EXHIBIT 10.14
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SECOND RESTATED CREDIT AGREEMENT
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MORTGAGE PORTFOLIO SERVICES, INC.
Borrower
NAB ASSET CORPORATION
Guarantor
GUARANTY FEDERAL BANK, F.S.B.
RESIDENTIAL FUNDING CORPORATION
FIRST AMERICAN BANK TEXAS, SSB
as Lenders
and
GUARANTY FEDERAL BANK, F.S.B.
as Agent
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August 29, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I GENERAL TERMS................................................. 1
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Section 1.01 Certain Definitions..................................... 1
Section 1.02 Other Definitional Provisions........................... 16
Section 1.03 Exhibits and Schedules.................................. 17
Section 1.04 Calculations and Determinations......................... 17
ARTICLE II AMOUNT OF TERMS OF CREDITS.................................... 17
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Section 2.01 Commitment and Loans.................................... 17
Section 2.02 Promissory Notes; Interest on the Notes................. 18
Section 2.03 Notice and Manner of Obtaining Loans.................... 18
Section 2.04 Fees.................................................... 19
Section 2.05 Mandatory Repayments.................................... 19
Section 2.06 Payments to Lenders..................................... 19
Section 2.07 Refinancing of Swing-Line Loans......................... 20
Section 2.08 Capital Reimbursement................................... 21
Section 2.09 Increased Cost of Loans................................. 21
Section 2.10 Availability............................................ 22
Section 2.11 Reimbursable Taxes...................................... 22
Section 2.12 Notice of Certain Events; Change of Applicable Lending
Office.................................................. 23
ARTICLE III CONDITIONS PRECEDENT.......................................... 23
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Section 3.01 Initial Borrowing....................................... 23
Section 3.02 All Borrowings.......................................... 24
ARTICLE IV BORROWER REPRESENTATIONS AND WARRANTIES....................... 24
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Section 4.01 Organization and Good Standing.......................... 24
Section 4.02 Authorization and Power................................. 25
Section 4.03 No Conflicts or Consents................................ 25
Section 4.04 Enforceable Obligations................................. 25
Section 4.05 Priority of Liens....................................... 25
Section 4.06 No Liens................................................ 25
Section 4.07 Financial Condition of Borrower and Guarantor........... 25
Section 4.08 Full Disclosure......................................... 26
Section 4.09 No Default.............................................. 26
Section 4.10 No Litigation........................................... 26
Section 4.11 Taxes................................................... 26
Section 4.12 Principal Office, etc................................... 26
Section 4.13 Compliance with ERISA................................... 26
Section 4.14 Subsidiaries............................................ 26
Section 4.15 Indebtedness............................................ 26
Section 4.16 Permits, Patents, Trademarks, etc....................... 27
Section 4.17 Status Under Certain Federal Statutes................... 27
Section 4.18 Securities Act.......................................... 27
Section 4.19 Pollution Control....................................... 27
Section 4.20 No Approvals Required................................... 27
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Section 4.21 Survival of Representations............................. 27
Section 4.22 Individual Mortgage Loans............................... 28
ARTICLE V AFFIRMATIVE COVENANTS......................................... 29
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Section 5.01 Financial Statements and Reports........................ 29
Section 5.02 Taxes and Other Liens................................... 30
Section 5.03 Maintenance............................................. 30
Section 5.04 Further Assurances...................................... 30
Section 5.05 Reimbursement of Expenses............................... 31
Section 5.06 Insurance............................................... 31
Section 5.07 Accounts and Records; Servicing Records................. 31
Section 5.08 Right of Inspection..................................... 32
Section 5.09 Notice of Certain Events................................ 32
Section 5.10 Performance of Certain Obligations and Information
Regarding Investors..................................... 32
Section 5.11 Use of Proceeds; Margin Stock........................... 32
Section 5.12 Notice of Default....................................... 33
Section 5.13 Compliance with Loan Documents.......................... 33
Section 5.14 Operations and Properties............................... 33
ARTICLE VI NEGATIVE COVENANTS............................................ 33
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Section 6.01 No Merger............................................... 33
Section 6.02 Limitation on Indebtedness.............................. 33
Section 6.03 Fiscal Year, Method of Accounting....................... 33
Section 6.04 Business................................................ 33
Section 6.05 Liquidations, Mergers, Consolidations and Dispositions
of Substantial Assets................................... 33
Section 6.06 Loans, Advances, and Investments........................ 34
Section 6.07 Use of Proceeds......................................... 34
Section 6.08 Actions with Respect to Mortgage Collateral............. 34
Section 6.09 Net Worth............................................... 35
Section 6.10 Total Liabilities to Tangible Net Worth Ratio........... 35
Section 6.11 Interest Coverage Ratio................................. 35
Section 6.12 Transactions with Affiliates............................ 35
Section 6.13 Liens................................................... 35
Section 6.14 ERISA................................................... 35
Section 6.15 Change of Principal Office.............................. 35
ARTICLE VII EVENTS OF DEFAULT............................................. 36
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Section 7.01 Nature of Event......................................... 36
Section 7.02 Default Remedies........................................ 38
ARTICLE VIII INDEMNIFICATION.............................................. 38
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Section 8.01 Indemnification......................................... 38
Section 8.02 Limitation of Liability................................. 38
ARTICLE IX AGENT......................................................... 39
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Section 9.01 Appointment and Authority............................... 39
Section 9.02 Agent's Reliance, Etc................................... 39
Section 9.03 Lenders' Credit Decisions............................... 40
Section 9.04 Indemnification......................................... 40
Section 9.05 Rights as Lender........................................ 40
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Section 9.06 Sharing of Set-Offs and Other Payments.................. 40
Section 9.07 Investments............................................. 41
Section 9.08 Benefit of Article IX................................... 41
Section 9.09 Resignation............................................. 41
ARTICLE X MISCELLANEOUS................................................. 41
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Section 10.01 Notices................................................ 41
Section 10.02 Amendments, Etc........................................ 42
Section 10.03 Invalidity............................................. 43
Section 10.04 Survival of Agreements................................. 43
Section 10.05 Renewal, Extension or Rearrangement.................... 43
Section 10.06 Waivers................................................ 43
Section 10.07 Cumulative Rights...................................... 43
Section 10.08 Construction........................................... 43
Section 10.09 Limitation on Interest................................. 43
Section 10.10 Bank Accounts; Offset.................................. 44
Section 10.11 Assignments, Participations............................ 45
Section 10.12 Exhibits............................................... 46
Section 10.13 Titles of Articles, Sections and Subsections........... 46
Section 10.14 Counterparts........................................... 46
Section 10.15 ENTIRE AGREEMENT....................................... 46
Section 10.16 Termination; Limited Survival.......................... 46
Section 10.17 Joint and Several Liability............................ 46
Section 10.18 Restatement............................................ 46
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EXHIBITS
Exhibit A -- Form of Note
Exhibit B -- Form of Borrowing Request
Exhibit C -- Borrowing Base Certificate
Exhibit D -- Certificate Accompanying Financial Statement
Exhibit E -- Form of Security Agreement
Exhibit F -- Investors
Exhibit G -- Form of Opinion of Counsel for Borrower and Guarantor
Exhibit H -- Subsidiaries
Exhibit I -- Form of Guaranty
Exhibit J -- Acceptable Manufactured Housing States
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SECOND RESTATED CREDIT AGREEMENT
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THIS SECOND RESTATED CREDIT AGREEMENT is made and entered into as of August
29, 1997, among Mortgage Portfolio Services, Inc., a Delaware corporation
("Borrower"), NAB Asset Corporation, a Texas corporation ("Guarantor"), Guaranty
Federal Bank, F.S.B., as Agent ("Agent"), and the Lenders referred to below
("Lenders").
The parties hereto hereby agree as follows:
ARTICLE I
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GENERAL TERMS
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Section 1.01 Certain Definitions. As used in this Agreement, the following
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terms have the following meanings:
"Acceptable Manufactured Housing State" means any state: (1) listed on a
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schedule of `Acceptable Manufactured Housing States' mutually agreed to by
Borrower and Majority Lenders, from time to time, with the initial such schedule
in the form of that attached hereto as Exhibit "J", and (2) as to which Agent
shall have received an opinion of counsel to Borrower in form and substance
satisfactory to Agent regarding the perfection of Agent's security interest in
Mortgage Loans secured by Property in such state and covering such other matters
as Agent may request.
"Adjusted Eurodollar Rate" means the rate per annum calculated by Agent
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(rounded upwards, if necessary, to the next higher 0.01%) determined on a daily
basis pursuant to the following formula:
Adjusted Eurodollar Rate =
Eurodollar Rate + Applicable Margin
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100.0% - Reserve Percentage
The Adjusted Eurodollar Rate shall in no event, however, exceed the Maximum
Rate.
"Affiliate" means, as to any Person, each other Person that directly or
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indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person.
"Agent" has the meaning assigned to such term in the preamble hereof.
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"Aggregate Collateral Value of the Borrowing Base" means at any date the
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sum of the Collateral Value of the Tranche A Borrowing Base and the Collateral
Value of the Tranche B Borrowing Base, all as of such date.
"Agreement" means this Second Restated Credit Agreement, as the same may
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from time to time be amended, modified or supplemented.
"Agreement to Pledge" means each agreement by Borrower, in the form of
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Exhibit 1 to the Security Agreement, to deliver Required Mortgage Documents to
Agent.
"Applicable Margin" means with respect to
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(a) Tranche A Loans, and Swing-Line Loans that will be refinanced as
Tranche A Loans, one and three-quarters percent (1.75%); and
(b) Tranche B Loans and Swing-Line Loans that will be refinanced as
Tranche B Loans, two percent (2%);
provided, however, that with respect to any Loan made under an Agreement to
Pledge and prior to the delivery to Agent of the Required Mortgage Documents for
the Eligible Mortgage Loans with respect to such Loan, the margin set forth
above which is applicable to such Loan shall be increased by one-eighth of one
percent (0.125%).
"Applicable Rate" means with respect to any Lender's Loan, for any day, the
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Adjusted Eurodollar Rate in effect on such day, provided that, if any of the
events described in Section 2.10 with respect to such Loan have occurred and are
continuing on such day, "Applicable Rate" means the Back-Up Rate then in effect.
"Backup Rate" means a per annum rate equal to the higher of (a) the base
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commercial rate of interest as announced from time to time by Guaranty Federal
(which may not be the lowest, best or most favorable rate of interest which
Guaranty Federal may charge on loans to its customers) or (ii) the Federal Funds
Rate from time to time in effect, plus one-half of one percent (.50%). The
Backup Rate shall in no event, however, exceed the Maximum Rate.
"Balance Calculation Period" means each calendar month.
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"Balance Funded Amount" means with respect to any Lender for any Balance
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Calculation Period, the average of the Qualifying Balances of such Lender for
such Balance Calculation Period. As used in this paragraph, "Qualifying
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Balances" shall mean, with respect to any Lender, for any day the lesser of (x)
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the amount of such Lender's Loans on such day, and (y) the sum of the collected
balances in all identified non-interest bearing accounts of Borrower maintained
with such Lender less (i) amounts necessary to satisfy reserve and deposit
insurance requirements and (ii) amounts required to compensate such Lender for
services rendered in accordance with such Lender's system of charges for
services to similar accounts.
"Balance Funded Rate" means with respect to:
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(a) Tranche A Loans, one and three quarters percent (1.75%); and
(b) Tranche B Loans, two percent (2%).
"Borrower" shall have the meaning assigned to such term in the preamble
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hereof.
"Borrower's Adjusted EBITDA" means for any period, the sum of (a) the
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Consolidated Net Income of Borrower during such period, plus (b) all interest
during such period on the Subordinated Debt which was deducted in determining
such Consolidated Net Income, plus (c) all income taxes which were deducted in
determining such Consolidated Net Income, plus (d) all depreciation,
amortization (including amortization of good will and debt issue costs) and
other non-cash charges which were deducted in determining such Consolidated Net
Income, plus (e) the aggregate principal amount of Debt incurred by Borrower to
finance other assets created pursuant to a securitization facility during such
period, plus (f) the aggregate principal amount of funds advanced to Borrower
during such period pursuant to any Subordinated Debt, minus (g) unbilled
revenues which were included in determining such Consolidated Net Income, minus
(h) any Dividends made or declared (without duplication) by Borrower during such
period in respect of the preferred stock of Borrower.
"Borrower's Consolidated Tangible Net Worth" means, as of any date, (a)
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Borrower's Consolidated Net Worth as of such date minus (b) all Consolidated
assets of Borrower which would be classified as intangible assets under GAAP,
including Capitalized Servicing Rights, goodwill (whether representing the
excess cost over book value of assets acquired or otherwise), patents,
trademarks, trade names, copyrights, franchises, deferred charges and
intercompany Indebtedness plus (c) ninety percent (90%) of Capitalized Servicing
Rights plus (d) the original principal amount of the Subordinated Debt (without
including any occurred interest or payments of interest made by the issuance of
additional Indebtedness or otherwise compounded or added to the principal).
"Borrowing Base Certificate" means at a certificate in the form attached
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hereto as Exhibit "C".
"Borrowing Request" means a request, in the form of Exhibit "B", for a
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Borrowing pursuant to Article II.
"Business Day" means a day, other than a Saturday or Sunday, on which
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commercial banks are open for business with the public in Dallas, Texas. Any
Business Day in any way relating to the Eurodollar Rate must also be a day on
which, in the judgment of Agent, significant transactions in dollars are carried
out in the interbank Eurocurrency market.
"Capitalized Servicing Rights" means as of any Person, all rights to
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service Mortgage Loans which would be capitalized under GAAP (regardless of
whether such rights result from asset securitizations, whole loan sales or
originations of Mortgage Loans).
"Cash Equivalents" means (i) securities issued or directly and fully
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guaranteed or insured by the United States Government or any agency or
instrumentality thereof which mature within 90 days from the date of
acquisition, and (ii) time deposits and certificates of deposit, which mature
within 90 days from the date of acquisition, of Agent, any Lender or any other
domestic commercial bank having capital and surplus in excess of $200,000,000,
which has, or the holding company of which has, a commercial paper rating of at
least A-1 or the equivalent thereof by Standard & Poors Corporation or P-1 or
the equivalent thereof by ▇▇▇▇▇'▇ Investors Service, Inc.
"Change of Control" means (i) the acquisition by any Person or group of
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Persons acting together, of a direct interest in more than twenty percent (20%)
of the voting power of the voting stock of Borrower, by way of merger or
consolidation or otherwise; or (ii) ▇▇▇▇▇ ▇▇▇▇▇▇ ceases to be and act as
President and CEO of Borrower; provided, however, that the acquisition by CPS of
more than twenty percent (20%) of the voting power of the voting stock of
Borrower shall not constitute a Change of Control so long as concurrently with
such acquisition CPS executes and delivers a Guaranty to Agent and agrees to be
bound to the terms of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
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"Collateral" has the meaning given to it in the Security Agreement.
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"Collateral Value" means at any date, the Collateral Value of the Tranche A
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Borrowing Base or the Collateral Value of the Tranche B Borrowing Base, as
applicable.
"Collateral Value of the Tranche A Borrowing Base" means at any date the
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sum of the Unit Collateral Values of all Eligible Tranche A Mortgage Loans
included in the Tranche A Borrowing Base at such date.
"Collateral Value of the Tranche B Borrowing Base" means at any date the
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sum of the Unit Collateral Values of all Eligible Tranche B Mortgage Loans
included in the Tranche B Borrowing Base at such date.
"Commitment" means the obligation of Lenders to make Tranche A Loans and
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Tranche B Loans to Borrower pursuant to Section 2.01 hereof in an aggregate
amount not to exceed $75,000,000 at any time outstanding.
