - 25 (j) Amendments. Any provision of this Warrant Agreement may be amended by a written instrument signed by the Company and by the Warrantholder. (k) Additional Documents. The Company, upon execution of this Warrant Agreement, shall provide the Warrantholder with certified resolutions with respect to the representations, warranties and covenants set forth in subparagraphs (a) through (d), (f) and (g) of Section 9 above. If the purchase price for the Leases referenced in the preamble of this Warrant Agreement exceeds $1,000,000, the Company will also provide Warrantholder with an opinion from the Company's counsel with respect to those same representations, warranties and covenants. The Company shall also supply such other documents as the Warrantholder may from time to time reasonably request. IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to be executed by its officers thereunto duly authorized as of the Effective Date. COMPANY: E-LOAN, INC. By: /s/ Chris Larsen -------------------------- Title: President ----------------------- WARRANTHOLDER: COMDISCO, INC. By: /s/ Illegible -------------------------- Title: President, Comdisco Ventures Division ----------------------- - 8 - 26 EXHIBIT I NOTICE OF EXERCISE TO: ____________________________ (1) The undersigned Warrantholder hereby elects to purchase _______ shares of the Series ____ Preferred Stock of _________________, pursuant to the terms of the Warrant Agreement dated the ______ day of ________________________, 19__ (the "Warrant Agreement") between _____________________________________ and the Warrantholder, and tenders herewith payment of the purchase price for such shares in full, together with all applicable transfer taxes, if any. (2) In exercising its rights to purchase the Series ____ Preferred Stock of ________________________________________, the undersigned hereby confirms and acknowledges the investment representations and warranties made in Section 10 of the Warrant Agreement. (3) Please issue a certificate or certificates representing said shares of Series ____ Preferred Stock in the name of the undersigned or in such other name as is specified below. _________________________________ (Name) _________________________________ (Address) WARRANTHOLDER: COMDISCO, INC. By: _________________________ Title: _________________________ Date: _________________________ - 9 - 27 EXHIBIT II ACKNOWLEDGMENT OF EXERCISE The undersigned ____________________________________, hereby acknowledge receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares of the Series ____ Preferred Stock of _________________, pursuant to the terms of the Warrant Agreement, and further acknowledges that ______ shares remain subject to purchase under the terms of the Warrant Agreement. COMPANY: By: _________________________ Title: _________________________ Date: _________________________ - 10 - 28 EXHIBIT III TRANSFER NOTICE (TO TRANSFER OR ASSIGN THE FOREGOING WARRANT AGREEMENT EXECUTE THIS FORM AND SUPPLY REQUIRED INFORMATION. DO NOT USE THIS FORM TO PURCHASE SHARES.) FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights evidenced thereby are hereby transferred and assigned to ___________________________________________________________________ (Please Print) whose address is___________________________________________________ ___________________________________________________________________ Dated: ___________________________________ Holder's Signature: _____________________ Holder's Address: _____________________ ___________________________________________ Signature Guaranteed: ____________________________________________ NOTE: The signature to this Transfer Notice must correspond with the name as it appears on the face of the Warrant Agreement, without alteration or enlargement or any change whatever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant Agreement. - 11 - EX-10.38 44 LOAN & SECURITY AGREEMENT DATED DECEMBER 9, 1998 1 EXHIBIT 10.38 E-LOAN, INC. LOAN AND SECURITY AGREEMENT 2 TABLE OF CONTENTS Page 1. DEFINITIONS AND CONSTRUCTION.........................................1 1.1 Definitions.................................................1 1.2 Accounting and Other Terms..................................7 2. LOAN AND TERMS OF PAYMENT............................................7 2.1 Credit Extensions...........................................7 2.2 Overadvances................................................9 2.3 Interest Rates, Payments, and Calculations..................10 2.4 Crediting Payments..........................................10 2.5 Fees........................................................10 2.6 Additional Costs............................................11 2.7 Term........................................................11 3. CONDITIONS OF LOANS..................................................11 3.1 Conditions Precedent to Initial Credit Extension............11 3.2 Conditions Precedent to all Credit Extensions...............12 4. CREATION OF SECURITY INTEREST........................................12 4.1 Grant of Security Interest..................................12 4.2 Delivery of Additional Documentation Required...............12 4.3 Right to Inspect............................................12 5. REPRESENTATIONS AND WARRANTIES.......................................13 5.1 Due Organization and Qualification..........................13 5.2 Due Authorization; No Conflict..............................13 5.3 No Prior Encumbrances.......................................13 5.4 Bona Fide Accounts..........................................13 5.5 Merchantable Inventory......................................13 5.6 Intellectual Property.......................................13 5.7 Name; Location of Chief Executive Office....................13 5.8 Litigation..................................................14 5.9 No Material Adverse Change in Financial Statements..........14 5.10 Solvency....................................................14 5.11 Regulatory Compliance.......................................14 5.12 Environmental Condition.....................................14 5.13 Taxes.......................................................14 5.14 Subsidiaries................................................15 5.15 Government Consents.........................................15 5.16 Full Disclosure.............................................15 6. AFFIRMATIVE COVENANTS................................................15 6.1 Good Standing...............................................15 6.2 Government Compliance.......................................15 6.3 Financial Statements, Reports, Certificates.................15 6.4 Inventory; Returns..........................................16 6.5 Taxes.......................................................16 6.6 Insurance...................................................16 6.7 Principal Depository........................................17 6.8 Quick Ratio.................................................17 i 3 6.9 Profitability/Loss..........................................17 6.10 Liquidity, Debt Service Coverage............................17 6.11 Further Assurances..........................................17 7. NEGATIVE COVENANTS...................................................17 7.1 Dispositions................................................17 7.2 Changes in Business, Ownership, Management or Business Locations...................................................17 7.3 Mergers or Acquisitions.....................................18 7.4 Indebtedness................................................18 7.5 Encumbrances................................................18 7.6 Distributions...............................................18 7.7 Investments.................................................18 7.8 Transactions with Affiliates................................18 7.9 Intellectual Property Agreements............................18 7.10 Subordinated Debt...........................................19 7.11 Inventory...................................................19 7.12 Compliance..................................................19 8. EVENTS OF DEFAULT....................................................19 8.1 Payment Default.............................................19 8.2 Covenant Default............................................19 8.3 Material Adverse Change.....................................20 8.4 Attachment..................................................20 8.5 Insolvency..................................................20 8.6 Other Agreements............................................20 8.7 Subordinated Debt...........................................20 8.8 Judgments...................................................20 8.9 Misrepresentations..........................................20 9. BANK'S RIGHTS AND REMEDIES...........................................21 9.1 Rights and Remedies.........................................21 9.2 Power of Attorney...........................................22 9.3 Accounts Collection.........................................22 9.4 Bank Expenses...............................................22 9.5 Bank's Liability for Collateral.............................23 9.6 Remedies Cumulative.........................................23 9.7 Demand; Protest.............................................23 10. NOTICES..............................................................23 11. CHOICE OF LAW AND VENUE..............................................23 12. GENERAL PROVISIONS...................................................24 12.1 Successors and Assigns......................................24 12.2 Indemnification.............................................25 12.3 Time of Essence.............................................25 12.4 Severability of Provisions..................................25 12.5 Amendments in Writing, Integration..........................25 12.6 Counterparts................................................25 12.7 Survival....................................................25 12.8 Confidentiality.............................................25 ii 4 This LOAN AND SECURITY AGREEMENT is entered into as of December 9, 1998, by and between SILICON VALLEY BANK ("Bank") and E-LOAN, INC. ("Borrower"). RECITALS Borrower wishes to obtain credit from time to time from Bank, and Bank desires to extend credit to Borrower. This Agreement sets forth the terms on which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank. AGREEMENT The parties agree as follows: 1. DEFINITIONS AND CONSTRUCTION 1.1 Definitions. As used in this Agreement, the following terms shall have the following definitions: "Accounts" means all presently existing and hereafter arising accounts, contract rights, and all other forms of obligations owing to Borrower arising out of the sale or lease of goods (including, without limitation, the licensing of software and other technology) or the rendering of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower's Books relating to any of the foregoing. "Advance" or "Advances" means a loan advance under the Committed Revolving Line. "Affiliate" means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls or is controlled by or is under common control with such Person, and each of such Person's senior executive officers, directors, partners and, for any Person that is a limited liability company, such Persons, managers and members. "Bank Expenses" means all: reasonable costs or expenses (including reasonable attorneys' fees and expenses) incurred in connection with the preparation, negotiation, administration, and enforcement of the Loan Documents; and Bank's reasonable attorneys' fees and expenses incurred in amending, enforcing or defending the Loan Documents (including fees and expenses of appeal or review, or those incurred in any Insolvency Proceeding), whether or not suit is brought. "Borrower's Books" means all of Borrower's books and records including without limitation: ledgers; records concerning Borrower's assets or liabilities, the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment, containing such information. "Borrowing Base" means, for any applicable date of determination, an amount equal to eighty percent (80%) of Borrower's brokerage and referral fee revenue, calculated on a trailing three-month rolling average basis, as determined by Bank with reference to the most recent financial statements of Borrower delivered pursuant to Section 6.3 hereof. "Business Day" means any day that is not a Saturday, Sunday, or other day on which banks in the State of California are authorized or required to close. "Closing Date" means the date of this Agreement. "Code" means the California Uniform Commercial Code. "Collateral" means the property described on Exhibit A attached hereto. 1 5 "Committed Revolving Line" means a credit extension of up to One Million Five Hundred Thousand Dollars ($1,500,000). "Committed Equipment Line" means a credit extension of up to Three Million Five Hundred Thousand Dollars ($3,500,000). "Contingent Obligation" means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another, including, without limitation, any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term "Contingent Obligation" shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement. "Copyrights" means any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret, now or hereafter existing, created, acquired or held. "Credit Extension" means each Advance, Equipment Advance, Letter of Credit or any other extension of credit by Bank for the benefit of Borrower hereunder. "Current Assets" means, as of any applicable date, all amounts that should, in accordance with GAAP, be included as current assets on the consolidated balance sheet of Borrower and its Subsidiaries as at such date. "Current Liabilities" means, as of any applicable date, all amounts that should, in accordance with GAAP, be included as current liabilities on the consolidated balance sheet of Borrower and its Subsidiaries, as at such date, plus, to the extent not already included therein, all outstanding Credit Extensions made under this Agreement, including all Indebtedness that is payable upon demand or within one year from the date of determination thereof unless such Indebtedness is renewable or extendable at the option of Borrower or any Subsidiary to a date more than one year from the date of determination, but excluding Subordinated Debt. "Debt Service Coverage" means, as measured quarterly as of the last day of each fiscal quarter of Borrower, on a consolidated basis determined in accordance with GAAP, the ratio of (a) an amount equal to the sum of (i) net income for such quarter, plus (ii) depreciation and amortization of intangible assets and other non-cash charges to income for such quarter plus (iii) quarterly interest expense minus (iv) capitalized software expense for such quarter to (b) an amount equal to the sum of (x) all scheduled repayments and mandatory prepayments of principal on account of long-term Indebtedness for such quarter plus (y) quarterly interest expense. "Equipment" means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest. "Equipment Advance" has the meaning set forth in Section 2.1.5. "Equipment Availability End Date" has the meaning set forth in Section 2.1.5. 2 6 "ERISA" means the Employment Retirement Income Security Act of 1974, as amended, and the regulations thereunder. "GAAP" means generally accepted accounting principles as in effect in the United States from time to time. "Indebtedness" means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations and (d) all Contingent Obligations. "Insolvency Proceeding" means any proceeding commenced by or against any person or entity under any provision of the United States Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors, formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief. "Intellectual Property Collateral" means all of Borrower's right, title and interest in and to the following: (a) Copyrights, Trademarks, Patents, and Mask Works; (b) Any and all trade secrets, and any and all intellectual property rights in computer software and computer software products now or hereafter existing, created, acquired or held; (c) Any and all design rights which may be available to Borrower now or hereafter existing, created, acquired or held; (d) Any and all claims for damages by way of past, present and future infringement of any of the rights included above, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the intellectual property rights identified above; (e) All licenses or other rights to use any of the Copyrights, Patents, Trademarks, or Mask Works, and all license fees and royalties arising from such use to the extent permitted by such license or rights; (f) All amendments, renewals and extensions of any of the Copyrights, Trademarks, Patents or Mask Works; and (g) All proceeds and products of the foregoing, including without limitation all payments under insurance or any indemnity or warranty payable in respect of any of the foregoing. "Inventory" means all present and future inventory in which Borrower has any interest, including merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or at any time hereafter owned by or in the custody or possession, actual or constructive, of Borrower, including such inventory as is temporarily out of its custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above. "Investment" means any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person. "IRC" means the Internal Revenue Code of 1986, as amended, and the regulations thereunder. 