THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
BY AND BETWEEN
NEW CENTURY MORTGAGE CORPORATION,
U.S. BANK NATIONAL ASSOCIATION,
as Agent
and
THE LENDERS PARTY HERETO
MAY 29, 1998
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS............................................................... 1
1.01 Certain Defined Terms.......................................................................... 1
1.02 Accounting Terms............................................................................... 14
1.03 Computation of Time Periods.................................................................... 15
1.04 Other Definitional Terms....................................................................... 15
SECTION 2. THE CREDIT FACILITIES.......................................................................... 15
2.01 The Warehousing Facility and the Swingline Facility............................................ 15
2.02 Interest on the Note; Balances Deficiency Fees; Continuations and Conversions.................. 21
2.03 Payments and Computations...................................................................... 23
2.04 Setoff......................................................................................... 24
2.05 Increased Capital Requirements................................................................. 24
2.06 Provisions Relating to Eurodollar Advances and Fixed Rate Advances............................. 25
SECTION 3. REPRESENTATIONS AND WARRANTIES................................................................. 27
3.01 Formation; Powers; Good Standing; Subsidiaries; Agency Status.................................. 27
3.02 Authorization; No Conflict; Governmental Consents; Binding Effect.............................. 28
3.03 Financial Condition............................................................................ 29
3.04 Title to Property; Liens....................................................................... 29
3.05 Litigation; Adverse Facts...................................................................... 29
3.06 Other Agreements; Performance.................................................................. 30
3.07 Use of Proceeds................................................................................ 30
3.08 Taxes.......................................................................................... 30
3.09 ERISA.......................................................................................... 31
3.10 Governmental Regulation........................................................................ 31
3.11 Indebtedness................................................................................... 31
3.12 No Material Adverse Event...................................................................... 31
3.13 Licenses and Permits........................................................................... 31
3.14 Guarantees..................................................................................... 31
3.15 Accuracy and Completeness of Information....................................................... 32
SECTION 4. COVENANTS OF THE COMPANY....................................................................... 32
4.01 Financial Statements and Other Reports......................................................... 32
4.02 Corporate Existence............................................................................ 36
4.03 Compliance with Laws, Taxes, etc............................................................... 36
4.04 ERISA.......................................................................................... 36
4.05 Assets and Insurance........................................................................... 37
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Page
4.06 Inspection, Visitation, etc.................................................................... 37
4.07 Further Assurances............................................................................. 37
4.08 Indebtedness................................................................................... 38
4.09 Liens.......................................................................................... 38
4.10 Investments.................................................................................... 39
4.11 Guarantees..................................................................................... 41
4.13 Restricted Payments............................................................................ 41
4.14 Net Worth...................................................................................... 41
4.15 Minimum Liquidity.............................................................................. 42
4.16 Leverage Ratio................................................................................. 42
4.17 Subsidiaries................................................................................... 42
4.18 Affiliate Transactions......................................................................... 42
4.19 Escrow Imbalances.............................................................................. 42
4.20 Inconsistent Agreements........................................................................ 42
4.21 Closing Procedures............................................................................. 42
4.22 Underwriting................................................................................... 43
4.23 Independence of Covenants...................................................................... 43
SECTION 5. CONDITIONS PRECEDENT........................................................................... 43
5.01 Conditions Precedent to Effectiveness.......................................................... 43
5.02 Conditions Precedent to all Loans.............................................................. 45
SECTION 6. EVENTS OF DEFAULT; REMEDIES.................................................................... 46
6.01 Events of Default.............................................................................. 46
6.02 Remedies....................................................................................... 48
SECTION 7. THE AGENT...................................................................................... 48
7.01 Appointment and Authorization.................................................................. 48
7.02 Note Holders................................................................................... 49
7.03 Consultation With Counsel...................................................................... 49
7.04 Documents...................................................................................... 49
7.05 Agent and Affiliates........................................................................... 49
7.06 Action by Agent................................................................................ 49
7.07 Credit Analysis................................................................................ 50
7.08 Notices of Event of Default, etc............................................................... 50
7.09 Indemnification................................................................................ 50
7.10 Payments....................................................................................... 51
7.11 Sharing of Payments............................................................................ 51
7.12 Successor Agent................................................................................ 52
7.13 Inspection..................................................................................... 52
SECTION 8. MISCELLANEOUS.................................................................................. 53
8.01 Waiver......................................................................................... 53
8.02 Notices........................................................................................ 53
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Page
8.03 Expenses; Indemnification...................................................................... 53
8.04 Confidentiality................................................................................ 54
8.05 Releases, Amendments, Waivers, Consents and Exercise of Remedies............................... 54
8.06 Binding Effect; Assignments and Participations; Transferees; New Lenders; Commitment Increases. 55
8.07 Governing Law and Construction................................................................. 56
8.08 Consent to Jurisdiction........................................................................ 57
8.09 Waiver of Jury Trial........................................................................... 57
8.10 Survival of Agreement.......................................................................... 57
8.11 Captions....................................................................................... 58
8.12 Entire Agreement............................................................................... 58
8.13 Counterparts................................................................................... 58
8.14 Company Acknowledgements....................................................................... 58
8.15 Letter of Credi................................................................................ 58
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THIRD AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------------
THIRD AMENDED and RESTATED CREDIT AGREEMENT dated as of May 29, 1998
by and between NEW CENTURY MORTGAGE CORPORATION, a California corporation (the
"Company"), the lenders from time to time party hereto (each a "Lender" and
collectively, the "Lenders"), and U.S. BANK NATIONAL ASSOCIATION, as agent for
the Lenders (in such capacity, together with any successor agents appointed
hereunder, the "Agent").
WHEREAS, the Company, the Lenders and the Agent are parties to that
certain Second Amended and Restated Credit Agreement dated as of July 31, 1997
(as amended, the "Existing Credit Agreement") pursuant to which the Lenders
provided the Company with a revolving mortgage warehousing credit facility and
USBNA provided the Company with a swingline facility and working capital credit
facility; and
WHEREAS, the Company has requested that the Lenders and the Agent
amend certain provisions of and restate the Existing Credit Agreement;
Accordingly, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS AND ACCOUNTING TERMS.
--------------------------------
1.01 Certain Defined Terms. As used herein, the terms defined in the
---------------------
introductory paragraphs hereof shall have the meanings given them therein and
the following terms shall have the following respective meanings (such terms to
be equally applicable to both the singular and plural forms of the terms
defined):
"Adjusted Eurodollar Rate:" on any date of determination, the rate
------------------------
(rounded upward, if necessary, to the next higher one hundredth of one
percent) determined by dividing the Eurodollar Rate for such date by 1.00
minus the Eurodollar Reserve Percentage.
"Advance": (a) a Reference Rate Advance, (b) a Fixed Rate Advance, or
-------
(c)a Eurodollar Advance.
"Affiliate": with respect to any Person, any other Person directly or
---------
indirectly controlling, controlled by, or under common control with, such
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement": this Third Amended and Restated Credit Agreement, as
---------
amended, supplemented, restated or otherwise modified and in effect from
time to time.
"Applicable Margin": with respect to:
-----------------
(a) Reference Rate Advances, 0%; and
(b) Eurodollar Advances, 1.25%.
"Balance Calculation Period": each calendar quarter after the
--------------------------
Effective Date to and including the later of the date on which the Notes
shall be paid in full or the Termination Date, except that the first
Balance Calculation Period shall commence on the Effective Date and the
last Balance Calculation Period shall end on the later of the date on which
the Notes shall have been paid in full or the Termination Date.
"Balances Deficiency": as defined in Section 2.02(a)(i).
-------------------
"Balances Deficiency Fee": as defined in Section 2.02(a)(i).
-----------------------
"Balances Surplus": as defined in Section 2.02(a)(i).
----------------
"Borrowing Base": as of a date of determination, an amount equal to
--------------
100% of the Warehousing Collateral Value of the Collateral, as determined
by the Agent from its records.
"Borrowing Date": the Business Day specified by the Company in a
--------------
Confirmation of Borrowing/Paydown/Conversion as the date on which it
requests the Lenders to make Warehousing Loans or USBNA to make a Swingline
Loan.
"Business Day": any day of the year other than a Saturday, Sunday or
------------
other day on which commercial banks in Minneapolis, Minnesota are required or
authorized to close.
"Cash": all cash and cash equivalents, as shown on a consolidated
----
balance sheet of the Company prepared in accordance with GAAP, including,
without limitation, all deposit accounts of the Company with any Lender or
any other financial institution.
"Change of Control": the occurrence, after the Signing Date, of any
-----------------
of the following circumstances: (a) NCFC not owning, directly or
indirectly, all of the issued and outstanding capital stock of the Company;
or (b) any Person,
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or two or more Persons acting in concert, other than the Management
Shareholders, acquiring beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended), directly or indirectly, of securities of
NCFC (or other securities convertible into such securities) representing
35% or more of the combined voting power of all securities of NCFC entitled
to vote in the election of directors; (c) any Person, or two or more
Persons acting in concert, other than the Management Shareholders,
acquiring by contract or otherwise, or entering into a contract or
arrangement which upon consummation will result in its or their acquisition
of, control over securities of NCFC (or other securities convertible into
such securities) representing 35% or more of the combined voting power of
all securities of NCFC entitled to vote in the election of directors; or
(d) ▇▇▇▇▇▇ ▇▇▇▇ ceasing to be Chairman and Chief Executive Officer of NCFC.
"Code": the Internal Revenue Code of 1986, together with all
----
amendments from time to time thereto.
"Collateral": the "Collateral" as defined in the Pledge and Security
----------
Agreement, and the "Collateral" as defined in the Servicing Security
Agreement.
"Collateral Account": account number 1731-0097-1378 of the Company
------------------
with Agent.
"Commitment": as to any Lender, the obligation of such Lender to make
----------
Loans pursuant to Section 2.01(a).
"Commitment Amount": as to any Lender, the amount set opposite such
-----------------
Lender's name as its "Commitment" in Schedule 1.01(b), as the same may be
(i)reduced pursuant to Section 2.01(g), (ii) changed as the result of an
assignment pursuant to Section 8.06(a) or (iii) increased pursuant to
Section 8.06(b).
"Company Securitization Transaction": an issuance of Mortgage-backed
----------------------------------
Securities by the Company or an Affiliate of SBRC on behalf of the Company,
through a trust or other entity created by the Company, SBRC or such
Affiliate, which Mortgage-backed Securities are either secured (in whole or
in part) by Mortgage Loans originated or acquired by the Company or
evidence the entire beneficial ownership interest therein, and in
connection with which one or more Junior Securitization Interests are
issued to the Company or an Affiliate of the Company.
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"Compliance/Borrowing Base Certificate": a certificate in the form of
-------------------------------------
Exhibit A.
"Confirmation of Borrowing/Paydown/Conversion": a confirmation in the
--------------------------------------------
form of Exhibit B.
"Daily Leverage Ratio": as of any date of determination, the ratio of
--------------------
(a) Total Liabilities of NCFC and its Subsidiaries on such date to (b)
Tangible Net Worth of NCFC and its Subsidiaries as of the last day of the
most recently completed month.
"Effective Date": the date on or after the Signing Date on which all
--------------
of the conditions precedent set forth in Section 5.01 shall have been
satisfied or waived in writing by the Lenders.
"Eligible Servicing Portfolio": on any date of determination, the
----------------------------
aggregate unpaid principal balance of all Mortgage Loans owned by Persons
other than the Company that are serviced by the Company pursuant to
Eligible Servicing Rights, excluding Servicing Rights that are subject to
an executed and delivered agreement to sell the same.
"Eligible Servicing Rights": all rights of the Company held for its
-------------------------
own account (and not as nominee or subservicer), whether pursuant to a
Servicing Contract or otherwise, to service Mortgage Loans or Mortgage Loan
pools, other than rights to service Mortgage Loans:
(a) pursuant to Recourse Servicing Contracts;
(b) with respect to which any payment is more than 59 days past
due; or
(c) with respect to which any obligor is the subject of a
bankruptcy, debt arrangement or other proceeding under any insolvency
law.
"ERISA": the Employee Retirement Income Security Act of 1974,
-----
together with all amendments from time to time thereto.
"ERISA Affiliate": any trade or business (whether or not
---------------
incorporated) that is a member of a group that is treated as a single
employer under Section 414 of the Code of which the Company is a member.
"Eurodollar Advance": an outstanding Warehousing Loan that bears
------------------
interest as provided in Section 2.02(a)(iii).
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"Eurodollar Rate": on any date of determination, the average offered
---------------
rate for deposits in United States dollars having a maturity of thirty days
(rounded upward, if necessary, to the nearest 1/16 of 1%) for delivery of
such deposits on the second Eurodollar Business Day after such date of
determination, which appears on the Telerate page 3750 as of 11:00 a.m.,
London time (or such other time as of which such rate appears), on such
date of determination, or the rate for such deposits determined by the
Agent at such time based on such other published service of general
application as shall be selected by the Agent for such purpose (including
without limitation the Reuters Screen LIBO page); provided, that in lieu of
determining the rate in the foregoing manner, the Agent may determine the
rate based on rates at which thirty day United States dollar deposits are
offered to the entity which is the Agent in the interbank Eurodollar market
at such time for delivery in Immediately Available Funds on the second
Eurodollar Business Day after such date of determination in an amount
approximately equal to the Advance as made by the entity which is the Agent
to which such rate is to apply (rounded upward, if necessary, to the
nearest 1/16 of 1%). "Reuters Screen LIBO page" means the display
designated as page "LIBO" on the Reuters Monitor Money Rate Screen (or such
other page as may replace the LIBO page on such service for the purpose of
displaying London interbank offered rates of major banks for United States
dollar deposits), and "Telerate page 3750" means the display designated as
such on Telerate System Incorporated (or such other page as may replace
page 3750 or that service for the purpose of displaying London interbank
offered rates of major banks for United States dollar deposits).
"Eurodollar Reserve Percentage": on any date of determination, that
-----------------------------
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member
bank of the Federal Reserve System, with deposits comparable in amount to
those held by USBNA, in respect of "Eurocurrency Liabilities" (or in
respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Rate Advances is
determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of a Bank to United States
residents).
"Event of Default": as defined in Section 6.01.
----------------
"Existing Warehousing Loans": as of the Effective Date, the
--------------------------
outstanding "Warehousing Loans" (as such term is defined in the Existing
Credit Agreement) made by the Lenders under the Existing Credit Agreement.
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"Existing Working Capital Loans": as of the Effective Date, the
------------------------------
outstanding "Working Capital Loans" (as such term is defined in the
Existing Credit Agreement) made by USBNA under the Existing Credit
Agreement.
"Fair Market Value": as defined in Exhibit E.
-----------------
"Federal Funds Effective Rate": for any date of determination, the
----------------------------
weighted average of the quotations for such date for overnight federal
funds transactions received by the Agent from three (3) federal funds
brokers of recognized standing selected by the Agent; provided, that in
lieu of determining the rate in the foregoing manner, the Agent may
substitute the per annum rate for such transactions displayed on the
Telerate screen, page 120, at 10:00 A.M. (Minneapolis time) on such date
or, if such date is not a Business Day, the most recent Business Day, or
the equivalent rate determined by the Agent at such time based on such
other published service of general application as shall be selected by the
Agent for such purpose.
"FHLMC": the Federal Home Loan Mortgage Corporation and any successor
-----
thereto.
"Fixed Rate": as defined in Section 2.02(a)(i).
----------
"Fixed Rate Advance": an outstanding Loan that bears interest as
------------------
provided in Section2.02(a)(i).
"Floating Rate Advance": a Reference Rate Advance or a Eurodollar
---------------------
Advance.
"FNMA": the Federal National Mortgage Association and any successor
----
thereto.
"GAAP": generally accepted accounting principles in the United States
----
set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board
or in such other statements by such other entity as may be approved by a
significant segment of the accounting profession, which are applicable to
the circumstances as of the date of determination.
"GNMA": the Government National Mortgage Association and any
----
successor thereto.
"Guarantee": any obligation, contingent or otherwise, of any Person
---------
guaranteeing or having the economic effect of guaranteeing any Indebtedness
-6-
of any other Person (the "primary obligor") in any manner, whether directly
or otherwise, (a) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase of) any direct or indirect security therefor,
(b) to purchase property, securities, or services for the purpose of
assuring the owner of such Indebtedness of the payment of such
Indebtedness, (c) to maintain working capital, equity capital, or other
financial statement condition of the primary obligor so as to enable the
primary obligor to pay such Indebtedness or otherwise to protect the owner
thereof against loss in respect thereof, or (d) entered into for the
purpose of assuring in any manner the owner of such Indebtedness of the
payment of such Indebtedness or to protect such owner against loss in
respect thereof; provided, that the term "Guarantee" shall not include
--------
endorsements for collection or deposit, in each case in the ordinary course
of business.
"Guaranty": the guaranty in the form of Exhibit C, as the same may be
--------
amended, supplemented or restated from time to time.
"Hedging Arrangements": any agreements or other arrangements
--------------------
(including, without limitation, interest rate swap agreements, interest
rate cap agreements and forward sale agreements) entered into to protect
the Company against changes in interest rates or in the value of any assets
of the Company.
"Immediately Available Funds": funds with good value on the day and
---------------------------
in the city in which payment is received.
"Indebtedness": with respect to any Person at any time, without
------------
duplication, all obligations of such Person which, in accordance with GAAP,
consistently applied, should be classified as liabilities on an
unconsolidated balance sheet of such Person, but in any event shall
include: (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) all obligations of such Person upon which interest
charges are customarily paid or accrued, (d) all obligations of such Person
under conditional sale or other title retention agreements relating to
property purchased by such Person, (e) all obligations of such Person
issued or assumed as the deferred purchase price of property or services,
but excluding accrued expenses and trade payables incurred and paid in the
ordinary course of business, (f) all obligations of others secured by any
Lien on property owned or acquired by such Person, whether or not the
obligations secured thereby have been assumed, (g) all capitalized lease
obligations of such Person, (h) all obligations of such Person in respect
of interest rate protection agreements, (i) all obligations of any
partnership or joint venture as to which such Person is or
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may become personally liable, and (j) all Guarantees by such Person of
Indebtedness others.