"Consolidated" refers to the consolidation of any Person, in accordance
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with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"Consolidated Net Income" of any Person means, for the period ending on a
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particular date, the gross revenues of such Person for such period, plus any
cash Dividends actually received by such Person from any other business entity,
minus all expenses and other proper charges (including taxes on income, to the
extent imposed upon such Person), determined on a Consolidated basis after
eliminating earnings or losses attributable to outstanding minority interests.
"Consolidated Net Worth" of any Person means, as of any date, the remainder
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of all Consolidated assets of such Person minus such Person's Consolidated
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Indebtedness.
"Construction Home" means a single family residence that is being
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constructed on real property subject to a Mortgage.
"CPS" means Consumer Portfolio Services, Inc.
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"Debtor Laws" means all applicable liquidation, conservatorship,
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bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization or
similar laws from time to time in effect affecting the rights of creditors
generally and general principles of equity.
"Default" means any of the events specified in Section 7.01 hereof, whether
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or not any requirement for notice or lapse or time or any other condition has
been satisfied.
"Dividends", in respect of any corporation, means: (i) cash distributions
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or any other distributions on, or in respect of, any class of equity security of
such corporation, except for distributions made solely in shares of securities
of the same class; and (ii) any and all funds, cash or other payments made in
respect of the redemption, repurchase or acquisition of such securities;
provided, however, that "Dividends" shall not include Borrower's payments to
Guarantor for Borrower's Share of Taxes owed by the Affiliated Group of
Corporations (as defined in section 1504 of the Code) of which Borrower is a
member. As used herein "Borrower's Share of Taxes" means the amount of federal
income taxes which Borrower would have been obligated to pay if Borrower was not
a member of an Affiliated Group of Corporations.
"Drawdown Termination Date" means the earlier of August 29, 1998, or the
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day on which the Notes first become due and payable in full.
"Eligible Manufactured Housing Mortgage Loan" means a Mortgage Loan with
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respect to which each of the following statements is accurate and complete (and
Borrower by including such Mortgage Loan in any computation of the Collateral
Value of the Tranche A Borrowing Base shall be deemed to so represent to Agent
and Lenders at and as of the date of such computation):
(i) Such Mortgage Loan is an Eligible Mortgage Loan;
(ii) Such Mortgage Loan is secured by a first priority deed of trust
(or mortgage) on the related Property;
(iii) The proceeds of said Mortgage Loan are utilized by the Obligor to
facilitate the permanent attachment of a new Manufactured Home on the
related Property;
(iv) The Property securing such Mortgage Loan is located in an
Acceptable Manufactured Housing State;
(v) Upon completion and attachment of the related Manufactured Home to
the related Property, such Mortgage Loan will meet all underwriting and
other criteria for purchase by FNMA under the Take-Out Commitment relating
to such Mortgage Loan;
(vi) The Manufactured Home financed with the proceeds of such Mortgage
Loan is a new Manufactured Home which has not previously been financed;
(vii) All actions required to create a valid and enforceable first
priority perfected security interest in and lien upon such Mortgage Loan,
the related Manufactured Home, the related Property and all documents and
instruments relating to such Mortgage Loan, in favor of the Agent for the
benefit of the Lenders shall have been taken; and
(viii) The Unit Collateral Value of such Mortgage Loan, when added to
the Unit Collateral Value of all other Eligible Manufactured Housing Loans
included in the computation of the Collateral Value of the Tranche A
Borrowing Base does not exceed two percent (2%) of the Commitment.
"Eligible Mortgage Loan" means a Mortgage Loan with respect to which each
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of the following statements is accurate and complete (and the Borrower by
including such Mortgage Loan in any computation of the Aggregate Collateral
Value of the Borrowing Base shall be deemed to so represent to Agent and Lenders
at and as of the date of such computation):
(i) Such Mortgage Loan is a binding and valid obligation of the Obligor
thereon, in full force and effect and enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar terms affecting creditor's rights in
general and by general principles of equity;
(ii) Such Mortgage Loan is genuine in all respects as appearing on its
face and as represented in the books and records of Borrower, and all
information set forth therein is true and correct;
(iii) To the best knowledge of Borrower, such Mortgage Loan is free of
any default (other than as permitted by subparagraph below) of any party
thereto (including Borrower), counterclaims, offsets and defenses,
including the defense of usury, and from any rescission, cancellation or
avoidance, and all right thereof, whether by operation of law or otherwise;
(iv) No payment under such Mortgage Loan is more than thirty (30) days
past due the payment due date set forth in the underlying Mortgage Note and
Mortgage;
(v) Such Mortgage Loan contains the entire agreement of the parties
thereto with respect to the subject matter thereof, has not been modified
or amended in any respect not expressed in writing therein and is free of
concessions or understandings with the Obligor thereon of any kind not
expressed in writing therein;
(vi) Such Mortgage Loan is in all respects in accordance with all
Requirements of Law applicable thereto, including, without limitation, the
federal Consumer Credit Protection Act and the regulations promulgated
thereunder and all applicable usury laws and restrictions, and all notices,
disclosures and other statements or information required by law or
regulation to be given, and any other act required by law or regulation to
be performed, in connection with such Mortgage Loan have been given and
performed as required;
(vii) All advance payments and other deposits on such Mortgage Loan
have been paid in cash, and no part of said sums has been loaned, directly
or indirectly, by Borrower to the Obligor, and, other than as disclosed to
Agent in writing, there have been no prepayments;
(viii) At all times such Mortgage Loan will be free and clear of all
Liens, except in favor of Agent for the benefit of the Lenders and any
other Lien which has been disclosed to Agent in writing and is permitted
hereunder;
(ix) The Property covered by such Mortgage Loan is insured against loss
or damage by fire and all other hazards normally included within standard
extended coverage in accordance with the provisions of such Mortgage Loan
with Borrower named as a loss payee thereon;
(x) The Required Mortgage Documents have been delivered to Agent prior
to the inclusion of such Mortgage Loan in any computation of the Aggregate
Collateral Value of the Borrowing Base or, if such items have not been
delivered to Agent on or prior to the date such Mortgage Loan is first
included in any computation of the Aggregate Collateral Value of the
Borrowing Base, (1) an Agreement to Pledge has been delivered to Agent
prior to such inclusion, and (2) the Unit Collateral Value of such Mortgage
Loan when added to the Unit Collateral Value of all other Mortgage Loans
for which Agent has not received the Required Mortgage Documents does not
exceed (A) during the last five (5) Business Days in any calendar month and
the first five (5) Business Days in the next succeeding calendar month,
fifty percent (50%) of the Commitment, and (B) at any other time, thirty-
five percent (35%) of the Commitment, provided that, all Required Documents
with respect to such Mortgage Loan shall be delivered to Agent within seven
(7) Business Days after the date of the Agreement to Pledge with respect
thereto, provided further that, as to any Eligible Tranche B Mortgage Loan,
an Agreement to Pledge can be delivered to Agent only for the first Loan
made with respect to such Eligible Tranche B Mortgage Loan, all Required
Documents for any subsequent Loan with respect to such Eligible Tranche B
Mortgage Loan must be delivered to Agent not later than one (1) Business
Day after such subsequent Loan;
(xi) If such Mortgage Loan is included in either the Tranche A
Borrowing Base or the Tranche B Borrowing Base and has been withdrawn from
the possession of the Agent on terms and subject to conditions set forth in
the Security Agreement:
(1) If such Mortgage Loan was withdrawn by Borrower for purposes of
correcting clerical or other non-substantive documentation problems,
the promissory note and other documents relating to such Mortgage Loan
are returned to the Agent within twelve (12) calendar days from the
date of withdrawal; and the Unit Collateral Value of such Mortgage Loan
when added to the Unit Collateral Value of other Mortgage Loans which
have been similarly released to Borrower and have not been returned
does not exceed $4,000,000;
(2) If such Mortgage Loan was shipped by the Agent directly to a
permanent investor for purchase or to a custodian for the formation of
a pool, the full purchase price therefor has been received by the Agent
(or such Mortgage Loan has been returned to the Agent) within twenty-
one (21) days from the date of shipment by the Agent.
(xi) If such Mortgage Loan is a Jumbo Mortgage Loan or a Super Jumbo
Mortgage Loan, the Unit Collateral Value of such Mortgage Loan when added
to the Unit Collateral Value of all other Jumbo Mortgage Loans and Super
Jumbo Mortgage Loans does not exceed thirty percent (30%) of the
Commitment;
(xii) If such Mortgage Loan is a Super Jumbo Mortgage Loan, the Unit
Collateral Value of such Mortgage Loan when added to the Unit Collateral
Value of all other Super Jumbo Mortgage Loans does not exceed five percent
(5%) of the Commitment; and
(xiii) The face amount of the Mortgage Note underlying such Mortgage
Loan does not exceed $1,000,000.
In determining the eligibility of any Mortgage Loan, any of the
requirements for eligibility (other than the requirements contained in clauses
(i), (viii) and (ix) above) may be waived by Agent, provided, that any Mortgage
Loan which is accepted by Agent as an Eligible Mortgage Loan pursuant to such
waiver (an "Eligible Waiver Mortgage Loan") shall cease to be an Eligible Waiver
Mortgage Loan upon written notice of the retraction of such waiver given to
Borrower by Agent unless at the time of giving such notice the deficiency which
originally required such waiver has been cured and such Eligible Waiver Mortgage
Loan meets all other requirements for an Eligible Mortgage Loan; and provided
further, that the Unit Collateral Value of any Mortgage Loan accepted by Agent
as an Eligible Waiver Mortgage Loan when added to the Unit Collateral Value of
all other Eligible Waiver Mortgage Loans included in the Aggregate Collateral
Value of the Borrowing Base at anytime, does not exceed $5,000,000.
"Eligible Tranche A Mortgage Loan" means an Eligible Mortgage Loan or
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Eligible Manufactured Housing Mortgage Loan owned by Borrower with respect to
which each of the following statements shall be accurate and complete (and
Borrower by including such Eligible Mortgage Loan in any computation of the
Collateral Value of the Tranche A Borrowing Base shall be deemed to so represent
to Agent and Lenders at and as of the date of such computation):
(i) Such Mortgage Loan has not been included in the Tranche A Borrowing
Base for more than 120 days;
(ii) Such Mortgage Loan is covered by a Take-Out Commitment which is in
full force and effect, and Borrower and such Mortgage Loan are in full
compliance therewith;
(iii) Except for Eligible Manufactured Housing Mortgage Loans, such
Mortgage Loan is secured by a first or second Mortgage on Property
consisting of a completed one-to-four unit single family residence,
including a condominium, planned unit development, townhouse or co-op.
(iv) For any Mortgage Loan which was originally included in the Tranche
B Borrowing Base, Agent has received the Required Mortgage Documents set
forth in Section 3 of Schedule A to the Security Agreement.
"Eligible Tranche B Mortgage Loan" means an Eligible Mortgage Loan owned by
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Borrower with respect to which each of the following statements shall be
accurate and complete (and Borrower by including
such Eligible Mortgage Loan in any computation of the Collateral Value of the
Tranche B Borrowing Base shall be deemed to so represent to Agent and Lender at
and as of the date of such computation):
(i) Such Mortgage Loan is an Eligible Mortgage Loan;
(ii) Such Mortgage Loan has not been included in the Tranche B
Borrowing Base for more than 180 days; provided, however, that such
Mortgage Loan may be included in the Tranche B Borrowing Base for up to a
maximum aggregate period of 270 days so long as the Unit Collateral Value
of such Mortgage Loan when added to the Unit Collateral Value of all other
Eligible Tranche B Mortgage Loans included in the Tranche B Borrowing Base
pursuant to this proviso does not exceed $4,000,000;
(iii) Such Mortgage Loan is secured by a first Mortgage on Property
consisting of a Construction Home;
(iv) The Mortgage Note, Mortgage and other documents and instruments
evidencing such Mortgage Loan provide that the Mortgage Loan will become a
fully amortizing Mortgage Loan immediately upon certification by the
contractor and Borrower that the Construction Home has been completed and
is ready for occupancy;
(v) The Construction Home will be completed within nine (9) months from
the date on which construction commences; and
(vi) Borrower has advanced to or for the benefit of Borrower, at least
ten percent (10%) of the stated principal amount of the Mortgage Note
evidencing such Mortgage Loan; and
(vii) Such Mortgage Loan is not included in the Tranche A Borrowing
Base.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended from time to time, together with the regulations from time to time
promulgated with respect thereto.
"ERISA Affiliate" means all members of the group of corporations and trades
---------------
or businesses (whether or not incorporated) which, together with Borrower, are
treated as a single employer under Section 414 of the Code.
"ERISA Plan" means any pension benefit plan subject to Title IV of ERISA or
----------
Section 412 of the Code maintained or contributed to by Borrower or any ERISA
Affiliate with respect to which Borrower has a fixed or contingent liability.
"Eurodollar Rate" means, for any day, the rate per annum (rounded upwards,
---------------
if necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or
any successor page) as the London interbank offered rate for deposits in dollars
on that day for a period of one month. If for any reason such rate is not
available, the term "Eurodollar Rate" shall mean the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen
LIBO Page as the London interbank offered rate for deposits in dollars on that
day for a period of one month; provided, however, if more than one rate is
specified on Reuters Screen LIB0 Page, the applicable rate shall be the
arithmetic mean of all such rates (rounded upwards, if necessary, to the nearest
of 1/100 of 1%).
"Event of Default" means any of the events specified in Section 7.01
----------------
hereof, provided that any requirement in connection with such event for the
giving of notice or the lapse of time, or the happening of any further
condition, event or act has been satisfied.
"Existing Agreement" means that certain First Restated Credit Agreement
------------------
dated as of February 18, 1997, among Borrower, Guarantor, Agent and the lenders
named therein, as amended by that certain First Amendment to First Restated
Credit Agreement dated as of April 28, 1997, and that certain Second Amendment
to First Restated Credit Agreement dated as of June 6, 1997.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
------------------
upwards, if necessary, to the nearest 1/100th of one percent) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (i) if the day for which such rate is to
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate quoted to Agent on such day on such transactions as determined by Agent.
"Financing Lease" means (i) any lease of Property if the then present value
---------------
of the minimum rental commitment thereunder should, in accordance with GAAP, be
capitalized on a balance sheet of the lessee, and (ii) any other lease
obligations which are capitalized on a balance sheet of the lessee.
"Fiscal Quarter" means each period of three calendar months ending March
--------------
31, June 30, September 30 and December 31 of each year.
"Fiscal Year" means each period of twelve calendar months ending December
-----------
31 of each year.
"FNMA" means the Federal National Mortgage Association, or any successor
----
thereto.
"Funding Account" means the non-interest bearing demand checking account
---------------
established by Borrower with Agent to be used for (i) the initial deposit of
proceeds of Loans; and (ii) the funding or purchase of Mortgage Notes by
Borrower; provided that the Funding Account shall be pledged to Agent for the
benefit of Lenders and that Borrower shall not be entitled to withdraw funds
from the Funding Account and provided further that Agent will transfer funds as
directed by Borrower.
"GAAP" means those generally accepted accounting principles and practices
----
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower and Guarantor
and its Consolidated subsidiaries, are applied for all periods after the date
hereof in a manner consistent with the manner in which such principles and
practices were applied to the financing statements described in Section 4.07. If
any change in any accounting principle or practice is required by the Financial
Accounting Standards Board (or any such successor) in order for such principle
or practice to continue as a generally accepted accounting principle or
practice, all reports and financial statements required hereunder with respect
to Borrower or with respect to Borrower and its Consolidated subsidiaries may be
prepared in accordance with such change, but all calculations and determinations
to be made hereunder may be made in accordance with such change only after
notice of such change is given to each Lender and Majority Lenders agree to such
change insofar as it affects the accounting of Borrower, Guarantor or of
Guarantor and its Consolidated subsidiaries.
