Exhibit 10.28
================================================================================
LENDING AND CREDIT SUPPORT AGREEMENT
_______________________
July 1, 2000
_______________________
NFI HOLDING CORPORATION
NOVASTAR CAPITAL, INC.
NOVASTAR MORTGAGE, INC.
as Borrowers
and
NOVASTAR FINANCIAL, INC.
as Lender
================================================================================
LENDING AND CREDIT SUPPORT AGREEMENT
LENDING AND CREDIT SUPPORT AGREEMENT, dated as of July 1, 2000, between NFI
HOLDING CORPORATION, a Delaware corporation ("Holding"), NOVASTAR CAPITAL,
INC., a Delaware corporation ("Capital"), NOVASTAR MORTGAGE, INC., a
Virginia corporation ("Mortgage"), and such other subsidiaries of Holding
as may from time to time execute a copy of this Agreement and the Note
(collectively, the "Borrowers" and each individually, a "Borrower") and
NOVASTAR FINANCIAL, INC., a Maryland corporation (the "Lender").
RECITALS
The Borrowers have requested that the Lender from time to time consider
making revolving credit loans to them for working capital purposes or to finance
certain residential and/or commercial mortgage loans owned or to be acquired by
the Borrowers, and the Lender is prepared to consider making such loans upon the
terms and conditions hereof. The Borrowers have further requested that the
Lender from time to time consider lending credit support to the Borrowers to
facilitate Borrowers' financings from third-party lenders and Borrowers' hedging
arrangements with counterparties. Such credit support may be provided by the
Lender by guarantying a Borrower's borrowings from third-party lenders or by
entering into co-borrowing or co-obligor arrangements with a Borrower.
Furthermore, credit support may be provided by the Lender by guarantying the
performance under loan sale agreements, including sales of loans by a Borrower
in an asset-securitization transaction executed by a Borrower. In addition,
credit support may be provided by the Lender to the mortgage servicing
operations of the Borrowers. The Lender is prepared to consider lending such
credit support upon the terms and conditions hereof. Accordingly, the parties
hereto agree as follows:
Section 1. Definitions and Accounting Matters.
----------------------------------
1.01 Certain Defined Terms. As used herein, the following terms shall
---------------------
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
---- -----
"Adjusted Net Worth" shall mean at any date the sum of (1) GAAP Net Worth,
plus (2) the amount of reserves of Holding and its consolidated
Subsidiaries, if any, for credit losses (as reflected on the financial
statements referred to in 6.01 below), minus (3) the amount of the
unrealized gains on debt securities (as defined in FASB 115) of Holding and
its consolidated Subsidiaries, if any, plus (4) the amount of unrealized
losses on debt securities (as defined in FASB 115) of Holding and its
consolidated Subsidiaries, if any, plus (5) the amount of Loan
Indebtedness, minus (6) the excess of the amount of assets securing
nonrecourse indebtedness over the amount of such nonrecourse indebtedness.
"Affiliate" means, (i) with respect to Lender, NAC, NCFC, and NovaStar
Capital Access Corporation, and any other wholly-owned subsidiaries in
corporate, trust or other form, whether owned directly or indirectly, and (ii)
with respect to the Borrowers, any affiliate of any Borrower as such term is
defined in the United States Bankruptcy Code in effect from time to time.
"Agreement" shall mean this Lending and Credit Support Agreement, as may be
amended, supplemented or otherwise modified from time to time.
1
"Applicable Margin" shall mean 1.75% unless a different percentage shall be
indicated in the related Loan Commitment pursuant to Section 2.03(b) hereof.
"Bankruptcy Code" shall mean the United States Bankruptcy Code of 1978, as
amended from time to time.
"Borrower" and "Borrowers" shall have the meanings provided in the heading
hereof.
"Business Day" shall mean any day other than (i) a Saturday or Sunday, or
(ii) a day in which the New York Stock Exchange or the Federal Reserve Bank of
New York is authorized or obligated by law or executive order to be closed.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Commitment Amount" shall be the maximum aggregate outstanding principal
amount of the Loans as specified in Section 4.02 hereof.
"Credit Support" shall have the meaning specified in Section 2.B. hereof.
"Credit Support Commitment" shall mean a commitment issued pursuant to
Section 2.B. hereof.
"Credit Support Documents" shall mean any form of guarantee or co-borrowing
or co-obligor agreement and related documentation entered into pursuant to
Section 2.B.
"Default" shall mean an Event of Default or an event that with notice or
lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of America.
"Effective Date" shall mean the date set forth in the first paragraph
hereof.
"Event of Default" shall have the meaning assigned thereto in Section 7
hereof.
"Funding Date" shall mean the date on which a Loan is made hereunder or a
Credit Support becomes effective hereunder.
"GAAP" shall mean generally accepted accounting principles in effect in the
United States.
"GAAP Net Worth" shall mean the excess of total assets of Holding and its
consolidated Subsidiaries, if any, over Total Liabilities of Holding determined
in accordance with GAAP.
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any court or arbitrator having jurisdiction over a Borrower,
any of its Subsidiaries or any of its properties.
"Interest Period" shall mean with respect to any Loan:
(a) initially, the period commencing on the Funding Date, with
respect to such Loan and ending one month thereafter; and
2
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such Loan and ending one month
thereafter.
provided that, all of the foregoing provisions relating to Interest Periods are
--------
subject to the following:
(i) if any Interest Period pertaining to a Loan would otherwise end on a
day which is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless the result of such extension would
be to carry such Interest Period into another calendar month in which event
such Interest Period shall end on the immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date; and
(iii) any Interest Period pertaining to a Loan that begins on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall end on the Last Business Day of a calendar month.
"Lender" shall have the meaning assigned thereto in the heading hereto.
"LIBOR" shall mean the arithmetic mean of the London interbank offered
rates for one-month U.S. dollar deposits in the London market based on
quotations at four major banks selected by the Lender, which rates appear
in the display designated as page "LIUS01M" on the Bloomberg Financial
Markets Commodities News (or such other comparable displaying LIBOR
quotations on the Bloomberg service) as of 11:00 a.m., London Time, on the
date of determination. LIBOR shall be determined separately for each
Interest Period.