"Investment": as applied to any Person, any direct or indirect
----------
purchase or other acquisition by that Person of, or a beneficial interest
in, stock or other securities of any other Person, or any direct or
indirect loan, advance (other than advances to employees for moving and
travel expenses, drawing accounts and similar expenditures in the ordinary
course of business) or capital contribution by that Person to any other
Person, including all Indebtedness and accounts receivable from that other
Person which are not current assets or did not arise from sales to that
other Person in the ordinary course of business.
"Investor": any financially responsible Person in the business of
--------
purchasing Mortgage Loans designated by the Company and approved by the
Agent (which approval shall not be unreasonably withheld) with respect to
Mortgage Loans of a particular type; provided, that the Agent or the
Required Lenders may at any time, by written notice to the Company, reject
any Investor designated by the Company or designate any Investor as no
longer acceptable. Upon receipt of such written notice, the Person(s)
named in such notice to the Company shall no longer be considered Investors
hereunder.
"Junior Securitization Interests": a Mortgage-backed Security created
-------------------------------
in a Company Securitization Transaction that represents a subordinated
right to receive principal or interest payments on the underlying Mortgage
Loans (whether or not such subordination arises only under particular
circumstances).
"Leverage Ratio": on any date of determination, the ratio of (a)Total
--------------
Liabilities to (b)Tangible Net Worth.
"Lien": any security interest, mortgage, pledge, lien, charge,
----
encumbrance, title retention agreement or analogous instrument, in, of, or on
any of the assets or properties, now owned or hereafter acquired, of any
Person, whether arising by agreement or operation of law.
"Loan Documents": this Agreement, the Notes, the Pledge and Security
--------------
Agreement, the Servicing Security Agreement, the Guaranty, and all other
agreements, instruments, certificates and other documents executed and
delivered pursuant hereto or thereto or in connection herewith or
therewith, as the same may be supplemented, amended or otherwise modified
from time to time after the Signing Date.
"Loans": Warehousing Loans and Swingline Loans.
-----
-8-
"Management Shareholders": ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
-----------------------
EdwardF. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇.
"Material Adverse Event": any occurrence of whatsoever nature
----------------------
(including, without limitation, any adverse determination in any
litigation, arbitration or governmental investigation or proceeding) which
materially adversely affects the present or reasonably foreseeable
prospective financial condition or operations of NCFC or the Company or
materially impairs the ability of NCFC or the Company to perform its
respective obligations under the Loan Documents.
"Mortgage": a mortgage or deed of trust on real property which has
--------
been improved by a completed single family (i.e., one to four family units)
----
dwelling unit (i.e., a detached house, townhouse or condominium).
----
"Mortgage-backed Security": a security (including, without
------------------------
limitation, a participation certificate) that is an interest in a pool of
Mortgage Loans or is secured by such an interest.
"Mortgage Banker's Financial Reporting Form": Form Number 10021055 of
------------------------------------------
the FNMA Seller's Guide.
"Mortgage Loan": a Mortgage Note and the related Mortgage.
-------------
"Mortgage Note": a promissory note which has a term not exceeding 30
-------------
years evidencing a loan or advance which is secured by a Mortgage.
"Multiemployer Plan": a multiemployer plan, as such term is defined
------------------
in Section 4001 (a) (3) of ERISA, which is maintained (on the Closing Date,
within the five years preceding the Closing Date, or at any time after the
Closing Date) for employees of the Company or any ERISA Affiliate.
"NCFC": New Century Financial Corporation, a Delaware corporation.
----
"Net Worth": as to any Person, as of any date of determination, the
---------
net worth of such Person as of such date, determined in accordance with
GAAP.
"Note": as defined in Section 2.01(e).
----
"Obligations": all obligations of each of the Company and NCFC to the
-----------
Agent or any Lender now or hereafter existing under any Loan Document,
whether for principal, interest, fees, expenses, indemnification or
otherwise.
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"PBGC": the Pension Benefit Guaranty Corporation created by Section
----
4002(a) of ERISA or any governmental body succeeding to the functions
thereof.
"Person": any natural person, corporation, partnership, joint
------
venture, firm, association, limited liability company, trust,
unincorporated organization, government or governmental agency or political
subdivision or any other entity, whether acting in an individual, fiduciary
or other capacity.
"Plan": each employee benefit plan (whether in existence on the
----
Closing Date or thereafter instituted), as such term is defined in Section
3 of ERISA, maintained for the benefit of employees, officers or directors
of the Company or of any ERISA Affiliate, other than a Multiemployer Plan.
"Pledge and Security Agreement": the pledge and security agreement in
-----------------------------
the form of ExhibitD, as the same may be amended, supplemented or restated
from time to time.
"Prohibited Transaction": as defined in Section 4975 of the Code and
----------------------
Section 406 of ERISA.
"Pro Rata Share": with respect to each Lender, in each case expressed
--------------
as a percentage:
(a) as such term pertains to such Lender's obligation to make
Warehousing Loans, including its obligation to refinance any
outstanding Swingline Loans, the fraction which the amount of its
Commitment Amount is to the aggregate amount of all the Commitment
Amounts,
(b) as such term pertains to such Lender's right to receive
payment of interest on and Balances Deficiency Fees with respect to
its outstanding Warehousing Loans, the fraction which the outstanding
amount of interest and Balances Deficiency Fees payable to it on or
with respect to the outstanding principal balance of such Lender's
Warehousing Loans is to the aggregate outstanding amount of interest
and Balances Deficiency Fees payable on or with respect to the
aggregate unpaid principal balance of all Warehousing Loans,
(c) as such term pertains to such Lender's right to receive
payment of principal of its outstanding Warehousing Loans, the
fraction which the amount of the unpaid principal balance of its
Warehousing Loans is to the aggregate unpaid principal balance of all
outstanding Warehousing Loans,
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(d) as such term pertains to such Lender's right to receive
facility fees under Section 2.01(h), the fraction which such Lender's
Commitment Amount is to the sum of all Commitment Amounts, and
(e) as such term pertains to such Lender's obligations under
Section 7.09, and for all other purposes, the fraction which the sum
of such Lender's Commitment Amount, or, if its Commitment has
terminated, the unpaid principal balance of its Warehousing Loans, is
to the sum of the Commitment Amounts of all of the Lenders or, if the
Commitments have terminated, the unpaid principal balance of all of
the Warehousing Loans.
"Recourse Servicing Contract": a Servicing Contract under which the
---------------------------
Company is obligated to repurchase or indemnify the holder of any Mortgage
Loans as a result of defaults on such Mortgage Loans at any time during the
term of such Mortgage Loans (other than those Servicing Contracts that are
customarily recognized in the trade as non-recourse but that may contain
repurchase or indemnification obligations related to breaches of usual and
customary representations and warranties made by the Company in connection
with the sale and servicing of the Mortgage Loans serviced thereunder and
usual and customary provisions for the advance of principal and interest on
Mortgage-backed Securities by the Company).
"Reference Rate": at the time of any determination thereof, the rate
--------------
per annum which is most recently publicly announced by USBNA as its
"reference rate", which may be a rate at, above or below which USBNA lends
to other Persons.
"Reference Rate Advance": an outstanding Loan that bears interest as
----------------------
provided in Section 2.02(a)(ii).
"Regulation D": Regulation D (or any substitute regulations) of the
------------
Board of Governors of the Federal Reserve System (or any successor
thereto), together with all amendments from time to time thereto.
"Regulatory Change": any change after the Signing Date in United
-----------------
States federal, state or foreign laws or regulations or the adoption or
making after such date of any interpretations, directives or requests
applying to a class of banks including any Lender under any United States
federal, state or foreign laws or regulations (whether or not having the
force of law) by any court or governmental or monetary authority charged
with the interpretation or administration thereof.
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"Reportable Event": a reportable event as defined in Section 4043 of
----------------
ERISA and the regulations issued under such Section, with respect to a
Plan, excluding, however, such events as to which the PBGC by regulation
has waived the requirement of Section 4043(a) of ERISA that it be notified
within 30 days of the occurrence of such event, provided, that a failure to
meet the minimum funding standard of Section 412 of the Code and of Section
302 of ERISA shall be a Reportable Event regardless of the issuance of any
waiver in accordance with Section 412(d) of the Code.
"Required Lenders": at any time of determination, Lenders whose Pro
----------------
Rata Shares (as defined under clause (e) of the definition of such term)
aggregate at least 66.67%; provided, that if there is more than one Lender,
the "Required Lenders" shall not consist of fewer than two Lenders.
"Reserve-Adjusted Balances": for any Balance Calculation Period, an
-------------------------
amount obtained by multiplying (a) the average net daily collected non-
interest-bearing balances of the Company on deposit with any Lender during
such Balance Calculation Period over and above the balances required to
compensate such Lender for services provided by such Lender for said
Balance Calculation Period, reductions in the interest payable on
Indebtedness (other than the Loans) outstanding to such Lender and
assessments payable with respect to such balances by such Lender to the
Federal Deposit Insurance Corporation (or any successor thereto) for such
Corporation's insuring of time deposits in United States dollars maintained
at such Lender for such Balance Calculation Period by (b) a percentage
equal to 100%, minus the average daily Reserve Percentage in effect for
------------------
said Balance Calculation Period. For purposes of the foregoing, "Reserve
Percentage" shall mean, on any date of determination, the percentage as
prescribed by Regulation D for determining the highest maximum reserve
requirement (including, without limitation, any marginal, emergency,
supplemental, special or other reserve) that the applicable Lender
determines it is required to maintain on such date in respect of deposits
of the type maintained with such Lender in the applicable Balance
Calculation Period.
"Restricted Payments": with respect to any Person, collectively, all
-------------------
dividends or other distributions of any nature (cash, securities, assets or
otherwise), and all payments, by virtue of redemption or otherwise, on any
class of equity securities (including, without limitation, warrants,
options or rights therefor) issued by such Person, whether such securities
are now or may hereafter be authorized or outstanding and any distribution
in respect of any of the foregoing, whether directly or indirectly.
"Risk Rating": as defined in Exhibit E.
-----------
-12-
"SBRC": Salomon Brothers Realty Corp., a Delaware corporation.
----
"Servicing Contract": a contract or agreement purchased by the
------------------
Company or entered into by the Company for its own account (and not as
nominee or subservicer), whether now existing or hereafter purchased or
entered into, pursuant to which the Company services Mortgage Loans or
Mortgage Loan pools for others.
"Servicing Rights": any and all rights of the Company held for its
----------------
own account (and not as nominee or subservicer), whether pursuant to a
Servicing Contract or otherwise, to service Mortgage Loans or Mortgage Loan
pools, including, without limitation, (i) all rights to collect payments
due and enforce the rights of the mortgagee under any Mortgage Loans, (ii)
all rights to receive compensation and termination fees under any Servicing
Contract and (iii) all rights to receive the proceeds from any sale or
other transfer of the Company's interest in any Servicing Contract.
"Servicing Security Agreement": the servicing security agreement in
----------------------------
the form of Exhibit G, as the same may be amended, supplemented or restated
from time to time.
"Signing Date": the Business Day on which counterparts of this
------------
Agreement, duly executed by the Company and the Lenders, have been
delivered to the Agent.
"Subsidiary": as to any Person, any corporation or other entity of
----------
which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other Persons performing
similar functions are at the time owned directly or indirectly by such
Person.
"Swingline Commitment": the discretionary revolving credit facility
--------------------
provided by USBNA to the Borrower described in Section 2.01(b).
"Swingline Loan": a loan made by USBNA to the Borrower pursuant to
--------------
Section 2.01(b).
"Take-Out Commitment": as defined in Exhibit E.
-------------------
"Tangible Net Worth": as of any date of determination, the
------------------
consolidated Net Worth of the Company or NCFC, as applicable, and its
respective Subsidiaries, less the consolidated book value of all assets of
----
the Company or NCFC, as applicable, and its respective Subsidiaries (to the
extent reflected as an asset in the balance sheet of the Company or NCFC,
as applicable, or any such Subsidiary at such date) which are treated as
-13-
intangibles under GAAP, including, without limitation, such items as
deferred financing expenses, net leasehold improvements, good will,
trademarks, trade names, service marks, copyrights, patents, licenses and
unamortized debt discount and expense; provided, that Junior Securitization
--------
Interests shall not be treated as intangibles for purposes of this
definition.
"Termination Date": the earliest of (a) May 28, 1999, (b) the date on
----------------
which the Commitments are terminated or reduced to zero pursuant to Section
2.01(g), or (c) the date on which the Commitments are terminated pursuant
to Section 6.02.
"Total Liabilities": at any time of determination, the amount, on a
-----------------
consolidated basis, of the liabilities of the Company or NCFC, as
applicable, and its respective Subsidiaries, determined in accordance with
GAAP.
"Transferees": as defined in Section 8.06.
-----------
"Transferred Interest": as defined in Section 8.06.
--------------------
"Underwriting Guidelines": the Company's underwriting guidelines as
-----------------------
in effect on the Signing Date, a copy of which is attached hereto as
Schedule 1.01 (a), as the same may be modified from time to time in
accordance with this Agreement.
"Unmatured Event of Default": any event which with the lapse of time,
--------------------------
with notice to the Company or with both would constitute an Event of
Default.
"USBNA": U.S. Bank National Association, in its individual capacity.
-----
"Warehousing Collateral Value": on the date of any determination,
----------------------------
with respect to the Collateral or any portion thereof, as determined by the
Agent in accordance with the provisions of Exhibit E.
"Warehousing Loan": a loan made by the Lenders to the Company
----------------
pursuant to Section 2.01(a).
1.02 Accounting Terms. Except as provided to the contrary herein, all
----------------
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP. To the extent
any change in GAAP affects any computation or determination required to be made
pursuant to this Agreement, such computation or determination shall be made as
if such change in GAAP had not occurred unless the Company and the Lenders agree
-14-
in writing on an adjustment to such computation or determination to account for
such change in GAAP.
1.03 Computation of Time Periods. In this Agreement, in the
---------------------------
computation of a period of time from a specified date to a later specified date,
unless otherwise stated the word "from" means "from and including" and the word
"to" or "until" each means "to but excluding".
1.04 Other Definitional Terms. The words "hereof", "herein" 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, and section, schedule, exhibit and like references are to this
Agreement unless otherwise specified. Unless the context in which used herein
otherwise clearly requires, "or" has the inclusive meaning represented by the
phrase "and/or".
SECTION 2. THE CREDIT FACILITIES.
---------------------
2.01 The Warehousing Facility and the Swingline Facility.
---------------------------------------------------
(a) Warehousing Credit Commitment. Upon the terms and subject
-----------------------------
to the conditions of this Agreement, during the period beginning on the
Effective Date and ending on the Termination Date, each Lender agrees,
severally but not jointly, to lend (and after repayment, to relend) to the
Company, at such times and in such amounts as the Company shall request, up
to an aggregate principal amount at any time outstanding equal to such
Lender's Commitment Amount, subject to the following limitations:
(i) the aggregate principal amount of Warehousing Loans and
Swingline Loans at any time outstanding shall not exceed the sum of
the Commitment Amounts of all the Lenders; and
(ii) the aggregate principal amount of Warehousing Loans and
Swingline Loans at any time outstanding shall not exceed the Borrowing
Base, as determined by the Agent from its records.
No Lender shall be obligated to make Warehousing Loans if, after giving
effect thereto, either of the foregoing limitations would be exceeded. The
failure of any one or more of the Lenders to make a Warehousing Loan in
accordance with its Commitment shall not relieve the other Lenders of their
several obligations hereunder, but no Lender shall be liable with respect
to the obligation of any other Lender hereunder or be obligated in any
event to make Warehousing Loans which, together with its Pro Rata Share of
outstanding Swingline Loans, would exceed its Commitment Amount.
-15-
(b) Discretionary Swingline Commitment. Upon the terms and
----------------------------------
subject to the conditions of this Agreement, until the Termination Date,
USBNA, in its sole discretion, may lend to the Company loans (each such
loan, a "Swingline Loan") at such times and in such amounts as the Company
shall request, up to an aggregate principal amount at any time outstanding
equal to the amount by which USBNA's Commitment Amount exceeds the
principal amount outstanding under USBNA's Note; provided, that USBNA will
not make a Swingline Loan if (i) after giving effect thereto, either of the
limitations set forth in Section 2.01(a) would be exceeded or (ii)USBNA has
received written notice from the Company or any Lender that one or more of
the conditions precedent set forth in Section5 for the making of a
Warehousing Loan have not been satisfied.
(c) Manner of Borrowing. The Company shall give the Agent
-------------------
telephonic notice of each request for Warehousing Loans not later than1:00
P.M. (Minneapolis time) on the requested Borrowing Date, and each request
for Swingline Loans not later than 3:30p.m. (Minneapolis time) on the
requested Borrowing Date. On the Effective Date, the Company shall be
deemed to have requested Warehousing Loans in an amount equal to the
outstanding principal balance of all Existing Warehousing Loans and
Existing Working Capital Loans, and such Warehousing Loans shall be used to
refund such Existing Warehousing Loans and Existing Working Capital Loans.
Each request for Warehousing Loans or Swingline Loans shall specify the
aggregate amount of Warehousing Loans or Swingline Loans, as the case may
be, requested and whether such Loans to be made by each Lender are to be
funded as Eurodollar Advances, Fixed Rate Advances or Reference Rate
Advances; provided, that any portion of a Loan not so designated shall be
funded as a Eurodollar Advance. The Company shall, not later than the
following Business Day, confirm any such request by delivering to the Agent
a duly completed and executed Confirmation of Borrowing/Paydown/Conversion.