"Governmental Authority" means any nation or government, any agency,
----------------------
department, state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Governmental Requirement" means any law, statute, code, ordinance, order,
------------------------
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other direction or requirement (including, without
limitation, any of the foregoing which relate to environmental standards or
controls, energy regulations and occupational, safety and health standards or
controls) of any arbitrator, court or other Governmental Authority, which
exercises jurisdiction over any Related Person or any of its Property.
"Guarantor" means NAB Asset Corporation, a Texas corporation, or any other
---------
Person who has guaranteed some or all of the Obligations and who has been
accepted by Agent as a Guarantor.
"Guaranty" means a Guaranty in the form attached hereto as Exhibit "I", as
--------
the same may from time to time be further supplemented, amended or restated.
"Guaranty Federal" means Guaranty Federal Bank, F.S.B., as a Lender and its
----------------
successors in such capacity.
"Guaranty Obligation" of any Person means any contract, agreement or
-------------------
understanding of such Person pursuant to which such Person guarantees, or in
effect guarantees, any Indebtedness, lease, dividends or other obligations (the
"Primary Obligations") of any other Person (the "Primary Obligor") in any
------------------- ---------------
manner, whether directly or indirectly, contingently or absolutely, in whole or
in part, including without limitation agreements:
(i) to purchase such Primary Obligation or any property constituting
direct or indirect security therefor;
(ii) to advance or supply funds (A) for the purchase or payment of any
such Primary Obligation, or (B) to maintain working capital or other
balance sheet conditions of the Primary Obligor or otherwise to maintain
the net worth or solvency of the Primary Obligor;
(iii) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such Primary Obligation of the ability
of the Primary Obligor to make payment of such Primary Obligation; or
(iv) otherwise to assure or hold harmless the owner of any such Primary
Obligation against loss in respect thereof;
provided, that "Guaranty Obligation" shall not include endorsements that are
-------------------
made in the ordinary course of business of negotiable instruments or documents
for deposit or collection. The amount of any Guaranty Obligation shall be
deemed to be the maximum amount for which the guarantor may be liable pursuant
to the agreement that governs such Guaranty Obligation, unless such maximum
amount is not stated or determinable, in which case the amount of such
obligation shall be the maximum reasonably anticipated liability thereon, as
determined by such guarantor in good faith.
"Indebtedness" of any Person at a particular date means the sum (without
------------
duplication) at such date of (i) all indebtedness of such Person for borrowed
money or for the deferred purchase price of property or services or which is
evidenced by a note, bond, debenture, or similar instrument, (ii) all
obligations of such Person under any Financing Lease, (iii) all obligations of
such Person in respect of letters of credit, acceptances, or similar obligations
issued or created for the account of such Person, (iv) all Guaranty Obligations
of such Person, (v) all liabilities secured by any Lien on any property owned by
such Person, whether or not such Person has assumed or otherwise become liable
for the payment thereof, and (vi) any liability of such Person or any Affiliate
thereof in respect of unfunded vested benefits under an ERISA Plan.
"Investor" means any Person listed on Exhibit "F" and any other Person
--------
approved in writing by Agent who agrees to purchase Mortgage Collateral pursuant
to a Take-Out Commitment.
"Jumbo Loan" means a Mortgage Loan for which the original unpaid principal
----------
amount of the underlying Mortgage Note is greater than $350,000 but does not
exceed $600,000.
"Late Payment Rate" means, at the time in question, four percent (4%) per
-----------------
annum plus the Applicable Rate then in effect.
"Lenders" means each signatory hereto (other than Borrower and Guarantor),
-------
including Guaranty Federal in its capacity as a Lender hereunder rather than as
Agent, and the successors of each as holder of a Note (or a portion thereof)
that has been transferred in accordance with Section 10.11.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
----
arrangement, encumbrance, lien (whether statutory or otherwise), or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"Loan" means a Tranche A Loan, Tranche B Loan, or Swing-Line Loan as
----
applicable. "Loans" means all Tranche A Loans, Tranche B Loans and Swing-Line
Loans.
"Loan Document" means any, and "Loan Documents" shall mean all, of this
------------- --------------
Agreement, the Notes, the Security Instruments and any and all other agreements
or instruments now or hereafter executed and delivered by Borrower, Guarantor,
or any other Person in connection with, or as security for the payment or
performance of any or all of the Obligations, as any of such may be renewed,
amended or supplemented from time to time.
"Majority Lenders" means Lenders collectively having Percentage Shares
----------------
totaling in the aggregate at least sixty-six and two-thirds percent (66 2/3%).
"Manufactured Home" means a structure, transportable in one or more
-----------------
sections, which is built on a permanent basis and designed to be used as a
dwelling with a permanent foundation when affixed to real property and connected
to the required utilities, including, without limitation, plumbing and
electrical systems.
"Market Value" at any time shall be determined by Agent, in its sole
------------
discretion, based upon information then available to Agent regarding quotes to
dealers for the purchase of mortgage notes similar to the Mortgage Notes that
have been delivered to Agent pursuant to this Agreement.
"Material Adverse Effect" means any material adverse effect on (i) the
-----------------------
validity or enforceability of this Agreement, the Notes or any other Loan
Document, (ii) the business, operations, total Property or financial condition
of any Related Person, (iii) the collateral under any Security Instrument, or
(iv) the ability of any Related Person to fulfill its obligations under this
Agreement, the Notes, or any other Loan Document to which it is a party.
"Maximum Rate" means, with respect to each Lender, the maximum nonusurious
------------
rate of interest that such Lender is permitted under applicable law to contract
for, take, charge, or receive with respect to its Loans. All determinations
herein of the Maximum Rate, or of any interest rate determined by reference to
the Maximum Rate, shall be made separately for each Lender as appropriate to
assure that the Loan Documents are not construed to obligate any Person to pay
interest to any Lender at a rate in excess of the Maximum Rate applicable to
such Lender.
"Mortgage" means a mortgage or deed of trust, on standard forms in form and
--------
substance satisfactory to Agent, securing a Mortgage Note and granting a
perfected first or second priority lien on residential real
property consisting of land and either a Construction Home thereon or a single-
family dwelling thereon which is completed and ready for occupancy.
"Mortgage Assignment" means an instrument duly executed and in recordable
-------------------
form assigning a Mortgage, in blank and like all intervening instruments that
have been executed with respect to such Mortgage and which is in form acceptable
to Agent and satisfies all Requirements of Law.
"Mortgage Collateral" means all Mortgage Notes (i) which are made payable
-------------------
to the order of Borrower or have been endorsed (without restriction or
limitation) payable to the order of Borrower, (ii) in which Agent has been
granted and continues to hold a perfected first priority security interest,
(iii) which are in form and substance acceptable to Agent in its reasonable
discretion, (iv) which are secured by Mortgages, and (v) with respect to Tranche
A Eligible Mortgage Loans, conform in all respects with all the requirements for
purchase of such Mortgage Notes under the Take-Out Commitments and are valid and
enforceable in accordance with their respective terms.
"Mortgage Loan" means a one-to-four-family mortgage loan which is evidenced
-------------
by a Mortgage Note and secured by a Mortgage, together with the rights and
obligations of a holder thereof and payments thereon and proceeds therefrom.
"Mortgage Note" means the Note or other evidence of indebtedness evidencing
-------------
the indebtedness of an Obligor under a Mortgage Loan.
"Note" means any promissory note delivered by Borrower to a Lender pursuant
----
to Section 2.02 in the form attached hereto as Exhibit "A", and all renewals,
modifications and extensions thereof. "Notes" means collectively each Lender's
Note.
"Obligations" means all present and future Indebtedness, obligations, and
-----------
liabilities of Borrower to Agent or any Lender, and all renewals and extensions
thereof, or any part thereof, arising pursuant to this Agreement or any other
Loan Document, and all interest accrued thereon, and reasonable attorneys' fees
and other costs incurred in the drafting, negotiation, enforcement or collection
thereof, regardless of whether such indebtedness, obligations, and liabilities
are direct, indirect, fixed contingent, joint, several or joint and several.
"Obligor" means the Person or Persons obligated to pay the Indebtedness
-------
which is the subject of a Mortgage Loan.
"Operating Account" means the non-interest bearing demand checking account
-----------------
established by Borrower with Agent to be used for Borrower's operations.
"PBGC" means the Pension Benefit Guaranty Corporation or any Governmental
----
Authority succeeding to any of its functions.
"Percentage Share" means, with respect to any Lender (a) when used in
----------------
Section 2.01, in any Borrowing Request or when no Loans are outstanding
hereunder, the percentage set forth opposite such Lender's name on the signature
pages of this Agreement, and (b) when used otherwise, the percentage obtained by
dividing (i) the sum of the unpaid principal balance of such Lender's Loans at
the time in question by (ii) the sum of the aggregate unpaid principal balance
of all Loans at such time.
"Person" means any individual, corporation, partnership, joint venture,
------
association, joint stock company, limited liability company trust,
unincorporated organization, Governmental Authority, or any other form of
entity.
"Property" means any interest in any kind of property or asset, whether
--------
real, personal or mixed, or tangible or intangible.
"Regulation D" means Regulation D issued by the Board of Governors of the
------------
Federal Reserve System as in effect from time to time.
"Regulation U" means Regulation U issued by the Board of Governors of the
------------
Federal Reserve System as in effect from time to time.
"Regulation X" means Regulation X issued by the Board of Governors of the
------------
Federal Reserve System as in effect from time to time.
"Related Persons" means Borrower, Guarantor and each of Borrower's
---------------
Subsidiaries.
"Reportable Event" means (1) a reportable event described in Sections
----------------
4043(b)(5) or (6) of ERISA or the regulations promulgated thereunder, or (2) any
other reportable event described in Section 4043(b) of ERISA or the regulations
promulgated thereunder other than a reportable event not subject to the
provision for 30-day notice to the PBGC pursuant to a waiver by the PBGC under
Section 4043(a) of ERISA.
"Required Mortgage Documents" means as to any Mortgage Loan, the items
---------------------------
described on Schedule A to the Security Agreement.
"Requirement of Law" as to any Person means the charter and by-laws or
------------------
other organizational or governing documents of such Person, and any law,
statute, code, ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other determination,
direction or requirement (including, without limitation, any of the foregoing
which relate to environmental standards or controls, energy regulations and
occupational, safety and health standards or controls) of any arbitrator, court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its Property or to which such Person or any of its Property is
subject.
"Reserve Percentage" means the maximum reserve requirement, as determined
------------------
by Agent (including without limitation any basic, supplemental, marginal,
emergency or similar reserves), expressed as a percentage and rounded to the
next higher 0.01%, which would then apply to a member bank of the Federal
Reserve System under Regulation D, with deposits comparable in amount to those
held by Agent, with respect to "Eurocurrency liabilities" (as such term is
defined in Regulation D). If such reserve requirement shall change after the
date hereof, the Reserve Percentage shall be automatically increased or
decreased, as the case may be, from time to time as of the effective time of
each such change in such reserve requirement.
"Risk Rating" means the risk rating of a Mortgage Loan determined by the
-----------
underwriting guidelines of Borrower or other applicable standards of an Investor
to which such Mortgage Loan is to be sold by the Company under a Take-Out
Commitment, provided that such underwriting guidelines or other applicable
standards comply with industry standards in the sole judgment of Agent.
"Security Agreement" means the Security and Collateral Agency Agreement
------------------
between Borrower and Agent in the form attached hereto as Exhibit "E", as the
same may from time to time be further supplemented, amended or restated.
"Security Instrument" means (i) the Security Agreement and (ii) such other
-------------------
executed documents as are or may be necessary to grant to Agent a perfected
first prior and continuing security interest in and to all Mortgage Collateral,
and any and all other agreements or instruments now or hereafter executed and
delivered
by Borrower in connection with, or as security for the payment or performance
of, all or any of the Obligations, including Borrower's obligations under the
Notes and this Agreement, as such agreements may be amended, modified or
supplemented from time to time.
"Servicing Agreements" means all agreements between Borrower and Persons
--------------------
other than Borrower pursuant to which Borrower undertakes to service Mortgage
Loans.
"Servicing Records" means all contracts and other documents, books, records
-----------------
and other information (including without limitation, computer programs, tapes,
discs, punch cards, data processing software and related property and rights)
maintained with respect to the Servicing Rights.
"Servicing Rights" means all of Borrower's right, title and interest in and
----------------
under the Servicing Agreements, including, without limitation, the rights of
Borrower to income and reimbursement thereunder.
"Settlement Account" means the non-interest bearing demand checking account
------------------
established by Borrower with Agent to be used for (i) the deposit of proceeds
from the sale of Mortgage Collateral; (ii) the payment of the Obligations;
provided that (i) the Settlement Account shall be pledged to Agent for the
benefit of Lenders, (ii) Borrower shall not be entitled to withdraw funds from
the Settlement Account, (iii) as long as no Event of Default has occurred and is
continuing, to the extent that the deposit of proceeds from the sale of Mortgage
Loans exceeds the Unit Collateral Value of such Mortgage Loans and any payments
then due and owing under this Agreement or the Notes, Agent shall transfer such
excess amount to the Operating Account, and (iv) if at any time the aggregate
amount of funds in the Settlement Account is insufficient to pay any and all
payments due and owing under this Agreement or the Notes (such amount being
referred to as the "Deficiency"), Agent shall transfer an amount equal to the
Deficiency from the Operating Account to the Settlement Account.
"Submission List" means a list in the form of Schedule I to the form of
---------------
Borrowing Request.
"Subordinated Debt" means unsecured Indebtedness of Borrower which matures
-----------------
at least twelve (12) months after the Drawdown Termination Date and is subject
to a subordination agreement in form and substance satisfactory to Agent in its
sole and absolute discretion, which subordination agreement shall provide for,
among other things, a prohibition on (i) principal payments of such Indebtedness
until the Obligations are paid in full and all commitments of Lenders to advance
funds hereunder have terminated, (ii) interest payments on such Indebtedness if
a Default is then continuing or would arise as a result of such payment and
(iii) the exercise of any rights or remedies by the subordinating creditor
against Borrower, Guarantor (if Guarantor is not the subordinating creditor) or
any of the Collateral until such time as the Obligations have been paid in full.
"Subsidiary" means, with respect to any Person, any corporation,
----------
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
"Super-Jumbo Loan" means a Mortgage Loan for which the original principal
----------------
amount of the underlying Mortgage Note is greater than $600,000 but does not
exceed $1,000,000.
"Swing-Line Loan" means a loan made by Guaranty Federal to Borrower
---------------
pursuant to Section 2.01(c).
"Take-Out Commitment" means (a) with respect to any Mortgage Loan which has
-------------------
a Risk Rating of A, a written commitment of an Investor to purchase such
Mortgage Loan on terms satisfactory to Agent, in its sole discretion and, (b)
with respect to any Mortgage Loan which has a Risk Rating of B or C, a written
master commitment of an Investor to purchase Mortgage Collateral on terms
satisfactory to Agent, in its sole discretion.
"Termination Event" means (1) the occurrence with respect to any ERISA Plan
-----------------
of a Reportable Event, (2) the withdrawal of the Borrower or any ERISA Affiliate
from a plan during a plan year in which it was a "substantial employer", as
defined in Section 4001(a)(2) of ERISA, (3) the distribution to affected parties
of a notice of intent to terminate any ERISA Plan or the treatment of any ERISA
Plan amendment as a termination under Section 4041 of ERISA, (4) the institution
of proceedings to terminate any ERISA Plan by the PBGC under Section 4042 of
ERISA, or (5) any other event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any ERISA Plan.
"Total Liabilities" of any Person means, as of any date, all amounts which
-----------------
would be included as liabilities on a balance sheet of such Person as of such
date prepared in accordance with GAAP; provided however, that as to the
Subordinated Debt only, the Total Liabilities of Borrower shall include fifty
percent (50%) of the aggregate principal amount outstanding as of such date of
the Subordinated Debt rather than the entire Subordinated Debt.