"Lien" shall mean any mortgage, lien, pledge, charge, security interest or
similar encumbrance.
"Loan" shall have the meaning specified in Section 2.A. hereof.
"Loan Commitment" shall mean a commitment issued pursuant to Section 2.B.
hereof.
"Loan Documents" shall mean, collectively, this Agreement and the Note.
"Loan Indebtedness" shall mean, at any date, the principal amount of Loans
outstanding on such date.
"Note" shall mean the promissory note provided for by Section 2.02(a)
hereof for Loans and any promissory note delivered in substitution or exchange
therefor, in each case as the same shall be modified and supplemented and in
effect from time to time.
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, limited liability company, trust,
unincorporated association or government (or any agency, instrumentality or
political subdivision thereof).
"Post-Default Rate" shall mean, in respect of any principal of any Loan or
any other amount under this Agreement, the Note or any other Loan Document that
is not paid when due to the Lender
3
(whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise), a rate per annum during the period from and including
the due date to but excluding the date on which such amount is paid in full
equal to 2% per annum plus the rate otherwise applicable.
----
"Regulations G, T, U and X" shall mean Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System (or any successor), as the same
may be modified and supplemented and in effect from time to time.
"Requirements of Law" shall mean, as to any person, the Articles or
Certificate of Incorporation and Bylaws or other organization or governing
documents of such Person, and any law, treaty, rule or regulation, or a final
and binding determination of an arbitration or a determination of a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such person or any of its property is
subject.
"Responsible Officer" shall mean, as to any Person, the chief executive
officer or, with respect to financial matters, the chief financial officer of
such Person.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of such corporation, partnership or other entity shall have or
might have voting power by reason of the happening of any contingency) is at the
time directly or indirectly owned or controlled by such Person or one or more
Subsidiaries of such Person or by such Person and one or more Subsidiaries of
such Person.
"Termination Date" shall mean July 1, 2001 or such earlier date on which
this Agreement shall terminate in accordance with the provisions hereof or by
operation of law.
"Total Indebtedness" shall mean total indebtedness for borrowed monies of
Holding and its consolidated Subsidiaries, if any, determined in accordance
with GAAP, less the amount of any nonrecourse indebtedness of Holding and
its consolidated Subsidiaries.
"Total Liabilities" shall mean total liabilities of Holding and its
consolidated Subsidiaries, if any, determined in accordance with GAAP.
"Uniform Commercial Code" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of Kansas; provided that if by reason of
mandatory provisions of law, the perfection or the effect of perfection or non-
perfection of the security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than Kansas, "Uniform
Commercial Code" shall mean the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection.
1.02 Accounting Terms and Determinations. Except as otherwise expressly
-----------------------------------
provided herein, all accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered to the Lender hereunder shall be prepared, in
accordance with GAAP.
4
Section 2.A. Loans, Notes and Prepayments.
----------------------------
2.01 Loans.
-----
(a) The Lender agrees to consider from time to time each Borrower's
requests that the Lender make, on the terms and conditions of this
Agreement, loans (individually, a "Loan"; collectively, the "Loans") to the
Borrower in Dollars, from and including the Effective Date to and including
the Termination Date. This Agreement is not a commitment to lend but
rather sets forth the procedures to be used in connection with periodic
requests for Loans. Each Borrower hereby acknowledges that the Lender is
under no obligation to agree to make, or to make, any Loan pursuant to this
Agreement.
(b) Subject to the terms and conditions of this Agreement, during such
period each Borrower may borrow, repay and reborrow hereunder.
(c) In no event shall a Loan be made when any Default or Event of Default
has occurred and is continuing.
2.02 Notes.
-----
(a) The Loans made by the Lender shall be evidenced by a single promissory
note of the Borrowers substantially in the form of Exhibit A hereto (the
"Note"), dated the date hereof, payable to the Lender in a principal amount
equal to the amount of the Loans outstanding from time to time. The Lender
shall have the right to have its Note subdivided, by exchange for
promissory notes of lesser denominations or otherwise.
(b) The date, amount and interest rate of each Loan made by the Lender to
a Borrower, and each payment made on account of the principal thereof,
shall be recorded by the Lender on its books and, prior to any
transfer of the Note, endorsed by the Lender on the schedule attached
to the Note or any continuation thereof; provided, that the failure of
--------
the Lender to make any such recordation or endorsement shall not
affect the obligations of the Borrower to make a payment when due of
any amount owing hereunder or under the Note in respect of the Loans.
(c) The Borrowers shall be jointly and severally liable for all loans made
hereunder.
2.03 Procedure for Borrowing.
-----------------------
(a) Each Borrower may request a borrowing hereunder, on any Business Day
during the period from and including the Effective Date to and including
the Termination Date, by delivering to the Lender an irrevocable written
request for borrowing, which request must be countersigned by Holding if
Holding is not the requesting Borrower and must be received by the Lender
prior to 10:00 a.m. (Central time) at least one (1) Business Day prior to
the requested Funding Date unless otherwise agreed by the Lender. Such
request for borrowing shall specify the requested Funding Date.
(b) Upon the Borrower's request for a borrowing, the Lender may, at its
option, offer to make a Loan to the Borrower by confirming to the Borrower
(telephonically or via electronic communication) (i) the Funding Date, (ii) the
amount of the Loan to be made on such Funding Date, and (iii) the Applicable
Margin, and may contain additional terms or conditions which may or may
5
not be inconsistent with this Agreement (the "Loan Commitment"). In the event
there is a conflict between the terms of this Agreement and the terms of the
Loan Commitment, the terms of the Loan Commitment shall control. Each Loan
Commitment, together with this Agreement, shall be conclusive evidence of the
terms of the Loan(s) covered thereby.
(c) The Borrower shall, no later than 3:00 p.m. (Central time) on the
Business Day that it receives a Loan Commitment from the Lender, either:
(i) decline the offer contained in such Loan Commitment by notifying
the Lender by telephone or electronic communication to that effect; or
(ii) accept such offer contained in such Loan Commitment by notifying
the Lender by telephone or electronic communication to that effect.