3 7 "Letter of Credit" means a letter of credit or similar undertaking issued by Bank pursuant to Section 2.1.2. "Letter of Credit Reserve" has the meaning set forth in Section 2.1.2. "Lien" means any mortgage, lien, deed of trust, charge, pledge, security interest or other encumbrance. "Loan Documents" means, collectively, this Agreement, any note or notes executed by Borrower, and any other present or future agreement entered into between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, extended or restated from time to time. "Mask Works" means all mask works or similar rights available for the protection of semiconductor chips, now owned or hereafter acquired. "Material Adverse Effect" means a material adverse effect on (i) the business operations or condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the Obligations or otherwise perform its obligations under the Loan Documents. "Maturity Date" means September 8, 2002. "Negotiable Collateral" means all of Borrower's present and future letters of credit of which it is a beneficiary, notes, drafts, instruments, securities, documents of title, and chattel paper. "Obligations" means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement or any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower to others that Bank may have obtained by assignment or otherwise. "Patents" means all patents, patent applications and like protections, including without limitation improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same. "Payment Date" means the eighth (8th) calendar day of each month, commencing on the first such date after the Closing Date and ending on the Maturity Date. "Permitted Indebtedness" means: (a) Indebtedness of Borrower in favor of Bank arising under this Agreement or any other Loan Document; (b) Indebtedness existing on the Closing Date and disclosed in the Schedule; (c) Indebtedness to trade creditors and with respect to surety bonds and similar obligations incurred in the ordinary course of business; (d) Subordinated Debt; (e) Indebtedness of Borrower to any Subsidiary and Contingent Obligations of any Subsidiary with respect to obligations of Borrower (provided that the primary obligations are not prohibited hereby), and Indebtedness of any Subsidiary to any other Subsidiary and Contingent Obligations of any Subsidiary with respect to obligations of any other Subsidiary (provided that the primary obligations are not prohibited hereby); (f) Indebtedness secured by Permitted Liens; 4 8 (g) Capital leases or indebtedness incurred solely to purchase equipment which is secured in accordance with clause (c) of "Permitted Liens" below and is not in excess of the lesser of the purchase price of such equipment or the fair market value of such equipment on the date of acquisition; and (h) Extensions, refinancings, modifications, amendments and restatements of any of items of Permitted Indebtedness (a) through (g) above, provided that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower or its Subsidiary, as the case may be. "Permitted Investment" means: (a) Investments existing on the Closing Date disclosed in the Schedule; and (b) (i) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one (1) year from the date of acquisition thereof, (ii) commercial paper maturing no more than one (1) year from the date of creation thereof and currently having the highest rating obtainable from either Standard & Poor's Corporation or Moody's Investors Service, Inc., and (iii) certificates of deposit maturing no more than one (1) year from the date of investment therein issued by Bank; (c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transaction in the ordinary course of business; (d) Investments accepted in connection with Transfers permitted by Section 7.1; (e) Investments consisting of (i) compensation of employees, officers and directors of Borrower or its Subsidiaries so long as the Board of Directors of Borrower determines that such compensation is in the best interests of Borrower, (ii) travel advances, employee relocation loans and other employee loans and advances in the ordinary course of business, and (iii) loans to employees, officers or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrower's Board of Directors; (f) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; (g) Investments pursuant to or arising under currency agreements or interest rate agreements entered into in the ordinary course of business; (h) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions to, customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this paragraph (i) shall not apply to Investments by Borrower in any Subsidiary; (i) Investments constituting acquisitions permitted under Section 7.3; (j) Deposit accounts of Borrower in which Bank has a Lien prior to any other Lien; and (k) Deposit accounts of any Subsidiaries maintained in the ordinary course of business. "Permitted Liens" means the following: (a) Any Liens existing on the Closing Date and disclosed in the Schedule or arising under this Agreement or the other Loan Documents; 5 9 (b) Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in good faith by appropriate proceedings and as to which adequate reserves are maintained on Borrower's Books in accordance with GAAP, provided the same have no priority over any of Bank's security interests; (c) Liens (i) upon or in any Equipment acquired or held by Borrower or any of its Subsidiaries to secure the purchase price of such Equipment or indebtedness incurred solely for the purpose of financing the acquisition of such Equipment, or (ii) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such Equipment; (d) Liens on Equipment leased by Borrower or any Subsidiary pursuant to an operating or capital lease in the ordinary course of business (including proceeds thereof and accessions thereto) incurred solely for the purpose of financing the lease of such Equipment (including Liens pursuant to leases permitted pursuant to Section 7.1 and Liens arising from UCC financing statements regarding leases permitted by this Agreement); (e) Leases or subleases and licenses or sublicenses granted to others in the ordinary course of Borrower's business not interfering in any material respect with the business of Borrower and its Subsidiaries taken as a whole, and any interest or title of a lessor, licensor or under any lease or license, provided that such leases, subleases, licenses and sublicenses do not prohibit the grant of the security interest granted hereunder; (f) Liens on assets (including the proceeds thereof and accessions thereto) that existed at the time such assets were acquired by Borrower or any Subsidiary (including Liens on assets of any corporation that existed at the time it became or becomes a Subsidiary); provided such Liens are not granted in contemplation of or in connection with the acquisition of such asset by Borrower or a Subsidiary; (g) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.8; (h) Easements, reservations, rights-of-way, restrictions, minor defects or irregularities in title and other similar charges or encumbrances affecting real property not constituting a Material Adverse Effect; (i) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of customs duties in connection with the importation of goods; (j) Liens that are not prior to the Lien of Bank which constitute rights of set-off of a customary nature or banker's Liens with respect to amounts on deposit, whether arising by operation of law or by contract, in connection with arrangement entered in to with banks in the ordinary course of business; (k) Earn-out and royalty obligations existing on the date hereof or entered into in connection with an acquisition permitted by Section 7.3; (l) Liens on insurance proceeds in favor of insurance companies granted solely as security for financed premiums; and (m) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (a), (c), (d), (e), (f) and (k) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase. "Person" means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency. 6 10 "Prime Rate" means the variable rate of interest, per annum, most recently announced by Bank, as its "prime rate," whether or not such announced rate is the lowest rate available from Bank. "Quick Assets" means, as of any applicable date, the unrestricted cash; unrestricted cash-equivalents; net, billed accounts receivable and investments with maturities of fewer than one year of Borrower determined in accordance with GAAP. "Responsible Officer" means each of the Chief Executive Officer, the President, the Chief Financial Officer and the Controller of Borrower. "Revolving Maturity Date" means the date immediately preceding the first anniversary of the Closing Date. "Schedule" means the schedule of exceptions attached hereto, if any. "Subordinated Debt" means any debt incurred by Borrower that is subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank (and identified as being such by Borrower and Bank). "Subsidiary" means with respect to any Person, corporation, partnership, company association, joint venture, or any other business entity of which more than fifty percent (50%) of the voting stock or other equity interests is owned or controlled, directly or indirectly, by such Person or one or more Affiliates of such Person. "Tangible Net Worth" means, as of any applicable date, the consolidated total assets of Borrower and its Subsidiaries minus, without duplication, (i) the sum of any amounts attributable to (a) goodwill, (b) intangible items such as unamortized debt discount and expense, patents, trade and service marks and names, copyrights and research and development expenses except prepaid expenses, and (c) all reserves not already deducted from assets, and (ii) Total Liabilities. "Total Liabilities" means, as of any applicable date, all obligations that should, in accordance with GAAP, be classified as liabilities on the consolidated balance sheet of Borrower, including in any event all Indebtedness, but specifically excluding Subordinated Debt. "Trademarks" means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same and like protections, and the entire goodwill of the business of Assignor connected with and symbolized by such trademarks. 1.2 Accounting and Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP and all calculations and determinations made hereunder shall be made in accordance with GAAP. When used herein, the term "financial statements" shall include the notes and schedules thereto. The terms "including" / "includes" shall always be read as meaning "including (or includes) without limitation," when used herein or in any other Loan Document. 2. LOAN AND TERMS OF PAYMENT 2.1 Credit Extensions. Borrower promises to pay to the order of Bank, in lawful money of the United States of America, the aggregate unpaid principal amount of all Credit Extensions made by Bank to Borrower hereunder. Borrower shall also pay interest on the unpaid principal amount of such Credit Extensions at rates in accordance with the terms hereof. 7 11 2.1.1 Revolving Advances (a) Subject to and upon the terms and conditions of this Agreement, Bank agrees to make Advances to Borrower in an aggregate outstanding amount not to exceed (i) (a) the Committed Revolving Line minus the Credit Card Sublimit minus the Merchant Services Sublimit, or (b) the Borrowing Base, whichever is less, minus (ii) the face amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit); provided, that Borrower shall not request or receive any Advances until Bank has received Borrower's financial projections for the 1999 fiscal year. Subject to the terms and conditions of this Agreement, amounts borrowed pursuant to this Section 2.1.1 may be repaid and reborrowed at any time prior to the Revolving Maturity Date. (b) Whenever Borrower desires an Advance, Borrower will notify Bank by facsimile transmission or telephone no later than 3:00 p.m. Pacific time, on the Business Day that the Advance is to be made. Each such notification shall be promptly confirmed by a Payment/Advance Form in substantially the form of Exhibit B hereto. Bank is authorized to make Advances under this Agreement, based upon instructions received from a Responsible Officer or a designee of a Responsible Officer, or without instructions if in Bank's discretion such Advances are necessary to meet Obligations which have become due and remain unpaid. Bank shall be entitled to rely on any telephonic notice given by a person who Bank reasonably believes to be a Responsible Officer or a designee thereof, and Borrower shall indemnify and hold Bank harmless for any damages or loss suffered by Bank as a result of such reliance. Bank will credit the amount of Advances made under this Section 2.1 to Borrower's deposit account. (c) The Committed Revolving Line shall terminate on the Revolving Maturity Date, at which time all Advances under this Section 2.1.1 shall be immediately due and payable. 2.1.2 Letters of Credit. (a) Subject to the terms and conditions of this Agreement, Bank agrees to issue or cause to be issued Letters of Credit for the account of Borrower in an aggregate outstanding face amount not to exceed (i) the lesser of (a) the Committed Revolving Line minus the Credit Card Sublimit, minus the Merchant Services Sublimit, or (b) the sum of the Borrowing Base plus $1,100,000, whichever is less, minus (ii) the then outstanding principal balance of the Advances. Each Letter of Credit shall have an expiry date no later than the Revolving Maturity Date. All Letters of Credit shall be, in form and substance, acceptable to Bank in its sole discretion and shall be subject to the terms and conditions of Bank's form of standard Application and Letter of Credit Agreement. (b) The obligation of Borrower to immediately reimburse Bank for drawings made under Letters of Credit shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement and such Letters of Credit, under all circumstances whatsoever. Borrower shall indemnify, defend, protect and hold Bank harmless from any loss, cost, expense or liability, including, without limitation, reasonable attorneys' fees, arising out of or in connection with any Letters of Credit. (c) Borrower may request that Bank issue a Letter of Credit payable in a currency other than United States Dollars. If a demand for payment is made under any such Letter of Credit, Bank shall treat such demand as an Advance to Borrower of the equivalent of the amount thereof (plus cable charges) in United States currency at the then prevailing rate of exchange in San Francisco, California, for sales of that other currency for cable transfer to the country of which it is the currency. (d) Upon the issuance of any Letter of Credit payable in a currency other than United States Dollars, Bank shall create a reserve under the Committed Revolving Line for Letters of Credit against fluctuations in currency exchange rates, in an amount equal to ten percent (10%) of the face amount of such 8 12 Letter of Credit. The amount of such reserve may be amended by Bank from time to time to account for fluctuations in the exchange rate. The availability of funds under the Committed Revolving Line shall be reduced by the amount of such reserve for so long as such Letter of Credit remains outstanding. 2.1.3 Credit Card Sublimit. Subject to the terms and conditions of this Agreement, Bank agrees to issue or cause to be issued corporate credit cards for the executives of Borrower in an aggregate credit limit not to exceed Five Hundred Thousand Dollars ($500,000) (the "Credit Card Sublimit"). All agreements executed in connection with the Credit Card Sublimit shall be, in form and substance, acceptable to Bank, in its sole discretion. 2.1.4 Merchant Services Sublimit. Subject to the terms and conditions of this Agreement, Borrower may utilize up to an aggregate amount not to exceed One Hundred Thousand Dollars ($100,000) (the "Merchant Services Sublimit") for merchant credit card services provided by Bank as defined in that certain Merchant Services Agreement provided to Borrower in connection herewith (a "Merchant Service", or the "Merchant Services"). Any amounts actually paid by Bank in respect of a Merchant Service or Merchant Services shall, when paid, constitute an Advance under the Committed Revolving Line. 2.1.5 Equipment Advances. (a) Subject to and upon the terms and conditions of this Agreement, at any time from the date hereof through September 8, 1999 (the "Equipment Availability End Date"), Bank agrees to make advances (each an "Equipment Advance" and, collectively, the "Equipment Advances") to Borrower in an aggregate outstanding amount not to exceed the Committed Equipment Line; provided, that Borrower shall not request or receive Equipment Advances in excess of $1,000,000 in the aggregate until Bank has received Borrower's financial projections for the 1999 fiscal year. To evidence the Equipment Advance or Equipment Advances, Borrower shall deliver to Bank, within thirty (30) days after the date of each Equipment Advance request, an invoice for the equipment or software to be purchased. The Equipment Advances shall be used only to purchase or refinance Equipment and software purchased on or after April 1, 1998 and shall not exceed one hundred percent (100%) of the invoice amount of such equipment or software approved from time to time by Bank, excluding taxes, shipping, warranty charges, freight discounts and installation expense. (b) Interest shall accrue from the date of each Equipment Advance at the rate specified in Section 2.3(a), and shall be payable monthly for each month through the month in which the Equipment Availability End Date falls. Any Equipment Advances that are outstanding on the Equipment Availability End Date will be payable in thirty-six (36) equal monthly installments of principal, plus all accrued interest, beginning on the Payment Date of each month following the Equipment Availability End Date and ending on the Maturity Date, at which time all amounts owing under this Agreement shall be immediately due and payable. Equipment Advances, once repaid, may not be reborrowed. (c) When Borrower desires to obtain an Equipment Advance, Borrower shall notify Bank (which notice shall be irrevocable) by facsimile transmission to be received no later than 3:00 p.m. Pacific time one (1) Business Day before the day on which the Equipment Advance is to be made. Such notice shall be substantially in the form of Exhibit B. The notice shall be signed by a Responsible Officer or its designee and include a copy of the invoice for the Equipment to be financed. 