"Tranche A Borrowing Base" means at any date all Eligible Tranche A
------------------------
Mortgage Loans which have been delivered to and held by Agent or otherwise
identified as Mortgage Collateral.
"Tranche A Loan" has the meaning given it in Section 2.01(a).
--------------
"Tranche B Borrowing Base" means at any date all Eligible Tranche B
------------------------
Mortgage Loans which have been delivered to and held by Agent or otherwise
identified as Mortgage Collateral.
"Tranche B Loan" has the meaning given it in Section 2.01(b).
--------------
"Tranche B Sublimit means twenty-five percent (25%) of the Commitment.
------------------
"UCC" means the Texas Uniform Commercial Code, as the same may hereafter be
---
amended.
"Unit Collateral Value" means
---------------------
(a) with respect to each Eligible Tranche A Mortgage Loan included in the
Tranche A Borrowing Base, ninety-seven percent (97%) of the least of: (i) the
outstanding principal balance of the Mortgage Note constituting such Eligible
Tranche A Mortgage Loan; (ii) the actual out-of-pocket cost to Borrower of such
Eligible Tranche A Mortgage Loan minus the amount of principal paid under such
Eligible Tranche A Mortgage Loan and delivered to Agent for application to the
prepayment of the Loans; (iii) the amount at which an Investor has committed to
purchase the Eligible Tranche A Mortgage Loan pursuant to a Take-Out Commitment
not to exceed 100% of the original principal balance of the Mortgage Note; or
(iv) the Market Value of the Mortgage Note constituting such Eligible Tranche A
Mortgage Loan; and
(b) with respect to each Eligible Tranche B Mortgage Loan included in the
Tranche B Borrowing Base, ninety percent (90%) of the least of: (i) the
outstanding principal balance of the Mortgage Note constituting such Eligible
Tranche B Mortgage Loan; (ii) the amount at which an Investor has committed to
purchase the Eligible Tranche B Mortgage Loan pursuant to a Take-Out Commitment
not to exceed 100% of the original principal balance of the Mortgage Note; and
(iii) the Market Value of the Mortgage Note constituting such Eligible Tranche B
Mortgage Loan.
Section 1.02 Other Definitional Provisions.
-----------------------------
(a) Unless otherwise specified therein, all terms defined in this Agreement
shall have the above-defined meanings when used in the Notes or any other Loan
Document, certificate, report or other document made or delivered pursuant
hereto.
(b) Each term defined in the singular form in Section 1.01 shall mean the
plural thereof when the plural form of such term is used in this Agreement, the
Notes or any other Loan Document, certificate, report or other document made or
delivered pursuant hereto, and each term defined in the plural form in Section
1.01 shall mean the singular thereof when the singular form of such term is used
herein or therein.
(c) The words "hereof," "herein," "hereunder" and similar terms when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and section, subsection, schedule and
exhibit references herein are references to sections, subsections, schedules and
exhibits to this Agreement unless otherwise specified. The word "or" is not
exclusive, and the word "including" (in its various forms) means "including
without limitation.
(d) Unless the context otherwise requires or unless otherwise provided
herein the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments and restatements of such agreement,
instrument or document, provided that nothing contained in this section shall be
construed to authorize any such renewal, extension, modification, amendment or
restatement.
(e) As used herein, in the Notes or in any other Loan Document,
certificate, report or other document made or delivered pursuant hereto,
accounting terms relating to any Person and not specifically defined in this
Agreement or therein shall have the respective meanings given to them under
GAAP.
Section 1.03 Exhibits and Schedules. All Exhibits and Schedules attached
----------------------
to this Agreement are a part hereof for all purposes.
Section 1.04 Calculations and Determinations. All calculations under the
-------------------------------
Loan Documents of interest and of fees shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of 360 days.
Each determination by Agent or a Lender of amounts to be paid under Sections
2.08 through 2.11 or any other matters which are to be determined hereunder by
Agent or a Lender (such as any Eurodollar Rate, Adjusted Eurodollar Rate,
Business Day, or Reserve Percentage) shall, in the absence of manifest error, be
conclusive and binding. Unless otherwise expressly provided herein or unless
Agent otherwise consents all financial statements and reports furnished to Agent
or any Lender hereunder shall be prepared and all financial computations and
determinations pursuant hereto shall be made in accordance with GAAP.
ARTICLE II
----------
AMOUNT OF TERMS OF CREDITS
--------------------------
Section 2.01 Commitment and Loans.
--------------------
(a) Tranche A Loans. Subject to the terms and conditions contained in
---------------
this Agreement, each Lender agrees to make loans ("Tranche A Loans") to Borrower
on a revolving credit basis from time to time on any Business Day from the date
of this Agreement through the Drawdown Termination Date. Each request for
Tranche A Loans pursuant to a Borrowing Request shall be in an aggregate amount
of not less than $50,000. The aggregate principal amount of any Lender's
Tranche A Loans at any time outstanding (after giving effect to the other
transactions contemplated by the Borrowing Request pursuant to which a Tranche A
Loan is requested) shall not exceed the lesser of: (1) such Lender's Percentage
Share of the Collateral Value of the Tranche A Borrowing Base or (2) such
Lender's Percentage Share of the Commitment. At no time shall the aggregate
amount of all Loans outstanding at any time exceed the lesser of (1) the
Aggregate Collateral Value of the Borrowing Base, and (2) the Commitment at such
time.
(b) Tranche B Loans. Subject to the terms and conditions contained in
---------------
this Agreement, each Lender agrees to make loans ("Tranche B Loans") to Borrower
to finance the draws advanced from time to time by Borrower pursuant to the
Eligible Tranche B Mortgage Loans. Tranche B Loans shall be made on a revolving
credit basis from time to time on any Business Day from the date of this
Agreement through the Drawdown Termination Date. Each request for Tranche B
Loans pursuant to a Borrowing Request shall be in an aggregate amount of not
less than $10,000. The aggregate principal amount of any Lender's Tranche B
Loans at any time outstanding (after giving effect to the other transactions
contemplated by the Borrowing Request pursuant to which a Tranche B Loan is
requested) shall not exceed the lesser of: (1) such Lender's Percentage Share of
the Collateral Value of the Tranche B Borrowing Base or (2) such Lender's
Percentage Share of the Tranche B Sublimit. At no time shall the aggregate
amount of all Tranche B Loans outstanding at any time exceed the lesser of (1)
the Collateral Value of the Tranche B Borrowing Base, and (2) the Tranche B
Sublimit.
(c) Discretionary Swing-Line Loans. Subject to the terms and conditions of
------------------------------
this Agreement, until the Drawdown Termination Date, Guaranty Federal, in its
sole discretion, may lend to Borrower at such times and in such amounts as
Borrower shall request, up to an aggregate principal amount outstanding equal to
$30,000,000. Guaranty Federal will not make a Swing-Line Loan if either (i)
after giving effect thereto, the aggregate amount of all Loans outstanding would
exceed the lesser of (1) the Aggregate Collateral Value of the Borrowing Base or
(2) the Commitment or (ii) one or more of the conditions precedent set forth in
Article 3 for the making of any Loan have not been satisfied.
Section 2.02 Promissory Notes; Interest on the Notes. The Loans made by
---------------------------------------
each Lender pursuant to this Article II shall be evidenced by a Note payable to
the order of such Lender. Each Lender's Loans (exclusive of any past due
principal) from time to time outstanding shall bear interest on each day
outstanding at the Applicable Rate in effect on such day; provided, however,
that the portion of such Lender's Loans which is equal to the Balance Funded
Amount for such Lender computed for the immediately preceding Balance
Calculation Period, shall bear interest on each day outstanding at the Balance
Funded Rate. All past due principal of and past due interest on each Lender's
Loans shall bear interest on each day at the Late Payment Rate in effect on such
day.
Section 2.03 Notice and Manner of Obtaining Loans. Borrower shall give
------------------------------------
Agent notice of each request for Tranche A Loans or Tranche B Loans pursuant to
a Borrowing Request which is received by Agent not later than 11:00 a.m.
(Dallas, Texas) time, on the day on which such Loans are to be advanced. Each
Borrowing Request shall constitute a request for both (1) a Swing-Line Loan to
be funded by Guaranty Federal and the Loans to be made by Lender to refinance
that Swing-Line Loan, and (2) if Guaranty Federal elects not to make a Swing-
Line Loan, the Loans actually requested by the text of the Borrowing Request to
be funded by the Lenders. If all conditions precedent to such Loan have been met
and Agent has notified each Lender that Guaranty Federal has elected not to make
a Swing-Line Loan pursuant to such Borrowing Request, each Lender will on the
date requested promptly remit to Agent at Agent's office in Dallas, Texas the
amount of such Lender's Tranche A Loan or Tranche B Loan, as applicable, in
immediately available dollars, and upon receipt of such funds, unless to its
actual knowledge any conditions precedent to such Loan have been neither met nor
waived as provided herein, Agent shall promptly make such Loan available to
Borrower by crediting the Funding Account with a like amount of immediately
available funds. Guaranty Federal shall, not later than 3:00 p.m. (Dallas, Texas
time) on the date on which it makes any Swing-Line Loan, deposit the amount
thereof into the Funding Account. Each Borrowing Request shall be irrevocable
and binding on Borrower. Unless Agent shall have received prompt notice from a
Lender that such Lender will not make available to Agent such Lender's Loan,
Agent may in its discretion assume that such Lender has made such Loan available
to Agent in accordance with this section and Agent may if it chooses, in
reliance upon such assumption, make such Loan available to Borrower. If and to
the extent such Lender shall not so make its Loan available to Agent, such
Lender and Borrower severally agree to pay or repay to Agent within three days
after demand the amount of such Loan together with interest thereon, for each
day from the date such amount is made available to Borrower until the date such
amount is paid or repaid to Agent, at (i) the Federal Funds Rate, if such Lender
is making such payment and (ii) the interest rate applicable at the time to the
other Loans made on such date, if Borrower is making such repayment; Agent shall
use its best efforts to demand any such amount from both such Lender and
Borrower, provided, that any failure by Agent to make any such demand on both
such Lender and Borrower shall not in any manner affect such Lender's and
Borrower's obligation to pay or repay such amount, with interest, as set forth
herein. The failure of any Lender to make any Loan to be made by it hereunder
shall not relieve any other Lender of its obligation hereunder, if any, to make
its Loan, but no Lender shall be responsible for the failure of any other Lender
to make any Loan to be made by such other Lender.
Section 2.04 Fees.
----
(a) In consideration of each Lender's commitment to make Tranche A Loans
and Tranche B Loans, Borrower will pay to Agent for the account of each Lender a
commitment fee determined on a daily basis by applying a rate of one-quarter of
one percent (0.25%) per annum on the Commitment on each day from the date of the
initial Loan until the Drawdown Termination Date. This commitment fee shall be
due and payable quarterly in advance beginning on the date of the initial Loan
and thereafter on the last day of each Fiscal Quarter.
(b) Borrower shall also pay to Agent for its own account, a collateral
handling fee and an agent's fee agreed to in that certain letter agreement dated
of even date herewith between Borrower and Agent.
Section 2.05 Mandatory Repayments.
--------------------
(a) If at any time the aggregate outstanding principal amount of
all Tranche A Loans exceeds the Collateral Value of the Tranche A Borrowing
Base, Borrower shall repay the amount of such excess within three (3) Business
Days after written notice thereof from Agent.
(b) If at any time the aggregate outstanding principal amount of all
Tranche B Loans exceeds the Collateral Value of the Tranche B Borrowing Base,
Borrower shall repay the amount of such excess within three (3) Business Days
after written notice thereof from Agent.
Section 2.06 Payments to Lenders. All payments of interest on the Notes,
-------------------
all payments of principal, including any principal payment made with proceeds of
Mortgage Collateral, and fees hereunder shall be made directly to Agent for the
account of the Lender to whom such payment is owed in federal or other
immediately available funds before 1:00 pm (Dallas, Texas time) on the
respective dates when due via wire transfer to the Settlement Account. Any
payment received by Agent after such time will be deemed to have been made on
the next following Business Day. Should any such payment become due and payable
on a day other than a Business Day, the maturity of such payment shall be
extended to the next succeeding Business Day, and, in the case of a payment of
principal or past due interest, interest shall accrue and be payable thereon for
the period of such extension as provided in the Loan Document under which such
payment is due. Each payment under a Loan Document shall be payable at the place
provided therein and, if no specific place of payment is provided, shall be
payable at the place of payment of the Notes. When Agent collects or receives
money on account of the Obligations, Agent shall distribute all money so
collected or received, and Agent and Lenders shall apply all such money so
distributed, as follows:
(a) first, for the payment of all Obligations which are then due, and
if such money is insufficient to pay all such Obligations, (i) first to any
reimbursements due Agent under Section 5.05, (ii) second to Guaranty
Federal for the payment of any outstanding Swing-Line Loans then due, (iii)
third if such payments are on account of the Tranche A Loans, to the
payment of the Tranche A Loans then due, or if such payments are on account
of the Tranche B Loans, to the payment of the Tranche B Loans then due, and
(iv) then to the partial payment of all other Obligations then due in
proportion to the amounts thereof, or as Lenders shall otherwise agree;
(b) then for the prepayment of amounts owing under the Loan Documents
if so specified by Borrower;
(c) then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and
(d) last, for the payment or prepayment of any other Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest. All distributions of
amounts described in any of subsections (b), (c) or (d) above shall be made by
Agent pro rata to Agent and each Lender then owed Obligations described in such
subsection in proportion to all amounts owed to all Lenders which are described
in such subsection.
Section 2.07 Refinancing of Swing-Line Loans.
-------------------------------
(a) Permitted Refinancings of Swing-Line Loans. Guaranty Federal, at any
------------------------------------------
time in its sole and absolute discretion, may, upon notice given to each other
Lender by not later than 12:00 noon (Dallas time) on any Business Day, request
that each Lender (including Guaranty Federal) make a Tranche A Loan or Tranche B
Loan, as applicable, in an aggregate amount equal to its Percentage Share of the
portion of the aggregate unpaid principal amount of any outstanding Swing-Line
Loans for the purpose of refinancing such Swing-Line Loans.
(b) Mandatory Refinancings of Swing-Line Loans. Not later than 12:00 noon
------------------------------------------
(Dallas time) on the penultimate Business Day of each week, Guaranty Federal
will notify each other Lender of the aggregate
amount of Swing-Line Loans which are then outstanding and the amount of the
Tranche A Loan or Tranche B Loan required to be made by each Lender (including
Guaranty Federal) to refinance such outstanding Swing-Line Loans (the aggregate
amount of Loans to be made by each Lender shall equal such Lender's Percentage
Share of such outstanding Swing-Line Loans).