Notwithstanding the foregoing, the Borrower shall be deemed to have
accepted such offer, and such Loan Commitment, together with this Agreement,
shall be conclusive evidence of the terms of the Loan covered thereby, unless
the Borrower has declined such offer by the time set forth above.
Subject to Section 4 hereof, each loan will be made available to the Borrower by
the Lender transferring, via wire transfer, to an escrow account or account
maintained by the Borrower prior to 3:00 p.m., (Central time), on the Funding
Date, the aggregate amount of such borrowing in funds immediately available
to the Borrower.
2.04 Repayment of Loans; Interest.
----------------------------
(a) Each Borrower hereby promises to repay in full the outstanding
principal amount of each Loan no later than the date (the "Stated
Maturity") which is twelve (12) months after the Funding Date of such Loan.
(b) Each Borrower hereby promises to pay to the Lender interest on the
unpaid principal amount of each Loan for the period from and including the date
of such Loan to but excluding the date such Loan shall be paid in full, at a
rate per annum equal to LIBOR plus the Applicable Margin. Notwithstanding the
----
foregoing, each Borrower hereby promises to pay to the Lender interest at the
applicable Post-Default Rate on any principal of any Loan and on any other
amount payable by the Borrower hereunder or under the Note, that shall not be
paid in full when due (whether at Stated Maturity, by acceleration or by
mandatory prepayment or otherwise), for the period from and including the due
date thereof to but excluding the date the same is paid in full. Accrued
interest on each Loan shall be payable monthly commencing on the date one month
from the Funding Date and on each successive date which is one month thereafter
or the date of final payment of principal on such Loan, except that interest
payable at the Post-Default Rate shall be payable from time to time on demand.
Promptly after the determination of any interest rate provided for herein or any
change therein, the Lender shall give notice thereof to the Borrowers.
2.05 Voluntary Prepayments. The Borrowers may prepay the outstanding
---------------------
principal of any Loan, in whole or in part, at any time prior to the Stated
Maturity thereof.
6
Section 2.B. Credit Support.
--------------
2.06 Issuance of Credit Support.
--------------------------
(a) The Lender agrees to consider from time to time each Borrower's
requests that the Lender issue credit support of loans made to the Borrower
by third parties or of mortgage sale and/or servicing agreements or hedging
or other arrangements to be entered into by the Borrower with
counterparties on the terms and conditions of this Agreement from and
including the Effective Date to and including the Termination Date. Such
credit support could be in the form of guarantees by the Lender or co-
borrowing or co-obligor arrangements with the Borrower in which the Lender
is jointly and severally liable for the Borrower's obligations thereunder
(individually, a "Credit Support"; collectively, the "Credit Supports").
This Agreement is not a commitment to enter into Credit Supports but rather
sets forth the procedures to be used in connection with periodic requests
for Credit Supports. The Borrowers hereby acknowledge that the Lender is
under no obligation to agree to enter into, or to enter into, any Credit
Support pursuant to this Agreement.
(b) Subject to the terms and conditions of this Agreement, during such
period each Borrower may borrow, repay and reborrow amounts from third parties
covered by Credit Supports issued hereunder.
(c) In no event shall Credit Support Documents be entered into when any
Default or Event of Default has occurred and is continuing.
2.07 Credit Supports. The Credit Supports entered by the Lender shall be
---------------
evidenced by such Credit Support Documents as the Lender may from time to time
approve.
2.08 Procedure for Obtaining Credit Supports.
---------------------------------------
(a) Each Borrower may request Credit Support hereunder, on any Business
Day during the period from and including the Effective Date to and
including the Termination Date, by delivering to the Lender, an irrevocable
written request for Credit Support, which request must be received by the
Lender prior to 10:00 a.m. (Central time), at least one (1) Business Day
prior to the requested Funding Date unless otherwise agreed by the Lender.
Such request for Credit Support shall specify the requested Funding Date.
(b) Upon the Borrower's request for Credit Support, the Lender may, at its
option, offer to enter into Credit Support Documents in favor of the Borrower by
confirming to the Borrower (telephonically or via electronic communication) (i)
the Funding Date, (ii) the amount of the Credit Support to be entered into on
such Funding Date, (iii) the Applicable Margin, (iv) Credit Support Fee and may
contain additional terms and conditions which may or may not be inconsistent
with this Agreement (the "Credit Support Commitment"). In the event there is a
conflict between the terms of this Agreement and the terms of the Credit Support
Commitment, the terms of the Credit Support Commitment shall control. Each
Credit Support Commitment, together with this Agreement, shall be conclusive
evidence of the terms of the Credit Support(s) covered thereby.
(c) The Borrower shall, no later than 3:00 p.m. (Central time) on the
Business Day that it receives a Credit Support Commitment from the Lender,
either:
7
(i) decline the offer contained in such Credit Support Commitment by
notifying the Lender by telephone or electronic communication to that
effect; or
(ii) accept such offer contained in such Credit Support Commitment by
notifying the Lender by telephone or electronic communication to that
effect.
Notwithstanding the foregoing, the Borrower shall be deemed to have
accepted such offer, and such Credit Support Commitment, together with this
Agreement, shall be conclusive evidence of the terms of the Credit Support
covered thereby, unless the Borrower has declined such offer by the time set
forth above.
2.09 Repayment of Credit Support Disbursements; Interest. Each Borrower
---------------------------------------------------
hereby promises to make payments to the Lender in respect of any amount
expended by the Lender pursuant to any Credit Support on the following
terms and conditions, unless otherwise provided in the related Credit
Support Commitment:
(a) The amount of any such expenditure, whether used to repay principal,
interest or other amounts due to the third-party lender, shall be treated
as principal of a Loan, the Stated Maturity of which is the first Business
Day following the date of the expenditure; and
(b) Interest will be payable on such constructive Loan at the Post-Default
Rate and on the same terms as if such Loan was in default with respect to
repayment of principal due on the Stated Maturity thereof as set forth in
(a) above.