The Agent shall notify each Lender by not later than 2:00 P.M. (Minneapolis
time) on the date it receives such request of each request for Warehousing
Loans received from the Company, of such Lender's Pro Rata Share of the
Warehousing Loans requested and whether such Lender's Warehousing Loans are
to be funded as Reference Rate Advances, Eurodollar Advances or Fixed Rate
Advances. Each Lender shall deposit into the Collateral Account in
Immediately Available Funds by not later than 3:00 P.M. (Minneapolis time)
on the Borrowing Date the total amount of the Warehousing Loans to be made
by such Lender. On the Borrowing Date of requested Swingline Loans, USBNA
may deposit into the Collateral Account in Immediately Available Funds by
not later than 4:00 p.m. (Minneapolis time) on the requested Borrowing Date
the amount of the requested Swingline Loans. Unless the Agent shall have
received notice from a Lender prior to 3:00 P.M. (Minneapolis time) on any
Borrowing Date that such Lender will not make
-16-
available to the Agent the Warehousing Loans to be made by such Lender on
such date, the Agent may assume that such Lender has made such Warehousing
Loan available to the Agent on such date and the Agent in its sole
discretion may, in reliance upon such assumption, make available to the
Company on such date a corresponding amount on behalf of such Lender. If a
Lender shall not have timely given such a notice, and to the extent such
Lender shall not have so made available to the Agent the Warehousing Loans
to be made by such Lender on such date and the Agent shall have so made
available to the Company a corresponding amount on behalf of such Lender,
such Lender shall, on demand, pay to the Agent such corresponding amount
together with interest thereon, at the Federal Funds Effective Rate, for
each day from the date such amount shall have been so made available by the
Agent to the Company until the date such amount shall have been repaid to
the Agent. If such Lender does not pay such corresponding amount promptly
upon the Agent's demand therefor, the Agent shall promptly notify the
Company and the Company shall immediately repay such corresponding amount
to the Agent together with accrued interest thereon at the applicable rate
or rates provided in Section 2.04. Each request for Warehousing Loans or
Swingline Loans shall be deemed to be a representation by the Company that
(i)no Event of Default or Unmatured Event of Default has occurred or will
exist upon the making of the requested Warehousing Loans and (ii)the
representations and warranties contained in Section 3 hereof, in Section5
of the Pledge and Security Agreement, in Section ___ of the Servicing
Security Agreement, and in Section 15 of the Guaranty are true and correct
with the same force and effect as if made on and as of the date of such
request.
(d) Refinancing of Swingline Loans.
------------------------------
(i) Permitted Refinancings of Swingline Loans. USBNA, at
-----------------------------------------
any time in its sole and absolute discretion, may, upon notice given
to each other Lender by not later than 2:00 P.M. (Minneapolis time) on
any Business Day, request that each Lender (including USBNA) make a
Warehousing Loan in an amount equal to its Pro Rata Share of a portion
of the aggregate unpaid principal amount of any outstanding Swingline
Loans for the purpose of refinancing such Swingline Loans. Such
Warehousing Loans shall be made as Eurodollar Advances, unless the
Company specifies otherwise.
(ii) Mandatory Refinancings of Swingline Loans. Not later
-----------------------------------------
than 2:00 P.M. (Minneapolis time) on Thursday of each week, USBNA will
notify each other Lender of the aggregate amount of Swingline Loans
which are then outstanding and the amount of Warehousing Loans
required to be made by each Lender (including USBNA) to refinance such
outstanding Swingline Loans (which shall
-17-
be in the amount of each Lender's Pro Rata Share of such outstanding
Swingline Loans). Such Warehousing Loans shall be made as Eurodollar
Advances, unless the Company specifies otherwise.
(iii) Lenders' Obligation to Fund Refinancings of Swingline
-----------------------------------------------------
Loans. Upon the giving of notice by USBNA under Section 2.01(d)(i) or
-----
2.01(d)(ii), each Lender (including USBNA) shall make a Warehousing
Loan in an amount equal to its Pro Rata Share of the aggregate
principal amount of Swingline Loans to be refinanced, and provide
proceeds of such Warehousing Loans, in Immediately Available Funds, by
not later than 3:00 P.M. (Minneapolis time) on the date such notice
was received; provided, however, that a Lender shall not be obligated
to make any such Warehousing Loan unless (A)USBNA believed in good
faith that all conditions to making the subject Swingline Loan were
satisfied at the time such Swingline Loan was made, or (B) if the
conditions to such Swingline Loan were not satisfied, such Lender had
actual knowledge, by receipt of the statements furnished to it
pursuant to Section 4.01 or otherwise, that any such condition had not
been satisfied and failed to notify USBNA in a writing received by
USBNA prior to the time it made such Swingline Loan that USBNA was not
authorized to make a Swingline Loan until such condition had been
satisfied, or USBNA was obligated to give notice of the occurrence of
an Event of Default or an Unmatured Event of Default to the Lenders
pursuant to Section 7.08 and failed to do so, or (C) any conditions to
the making of such Swingline Loan that were not satisfied had been
waived in writing by the Majority Lenders prior to or at the time such
Swingline Loan was made. The proceeds of Warehousing Loans made
pursuant to the preceding sentence shall be paid to USBNA (and not to
the Company) and applied to the payment of principal of the
outstanding Swingline Loans, and the Company authorizes the Agent to
charge the Collateral Account or any other account (other than escrow
or custodial accounts) maintained by the Company with the Agent (up to
the amount available therein) in order to immediately pay USBNA the
principal amount of such Swingline Loans to the extent Warehousing
Loans made by the Lenders are not sufficient to repay in full the
principal of the outstanding Swingline Loans requested or required to
be refinanced. Upon the making of a Warehousing Loan by a Lender
pursuant to this Section 2.01(d)(iii), the amount so funded shall
become due under such Lender's Note and the outstanding principal
amount of the Swingline Loans shall be correspondingly reduced. If any
portion of any Warehousing Loan made by the Lenders pursuant to this
Section 2.01(d)(iii) should be recovered by or on behalf of the
Company from USBNA in bankruptcy or otherwise, the loss of the
-18-
amount so recovered shall be ratably shared among all the Lenders in
the manner contemplated by Section 7.11. Each Lender's obligation to
make Warehousing Loans referred to in this Section 2.01(d) shall,
subject to the proviso to the first sentence of this Section
2.01(d)(iii), be absolute and unconditional and shall not be affected
by any circumstance, including, without limitation, (1) any setoff,
counterclaim, recoupment, defense or other right which such Lender may
have against USBNA, the Company or anyone else for any reason
whatsoever; (2) the occurrence or continuance of a Default or an Event
of Default; (3) any adverse change in the condition (financial or
otherwise) of the Company or the Guarantor; (4) any breach of this
Agreement by the Company, the Agent or any Lender; or (5) any other
circumstance, happening or event whatsoever, whether or not similar to
any of the foregoing; provided, that in no event shall a Lender be
obligated to make a Warehousing Loan if, after giving effect thereto,
the outstanding principal balance of such Lender's Note would exceed
its Commitment Amount.
(e) Notes. Warehousing Loans made by each Lender shall be
-----
evidenced by the Company's promissory note in the form of ExhibitF (each,
together with any promissory note subsequently executed and delivered by
the Company to evidence any Lender's Loans, a "Note"), which shall be made
payable to the order of such Lender in an amount equal to such Lender's
Commitment Amount, shall be dated the Effective Date and shall mature on
the Termination Date. USBNA's Note shall also evidence the Swingline
Loans made by it hereunder. The aggregate amount of the Warehousing Loans
made by a Lender and, in the case of USBNA, Swingline Loans, less all
repayments of principal thereof shall be the principal amount owing and
unpaid on such Lender's Note. The principal amount of each Loan made by a
Lender and all principal payments and prepayments thereof may be noted by
such Lender on a schedule attached to its Note and shall be entered by such
Lender on its ledgers and computer records. The failure of any Lender to
make such notations or entries shall not affect the principal amount owing
and unpaid on its Note. The entries made by a Lender on its ledgers and
computer records and any notations made by a Lender on any such schedule
annexed to its Note shall be presumed to be accurate until the contrary is
established.
(f) Payment and Prepayment of Warehousing Loans and Swingline
---------------------------------------------------------
Loans. The Company shall pay the principal of the Warehousing Loans and
-----
Swingline Loans as follows:
-19-
(i) Mandatory Payments. The entire unpaid principal
------------------
balance of each Lender's Note shall be due and payable on the
Termination Date.
(ii) Mandatory Prepayments. If, at any time, the
---------------------
aggregate principal amount of all Loans outstanding exceeds the
Borrowing Base, the Company shall immediately either (A) pledge
additional Mortgage Loans with a Warehousing Collateral Value not less
than the amount of such excess to the Agent for the benefit of the
Lenders pursuant to the Pledge and Security Agreement, or (B) make
principal prepayments of the Notes in an aggregate amount equal to the
amount of such excess, which amount shall be paid to the Agent and
distributed (y)first, to USBNA as a prepayment on the outstanding
principal balance of any Swingline Loans and (z)after repayment in
full of any Swingline Loans, to the Lenders ratably on the basis of
each Lender's Pro Rata Share. In addition, all Swingline Loans shall
also be prepayable on demand therefor by USBNA.
(iii) Optional Prepayments. The Company shall have the
--------------------
right to prepay, without penalty, the outstanding principal balance of
the Notes in whole or in part at any time and from time to time, each
such principal prepayment to be paid to the Agent and distributed
(A)first, to USBNA as a prepayment on the outstanding principal
balance of any Swingline Loans and (B)after repayment in full of any
Swingline Loans, to the Lenders ratably on the basis of each Lender's
Pro Rata Share.
(iv) Confirmation. The Company shall promptly send the
------------
Agent a Confirmation of Borrowing/Paydown/Conversion confirming any
payment or prepayment of principal made on the Notes.
(g) Termination and Reduction of the Commitments.
--------------------------------------------
(i) The Company may, at any time, upon not less than
thirty days' prior written notice to the Agent, a copy of which shall
be promptly provided by the Agent to each Lender, reduce the aggregate
Commitment Amounts, with any such reduction in a minimum amount of
$10,000,000, or, if more, in an integral multiple of $5,000,000 in
excess thereof; provided, that the Company may not reduce the
aggregate Commitment Amounts below the aggregate principal amount of
outstanding Loans. The Company may, upon not less than thirty days'
prior written notice to the Agent, a copy of which shall be promptly
provided by the Agent to each Lender, terminate the
-20-
Commitments in their entirety. Upon termination of the Commitments
pursuant to this Section, the Company shall pay to the Agent the
aggregate amount of all outstanding Loans, all accrued and unpaid
interest thereon, any unpaid fees accrued to the date of such
termination and all other unpaid obligations of the Company to the
Lenders in respect of their Commitments hereunder.
(ii) Notwithstanding the foregoing, any termination of the
Commitments pursuant to Section6.02 shall supersede any notice of
termination or reduction under this Section 2.01(g). Once the
Commitments have been terminated or reduced, they may not be
reinstated.
(h) Facility Fees. The Company shall pay each Lender a facility
-------------
fee on the average daily amount of such Lender's Commitment Amount, whether
used or unused, payable monthly in arrears on the fifth Business Day of
each month in an amount equal to one-quarter of one percent (0.25%) per
annum.
(i) Use of Proceeds. Except as otherwise provided in Section
---------------
2.01(d) with respect to refinancing Swingline Loans, the proceeds of the
Swingline Loans and the Warehousing Loans shall be used to make, originate
or acquire Mortgage Loans, to finance Mortgage Loans previously made,
originated or acquired or, in the case of Warehousing Loans made on the
Effective Date, to repay in full the Existing Warehousing Loans and the
Existing Working Capital Loans.
2.02 Interest on the Note; Balances Deficiency Fees; Continuations and
-----------------------------------------------------------------
Conversions.
-----------
(a) Interest Rates; Balances Deficiency Fees. The Company will
----------------------------------------
pay each Lender monthly in arrears on the third Business Day of each month
interest on the unpaid principal balance of each Advance of such Lender
from time to time outstanding as follows:
(i) with respect to Fixed Rate Advances, at the per annum rate
of 1.25% (the "Fixed Rate"); provided, that if for any Balance
Calculation Period the average daily Reserve-Adjusted Balances
maintained by the Company with any Lender are less than an amount
equal to the average daily aggregate unpaid principal balance of the
Fixed Rate Advances owed to such Lender during such Balance
Calculation Period (such deficiency being herein referred to as the
"Balances Deficiency"), the Company will pay such Lender a fee (the
"Balances Deficiency Fee") for said Balance Calculation Period on the
Balances Deficiency at a per
-21-
annum rate equal to 1.25% below the average daily Reference Rate in
effect during said Balance Calculation Period; and provided further,
that if the weighted average Reserve-Adjusted Balances maintained by
the Company with any Lender for any Balance Calculation Period exceeds
the weighted average daily aggregate unpaid principal balance of the
Fixed Rate Advances owed to such Lender during such Balance
Calculation Period (such excess being defined herein as the "Balances
Surplus"), then such Balances Surplus, or, if the Company and such
Lender shall so agree, the charges reduction benefit for such Balances
Surplus (as determined by such Lender), may be carried forward and
applied to succeeding Balance Calculation Periods (but not to any
Balance Calculation Period occurring in any subsequent calendar year);
(ii) with respect to Reference Rate Advances, the Reference Rate
plus the Applicable Margin, as adjusted automatically on and as of the
effective date of any change in the Reference Rate;
(iii) with respect to Eurodollar Advances, the Adjusted
Eurodollar Rate plus the Applicable Margin, as adjusted automatically
on and as of the effective date of any change in the Adjusted
Eurodollar Rate; and
(iv) with respect to any Obligations not paid when due (i)
consisting of Fixed Rate Advances, a rate per annum equal to the Fixed
Rate plus 2.0%, and (ii) consisting of other Obligations, a rate per
annum equal to the Reference Rate plus the Applicable Margin plus 2.0%
for the period from the date such Obligations were due until the same
are paid.
(b) Payment of Interest and Fees. The Agent shall use its best
----------------------------
efforts to provide the Company with a statement for interest on the Notes,
the facility fees with respect to the Commitments and the collateral
handling fees with respect to Mortgage Loans pledged under the Pledge and
Security Agreement, in each case accrued through the last day of each
calendar month, on or before the fifth Business Day of the next succeeding
calendar month, but shall have no liability to the Company for its failure
to do so. Interest on the Notes, facility fees and collateral handling fees
accrued through the last day of each calendar month shall be due and
payable on the second Business Day after the date the Company receives such
statement from the Agent; provided, that interest payable at the rates
provided for in Section 2.02 (a)(iv) shall be payable on demand. Any
Balances Deficiency Fee payable hereunder shall be due and payable
quarterly after each Balance Calculation Period within two Business Days
after receipt by the Company from any Lender of a statement therefor (a
copy of which shall be provided to the Agent)
-22-
containing the calculations made to determine such Balances Deficiency Fee,
which statement shall be conclusive absent manifest error.
(c) Designation and Conversions of Outstanding Advances.
---------------------------------------------------
Subject to the terms and conditions of this Agreement, the Company shall
designate, on any Borrowing Date, all or portions of the Warehousing Loans
or Swingline Loans to be made on such Borrowing Date as one or more
Eurodollar Advances, Fixed Rate Advances or Reference Rate Advances. Any
portion of an outstanding Loan not designated as a Reference Rate Advance
or a Fixed Rate Advance shall be funded as a Eurodollar Advance.
Thereafter, subject to the terms and conditions of this Agreement, the
Company shall have the option to convert all or any portion of any
outstanding Advance consisting of Warehousing Loans or Swingline Loans into
Advances of another type (i.e., Eurodollar Advances, Fixed Rate Advances or
Reference Rate Advances); provided, however, that (i)no Advance may be
requested as or converted into a Eurodollar Advance or, without the written
consent of the Lender to which it is owed (a copy of which shall be
provided to the Agent), a Fixed Rate Advance if an Event of Default or
Unmatured Event of Default has occurred and is continuing on the proposed
date of conversion, and (ii)no Advance owed to any Lender may be requested
as or converted into a Fixed Rate Advance without the prior consent of such
Lender, which shall be confirmed to the Agent in writing by such Lender, if
the Reserve-Adjusted Balances maintained by the Company at such Lender are
less than the aggregate amount of Fixed Rate Advances owed to such Lender,
after giving effect to such conversion. The Company shall provide the Agent
with telephonic notice of each proposed conversion not later than 1:00 P.M.
(Minneapolis time) on the date of any conversion, which notice shall set
forth the proposed date therefor. Each such notice shall specify (A)the
amount to be converted, and (B)the date for the conversion. Any notice
given by the Company under this Section 2.02(c) shall be irrevocable. The
Company shall promptly confirm any such proposed conversion by delivering
to the Agent a duly completed and executed Confirmation of
Borrowing/Paydown/Conversion. The Agent shall notify each Lender affected
by such proposed conversion by not later than 1:30 P.M. (Minneapolis time)
on the date it receives such notice of the Advances of such Lender being
converted and the types of Advances into which such Advances are being
converted.
(d) Agent's Fees. The Company shall pay to the Agent collateral
------------
handling fees in accordance with the terms of a letter dated May 29, 1998,
as the same may be amended, supplemented, restated or replaced from time to
time.
2.03 Payments and Computations.
-------------------------
-23-
(a) Payments. All payments and prepayments by the Company of
--------
principal of and interest on each Note and all fees, expenses and other
obligations under this Agreement shall be made in Immediately Available
Funds to the Agent not later than 2:00 p.m. (Minneapolis time) on the dates
called for under this Agreement, at the main office of the Agent in
Minneapolis. Funds received after such hour shall be deemed to have been
received by the Agent on the next Business Day. The Company irrevocably
authorizes the Agent to charge the Collateral Account or any other account
of the Company (other than escrow or custodial accounts) maintained with
the Agent in an amount equal to any such payment or permitted prepayment of
principal, interest, fees, expenses and other Obligations then due and
payable by the Company to the Lenders or the Agent under this Agreement and
the other Loan Documents, as the case may be.
(b) Computations. Balances Deficiency Fees, facility fees and
------------
interest on each Note shall be computed on the basis of actual days elapsed
and a year of 360 days.