(c) Lenders' Obligation to Fund Refinancings of Swing-Line Loans. Upon the
------------------------------------------------------------
giving of notices by Guaranty Federal under Section 2.07(a) or 2.07(b), each
Lender (including Guaranty Federal) shall promptly remit to Agent at Agent's
office in Dallas, Texas, the amount equal to its Percentage Share of the
aggregate principal amount of Swing-Line Loans to be refinanced, in immediately
available funds, by not later than 3:00 p.m. (Dallas time) on the date such
notice was received, provided, however, that a Lender shall not be obligated to
make any such Tranche A Loan or Tranche B Loan, unless (A) Guaranty Federal
believed in good faith that all conditions to making the subject Swing-Line Loan
were satisfied at the time such Swing-Line Loan was made, or (B) if the
conditions to such Swing-Line Loan were not satisfied, the satisfaction of such
conditions have been waived in a writing by Majority Lenders in accordance with
the provisions of this Agreement. The proceeds of Tranche A Loans and Tranche B
Loans made pursuant to the preceding sentence shall be paid to Guaranty Federal
(and not to Borrower) and applied to the payment of principal of the outstanding
Swing-Line Loans, and Borrower authorizes Agent to charge the Operating Account
or any other account (other than escrow or custodial accounts) maintained by it
with Agent (up to the amount available therein) in order to immediately pay
Guaranty Federal the principal amount of such Swing-Line Loans to the extent
amounts received from the other Lenders are not sufficient to repay in full the
principal of the outstanding Swing-Line Loans requested or required to be
refinanced. Upon the making of a Tranche A Loan or Tranche B Loan by a Lender
pursuant to this Section 2.07(c), the amount so funded shall become due under
such Lender's Note and the outstanding principal amount of the Swing-Line Loans
shall be correspondingly reduced. If any portion of any such amount paid to
Guaranty Federal should be recovered by or on behalf of Borrower from Guaranty
Federal in bankruptcy or otherwise, the loss of the amount so recovered shall be
ratably shared among all the Lenders in the manner contemplated by Section 9.06.
Each Lender's obligation to make Tranche A Loans and Tranche B Loans pursuant to
this Section 2.07(c) shall, subject to the proviso to the first sentence of this
Section 2.07(c), be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, (1) any setoff, counterclaim,
recoupment, defense or other right which such Lender may have against Guaranty
Federal, Borrower or anyone else for any reason whatsoever; (2) the occurrence
or continuance of an Event of Default or Default; (3) any adverse change in the
condition (financial or otherwise) of Borrower; (4) any breach of this Agreement
by Borrower, 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 Tranche A Loan or Tranche B
Loan pursuant to this Section 2.07(c) if, after giving effect thereto, the
outstanding principal balance of such Lender's Loans would exceed its Percentage
Share of the Commitment.
Section 2.08 Capital Reimbursement. If either (a) the introduction or
---------------------
implementation of or the compliance with or any change in or in the
interpretation of any law, rule or regulation, or (b) the introduction or
implementation of or the compliance with any request, directive or guideline
from any central bank or other governmental authority (whether or not having the
force of law) affects or would affect the amount of capital required or expected
to be maintained by any Lender or any corporation controlling such Lender, then,
upon demand by such Lender, Borrower will pay to Agent for the account of such
Lender, from time to time as specified by such Lender, such additional amount or
amounts which such Lender shall determine to be appropriate to compensate such
Lender or any corporation controlling such Lender in light of such
circumstances, to the extent that such Lender reasonably determines that the
amount of any such capital would be increased or the rate of return on any such
capital would be reduced by or in whole or in part based on the face amount of
such Lender's Note or commitments under this Agreement.
Section 2.09 Increased Cost of Loans. If any applicable domestic or
-----------------------
foreign law, treaty, rule or regulation (whether now in effect or hereinafter
enacted or promulgated, including Regulation D) or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law):
(a) shall change the basis of taxation of payments to any Lender of any
principal, interest, or other amounts attributable to any Loan bearing interest
at the Eurodollar Rate (a "Eurodollar Loan") or otherwise due under this
Agreement in respect of any Eurodollar Loan (other than taxes imposed on the
overall net income of such Lender or any lending office of such Lender by any
jurisdiction in which such Lender or any such lending office is located); or
(b) shall change, impose, modify, apply or deem applicable any reserve,
special deposit or similar requirements in respect of any Eurodollar Loan
(excluding those for which such Lender is fully compensated pursuant to
adjustments made in the definition of any Adjusted Eurodollar Rate) or against
assets of, deposits with or for the account of, or credit extended by, such
Lender; or
(c) shall impose on any Lender or the interbank Eurocurrency deposit
market any other condition relating to any Eurodollar Loan, the result of which
is to increase the cost to any Lender of funding or maintaining any Eurodollar
Loan or to reduce the amount of any sum receivable by any Lender in respect of
any Eurodollar Loan by an amount deemed by such Lender to be material,
then such Lender shall promptly notify Agent and Borrower in writing of the
happening of such event and Borrower shall upon demand pay to Agent for the
account of such Lender such additional amount or amounts as will compensate such
Lender for such event (on an after-tax basis, taking into account any taxes on
such compensation).
Section 2.10 Availability. If (a) any change in applicable laws,
------------
treaties, rules or regulations or in the interpretation or administration
thereof of or in any jurisdiction whatsoever, domestic or foreign, shall make it
unlawful or impracticable for any Lender to fund or maintain Loans which bear
interest at the Eurodollar Rate, or shall materially restrict the authority of
any Lender to purchase or take offshore deposits of dollars (i.e.,
"eurodollars"), or (b) any Lender determines that matching deposits appropriate
to fund or maintain loans bearing interest at the Eurodollar Rate are not
available to it, or (c) any Lender determines that the formula for calculating
the Adjusted Eurodollar Rate does not fairly reflect the cost to any Lender of
making or maintaining loans based on such rate, then, upon notice by such Lender
to Borrower and Agent, all Loans of such Lender which are then outstanding or
are then the subject of any Borrowing Request and which cannot lawfully or
practicably be maintained or funded based on the Eurodollar Rate shall
immediately begin bearing interest at the Back-Up Rate. Borrower agrees to
indemnify each Lender and hold it harmless against all costs, expenses, claims,
penalties, liabilities and damages which may result from any such change in law,
treaty, rule, regulation, interpretation or administration. Such indemnification
shall be on an after-tax basis, taking into account any taxes imposed on the
amounts paid as indemnity.
Section 2.11 Reimbursable Taxes. Borrower covenants and agrees that:
------------------
(a) Borrower will indemnify Agent and each Lender against and reimburse
Agent and each Lender for all present and future income, stamp and other taxes,
levies, costs and charges whatsoever imposed, assessed, levied or collected on
or in respect of this Agreement or any Loans bearing interest at the Eurodollar
Rate (whether or not legally or correctly imposed, assessed, levied or
collected), excluding, however, any taxes imposed on or measured by the overall
net income of Agent or such Lender or any lending office of Agent or such Lender
by any jurisdiction in which Agent or such Lender or any lending office is
located (all such non-excluded taxes, levies, costs and charges being
collectively called "Reimbursable Taxes" in this section). Such indemnification
shall be on an after-tax basis, taking into account any taxes imposed on the
amounts paid as indemnity.
(b) All payments on account of the principal of, and interest on, each
Lender's Loan and each Lender's Note, and all other amounts payable by Borrower
to Agent and each Lender hereunder, shall be made in full without set-off or
counterclaim and shall be made free and clear of and without deductions or
withholdings of any nature by reason of any Reimbursable Taxes, all of which
will be for the account of Borrower. In the event of Borrower being compelled by
law or other regulations to make any such deduction or withholding from any
payment to Agent or any Lender, Borrower shall pay on the due date of such
payment, by way of additional interest, such additional amounts as are needed to
cause the amount receivable by Agent or such Lender after such deduction or
withholding to equal the amount which would have been receivable in the absence
of such deduction or withholding. If Borrower should make any deduction or
withholding as aforesaid, Borrower shall within 60 days thereafter forward to
Agent or such Lender an official receipt or other official document evidencing
payment of such deduction or withholding.
Section 2.12 Notice of Certain Events; Change of Applicable Lending Office.
-------------------------------------------------------------
Each Lender agrees to provide written notice to Borrower of the occurrence of
any event (a "Triggering Event") described in Sections 2.08, 2.09, 2.10 or 2.11,
which would give rise to any costs, expenses, claims, penalties, liabilities,
damages or Reimbursable Taxes, within sixty (60) days of the date such Lender
first learns of the occurrence of such Triggering Event (the "Trigger Date"). If
any Lender fails to provide written notice to Borrower of a Triggering Event in
accordance with the immediately preceding sentence, Borrower shall be liable for
only those costs, expenses, claims, penalties, liabilities, damages or
Reimbursable Taxes with respect to such Lender which arose during the period
beginning 120 days prior to the Trigger Date and ending on the Trigger Date.
ARTICLE III
-----------
CONDITIONS PRECEDENT
--------------------
The obligation of each Lender to make Loans hereunder is subject to
fulfillment of the conditions precedent stated in this Article III.
Section 3.01 Initial Borrowing. The obligation of each Lender to fund any
-----------------
Loan hereunder shall be subject to, in addition to the conditions precedent
specified in Section 3.02, delivery to Agent of the following (each of the
following documents being duly executed and delivered and in form and substance
satisfactory to Agent, and, with the exception of the Notes, each in a
sufficient number of originals that Agent, its counsel and each Lender may have
an executed original of each document):
(a) an executed counterpart of this Agreement and of all instruments, and
opinions referred to in this Article III not theretofore delivered (except the
Borrowing Request which is to be delivered at the time provided in Subsection
3.02(a) hereof);
(b) the Notes;
(c) the Security Agreement dated of even date herewith;
(d) the Guaranty dated of even date herewith;
(e) a certificate of the Secretary or Assistant Secretary of each of
Borrower and Guarantor setting forth (i) resolutions of its board of directors
authorizing the execution, delivery, and performance of the Loan Documents to
which it is a party and identifying the officers authorized to sign such
instruments, (ii) specimen signatures of the officers so authorized, and (iii)
articles of incorporation of each of Borrower and Guarantor certified by the
appropriate Secretary of State as of a recent date, and (iv) bylaws of each of
Borrower and Guarantor, certified as being accurate and complete;
(f) a certificate of the existence and good standing for Borrower and
Guarantor in their state of incorporation dated no earlier than August 20, 1997;
and
(g) an opinion of counsel for Borrower and Guarantor in the form of
Exhibit G;
(h) a Borrowing Base Certificate dated as of the date of the first
Borrowing, certified by the chief financial officer of Borrower; and
(i) such other documents as Agent may reasonably request at any time at or
prior to the date of the initial Borrowing hereunder.
Section 3.02 All Borrowings. The obligation of each Lender to fund any
--------------
Loan pursuant to this Agreement is subject to the following further conditions
precedent:
(a) Borrower shall deliver to Agent a Borrowing Request accompanied by the
Required Mortgage Documents or, if applicable, an Agreement to Pledge;
(b) all Property in which Borrower has granted a Lien to Agent shall have
been physically delivered to the possession of Agent or a bailee acceptable to
Agent to the extent that such possession is required under this Agreement or
necessary or appropriate for the purpose of perfecting the Lien of Agent in such
collateral;
(c) the representations and warranties of each Related Person contained in
this Agreement or any Security Instrument (other than those representations and
warranties which are by their terms limited to the date of the agreement in
which they are initially made) shall be true and correct in all material
respects on and as of the date of such Loan;
(d) no Default or Event of Default shall have occurred and be continuing
and no change or event which constitutes a Material Adverse Effect shall have
occurred as of the date of such Loan;
(e) the Funding Account, the Settlement Account and the Operating Account
shall be established and in existence;
(f) the making of such Loan shall not be prohibited by any Governmental
Requirement;
(g) the delivery to Agent of such other documents and opinions of counsel,
including such documents as may be necessary or desirable to perfect or maintain
the priority of any Lien granted or intended to be granted hereunder or
otherwise and including favorable written opinions of counsel with respect
thereto, as Agent may reasonably request; and
(h) the aggregate amount of all Loans outstanding, after giving effect to
such Loan, does not exceed the lesser of (1) Aggregate Collateral Value of the
Borrowing Base and (2) the Commitment.
Delivery to Agent of a Borrowing Request shall be deemed to constitute a
representation and warranty by Borrower on the date thereof and on the date on
which the Loan is made, if any, set forth therein as to the facts specified in
Subsections (c) and (d) of this Section 3.02.
ARTICLE IV
----------
BORROWER REPRESENTATIONS AND WARRANTIES
---------------------------------------
Each of Borrower and Guarantor represents and warrants as follows:
Section 4.01 Organization and Good Standing. Each Related Person (a) is a
------------------------------
corporation duly incorporated and existing in good standing under the laws of
the jurisdiction of its incorporation, (b) is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which its failure to be
so qualified could have a Material Adverse Effect, (c) has the corporate power
and authority to own its properties and assets and to transact the business in
which it is engaged and is or will be qualified in those states wherein it
proposes to transact business in the future and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, have a Material Adverse Effect.
Section 4.02 Authorization and Power. Each Related Person has the
-----------------------
corporate power and requisite authority to execute, deliver and perform the Loan
Documents to which it is a party; each Related Person is duly authorized to and
has taken all corporate action necessary to authorize it to, execute, deliver
and perform the Loan Documents to which it is a party and is and will continue
to be duly authorized to perform such Loan Documents.
Section 4.03 No Conflicts or Consents. Neither the execution and delivery
------------------------
by any Related Person of the Loan Documents to which it is a party, nor the
consummation of any of the transactions herein or therein contemplated, nor
compliance with the terms and provisions hereof or with the terms and provisions
thereof, will (a) materially contravene or conflict with any Requirement of Law
to which any Related Person is subject, or any indenture, mortgage, deed of
trust, or other agreement or instrument to which any Related Person is a party
or by which any Related Person may be bound, or to which the Property of any
Related Person may be subject, or (b) result in the creation or imposition of
any Lien, other than the Lien of the Security Agreement, on the Property of any
Related Person. All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, from any
Governmental Authority that are necessary in connection with the transactions
contemplated by the Loan Documents have been obtained.
Section 4.04 Enforceable Obligations. This Agreement, the Notes and the
-----------------------
other Loan Documents to which any Related Person is a party are the legal, valid
and binding obligations of such Related Person, enforceable in accordance with
their respective terms, except as limited by Debtor Laws.
Section 4.05 Priority of Liens. Upon delivery to Agent of each Borrowing
-----------------
Request, Agent shall have valid, enforceable, perfected, first priority Liens
and security interests in each Mortgage Note identified therein, except to the
extent that the requirements for perfection have not been completed with respect
to Eligible Mortgage Loans for which Agent has received an Agreement to
Pledge.
Section 4.06 No Liens. Borrower has good and indefeasible title to the
--------
Mortgage Collateral free and clear of all Liens and other adverse claims of any
nature, other than Liens in the Mortgage Collateral in favor of Agent.
Section 4.07 Financial Condition of Borrower and Guarantor. Each of
---------------------------------------------
Borrower and Guarantor has delivered to Agent and each Lender copies of their
annual audited balance sheet as of December 31, 1996, in the case of Borrower,
and as of December 31, 1996 in the case of Guarantor, and the related statements
of income, stockholders' equity and cash flows for the period ended such date;
such financial statements fairly present the financial condition of each of
Borrower and Guarantor, respectively as of such date and the results
of operations of Borrower for the period ended on such date and have been
prepared in accordance with GAAP, subject to normal year-end adjustments; as of
the date thereof, there were no obligations, liabilities or Indebtedness
(including material contingent and indirect liabilities and obligations or
unusual forward or long-term commitments) of Borrower which are not reflected in
such financial statements and no change which constitutes a Material Adverse
Effect has occurred in the financial condition or business of (i) Borrower since
June 30, 1997 and (ii) Guarantor since June 30, 1997. Borrower has also
delivered to Agent and each Lender management reports for the months ended June
30, 1997; such reports fairly and accurately present Borrower's commitment
position, pipeline position, servicing and production as of the end of such
months and for the fiscal year to date for the periods ending on such dates.
Guarantor has also delivered to Agent and each Lender its unaudited quarterly
balance sheet for the period ending June 30, 1997; such report fairly and
accurately presents Guarantor's financial condition for the fiscal period ending
on such date.
Section 4.08 Full Disclosure. There is no material fact that Borrower or
---------------
Guarantor has not disclosed to Agent and each Lender which could adversely
affect the properties, business, prospects or condition (financial or otherwise)
of the Related Persons, or could adversely affect the Mortgage Collateral or the
Servicing Rights. To the best knowledge of each of Borrower and Guarantor,
neither the financial statements referred to in Section 4.07 hereof, nor any
Borrowing Request, officer's certificate or statement delivered by any Related
Person to Agent and each Lender in connection with this Agreement, contains any
untrue statement of material fact.