2.10 Credit Support Fee. As compensation for the Lender's issuance of
------------------
each Credit Support, the Borrowers agree to pay the Lender a Credit Support
Fee on each Funding Date in the amounts as shown in the Schedule of Credit
Support Fees (Exhibit B). These amounts may be amended from time to time
by the parties hereto.
Section 3. Payments; Computations; Etc.
----------------------------
3.01 Payments.
--------
(a) Except to the extent otherwise provided herein, all payments of
principal, interest and other amounts to be made by the Borrowers under
this Agreement and the Note, shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to the Lender
at the account maintained by the Lender and specified in writing to the
Borrower, not later than 1:00 p.m., (Central time), on the date on which
such payment shall become due (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding
Business Day). The Borrowers acknowledge that they have no rights of
withdrawal from the foregoing account.
(b) Except to the extent otherwise expressly provided herein, if the due
date of any payment under this Agreement or the Note would otherwise fall
on a day that is not a Business Day, such date shall be extended to the
next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
3.02 Computations. Interest on the Loans shall be computed on the basis
------------
of a 360-day year for the actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
8
Section 4. Conditions Precedent.
--------------------
4.01 Initial Loan and Credit Supports. The obligation of the Lender to
--------------------------------
make its initial Loan and enter into the initial Credit Supports hereunder
is subject to the satisfaction, immediately prior to or concurrently with
the making of such Loan and the issuance of such Credit Supports, of the
following conditions precedent:
(a) Loan Documents. The Lender shall have received the following
--------------
documents, each of which shall be satisfactory to the Lender in form and
substance:
(i) Note. the Note, duly completed and executed; and
----
(ii) Credit Supports. one or more agreements constituting Credit Supports,
---------------
duly executed and delivered by the Borrower and the Lender.
In addition, the Borrowers shall have taken such other action as the Lender
shall have requested in order to perfect the security interests created
pursuant to the Agreement; and
(b) Organization Documents. A good standing certificate and certified
----------------------
copies of the charter and bylaws (or equivalent documents) of each Borrower
and of all corporate or other authority for each Borrower with respect to
the execution, delivery and performance of the Loan Documents and each
other document to be delivered by the Borrowers from time to time in
connection herewith (and the Lender may conclusively rely on such
certificate until it receives notice in writing from any Borrower to the
contrary);
(c) Other Documents. Such other documents as the Lender may reasonably
---------------
request.
4.02 Initial and Subsequent Loans and Credit Supports. The making of each
------------------------------------------------
Loan to a Borrower and issuance of each Credit Support (including the
initial Loan and initial Credit Supports) on any Business Day is subject to
the following further conditions precedent, both immediately prior to the
making of such Loan or issuance of such Credit Support and also after
giving effect thereto and to the intended use thereof:
(a) no Default or Event of Default shall have occurred and be continuing;
(b) (i) both immediately prior to the making of such Loan or issuance of
such Credit Support and also after giving effect thereto and to the
intended use thereof, the representations and warranties made by each
Borrower in Section 5 hereof, and in each of the other Loan Documents,
shall be true and complete on and as of the date of the making of such Loan
or issuance of such Credit Support in all material respects with the same
force and effect as if made on and as of such date (or, if any such
representation or warranty is expressly stated to have been made as of a
specific date, as of such specific date) and (ii) with respect to any
Credit Support being issued to support a third party borrowing to finance
the acquisition or maintenance of assets, the value of such assets must be
equal to or greater than the sum of such third party indebtedness plus any
Loan obtained to facilitate such acquisition or maintenance. The Lender
shall have received an officer's certificate signed by a Responsible
Officer of the Borrower certifying as to the truth and accuracy of the
above, which certificate shall specifically include a statement that the
Borrower is in compliance with all governmental licenses and authorizations
and is qualified to do business and in good standing in all required
jurisdictions; and
9
(c) the aggregate outstanding principal amount of the Loans at the time
shall not exceed $150,000,000 and the aggregate outstanding principal
amount covered by Credit Supports at the time shall not exceed
$5,000,000,000.
Section 5. Representations and Warranties.
------------------------------
Each Borrower represents and warrants to the Lender that throughout the
term of this Agreement:
5.01 Existence. The Borrower (a) is a corporation duly organized, validly
---------
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
governmental licenses, authorizations, consents and approvals, necessary to
own its assets and carry on its business as now being or as proposed to be
conducted, the lack of which would be reasonably likely to have a material
adverse effect on its property, business or financial condition, or
prospects; and (c) is qualified to do business and is in good standing in
all other jurisdictions in which the nature of the business conducted by it
makes such qualification necessary and where failure so to qualify would be
reasonably likely (either individually or in the aggregate) to have a
material adverse effect on its property, business or financial condition,
or prospects.
5.02 Financial Condition. Holdings has heretofore furnished to the Lender
-------------------
a copy of its consolidated balance sheets and the consolidated balance sheets of
its consolidated Subsidiaries for the fourth quarterly fiscal period of 1998.
Holdings has also heretofore furnished to the Lender the related consolidated
statements of operations, stockholders' equity and cash flows for Holdings and
its consolidated Subsidiaries for the fourth quarterly fiscal period of 1998.
All such financial statements are complete and correct and fairly present the
consolidated financial condition of Holdings and its Subsidiaries and the
consolidated results of their operations for the fiscal period needed on said
date, all in accordance with GAAP applied on a consistent basis.
5.03 Litigation. There are no actions, suits, arbitrations,
----------
investigations or proceedings pending or, to its knowledge, threatened
against the Borrower or any of its Subsidiaries or affecting any of the
property thereof before any Governmental Authority, (i) as to which
individually or in the aggregate there is a reasonable likelihood of an
adverse decision which would be reasonably likely to have a material
adverse effect on the property, business or financial condition, or
prospects of the Borrower or (ii) which questions the validity or
enforceability of any of the Loan Documents or any action to be taken in
connection with the transactions contemplated hereby.