2.04 Setoff. Whenever an Event of Default shall have occurred and be
------
continuing, the Company hereby irrevocably authorizes each Lender to set off the
Obligations owed to such Lender against all deposits and credits of the Company
with, and any and all claims of the Company against, such Lender, excluding
deposits of the Company with such Lender which the Company holds in escrow or in
trust for the benefit of third parties, whether or not the Obligations owed to
such Lender, or any part thereof, shall be then due. No Lender shall, except as
otherwise set forth in the Loan Documents, have any right to set off the
Obligations owed to such Lender against any such deposits or credits except
during the continuance of an Event of Default.
2.05 Increased Capital Requirements. In the event that, as a result
------------------------------
of any Regulatory Change, compliance by any Lender with any applicable law or
governmental rule, requirement, regulation, guideline or order (whether or not
having the force of law) regarding capital adequacy has the effect of reducing
the rate of return on such Lender's capital as a consequence of such Lender's
Commitment or amounts outstanding under such Lender's Note to a level below that
which such Lender would have achieved but for such compliance (taking into
consideration such Lender's policies with respect to capital adequacy), then
from time to time the Company shall pay to such Lender, within thirty days after
written demand by such Lender, such additional amount or amounts as will
compensate such Lender for such reduction; provided, that the Company shall not
be obligated to pay any such additional amount (i) unless such Lender shall
first have notified the Company in writing that it intends to seek such
compensation pursuant to this Section, or (ii) to the extent such additional
amount is attributable to the period ending 91 days prior to the date of the
first such notice with respect to such Regulatory Change (the
-24-
"Excluded Period"), except to the extent any amount is attributable to the
Excluded Period as a result of the retroactive application of the applicable
Regulatory Change. A certificate, which shall be conclusive except for manifest
error, as to the amount of any such reduction (including calculations in
reasonable detail showing how such Lender computed such reduction and a
statement that such Lender has not allocated to its Commitment or amounts
outstanding under its Note a proportionately greater amount of such reduction
than is attributable to each of its other commitments to lend or to each of its
other outstanding credit extensions that are affected similarly by such
compliance by such Lender, whether or not such Lender allocates any portion of
such reduction to such other commitments or credit extensions) shall be
furnished promptly by such Lender to the Company.
2.06 Provisions Relating to Eurodollar Advances and Fixed Rate
---------------------------------------------------------
Advances.
--------
(a) Interest Rate Not Ascertainable, Etc. If, on the date for
------------------------------------
determining the Adjusted Eurodollar Rate in respect of any Eurodollar
Advance, any Lender determines (which determination shall be conclusive and
binding, absent error) that the Adjusted Eurodollar Rate will not
adequately and fairly reflect the cost to such Lender of funding such
Eurodollar Advance, then such Lender shall notify the Agent, and the Agent
shall notify the Company, of such determination, whereupon the obligation
of such Lender to make, or to convert any Advances to, Eurodollar Advances
shall be suspended until such Lender notifies the Agent, and the Agent
notifies the Company, that the circumstances giving rise to such suspension
no longer exist. Outstanding Eurodollar Advances owed to such Lender shall
thereupon automatically be converted to Reference Rate Advances.
(b) Increased Cost. If, after the date hereof, any Regulatory
--------------
Change or compliance with any request or directive (whether or not having
the force of law) of any governmental authority, central bank or comparable
agency:
(i) shall subject any Lender to any tax, duty or other charge
with respect to Eurodollar Advances or Fixed Rate Advances, its Note,
or its obligation to make Eurodollar Advances or Fixed Rate Advances,
or shall change the basis of taxation of payment to such Lender of the
principal of or interest on Eurodollar Advances or Fixed Rate Advances
or any other amounts due under this Agreement in respect of Eurodollar
Advances or Fixed Rate Advances or its obligation to make Eurodollar
Advances or Fixed Rate Advances (except for changes in the rate of tax
on the overall net income of such Lender imposed by the laws of the
United States or any jurisdiction in which such Lender's principal
office is located); or
-25-
(ii) shall impose, modify or deem applicable any reserve, special
deposit, capital requirement or similar requirement (including,
without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding any such
requirement to the extent included in calculating the Adjusted
Eurodollar Rate) against assets of, deposits with or for the account
of, or credit extended by, any Lender or shall impose on any Lender or
on the interbank Eurodollar market any other condition affecting
Eurodollar Advances or Fixed Rate Advances, such Lender's Note, or its
obligation to make Eurodollar Advances or Fixed Rate Advances;
and the result of any of the foregoing is to increase the cost to such
Lender of making or maintaining any Eurodollar Advance or Fixed Rate
Advance, or to reduce the amount of any sum received or receivable by such
Lender under this Agreement or under its Note, then, within 30 days after
written demand by such Lender, the Company shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such
increased cost or reduction; provided, that the Company shall not be
obligated to pay any such additional amount (i) unless such Lender shall
first have notified the Company in writing that it intends to seek such
compensation pursuant to this Section, or (ii) to the extent such
additional amount is attributable to the period ending 91 days prior to the
date of the first such notice with respect to such Regulatory Change (the
"Excluded Period"), except to the extent any amount is attributable to the
Excluded Period as a result of the retroactive application of the
applicable Regulatory Change. A certificate of any Lender claiming
compensation under this Section 2.06(b), setting forth the additional
amount or amounts to be paid to it hereunder and stating in reasonable
detail the basis for the charge and the method of computation, shall be
conclusive in the absence of manifest error. In determining such amount,
such Lender may use any reasonable averaging and attribution methods.
Failure on the part of any Lender to demand compensation for any increased
costs or reduction in amounts received or receivable with respect to any
period shall not constitute a waiver of such Lender's rights to demand
compensation for any increased costs or reduction in amounts received or
receivable in any subsequent period.
(c) Illegality. If, after the date of this Agreement, the
----------
adoption of, or any change in, any applicable law, rule or regulation, or
any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender with
any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency shall make it unlawful or
impossible for such Lender to make, maintain or fund Eurodollar Advances or
Fixed Rate
-26-
Advances, such Lender shall notify the Company and the Agent, whereupon the
obligation of such Lender to make or convert Advances into Eurodollar
Advances or Fixed Rate Advances, shall be suspended until such Lender
notifies the Company and the Agent that the circumstances giving rise to
such suspension no longer exist. If any Lender determines that it may not
lawfully continue to maintain any Eurodollar Advances or Fixed Rate
Advances, all of the affected Advances shall be automatically converted to
Reference Rate Advances as of the date of such Lender's notice.
SECTION 3. REPRESENTATIONS AND WARRANTIES. In order to induce the
------------------------------
Lenders to enter into this Agreement and to make and maintain the Loans
hereunder, the Company makes the following representations and warranties to the
Lenders effective on and as of the Signing Date, the Effective Date and each
Borrowing Date:
3.01 Formation; Powers; Good Standing; Subsidiaries; Agency Status.
-------------------------------------------------------------
(a) Formation and Powers. NCFC is a corporation duly organized,
--------------------
validly existing and in good standing under the laws of the State of
Delaware, the Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California, and each of
NCFC and the Company has all requisite corporate power and authority to own
and operate its properties, to carry on its business as now conducted and
proposed to be conducted, to enter into and perform each Loan Document to
which it is or will be a party and to carry out the transactions
contemplated thereby.
(b) Good Standing. Each of NCFC and the Company is in good
-------------
standing wherever necessary to carry on its business and operations, except
in jurisdictions in which the failure to be in good standing would not
preclude it from enforcing its rights with respect to any material asset or
expose it to any material liability.
(c) Subsidiaries, Joint Ventures and Partnerships. As of the
---------------------------------------------
Signing Date, neither NCFC nor the Company has any Subsidiaries other than
those listed on Schedule 3.01. Neither NCFC nor the Company is a member of
any joint venture or partnership other than a strategic alliance with
Persons in which the Company has made Investments of the types permitted
pursuant to Sections 4.10(i) and 4.10(j).
-27-
3.02 Authorization; No Conflict; Governmental Consents; Binding
----------------------------------------------------------
Effect.
(a) Authorization of Borrowing. The execution, delivery and
--------------------------
performance by each of NCFC and the Company of each Loan Document to
which it is or will become a party, the carrying out of the transactions
contemplated thereby, and the issuance, delivery and payment of the Notes
have been duly authorized by all necessary corporate action by each of
them.
(b) No Conflict. The execution, delivery and performance by
-----------
each of NCFC and the Company of each Loan Document to which it is or will
be a party, the carrying out of the transactions contemplated thereby, and
the issuance, delivery and payment of the Notes does not and will not
(i)violate any provision of law applicable to it, its articles or
certificate of incorporation or bylaws or any order, judgment or decree of
any court or other agency of government binding on it, (ii)conflict with,
result in a breach of or constitute (with due notice or lapse of time or
both) a default under any of its contractual obligations, (iii)result in or
require the creation or imposition of any Lien, charge or encumbrance of
any nature whatsoever upon any of its properties or assets except the Liens
granted to the Agent for the benefit of the Lenders under the Pledge and
Security Agreement or (iv)require any approval of shareholders or any
approval or consent of any Person under any of its contractual obligations
other than approvals or consents which have been obtained.
(c) Governmental Consents. The execution, delivery and
---------------------
performance by each of NCFC and the Company of, and the validity and
enforceability of, each Loan Document to which it is or will be a party,
the carrying out of the transactions contemplated thereby, and the
issuance, delivery and payment of the Notes by the Company do not and will
not require any registration with, consent or approval of, or notice to, or
other action of, with or by, any Federal, state or other governmental
authority or regulatory body or other Person except those that have been
obtained. Any registration with, consent or approval of or other action by
any federal, state or other governmental authority or regulatory body or
other Person which has been obtained and has been disclosed in writing to
the Lenders shall remain in effect and shall not be modified except as may
be approved in writing by the Agent, which approval shall not be
unreasonably withheld.
(d) Binding Obligations. Each of the Loan Documents to which it
-------------------
is a party is, and each of the Loan Documents to which it will be a party
will be, the legally valid and binding obligations of each of NCFC and the
Company, and each of the Loan Documents has been or will be duly executed,
and is or will be enforceable against it in accordance with its terms,
-28-
except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating
to or limiting creditors' rights generally.
3.03 Financial Condition. NCFC has heretofore delivered to the
-------------------
Lenders its audited consolidated balance sheet as at December 31, 1997, its
unaudited consolidated balance sheet as at March 31, 1998 and the related
statements of income, shareholders' equity and cash flow for the periods then
ended. The Company has heretofore delivered to the Lenders its audited
consolidated balance sheet as at December 31, 1997, its unaudited consolidated
balance sheet as at March 31, 1998, and the related statements of income,
shareholder's equity and cash flow for the periods then ended. Such financial
statements have been prepared in accordance with GAAP and fairly present the
consolidated financial condition of NCFC and the Company as of the dates
indicated and the results of their operations and cash flow for the periods
indicated. As of the Signing Date, neither NCFC nor the Company has any material
contingent obligation, contingent liability or liability for taxes, long-term
lease or unusual forward or long-term commitment, which is not reflected in the
foregoing financial statements or in the notes thereto.
3.04 Title to Property; Liens. NCFC and the Company each has good,
------------------------
sufficient and legal title to all the properties and assets reflected in the
balance sheets dated as at March 31, 1998 referred to in Section 3.03 and all
assets held by NCFC and the Company on the Signing Date but acquired subsequent
to the date of such balance sheet, except for assets disposed of in the ordinary
course of business. All such properties and assets are free and clear of Liens,
except as permitted hereunder. The grants of security interests pursuant to the
Pledge and Security Agreement and the Servicing Security Agreement create valid
security interests in the property subject thereto and the Liens on the
Collateral created by the Pledge and Security Agreement and the Servicing
Security Agreement will be first priority Liens thereon, free and clear of any
other Liens except as permitted hereunder.
3.05 Litigation; Adverse Facts. Except as set forth in Schedule 3.05,
-------------------------
there is no action, suit, proceeding or arbitration at law or in equity or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
pending or, to the knowledge of NCFC or the Company, threatened against or
affecting NCFC or the Company or any of their respective properties that would,
if decided in a manner adverse to it, result in any material adverse change in
its business, operations, properties, assets or condition
-29-
(financial or otherwise) or would materially adversely affect its ability to
perform its obligations under each Loan Document to which it is or will be a
party, and there is no basis known to it for any action, suit or proceeding
which would have such an effect. Neither NCFC nor the Company is (i)in violation
of any applicable law if such violation materially adversely affects or may
materially adversely affect its business, operations, properties, assets or
condition (financial or otherwise) or (ii)subject to or in violation of any
final judgment, writ, injunction, decree, rule or regulation of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, which could have a
material adverse effect on its business, operations, properties, assets or
condition (financial or otherwise). There is no action, suit, proceeding or
investigation pending or, to the knowledge of NCFC or the Company, threatened
against or affecting NCFC or the Company, which questions the validity or the
enforceability of any Loan Document.
3.06 Other Agreements; Performance.
-----------------------------
(a) Agreements. Neither NCFC nor the Company is a party to or
----------
subject to any contractual obligation or charter or other internal
restriction materially adversely affecting its business, properties,
assets, operations or condition (financial or otherwise).
(b) Performance. Neither NCFC nor the Company is in default in
-----------
the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any of its material contractual
obligations, and no condition exists which, with the giving of notice or
the lapse of time or both, would constitute such a default, except where
the consequences, direct or indirect, of such default or defaults, if any,
would not have a material adverse effect on its business, properties,
assets, operations or condition (financial or otherwise). To the best
knowledge of NCFC and the Company, the other parties to any of the
contractual obligations of NCFC or the Company are not in default
thereunder, except where the consequences, direct or indirect, of such
default or defaults, if any, would not have a material adverse effect on
its business, properties, assets, operations or condition (financial or
otherwise).
3.07 Use of Proceeds. All proceeds of the Loans will be used only in
---------------
accordance with Section 2.01(i). No part of the proceeds of the Loans will be
used by the Company to purchase or carry any margin stock (as such term is
defined in Regulation U of the Board of Governors of the Federal Reserve System
(or any successor thereto)) or to extend credit to any other Person for the
purpose of purchasing or carrying any margin stock.
3.08 Taxes. Each of NCFC and the Company has filed all tax returns
-----
required to be filed by it, and has paid all taxes and assessments payable by it
which have become due, other than those not yet delinquent and except for those
contested in good faith by appropriate proceedings for which adequate reserves
in conformity with GAAP have been provided. No material tax Liens have been
filed and, to their knowledge, no material claims or assessments are being
asserted or will be asserted with respect to any such taxes or other charges.
-30-
3.09 ERISA. Each Plan is in substantial compliance with all
-----
applicable requirements of ERISA and the Code and with all material applicable
rulings and regulations issued under the provisions of ERISA and the Code
setting forth those requirements. No Reportable Event has occurred and is
continuing with respect to any Plan. All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no event or
condition which would reasonably be expected to result in the institution of
proceedings to terminate any Plan under Section 4042 of ERISA. With respect to
each Plan subject to Title IV of ERISA, as of the most recent valuation date for
such Plan, the present value (determined on the basis of reasonable assumptions
employed by the independent actuary for such Plan and previously furnished in
writing to the Lenders) of such Plan's projected benefit obligations did not
exceed the fair market value of such Plan's assets. Neither the Company nor any
ERISA Affiliate is required to make contributions to any Multiemployer Plan.
3.10 Governmental Regulation. Neither NCFC nor the Company is subject
-----------------------
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, the Investment Company Act of 1940 or
any federal or state statute or regulation limiting its ability to incur
Indebtedness for money borrowed.
3.11 Indebtedness. As of the Signing Date, neither NCFC nor the
------------
Company has any Indebtedness outstanding except the Indebtedness permitted
pursuant to Section 4.08.
3.12 No Material Adverse Event. Since December 31, 1997, neither the
-------------------------
business, operations, condition (financial or otherwise), properties nor assets
of NCFC or the Company or their Subsidiaries have been affected in any material
adverse way as the result of any Material Adverse Event, including, without
limitation, fire, explosion, accident, act of God, strike, lockout, flood,
drought, storm, earthquake, or combination of workmen or other labor
disturbance, riot, activity of armed forces or of the public enemy, embargo or
nationalization, condemnation, requisition or taking of property, or
cancellation or modification of contracts, by any domestic or foreign government
or any instrumentality or agency thereof.
3.13 Licenses and Permits. Each of NCFC and the Company has all
--------------------
federal, state and local licenses and permits required to be maintained in
connection with and material to the current operation of its businesses, and all
such licenses and permits are valid and fully effective.
3.14 Guarantees. As of the Signing Date, neither NCFC nor the Company
----------
has made, or is liable in respect of, any Guarantee, other than the Guaranty and
Guarantees permitted pursuant to Section 4.11.
-31-
3.15 Accuracy and Completeness of Information. No representation or
----------------------------------------
warranty of NCFC or the Company contained in this Agreement or the other Loan
Documents, no representation or warranty contained in any other document,
certificate or written statement furnished to the Agent or any Lender by NCFC or
the Company for use in connection with the transactions contemplated by the Loan
Documents and no representation or warranty contained in any other document,
certificate or written statement furnished to the Agent or any Lender by or on
behalf of any other Person for use in connection with the transactions
contemplated by the Loan Documents, contains any untrue statement of a material
fact or omits to state a material fact (known to it in the case of any document
not furnished by it) necessary in order to make the statements contained herein
or therein not materially misleading. There is no fact known to NCFC or the
Company (other than matters of a general economic nature) which materially
adversely affects the business, operations, property, assets or condition
(financial or otherwise) of NCFC or the Company which has not been disclosed
herein or in such other documents, certificates and statements furnished to the
Agent or any Lender for use in connection with the transactions contemplated
hereby.
SECTION 4. COVENANTS OF THE COMPANY. So long as the Commitments are
------------------------
in effect and thereafter so long as any Obligation shall remain unpaid, the
Company covenants that, unless the Lenders shall otherwise consent in writing,
it will perform all the covenants set forth in this Section 4.