2.2 Overadvances. If, at any time or for any reason, the amount of Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this Agreement is greater than the lesser of (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of such excess. If, at any time or for any reason, the amount of Obligations owed by Borrower to Bank pursuant to Section 2.1.1, 2.1.2, 2.1.3 and 2.1.4 is 9 13 greater than the lesser of (i) the Committed Revolving Line or (ii) the Borrowing Base plus $1,100,000, Borrower shall immediately pay to Bank, in cash, the amount of such excess. 2.3 Interest Rates, Payments, and Calculations. (a) Interest Rate. Except as set forth in Section 2.3(b), any Advances and/or Equipment Advances shall bear interest on the average daily balance thereof, at a per annum rate equal to the Prime Rate plus 0.50%. (b) Default Rate. All Obligations shall bear interest, from and after the occurrence of an Event of Default, at a rate equal to five (5) percentage points above the interest rate applicable immediately prior to the occurrence of the Event of Default. (c) Payments. Interest hereunder shall be due and payable on each Payment Date. Borrower hereby authorizes Bank to debit any accounts with Bank, including, without limitation, Account Number __________ for payments of principal and interest due on the Obligations and any other amounts owing by Borrower to Bank. Bank will notify Borrower of all debits which Bank has made against Borrower's accounts. Any such debits against Borrower's accounts in no way shall be deemed a set-off. Any interest not paid when due shall be compounded by becoming a part of the Obligations, and such interest shall thereafter accrue interest at the rate then applicable hereunder. (d) Computation. In the event the Prime Rate is changed from time to time hereafter, the applicable rate of interest hereunder shall be increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an amount equal to such change in the Prime Rate. All interest chargeable under the Loan Documents shall be computed on the basis of a three hundred sixty (360) day year for the actual number of days elapsed. 2.4 Crediting Payments. Prior to the occurrence of an Event of Default, Bank shall credit a wire transfer of funds, check or other item of payment to such deposit account or Obligation as Borrower specifies. After the occurrence of an Event of Default, the receipt by Bank of any wire transfer of funds, check, or other item of payment, whether directed to Borrower's deposit account with Bank or to the Obligations or otherwise, shall be immediately applied to conditionally reduce Obligations, but shall not be considered a payment in respect of the Obligations unless such payment is of immediately available federal funds or unless and until such check or other item of payment is honored when presented for payment. Notwithstanding anything to the contrary contained herein, any wire transfer or payment received by Bank after 12:00 noon Pacific time shall be deemed to have been received by Bank as of the opening of business on the immediately following Business Day. Whenever any payment to Bank under the Loan Documents would otherwise be due (except by reason of acceleration) on a date that is not a Business Day, such payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and be payable for the period of such extension. 2.5 Fees. Borrower shall pay to Bank the following: (a) Facility Fee. A Facility Fee equal to Ten Thousand Dollars ($10,000), which fee shall be due on the Closing Date and shall be fully earned and non-refundable; (b) Financial Examination and Appraisal Fees. Bank's customary fees and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for each appraisal of Collateral and financial analysis and examination of Borrower performed from time to time by Bank or its agents; 10 14 (c) Bank Expenses. Upon demand from Bank, including, without limitation, upon the date hereof, all Bank Expenses incurred through the date hereof, including reasonable attorneys' fees and expenses not in excess of $2,500 and, after the date hereof, all Bank Expenses, including reasonable attorneys' fees and expenses, as and when they become due. 2.6 Additional Costs. In case any change in any law, regulation, treaty or official directive or the interpretation or application thereof by any court or any governmental authority charged with the administration thereof or the compliance with any guideline or request of any central bank or other governmental authority (whether or not having the force of law), in each case after the date of this Agreement: (a) subjects Bank to any tax with respect to payments of principal or interest or any other amounts payable hereunder by Borrower or otherwise with respect to the transactions contemplated hereby (except for taxes on the overall net income of Bank imposed by the United States of America or any political subdivision thereof); (b) imposes, modifies or deems applicable any deposit insurance, reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans by, Bank; or (c) imposes upon Bank any other condition with respect to its performance under this Agreement, and the result of any of the foregoing is to increase the cost to Bank, reduce the income receivable by Bank or impose any expense upon Bank with respect to any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank the amount of such increase in cost, reduction in income or additional expense as and when such cost, reduction or expense is incurred or determined, upon presentation by Bank of a statement of the amount and setting forth Bank's calculation thereof, all in reasonable detail, which statement shall be deemed true and correct absent manifest error; provided, however, that Borrower shall not be liable for any such amount attributable to any period prior to the date of hundred eighty (180) days prior to the date of such statement. 2.7 Term. Except as otherwise set forth herein, this Agreement shall become effective on the Closing Date and, subject to Section 12.7, shall continue in full force and effect for a term ending on the Maturity Date. Notwithstanding the foregoing, Bank shall have the right to terminate its obligation to make Credit Extensions under this Agreement immediately and without notice upon the occurrence and during the continuance of an Event of Default. Notwithstanding termination of this Agreement, Bank's lien on the Collateral shall remain in effect for so long as any Obligations (excluding Obligations under Section 2.6 and 12.2 to the extent they remain inchoate at the time outstanding payment obligations are paid in full) are outstanding. 3. CONDITIONS OF LOANS 3.1 Conditions Precedent to Initial Credit Extension. The obligation of Bank to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, the following: (a) this Agreement; (b) a certificate of the Secretary of Borrower with respect to articles, bylaws, incumbency and resolutions authorizing the execution and delivery of this Agreement; (c) financing statements (Forms UCC-1); 11 15 (d) insurance certificate; (e) payment of the fees and Bank Expenses then due specified in Section 2.5 hereof; and (f) such other documents, and completion of such other matters, as Bank may reasonably deem necessary or appropriate. 3.2 Conditions Precedent to all Credit Extensions. The obligation of Bank to make each Credit Extension, including the initial Credit Extension, is further subject to the following conditions: (a) timely receipt by Bank of the Payment/Advance Form as provided in Section 2.1; and (b) the representations and warranties contained in Section 5 shall be true and correct in all material respects on and as of the date of such Payment/Advance Form and on the effective date of each Credit Extension as though made at and as of each such date, and no Event of Default shall have occurred and be continuing, or would result from such Credit Extension. The making of each Credit Extension shall be deemed to be a representation and warranty by Borrower on the date of such Advance as to the accuracy of the facts referred to in this Section 3.2(b). 4. CREATION OF SECURITY INTEREST 4.1 Grant of Security Interest. Borrower grants and pledges to Bank a continuing security interest in all presently existing and hereafter acquired or arising Collateral in order to secure prompt payment of any and all Obligations and in order to secure prompt performance by Borrower of each of its covenants and duties under the Loan Documents. Except as set forth in the Schedule, such security interest constitutes a valid, first priority security interest in the presently existing Collateral, and will constitute a valid, first priority security interest in Collateral acquired after the date hereof. Borrower acknowledges that Bank may place a "hold" on any Deposit Account pledged as Collateral to secure the Obligations, in each case, to the extent that a security interest in such Collateral can be perfected by the filing of a financing statement or, in the case of Collateral consisting of instruments, documents, chattel paper or certificated securities, to the extent that Bank takes possession of such Collateral. Bank agrees to execute and deliver to Borrower from time to time such subordination agreements as Borrower may request and as are necessary to give to other lenders which finance equipment for Borrower a first priority security interest in the equipment financed so long as the Liens and the Indebtedness incurred with respect to such equipment financing are permitted under this Agreement. Notwithstanding termination of this Agreement, Bank's Lien on the Collateral shall remain in effect for so long as any Obligations are outstanding. 4.2 Delivery of Additional Documentation Required. Borrower shall from time to time execute and deliver to Bank, at the request of Bank, all Negotiable Collateral, all financing statements and other documents that Bank may reasonably request, in form satisfactory to Bank, to perfect and continue perfected Bank's security interests in the Collateral and in order to fully consummate all of the transactions contemplated under the Loan Documents. 4.3 Right to Inspect. Bank (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from time to time during Borrower's usual business hours, to inspect Borrower's Books and 12 16 to make copies thereof and to check, test, and appraise the Collateral in order to verify Borrower's financial condition or the amount, condition of, or any other matter relating to, the Collateral. 5. REPRESENTATIONS AND WARRANTIES Borrower represents and warrants as follows: 5.1 Due Organization and Qualification. Borrower and each Subsidiary is a corporation duly existing and in good standing under the laws of its state of incorporation and qualified and licensed to do business in, and is in good standing in, any state in which the conduct of its business or its ownership of property requires that it be so qualified, except for states as to which any failure to so qualify would not have a Material Adverse Effect. 5.2 Due Authorization; No Conflict. The execution, delivery, and performance of the Loan Documents are within Borrower's powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in Borrower's Articles/Certificate of Incorporation or Bylaws, nor will they constitute an event of default under any material agreement to which Borrower is a party or by which Borrower is bound except to the extent that certain intellectual property agreements prohibit the assignment of the rights thereunder to a third party without the Borrower's or other party's consent and the Loan Documents constitute an assignment. Borrower is not in default under any agreement to which it is a party or by which it is bound, which default could reasonably be expected to have a Material Adverse Effect. 5.3 No Prior Encumbrances. Borrower has good and indefeasible title to the Collateral, free and clear of Liens, except for Permitted Liens. 5.4 Bona Fide Accounts. The Accounts are bona fide existing obligations. The service or property giving rise to such Accounts has been performed or delivered to the account debtor or to the account debtor's agent for immediate shipment to and unconditional acceptance by the account debtor. 5.5 Merchantable Inventory. All Inventory is in all material respects of good and marketable quality, free from all material defects. 5.6 Intellectual Property. Borrower is the sole owner of the Intellectual Property Collateral, except for non-exclusive licenses granted by Borrower to its customers in the ordinary course of business. Each of the Patents is valid and enforceable, and no part of the Intellectual Property Collateral has been judged invalid or unenforceable, in whole or in part, and no claim has been made that any part of the Intellectual Property Collateral violates the rights of any third party. 5.7 Name; Location of Chief Executive Office. Except as disclosed in the Schedule, Borrower has not done business and will not, without at least thirty (30) days prior written notice to Bank, do business under any name other than that specified on the signature page hereof. The chief executive office of Borrower is located at the address indicated in Section 10 hereof. 13 17 5.8 Litigation. Except as set forth in the Schedule, there are no actions or proceedings pending or, to Borrower's knowledge, threatened by or against Borrower or any Subsidiary before any court or administrative agency in which an adverse decision could reasonably be expected to have a Material Adverse Effect or a material adverse effect on Borrower's interest or Bank's security interest in the Collateral. 5.9 No Material Adverse Change in Financial Statements. All consolidated financial statements related to Borrower and any Subsidiary that have been delivered by Borrower to Bank fairly present in all material respects Borrower's consolidated financial condition as of the date thereof and Borrower's consolidated results of operations for the period then ended. There has not been a material adverse change in the consolidated financial condition of Borrower since the date of the most recent of such financial statements submitted to Bank on or about the Closing Date. 5.10 Solvency. The fair saleable value of Borrower's assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; the Borrower is not left with unreasonably small capital after the transactions contemplated by this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature. 5.11 Regulatory Compliance. Borrower and each Subsidiary has met the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA. No event has occurred resulting from Borrower's failure to comply with ERISA that is reasonably likely to result in Borrower's incurring any liability that could reasonably be expected to have a Material Adverse Effect. Borrower is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940. Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations G, T and U of the Board of Governors of the Federal Reserve System). Borrower has complied with all the provisions of the Federal Fair Labor Standards Act. Borrower has not violated any statutes, laws, ordinances or rules applicable to it, violation of which could have a Material Adverse Effect. 5.12 Environmental Condition. None of Borrower's or any Subsidiary's properties or assets has ever been used by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by previous owners or operators, in the disposal of, or to produce, store, handle, treat, release, or transport, any hazardous waste or hazardous substance other than in accordance with applicable law; to the best of Borrower's knowledge, none of Borrower's properties or assets has ever been designated or identified in any manner pursuant to any environmental protection statute as a hazardous waste or hazardous substance disposal site, or a candidate for closure pursuant to any environmental protection statute; no lien arising under any environmental protection statute has attached to any revenues or to any real or personal property owned by Borrower or any Subsidiary; and neither Borrower nor any Subsidiary has received a summons, citation, notice, or directive from the Environmental Protection Agency or any other federal, state or other governmental agency concerning any action or omission by Borrower or any Subsidiary resulting in the release or other disposition of hazardous waste or hazardous substances into the environment. 5.13 Taxes. Borrower and each Subsidiary has filed or caused to be filed all tax returns required to be filed on a timely basis, and has paid, or has made adequate provision for the payment of, all taxes reflected therein, except those being contested in good faith by proper proceedings with adequate reserves under GAAP. 14 18 5.14 Subsidiaries. Borrower does not own any stock, partnership interest or other equity securities of any Person, except for Permitted Investments. 5.15 Government Consents. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all governmental authorities that are necessary for the continued operation of Borrower's business as currently conducted except where the failure to obtain any such consent, approval or authorization, to make any such declaration or filing, or to be given any such notice could not reasonably be expected to have a Material Adverse Effect. 5.16 Full Disclosure. No representation, warranty or other statement made by Borrower in any certificate or written statement furnished to Bank contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained in such certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower are not to be viewed as facts and that actual results during the period or period covered by any such projections and forecasts may differ from the projected or forecasted results). 