5.04 No Breach. Neither (a) the execution and delivery of the Loan
---------
Documents or (b) the consummation of the transactions therein contemplated
in compliance with the terms and provisions thereof will conflict with or
result in a breach of the charter or bylaws of the Borrower, or any
applicable law, rule or regulation, or any order, writ, injunction or
decree of any Governmental Authority, or any Servicing Agreement or other
material agreement or instrument to which the Borrower, or any of its
Subsidiaries, is a party or by which any of them or any of their property
is bound or to which any of them is subject, or constitute a default under
any such material agreement or instrument, or (except for the Liens created
pursuant to this Agreement) result in the creation or imposition of any
Lien upon any property of the Borrower or any of its Subsidiaries pursuant
to the terms of any such agreement or instrument.
10
5.05 Action. The Borrower has all necessary corporate or other power,
------
authority and legal right to execute, deliver and perform its obligations
under each of the Loan Documents; the execution, delivery and performance
by the Borrower of each of the Loan Documents have been duly authorized by
all necessary corporate or other action on its part; and each Loan Document
has been duly and validly executed and delivered by the Borrower and
constitutes a legal, valid and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms.
5.06 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any Governmental Authority, or any
securities exchange, are necessary for the execution, delivery or
performance by the Borrower of the Loan Documents or for the legality,
validity or enforceability thereof, except for filings and recordings in
respect of the Liens created pursuant to this Agreement.
5.07 Margin Regulations. Neither the making of any Loan hereunder, nor
------------------
the use of the proceeds thereof, will violate or be consistent with the
provisions of Regulation G, T, U or X.
5.08 Taxes. The Borrower and its Subsidiaries have filed all Federal
-----
income tax returns and all other material tax returns that are required to
be filed by them and have paid all taxes due pursuant to such returns or
pursuant to any assessment received by any of them, except for any such
taxes, if any, that are being appropriately contested in good faith by
appropriate proceedings diligently conducted and with respect to which
adequate reserves have been provided. The charges, accruals and reserves
on the books of the Borrower and its Subsidiaries in respect of taxes and
other governmental charges are, in the opinion of the Borrower, adequate.
5.09 Investment Company Act. Neither the Borrower nor any of its
----------------------
Subsidiaries is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of
1940, as amended.
5.10 Chief Executive Office. Holding's, Capital's and Mortgage's chief
----------------------
executive offices on the Effective Date are each located at 0000 Xxxx
00/xx/ Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxx, 00000.
5.11 Location of Books and Records. The location where the Borrower keeps
-----------------------------
its books and records is its chief executive office.
Section 6A. Affirmative Covenants of the Borrower.
-------------------------------------
Each Borrower covenants and agrees with the Lender that, so long as any
Loan or Credit Support is outstanding and until payment in full of all
Obligations:
6.01 Financial Statements. Holding shall deliver to the Lender as soon as
--------------------
available all financial statements it prepares, including at a minimum the
following:
(a) as soon as available and in any event within forty-five (45) days
after the end of each of the operations, stockholders' equity and quarterly
fiscal periods of each fiscal year of Holdings, the consolidated balance
sheets of Holdings and its consolidated Subsidiaries as at the end of such
period and the related unaudited consolidated statements of operations,
11
stockholders' equity and cash flows for Holdings and its consolidated
Subsidiaries for such period and the portion of the fiscal year through the
end of such period;
(b) as soon as available and in any event within ninety (90) days after
the end of each fiscal year of Holdings, the consolidated balance sheets of
Holdings and its consolidated Subsidiaries as at the end of such fiscal
year and the related consolidated statements of operations, stockholders'
equity and cash flows for Holdings and its consolidated Subsidiaries for
such year, setting forth in each case in comparative form the figures for
the previous year, accompanied by an opinion thereon of independent
certified public accountants of recognized national standing previously
approved by the Lender, which opinion shall not be qualified as to scope of
audit or going concern and shall state that said consolidated financial
statements fairly present the consolidated financial condition and results
of operations of Holdings and its consolidated Subsidiaries as at the end
of, and for, such fiscal year in accordance with GAAP;
(c) from time to time such other information regarding the financial
condition, operations, or business of Holding as the Lender may reasonably
request, including but not limited to quarterly audited financial
statements.
6.02 Litigation. The Borrower will promptly, and in any event within 10
----------
days after service of process on any of the following, give the Lender
notice of all legal or arbitrable proceedings affecting the Borrower or any
of its Subsidiaries that questions or challenges the validity or
enforceability of any of the Loan Documents or as to which there is a
reasonable likelihood of adverse determination which would result in a
material adverse effect.
6.03 Existence, Etc. The Borrower will:
---------------
(a) preserve and maintain its legal existence and all of its material
rights, privileges, licenses and franchises (provided, that nothing in this
--------
Section 6.03 shall prohibit any transaction expressly permitted under
Section 6.04 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of Government Authorities (including, without
limitation, all environmental laws) if failure to comply with such
requirements would be reasonably likely (either individually or in the
aggregate) to have a material adverse effect on its property, business or
financial condition, or prospects;
(c) keep adequate records and books of account, in which complete entries
will be made in accordance with GAAP consistently applied; and
(d) not move its chief executive office from the address referred to in
Section 6.11 unless it shall have provided the Lender 30 days prior written
notice of such change.
6.04 Cooperation and Access to Records. The Borrower agrees to cooperate
---------------------------------
fully and in a timely fashion with the Lender's requests for information or
access to data, reports, records and personnel made for purposes of the
Lender's compliance with securities law reporting and filing requirements,
federal and state tax reporting and filing requirements or any other legal
or regulatory reporting and filing requirements applicable to it. As part
of this cooperation, the Borrower will agree to provide the following
information:
12
(a) keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all Requirements of Law shall
be made of all dealings and transactions in relation to its business and
activities; and
(b) permit: (i) representatives of the Lender to (A) visit and inspect any
of its properties and examine and make abstracts from any of its books and
records at any reasonable time and as often as may reasonably be desired by
the Lender (but, prior to the occurrence of an Event of Default, only upon
not less than two (2) Business Days' prior notice), and (B) discuss the
business, operations, properties and financial and other condition of the
Borrower with officers and employees of the Borrower, and with its
independent certified public accountants, and (ii) representatives of the
Lender to conduct periodic operational audits of the Borrower's business
and operations
6.05 Notices. The Borrower shall give notice to the Lender:
-------
(a) promptly of the occurrence of any Default or Event of Default; and
(b) any event or change in circumstances, in each case which could
reasonably be expected to have a material adverse effect on the Borrower's
property, business or financial condition, or prospects.