Section 4.09 No Default. No Related Person is in default under any loan
----------
agreement, mortgage, security agreement or other material agreement or
obligation to which it is a party or by which any of its Property is bound.
Section 4.10 No Litigation. There are no material actions, suits or
-------------
legal, equitable, arbitration or administrative proceedings pending, or to the
knowledge of Borrower or Guarantor threatened, against any Related Person the
adverse determination of which could constitute a Material Adverse Effect.
Section 4.11 Taxes. All tax returns required to be filed by each Related
-----
Person in any jurisdiction have been filed and all taxes, assessments, fees and
other governmental charges upon each Related Person or upon any of its
properties, income or franchises have been paid prior to the time that such
taxes could give rise to a Lien thereon, unless protested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been established on the books of such Related Person. No Related
Person has any knowledge of any proposed tax assessment against any Related
Person.
Section 4.12 Principal Office, etc. The principal office, chief executive
----------------------
office and principal place of business of each Related Person is at the address
set forth in Section 10.01.
Section 4.13 Compliance with ERISA. No Related Person nor any ERISA
---------------------
Affiliate of any Related Person currently maintains, contributes to, is required
to contribute to or has any liability, whether absolute or contingent, with
respect to an ERISA Plan. With respect to all other employee benefit plans
maintained or contributed to by each Related Person, each Related Person is in
material compliance with ERISA.
Section 4.14 Subsidiaries. No Related Person presently has any Subsidiary
------------
or owns any stock in any other corporation or association except those listed in
Exhibit "H". As of the date hereof, each Related Person owns, directly or
indirectly, the equity interest in each of its Subsidiaries which is indicated
in Exhibit "H".
Section 4.15 Indebtedness. Borrower has no indebtedness outstanding other
------------
than the Indebtedness permitted by Section 6.02.
Section 4.16 Permits, Patents, Trademarks, etc.
----------------------------------
(a) Each Related Person has all permits and licenses necessary for the
operation of its business.
(b) Each Related Person owns or possesses (or is licensed or otherwise has
the necessary right to use) all patents, trademarks, service marks, trade names
and copyrights, technology, know-how and processes, and all rights with respect
to the foregoing, which are necessary for the operation of its business, without
any known material conflict with the rights of other. The consummation of the
transactions contemplated hereby will not alter or impair in any material
respect any of such rights of each Related Person.
Section 4.17 Status Under Certain Federal Statutes. No Related Person is
-------------------------------------
(a) a "holding company" or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, (b) a "public utility", as such term is defined in the Federal
Power Act, as amended, (c) an "investment company", or a company "controlled" by
an "investment company", within the meaning of the Investment Company Act of
1949, as amended or (d) a "rail carrier", or a "person controlled by or
affiliated with a rail carrier", within the meaning of Title 49, U.S.C., and no
Related Person is a "carrier" to which 49 U.S.C. (S)11301(b)(1) is applicable.
Section 4.18 Securities Act. No Related Person has issued any
--------------
unregistered securities in violation of the registration requirements of the
Securities Act of 1933, as amended, or of any other Requirement of Law, and is
not violating any rule, regulation, or requirement under the Securities Act of
1933, as amended, or the Securities and Exchange Act of 1934, as amended. No
Related Person is required to qualify an indenture under the Trust Indenture Act
of 1939, as amended, in connection with its execution and delivery of the
Notes.
Section 4.19 Pollution Control. Each Related Person is in compliance
-----------------
with, and to the best of each Related Person's knowledge after due inquiry, each
Related Person has, at all times since its incorporation, been in compliance
with, all Requirements of Law relating to pollution control (a) in the United
States and the State of Texas and (b) in each other jurisdiction where it is
presently doing business.
Section 4.20 No Approvals Required. Other than consents and approvals
---------------------
previously obtained and actions previously taken, neither the execution and
delivery of this Agreement, the Notes and the other Loan Documents to which any
Related Person is a party, nor the consummation of any of the transactions
contemplated hereby or thereby requires the consent or approval of, the giving
of notice to, or the registration, recording or filing by any Related Person of
any document with, or the taking of any other action in respect of, any
Governmental Authority which has jurisdiction over each Related Person or any of
its Property, except for (a) the filing of the Mortgages, Uniform Commercial
Code financing statements and other similar filings to perfect the interest of
Agent in the Collateral, and (b) such other consents, approvals, notices,
registrations, filings or action as may be required in the ordinary course of
business of the Related Persons in connection with the performance of the
obligations of the Related Persons hereunder.
Section 4.21 Survival of Representations. All representations and
---------------------------
warranties by each of Borrower and Guarantor herein shall survive delivery of
the Notes and the funding of the Borrowings, and any investigation at any time
made by or on behalf of Agent or any Lender shall not diminish the right of
Agent or such Lender to rely thereon.
Section 4.22 Individual Mortgage Loans. Borrower hereby represents with
-------------------------
respect to each Mortgage Note and Mortgage Loan that is part of the
Collateral:
(a) Borrower has good and marketable title to each Mortgage Note and
Mortgage, was the sole owner thereof and had full right to pledge the
Mortgage Loan to Agent free and clear of any other Lien except any such
Lien which has been disclosed to Agent in writing and which is permitted
hereunder;
(b) To the best knowledge of Borrower, there is no default, breach,
violation or event of acceleration existing under any Mortgage or the
related Mortgage Note and there is no event which, with the passage of time
or with notice and/or the expiration of any grace or cure period, would
constitute a default, breach, violation or event of acceleration and no
such default, breach, violation or event of acceleration has been waived;
(c) To the best of the knowledge of Borrower, the physical condition
of the Property subject to the Mortgage has not deteriorated since the date
of origination of the related secured Mortgage Loan (normal wear and tear
excepted) and there is no proceeding pending for the total or partial
condemnation of any Mortgaged Property;
(d) Each Mortgage contains customary and enforceable provisions such
as to render the rights and remedies of the holder thereof adequate for the
realization against the related Property subject to the Mortgage of the
benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii)
otherwise, by judicial foreclosure;
(e) Each Mortgage Loan is a first or second lien one-to-four-family
loan, and has been underwritten by the originator thereof in accordance
with such originator's then current underwriting guidelines;
(f) Each Mortgage Note (other than with respect to Eligible Tranche B
Mortgage Loans) is payable in monthly installments of principal and
interest, with interest payable in arrears, and requires a monthly payment
which is sufficient to amortize the original principal balance over the
original term and to pay interest at the related interest rate; and no
Mortgage Note (except for any Mortgage Note evidencing an Eligible Tranche
B Mortgage Loan) provides for any extension of the original term;
(g) Except for Eligible Manufactured Housing Mortgage Loans, no
Mortgage Loan is a loan in respect of the purchase of a Manufactured Home
or mobile home or the land on which a Manufactured Home or mobile home will
be placed;
(h) The origination practices used by the originator of the Mortgage
Loans and the collection practices used by the Borrower with respect to
each Mortgage Loan have been in all material respects legal, proper,
prudent and customary in the loan origination and servicing business;
(i) Each Mortgage Loan was originated in compliance with all
applicable laws and no fraud or misrepresentation was committed by any
Person in connection therewith; and
(j) Any Eligible Manufactured Housing Mortgage Loan originated in the
State of Texas, was originated pursuant to Chapter 6A of the Texas Consumer
Credit Code.
ARTICLE V
---------
AFFIRMATIVE COVENANTS
---------------------
Each Related Person shall at all times comply with the covenants contained
in this Article V, from the date hereof and for so long as any part of the
Obligations or the Commitment is outstanding unless Majority Lenders have agreed
otherwise.
Section 5.01 Financial Statements and Reports.
--------------------------------
(a) Borrower shall furnish to Agent and each Lender the following, all in
form and detail reasonably satisfactory to Majority Lenders:
(i) Promptly after becoming available, and in any event within ninety
(90) days after the close of each Fiscal Year of Borrower, the balance
sheet of Borrower as of the end of such year, and the related statements of
income, stockholders' equity and cash flows of Borrower for such year,
setting forth in each case in comparative form the corresponding figures
for the preceding Fiscal Year, accompanied by the related report of
independent certified public accountants, KPMG Peat Marwick or other
independent certified public accountants of national standing acceptable to
Majority Lenders which report shall be to the effect that such statements
have been prepared in accordance with GAAP applied on a basis consistent
with prior periods except for such changes in such principles with which
the independent public accountants shall have concurred;
(ii) Promptly after becoming available, and in any event within thirty
(30) days after the end of each month, including the twelfth month in the
Fiscal Year of Borrower, a balance sheet of Borrower as of the end of such
month and the related statements of income, stockholders' equity and cash
flows of Borrower for such month and the period from the first day of the
then current fiscal year of Borrower through the end of such month,
certified by the chief financial officer or other executive officer of
Borrower to have been prepared in accordance with GAAP applied on a basis
consistent with prior periods, subject to normal year-end adjustments;
(iii) Promptly upon receipt thereof, a copy of each other report
submitted to Borrower by independent accountants in connection with any
annual, interim or special audit of the books of Borrower;
(iv) Promptly and in any event within thirty (30) days after the
request of Agent at any time and from time to time, a certificate, executed
by the president or chief financial officer of Borrower, setting forth all
of Borrower's warehouse borrowings;
(v) Promptly and in any event within thirty (30) days after the end of
each calendar month in each Fiscal Year of Borrower (except the last), and
within fifteen (15) days after the completion of each year-end audit by
Borrower's independent public accountants, a completed Officer's
Certificate in the form of Exhibit "D" hereto, executed by the president,
chief financial officer or other executive officer of Borrower;
(vi) Promptly and in any event within thirty (30) days after the end
of each month, (A) a Borrowing Base Certificate, and (B) a management
report regarding (1) Borrower's pipeline and commitment position, including
amount and rate of committed Mortgage Loans and (2) Borrower's production
statistics, including type of product and origination source (retail or
correspondent) in each case in form and detail as reasonably required by
Agent, prepared as of the end of such month and for the Fiscal Year to
date; and
(vii) Such other information concerning the business, properties or
financial condition of any Related Person as Agent or any Lender may
reasonably request.
(b) Guarantor shall furnish to Agent and each Lender the following, all in
form and detail reasonably satisfactory to Majority Lenders:
(i) Promptly after becoming available, and in any event within ninety
(90) days after the close of each Fiscal Year of Guarantor, the balance
sheet of Guarantor as of the end of such year, and the related statements
of income, stockholders' equity and cash flows of Guarantor for such year,
setting forth in each case in comparative form the corresponding figures
for the preceding Fiscal Year, accompanied by the related report of
independent certified public accountants, KPMG Peat Marwick or other
independent certified public accountants of national standing acceptable to
Majority Lenders which report shall be to the effect that such statements
have been prepared in accordance with GAAP applied on a basis consistent
with prior periods except for such changes in such principles with which
the independent public accountants shall have concurred;
(ii) Promptly after becoming available, and in any event within forty-
five (45) days after the end of each Fiscal Quarter, including the last
Fiscal Quarter in the Fiscal Year of Guarantor, a copy Guarantor's 10-Q as
of the end of such Fiscal Quarter filed by Guarantor with the Securities
and Exchange Commission or any similar governmental authority, including a
balance sheet of Guarantor as of the end of such Fiscal Quarter and the
related statements of income, stockholders' equity and cash flows of
Guarantor for such Fiscal Quarter and the period from the first day of the
then current Fiscal Year of Guarantor through the end of such Fiscal
Quarter.
Section 5.02 Taxes and Other Liens. Each Related Person shall pay and
---------------------
discharge promptly all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or upon any of its Property as well as all
claims of any kind (including claims for labor, materials, supplies and rent)
which, if unpaid, might become a Lien upon any or all of its Property; provided,
however, each Related Person shall not be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
diligently conducted by or on behalf of such Related Person and if such Related
Person shall have set up reserves therefor adequate under GAAP.
Section 5.03 Maintenance. Each Related Person shall (i) maintain its
-----------
corporate existence, rights and franchises; (ii) observe and comply in all
material respects with all Governmental Requirements, and (iii) maintain its
Properties (and any Properties leased by or consigned to it or held under title
retention or conditional sales contracts) in good and workable condition at all
times and make all repairs, replacements, additions, betterments and
improvements to its Properties as are needful and proper so that the business
carried on in connection therewith may be conducted properly and efficiently at
all times.
Section 5.04 Further Assurances. Borrower shall, within three (3)
------------------
Business Days after the request of Agent, cure any defects in the execution and
delivery of the Notes, this Agreement or any other Loan Document and each
Related Person shall, at its expense, promptly execute and deliver to Agent upon
request all such other and further documents, agreements and instruments in
compliance with or accomplishment of the covenants and agreements of each
Related Person in this Agreement and in the other Loan Documents or to further
evidence and more fully describe the collateral intended as security for the
Notes, or to correct any omissions in this Agreement or the other Loan
Documents, or more fully to state the security for the obligations set out
herein or in any of the other Loan Documents, or to make any recordings, to file
any notices, or obtain any consents.
Section 5.05 Reimbursement of Expenses. Borrower shall pay (i) all
-------------------------
reasonable legal fees (including, without limitation, allocated costs for in-
house legal service) incurred by Agent in connection with the preparation,
negotiation or execution of this Agreement, the Notes and the other Loan
Documents and any amendments, consents or waivers executed in connection
therewith, (ii) legal fees (including without limitation, allocated costs for
in-house legal service), in an amount of $1,000 for each Lender (other than
Guaranty Federal) incurred by such Lender in connection with the preparation,
negation or execution of this Agreement, the Notes and the other Loan Documents,
(iii) all fees, charges or taxes for the recording or filing of the Security
Instruments, (iv) all out-of-pocket expenses of Agent in connection with the
legal administration of this Agreement, the Notes and the other Loan Documents,
including courier expenses incurred in connection with the Mortgage Collateral,
and (v) all amounts expended, advanced or incurred by Agent to satisfy any
obligation of Borrower under this Agreement or any of the other Loan Documents
or to collect the Notes, or to enforce the rights of Agent or any Lender under
this Agreement or any of the other Loan Documents or to collect the Note, or to
enforce the rights of Agent or any Lender under this Agreement or any of the
other Loan Documents, which amounts shall include all underwriting expenses,
collateral liquidation costs, court costs, attorneys' fees (including, without
limitation, for trial, appeal or other proceedings), fees of auditors and
accountants, and investigation expenses reasonably incurred by Agent or any
Lender in connection with any such matters, together with interest at the post-
maturity rate specified in the Note on each item specified in clause (i) through
(v) from thirty (30) days after the date of written demand or request for
reimbursement until the date of reimbursement.
Section 5.06 Insurance. Borrower shall maintain with financially sound
---------
and reputable insurers, insurance with respect to its Properties and business
against such liabilities, casualties, risks and contingencies and in such types
and amounts as is customary in the case of Persons engaged in the same or
similar businesses and similarly situated, including, without limitation, a
fidelity bond or bonds with financially sound and reputable insurers with such
coverage and in such amounts as is customary in the case of Persons engaged in
the same or similar businesses and similarly situated. The improvements on the
land covered by each Mortgage shall be kept continuously insured at all times by
responsible insurance companies against fire and extended coverage hazards under
policies, binders, letters, or certificates of insurance, with a standard
mortgagee clause in favor of Borrower and its assigns. Each such policy must be
in an amount equal to the lesser of the maximum insurable value of the
improvements or the original principal amount of the Mortgage Note, without
reduction by reason of any co-insurance, reduced rate contribution, or similar
clause of the policies or binders. Upon request of Agent, Borrower shall furnish
or cause to be furnished to Agent from time to time a summary of the insurance
coverage of Borrower in form and substance satisfactory to Agent and if
requested shall furnish Agent copies of the applicable policies.