6. AFFIRMATIVE COVENANTS Borrower covenants and agrees that, until payment in full of all outstanding Obligations, and for so long as Bank may have any commitment to make a Credit Extension hereunder, Borrower shall do all of the following: 6.1 Good Standing. Borrower shall maintain its and each of its Subsidiaries' corporate existence and good standing in its jurisdiction of incorporation and maintain qualification in each jurisdiction in which the failure to so qualify could reasonably be expected to have a Material Adverse Effect. Borrower shall maintain, and shall cause each of its Subsidiaries to maintain, to the extent consistent with prudent management of Borrower's business, in force all licenses, approvals and agreements, the loss of which could reasonably be expect to have a Material Adverse Effect. 6.2 Government Compliance. Borrower shall meet, and shall cause each Subsidiary to meet, the minimum funding requirements of ERISA with respect to any employee benefit plans subject to ERISA. Borrower shall comply, and shall cause each Subsidiary to comply, with all statutes, laws, ordinances and government rules and regulations to which it is subject, noncompliance with which could reasonably be expected to have a Material Adverse Effect or a material adverse effect on the Collateral or the priority of Bank's Lien on the Collateral. 6.3 Financial Statements, Reports, Certificates. Borrower shall deliver to Bank: (a) as soon as available, but in any event within thirty (30) days after the end of each month, a company prepared consolidated balance sheet and income statement covering Borrower's consolidated operations during such period, in a form and certified by an Officer of Borrower reasonably acceptable to Bank; (b) as soon as available, but in any event within one hundred twenty (120) days after the end of Borrower's fiscal year, audited consolidated financial statements of Borrower prepared in accordance with GAAP, consistently applied, together with an unqualified opinion on such financial statements of an independent certified public accounting firm reasonably acceptable to Bank; (c) within five (5) days of filing, copies of all statements, reports and notices sent or made available generally by Borrower to its security holders or to any 15 19 holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K filed with the Securities and Exchange Commission; (d) promptly upon receipt of notice thereof, a report of any legal actions pending or threatened against Borrower or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000) or more; (e) as soon as available, but in any event not later than December 31, 1998, Borrower's financial projections for the 1999 fiscal year, approved by Borrower's board of directors; and (f) such budgets, sales projections, operating plans or other financial information as Bank may reasonably request from time to time. Within thirty (30) days after the last day of each month, Borrower shall deliver to Bank with the monthly financial statements a Compliance Certificate signed by a Responsible Officer in substantially the form of Exhibit C hereto. 6.4 Inventory; Returns. Borrower shall keep all Inventory in good and marketable condition, free from all material defects. Returns and allowances, if any, as between Borrower and its account debtors shall be on the same basis and in accordance with the usual customary practices of Borrower, as they exist at the time of the execution and delivery of this Agreement. Borrower shall promptly notify Bank of all returns and recoveries and of all disputes and claims, where the return, recovery, dispute or claim involves more than Fifty Thousand Dollars ($50,000). 6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make, due and timely payment or deposit of all material federal, state, and local taxes, assessments, or contributions required of it by law, and will execute and deliver to Bank, on demand, appropriate certificates attesting to the payment or deposit thereof; and Borrower will make, and will cause each Subsidiary to make, timely payment or deposit of all material tax payments and withholding taxes required of it by applicable laws, including, but not limited to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal income taxes, and will, upon request, furnish Bank with proof satisfactory to Bank indicating that Borrower or a Subsidiary has made such payments or deposits; provided that Borrower or a Subsidiary need not make any payment if the amount or validity of such payment is (i)contested in good faith by appropriate proceedings, (ii) is reserved against (to the extent required by GAAP) by Borrower and (iii) no lien other than a Permitted Lien results. 6.6 Insurance. (a) Borrower, at its expense, shall keep the Collateral insured against loss or damage by fire, theft, explosion, sprinklers, and all other hazards and risks, and in such amounts, as ordinarily insured against by other owners in similar businesses conducted in the locations where Borrower's business is conducted on the date hereof. Borrower shall also maintain insurance relating to Borrower's ownership and use of the Collateral in amounts and of a type that are customary to businesses similar to Borrower's. (b) All such policies of insurance shall be in such form, with such companies, and in such amounts as are reasonably satisfactory to Bank. All such policies of property insurance shall contain a lender's loss payable endorsement, in a form satisfactory to Bank, showing Bank as an additional loss payee thereof and all liability insurance policies shall show the Bank as an additional insured, and shall specify that the insurer must give at least twenty (20) days notice to Bank before canceling its policy for any reason. At Bank's request, Borrower shall deliver to Bank certified copies of such policies of insurance and evidence of the payments of all premiums therefor. So long as no Event of Default has occurred and is continuing, Borrower shall have the option of applying the proceeds of any casualty policy to the replacement or repair of destroyed or damaged property; provided, that after the occurrence and during the continuance of an Event of Default, all proceeds payable under any such policy shall, at the option of Bank, be payable to Bank to be applied on account of the Obligations. 16 20 6.7 Principal Depository. Borrower shall maintain its principal depository and operating accounts with Bank. 6.8 Quick Ratio. Borrower shall maintain, as of the last day of each calendar month, a ratio of Quick Assets to Current Liabilities of at least 2.0 to 1.0. 6.9 Profitability/Loss. Borrower shall not incur a loss of more than $2,500,000 for the fiscal quarter ended December 31, 1998. Prior to February 15, 1999, Borrower and Bank shall agree upon minimum operating performance covenants for the fiscal quarter ended March 31, 1999 and thereafter. If no agreement has been made by such date, this Agreement shall automatically terminate, and all Obligations owing hereunder shall be immediately due and payable. 6.10 Liquidity, Debt Service Coverage. (a) Subject to the remainder of this section, Borrower shall maintain, as of the last day of each calendar month, a Liquidity Ratio of at least 2.0 to 1.0. Notwithstanding the foregoing, if Borrower attains two consecutive quarters of profitability and a Debt Service Coverage of not less than 1.5 to 1.0, then Liquidity Ratio will no longer be tested and instead Borrower shall maintain, as of the last day of each of Borrower's fiscal quarters, a Debt Service Coverage of at least 1.5 to 1.0. For purposes of this Section, "Liquidity Ratio" means as of any date for which it is tested, the ratio of (a) an amount equal to (i) cash and cash equivalents minus (ii) the aggregate amount of outstanding Advances under Section 2.1.1 to (b) the aggregate amount of outstanding Equipment Advances. 6.11 Further Assurances. At any time and from time to time Borrower shall execute and deliver such further instruments and take such further action as may reasonably be requested by Bank to effect the purposes of this Agreement. 7. NEGATIVE COVENANTS Borrower covenants and agrees that, so long as any Credit Extension hereunder shall be available and until payment in full of the outstanding Obligations or for so long as Bank may have any commitment to make any Advances, Borrower will not do any of the following: 7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, other than Transfers (i) of inventory in the ordinary course of business, (ii) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of business, (iii) Transfers of worn-out or obsolete Equipment or Equipment financed by other vendors, (iv) Transfers which constitute liquidation of Investments permitted under Section 7.7, and (v) other Transfers not otherwise permitted by this Section 7.1 not exceeding One Hundred Thousand Dollars ($100,000) in the aggregate in any fiscal year. 7.2 Changes in Business, Ownership, Management or Business Locations. Engage in any business, or permit any of its Subsidiaries to engage in any business, other than the businesses currently engaged in by Borrower and any business substantially similar or related thereto (or incidental thereto), or suffer a material change in Borrower's ownership or management. Borrower will not, 17 21 without at least thirty (30) days prior written notification to Bank, relocate its chief executive office or add any new offices or business locations. 7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business organization, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person if no Event of Default has occurred and is continuing or would exist after giving effect to such action, provided that this Section 7.3 shall not apply to (i) the purchase of inventory, equipment or intellectual property rights in any transaction valued at less than One Hundred Thousand Dollars ($100,000) in the ordinary course of business, (ii) transactions among Subsidiaries or among Borrower and its Subsidiaries in which Borrower is the surviving entity, or (iii) such transactions that do not involve an amount that in the aggregate exceeds Two Million Dollars ($2,000,000) during the term of this Agreement. 7.4 Indebtedness. Create, incur, assume or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness. 7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with respect to any of its property, or assign or otherwise convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries so to do, except for Permitted Liens. 7.6 Distributions. Pay any dividends or make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock, provided, that (i) Borrower may declare and make any dividend payment or other distribution payable in its equity securities, (ii) Borrower may convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange therefor and (iii) for so long as an Event of Default has not occurred, Borrower may repurchase stock from former employees of Borrower in accordance with the terms of repurchase or similar agreements between Borrower and such employees. 7.7 Investments. Directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries so to do, other than Permitted Investments. 7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for transactions that are in the ordinary course of Borrower's business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm's length transaction with a non-affiliated Person and except for transactions with a Subsidiary that are upon fair and reasonable terms and transactions constituting Permitted Investments. 7.9 Intellectual Property Agreements. Borrower shall not permit the inclusion in any material contract to which it becomes a party of any provisions that could or might in any way prevent the creation of a security interest in Borrower's rights and interests in any property included within the definition of the Intellectual Property Collateral acquired under such contracts, except to the extent that such provisions are necessary in Borrower's exercise of its reasonable business judgment. 18 22 7.10 Subordinated Debt. Make any payment in respect of any Subordinated Debt, or permit any of its Subsidiaries to make any such payment, except in compliance with the terms of such Subordinated Debt, or amend any provision contained in any documentation relating to the Subordinated Debt without Bank's prior written consent. 7.11 Inventory. Store the Inventory with a bailee, warehouseman, or similar party unless Bank has received a pledge of any warehouse receipt covering such Inventory. Except for Inventory sold in the ordinary course of business and except for such other locations as Bank may approve in writing, Borrower shall keep the Inventory only at the location set forth in Section 10 hereof and such other locations of which Borrower gives Bank prior written notice and as to which Borrower signs and files a financing statement where needed to perfect Bank's security interest. 7.12 Compliance. Become an "investment company" or a company controlled by an "investment company," within the meaning of the Investment Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of extending credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Advance for such purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, which violation could have a Material Adverse Effect or a material adverse effect on the Collateral or the priority of Bank's Lien on the Collateral, or permit any of its Subsidiaries to do any of the foregoing. 8. EVENTS OF DEFAULT Any one or more of the following events shall constitute an Event of Default by Borrower under this Agreement: 8.1 Payment Default. If Borrower fails to pay, when due, any of the Obligations; 8.2 Covenant Default. (a) If Borrower fails to perform any obligation under Sections 6.3, 6.6, 6.7, 6.8, 6.9, 6.10 or 6.11 or violates any of the covenants contained in Article 7 of this Agreement, or (b) If Borrower fails or neglects to perform, keep, or observe any other material term, provision, condition, covenant, or agreement contained in this Agreement, in any of the Loan Documents, or in any other present or future agreement between Borrower and Bank and as to any default under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure such default within ten (10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional reasonable period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time period the failure to have cured such default shall not be deemed an Event of Default (provided that no Advances will be required to be made during such cure period); 19 23 8.3 Material Adverse Change. If there (i) occurs a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower or (ii) is a material impairment of the prospect of repayment of any portion of the Obligations or (iii) is a material impairment of the value or priority of Bank's security interests in the Collateral; 8.4 Attachment. If any material portion of Borrower's assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress warrant or levy has not been removed, discharged or rescinded within ten (10) days, or if Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a judgment or other claim becomes a lien or encumbrance upon any material portion of Borrower's assets, or if a notice of lien, levy, or assessment is filed of record with respect to any of Borrower's assets by the United States Government, or any department, agency, or instrumentality thereof, or by any state, county, municipal, or governmental agency, and the same is not paid within ten (10) days after Borrower receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such action or event is stayed or an adequate bond has been posted pending a good faith contest by Borrower (provided that no Credit Extensions will be required to be made during such cure period); 8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced against Borrower and is not dismissed or stayed within thirty (30) days (provided that no Advances will be made prior to the dismissal of such Insolvency Proceeding); 8.6 Other Agreements. If there is a default in any agreement to which Borrower is a party with a third party or parties resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount in excess of One Hundred Thousand Dollars ($100,000) or that could reasonably be expect to have a Material Adverse Effect; 8.7 Subordinated Debt. If Borrower makes any payment on account of Subordinated Debt, except to the extent such payment is allowed under any subordination agreement entered into with Bank; 8.8 Judgments. If a judgment or judgments for the payment of money in an amount, individually or in the aggregate, of at least Fifty Thousand Dollars ($50,000) shall be rendered against Borrower and shall remain unsatisfied and unstayed for a period of ten (10) days (provided that no Credit Extensions will be made prior to the satisfaction or stay of such judgment); or 8.9 Misrepresentations. If any material misrepresentation or material misstatement exists now or hereafter in any warranty or representation set forth herein or in any certificate or writing delivered to Bank by Borrower or any Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank to enter into this Agreement or any other Loan Document. 20 24 9. BANK'S RIGHTS AND REMEDIES 9.1 Rights and Remedies. Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without notice of its election and without demand, do any one or more of the following, all of which are authorized by Borrower: (a) Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable (provided that upon the occurrence of an Event of Default described in Section 8.5 all Obligations shall become immediately due and payable without any action by Bank); (b) Cease advancing money or extending credit to or for the benefit of Borrower under this Agreement or under any other agreement between Borrower and Bank; (c) Demand that Borrower (i) deposit cash with Bank in an amount equal to the amount of any Letters of Credit remaining undrawn, as collateral security for the repayment of any future drawings under such Letters of Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all Letters of Credit fees scheduled to be paid or payable over the remaining term of the Letters of Credit; (d) Liquidate any Exchange Contracts not yet settled and demand that Borrower immediately deposit cash with Bank in an amount sufficient to cover any losses incurred by Bank due to liquidation of the Exchange Contracts at the then prevailing market price; (e) Settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Bank reasonably considers advisable; (f) Without notice to or demand upon Borrower, make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral. Borrower agrees to assemble the Collateral if Bank so requires, and to make the Collateral available to Bank as Bank may designate. Borrower authorizes Bank to enter the premises where the Collateral is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise any encumbrance, charge, or lien which in Bank's determination appears to be prior or superior to its security interest and to pay all expenses incurred in connection therewith. With respect to any of Borrower's premises, Borrower hereby grants Bank a license to enter such premises and to occupy the same, without charge, in order to exercise any of Bank's rights or remedies provided herein, at law, in equity, or otherwise; (g) Without notice to Borrower set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by Bank, or (ii) indebtedness at any time owing to or for the credit or the account of Borrower held by Bank; (h) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for herein) the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or other right, solely pursuant to the provisions of this Section 9.1, to use, without charge, Borrower's labels, patents, copyrights, mask works, rights of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing production of, advertising for sale, and selling any Collateral and, in connection with Bank's exercise of its rights under this Section 9.1, Borrower's rights under all licenses and all franchise agreements shall inure to Bank's benefit; (i) Sell the Collateral at either a public or private sale, or both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at such places (including Borrower's 21 25 premises) as Bank determines is commercially reasonable, and apply the proceeds thereof to the Obligations in whatever manner or order Bank deems appropriate; (j) Bank may credit bid and purchase at any public sale, or at any private sale as permitted by law; and (k) Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrower. (l) Bank shall have a non-exclusive, royalty-free license to use the Intellectual Property Collateral to the extent reasonably necessary to permit Bank to exercise its rights and remedies upon the occurrence of an Event of Default. 9.2 Power of Attorney. Effective only upon the occurrence and during the continuance of an Event of Default, Borrower hereby irrevocably appoints Bank (and any of Bank's designated officers, or employees) as Borrower's true and lawful attorney to: (a) send requests for verification of Accounts or notify account debtors of Bank's security interest in the Accounts; (b) endorse Borrower's name on any checks or other forms of payment or security that may come into Bank's possession; (c) sign Borrower's name on any invoice or bill of lading relating to any Account, drafts against account debtors, schedules and assignments of Accounts, verifications of Accounts, and notices to account debtors; (d) make, settle, and adjust all claims under and decisions with respect to Borrower's policies of insurance; (e) settle and adjust disputes and claims respecting the accounts directly with account debtors, for amounts and upon terms which Bank determines to be reasonable; (f) to file, in its sole discretion, one or more financing or continuation statements and amendments thereto, relative to any of the Collateral without the signature of Borrower where permitted by law; and (g) to transfer the Intellectual Property Collateral into the name of Bank or a third party to the extent permitted under the California Uniform Commercial Code, provided Bank may exercise such power of attorney to sign the name of Borrower on any of the documents described in Section 4.2 regardless of whether an Event of Default has occurred. The appointment of Bank as Borrower's attorney in fact, and each and every one of Bank's rights and powers, being coupled with an interest, is irrevocable until all of the Obligations have been fully repaid and performed and Bank's obligation to provide advances hereunder is terminated. 9.3 Accounts Collection. At any time from the date of this Agreement, Bank may notify any Person owing funds to Borrower of Bank's security interest in such funds and verify the amount of such Account. Borrower shall collect all amounts owing to Borrower for Bank, receive in trust all payments as Bank's trustee, and, if requested or required by Bank, immediately deliver such payments to Bank in their original form as received from the account debtor, with proper endorsements for deposit. 9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as required under the terms of this Agreement, then Bank may do any or all of the following: (a) make payment of the same or any part thereof; (b) set up such reserves under the Committed Revolving Line as Bank deems necessary to protect Bank from the exposure created by such failure; or (c) obtain and maintain insurance policies of the type discussed in Section 6.6 of this Agreement, and take any action with respect to such policies as Bank deems prudent. Any amounts so paid or deposited by Bank shall constitute Bank Expenses, shall be immediately due and payable, and shall bear interest at the then applicable rate hereinabove provided, and shall be secured by the Collateral. Any payments made by Bank shall not constitute an agreement by Bank to make similar payments in the future or a waiver by Bank of any Event of Default under this Agreement. 22 26 9.5 Bank's Liability for Collateral. So long as Bank complies with its obligations under Section 9207 of the Code, Bank shall not in any way or manner be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring or arising in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of loss, damage or destruction of the Collateral shall be borne by Borrower. 9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative. Bank shall have all other rights and remedies not expressly set forth herein as provided under the Code, by law, or in equity. No exercise by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be effective unless made in a written document signed on behalf of Bank and then shall be effective only in the specific instance and for the specific purpose for which it was given. 9.7 Demand; Protest. Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees at any time held by Bank on which Borrower may in any way be liable. 10. NOTICES Unless otherwise provided in this Agreement, all notices or demands by any party relating to this Agreement or any other agreement entered into in connection herewith shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by a recognized overnight delivery service, by certified mail, postage prepaid, return receipt requested, or by telefacsimile to Borrower or to Bank, as the case may be, at its addresses set forth below: If to Borrower: E-Loan, Inc. 6200 Village Parkway, Suite 102 Dublin, CA 94568 Attn: Frank M. Siskowski FAX: (925) 556-2178 If to Bank: Silicon Valley Bank 3003 Tasman Drive Santa Clara, CA 95054 Attn: Scott Wiebe FAX: (408) 748-9478 The parties hereto may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other. 11. CHOICE OF LAW AND VENUE The Loan Documents shall be governed by, and construed in accordance with, the internal laws of the State of California, without regard to principles of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive jurisdiction of the state and Federal courts located in the County of Santa Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN 23 27 DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. 12. GENERAL PROVISIONS 12.1 Successors and Assigns. (a) 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 Borrower 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 Borrower to sell, transfer, negotiate, or grant participations in all or any part of, or any interest in, Bank's obligations, rights and benefits hereunder, subject to the provisions of this Section 12.1. (b) Bank may sell, negotiate or grant participations to other financial institutions in all or part of the obligations of the Borrower outstanding under the Loan Documents, without notice to or the approval of Borrower; provided that any such sale, negotiation or participation shall be in compliance with the applicable federal and state securities laws and the other requirements of this Section 12.1. Notwithstanding the sale, negotiation or grant of participations, Bank shall remain solely responsible for the performance of its obligations under this Agreement, and Borrower shall continue to deal solely and directly with Bank in connection with this Agreement and the other Loan Documents. (c) The grant of a participation interest shall be on such terms as Bank determines are appropriate, provided only that (1) the holder of such a participation interest shall not have any of the rights of Bank under this Agreement except, if the participation agreement so provides, rights to demand the payment of costs of the type described in Section 2.6, provided that the aggregate amount that the Borrower shall be required to pay under Section 2.6 with respect to any ratable share of the Committed Revolving Line or any Advance (including amounts paid to participants) shall not exceed the amount that Borrower would have had to pay if no participation agreements had been entered into, and (2) the consent of the holder of such a participation interest shall not be required for amendments or waivers of provisions of the Loan Agreement other than those which (i) increase the amount of the Committed Revolving Line, (ii) extend the term of this Agreement, (iii) decrease the rate of interest or the amount of any fee or any other amount payable to Bank under this Agreement, (iv) reduce the principal amount payable under this Agreement, or (v) extend the date fixed for the payment of principal or interest or any other amount payable under this Agreement. (d) Bank may assign, from time to time, all or any portion of the Committed Revolving Line to an Affiliate of Bank or to The Federal Reserve Bank or, subject to the prior written approval of Borrower (which approval will not be unreasonably withheld), to any other financial institution; provided, that (i) the amount of the Committed Revolving Line being assigned pursuant to each such assignment shall in no event be less than Five Hundred Thousand Dollars ($500,000) and shall be an integral multiple of One Hundred Thousand Dollars ($100,000) and (ii) the parties to each such assignment shall execute and deliver to Borrower an assignment agreement in a form reasonably acceptable to each. Upon such execution and delivery, from and after the effective date specified in such assignment agreement (x) the assignee thereunder shall be a party hereto and, to the extent that rights and obligations hereunder have been assigned to it pursuant to such assignment agreement, have the rights and obligations of a Bank hereunder and (y) Bank shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to such assignment agreement, relinquish its rights and be released from its obligations under this Agreement (other than pursuant to this Section 12.1(d)), and, in the case of an assignment agreement covering all or the remaining portion of Bank's rights and obligations under this Agreement, Bank shall cease to be a party hereto. In the event of an assignment hereunder, the parties agree to amend this Agreement to 24 28 the extent necessary to reflect the mechanical changes which are necessary to document such assignment. Each party shall bear its own expenses (including without limitation attorneys' fees and costs) with respect to such an amendment. 12.2 Indemnification. Borrower shall indemnify, defend, protect and hold harmless Bank and its officers, employees, and agents against: (a) all obligations, demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank 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 Borrower whether under the Loan Documents, or otherwise (including without limitation reasonable attorneys fees and expenses), except for losses caused by Bank's gross negligence or willful misconduct. 12.3 Time of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement. 12.4 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. 12.5 Amendments in Writing, Integration. This Agreement cannot be amended or terminated except by a writing signed by Borrower and Bank. 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 the Loan Documents. 12.6 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. 12.7 Survival. All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any Obligations (excluding Obligations under Section 2.6 and 12.2 to the extent they remain inchoate at the time the outstanding payment Obligations are paid in full) remain outstanding. The obligations of Borrower to indemnify Bank with respect to the expenses, damages, losses, costs and liabilities described in Section 12.2 shall survive until all applicable statute of limitations periods with respect to actions that may be brought against Bank have run, provided that so long as the obligations referred to in the first sentence of this Section 12.7 have been satisfied, and Bank has no commitment to make any Credit Extensions or to make any other loans to Borrower, Bank shall release all security interests granted hereunder and redeliver all Collateral held by it in accordance with applicable law. 12.8 Confidentiality. In handling any confidential information, Bank shall exercise the same degree of care that it exercises with respect to its own proprietary information of the same types to maintain the confidentiality of any non-public information thereby received or received pursuant to this Agreement, except that disclosure of such information may be made (i) to the subsidiaries or affiliates of Bank in connection with their present or prospective business relations with Borrower, (ii) to prospective transferees or purchasers of any interest in the Loans, provided 25 29 that they have entered into a comparable confidentiality agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as required by law, regulations, rule or order, subpoena, judicial order or similar order, (iv) as may be required in connection with the examination, audit or similar investigation of Bank and (v) as Bank may deem appropriate in connection with the exercise of any remedies hereunder. Confidential information hereunder shall not include information that either: (a) is in the public domain or in the knowledge or possession of Bank when disclosed to Bank, or becomes part of the public domain after disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank by a third party, provided Bank does not have actual knowledge that such third party is prohibited from disclosing such information. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. E-LOAN, INC. By: /s/ Frank Siskowski ------------------------------------ Title: Chief Financial Officer --------------------------------- SILICON VALLEY BANK By: /s/ Scott M. Wiebe ------------------------------------ Title: Assistant Vice President --------------------------------- 26 30 EXHIBIT A The Collateral shall consist of all right, title and interest of Borrower in and to the following: (a) All goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located; (b) All inventory, now owned or hereafter acquired, including, without limitation, all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products including such inventory as is temporarily out of Borrower's custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the above; (c) All contract rights and general intangibles now owned or hereafter acquired, including, without limitation, goodwill, trademarks, servicemarks, trade styles, trade names, patents, patent applications, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer discs, computer tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind; (d) All now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Borrower arising out of the sale or lease of goods, the licensing of technology or the rendering of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as all merchandise returned to or reclaimed by Borrower; (e) All documents, cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, letters of credit, certificates of deposit, instruments and chattel paper now owned or hereafter acquired and Borrower's Books relating to the foregoing; (f) All copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, now owned or hereafter acquired; all trade secret rights, including all rights to unpatented inventions, know-how, operating manuals, license rights and agreements and confidential information, now owned or hereafter acquired; all mask work or similar rights available for the protection of semiconductor chips, now owned or hereafter acquired; all claims for damages by way of any past, present and future infringement of any of the foregoing; (g) All Borrower's Books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions and accessions to and proceeds thereof. A-1 31 EXHIBIT B LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T. TO: CENTRAL CLIENT SERVICE DIVISION DATE: ---------------------- FAX#: (408) 496-2426 TIME: ---------------------- FROM: --------------------------------------------------------------------------- CLIENT NAME (BORROWER) REQUESTED BY: ------------------------------------------------------------------ AUTHORIZED SIGNER'S NAME AUTHORIZED SIGNATURE: ---------------------------------------------------------- PHONE NUMBER: ------------------------------------------------------------------ FROM ACCOUNT # TO ACCOUNT # ---------------- ---------------------------------- REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT PRINCIPAL INCREASE (ADVANCE) $ ----------------------------------- PRINCIPAL PAYMENT (ONLY) $ ----------------------------------- INTEREST PAYMENT (ONLY) $ ----------------------------------- PRINCIPAL AND INTEREST (PAYMENT) $ ----------------------------------- OTHER INSTRUCTIONS: ------------------------------------------------------------ - -------------------------------------------------------------------------------- All representations and warranties of Borrower stated in the Loan and Security Agreement are true, correct and complete in all material respects as of the date of the telephone request for and Advance confirmed by this Borrowing Certificate; provided, however, that those representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of such date. BANK USE ONLY TELEPHONE REQUEST: The following person is authorized to request the loan payment transfer/loan advance on the advance designated account and is known to me. - ----------------------------------- ---------------------------- Authorized Requester Phone # - ----------------------------------- ---------------------------- Received By (Bank) Phone # -------------------------------------- Authorized Signature (Bank) B-1 32 EXHIBIT C COMPLIANCE CERTIFICATE TO: SILICON VALLEY BANK FROM: E-LOAN, INC. The undersigned authorized officer of E-Loan, Inc. hereby certifies that in accordance with the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is in complete compliance for the period ending _______________ with all required covenants except as noted below and (ii) all representations and warranties of Borrower stated in the Agreement are true and correct in all material respects as of the date hereof. Attached herewith are the required documents supporting the above certification. The Officer further certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) and are consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The Officer expressly acknowledges that no borrowings may be requested by Borrower at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that such compliance is determined not just at the date this certificate is delivered. PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN. REPORTING COVENANT REQUIRED COMPLIES Monthly financial statements Monthly within 30 days Yes No Annual (CPA Audited) FYE within 120 days Yes No 10-Q, 10-K and 8-K Within 5 days after filing with SEC Yes No FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES Maintain on the following Basis: Minimum Quick Ratio (Monthly) 2.0:1.0 _____:1.0 Yes No Liquidity Ratio (Monthly)(1) 2.0:1.0 _____:1.0 Yes No Minimum Debt Service(Quarterly)(2) 1.5:1.0 _____:1.0 Yes No Profitability: Quarterly $________(3) $________ Yes No