Each notice pursuant to this Section shall be accompanied by a statement of
a Responsible Officer of the Borrower setting forth details of the
occurrence referred to therein and stating what action the Borrower has
taken or proposes to take with respect thereto.
Section 6B. Negative Covenants.
------------------
Each Borrower covenants and agrees with the Lender that, so long as any
Loan or Credit Support is outstanding:
6.07 Total Indebtedness to Adjusted Net Worth Ratio. Holding will not
----------------------------------------------
permit its ratio at any date of Total Indebtedness to Adjusted Net Worth to
be more than 10.0:1.0.
6.08 Loan Indebtedness to GAAP Net Worth. Holding will not permit its
-----------------------------------
ratio at any date of Loan Indebtedness to GAAP Net Worth to be more that
2.0:1.0.
6.09 Minimum GAAP Net Worth. Holding will not permit its GAAP Net Worth
----------------------
as of the last day of any fiscal quarter to be less than the sum of (1)
$7,000,000, plus (2) fifty percent (50%) of (A) the cash proceeds of any
sale or issuance of equity securities of any Borrower (or of any options,
warrants or rights in respect of any such equity securities) which issuance
takes place after the date of this Agreement, plus (B) cumulative after-tax
earnings earned after the date hereof less cumulative dividends paid after
the date of this Agreement.
Section 7. Events of Default.
-----------------
Each of the following events shall constitute an event of default (an
"Event of Default") hereunder:
13
(a) the Borrowers shall default in the payment of any principal of or
interest on any Loan when due (whether at Stated Maturity, upon
acceleration or at mandatory or optional prepayment) or any Credit Support
when due; or
(b) the Borrowers shall default in the payment of any other amount payable
hereunder or under any other Loan Document after notification by the Lender
of such default, and such default shall have continued unremedied for five
Business Days; or
(c) any representation, warranty or certification made or deemed made
herein or in any other Loan Document by any Borrower or any certificate
furnished to the Lender pursuant to the provisions thereof, shall prove to
have been false or misleading in any material respect as of the time made
or furnished; or
(d) any Borrower shall fail to comply with the requirements of Section 6.03
(as to existence), Section 6.04, Section 6.05, Section 6.06, Section 6.07
or Section 6.08 hereof; or any Borrower shall otherwise fail to comply with
the requirements of Section 6.03 hereof and such default shall continue
unremedied for a period of five Business Days; or any Borrower shall fail
to observe or perform any other agreement contained in this Agreement or
any other Loan Document and such failure to observe or perform shall
continue unremedied for a period of seven Business Days; or
(e) a final judgment or judgments for the payment of money in excess of
$5,000,000 in the aggregate shall be rendered against any Borrower or any
Subsidiary of a Borrower by one or more courts, administrative tribunals or
other bodies having jurisdiction over them and the same shall not be
discharged (or provision shall not be made for such discharge) or bonded,
or a stay of execution thereof shall not be procured, within 60 days from
the date of entry thereof and the Borrower or any such Subsidiary shall
not, within said period of 60 days, or such longer period during which
execution of the same shall have been stayed or bonded, appeal therefrom
and cause the execution thereof to be stayed during such appeal; or
(f) any Borrower shall admit in writing its inability to pay its debts as
such debts become due; or
(g) any Borrower or any Subsidiary of a Borrower shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee, examiner or liquidator of itself or of all or a
substantial part of its property, (ii) make a general assignment for the
benefit of its creditors, (iii) commerce a voluntary case under the
Bankruptcy Code, (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code or (vi) take
any corporate or other action for the purpose of effecting any of the
foregoing; or
(h) a proceeding or case shall be commenced with respect to any Borrower or
any Subsidiary of a Borrower, without the application or consent of the
Borrower or any such Subsidiary, in any court of competent jurisdiction,
seeking (i) its reorganization, liquidation, dissolution, arrangement or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a receiver, custodian, trustee, examiner, liquidator or the
like of the
14
Borrower or any such Subsidiary or of all or any substantial part of its
property, or (iii) similar relief in respect of the Borrower or any such
Subsidiary under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 or more days; or an
order for relief against the Borrower or any such Subsidiary shall be
entered in an involuntary case under the Bankruptcy Code; or
(i) any Borrower grants, or suffers to exist, any Lien not contemplated
herein; or
(j) any materially adverse change in the properties, business or financial
condition, or prospects of any Borrower or any Subsidiary of a Borrower, in
each case as determined by the Lender in its sole discretion, or the
existence of any other condition which, in the Lender's sole discretion,
constitutes a material impairment of the Borrowers' collective ability to
perform their obligations under this Agreement, the Note, the Credit
Supports or any other Loan Document.
Section 8. Remedies Upon Default.
---------------------
(a) Upon the occurrence of one or more Events of Default other than those
referred to in Section 7(g) or (h), the Lender may immediately declare the
principal amount of the Loans then outstanding under the Note to be
immediately due and payable, together with all interest thereon and fees
and expenses accruing under this Agreement; provided that upon the
--------
occurrence of an Event of Default referred to in Sections 7(g) or (h) such
amounts shall immediately and automatically become due and payable without
any further action by any Person. Upon such declaration or such automatic
acceleration, the balance then outstanding on the Note shall become
immediately due and payable, without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrowers.
(b) Upon the occurrence of one or more Events of Default, the Lender shall
be entitled to specific performance of all agreements of the Borrowers
contained in this Agreement.
Section 9. No Duty on Lender's Part.