4.01 Financial Statements and Other Reports. NCFC and the Company
--------------------------------------
will each maintain a system of accounting established and administered in
accordance with sound business practices such as to permit the preparation of
financial statements in accordance with GAAP and furnish or cause to be
furnished to each Lender:
(a) as soon as available and in any event within 30 days after
the end of each calendar month, a copy of the unaudited financial
statements of NCFC (on a consolidated and a consolidating basis) and the
Company as at the end of such month, consisting of at least a balance sheet
and the related statements of income, shareholders' equity and cash flow of
NCFC and the Company for such month and from the beginning of the then
current fiscal year of NCFC and the Company to the end of such month,
setting forth in each case in comparative form the figures for the
corresponding date or period of the previous fiscal year, all in reasonable
detail, and certified by the chief financial officer of NCFC as being
complete and correct in all material respects and fairly presenting NCFC's
and the Company's financial condition and results of operations, subject to
changes resulting from normal year-end adjustments;
-32-
(b) as soon as available and in any event within 90 days after
the end of each fiscal year, financial statements of NCFC (on a
consolidated and a consolidating basis) and the Company, consisting of at
least a balance sheet as at the end of such fiscal year and the related
statement of income, shareholders' equity and cash flow for such fiscal
year of NCFC and the Company, setting forth in each case in comparative
form the corresponding figures as of the end of and for the previous fiscal
year, all in reasonable detail, accompanied by a report thereon of the
accounting firm of KPMG Peat Marwick or other independent certified public
accountants selected by NCFC and reasonably satisfactory to the Agent,
which report shall be unqualified and shall state that such financial
statements present fairly the financial condition of NCFC and the Company
as at the date indicated and the results of their operations for the
periods indicated in conformity with GAAP applied on a basis consistent
with prior fiscal years (except as otherwise required by GAAP and stated
therein) and that the examination of such accountants in connection with
such consolidated financial statements has been made in accordance with
generally accepted auditing standards, accompanied by a letter from such
accounting firm addressed to the Lenders acknowledging that the Lenders are
extending credit in reliance on such statements and authorizing such
reliance, and also by any management letters to the Company or its board of
directors furnished by such accounting firm in connection with its audit of
the Company's consolidated financial statements;
(c) with the financial statements furnished pursuant to Section
4.01(a) for each calendar month:
(i) a certificate signed by the chief financial officer of
the Company and a certificate signed by the chief financial officer of
NCFC, each stating that to the best of the respective chief financial
officer's knowledge, after due inquiry, there exists no Event of
Default or Unmatured Event of Default, or, if such Event of Default or
Unmatured Event of Default exists, stating the nature thereof, the
period of existence thereof, and what action the Company or NCFC
proposes to take with respect thereto;
(ii) a properly completed Compliance/Borrowing Base
Certificate as of the end of such month;
(iii) a servicing/delinquency report showing with respect
to the Eligible Servicing Portfolio: the number of Mortgage Notes
(including Mortgage Notes backing Mortgage-backed Securities) included
therein, the total outstanding principal amount thereof,
-33-
Investor type, weighted average coupon, delinquency status and
foreclosure experience; and
(iv) such additional information concerning the Eligible
Servicing Portfolio and such selective detail by segments and
categories thereof as may from time to time be reasonably requested by
any Lender.
(d) within five days after the end of each (i) semi-monthly
period (for the purposes of this paragraph (d)), with respect to the Agent,
and (ii) month, with respect to all the Lenders, an inventory/pipeline
position report showing with respect to each Take-Out Commitment: the type,
Investor type, expiration date, price, interest rate and/or required yield,
the original amount or aggregate amount thereof and the portions thereof
that have been utilized and the portions thereof that remain available,
future contracts, hedged positions, repurchase agreements and profit and
loss, indicating the number of Mortgage Notes owned by the Company, the
aggregate principal balance thereof and the warehouse and pipeline balances
(for purposes of this clause(d), "inventory" means Mortgage Notes owned by
the Company which have been fully funded or with respect to which the
Company has paid the full purchase price and "pipeline" means the Mortgage
Notes (or applications for Mortgages) as to which the Company has made
either firm or floating price quotes to purchase or fund but which have not
been purchased or funded by the Company), together with copies of any new
Take-Out Commitments issued to or entered into by the Company during such
week or month, as the case may be;
(e) within five Business Days after any officer of the Company
has knowledge of their occurrence, notice of each of the following events:
(i) the commencement of any action, suit, proceeding or
arbitration against NCFC or any Subsidiary of NCFC, or any material
development in any action, suit, proceeding or arbitration pending or
threatened against NCFC or any such Subsidiary, (A)in which the
aggregate uninsured amount claimed is more than $250,000, (B)which
would, if decided in a manner adverse to NCFC or such Subsidiary,
constitute a Material Adverse Event or (C)which relates to this
Agreement or any document executed pursuant hereto or any transaction
financed or to be financed in whole or in part directly or indirectly
with the proceeds of the Loans made pursuant hereto;
-34-
(ii) any Event of Default or Unmatured Event of Default
and what actions, if any, the Company is taking or contemplates taking
in regard thereto;
(iii) any notice from any Investor that it intends to put
the Company on probation or that it will cease purchasing Mortgage
Loans from the Company or that it will cease permitting the Company to
service Mortgage Notes owned, sold or guaranteed by it;
(iv) the occurrence of any default (however denominated)
under, the termination of, or the receipt by the Company of a notice
of non-renewal of, any credit, gestation repurchase or other financing
facility of the Company or NCFC (A) with SBRC or any similar
counterparty reasonably satisfactory to the Agent or (B) under which
there is Indebtedness or other obligations in an amount in excess of
$100,000 outstanding; and
(v) notice of any other Material Adverse Event, including
any material adverse development which occurs in any litigation,
arbitration or governmental investigation or proceeding previously
disclosed by the Company to the Lenders;
(f) within ten Business Days following each issuance of Mortgage-
backed Securities by the Company, a copy of the due diligence report
prepared in connection with such issuance by KPMG Peat Marwick or other
independent certified public accountants selected by the Company and
reasonably satisfactory to the Agent;
(g) prior to the end of each fiscal year, final annual budgets,
forecasts and pro-forma cash flow projections developed by NCFC and the
Company for its next succeeding fiscal year;
(h) as soon as available and in any event within 30 days after
the end of each fiscal quarter of the Company, management reports
containing such information with respect to each Junior Securitization
Interest owned by the Company or an Affiliate of the Company, and the
related Company Securitization Transaction, as the Agent may request,
including, without limitation, information concerning reserve account
balances, cash receipts, prepayment and credit loss experience, REO
inventory status and loss projections, and relevant gain on sale
assumptions;
(i) as soon as available, copies of all financial statements,
reports and returns sent to NCFC's stockholders and copies of all regular,
-35-
periodic, or special reports which the Company or NCFC is or may be
required to file with any governmental department, bureau, commission or
agency;
(j) simultaneously with any request to the Agent to approve a new
Investor, notice of the identity of such Investor, and promptly upon the
request of any Lender, additional information concerning any such proposed
Investor; and
(k) from time to time, such other information regarding the
business, operations, affairs and financial condition of NCFC or the
Company as any Lender may reasonably request.
4.02 Corporate Existence. The Company and NCFC will each (a)
-------------------
maintain its corporate existence in good standing under the laws of the
jurisdiction of its incorporation and (b)its right to carry on its business and
operations in each jurisdiction in which the character of the properties owned
or leased by it or the business conducted by it makes such qualification
necessary and the failure to be in good standing would preclude NCFC or the
Company from enforcing its rights with respect to any material assets or expose
the Company or NCFC to any material liability.
4.03 Compliance with Laws, Taxes, etc. The Company and NCFC will each
--------------------------------
comply in all material respects with all applicable laws, rules, regulations and
orders (including without limitation Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System), the failure to be in compliance with
which would have a materially adverse effect on the financial condition of NCFC
or the Company, such compliance to include, without limitation, paying before
the same become delinquent all taxes, assessments and governmental charges
imposed upon it or upon its property except to the extent contested in good
faith by appropriate proceedings and for which any reserves required by GAAP
have been established. In the event the Company or NCFC fails to satisfy its
obligations under this Section 4.03 as to taxes, assessments and governmental
charges, the Lenders may but are not obligated to satisfy such obligations in
whole or in part and any payments made and expenses incurred in doing so shall
constitute Obligations, shall bear interest at the rate set forth in Section
2.02(a)(iv) from the date incurred and shall be paid or reimbursed by the
Company on demand.
4.04 ERISA. The Company and NCFC will each maintain, and cause each
-----
ERISA Affiliate to maintain, each Plan in compliance with all material
applicable requirements of ERISA and of the Code and with all applicable rulings
and regulations issued under the provisions of ERISA and of the Code and will
not and not permit any of the ERISA Affiliates to (a) engage in any transaction
in connection with which the Company or any of the ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax
-36-
imposed by Section4975 of the Code, in each case in an amount exceeding $10,000,
or (b)fail to make full payment when due of all amounts which, under the
provisions of any Plan, the Company, NCFC or any ERISA Affiliate is required to
pay as contributions thereto, or permit to exist any accumulated funding
deficiency (as such term is defined in Section 302 of ERISA and Section 412 of
the Code), whether or not waived with respect to any Plan in an aggregate amount
exceeding $10,000. The Company and NCFC will not permit, and will not allow any
ERISA Affiliate to permit, any event to occur or condition to exist which would
permit any Plan to terminate under any circumstances which would cause the Lien
provided for in Section 4068 of ERISA to attach to any assets of the Company,
NCFC or any Subsidiary of the Company; and the Company and NCFC will not permit,
as of the most recent valuation date for any Plan subject to Title IV of ERISA,
the present value (determined on the basis of reasonable assumptions employed by
the independent actuary for such Plan and previously furnished in writing to the
Lenders) of such Plan's projected benefit obligations to exceed the fair market
value of such Plan's assets. The Company and NCFC will not, and will not permit
any ERISA Affiliate to, become a party to any Multiemployer Plan.
4.05 Assets and Insurance. The Company and NCFC will each maintain in
--------------------
full force and effect (a)an adequate errors and omissions insurance policy,
(b)such other insurance coverage by financially sound and respectable insurers,
on all properties of a character usually insured by organizations engaged in the
same or similar business (including, without limitation, all real property
covered by Mortgages to the extent normally required by prudent mortgagees)
against loss or damage of a kind customarily insured against by such
organizations, (c)adequate public liability insurance against tort claims which
may be asserted against NCFC or the Company, and (d)a mortgage bankers blanket
bond insurance policy in at least the amount customarily maintained by
organizations engaged in the same or similar business and under similar
circumstances as NCFC and the Company.
4.06 Inspection, Visitation, etc. The Company and NCFC will each
---------------------------
permit any Person designated by any Lender in writing, at such Lender's expense,
to visit and inspect any of the properties, corporate books and financial
records of NCFC or the Company and discuss its affairs and finances with the
principal officers of NCFC or the Company and their independent public
accountants, all at such times as any such Lender shall reasonably request.
4.07 Further Assurances. The Company and NCFC will each take all such
------------------
further actions and execute all such further documents and instruments as the
Agent may at any time reasonably determine in its sole discretion to be
necessary or advisable to further carry out and consummate the transactions
contemplated by the Loan Documents and to perfect or protect the Liens granted
to the Agent for the benefit of the Lenders under any Loan Document.
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4.08 Indebtedness. The Company and NCFC will not, directly or
------------
indirectly, create, incur, assume, guarantee, or otherwise become or remain
directly or indirectly liable with respect to, any Indebtedness, except:
(a) the Obligations;
(b) current liabilities not more than 90 days overdue, unless
contested in good faith by appropriate proceedings and any reserves
required by GAAP have been established, incurred by NCFC or the
Company in the ordinary course of business otherwise than for money
borrowed;
(c) Indebtedness incurred to finance the purchase of equipment
and secured solely by Liens on such equipment, in an aggregate amount
not to exceed $7,500,000;
(d) Indebtedness incurred to finance Junior Securitization
Interests issued by the Company and which Indebtedness is secured only
by such Junior Securitization Interests, provided, such Indebtedness
--------
does not exceed 75% of the value of such Junior Securitization
Interests determined in accordance with GAAP;
(e) intercompany Indebtedness of NCFC to the Company in an
aggregate amount not to exceed $1,000,000;
(f) obligations under gestation repurchase agreements or similar
arrangements of the type described in Section 4.09(f); and
(g) obligations in respect of letters of credit issued by USBNA
for the account of the Company or NCFC with an aggregate face amount
not to exceed $1,250,000.
4.09 Liens. The Company and NCFC will not, directly or indirectly,
-----
create, incur, assume or permit to exist, any Lien with respect to any property
now owned or hereafter acquired by NCFC or the Company, or any income or profits
therefrom, except:
(a) the security interests granted to the Agent for the benefit
of the Lenders, FBS Business Finance Corp. (with respect to obligations
described in Section 4.08(c)) and USBNA (with respect to obligations
described in Section 4.08(g)) under the Loan Documents;
(b) Liens in connection with deposits or pledges to secure
payment of workers' compensation, unemployment insurance, old age
-38-
pensions or other social security obligations, in the ordinary course of
business of NCFC or the Company;
(c) Liens for taxes, fees, assessments and governmental charges
not delinquent or which are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established in
accordance with GAAP;
(d) encumbrances consisting of zoning regulations, easements,
rights of way, survey exceptions and other similar restrictions on the use
of real property and minor irregularities in title thereto which do not
materially impair their use in the operation of its business;
(e) Liens on equipment arising under any capitalized lease
obligation or other purchase money Liens on equipment acquired after the
Signing Date to secure Indebtedness permitted pursuant to Section 4.08(c);
(f) Liens incurred in connection with gestation repurchase
agreements or similar arrangements under which NCFC or its Subsidiaries are
required to repurchase Mortgage-backed Securities or Mortgage Loans from
any Lender or other counterparty reasonably satisfactory to the Agent;
provided, that such gestation repurchase agreements are entered into in the
ordinary course of business in contemplation of the subsequent non-recourse
sale of such Mortgage-backed Securities or Mortgage Loans;
(g) Liens on Junior Securitization Interests issued by the
Company and which Liens secure Indebtedness permitted by Section 4.08(d);
and
(h) Liens arising under Hedging Arrangements.
4.10 Investments. The Company and NCFC will not, directly or
-----------
indirectly, make or own any Investment, except Investments in:
(a) Marketable direct obligations issued or unconditionally
guaranteed by the United States Government or issued by any agency thereof
and backed by the full faith and credit of the United States, in each case
maturing within one year from the date of acquisition thereof.
(b) Marketable direct obligations issued by any state of the
United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date
of acquisition thereof and, at the time of acquisition, having the highest
rating
-39-
obtainable from either Standard & Poor's Ratings Group, a division of
McGraw Hill, Inc., or ▇▇▇▇▇'▇ Investors Service, Inc.
(c) Commercial paper maturing no more than one year from the date
of creation thereof and, at the time of acquisition, having the highest
rating obtainable from either Standard & Poor's Ratings Group, a division
of McGraw Hill, Inc., or ▇▇▇▇▇'▇ Investors Service, Inc.
(d) In the case of the Company, Mortgage Loans originated or
acquired by the Company in the ordinary course of the Company's business,
and in the case of NCFC, other consumer debt obligations originated or
acquired by NCFC in the ordinary course of NCFC's business.
(e) Certificates of deposits or bankers acceptances issued by any
of the Lenders or any other commercial bank organized under the laws of the
United States or any State thereof and having a combined capital and
surplus of at least $500,000,000, or by United States offices of foreign
banks having the highest rating obtainable from a nationally recognized
rating agency, in each case maturing within one year from the date of
acquisition thereof.
(f) Investments in mutual funds that invest substantially all of
their assets in Investments of the types described in subsections (a), (b),
(c) and (e) of this Section 4.10.
(g) The capital stock of any Subsidiary (subject to the
limitations set forth in Sections 4.12 and 4.17).
(h) In the case of the Company, loans to NCFC in an aggregate
amount not to exceed $1,000,000.
(i) In the case of the Company, to the extent no Event of Default
or Unmatured Event of Default has occurred and is continuing, or would
occur as a result thereof, the Company may make direct equity investments
in or loans to Persons in the mortgage origination business, in an
aggregate amount not to exceed $2,500,000.
(j) Investments made or to be made by the Company, in an amount
not to exceed $1,250,000 in the aggregate, and a guaranty made by NCFC,
pursuant to a Strategic Alliance Agreement by and among the Company,
Qualified Financial Services, Inc., a Colorado corporation, Qualified
Financial Services, Inc., a California corporation, ▇▇▇▇▇ ▇▇▇▇▇, an
individual, and ▇▇▇▇▇ V.V. Thais, an individual.
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(k) Investments arising under Hedging Arrangements.
4.11 Guarantees. The Company and NCFC will not, directly or
----------
indirectly, create or become or be liable with respect to any Guarantee, other
than the Guaranty, Guarantees by NCFC of Indebtedness of the Company secured by
liens described in Section 4.09(e), in an amount not to exceed $7,500,000, and
Guarantees by NCFC of the Company's obligations under (a) gestation repurchase
agreements or similar arrangements of the type described in Section 4.09(f), or
(b) the Strategic Alliance Agreement described in Section 4.10(i).
4.12 Restriction on Fundamental Changes. The Company and NCFC will
----------------------------------
not engage in any business activities or operations substantially different from
or unrelated to those in which the Company and NCFC were engaged on the Signing
Date, enter into any transaction of merger or consolidation, or liquidate, wind
up or dissolve itself (or suffer any liquidation or dissolution), or convey,
sell, lease, transfer or otherwise dispose of, in one transaction or a series of
transactions, any of its assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or substantially all the business or
property of, or stock or other evidence of beneficial ownership of, any Person,
except:
(a) the Company or NCFC may sell or otherwise dispose of property
in the ordinary course of business, provided such sales do not include all
or substantially all of the assets of NCFC or the Company; and
(b) NCFC and its Subsidiaries other than the Company may engage
in any business involving the origination, acquisition, servicing or sale
of consumer Indebtedness.
4.13 Restricted Payments. The Company and NCFC will not make any
-------------------
Restricted Payments.