(1)Converts to Debt Service Coverage after two consecutive quarters of Debt Service Coverage of at least 1.5 to 1.0. (2)Tested after conversion of Liquidity Ratio. (3)No loss exceeding $2,500,000 for the fiscal quarter ended 12/31/98. Subsequent operating performance covenants to be agreed upon by 2/15/99. COMMENTS REGARDING EXCEPTIONS: See Attached. Sincerely, - --------------------------------- SIGNATURE - --------------------------------- TITLE - --------------------------------- DATE BANK USE ONLY Received by: ---------------------------------------- AUTHORIZED SIGNER Date: ----------------------------------------------- Verified: ------------------------------------------- AUTHORIZED SIGNER Date: ----------------------------------------------- Compliance Status: Yes No D-1 33 DISBURSEMENT REQUEST AND AUTHORIZATION Borrower: E-Loan, Inc. Bank: Silicon Valley Bank LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal amount up to $1,500,000, and a Variable Rate, Equipment Line of Credit in a principal amount up to $3,500,000. PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business. SPECIFIC PURPOSE. The specific purpose of this loan is: working capital and purchase of equipment. DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be disbursed until all of Bank's conditions for making the loan have been satisfied. Please disburse the loan proceeds as follows:
Revolving Line Equipment Line Amount paid to Borrower directly: $ $ -------- ------- Undisbursed Funds $ $ -------- ------- Principal $ $ -------- -------
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the following charges: Prepaid Finance Charges Paid in Cash: $ ----------- $10,000 Loan Fee $ Accounts Receivables Audit ----- Other Charges Paid in Cash: $ ----------- $ UCC Search Fees ----- $ UCC Filing Fees ----- $ Patent Filing Fees ----- $ Trademark Filing Fees ----- $ Copyright Filing Fees ----- $ Outside Counsel Fees and Expenses (Estimate) ----- Total Charges Paid in Cash $ -----------
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct from Borrower's account numbered __________ the amount of any loan payment. If the funds in the account are insufficient to cover any payment, Bank shall not be obligated to advance funds to cover the payment. FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS AUTHORIZATION IS DATED AS OF DECEMBER 9, 1998. BORROWER: E-Loan, Inc. - ---------------------------- Authorized Officer 34 AGREEMENT TO PROVIDE INSURANCE GRANTOR: E-Loan, Inc. BANK: Silicon Valley Bank INSURANCE REQUIREMENTS. E-Loan, Inc. ("Grantor") understands that insurance coverage is required in connection with the extending of a loan or the providing of other financial accommodations to Grantor by Bank. These requirements are set forth in the Loan Documents. The following minimum insurance coverages must be provided on the following described collateral (the "Collateral"): Collateral: All Inventory, Equipment and Fixtures. Type: All risks, including fire, theft and liability. Amount: Full insurable value. Basis: Replacement value. Endorsements: Loss payable clause to Bank with stipulation that coverage will not be cancelled or diminished without a minimum of twenty (20) days' prior written notice to Bank. INSURANCE COMPANY. Grantor may obtain insurance from any insurance company Grantor may choose that is reasonably acceptable to Bank. Grantor understands that credit may not be denied solely because insurance was not purchased through Bank. FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or before closing, evidence of the required insurance as provided above, with an effective date of December 9, 1998, or earlier. Grantor acknowledges and agrees that if Grantor fails to provide any required insurance or fails to continue such insurance in force, Bank may do so at Grantor's expense as provided in the Loan and Security Agreement. The cost of such insurance, at the option of Bank, shall be payable on demand or shall be added to the indebtedness as provided in the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS. AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor authorizes Bank to provide to any person (including any insurance agent or company) all information Bank deems appropriate, whether regarding the Collateral, the loan or other financial accommodations, or both. GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED DECEMBER 9, 1998. GRANTOR: E-Loan, Inc. x /s/ Frank Siskowski ------------------------------ Authorized Officer FOR BANK USE ONLY INSURANCE VERIFICATION DATE: PHONE: ---------------------------------------- ----------------- AGENT'S NAME: ------------------------------------------------------------------ INSURANCE COMPANY: ------------------------------------------------------------- POLICY NUMBER: ----------------------------------------------------------------- EFFECTIVE DATES: --------------------------------------------------------------- COMMENTS: ---------------------------------------------------------------------- 35 CORPORATE RESOLUTIONS TO BORROW BORROWER: E-Loan, Inc. I, the undersigned Secretary or Assistant Secretary of E-Loan, Inc. (the "Corporation"), HEREBY CERTIFY that the Corporation is organized and existing under and by virtue of the laws of the State of . I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and complete copies of the Certificate of Incorporation and Bylaws of the Corporation, each of which is in full force and effect on the date hereof. I FURTHER CERTIFY that at a meeting of the Directors of the Corporation (or by other duly authorized corporate action in lieu of a meeting), duly called and held, at which a quorum was present and voting, the following resolutions were adopted: BE IT RESOLVED, that ANY ONE (1) of the following named officers, employees, or agents of this Corporation, whose actual signatures are shown below: NAMES POSITIONS ACTUAL SIGNATURES - ------------------------- ------------------- ---------------------------- Christian Larsen CEO /s/ Chris Larsen - ------------------------- ------------------- ---------------------------- Janina Pawlowski President /s/ Janina Pawlowski - ------------------------- ------------------- ---------------------------- Frank Siskowski CFO /s/ Frank Siskowski - ------------------------- ------------------- ---------------------------- - ------------------------- ------------------- ---------------------------- acting for an on behalf of this Corporation and as its act and deed be, and they hereby are, authorized and empowered: BORROW MONEY. To borrow from time to time from Silicon Valley Bank ("Bank"), on such terms as may be agreed upon between the officers, employees, or agents and Bank, such sum or sums of money as in their judgment should be borrowed, without limitation, including such sums as are specified in that certain Loan and Security Agreement dated as of December 9, 1998 (the "Loan Agreement"). EXECUTE NOTES. To execute and deliver to Bank the promissory note or notes of the Corporation, on Bank's forms, at such rates of interest and on such terms as may be agreed upon, evidencing the sums of money so borrowed or any indebtedness of the Corporation to Bank, and also to execute and deliver to Bank one or more renewals, extensions, modifications, refinancings, consolidations, or substitutions for one or more of the notes, or any portion of the notes. GRANT SECURITY. To grant a security interest to Bank in the Collateral described in the Loan Agreement, which security interest shall secure all of the Corporation's Obligations, as described in the Loan Agreement. NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts, trade acceptances, promissory notes, or other evidences of indebtedness payable to or belonging to the Corporation or in which the Corporation may have an interest, and either to receive cash for the same or to cause such proceeds to be credited to the account of the Corporation with Bank, or to cause such other disposition of the proceeds derived therefrom as they may deem advisable. 1 36 LETTERS OF CREDIT; FOREIGN EXCHANGE. To execute letters of credit applications, foreign exchange agreements and other related documents pertaining to Bank's issuance of letters of credit and foreign exchange contracts. ISSUE WARRANTS. To issue warrants to purchase the Corporation's capital stock, for such series and number, and on such terms, as an officer of the Corporation shall deem appropriate. FURTHER ACTS. In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances thereunder, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver such other documents and agreements as they may in their discretion deem reasonably necessary or proper in order to carry into effect the provisions of these Resolutions. BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these resolutions and performed prior to the passage of these resolutions are hereby ratified and approved, that these Resolutions shall remain in full force and effect and Bank may rely on these Resolutions until written notice of their revocation shall have been delivered to and received by Bank. Any such notice shall not affect any of the Corporation's agreements or commitments in effect at the time notice is given. I FURTHER CERTIFY that the officers, employees, and agents named above are duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupy the positions set forth opposite their respective names; that the foregoing Resolutions now stand of record on the books of the Corporation; and that the Resolutions are in full force and effect and have not been modified or revoked in any manner whatsoever. IN WITNESS WHEREOF, I have hereunto set my hand on 12/11, 1998 and attest that the signatures set opposite the names listed above are their genuine signatures. CERTIFIED TO AND ATTESTED BY: X /s/ Chris Larsen ------------------------------ 2 EX-10.39 45 INTERNET DATA CENTER SERVICES AGMNT. 11/10/97 1 EXHIBIT 10.39 EXODUS COMMUNICATIONS, INC. INTERNET DATA CENTER SERVICES AGREEMENT THIS INTERNET DATA CENTER SERVICES AGREEMENT (this "Agreement") is made effective as of the Submission Date (November 10, 1997) indicated in the initial Internet Data Center Services Order Form accepted by Exodus, by and between Exodus Communications, Inc. ("Exodus") and the customer identified below ("Customer"). PARTIES: CUSTOMER NAME: E-Loan, Inc. --------------------------------------------------------- ADDRESS: 540 University Ave. Ste. 350 --------------------------------------------------------- Palo Alto, CA 94301 --------------------------------------------------------- PHONE: 650-617-0400 --------------------------------------------------------- FAX: 650-617-0410 --------------------------------------------------------- EXODUS COMMUNICATIONS, INC. 2650 San Tomas Expressway Santa Clara, CA 95051 Phone: (408) 346-2200 Fax: (408) 346-2206 1. INTERNET DATA CENTER SERVICES. Subject to the terms and conditions of this Agreement, during the term of this Agreement, Exodus will provide to Customer the services described in the Internet Data Center Services Order Form(s) ("IDC Services Order Form(s)") accepted by Exodus, or substantially similar services if such substantially similar services would provide Customer with substantially similar benefits ("Internet Data Center Services"). All IDC Services Order Forms accepted by Exodus are incorporated herein by this reference, each as of the Submission Date indicated in such form. 2. FEES AND BILLING. 2.1 Fees. Customer will pay all fees due according to the IDC Services Order Form(s). 2.2 Billing Commencement. Billing for Internet Data Center Services, other than Setup Fees, indicated in the initial IDC Services Order Form shall commence on the earlier to occur of (i) the "Installation Date" indicated in the initial IDC Services Order Form, regardless of whether Customer has commenced use of the Internet Data Center Services, unless Customer is unable to install the Customer Equipment and/or use the Internet Data Center Services by the Installation Date due to the fault of Exodus, then billing will not begin until the date Exodus has remedied such fault and (ii) the date the "Customer Equipment" (Customer's computer hardware and other tangible equipment, as identified in the Customer Equipment List which is incorporated herein by this reference) is placed by Customer in the "Customer Area" (the portion(s) of the Internet Data Centers, as defined in Section 3.1 below, made available to Customer hereunder for the placement of Customer Equipment) and is operational. All Setup Fees will be billed upon receipt of a Customer signed IDC Services Order Form. In the event that Customer orders additional Internet Data Center Services, billing for such services shall commence on the date Exodus first provides such additional Internet Data Center Services to Customer or as otherwise agreed to by Customer and Exodus. 2.3 Billing and Payment Terms. Customer will be billed monthly in advance of the provision of Internet Data Center Services, and payment of such fees will be due within thirty (30) days of the date of each Exodus invoice. All payments will be made in U.S. dollars. Late payments hereunder will accrue interest at a rate of one and one-half percent (1 -1/2%) per month, or the highest rate allowed by applicable law, whichever is lower. If in its judgment Exodus determines that Customer is not creditworthy or is otherwise not financially secure, Exodus may, upon written notice to Customer, modify the payment terms to require full payment before the provision of Internet Data Center Services or other assurances to secure Customer's payment obligations hereunder. 2.4 Taxes. All payments required by this Agreement are exclusive of all national, state, municipal or other governmental excise, sales, value-added, use, personal property, and occupational taxes, excises, withholding taxes and obligations and other levies now in force or enacted in the future, all of which Customer will be responsible for and will pay in full, except for taxes based on Exodus' net income. 3. CUSTOMER'S OBLIGATIONS. 3.1 Compliance with Law and Rules and Regulations. Customer agrees that Customer will comply at all times with all applicable laws and regulations and Exodus' general rules and regulations relating to its provision of Internet Data Center Services, as updated by Exodus from time to time ("Rules and Regulations"). Customer acknowledges that Exodus exercises no control whatsoever over the content of the information passing through its sites containing the Customer Area and equipment and facilities used by Exodus to provide Internet Data Center Services ("Internet Data Centers"), and that it is the sole responsibility of Customer to ensure that the information it transmits and receives complies with all applicable laws and regulations. 3.2 Customer's Costs. Customer agrees that it will be solely responsible, and at Exodus's request will reimburse Exodus, for all costs and expenses (other than those included as part of the Internet Data Center Services and except as otherwise expressly provided herein) it incurs in connection with this agreement. 3.3 Access and Security. Customer will be fully responsible for any charges, costs, expenses (other than those included in the Internet Data Center Services), and third party claims that may result from its use of, or access to, the Internet Data Centers and/or the Customer Area including but not limited to any unauthorized use of any access devices provided by Exodus hereunder. Except with the advanced written consent of Exodus, Customer's access to the Internet Data Centers will be limited solely to the individuals identified and authorized by Customer to have access to the Internet Data Centers and the Customer Area in accordance with this Agreement, as identified in the Customer Registration Form, as amended from time to time, which is hereby incorporated by this reference ("Representatives"). 