------------------------
The powers conferred on the Lender shall not impose any duty upon it to
exercise any such powers. The Lender shall be accountable only for amounts
that it actually receives as a result of the exercise of such powers, and
neither it nor any of its officers, directors, employees or agents shall be
responsible to the Borrowers for any act or failure to act hereunder,
except for its own gross negligence or willful misconduct.
Section 10. Miscellaneous.
-------------
10.01 Waiver. No failure on the part of the Lender to exercise and no
------
delay in exercising, and no course of dealing with respect to, any right,
power or privilege under any Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege under any Loan Document preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
15
10.02 Notices. Except as otherwise expressly permitted by this Agreement,
-------
all notices, requests and other communications provided for herein
(including, without limitation, any modifications of, or waivers, requests
or consents under, this Agreement) shall be given or made in writing
(including, without limitation, by telex or telecopy) delivered to the
intended recipient at the "Address for Notices" specified below its name
on the signature pages hereof); or, as to any party, at such other address
as shall be designated by such party in a written notice to each other
party. Except as otherwise provided in this Agreement and except for
notices given under Section 2 (which shall be effective only on receipt),
all such communications shall be deemed to have been duly given when
transmitted by telex or telecopier or personally delivered or, in the case
of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
10.03 Indemnification and Expenses.
----------------------------
(a) The Borrowers agree, jointly and severally, to hold the Lender
harmless from and indemnify the Lender against all liabilities, losses,
damages, judgments, costs and expenses of any kind which may be imposed on,
incurred by, or asserted against the Lender, relating to or arising out of,
this Agreement, the Note, the Credit Supports, any other Loan Document or
any transaction contemplated hereby or thereby, or any amendment,
supplement or modification of, or any waiver or consent under or in respect
of, this Agreement, the Note, the Credit Supports, any other Loan Document
or any transaction contemplated hereby or thereby, that, in each case,
results from anything other than the Lender's gross negligence or willful
misconduct. The Borrowers also agree to reimburse the Lender for all of its
costs and expenses incurred in connection with the enforcement or the
preservation of the Lender's rights under this Agreement, the Note, the
Credit Supports, any other Loan Document or any transaction contemplated
hereby or thereby, including without limitation the reasonable fees and
disbursements of its counsel. The Borrowers hereby acknowledge that the
obligations of the Borrowers under the Note and Credit Supports are
nonrecourse obligations of the Borrowers.
(b) The Borrowers agree to pay as and when billed by the Lender all of
the out-of-pocket costs and expenses incurred by the Lender in connection
with the development, preparation and execution of, and any amendment,
supplement or modification to, this Agreement, the Note, the Credit
Supports, any other Loan Document or any other documents prepared in
connection herewith or therewith. The Borrowers agree to pay as and when
billed by the Lender all of the out-of-pocket costs and expenses incurred
in connection with the consummation and administration of the transactions
contemplated hereby and thereby including, without limitation all the
reasonable fees, disbursements and expenses of Xxxxx & Xxxxx, counsel to
the Lender and any local counsel to the Lender.
10.04 Amendments. Except as otherwise expressly provided in this
----------
Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Borrowers and the Lender and
any provision of this Agreement may be waived by the Lender.
10.05 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
10.06 Survival. The obligations of the Borrowers under Sections 3.03 and
--------
10.03 hereof shall survive the repayment of the Loans and the Credit
Supports and the termination of this
16
Agreement. In addition, each representation and warranty made, or deemed to
be made by a request for a borrowing, herein or pursuant hereto shall
survive the making of such representation and warranty, and the Lender
shall not be deemed to have waived, by reason of making any Loan, any
Default that may arise by reason of such representation or warranty proving
to have been false or misleading, notwithstanding that the Lender may have
had notice or knowledge or reason to believe that such representation or
warranty was false or misleading at the time such Loan was made.
10.07 Captions. The table of contents and captions and section headings
--------
appearing herein are included solely for convenience of reference and are
not intended to affect the interpretation of any provision of this
Agreement.
10.08 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
10.09 Agreement Constitutes Security Agreement; Governing Law. This
-------------------------------------------------------
Agreement shall be governed by Kansas law without reference to choice of
law doctrine, and shall constitute a security agreement within the meaning
of the Uniform Commercial Code.
10.10 SUBMISSION TO JURISDICTION; WAIVERS. EACH BORROWER HEREBY
-----------------------------------
IRREVOCABLY AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT, THE NOTE, THE CREDIT SUPPORTS, AND
THE OTHER LOAN DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF
THE COURTS OF THE STATE OF KANSAS, THE FEDERAL COURTS OF THE UNITED STATES
OF AMERICA FOR KANSAS, AND APPELLATE COURTS FROM ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT
MAY NOW OR THEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN
ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY
BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR
ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS
SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH THE
LENDER SHALL HAVE BEEN NOTIFIED; AND
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO
XXX IN ANY OTHER JURISDICTION.
17
10.11 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS AND THE LENDER HEREBY
--------------------
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
10.12 Acknowledgments. Each Borrower hereby acknowledges that:
---------------
(a) the Lender has no fiduciary relationship to the Borrower, and the
relationship between the Borrower and the Lender is solely that of debtor
and creditor; and
(b) no joint venture exists between the Lender and the Borrower.
10.13 Termination. This Agreement may be terminated by the Lender or
-----------
Holding by delivering written notice of such termination to each of the
other parties hereto at least 60 days prior to the effective date of
termination. Termination of this Agreement shall not affect the terms of
Loans or Credit Supports at the time outstanding and shall otherwise be
subject to Section 10.06 hereof.
[remainder of page intentionally left blank]
18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
BORROWERS
---------
NFI HOLDING CORPORATION
By: __________________________
Name: W. Xxxxx Xxxxxxxx
Title: President
Address for Notices:
-------------------
0000 Xxxx 00/xx/ Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx
Telecopier No.: 913.514.3567
Telephone No.: 000.000.0000
NOVASTAR CAPITAL, INC.