4.14 Net Worth. The Company will at all times maintain Tangible Net
---------
Worth of not less than (a) the greater of (i) $40,000,000 or (ii)eighty-five
percent (85%) of the Tangible Net Worth at the end of its most recently
completed fiscal year (or, in the case of the Tangible Net Worth at the end of
any fiscal year, its prior fiscal year) plus (b) ninety percent (90%) of capital
----
contributions made during such fiscal year plus (c) fifty percent (50%) of
----
positive year-to-date net income. NCFC will at all times maintain Tangible Net
Worth of not less than (a) the greater of (i)$55,000,000 or (ii)eighty-five
percent (85%) of the Tangible Net Worth at the end of its most recently
completed fiscal year (or, in the case of the Tangible Net Worth at the end of
any fiscal year, its prior fiscal year) plus (b) ninety percent (90%) of capital
----
contributions made during such fiscal year plus (c) fifty percent (50%) of
----
positive year-to-date net income.
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4.15 Minimum Liquidity. The Company will not permit the sum of (a)
-----------------
Cash plus (b) the lesser of the Borrowing Base and the sum of the Commitment
----
Amounts minus, in either case, the outstanding principal balance of all Loans,
-----
as of the end of each month, to be less than $10,000,000.
4.16 Leverage Ratio. The Company will not permit the Leverage Ratio
--------------
to be greater than 8.0 to 1.0 as of the last day of each fiscal quarter of the
Company. NCFC will not permit the Daily Leverage Ratio to be greater than 10.0
to 1.0.
4.17 Subsidiaries. (a) The Company will not create or acquire any
------------
Subsidiaries, and (b) NCFC will not create or acquire any Subsidiaries other
than (i) the Company and (ii) Subsidiaries engaged solely in any business
involving the origination, acquisition, servicing and sale of consumer
obligations.
4.18 Affiliate Transactions. The Company and NCFC will not enter into
----------------------
any transaction with an Affiliate of the Company or NCFC, other than
transactions in the ordinary course of business on terms no less favorable to
the Company or NCFC than those that would be obtained in an arm's-length
transaction and the loans described in Section 4.08(e).
4.19 Escrow Imbalances. The Company will, no later than five (5)
-----------------
Business Days after learning (from any source) of any material imbalance in any
escrow account, fully and completely correct and eliminate such imbalance.
4.20 Inconsistent Agreements. The Company and NCFC will not, directly
-----------------------
or indirectly, enter into any agreement containing any provision which would be
violated or breached by any extension of credit to the Company hereunder or by
the performance by the Company or NCFC of their respective obligations hereunder
or under any other Loan Document.
4.21 Closing Procedures. The Company will provide closing
------------------
instructions to each Closing Agent (as defined in the Pledge and Security
Agreement) which (a) require, in connection with Mortgage Loans tablefunded by
the Company, that (i) the Mortgage Note evidencing each such Mortgage Loan shall
be endorsed to the Company, (ii) the assignment of the applicable Mortgage to
the Company shall be recorded simultaneously with but separate from the related
Mortgage and (iii) the Mortgage Note evidencing each such Mortgage Loan and
other related loan documents shall be delivered to the Company promptly upon the
closing of such Mortgage Loan, and (b) in the case of Mortgage Loans funded by a
wire transfer of funds from the Wet Funding Wire Clearing Account (as defined in
the Pledge and Security Agreement) in accordance with Section 4.01(b)(ii) of the
Pledge and Security Agreement, contain a statement substantially in the form set
forth in Exhibit H. The Company shall review for accuracy and completeness each
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Mortgage Note, Mortgage, assignment and other document evidencing or securing
each Mortgage Loan originated or purchased by the Company.
4.22 Underwriting. All Mortgage Loans pledged to the Agent, for the
------------
benefit of Lenders, pursuant to the Pledge and Security Agreement will conform
with, and will be assigned a Risk Rating in accordance with, the Underwriting
Guidelines. The Company shall not make any material change in the Underwriting
Guidelines and shall review the Underwriting Guidelines periodically to confirm
that they are being complied with in all material respects and are adequate to
meet the Company's business objectives.
4.23 Independence of Covenants. All covenants hereunder shall be
-------------------------
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of an Event of Default or Unmatured Event of Default if
such action is taken or condition exists.
SECTION 5. CONDITIONS PRECEDENT.
--------------------
5.01 Conditions Precedent to Effectiveness. The several obligations
-------------------------------------
of the Lenders to make the initial Warehousing Loans and the effectiveness of
this Agreement are subject to the satisfaction on or before the Effective Date
of each and every of the following conditions:
(a) The following documents, certificates and opinion, each in
form and substance satisfactory to the Lenders and their counsel, shall
have been delivered to the Agent:
(i) the Notes, duly executed by the Company;
(ii) the Pledge and Security Agreement, duly executed by
the Company, together with such financing statements and other
instruments required by the Agent to create and perfect the security
interests granted under the Pledge and Security Agreement;
(iii) the Servicing Security Agreement, duly executed by
the Company, together with such financing statements and other
instruments required by the Agent to create and perfect the security
interests granted under the Servicing Security Agreement;
(iv) the Guaranty, duly executed by NCFC;
-43-
(v) completed responses to requests for information or
other evidence satisfactory to the Agent that the financing statements
and other instruments delivered to the Agent pursuant to Sections
5.01(a)(ii) and (iii) have been filed in all appropriate filing
offices and that such filed financing statements perfect a first
priority security interest in favor of the Agent for the benefit of
the Lenders in the property described therein;
(vi) copies of the resolutions of the Boards of Directors
of the Company and NCFC, certified by the respective Secretary or
Assistant Secretary of each of them, authorizing the execution,
delivery and performance of each Loan Document to which it is or will
be a party and the other matters contemplated hereby;
(vii) a certificate signed by the Secretary or an Assistant
Secretary of each of the Company and NCFC certifying (A)as to the
names, incumbency and true signatures of the respective persons
authorized to execute and deliver each Loan Document to which it is or
will be a party and any other instrument or agreement hereunder and
under any other Loan Documents and (B)that the Agent and the Lenders
may conclusively rely on such certificate until the Agent shall have
received a further certification of its Secretary or an Assistant
Secretary canceling or amending such certificate and submitting the
names, incumbency and signatures of the officers named in such further
certificate;
(viii) copies of the Articles or Certificate of
Incorporation of each of the Company and NCFC with all amendments
thereto, certified by the appropriate governmental official of the
jurisdiction of their respective incorporation;
(ix) certificates of good standing for each of the Company
and NCFC in the jurisdiction of its incorporation and certificates of
good standing for the Company in each of the jurisdictions in which
the Company is required to be qualified to do business, certified by
the appropriate governmental officials as of a date not more than
forty-five days prior to the Closing Date;
(x) a certificate of the Secretary or an Assistant
Secretary of each of the Company and NCFC certifying to true and
correct copies of its respective bylaws, as amended to the Effective
Date;
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(xi) the favorable written opinions of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇,
counsel to the Company and NCFC, addressed to the Lenders, as to the
matters and effect set forth in Exhibit I; and
(xii) a certificate of the Secretary or Assistant Secretary
of the Company in the form set forth as Exhibit J.
(b) The requirements of Section 5.02 shall have been satisfied.
5.02 Conditions Precedent to all Loans. The obligation of each Lender
---------------------------------
to make each Loan (including the initial Loan) is subject to the satisfaction of
each and every of the following additional conditions:
(a) the Agent shall have received a timely and properly completed
notice under Section 2.01(c);
(b) there shall not have been any Regulatory Change after the
Signing Date which would render the transactions contemplated hereby
unlawful or which would impose a cost on or increase the cost to such
Lender for making or maintaining its Loans or which would reduce any amount
payable to such Lender under this Agreement or its Note or Notes;
(c) no Event of Default or Unmatured Event of Default shall
have occurred and be continuing or will exist upon making the requested
Loan;
(d) all the representations and warranties set forth in Section 3
of this Agreement, in Section 5 of the Pledge and Security Agreement, in
Section ___ of the Servicing Security Agreement and in Section 15 of the
Guaranty shall be true and correct in all material respects as though made
on and as of the applicable Borrowing Date;
(e) no material adverse change in, or development likely to have
a material adverse effect on, the business, operations, prospects, assets
or condition (financial or otherwise) of NCFC or the Company shall have
occurred and no occurrence or event which is likely to have a material
adverse effect on the rights and remedies of the Lenders or the ability of
NCFC or the Company to perform their respective obligations to the Lenders
shall have occurred; and
(f) the requested Loan is permitted under Section 2.01.
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SECTION 6. EVENTS OF DEFAULT; REMEDIES.
---------------------------
6.01 Events of Default. The occurrence of any one or more of the
-----------------
following events shall constitute an Event of Default:
(a) The Company shall fail to make when due, whether by
acceleration of maturity or otherwise, any payment of principal of any
Note, or shall fail to pay within five days after the same becomes due,
whether by acceleration of maturity or otherwise, any payment of interest
on any Note or any fee or other amount required to be paid to the Agent or
any Lender pursuant to this Agreement or any other Loan Document; or
(b) Any representation or warranty made or deemed made by the
Company in this Agreement or by the Company or NCFC in any other Loan
Documents or in any certificate, statement, report or document furnished to
the Agent or the Lenders pursuant to or in connection with any Loan
Document shall be untrue or misleading in any material respect on the date
as of which the facts set forth are stated or certified or deemed stated or
certified; or
(c) The Company shall fail to comply with any agreement,
covenant, condition, provision or term contained in the Pledge and Security
Agreement, the Servicing Security Agreement or in Section 4.02(a), 4.08,
4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.20, 4.21 or 4.22,
or shall fail to comply with any agreement, covenant, condition, provision
or term contained in Sections 4.02(b) or 4.04 and such failure shall not be
remedied within 10 calendar days after an executive officer of the Company
shall have become aware of such failure to comply; or
(d) The Company or NCFC shall fail to comply with any other
agreement, covenant, condition, provision or term contained in this
Agreement or any other Loan Document then in effect (other than those
hereinabove set forth in this Section 6.01) and such failure to comply is
not remedied within 30 calendar days after the earliest of (i) the date the
Agent has given the Company written notice of the occurrence thereof, (ii)
the date the Company gives notice of such failure to the Agent or (iii) the
date the Company should have given such notice of such failure to the Agent
pursuant to Section 4.01(e)(ii); or
(e) Any creditor or representative of any creditor of the
Company or NCFC shall become entitled to declare any Indebtedness in the
amount of $250,000 or more owing on any bond, debenture, note or other
evidence of Indebtedness for borrowed money to be due and payable prior to
its expressed maturity, whether or not such Indebtedness is actually
declared
-46-
to be immediately due and payable, or any such Indebtedness becomes due and
payable prior to its expressed maturity by reason of any default by the
Company or NCFC in the performance or observance of any obligation or
condition and such default shall not have been effectively waived or shall
not have been cured within any grace period allowed therefor or any such
Indebtedness shall have become due by its terms and shall not have been
promptly paid or extended; or
(f) The Company or NCFC shall become insolvent or shall
generally not or admit in writing its inability to pay its debts as they
mature or shall apply for, shall consent to, or shall acquiesce in the
appointment of a custodian, trustee or receiver of the Company or NCFC or
for a substantial part of the property thereof or, in the absence of such
application, consent or acquiescence, a custodian, trustee or receiver
shall be appointed for the Company or NCFC or for a substantial part of the
property thereof and shall not be discharged within 60 days, or the Company
or NCFC shall make an assignment for the benefit of creditors; or
(g) Any bankruptcy, reorganization, debt arrangement or other
proceeding under any bankruptcy or insolvency law shall be instituted by or
against the Company or NCFC, and, if instituted against the Company or
NCFC, shall have been consented to or acquiesced in by the Company or NCFC,
or shall remain undismissed for 60 days, or an order for relief shall have
been entered against the Company or NCFC; or
(h) Any dissolution or liquidation proceeding shall be
instituted by or against the Company or NCFC and, if instituted against the
Company or NCFC, shall be consented to or acquiesced in by the Company or
NCFC or such Subsidiary or shall remain for 60 days undismissed; or
(i) A judgment or judgments for the payment of money in excess
of the sum of $250,000 in the aggregate shall be rendered against the
Company or NCFC and either (i) the judgment creditor executes on such
judgment or (ii) such judgment remains unpaid or undischarged for more than
60 days from the date of entry thereof or such longer period during which
execution of such judgment shall be stayed during an appeal from such
judgment.
(j) Any execution or attachment shall be issued whereby any
substantial part of the property of the Company or NCFC shall be taken or
attempted to be taken and the same shall not have been vacated or stayed
within 30 days after the issuance thereof; or
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(k) The Pledge and Security Agreement, the Servicing Security
Agreement or the Guaranty shall, at any time, cease to be in full force and
effect or shall be judicially declared null and void, or the validity or
enforceability thereof shall be contested by the Company or NCFC, or the
Agent for the benefit of the Lenders shall cease to have a valid and
perfected security interest having the priority contemplated under the
Pledge and Security Agreement or the Servicing Security Agreement in any
part of the Collateral described therein, other than by action or inaction
of the Agent, unless the Company shall, within two Business Days after the
earlier of the date it receives notice thereof from the Agent or the date
an officer of the Company has knowledge thereof, repay the outstanding
Loans in an amount sufficient to reduce the aggregate outstanding principal
balance of the Loans to the aggregate Warehousing Collateral Value of the
Collateral; or
(l) A Change of Control shall occur.
6.02 Remedies. If (a)any Event of Default described in Section
--------
6.01(f), (g) or (h) shall occur, the Commitments shall automatically terminate
and the Obligations shall automatically become immediately due and payable, and
thereafter the Required Lenders may direct the Agent to attempt to enforce its
rights under any one or more of the Loan Documents; or (b)any other Event of
Default shall occur and be continuing, then, the Required Lenders may do any or
all of the following: (i)declare the Commitments terminated, whereupon the
Commitments shall be terminated, (ii)declare the Obligations to be forthwith due
and payable, whereupon the Obligations shall immediately become due and payable,
in each case without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived, anything in this Agreement or in any
other Loan Document to the contrary notwithstanding, and (iii)direct the Agent
to attempt to enforce its rights under any one or more of the Loan Documents.
SECTION 7. THE AGENT
---------
7.01 Appointment and Authorization. Each Lender appoints and
-----------------------------
authorizes the Agent to take such actions as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto. Neither the Agent nor any of its directors,
officers or employees shall be liable for any action taken or omitted to be
taken by it or them under or in connection with this Agreement or the other Loan
Documents, WHETHER OR NOT AMOUNTING TO SIMPLE NEGLIGENCE, except for its or
their own gross negligence or willful misconduct; provided, however, that the
Agent shall be protected in acting or refraining from acting upon the
instruction of the requisite Lenders under Section 8.05; and provided, further,
that the Agent shall not be required to take any action that exposes it to
personal liability or is contrary to
-48-
any Loan Document, other agreement or applicable law. The Agent shall act as an
independent contractor in performing its obligations as the Agent hereunder and
under the other Loan Documents and nothing herein contained shall be deemed to
create a fiduciary relationship among or between the Agent, the Company or the
Lenders.
7.02 Note Holders. The Agent may treat the payee of any Note as the
------------
holder thereof until written notice of transfer shall have been filed with it
signed by such payee.
7.03 Consultation With Counsel. The Agent may consult with legal
-------------------------
counsel selected by it and shall not be liable for any action taken or suffered
in good faith by it in accordance with the advice of such counsel.
7.04 Documents. The Agent shall not be under a duty to examine into
----------
or pass upon the validity, effectiveness, genuineness or value of the Notes, the
other Loan Documents or any other instrument or document furnished pursuant
thereto or thereunder. The Agent makes no representation or warranty to any
Lender, nor shall the Agent be responsible for any representations, warranties
or statements made in connection with this Agreement or any other Loan Document.
The Agent shall be entitled to assume that this Agreement and the other Loan
Documents are valid, effective and genuine and what they purport to be. The
Agent (i) shall execute and deliver the Pledge and Security Agreement in the
form of Exhibit D hereto, whereupon each provision thereof which is contemplated
to be binding upon the Lenders shall be binding upon the Lenders and each of
them; and (ii) shall not waive, amend or otherwise modify any provision of the
Pledge and Security Agreement without the written consent of the Lenders
required pursuant to Section 8.05.
7.05 Agent and Affiliates. With respect to its Commitments and the
--------------------
Loans made by it in its capacity as a Lender, the entity that is the Agent shall
have the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were not
the Agent, and the entity that is the Agent and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
the Company or any Subsidiary as if it were not the Agent.
7.06 Action by Agent. The Agent shall be entitled to use its
---------------
discretion with respect to exercising or refraining from exercising any rights
which may be vested in it by, or with respect to taking or refraining from
taking any action or actions which it may be able to take under or in respect
of, this Agreement and the other Loan Documents. The Agent shall incur no
liability under or in respect of this Agreement or any of the other Loan
Documents by acting upon any notice, consent, certificate, warranty or other
paper or instrument believed by it to be genuine or authentic or to be signed by
the proper party or parties, or with respect to anything
-49-
which it may do or refrain from doing in the reasonable exercise of its
judgment, or which may seem to it to be necessary or desirable in the premises.
The Agent may employ agents and attorneys-in-fact in carrying out its
responsibilities under the Loan Documents, and shall not be responsible for the
negligence or misconduct of any such agents or attorneys-in-fact as long as the
Agent was not grossly negligent in selecting or directing such agents or
attorneys-in-fact, EVEN IF SUCH SELECTION AMOUNTED TO SIMPLE NEGLIGENCE.
7.07 Credit Analysis. Each Lender has made, and shall continue to
---------------
make, its own independent investigation or evaluation of the operations,
business, property and condition, financial and otherwise, of the Company in
connection with its Commitments and Loans and has made its own appraisal of the
creditworthiness of the Company. Except as explicitly provided herein, the Agent
has no duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with respect to such
operations, business, property, condition or creditworthiness, whether such
information comes into its possession on or before the first Event of Default or
at any time thereafter.