3.4 No Competitive Services. Customer may not at any time permit any Internet Data Center Services to be utilized for the provision of any services that compete with any Exodus services, without Exodus' prior written consent. 3.5 Insurance. (a) Minimum Levels. Customer will keep in full force and effect during the term of this Agreement: (i) comprehensive general liability insurance in an amount not less than $5 million per occurrence for bodily injury and property damage; (ii) employer's liability insurance in an amount not less than $1 million per occurrence; and (iii) workers' compensation insurance in an amount not less than that required by applicable law. Customer also agrees that it will, and will be solely responsible for ensuring that its agents (including contractors and subcontractors) maintain, other insurance at levels no less than those required by applicable law and customary in Customer's and its agents' industries. (b) Certificates of Insurance. Prior to installation of any Customer Equipment in the Customer Area, Customer will furnish Exodus with certificates of insurance which evidence the minimum levels of insurance set forth above. (c) Naming Exodus as an Additional Insured. Customer agrees that prior to the installation of any Customer Equipment, Customer will cause its insurance provider(s) to name Exodus as an additional insured and notify Exodus in writing of the effective date thereof. 4. CONFIDENTIAL INFORMATION. 4.1 Confidential Information. Each party acknowledges that it will have access to certain confidential information of the other party concerning the other party's business, plans, customers, technology, and products, including the terms and conditions of this Agreement ("Confidential Information"). Confidential Information will include, but not be limited to, each party's proprietary software and customer information. Each party agrees that it will not use in any way, for its own account or the account of any third party, except as expressly permitted by this Agreement, nor disclose to any third party (except as required by law or to that party's attorneys, accountants and other advisors as reasonably necessary), any of the other party's Confidential Information and will take reasonable precautions to protect the confidentiality of such information. 4.2 Exceptions. Information will not be deemed Confidential Information hereunder if such information: (i) is known to the receiving party prior to receipt from the disclosing party directly or indirectly from a source other than one having an obligation of confidentiality to the disclosing party; (ii) becomes known (independently of disclosure by the disclosing party) to the receiving party directly or indirectly from a source other than one having an obligation of confidentiality to the disclosing party; (iii) becomes publicly known or otherwise ceases to be secret or confidential, except through a breach of this Agreement by the receiving party; or (iv) is independently developed by the receiving party. 5. REPRESENTATIONS AND WARRANTIES. 5.1 Warranties by Customer. (a) Customer Equipment. Customer represents and warrants that it owns or has the legal right and authority, and will continue to own or maintain the legal right and authority during the term of this Agreement, to place and use the Customer Equipment as contemplated by this Agreement. Customer further represents and warrants that its placement, arrangement, and use of the Customer Equipment in the Internet Data Centers complies with the Customer Equipment Manufacturer's environmental and other specifications. (b) Customer's Business. Customer represents and warrants that Customer's services, products, materials, data, information and Customer Equipment used by Customer in connection with this Agreement as well as Customer's and its permitted customers' and users' use of the Internet Data Center Services (collectively, "Customer's Business") does not as of the Installation Date, and will not during the term of this Agreement operate in any manner that would violate any applicable law or regulation. (c) Rules and Regulations. Customer has read the Rules and Regulations and represents and warrants that Customer and Customer's Business are currently in full compliance with the Rules and Regulations, and will remain so at all times during the term of this Agreement. (d) Breach of Warranties. In the event of any breach, or reasonably anticipated breach, of any of the foregoing warranties, in addition to any other remedies available at law or in equity, Exodus will have the right immediately, in Exodus' sole discretion, to suspend any related Internet Data Center Services if deemed reasonably necessary by Exodus to prevent any harm to Exodus and its business. 5.2 Warranties and Disclaimers by Exodus. (a) Service Level Warranty. In the event Customer is unable to transmit and receive information from Exodus' Internet Data Centers to other portions of the Internet and EXODUS COMMUNICATIONS, INC. CONFIDENTIAL (REV 10/97) PAGE 1 2 Customer notifies Exodus immediately of such event and Exodus determines in its reasonable judgment that such inability was caused by Exodus' failure to provide Internet Data Center Services for reasons within Exodus' reasonable control and not as a result of any actions or inactions of Customer or any third parties (including failure of third party equipment), Exodus will, upon Customer's request, credit Customer's account as follows: If Exodus failed to provide the Internet Data Center Services for (i) more than two (2) consecutive hours in a calendar month, Exodus will credit Customer's account the connectivity charges for one (1) day of service; and (ii) more than eight (8) consecutive hours in a calendar month, Exodus will credit Customer's account the connectivity charges for one (1) week of service. Customer may receive only one of the foregoing credits in any single calendar month, regardless of the number of such occurrences. Exodus' scheduled maintenance of the Internet Data Centers and Internet Data Center Services, as described in the Rules and Regulations, shall not be deemed to be a failure of Exodus to provide Internet Data Center Services. THIS WARRANTY DOES NOT APPLY TO ANY INTERNET DATA CENTER SERVICES THAT EXPRESSLY EXCLUDE THIS WARRANTY. THIS SECTION 5.2(a) STATES CUSTOMER'S SOLE AND EXCLUSIVE REMEDY (OTHER THAN TERMINATION OF THIS AGREEMENT) FOR ANY FAILURE BY EXODUS TO PROVIDE INTERNET DATA CENTER SERVICES. (b) No Other Warranty. EXCEPT FOR THE EXPRESS WARRANTY SET OUT IN SUBSECTION (a) ABOVE, THE INTERNET DATA CENTER SERVICES ARE PROVIDED ON AN "AS IS" BASIS, AND CUSTOMER'S USE OF THE INTERNET DATA CENTER SERVICES IS AT ITS OWN RISK. EXODUS DOES NOT MAKE, AND HEREBY DISCLAIMS, ANY AND ALL OTHER EXPRESS AND/OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NONINFRINGEMENT AND TITLE, AND ANY WARRANTIES ARISING FROM A COURSE OF DEALING, USAGE, OR TRADE PRACTICE. EXODUS DOES NOT WARRANT THAT THE INTERNET DATA CENTER SERVICES WILL BE UNINTERRUPTED, ERROR-FREE, OR COMPLETELY SECURE. (c) Disclaimer of Actions Caused by and/or Under the Control of Third Parties. EXODUS DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM EXODUS' INTERNET DATA CENTERS AND OTHER PORTIONS OF THE INTERNET. SUCH FLOW DEPENDS IN LARGE PART ON THE PERFORMANCE OF INTERNET SERVICES PROVIDED OR CONTROLLED BY THIRD PARTIES. AT TIMES, ACTIONS OR INACTIONS CAUSED BY THESE THIRD PARTIES CAN PRODUCE SITUATIONS IN WHICH EXODUS' CUSTOMERS' CONNECTIONS TO THE INTERNET (OR PORTIONS THEREOF) MAY BE IMPAIRED OR DISRUPTED. ALTHOUGH EXODUS WILL USE COMMERCIALLY REASONABLE EFFORTS TO TAKE ACTIONS IT DEEMS APPROPRIATE TO REMEDY AND AVOID SUCH EVENTS, EXODUS CANNOT GUARANTEE THAT THEY WILL NOT OCCUR. ACCORDINGLY, EXODUS DISCLAIMS ANY AND ALL LIABILITY RESULTING FROM OR RELATED TO SUCH EVENTS. 6. LIMITATIONS OF LIABILITY. 6.1 Personal Injury. EACH REPRESENTATIVE AND ANY OTHER PERSONS VISITING THE INTERNET DATA CENTERS DOES SO AT ITS OWN RISK AND EXODUS ASSUMES NO LIABILITY WHATSOEVER FOR ANY HARM TO SUCH PERSONS RESULTING FROM ANY CAUSE OTHER THAN EXODUS' GROSS NEGLIGENCE OR WILLFUL MISCONDUCT RESULTING IN PERSONAL INJURY TO SUCH PERSONS DURING SUCH A VISIT. 6.2 Damage to Customer Equipment or Business. EXODUS ASSUMES NO LIABILITY FOR ANY DAMAGE TO, OR LOSS RELATING TO, CUSTOMER'S BUSINESS RESULTING FROM ANY CAUSE WHATSOEVER. CERTAIN CUSTOMER EQUIPMENT, INCLUDING BUT NOT LIMITED TO CUSTOMER EQUIPMENT LOCATED ON CYBERRACKS, MAY BE DIRECTLY ACCESSIBLE BY OTHER CUSTOMERS. EXODUS ASSUMES NO LIABILITY FOR ANY DAMAGE TO, OR LOSS OF, ANY CUSTOMER EQUIPMENT RESULTING FROM ANY CAUSE OTHER THAN EXODUS' GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. TO THE EXTENT EXODUS IS LIABLE FOR ANY DAMAGE TO, OR LOSS OF, THE CUSTOMER EQUIPMENT FOR ANY REASON, SUCH LIABILITY WILL BE LIMITED SOLELY TO THE THEN-CURRENT VALUE OF THE CUSTOMER EQUIPMENT. 6.3 Exclusions. EXCEPT AS SPECIFIED IN SECTIONS 6.1 AND 6.2, IN NO EVENT WILL EXODUS BE LIABLE TO CUSTOMER, ANY REPRESENTATIVE, OR ANY THIRD PARTY FOR ANY CLAIMS ARISING OUT OF OR RELATED TO THIS AGREEMENT, CUSTOMER EQUIPMENT, CUSTOMER'S BUSINESS OR OTHERWISE, AND ANY LOST REVENUE, LOST PROFITS, REPLACEMENT GOODS, LOSS OF TECHNOLOGY, RIGHTS OR SERVICES, INCIDENTAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES, LOSS OF DATA, OR INTERRUPTION OR LOSS OF USE OF SERVICE OR OF ANY CUSTOMER EQUIPMENT OR CUSTOMER'S BUSINESS, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER UNDER THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE. 6.4 Maximum Liability. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, EXODUS'S MAXIMUM AGGREGATE LIABILITY TO CUSTOMER RELATED TO OR IN CONNECTION WITH THIS AGREEMENT WILL BE LIMITED TO THE TOTAL AMOUNT PAID BY CUSTOMER TO EXODUS HEREUNDER FOR THE PRIOR TWELVE (12) MONTH PERIOD. 6.5 Customer's Insurance. Customer agrees that it will not pursue any claims against Exodus for any liability Exodus may have under or relating to this Agreement until Customer first makes claims against Customer's insurance provider(s) and such insurance provider(s) finally resolve(s) such claims. 6.6 Basis of the Bargain; Failure of Essential Purpose. Customer acknowledges that Exodus has set its prices and entered into this Agreement in reliance upon the limitations of liability and the disclaimers of warranties and damages set forth herein, and that the same form an essential basis of the bargain between the parties. The parties agree that the limitations and exclusions of liability and disclaimers specified in this Agreement will survive and apply even if found to have failed of their essential purpose. 7. INDEMNIFICATION. 7.1 Exodus' Indemnification of Customer. Exodus will indemnify, defend and hold Customer harmless from and against any and all costs, liabilities, losses, and expenses (including, but not limited to, reasonable attorneys' fees) (collectively, "Losses") resulting from any claim, suit, action, or proceeding (each, an "Action") brought against Customer alleging (i) the infringement of any third party registered U.S. copyright or issued U.S. patent resulting from the provision of Internet Data Center Services pursuant to this Agreement (but excluding any infringement contributorily caused by Customer's Business or Customer Equipment) and (ii) personal injury to Customer's Representatives from Exodus's gross negligence or willful misconduct. 7.2 Customer's Indemnification of Exodus. Customer will indemnify, defend and hold Exodus, its affiliates and customers harmless from and against any and all Losses resulting from or arising out of any Action brought by or against Exodus, its affiliates or customers alleging: (a) with respect to the Customer's Business: (i) infringement or misappropriation of any intellectual property rights; (ii) defamation, libel, slander, obscenity, pornography, or violation of the rights of privacy or publicity; or (iii) spamming, or any other offensive, harassing or illegal conduct or violation of the Rules and Regulations; (b) any damage or destruction to the Customer Area, the Internet Data Centers or the equipment of Exodus or any other customer by Customer or Representative(s) or Customer's designees; or (c) any other damage arising from the Customer Equipment or Customer's Business. 7.3 Notice. Each party will provide the other party prompt written notice upon of the existence of any such event of which it becomes aware, and an opportunity to participate in the defense thereof. 8. TERM AND TERMINATION. 8.1 Term. This Agreement will be effective for a period of one (1) year from the Installation Date, unless earlier terminated according to the provisions of this Section 8. The Agreement will automatically renew for additional terms of one (1) year each. 8.2 Termination. (a) For Convenience. (i) By Customer During First Thirty Days. Customer may terminate this Agreement for convenience by providing written notice to Exodus at any time during the thirty (30) day period beginning on the Installation Date. (ii) By Either Party. Either party may terminate this Agreement for convenience at any time effective after the first (1st) anniversary of the Installation Date by providing ninety (90) days' prior written notice to the other party at any time thereafter. (b) For Cause. Either party will have the right to terminate this Agreement if: (i) the other party breaches any material term or condition of this Agreement and fails to cure such breach within thirty (30) days after receipt of written notice of the same, except in the case of failure to pay fees, which must be cured within five (5) days after receipt of written notice from Exodus; (ii) the other party becomes the subject of a voluntary petition in bankruptcy or any voluntary proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors; or (iii) the other party becomes the subject of an involuntary petition in bankruptcy or any involuntary proceeding relating to insolvency, receivership, liquidation, or composition for the benefit of creditors, if such petition or proceeding is not dismissed within sixty (60) days of filing. 8.3 No Liability for Termination. Neither party will be liable to the other for any termination or expiration of this Agreement in accordance with its terms. 8.4 Effect of Termination. Upon the effective date of expiration or termination of this Agreement: (a) Exodus will immediately cease providing the Internet Data Center Services; (b) any and all payment obligations of Customer under this Agreement will become due immediately; (c) within thirty (30) days after such expiration or termination, each party will return all Confidential Information of the other party in its possession at the time of expiration or termination and will not make or retain any copies of such Confidential Information except as required to comply with any applicable legal or accounting record keeping requirement; and (d) Customer will remove from the Internet Data Centers all Customer Equipment and any of its other property within the Internet Data Centers within five (5) days of such expiration or termination and return the Customer Area to Exodus in the same condition as it was on the Installation Date, normal wear and tear excepted. If Customer does not remove such property within such five-day period, Exodus will have the option to (i) move any and all such property to secure storage and charge Customer for the cost of such removal and storage, and/or (ii) liquidate the property in any reasonable manner. 8.5 Customer Equipment as Security. In the event that Customer fails to pay Exodus all amounts owed Exodus under this Agreement when due, Customer Agrees that upon written notice, Exodus may take possession of any Customer Equipment and store it, at Customer's expense, until taken in full or partial satisfaction of any lien or judgment, all without being liable to prosecution or for damages. 8.6 Survival. The following provisions will survive any expiration or termination of the Agreement: Sections 2, 3, 4, 5, 6, 7, 8 and 9. 9. MISCELLANEOUS PROVISIONS. 9.1 Force Majeure. Except for the obligation to pay money, neither party will be liable for any failure or delay in its performance under this Agreement due to any cause beyond its reasonable control, including act of war, acts of God, earthquake, flood, embargo, riot, sabotage, labor shortage or dispute, governmental act or failure of the Internet, provided that the delayed party: (a) gives the other party prompt notice of such cause, and (b) uses its reasonable commercial efforts to correct promptly such failure or delay in performance. 9.2 No Lease. This Agreement is a services agreement and is not intended to and will not constitute a lease of any real or personal property. Customer acknowledges and agrees that (i) it has been granted only a license to occupy the Customer Space and use the Internet Data Centers and any equipment provided by Exodus in accordance with this Agreement, (ii) Customer has not been granted any real property interest in the Customer Space or Internet Data Centers, and (iii) Customer has no rights as a tenant or otherwise under any real property or landlord/tenant laws, regulations, or ordinances. For good cause, including the exercise of any rights under Section 8.5 above, Exodus may suspend the right of any Representative or other person to visit the Internet Data Centers. EXODUS COMMUNICATIONS, INC. CONFIDENTIAL (REV 10/97) PAGE 2 3 9.3 Marketing. Customer agrees that Exodus may refer to Customer by trade name and trademark, and may briefly describe Customer's Business, in Exodus' marketing materials and web site. Customer hereby grants Exodus a license to use any Customer trade names and trademarks solely in connection with the rights granted to Exodus pursuant to this Section 9.3. 