Section 5.07 Accounts and Records; Servicing Records. Each Related Person
---------------------------------------
shall keep books of record and account in which full, true and correct entries
will be made of all dealings or transactions in relation to its business and
activities, in accordance with GAAP. Each Related Person shall maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate all records pertaining to the performance of
such Related Person's obligations under the Servicing Agreements in the event of
the destruction of the originals of such records) and keep and maintain all
documents, books, records, computer tapes and other information reasonably
necessary or advisable for the performance by each Related Person of its
obligations under the Servicing Agreements.
Section 5.08 Right of Inspection. Each Related Person shall permit
-------------------
authorized representatives of Agent to discuss the business, operations, assets
and financial condition of such Related Person with their officers and
employees, to examine their Servicing Records and books of records and account
and make copies or extracts thereof and to visit and inspect any of the
Properties of each Related Person, all at such reasonable times and as often as
Agent may request. Each Related Person will provide its accountants with a copy
of this Agreement promptly after the execution hereof and will instruct its
accountants to answer candidly any and all questions that the officers of Agent
or any authorized representatives of Agent may
address to them in reference to the financial condition or affairs of any
Related Person as those conditions or affairs relate to this Agreement. Each
Related Person may have its representatives in attendance at any meetings
between the officers or other representatives of Agent and such Related Person's
accountants held in accordance with this authorization.
Section 5.09 Notice of Certain Events. Borrower shall promptly notify
------------------------
Agent and each Lender upon (i) the receipt of any notice from, or the taking of
any other action by, the holder of any promissory note, debenture or other
evidence of Indebtedness of any Related Person with respect to a claimed
default, together with a detailed statement by a responsible officer of Borrower
specifying the notice given or other action taken by such holder and the nature
of the claimed default and what action Borrower is taking or proposes to take
with respect thereto; (ii) the commencement of, or any determination in, any
legal, judicial or regulatory proceedings which, if adversely dispute between
any Related Person and any Governmental Authority or any other Person which, if
adversely determined, could have a Material Adverse Effect; (iii) any change in
senior management of Borrower or Guarantor; (iv) any material adverse change in
the business, operations, prospects or financial condition of any Related
Person, including, without limitation, the insolvency of any Related Person, (v)
any event or condition which, if adversely determined, could have a Material
Adverse Effect or (vi) the occurrence of any Termination Event.
Section 5.10 Performance of Certain Obligations and Information Regarding
------------------------------------------------------------
Investors. Borrower shall perform and observe in all material respects each of
---------
the provisions of each Take-Out Commitment and each of the Servicing Agreements
on its part to be performed or observed and will cause all things to be done
which are necessary to have each item of Mortgage Collateral covered by a Take-
Out Commitment comply with the requirements of such Take-Out Commitment.
Borrower will deliver to Agent financial information concerning any Person
Lenders are reviewing to determine whether to approve such Person as an
Investor.
Section 5.11 Use of Proceeds; Margin Stock. The proceeds of the first
-----------------------------
Borrowing shall be used to repay Borrower's obligations under the Existing
Agreement, and the proceeds of all other Borrowings shall be used by Borrower
solely for the origination or acquisition of Mortgage Loans in the ordinary
course of Borrower's business. None of such proceeds shall be used for the
purpose of purchasing or carrying any "margin stock" as defined in Regulation U,
or for the purpose of reducing or retiring any Indebtedness which was originally
incurred to purchase or carry margin stock or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of such
Regulation U. Neither Borrower nor any Person acting on behalf of Borrower shall
take any action in violation of Regulation U or Regulation X or shall violate
Section 7 of the Securities Exchange Act of 1934 or any rule or regulation
thereunder, in each case as now in effect or as the same may hereafter be in
effect.
Section 5.12 Notice of Default. Borrower shall furnish to Agent and each
-----------------
Lender immediately upon becoming aware of the existence of any Default or Event
of Default, a written notice specifying the nature and period of existence
thereof and the action which Borrower is taking or proposes to take with respect
thereto.
Section 5.13 Compliance with Loan Documents. Each Related Person shall
------------------------------
promptly comply with any and all covenants and provisions of this Agreement the
Notes and the other Loan Documents to be complied with by such Related Person.
Section 5.14 Operations and Properties. Each Related Person shall comply
-------------------------
with all rules, regulations and guidelines applicable to it. Borrower shall act
prudently and in accordance with customary industry standards in managing and
operating its Property.
ARTICLE VI
----------
NEGATIVE COVENANTS
------------------
Each Related Person shall at all times comply with the covenants contained
in this Article VI, from the date hereof and for so long as any part of the
Obligations or the Commitment is outstanding unless Majority Lenders have agreed
otherwise (which agreement shall not be unreasonably withheld with respect to
Sections 6.06, 6.08 and 6.14):
Section 6.01 No Merger. Borrower and its Subsidiaries shall not merge or
---------
consolidate with or into any Person, nor shall Borrower or its Subsidiaries
acquire by purchase or otherwise all or substantially all of the assets (except
to the extent that such assets consist solely of Mortgage Notes, securities
which evidence undivided interests in pools of Mortgage Notes, and rights to
service mortgage loans) or capital stock of any Person.
Section 6.02 Limitation on Indebtedness. At no time shall Borrower incur,
--------------------------
create, contract, assume, have outstanding, guarantee or otherwise be or become,
directly or indirectly, liable in respect of any Indebtedness except:
(a) the Obligations;
(b) trade debt, equipment leases, equipment loans and liens for taxes and
assessments not yet due and payable owed in the ordinary course of
business; and
(c) the Subordinated Debt.
Section 6.03 Fiscal Year, Method of Accounting. Neither Borrower nor
---------------------------------
Guarantor shall change its Fiscal Year or make any material change in its method
of accounting.
Section 6.04 Business. Borrower shall not, directly or indirectly, engage
--------
in any business which differs materially from that currently engaged in by
Borrower or any other business customarily engaged in by other Persons in the
mortgage banking business.
Section 6.05 Liquidations, Mergers, Consolidations and Dispositions of
---------------------------------------------------------
Substantial Assets. Borrower and its Subsidiaries shall not dissolve or
------------------
liquidate or sell, transfer, lease or otherwise dispose of any material portion
of their property or assets or business; provided, however, nothing in this
Section 6.05 shall be construed to prohibit Borrower or its Subsidiaries from
selling rights to service mortgage loans and pools of mortgage loans or Mortgage
Notes in the ordinary course of their business.
Section 6.06 Loans, Advances, and Investments. Borrower shall not make
--------------------------------
any loan (other than Mortgage Loans), advance, or capital contribution to, or
investment in (including any investment in any Subsidiary, joint venture or
partnership), or purchase or otherwise acquire any of the capital stock,
securities, or evidences of indebtedness of, any Person (collectively,
"Investment"), or otherwise acquire any interest in, or control of, another
Person, except for the following:
(a) Cash Equivalents;
(b) Any acquisition of securities or evidences of indebtedness of others
when acquired by Borrower in settlement of accounts receivable or other debts
arising in the ordinary course of its business, so long as the aggregate amount
of any such securities or evidences of indebtedness is not material to the
business or condition (financial or otherwise) of Borrower;
(c) Mortgage Notes acquired in the ordinary course of Borrower's business;
and
(d) Investment in any Subsidiary listed on Exhibit "H", so long as Agent
is given 10 days advance notice of each such Investment in a Subsidiary and the
aggregate amount paid, contributed, lent, or otherwise invested in such
Subsidiary does not exceed $200,000.
Section 6.07 Use of Proceeds. Borrower shall not permit the proceeds of
---------------
the Loans to be used for any purpose other than those permitted by Section 5.11
hereof. Borrower shall not, directly or indirectly, use any of the proceeds of
the Loans for the purpose, whether immediate, incidental or ultimate, of buying
any "margin stock" or of maintaining, reducing or retiring any Indebtedness
originally incurred to purchase a stock that is currently any "margin stock", or
for any other purpose which might constitute this transaction a "purpose
credit", in each case within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System (12 C.F.R. 207, as amended), or
Regulation U, or otherwise take or permit to be taken any action which would
involve a violation of such Regulation G or Regulation U or of Regulation T (12
C.F.R. 220, as amended) or Regulation X (12 C.F.R. 224, as amended) or any other
regulation of such board.
Section 6.08 Actions with Respect to Mortgage Collateral. Borrower shall
-------------------------------------------
not:
(a) Compromise, extend, release, or adjust payments on any Mortgage
Collateral, accept a conveyance of mortgaged property in full or partial
satisfaction of any Mortgage Collateral, or release any Mortgage securing or
underlying any Mortgage Collateral;
(b) Agree to the amendment or termination of any Take-Out Commitment in
which Agent has a security interest or to substitution of a Take-Out Commitment
for a Take-Out Commitment in which Agent has a security interest hereunder, if
such amendment, termination or substitution may reasonably be expected (as
determined by Majority Lenders in their sole discretion) to have a Material
Adverse Effect;
(c) Transfer, sell, assign, or deliver any Mortgage Collateral pledged to
Agent to any Person other than Agent, except pursuant to a Take-Out Commitment;
or
(d) Grant, create, incur, permit or suffer to exist any Lien upon any
Mortgage Collateral except for Liens granted to Agent to secure the Notes and
Obligations and such non-consensual Liens as may be deemed to arise as a matter
of law pursuant to any Take-Out Commitment.
Section 6.09 Net Worth. As of the date hereof, Borrower's Consolidated
---------
Tangible Net Worth, excluding any Subordinated Debt in excess of $3,500,000,
shall not be less than $5,500,000. As of the end of each subsequent calendar
month, Borrower's Consolidated Tangible Net Worth shall not be less than the sum
of (i) $5,500,000 plus (ii) the original principal amount of Subordinated Debt
incurred after the date hereof (without including any accrued interest or
payments of interest made by the issuance of additional Indebtedness or
otherwise compounded or added to principal), plus (iii) equity contributions
received by Borrower, plus (iv) seventy-five percent (75%) of Borrower's
Consolidated Net Income (but only if a positive number) for each Fiscal Quarter
beginning with September 30, 1997. As of the end of each Fiscal Quarter,
Guarantor's Net Worth shall not be less than $5,000,000. As of the end of each
Fiscal Quarter occurring after CPS becomes a Guarantor, the Net Worth of CPS
shall not be less than $45,000,000.
Section 6.10 Total Liabilities to Tangible Net Worth Ratio. The ratio of
---------------------------------------------
Borrower's Total Liabilities to Borrower's Consolidated Tangible Net Worth shall
not be more than 12.0 to 1.0 as of the end of each calendar month.
Section 6.11 Interest Coverage Ratio. As of the end of each Fiscal
-----------------------
Quarter, the ratio of (a) Borrower's Adjusted EBITDA as of the four Fiscal
Quarters ending with such Fiscal Quarter to (b) the aggregate amount of interest
to be paid on Subordinated Debt and Debt of Borrower incurred to finance assets
pursuant to a securitization facility for the immediately following four Fiscal
Quarters shall not be less than 1.4 to 1.0.
Section 6.12 Transactions with Affiliates. Borrower shall not enter into
----------------------------
any transactions including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transactions are otherwise permitted under this Agreement, are in the
ordinary course of Borrower's business and are upon fair and reasonable terms no
less favorable to Borrower than it would obtain in a comparable arm's length
transaction with a Person not an Affiliate.
Section 6.13 Liens. Borrower shall not grant, create, incur, assume,
-----
permit or suffer to exist any Lien, upon any of its Property, including without
limitation any and all of Borrower's Mortgage Notes, and Servicing Rights and
the proceeds from any thereof, other than (i) Liens which secure payment of the
Obligations, and (ii) to the extent not otherwise prohibited hereunder, Liens
which secure payment of the Indebtedness described in Section 6.02(b) on
Property other than Collateral.
Section 6.14 ERISA Plans. Borrower shall not adopt or agree to maintain
-----------
or contribute to any ERISA Plan. Borrower shall promptly notify Agent and each
Lender in writing in the event an ERISA Affiliate adopts an ERISA Plan.
Section 6.15 Change of Principal Office. No Related Person shall move its
--------------------------
principal office, executive office or principal place of business from the
address set forth in Section 10.01 without prior written notice to Agent and
each Lender.
Section 6.16 Minimum Unrestricted Balance Sheet Liquidity. The
--------------------------------------------
Unrestricted Balance Sheet Liquidity of Borrower shall not be less than $200,000
as of the end of each calendar month. The Unrestricted Balance Sheet Liquidity
of Guarantor shall not be less than $750,000 as of the end of each Fiscal
Quarter. As of the end of each Fiscal Quarter occurring after CPS becomes a
Guarantor, the Unrestricted Balance Sheet Liquidity of CPS shall not be less
than $750,000. As used in this section with respect to any Person, the term
"Unrestricted Balance Sheet Liquidity" means the sum of (i) the Cash Equivalents
owned by such Person and (ii) the unutilized portion of any revolving credit
facility of such Person which is then available for borrowing.
ARTICLE VII
-----------
EVENTS OF DEFAULT
-----------------
Section 7.01 Nature of Event. An Event of Default shall exist if any one
---------------
or more of the following occurs:
(a) Borrower fails to make any payment of principal of or interest on
the Notes, or payment of any fee, expense or other amount due hereunder, under
the Notes or under any other Loan Document, on or before the date such payment
is due and such default continues unremedied for two (2) Business Days after any
executive officer of such Related Person obtains knowledge thereof;
(b) Guarantor fails to make any payment of any Obligation on the date
such payment in due and such default continues unremedied for two (2) Business
Days after any executive officer of such Related Person obtains knowledge
thereof;
(c) Default is made in the due observance or performance by any Related
Person of any covenant set forth in Sections 6.09 through 6.11 and Section 6.16
and such default continues unremedied for thirty (30) calendar days after any
executive officer of such Related Person obtains knowledge thereof;
(d) Default is made in the due observance or performance by any Related
Person of any covenant set forth in Article VI that is not described in
subsections (a), (b) or (c) immediately above;
(e) Default is made in the due observance or performance by any Related
Person of any of the other covenants or agreements contained in this Agreement
and such Default continues for a period of fifteen (15) days after Agent gives
Borrower notice thereof;
(f) Any Related Person defaults in the due observance or performance or
any of the covenants or agreements contained in any other Loan Document to which
it is a party, and (unless such default otherwise constitutes a Default pursuant
to other provisions of this Section 7.01) such default continues unremedied
beyond the expiration of any applicable grace period which may be expressly
allowed under such other Loan Document;
(g) Any material statement, warranty or representation by or on behalf of
any Related Person contained in this Agreement, the Notes or any other Loan
Document to which it is a party, or in any Borrowing Request, officer's
certificate or other writing furnished in connection with this Agreement, proves
to have been incorrect or misleading in any material respect as of the date made
or deemed made;
(h) Any Related Person:
(i) suffers the entry against it of a judgment, decree or order for
relief by a court of competent jurisdiction in an involuntary proceeding
commenced under any applicable bankruptcy, insolvency or other similar law
of any jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such proceeding
commenced against it which remains undismissed for a period of sixty days;
or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended; or applies for or consents
to the entry of an order for relief in an involuntary case under any such
law; or makes a general assignment for the benefit of creditors; or fails
generally to pay (or admits in writing its inability to pay) its debts as
such debts become due; or takes corporate or other action to authorize any
of the foregoing; or
(iii) suffers the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official
of all or a substantial part of its assets or of any part of the Mortgage
Collateral in a proceeding brought against or initiated by it, and such
appointment or taking possession is neither made ineffective nor discharged
within sixty days after the making thereof, or such appointment or taking
possession is at any time consented to, requested by, or acquiesced to by
it; or
(iv) suffers the entry against it of a final judgment for the payment
of money in excess of $500,000 (not covered by insurance satisfactory to
Agent in its discretion), unless the same is discharged within thirty days
after the date of entry thereof or an appeal or appropriate proceeding for
review thereof is taken within such period and a stay of execution pending
such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar process to
be issued by any court against all or any substantial part of its assets or
any part of the Mortgage Collateral;
(i) Any Related Person fails to make when due or within any applicable
grace period any payment on any Indebtedness (other than the Obligations) with
an unpaid principal balance of over $100,000; or any event or condition occurs
under any provision contained in any agreement under which such obligation is
governed, evidenced or secured (or any other material breach or default under
such obligation or agreement occurs) if the effect thereof is to cause or permit
the holder or trustee of such obligation to cause such obligation to become due
prior to its stated maturity; or any such obligation becomes due (other than by
regularly scheduled payments) prior to its stated maturity; or any of the
foregoing occurs with respect to any one or more items of Indebtedness of any
Related Person with unpaid principal balances exceeding, in the aggregate,
$100,000;
(j) Any default or event of default occurs under any other Indebtedness of
any Related Person to any Lender;
(k) This Agreement, the Notes or any other Loan Document shall for any
reason cease to be in full force and effect, or be declared null and void or
unenforceable in whole or in part as the result of any action initiated by any
Person other than Agent or any Lender; or the validity or enforceability of any
such document shall be challenged or denied by any Person other than Agent or
any Lender other than by reason of illegality;
(l) Either (i) any "accumulated funding deficiency" (as defined in Section
412(a) of the Code in excess of $25,000 exists with respect to any ERISA Plan,
whether or not waived by the Secretary of the Treasury or his delegate, or (ii)
any Termination Event occurs with respect to any ERISA Plan and the then current
value of such ERISA Plan's benefits guaranteed under Title IV of ERISA exceeds
the then current value of such ERISA Plan's assets available for the payment of
such benefits by more than $10,000 (or in the case of a Termination Event
involving the withdrawal of a substantial employer, the withdrawing employer's
proportionate share of such excess exceeds such amount) or (iii) any Related
Person or any ERISA Affiliate withdraws from a multiemployer plan resulting in
liability under Title IV of ERISA of an amount in excess of $10,000; or
(m) A Change of Control occurs.