7.08 Notices of Event of Default, etc. In the event that any Lender
---------------------------------
shall have acquired actual knowledge of any Event of Default or Unmatured Event
of Default, other than as a result of its receipt of financial statements
delivered to it pursuant to Section 4.01, such Lender shall promptly give notice
thereof to the Agent. The Agent shall, promptly upon receipt of any such notice
provide a copy thereof to the other Lenders. Upon receipt from any Lender of a
request that the Agent give notice to the Company of the occurrence of an Event
of Default or Unmatured Event of Default under Section6, the Agent shall
promptly forward such request to the other Lenders and will take such action and
assert such rights under this Agreement and the other Loan Documents as the
requisite Lenders under Section 8.05 shall direct in writing.
7.09 Indemnification. Each Lender agrees to indemnify the Agent (to
----------------
the extent not reimbursed by the Company), ratably according to its Pro Rata
Share (determined under clause (e) of the definition thereof), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of this Agreement or the other Loan Documents
or any action taken or omitted by the Agent under this Agreement or the other
Loan Documents, WHETHER OR NOT THE AGENT'S SIMPLE NEGLIGENCE CAUSES THE SAME IN
WHOLE OR IN PART; provided that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Agent promptly upon demand for its Pro Rata Share
(determined under clause(l) of the
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definition thereof) of any out-of-pocket expenses (including counsel fees)
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement and the other Loan Documents,
to the extent that the Agent is not reimbursed for such expenses by the Company,
WHETHER OR NOT SUCH OUT-OF-POCKET EXPENSES RESULTED, IN WHOLE OR IN PART, FROM
THE AGENT'S SIMPLE NEGLIGENCE; provided, that no Lender shall be liable for any
portion of any such expenses resulting from the Agent's gross negligence or
willful misconduct.
7.10 Payments. All payments of principal of the Notes and all other
---------
funds received by the Agent in respect of any payments made by the Company
pursuant to this Agreement, the Notes or the other Loan Documents, other than
payments under Sections 2.05 and 2.06, and subject to the effect of Section
7.11, shall be distributed forthwith by the Agent (in like currency and funds)
to the Lenders on the date received or deemed received pursuant to Section
2.03(a), in accordance with Sections2.02(b) in the case of payments of interest
and Balances Deficiency Fees, and ratably according to each Lender's Pro Rata
Share in the case of any other payment received by the Agent. If the Agent does
not make any such distribution (or provide Federal Reserve Bank reference
numbers for the wire transfer of the amount thereof) on the date any such
payment is received or deemed received pursuant to Section 2.03(a), the Agent
will pay interest to each Lender entitled to receive a portion of such
distribution on the amount distributable to it at the Federal Funds Effective
Rate from such date until the date such distribution is made, such interest to
be payable with such distribution. Notwithstanding any of the foregoing or any
other provision of this Agreement, upon and after the occurrence of an Event of
Default or Unmatured Event of Default, (a) all proceeds received by the Agent
from the sale or other disposition of the Collateral shall be applied in
accordance with Section 17 of the Pledge and Security Agreement or Section ___
of the Servicing Security Agreement, as applicable, and (b) all payments made by
the Guarantor to the Agent under the Guaranty shall be applied in the same order
of priority as is set forth in Section 17 of the Pledge and Security Agreement.
7.11 Sharing of Payments. Other than as provided in Section 7.10, if
-------------------
any Lender shall receive and retain any payment during the continuance of an
Event of Default or Unmatured Event of Default, whether by setoff, application
of deposit balance or security, or otherwise, in respect of the Obligations in
excess of such Lender's Pro Rata Share of all payments of the Obligations, then
such Lender shall purchase from the other Lenders for cash and at face value and
without recourse, such participation in the Obligations held by them as shall be
necessary to cause such excess payment to be shared ratably as aforesaid with
each of them; provided, that if such excess payment or part thereof is
thereafter recovered from such purchasing Lender, the related purchases from the
other Lenders shall be rescinded ratably and the purchase price restored as to
the portion of such excess payment so recovered, but
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without interest. Each Lender agrees to exercise any and all rights of setoff,
counterclaim or bankers' lien first fully against the Obligations, and only then
to any other indebtedness of the Company to such Lender.
7.12 Successor Agent. The Agent may resign at any time by giving ten
---------------
days written notice thereof to the Lenders and the Company. The Required Lenders
may remove the Agent at any time with or without cause by notifying the Agent
and the Company in writing. In addition, the Lenders with an aggregate Pro Rata
Share (determined under clause (a) of the definition thereof) of 66 2/3% may at
any time, if such Lenders determine, in the reasonable exercise of their
judgment, that the Agent is not handling the Collateral in accordance with
accepted industry practices, appoint a custodian to perform the Agent's
responsibilities under the Pledge and Security Agreement and, with respect to
the Collateral and the determination of the Borrowing Base, hereunder. Upon any
such resignation or removal, the Required Lenders or, in the case of a removal
pursuant to the preceding sentence, the removing Lenders shall have the right to
appoint a successor Agent, which successor Agent shall (unless an Event of
Default has then occurred and is continuing) be reasonably acceptable to the
Company. Upon any determination by the Lenders under the second preceding
sentence to appoint a custodian, the Lenders making such determination shall
have the right to appoint a custodian, which custodian shall (unless an Event of
Default has then occurred and is continuing) be reasonably acceptable to the
Company. If no successor Agent shall have been so appointed and shall have
accepted such appointment within 30 days after the retiring Agent's giving of
notice of its resignation or the removal of the Agent, then the retiring Agent
may, on behalf of the Lenders, appoint an Agent or custodian which shall be a
Lender or a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $100,000,000 and which shall be reasonably acceptable to the Company
(unless an Event of Default has occurred and is continuing). Any such
resignation or removal shall be effective upon the appointment of a successor
Agent. Upon the acceptance of any appointment as the 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 the retiring Agent shall be discharged from its duties and obligations,
under this Agreement and the other Loan Documents. After any retiring Agent's
resignation or removal hereunder as the Agent, the provisions of this Section7
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was acting as the Agent under this Agreement and any other Loan
Document.
7.13 Inspection. The Lenders and their agents, accountants, attorneys
----------
and auditors will be permitted during normal business hours at any time and from
time to time upon reasonable notice to examine (to the extent permitted by
applicable law) the files, documents, records and other papers in the possession
or under the control of the Agent relating to any or all Collateral and to make
copies thereof. Any
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such examination will be at the cost and expense of the Lender conducting such
examination.
7.14 Notice of New Investors. The Agent shall use reasonable efforts
-----------------------
to provide prompt notice to each Lender (which notice may be telephonic) of its
approval of any new Investor after May 29, 1998; provided, however, that the
-------- -------
Agent shall have no liability to any Lender or other Person for its failure to
provide the notice described in this Section 7.14.
SECTION 8. MISCELLANEOUS.
-------------
8.01 Waiver. No failure on the part of the Agent or the Lenders to
------
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement or any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege under this Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The remedies provided herein and in the other Loan
Documents are cumulative and not exclusive of any remedies provided by law.
8.02 Notices. Except as otherwise specifically provided for herein,
-------
all notices and other communications provided for herein shall be in writing
(including teletransmission communication) and, unless otherwise required herein
or by law, shall be teletransmitted, mailed or 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 notice to the other parties in accordance with this Section
8.02. All notices and other communications hereunder shall be effective when
transmitted by telex or telecopier, delivered or, in the case of a mailed notice
or notice sent by overnight courier, upon receipt thereof as conclusively
evidenced by the signed receipt therefor, in each case given or addressed as
aforesaid except that notices to the Agent under the provisions of Section 2
shall not be effective until received by the Agent.
8.03 Expenses; Indemnification. The Company agrees to pay on demand:
-------------------------
(a)the reasonable fees and expenses of Dorsey& Whitney LLP, special counsel to
the Agent in connection with the negotiation, preparation, approval, execution
and delivery of the Loan Documents, (b) the reasonable fees and expenses of
counsel for the Agent in connection with any amendment, modification or waiver
of any of the terms of any Loan Document and (c)all reasonable costs and
expenses of the Agent and each Lender (including reasonable counsel's fees) in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise) of this Agreement, the Notes and the other Loan Documents. The
Company hereby agrees to indemnify the Lenders and their directors, officers,
agents and employees from and hold each of them harmless against any and all
losses, liabilities, claims,
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damages or expenses incurred by any of them arising out of or by reason of any
investigation, litigation or other proceedings related to any use made or
proposed to be made by the Company of the proceeds of the Loans or the operation
of the Company's business, including, without limitation, the reasonable fees
and disbursements of counsel incurred in connection with any such investigation,
litigation or other proceedings, WHETHER OR NOT SUCH OUT-OF-POCKET EXPENSES
RESULTED, IN WHOLE OR IN PART, FROM THE AGENT'S OR ANY LENDER'S SIMPLE
NEGLIGENCE (but excluding, for all purposes under this Section 8.03, any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified).
8.04 Confidentiality. The Agent and each Lender shall use reasonable
---------------
efforts to assure that information about the Company, NCFC and their respective
operations, affairs and financial condition, not generally disclosed to the
public or to trade and other creditors, which is furnished to the Agent or such
Lender, as the case may be, pursuant to the provisions hereof is used only for
the purposes of this Agreement and any other relationship between the Lenders
and the Company and NCFC and shall not be divulged to any Person other than the
Agent, the Lenders, their respective Affiliates and their respective officers,
directors, employees and agents, except: (a) to their attorneys and accountants,
(b) in connection with the enforcement of the rights of the Agent and the
Lenders hereunder and under the other Loan Documents or otherwise in connection
with applicable litigation, (c) in connection with assignments and
participations and the solicitation of prospective assignees and participants
referred to in the immediately preceding Section, and (d) as may otherwise be
required or requested by any regulatory authority having jurisdiction over the
Agent or any Lender or by any applicable law, rule, regulation or judicial
process, the opinion of the applicable Lender's counsel concerning the making of
such disclosure to be binding on the parties hereto. Neither the Agent nor any
Lender shall incur any liability to the Company or NCFC by reason of any
disclosure permitted by this Section 8.04.
8.05 Releases, Amendments, Waivers, Consents and Exercise of Remedies.
----------------------------------------------------------------
Except as otherwise provided in this Section 8.05, any provision of this
Agreement or any other Loan Document may be amended or modified only by an
instrument or instruments in writing signed by the Required Lenders and the
Company. Any amendment, waiver or consent reducing any principal of, or the
amount of or rate of interest on or fees with respect to the Loans or the
Commitments, postponing any date fixed for the payment of any principal of,
interest on or fees with respect to the Loans or Commitments, extending the
Termination Date, releasing or subordinating any of the Collateral (except as
provided in the Pledge and Security Agreement or the Servicing Security
Agreement, as applicable), releasing the Guaranty, amending the definition of
"Pro Rata Share," "Required Lenders," "Borrowing Base" or "Warehousing
Collateral Value," or amending Section 2.01, this Section 8.05 or any other
provision hereof specifically requiring the consent or
-54-
approval or satisfaction of all of the Lenders, may only be made by an
instrument or instruments in writing signed by all of the Lenders and the
Company. In addition to the foregoing requirements, (A) no amendment, waiver or
consent shall, unless in writing and signed by the Agent in addition to the
requisite Lenders indicated above to take such action, affect the rights or
duties of the Agent under this Agreement or any Loan Document, and (B) no
amendment may increase any Lender's Commitment unless it is in writing and
signed by such Lender. No waiver of any provision of this Agreement or any other
Loan Document or consent to any departure by the Company therefrom shall in any
event be effective unless the same shall be in writing and signed or consented
to in writing by the requisite Lenders indicated above and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
8.06 Binding Effect; Assignments and Participations; Transferees; New
----------------------------------------------------------------
Lenders; Commitment Increases. (a) This Agreement shall be binding upon and
-----------------------------
inure to the benefit of the parties hereto and their respective successors and
assigns, except that the Company may not assign its rights or obligations
hereunder, under the Notes or under any other Loan Document without the prior
written consent of all of the Lenders. Each Lender may (i) grant participations
in any portion of its Note and its Commitment; and (ii) with the prior written
consent of the Agent (except in the case of an assignment by any Lender to an
Affiliate of such Lender or to another Lender), which consent shall not be
unreasonably withheld, sell, assign, transfer or otherwise dispose of any
portion of its Commitment (with a proportionate share of its outstanding Loans)
or, if its Commitment has terminated, its outstanding Loans (each such grant of
a participation or interest so sold, assigned, transferred or disposed of being
herein called a "Transferred Interest") to (y)banks chartered under the laws of
the United States or any State thereof or (z)insurance companies, other lenders
or mutual funds ("Transferees"). Upon any assignment and delegation as
contemplated in clause (ii) of the preceding sentence, (A) the Agent shall
revise Schedule 1.01(b) to reflect such assignment and delegation and distribute
such revised Schedule 1.01(b) to the Company and the Lenders, (B) the Company
shall, at the request of either the assignor or assignee Lenders, execute and
deliver new Notes to the assignor Lender (if it retains a Commitment following
such assignment) and the assignee Lender, in the principal amount of their
respective Commitments, and (C) the assignor Lender shall pay to the Agent an
assignment fee in the amount of $2,500. In addition, each Lender may pledge any
portion of its Note for security purposes to any Federal Reserve Bank. If a
Lender makes any assignment to a Transferee, then such Transferee, to the extent
of such assignment (unless otherwise provided therein), shall become a "Lender"
hereunder and shall have all the rights and obligations of the Lenders
hereunder, and the transferring Lender shall be released from its duties and
obligations under this Agreement to the extent of such assignment. Without in
any way limiting the rights of Transferees hereunder, the Company agrees that
each Transferee shall be entitled to the benefits of Sections 2.05 and 2.06 to
the extent of its Transferred Interest as if it were a "Lender" holding a
Commitment in an amount equal to such Transferred
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Interest, and that each Transferee may exercise any and all rights of banker's
lien, setoff and counterclaim available pursuant to law with respect to its
Transferred Interest as fully as if such Transferee were a direct lender to the
Company. Notwithstanding the sale by a Lender of any participation hereunder,
(i)no participant shall be deemed to be or have the rights and obligations of a
Lender hereunder except as provided in the preceding sentence and (ii)no Lender
shall, in connection with selling any such participation, condition such
Lender's rights in connection with consenting to amendments or granting waivers
concerning any matter under any Loan Document upon obtaining the consent of such
participant other than on matters relating to (A)any reduction in the amount of
any principal of, or the amount of or rate of interest on, any Note or Loan in
which such participation is sold, (B)any postponement of the date fixed for any
payment of principal of or interest on any Note or Loan, or the termination of
any Commitment, in which such participation is sold, or (C)the release or
subordination of any material portion of any collateral other than pursuant to
the terms of any Loan Document.
(b) From time to time, the Company may agree, with the prior written
consent of the Agent, to (i) permit a Lender to increase its Commitment Amount,
or (ii) add a bank chartered under the laws of the United States or any State
thereof, an insurance company, another lender or a mutual fund (a "New Bank") as
a "Lender" under this Agreement with a Commitment, for the purpose of increasing
the aggregate amount of the Commitments; provided that upon giving effect to any
--------
such new Commitment, the Commitment Amount of the New Bank shall not be less
than $10,000,000; and provided, further, that the aggregate Commitment Amounts,
-------- -------
after giving effect to any such increase, shall not exceed $400,000,000. The
Company and each Lender increasing its Commitment Amount or New Bank shall agree
on the date as of which the increased Commitment Amount or the New Bank's
Commitment Amount shall become effective, and each New Bank shall execute and
deliver an instrument in the form prescribed by the Agent to evidence its
agreement to be bound by this Agreement and the other Loan Documents. Upon the
effective date of an increase in any Lender's Commitment Amount or inclusion of
a New Bank as a lender under this Agreement, the Agent shall deliver to the
Company and each of the Lenders a revised Schedule 1.01(b) reflecting the
revised aggregate Commitment Amounts and the Company shall execute and deliver
to the Lender increasing its Commitment Amount or the New Bank a Note.
8.07 Governing Law and Construction. THE VALIDITY, CONSTRUCTION AND
------------------------------
ENFORCEABILITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO
CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE
UNITED STATES APPLICABLE TO NATIONAL BANKS. Whenever possible, each provision
of this Agreement and the other Loan Documents and any other statement,
instrument or transaction contemplated hereby or thereby or relating hereto or
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thereto shall be interpreted in such manner as to be effective and valid under
such applicable law, but, if any provision of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto shall be held to be prohibited or
invalid under such applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto.
8.08 Consent to Jurisdiction. AT THE OPTION OF THE AGENT, THIS
-----------------------
AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE ENFORCED IN ANY FEDERAL COURT OR
MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE COMPANY
CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT
THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE COMPANY COMMENCES
ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY
ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT,
THE AGENT AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF
THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
8.09 Waiver of Jury Trial. THE COMPANY, THE AGENT AND EACH LENDER
--------------------
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
8.10 Survival of Agreement. All representations, warranties,
---------------------
covenants and agreement made by the Company or NCFC herein or in the other Loan
Documents and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be deemed to have been relied upon by the Lenders and shall survive the making
of the Loans by the Lenders and the execution and delivery to the Agent by the
Company and NCFC of the Loan Documents, regardless of any investigation made by
or on behalf of the Lenders, and shall continue in full force and effect as long
as any Obligation is outstanding and unpaid and so long as the Commitments have
not been terminated; provided, however, that the obligations of the Company
under Sections 2.05, 2.06 and 8.03 shall survive payment in full of the
Obligations and the termination of the Commitments.
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8.11 Captions. The captions or headings herein and any table of
--------
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.
8.12 Entire Agreement. This Agreement and the other Loan Documents
----------------
embody the entire agreement and understanding between the Company, the Agent and
the Lenders with respect to the subject matter hereof and thereof. This
Agreement supersedes all prior agreements and understandings relating to the
subject matter hereof. Nothing contained in this Agreement or in any other Loan
Document, expressed or implied, is intended to confer upon any Persons other
than the parties hereto any rights, remedies, obligations or liabilities
hereunder or thereunder.
8.13 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.