9.4 Government Regulations. Customer will not export, re-export, transfer, or make available, whether directly or indirectly, any regulated item or information to anyone outside the U.S. in connection with this Agreement without first complying with all export control laws and regulations which may be imposed by the U.S. Government and any country or organization of nations within whose jurisdiction Customer operates or does business. 9.5 Non-Solicitation. During the period beginning on the Installation Data and ending on the first anniversary of the termination or expiration of this Agreement in accordance with its terms, Customer agrees that it will not, and will ensure that its affiliates do not, directly or indirectly, solicit or attempt to solicit for employment any persons employed by Exodus during such period. 9.6 Governing Law; Dispute Resolution, Severability; Waiver. This Agreement is made under and will be governed by and construed in accordance with the laws of the State of California (except that body of law controlling conflicts of law) and specifically excluding from application to this Agreement that law known as the United Nations Convention on the International Sale of Goods. Any dispute relating to the terms, interpretation or performance of this Agreement (other than claims for preliminary injunctive relief or other pre-judgment remedies) will be resolved at the request of either party through binding arbitration. Arbitration will be conducted in Santa Clara County, California, under the rules and procedures of the Judicial Arbitration and Mediation Society ("JAMS"). The parties will request that JAMS appoint a single arbitrator possessing knowledge of online services agreements; however the arbitration will proceed even if such a person is unavailable. In the event any provision of this Agreement is held by a tribunal of competent jurisdiction to be contrary to the law, the remaining provisions of this Agreement will remain in full force and effect. The waiver of any breach or default of this Agreement will not constitute a waiver of any subsequent breach or default, and will not act to amend or negate the rights of the waiving party. 9.7 Assignment; Notices. Neither party may assign its rights or delegate its duties under this Agreement either in whole or in part without the prior written consent of the other party, except that this Agreement may be assigned in whole as part of a corporate reorganization, consolidation, merger, or sale of substantially all of its assets. Any attempted assignment or delegation without such consent will be void. This Agreement will bind and inure to the benefit of each party's successors and permitted assigns. Any notice or communication required or permitted to be given hereunder may be delivered by hand, deposited with an overnight courier, sent by confirmed facsimile, or mailed by registered or certified mail, return receipt requested, postage prepaid, in each case to the address of the receiving party indicated on the signature page hereof, or at such other address as may hereafter be furnished in writing by either party hereto to the other. Such notice will be deemed to have been given as of the date it is delivered, mailed or sent, whichever is earlier. 9.8 Relationship of Parties. Exodus and Customer are independent contractors and this Agreement will not establish any relationship of partnership, joint venture, employment, franchise or agency between Exodus and Customer. Neither Exodus nor Customer will have the power to bind the other or incur obligations on the other's behalf without the other's prior written consent, except as otherwise expressly provided herein. 9.9 Entire Agreement; Counterparts. This Agreement, including all documents incorporated herein by reference, constitutes the complete and exclusive agreement between the parties with respect to the subject matter hereof, and supersedes and replaces any and all prior or contemporaneous discussions, negotiations, understandings and agreements, written and oral, regarding such subject matter. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together shall constitute one and the same instrument. Customer's and Exodus' authorized representatives have read the foregoing and all documents incorporated therein and agree and accept such terms effective as of the date first above written. CUSTOMER EXODUS COMMUNICATIONS, INC. Signature: /s/ Chris Larsen Signature: /s/ Illegible ---------------------------- ---------------------------- Print Name: Chris Larsen Print Name: Illegible --------------------------- --------------------------- Title: President Title: Illegible -------------------------------- -------------------------------- EXODUS COMMUNICATIONS, INC. CONFIDENTIAL REV 10/97) Page 3 EX-10.40 46 MARKETING AGREEMENT DATED JANUARY 18, 1998 1 EXHIBIT 10.40 MARKETING AGREEMENT BY AND BETWEEN E-LOAN, INC. AND PHH MORTGAGE SERVICES CORPORATION Release Date: REVISED DATE: 2/4/98 2 MARKETING AGREEMENT This Marketing Agreement ("Agreement") is entered into as of the 19th day of January, 1998 ("Effective Date"), between PHH Mortgage Services Corporation ("PHH"), a New Jersey corporation having an office at ??000 Atrium Way, Mt. Laurel, New Jersey 08054 and E-LOAN, INC., having an office at 540 University Avenue, Suite 150, Palo Alto, CA 94301 ("E-Loan") (the "Parties"). WHEREAS, PHH is engaged in providing mortgage services that include counseling, efficient processing, origination, and servicing of mortgage loans on homes located in the United States; and WHEREAS, E-Loan is a mortgage broker which provides marketing and access services to mortgage senders via the internet. WHEREAS, PHH and E-Loan wish to develop a marketing and access program ("Program") the purpose of which will be to market PHH's mortgage services on the internet. NOW, THEREFORE, in consideration of the mutual promises contained herein, the Parties hereby agree as follows: The Program. (a) E-Loan shall provide access to PHH and market PHH and its various mortgage programs and products on the internet at various web sites. The web sites shall include promotional information about PHH and educational materials to customers regarding the mortgage process. E-Loan shall be responsible for developing and maintaining the web sites which shall enable customers to access information regarding various loan programs and products, provide comparative product descriptions, costs and similar information, allow the customer to prequalify for a mortgage loan, and select the most suitable loan product under their circumstances. (b) The Parties contemporaneously have agreed upon additional details concerning their respective obligations under the Program, including but not limited to, as applicable, the frequency, size, number and general content of the web sites to be advertised. E-Loan shall review and make suggestions to PHH regarding PHH's advertisements and the most effective manner in which to promote its programs and products on the internet. PHH shall have sole discretion in selecting the marketing materials which are ultimately placed on the web site. (c) As part of the Program, E-Loan shall provide monthly reports to PHH (E-Loan Reports), in form and format reasonably acceptable to the Parties, that describe, among other things, the extent to which E-Loan has met its obligations under the Program. (d) In addition, PHH shall provide to E-Loan its standard monthly reporting on registrations, cancellations, closings and pipeline so that E-Loan may monitor the effectiveness and quality of the mortgage services provided by PHH. 2 3 Compensation. Beginning January 19, 1998, PHH shall pay a fee to E-Loan ("Semiannual Marketing Fee") for the access and marketing provided under the Program every six months during the term of this Agreement (Semiannual term). The amount of the Semiannual Marketing Fee shall be $100,000 unless adjusted as provided in this Section 2. The Semiannual Marketing Fee shall be paid in two equal installments. The first installment of $50,000 shall be paid within 30 days of execution of this Agreement and the second installment of $50,000 shall be paid within 10 days of the end of the Semiannual period. The Parties each acknowledge and agree that the Semiannual Marketing Fee reflects the reasonable and fair market value of the goods and services to be provided by E-Loan under the Program, without regard to the value or volume of mortgage loans that may be attributable to the Program. Not more frequently than once each six months, either party may notify the other, in writing, of its determination (Determination), and the bases therefor, that the Semiannual Marketing Fee amount may fail to reflect the reasonable and fair market value of the goods and services to be provided in the E-Loan Reports, and upon other information made available to the Parties including but not limited to: (i) the number of web sites maintained by E-Loan; (ii) the number of customers visiting the web site; (iii) E-Loan's marketing area; (iv) changes thereto since the prior six month period (collectively, the Data). To the extent they are reasonably available to it, E-Loan agrees to provide the Data to PHH as part of its E-Loan Reports. If the other party agrees with the Determination, the Semiannual Marketing Fee amount shall be so adjusted, effective upon the commencement of the next six month term. If there is disagreement, the Parties shall attempt in good faith to resolve the disagreement. If unable to do so, the Semiannual Marketing Fee shall not be adjusted in response to that Determination. Regulatory Compliance. Each party will comply with all applicable regulatory requirements of the United States or any state with respect to its services to be provided under this Agreement. Each party shall maintain any and all government approvals, licenses or authorizations required by the laws of the United States or any state to engage in the activities described in this Agreement. Relationship. The relationship between PHH and E-Loan shall be that of independent contractors and neither party shall be or represent itself to be an agent, employee, partner or joint venturer of the other, nor shall either party have or represent itself to have any power or authority to act for, bind or commit the other. PHH shall have sole discretion and authority with respect to product development, origination, processing, underwriting and servicing of all mortgage financing. Confidential Information. Each party recognizes that, during the term of this Agreement, its directors, officers or employees may obtain knowledge of trade secrets, membership lists and other confidential information of the other party which are valuable, special or unique to the continued business of that party. Accordingly, each party hereby agrees to hold such information in confidence and to use its best efforts to ensure that such information is held in confidence by its officers, directors and employees and to be utilized only in accordance with the terms of this agreement. Trademarks. Each party shall grant the other party a license to use certain of its trademarks during the term of this Agreement. Each party agrees that nothing herein shall give to the other party any right, title or interest in the other party's Marks, except to use the Marks in accordance with the terms of this Agreement and that the PHH Marks and the E-Loan Marks are the sole and exclusive property of PHH and E-Loan, respectively. 3 4 Disclaimer. Neither PHH nor E-Loan make any representation or warranty to the other regarding the effect that this Agreement and the consummation of the transactions contemplated hereby may have upon the Foreign, Federal, State or local tax liability of the other. Severability. If any provision of this Agreement should be invalid, illegal or in conflict with any applicable state or federal law or regulation, such law or regulation shall control, to the extent of such conflict, without affecting the remaining provisions of this Agreement. Term and Termination. (a) The term of this Agreement shall be for a period of one (1) year commencing on its Effective Date unless earlier terminated in accordance with the provisions of this Section 9. Upon expiration of the initial one (1) year term, this Agreement shall automatically renew from year to year unless earlier terminated in accordance with the provisions of this Section 9. (b) Either party may terminate this Agreement, at any time, with or without cause by providing sixty (60) days written notice to the other. (c) Upon termination of this Agreement, as provided herein: (i) E-Loan shall refrain from any and all further use of or reference to materials utilizing PHH; (ii) PHH shall continue to process, in due course, any mortgage loan applications submitted by E-Loan's customers prior to termination of this Agreement; and (iii) PHH shall be obligated to pay any then due Semiannual Marketing Fee, and (iv) the provisions of Sections 5 and 10 of this Agreement shall survive. Hold Harmless. (a) PHH agrees to indemnify, defend and hold E-Loan harmless from and against any and all claims, suits, actions, liability, losses, expenses, or damages which may hereafter arise, which E-Loan, its affiliates, directors, officers, agents or employees may sustain due to or arising out of any negligent act or omission by PHH, its affiliates, officers, agents, representatives or employees or out of any act by PHH, its affiliates, officers, agents, representatives or employees in violation of this Agreement or in violation of any applicable law or regulation. Provided, however, the above indemnification shall not provide coverage for (a) any claim, suit, action, liability, loss, expense or damage that resulted from an act or omission of E-Loan or (b) the amount by which any cost, fee, expense or loss associated with any of the foregoing were increased as a result of an act or omission on the part of E-Loan. (b) E-Loan agrees to indemnify, defend and hold PHH harmless from and against any and all claims, suits, actions, liability, losses, expenses, or damages which may hereafter arise, which PHH, its affiliates, directors, officers, agents or employees may sustain due to or arising out of any negligent act or omission by E-Loan, its affiliates, officers, agents, representatives or employees or out of any act by E-Loan, its affiliates, officers, agents, representatives or employees in violation of this Agreement or in violation of any applicable law or regulation. Provided, 4 5 however, the above indemnification shall not provide coverage for (a) any claim, suit, action, liability, loss, expense or damage that resulted from an act or omission of PHH or (b) the amount by which any cost, fee, expense or loss associated with any of the foregoing were increased as a result of an act or omission on the part of PHH. 1. Notices. All notices required or permitted by this Agreement shall be in writing and shall be given by certified mail, return receipt requested or by reputable overnight courier with package tracing capability and sent to the address at the head of this Agreement or such other address that a party specified in writing in accordance with this paragraph. 2. Amendment. The terms and conditions of this Agreement may not be modified or amended other than by a writing signed by both Parties. 3. Assignment; Binding Nature. The terms of this Agreement shall be binding upon and shall inure to the benefit of the Parties hereto. This Agreement shall not be assigned by any party without the express prior written consent of the other party. 4. Entire Agreement. This Agreement and any Exhibits attached hereto constitute the entire Agreement between the Parties and supersede all oral or written negotiations of the Parties with respect to the subject matter hereof. 5. Governing Law. This agreement shall be subject to and construed under the laws of the State of New Jersey, without reference to conflicts of law provisions thereof. IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed the day and year first above written. E-LOAN, INC. PHH MORTGAGE SERVICES CORPORATION Signature: /s/ Signature Illegible Signature: /s/ Signature Illegible By: DOUG GALEN By: Bruce Isaacson ---------- -------------- Title: V.P. Sales & Bus Dev. Title: Vice President Marketing --------------------- ------------------------ 5 EX-11.1 47 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11.1 SCHEDULE RE: COMPUTATION OF EARNINGS PER SHARE
1996 1997 1998 ---------- ----------- ------------ Net loss $ (110,044) $(1,374,493) $(10,527,054) Accretion for mandatorily redeemable preferred stock -- (41,667) (1,013,352) ---------- ----------- ------------ Net loss for common stockholders $ (110,044) $(1,416,160) $(12,185,406) ---------- ----------- ------------ Weighted average number of common shares outstanding - basic and diluted 4,085,000 4,087,334 4,133,428 ---------- ----------- ------------ Net loss per share - basic and diluted $(0.03) $(0.35) $(2.95) ====== ====== ======
EX-21.1 48 SUBSIDIARY LIST 1 EXHIBIT 21.1 SUBSIDIARY LIST E-LOAN EUROPE BV EX-23.1 49 CONSENTS OF ACCOUNTANTS 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in the Prospectus constituting part of this Registration Statement on Form S-1 of our report dated March 23, 1999 relating to the financial statements of E-Loan, Inc., which appears in such Prospectus. We also consent to the references to us under the headings "Experts" and "Selected Financial Data" in such Prospectus. However, it should be noted that PricewaterhouseCoopers LLP has not prepared or certified such "Selected Financial Data" /s/ PricewaterhouseCoopers LLP San Francisco, CA March 23, 1999 EX-27.1 50 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1998 JAN-01-1998 DEC-31-1998 9,141,367 0 411,058 0 0 52,426,754 2,719,516 353,952 55,523,256 44,024,519 0 21,393,002 502,383 26,867 (11,713,202) 34,130,254 0 6,831,546 0 18,176,926 0 0 758,031 (11,172,054) 0 (11,172,054) 0 0 0 (11,172,054) 2.95 0
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