By: __________________________
Name: Xxxx Xxxxxxx
Title: President
Address for Notices:
-------------------
0000 Xxxx 00/xx/ Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
19
Attn: Xxxxxx X. Xxxxxxxxx
Telecopier No.: 913.514.3567
Telephone No.: 000.000.0000
NOVASTAR MORTGAGE, INC.
By: __________________________
Name: W. Xxxxx Xxxxxxxx
Title: President
Address for Notices:
-------------------
0000 Xxxx 00/xx/ Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx
Telecopier No.: 913.514.3567
Telephone No.: 000.000.0000
20
LENDER
------
NOVASTAR FINANCIAL, INC.
By: __________________________
Name: Xxxxx X. Xxxxxxx
Title: Chief Executive Officer
Address for Notices:
-------------------
0000 Xxxx 00/xx/ Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attn: Xxxxxx X. Xxxxxxxxx
Telecopier No.: 913.514.3567
Telephone No.: 000.000.0000
21
EXHIBIT A
[FORM OF PROMISSORY NOTE]
FOR VALUE RECEIVED, NFI HOLDING CORPORATION, a Delaware corporation
("Holding"), NOVASTAR CAPITAL, INC., a Delaware corporation ("Capital"),
NOVASTAR MORTGAGE, INC., a Virginia corporation ("Mortgage"), and each
additional subsidiary of Holding that may sign this Note (collectively, the
"Borrowers" and each individually, a "Borrower") hereby promise, jointly
and severally, to pay to the order of NOVASTAR FINANCIAL, INC., a Maryland
corporation (the "Lender"), at the principal office of the Lender at 0000
Xxxx 00xx Xxxxx, Xxxxx 000, Xxxxxxxx, Xxxxxx, 00000, in lawful money of the
United States, and in immediately available funds, the principal sum of the
aggregate unpaid principal amount of the Loans made by the Lender to the
Borrowers under the Agreement, on the dates and in the principal amounts
provided in the related Loan Commitments issued under the Agreement, and to
pay interest on the unpaid principal amount of each such Loan, at such
office, in like money and funds, for the period commencing on the date of
such Loan until such Loan shall be paid in full, at the rates per annum and
on the dates provided in each such Loan Commitment.
The date, amount and interest rate of each Loan made by the Lender to a
Borrower, and each payment made on account of the principal thereof, shall
be recorded by the Lender on its books and, prior to any transfer of the
Note, endorsed by the Lender on the schedule attached hereto or any
continuation thereof; provided, that the failure of the Lender to make any
--------
such recordation or endorsement shall not affect the obligations of the
Borrower to make a payment when due of any amount owing under the Agreement
or hereunder in respect of the Loans made by the Lender.
This Note is the Note referred to in the Lending and Credit Support
Agreement dated as of July _, 2000 (as amended, supplemented or otherwise
modified and in effect from time to time, the "Agreement") between the
Borrowers and the Lender, and evidences Loans made by the Lender
thereunder. Terms used but not defined in this Note have the respective
meanings assigned to them in the Agreement.
The Borrowers agree to pay all the Lender's costs of collection and
enforcement (including reasonable attorneys' fees and disbursements of
Lender's counsel) in respect of this Note when incurred, including, without
limitation, reasonable attorneys' fees through appellate proceedings.
Each Borrower hereby acknowledges, admits and agrees that the Borrower's
obligations under this Note are nonrecourse obligations of the Borrower.
The Borrowers, and any indorsers or guarantors hereof, (a) severally waive
diligence, presentment, protest and demand and also notice of protest,
demand, dishonor and nonpayments of this Note, (b) expressly agree that
this Note, or any payment hereunder, may be extended from time to time, and
(c) expressly agree that it will not be necessary for the Lender, in order
to enforce payment of this Note, to first institute or exhaust the Lender's
remedies against the Borrowers or any other party liable hereon. No
extension of time for the payment of this Note, or any installment hereof,
made by agreement by the Lender with any person now or hereafter liable for
the payment of this Note, shall affect the liability under this Note of any
Borrower, even if the Borrower is not a party to such agreement; provided,
--------
22
however, that the Lender and any Borrower, by written agreement between
-------
them, may affect the liability of the Borrower.
Any reference herein to the Lender shall be deemed to include and apply to
every subsequent holder of this Note. Reference is made to the Agreement
for provisions concerning prepayments, acceleration and other material
terms affecting this Note.
This Note shall be governed by and construed under the laws of the State of
Kansas (without reference to choice of law doctrine) whose laws the
Borrower expressly elects to apply to this Note. The Borrower agrees that
any action or proceeding brought to enforce or arising out of this Note may
be commenced in the courts of the State of Kansas.
NFI HOLDING CORPORATION
By: __________________________
Name:_________________________
Title:________________________
NOVASTAR CAPITAL, INC.
By: __________________________
Name:_________________________
Title:________________________
23
NOVASTAR MORTGAGE, INC.
By:__________________________
Name:________________________
Title:______________________
24
SCHEDULE OF LOANS
This Note evidences Loans made under the within-described
Agreement to the Borrowers, on the dates, in the principal amounts and
bearing interest at the rates set forth below, and subject to the payments
and prepayments of principal set forth below:
Principal Amount Amount Paid Unpaid Principal Notation
Date Made Borrower of Loan Or Prepaid Amount Made By
--------- -------- ---------------- ---------- ---------------- --------
EXHIBIT B
SCHEDULE OF CREDIT SUPPORT FEES
Description of Credit Support Fee
Credit support for obligations under mortgage loan 1.00% of the outstanding
warehouse and repurchase agreements borrowings*
Commitment fee for the purchase of residual interests in 0.20% of unpaid principal balance
asset-backed bonds issued by Borrower of securitized assets
Guaranty of loan sales to third parties 0.125% of the unpaid principal
balance of the loans sold, payable
upon settlement of the sale
Credit support for loan servicing operations 0.1% of the outstanding, unpaid
principal balance of loans
serviced*
Financing commitment fee Annually, 0.25% of the Commitment
Amount, payable quarterly
* Calculated based on the actual number of days Credit Support is in effect
and a 360-day year and will be payable monthly, in arrears.
25