8.14 Company Acknowledgements. The Company hereby acknowledges that
------------------------
(a) it has been advised by counsel in the negotiation, execution and delivery of
this Agreement and the other Loan Documents, (b) neither the Agent nor any
Lender has any fiduciary relationship to the Company, the relationship being
solely that of debtor and creditor, (c) no joint venture exists between the
Company, the Agent or any Lender, and (d) neither the Agent nor any Lender
undertakes any responsibility to the Company to review or inform the Company of
any matter in connection with any phase of the business or operations of the
Company and the Company shall rely entirely upon its own judgment with respect
to its business, and any review, inspection or supervision of, or information
supplied to, the Company by the Lenders is for the protection of the Lenders and
neither the Company nor any third party is entitled to rely thereon.
8.15 Letter of Credit. On the Effective Date, the "Letter of Credit"
----------------
outstanding under the Existing Credit Agreement shall remain outstanding, but
shall no longer be governed by the terms of the Existing Credit Agreement and
shall not be governed by the terms of this Agreement. All of the obligations of
the Lenders (other than USBNA) with respect to such Letter of Credit under the
Existing Credit Agreement shall terminate on the Effective Date. The Company
shall remain obligated to reimburse USBNA for any amount drawn under such Letter
of Credit in accordance with the terms of the Application for Letter of Credit
and Reimbursement Agreement executed by the Company prior to the issuance of
such Letter of Credit, as the same may have been or may hereafter be amended,
supplemented or otherwise modified in connection with any extension or other
amendment to such Letter of Credit.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
NEW CENTURY MORTGAGE CORPORATION
By /s/ SIGNATURE ILLEGIBLE ^^
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Its CFO
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Address for Notices:
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▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
U.S. BANK NATIONAL ASSOCIATION
By /S/ SIGNATURE ILLEGIBLE ^^
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Its Vice President
-------------------------
Address for Notices:
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Mortgage Banking Services Division
Mail Station MPFP 0508
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number: (612) 973-0826S-66
S-1
GUARANTY FEDERAL BANK, F.S.B.
By /s/ W ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Its Vice President
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Address for Notices:
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▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
COMERICA BANK
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Its Assistance Vice President
-------------------------
Address for Notices:
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▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
FIRST UNION NATIONAL BANK
By /s/ SIGNATURE ILLEGIBLE ^^
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Its SVP
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Address for Notices:
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▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
S-2
RESIDENTIAL FUNDING CORPORATION
By /s/ SIGNATURE ILLEGIBLE ^^
-----------------------------
Its Director
-------------------------
Address for Notices:
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Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
BANK ONE, TEXAS, N.A.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Its Vice President
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Address for Notices:
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Attention: ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
THE BANK OF NEW YORK
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Its Vice President
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Address for Notices:
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
THE FIRST NATIONAL BANK
OF CHICAGO
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Its First Vice President
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Address for Notices:
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One First ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
NATIONSBANK OF TEXAS, N.A.
By /s/ ▇▇▇ ▇. ▇▇▇▇▇▇
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Its Senior Vice President
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Address for Notices:
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NationsBank Plaza
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Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
FLEET BANK, NATIONAL ASSOCIATION
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
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Its Senior Vice President
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Address for Notices:
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1185 Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
S-4
EXHIBITS
A Form of Compliance/Borrowing Base Certificate
B Form of Confirmation of Borrowing/Paydown/Conversion
C Guaranty
D Pledge And Security Agreement
E Formula for Determining Warehousing Collateral Value
F Form of Note
G Servicing Security Agreement
H Closing Agent Instructions
I Matters to be Covered by Opinion of Counsel to the Company and NCFC
at closing
J Operational Certificate
EXHIBIT E TO
THIRD AMENDED
AND RESTATED CREDIT AGREEMENT
FORMULA FOR DETERMINING
WAREHOUSING COLLATERAL VALUE
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"Warehousing Collateral Value": at the time of any determination as it
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pertains to the following described types or kinds of assets which constitute
Warehousing Collateral:
(1) A Mortgage Loan the entire interest in which is owned by the
Company and which is an Eligible Mortgage Loan covering a completed residential
property, provided that such Mortgage Loan has been pre-approved for purchase
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under a Take-Out Commitment and the aggregate available amount of such Take-Out
Commitment is not less than the aggregate outstanding principal amount of
Mortgage Loans pre-approved for delivery thereunder, and provided that at the
time such Mortgage Loan was pledged under the Pledge and Security Agreement not
more than 180 days had elapsed from the date such Mortgage Loan was closed: the
least of: (i) ninety-seven percent (97%) of the purchase price under the Take-
Out Commitment to which such Mortgage Loan has been assigned or, if such
Mortgage Loan has not been so assigned, the weighted average purchase price for
Mortgage Loans under Take-Out Commitments under which such Mortgage Loan has
been pre-approved for delivery, (ii) the unpaid principal amount of such
Mortgage Loan, (iii) the Acquisition Cost of such Mortgage Loan, or (iv) at the
election of the Agent, ninety-seven percent (97%) of the Fair Market Value of
such Mortgage Loan.
(2) All Eligible Servicing Receivables owned by the Company: eighty
percent (80%) of the sum of the amount of all Eligible Servicing Receivables.
(3) Such other assets of the Company as the Company shall offer to
the Required Lenders and as the Required Lenders shall accept in their sole
discretion as Warehousing Collateral: the amount of Warehousing Collateral Value
which the Required Lenders in their sole discretion assign thereto.
Notwithstanding the foregoing:
(i) the maximum aggregate Warehousing Collateral Value of all
Mortgage Loans which have been closed and funded under Agreements to Pledge, and
with respect to which the Agent has not received the instruments and documents
described in paragraph 2 of the related Collateral Identification Letters, shall
be not more than (a) during each Month-End Period, forty percent (40%) of the
aggregate Commitment Amounts and (b) at all other times, twenty-five percent
(25%) of the aggregate Commitment Amounts;
(ii) the maximum aggregate Warehousing Collateral Value of Mortgage
Loans with original principal balances in excess of $227,150 shall not exceed
thirty-five percent (35%) of the aggregate Commitment Amounts;
(iii) the maximum aggregate Warehousing Collateral Value of Mortgage
Loans with original principal balances of $500,000 or greater but less than
$750,000 shall not exceed twenty percent (20%) of the aggregate Commitment
Amounts;
(iv) the maximum aggregate Warehousing Collateral Value of Mortgage
Loans with original principal balances of $750,000 or greater shall not exceed
ten percent (10%) of the aggregate Commitment Amounts;
(v) the maximum aggregate Warehousing Collateral Value of a single
Mortgage Loan shall not exceed $1,000,000;
(vi) the maximum aggregate Warehousing Collateral Value of all
Mortgage Loans with a Risk Rating of C- or C shall not exceed thirty-five
percent (35%) of the aggregate Commitment Amounts;
(vii) the maximum aggregate Warehousing Collateral Value of all
Mortgage Loans with a Risk Rating of C- shall not exceed fifteen percent (15%)
of the aggregate Commitment Amounts;
(viii) the maximum aggregate Warehousing Collateral Value of all
Mortgage Loans secured by Second Mortgages shall not exceed ten percent (10%) of
the aggregate Commitment Amounts;
(ix) the maximum aggregate Warehousing Collateral Value of all
Mortgage Loans secured by Second Mortgages which have a Loan-to-Value Ratio of
greater than 100% shall not exceed five percent (5%) of the aggregate Commitment
Amounts;
(x) the maximum aggregate Warehousing Collateral Value of all
Eligible Servicing Receivables shall not exceed five percent (5%) of the
aggregate Commitment Amounts; and
(xi) the portion of the Warehousing Collateral Value of all Eligible
Servicing Receivables consisting of Foreclosure Advance Receivables shall not
exceed two and one-half percent (2 1/2%) of the aggregate Commitment Amounts.
A Mortgage Loan, or Mortgage-backed Security issued in consideration
of a Mortgage Loan, will be considered as having no Warehousing Collateral Value
if, as to any such Mortgage Loan, any of the following events occur:
E-2
(a) more than 90 days elapse from the date on which the Mortgage Note
and other documents relating to such Mortgage Loan were delivered to the Agent
in accordance with Sections 4.01 and 4.02 of the Pledge and Security Agreement;
(b) 21 or more days elapse from the date a document relating to such
Mortgage Loan was delivered to the Company for correction in accordance with
Section 10.01 of the Pledge and Security Agreement and such document has not
been returned to the Agent;
(c) 45 or more days elapse from the date such Mortgage Loan was
delivered to an Investor pursuant to Section 10.02 of the Pledge and Security
Agreement for examination and purchase under a Take-Out Commitment and such
Mortgage Loan has not been returned to the Agent;
(d) more than one payment on such Mortgage Loan is delinquent, as
reported on any Compliance/Borrowing Base Certificate delivered to each Lender
pursuant to Section 4.01(c)(ii) of the Credit Agreement, such Mortgage Loan has
been rescinded, canceled or avoided, or such Mortgage Loan is subject to any
rights of rescission, cancellation or avoidance or to any counterclaims, offsets
or defenses, whether by operation of law or otherwise;
(e) the Company fails to deliver any document relating to such
Mortgage Loan within five Business Days after being requested to do so by the
Agent pursuant to Section 4.03 of the Pledge and Security Agreement;
(f) such Mortgage Loan was listed on a Loan Detail Listing delivered
to the Agent with an Agreement to Pledge and a Collateral Identification Letter,
and such Mortgage Loan shall not have closed on or before the close of business
on the Business Day on which such Loan Detail Listing was delivered;
(g) such Mortgage Loan was closed and funded with the proceeds of a
Warehousing Loan under an Agreement to Pledge and the Company fails to deliver
to the Agent, with respect to such Mortgage Loan, within seven Business Days
after the date of such Agreement to Pledge, the documents referred to in Section
4.02 of the Pledge and Security Agreement;
(h) the Agent, for the benefit of the Lenders, does not have a
perfected, first priority security interest in such Mortgage Loan;
(i) the Agent notifies the Company that in its reasonable opinion
such Mortgage Loan is not marketable and will not be given Warehousing
Collateral Value;
E-3
(j) such Mortgage Loan has a Risk Rating lower than C-; or
(k) such Mortgage Loan was closed and funded more than ninety (90)
days prior to the date the Mortgage Note and other documents relating to such
Mortgage Loan were delivered to the Agent in accordance with Section 4.02 of the
Pledge and Security Agreement.
An Eligible Servicing Receivable shall cease to have Warehousing
Collateral Value if:
(i) such receivable is not paid (A) in the case of a Pool P&I
Payment Receivable, on or before the first Business Day of the first P&I Cleanup
Period beginning after the date the related Pool P&I Payment was made, (B) in
the case of a T&I Receivable, one hundred eighty (180) days after the date of
the related T&I Payment, and (C) in the case of a Foreclosure Advance
Receivable, two hundred seventy (270) days after the date foreclosure or
bankruptcy proceedings with respect to the related Mortgage Loan commenced;
(ii) such receivable is disputed by any Person, or the Company
obtains knowledge of any grounds for any such dispute;
(iii) the Servicing Contract under which such receivable arose
terminates, or any party under such Servicing Contract asserts a right to
terminate such Servicing Contract, for any reason;
(iv) the Company fails to comply with any of the requirements of the
Credit Agreement or the Servicing Security Agreement with respect thereto; or
(v) the Agent, for the benefit of the Lenders, does not have a
perfected, first priority security interest in such receivable or the related
Servicing Contract.
As used in the foregoing definition of Warehousing Collateral Value
and all defined terms used therein and in the following defined terms, all terms
defined in the Credit Agreement are used as therein defined and, in addition,
the following terms shall have the following respective meanings:
"Acquisition Cost": means, with respect to any Mortgage Loan, the cash
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purchase price paid by the Company to any unaffiliated Person to acquire such
Mortgage Loan.
"Agreement to Pledge": as defined in the Pledge and Security
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Agreement.
E-4
"Appraised Value": with respect to an interest in real estate, the
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then current fair market value thereof as of a recent date, as determined in
accordance with accepted methods of appraising by a qualified appraiser who is a
member of the American Institute of Real Estate Appraisers or other group of
professional appraisers.
"Approved Second Mortgage Investor": an Investor that has been
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approved in writing by Agent for the purchase of Mortgage Loans secured by
Second Mortgages.
"Collateral Identification Letter": as defined in the Pledge and
--------------------------------
Security Agreement.
"Eligible Mortgage Loan": a closed-end Mortgage Loan secured by a
----------------------
First Mortgage or a Second Mortgage on improved real estate in an original
principal amount not in excess of (a) in the case of Mortgage Loans secured by
First Mortgages, 80% of the Appraised Value of such real estate, and (b) in the
case of Mortgage Loans secured by Second Mortgages, 80% of the Appraised Value
of such real estate minus the amount of the Mortgage Loan secured by the First
Mortgage thereon, unless either (i) the amount of such Mortgage Loan in excess
of the maximum set forth above is insured, or is subject to a commitment to be
insured, by an insurer approved by the Agent, or (ii) such Mortgage Loan (A)
satisfies the underwriting guidelines or other applicable standards of the
Investor referenced in clause (C) below for a Risk Rating of at least "C-", (B)
has a Loan-to-Value Ratio of not more than 100%, in the case of a Mortgage Loan
secured by a First Mortgage, or 125% in the case of a Mortgage Loan secured by a
Second Mortgage, (C) has been pre-approved by an Approved Second Mortgage
Investor for purchase under a Take-Out Commitment, (D) is originated or acquired
pursuant to a program offered by such Approved Second Mortgage Investor and (E)
has an original principal amount of not more than $1,000,000.
"Eligible Servicing Receivable": a Pool P&I Payment Receivable, T&I
-----------------------------
Receivable or Foreclosure Advance Receivable with respect to which each of the
following statements shall be accurate and complete (and the Company, by
including any such receivable in any computation of the Borrowing Base, shall be
deemed to so represent and warrant to the Agent and the Lenders):
(a) The Servicing Contract under which such receivable arose is
in full force and effect and is free of any default of the Company and there
does not exist any fact or circumstance that would entitle the investor
thereunder to terminate said Servicing Contract;
E-5
(b) No Person has a Lien or other interest or claim on any right,
title or interest of the Company under the Servicing Contract under which such
receivable arose or on any right of the Company to payment thereunder;
(c) Such receivable arose in connection with a servicing advance made
by or a servicing fee owed to the Company, whether on account of principal or
interest, property taxes or property insurance or otherwise, consistent with all
terms and conditions of the related Servicing Contract and is free of any
counterclaim, right of appeal or defense to payment; and
(d) The pledge by the Company of its right to payment of such
receivable does not violate any requirement of law or contractual obligation, or
require the giving of notice to or obtaining the consent of any Person,
including, without limitation, the investor party to the related Servicing
Contract.
"Fair Market Value": at any date with respect to any Mortgage Loan,
-----------------
the bid price quoted in writing to the Agent as of the computation date by two
nationally recognized dealers selected by the Agent who at the time are making a
market in similar Mortgage Loans, multiplied, in any case, by the outstanding
principal amount thereof.
"First Mortgage": a Mortgage which is subject to no prior or superior
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mortgage liens.
"Foreclosure Advance": a recoverable advance made by the Company for
-------------------
T&I Payments or the costs of repair or enforcement in connection with the
foreclosure or other enforcement of a Mortgage Loan which is part of a pool of
Mortgage Loans backing a Mortgage-backed Security being serviced by the Company
under a Servicing Contract.
"Foreclosure Advance Receivable": on a date of determination, a
------------------------------
valid, readily enforceable claim of the Company to retain amounts received or to
be received from an obligor, or out of the foreclosure proceeds, under a
Mortgage Loan serviced by the Company to reimburse the Company for a Foreclosure
Advance.
"Loan-to-Value Ratio": with respect to a Mortgage Loan secured by a
-------------------
Mortgage on improved real estate, the ratio (expressed as a percentage) which
(a) the sum of the original principal amount of such Mortgage Loan plus the
original principal amount of the Mortgage Loan that is secured by prior
Mortgages on such real estate, if any, bears to (b) the Appraised Value of such
real estate.
"Month-End Period": the period beginning on the third to the last
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Business Day of each month and ending on the fifth Business Day of the following
month.
▇-▇
"▇&▇ Cleanup Period": a period beginning on or after the 15th day of
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one month and ending on or before the 14th day of the following month during
which no Pool P&I Payment Receivables shall be included in the calculation of
Eligible Servicing Receivables.
"Pool P&I Payment": a recoverable payment of delinquent principal or
----------------
interest on a Mortgage Loan (other than a Mortgage Loan which is in bankruptcy
or in the process of foreclosure) which is part of a pool of Mortgage Loans
backing a Mortgage-backed Security and which payment the Company is obligated to
fund under a Servicing Contract.
"Pool P&I Payment Receivable": on a date of determination, a valid,
---------------------------
readily enforceable claim of the Company to retain amounts received or to be
received from an obligor under a Mortgage Loan serviced by the Company that is
currently due from such obligor to reimburse the Company for a Pool P&I Payment.
"Risk Rating": the risk rating of a Mortgage Loan, determined using
-----------
the Underwriting Guidelines or other applicable standards of the Investor to
which such Mortgage Loan is to be sold by the Company under a Take-Out
Commitment previously issued to the Company by such Investor, provided such
underwriting guidelines or other applicable standards comply with industry
standards in the sole judgment of the Agent.
"Second Mortgage": a Mortgage which is subject to one prior or
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superior Mortgage.
"T&I Payment": a recoverable payment of real estate taxes or
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insurance premiums in respect of a Mortgage Loan (other than a Mortgage Loan
that is in bankruptcy or in the process of foreclosure) which is serviced by the
Company and which the Company is obligated to fund under a Servicing Contract.
"T&I Receivable": on any date of determination, a valid, readily
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enforceable claim against any obligor on any Mortgage Loan and the accounts of
such obligor for repayment of any T&I Payment made by the Company that is
currently due from such obligor to reimburse the Company for a T&I Payment.
"Take-Out Commitment": a current, written commitment issued to the
-------------------
Company by an Investor to purchase Mortgage Loans, at a definite price or yield,
within a specified time period.