Section 7.02 Default Remedies. Upon the occurrence of an Event of
----------------
Default, Agent may (and upon written instructions from Majority Lenders, Agent
shall) declare the Commitment to be terminated and/or declare the entire
principal and all interest accrued on the Notes to be, and the Notes, together
with all Obligations, shall thereupon become, forthwith due and payable, without
any presentment, demand, protest, notice of protest and nonpayment, notice of
acceleration or of intent to accelerate or other notice of any kind, all of
which hereby are expressly waived. Notwithstanding the foregoing, if an Event of
Default specified in Subsections 7.01 (h)(i), (ii) or (iii) above occurs with
respect to Borrower, the Commitment shall automatically and immediately
terminate and the Notes and all other Obligations shall become automatically and
immediately due and payable, both as to principal and interest, without any
action by Agent or any Lender and without presentment, demand, protest, notice
of protest and nonpayment, notice of acceleration or of intent to accelerate, or
any other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in any Notes to the contrary notwithstanding.
ARTICLE VIII
------------
INDEMNIFICATION
---------------
Section 8.01 Indemnification. Each of Borrower and Guarantor agrees to
---------------
indemnify Agent and each Lender and each director, officer, agent, attorney,
employee, representative and Affiliate of Agent and each Lender (each an
"Indemnified Party"), upon demand, from and against any and all liabilities,
obligations, claims, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (including reasonable fees of attorneys,
accountants, experts and advisors) of any kind or nature whatsoever (in this
Section 8.01 collectively called "liabilities and costs") which to any extent
(in whole or in part) may be imposed on, incurred by, or asserted against any
Indemnified Party growing out of, resulting from or in any other way associated
with any of the Mortgage Collateral, the Loan Documents, any Mortgage Loan
originated for the construction of a Construction Home, and the transactions and
events (including the enforcement or defense thereof) at any time associated
therewith or contemplated therein.
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES
AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER
ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED IN WHOLE OR PART, BY
ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY SUCH INDEMNIFIED PARTY,
provided only that such indemnified party shall be not entitled under this
section to receive indemnification for that portion, if any, of any liabilities
and costs which is proximately caused by its own individual gross negligence or
willful misconduct.
Section 8.02 Limitation of Liability. None of Agent, Lenders, their
-----------------------
directors, officers, agents 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.
THE FOREGOING EXCULPATION SHALL APPLY TO ANY NEGLIGENT ACT OR OMISSION OF ANY
KIND BY ANY SUCH PERSON, PROVIDED THAT SUCH PERSON SHALL BE LIABLE FOR ITS OWN
INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
ARTICLE IX
----------
AGENT
-----
Section 9.01 Appointment and Authority. Each Lender hereby irrevocably
-------------------------
authorizes Agent, and Agent hereby undertakes, to receive payments of principal,
interest and other amounts due hereunder as specified herein, to act as secured
party, agent, bailee and custodian for the exclusive benefit of Lenders with
respect to the Collateral, and to take all other actions and to exercise such
powers under the Loan Documents as are specifically delegated to Agent by the
terms hereof or thereof, together with all other powers reasonably incidental
thereto. The relationship of Agent to Lenders is only that of one commercial
bank acting as administrative agent for others, and nothing in the Loan
Documents shall be construed to constitute Agent a trustee or other fiduciary
for any holder of any of the Notes or of any participation therein nor to impose
on Agent duties and obligations other than those expressly provided for in the
Loan Documents. With respect to any matters not expressly provided for in the
Loan Documents and any matters which the Loan Documents place within the
discretion of Agent, Agent shall not be required to exercise any discretion or
take any action, and it may request instructions from Lenders with respect to
any such matter, in which case it shall be required to act or to refrain from
acting (and shall be fully protected and free from liability to all Lenders in
so acting or refraining from acting) upon the instructions of Majority Lenders
(including itself), provided, however, that Agent shall not be required to take
any action which exposes it to a risk of personal liability that it considers
unreasonable or which is contrary to the Loan Documents or to applicable law.
Upon receipt by Agent from Borrower of any communication calling for action on
the part of Lenders or upon notice from any Lender to Agent of any Default or
Event of Default, Agent shall promptly notify each Lender thereof.
Section 9.02 Agent's Reliance, Etc. Neither Agent nor any of its
----------------------
directors, officers, agents, attorneys, or employees shall be liable for any
action taken or omitted to be taken by any of them under or in connection with
the Loan Documents, including their negligence of any kind, except that each
shall be liable for its own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, Agent (a) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the assignment
or transfer thereof in accordance with this Agreement, signed by such payee and
in form satisfactory to Agent; (b) may consult with legal counsel (including
counsel for Borrower), independent public accountants and other experts selected
by it and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such counsel, accountants or
experts; (c) makes no warranty or representation to any Lender and shall not be
responsible to any Lender for any statements, warranties or representations made
in or in connection with the Loan Documents; (d) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of the Loan Documents on the part of Borrower or to
inspect the Property (including the books and records) of Borrower; (e) shall
not be responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Loan Document or any
instrument or document furnished in connection therewith; (f) may rely upon the
representations and warranties of Borrower and the Lenders in exercising its
powers hereunder; and (g) shall incur no liability under or in respect of the
Loan Documents by acting upon any notice, consent, certificate or other
instrument or writing (including any telecopy, telegram, cable or telex)
believed by it to be genuine and signed or sent by the proper Person or
Persons.
Section 9.03 Lenders' Credit Decisions. Each Lender acknowledges that it
-------------------------
has, independently and without reliance upon Agent or any other Lender, made its
own analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Documents.
Section 9.04 Indemnification. Each Lender agrees to indemnify Agent (to
---------------
the extent not reimbursed by Borrower within ten (10) days after demand) from
and against such Lender's Percentage Share of any and all liabilities,
obligations, claims, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (including reasonable fees of attorneys,
accountants, experts and advisors) of any kind or nature whatsoever (in this
section, collectively, "liabilities and costs") which to any extent (in whole or
---------------------
in part) may be imposed on, incurred by, or asserted against Agent, in its
capacity as Agent, growing out of, resulting from or in any other way associated
with any of the Collateral, the Loan Documents, any Mortgage Loan for the
construction of a one-to-four family residence, and the transactions and events
(including the enforcement thereof) at any time associated therewith or
contemplated therein. THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT
SUCH LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED UNDER ANY CLAIM
OR THEORY OF STRICT LIABILITY OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT OR BY STRICT LIABILITY, PROVIDED
ONLY THAT NO LENDER SHALL BE OBLIGATED UNDER THIS SECTION TO INDEMNIFY AGENT FOR
THAT PORTION, IF ANY, OF ANY LIABILITIES AND COSTS WHICH IS PROXIMATELY CAUSED
BY AGENT'S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, AS DETERMINED IN A FINAL
JUDGMENT. Cumulative of the foregoing, each Lender agrees to reimburse Agent
promptly upon demand for such Lender's Percentage Share of any costs and
expenses to be paid to Agent by Borrower under Section 5.05 to the extent that
Agent is not timely reimbursed for such expenses by Borrower as provided in such
section. As used in this section the term "Agent" shall refer not only to the
Person designated as such in Section 1.01 but also to each director, officer,
agent, attorney, employee, representative and Affiliate of such Person.
Section 9.05 Rights as Lender. In its capacity as a Lender, Agent shall
----------------
have the same rights and obligations as any Lender and may exercise such rights
as though it were not Agent. Agent may accept deposits from, lend money to, act
as Trustee under indentures of, and generally engage in any kind of business
with Borrower or its Affiliates, all as if it were not Agent hereunder and
without any duty to account therefor to any other Lender.
Section 9.06 Sharing of Set-Offs and Other Payments. Each of Agent and
--------------------------------------
Lender agrees that if it shall, whether through the exercise of rights under
Security Instruments or rights of banker's lien, set off, or counterclaim
against Borrower or otherwise, obtain payment of a portion of the aggregate
Obligations owed to it which, taking into account all distributions made by
Agent under Section 2.06, causes Agent or such Lender to have received more than
it would have received had such payment been received by Agent and distributed
pursuant to Section 2.06, then (a) it shall be deemed to have simultaneously
purchased and shall be obligated to purchase interests in the Obligations as
necessary to cause Agent and all Lenders to share all payments as provided for
in Section 2.06, and (b) such other adjustments shall be made from time to time
as shall be equitable to ensure that Agent and all Lenders share all payments of
Obligations as provided in Section 2.06; provided, however, that nothing herein
contained shall in any way affect the right of Agent or any Lender to obtain
payment (whether by exercise of rights of banker's lien, set-off or counterclaim
or otherwise) of indebtedness other than the Obligations. Borrower expressly
consents to the foregoing arrangements and agrees that any holder of any such
interest or other participation in the Obligations, whether or not acquired
pursuant to the foregoing arrangements, may to the fullest extent permitted by
law exercise any and all rights of banker's lien, set-off, or counterclaim as
fully as if such holder were a holder of the Obligations in the amount of such
interest or other participation. If all or any part of any funds transferred
pursuant to this section is thereafter recovered from a Lender under this
section which received the same, the purchase provided for in this section shall
be deemed to have been rescinded to the extent of such recovery, together with
interest, if any, if interest is required pursuant to court order to be paid on
account of the possession of such funds prior to such recovery.
Section 9.07 Investments. Whenever Agent in good faith determines that it
-----------
is uncertain about how to distribute to Lenders any funds which it has received,
or whenever Agent in good faith determines that there is any dispute among
Lenders about how such funds should be distributed, Agent may choose to defer
distribution of the funds which are the subject of such uncertainty or dispute.
If Agent in good faith believes that the uncertainty or dispute will not be
promptly resolved, or if Agent is otherwise required to invest funds pending
distribution to Lenders, Agent shall invest such funds pending distribution; all
interest on any such investment shall be distributed upon the distribution of
such investment and in the same proportion and to the same Persons as such
investment. All moneys received by Agent for distribution to Lenders (including
Agent in its separate capacity as a Lender) shall be held by Agent pending such
distribution solely as Agent for such Lenders, and Agent shall have no equitable
title to any portion thereof.
Section 9.08 Benefit of Article IX. The provisions of this Article are
---------------------
intended solely for the benefit of Agent and Lenders, and shall not be entitled
to rely on any such provision or assert any such provision in a claim or defense
against Agent or any Lender. Agent and Lenders may waive or amend such
provisions as they desire without any notice to or consent of Borrower.
Section 9.09 Resignation. Agent may resign at any time by giving written
-----------
notice thereof to Lenders and Borrower. Each such notice shall set forth the
date of such resignation. Upon any such resignation Majority Lenders shall have
the right to appoint a successor Agent. A successor must be appointed for any
retiring Agent, and such Agent's resignation shall become effective when such
successor accepts such appointment. If, within thirty days after the date of the
retiring Agent's resignation, no successor Agent has been appointed and has
accepted such appointment, then the retiring Agent may appoint a successor
Agent, which shall be a Lender or commercial bank organized or licensed to
conduct a banking or trust business under the laws of the United States of
America or of any state thereof. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, 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 hereunder the provisions of this Article IX
shall continue to inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under the Loan Documents.
ARTICLE X
---------
MISCELLANEOUS
-------------
Section 10.01 Notices. Any notice or request required or permitted to be
-------
given under or in connection with this Agreement, the Notes or the other Loan
Documents (except as may otherwise be expressly required therein) shall be in
writing and shall be mailed by first class or express mail, postage prepaid, or
sent by telex, telegram, telecopy or other similar form of rapid transmission,
confirmed by mailing (by first class or express mail, postage prepaid) written
confirmation at substantially the same time as such rapid transmission, or
personally delivered to an officer of the receiving party. All such
communications shall be mailed, sent or delivered to the parties hereto at their
respective addresses as follows:
Borrower: Mortgage Portfolio Services, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Guarantor: NAB Asset Corporation
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Agent: Guaranty Federal Bank, F.S.B.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other addresses or to such individual's or department's attention as
any party may have furnished the other party in writing. Any communication so
addressed and mailed shall be deemed to be given when so mailed, except that
Borrowing Requests, and communications related thereto shall not be effective
until actually received by Agent or Borrower, as the case may be; and any notice
so sent by rapid transmission shall be deemed to be given when receipt of such
transmission is acknowledged, and any communication so delivered in person shall
be deemed to be given when receipted for by, or actually received by, an
authorized officer of Borrower or Agent, as the case may be.
Section 10.02 Amendments, Etc. No amendment or waiver of any provision of
----------------
this Agreement, the Security Instruments, the Notes, or any other Loan Document,
nor consent to any departure by any Related Person from the terms thereof, shall
in any event be effective unless the same shall be in writing and signed by (i)
if such party is Borrower, by Borrower, (ii) if such party is Agent, by Agent
and (iii) if such party is a Lender, by such Lender or by Agent on behalf of
Lenders with the written consent of Majority Lenders (or without further consent
than that already provided herein in the circumstances provided in Section
10.16). Notwithstanding the foregoing or anything to the contrary herein, Agent
shall not, without the prior consent of each individual Lender, execute and
deliver on behalf of such Lender any waiver or amendment which would: (1) waive
any of the conditions specified in Article III (provided that Agent may in its
discretion withdraw any request it has made under Section 3.02(g)), (2) increase
the Percentage Share of the Commitment of such Lender or subject such Lender to
any additional obligations, (3) reduce any fees hereunder, or the principal of,
or interest on, such Lender's Note, (4) postpone any date fixed for any payment
of any fees hereunder, or principal of, or interest on, such Lender's Note, (5)
amend the definition herein of "Majority Lenders" or otherwise change the
aggregate amount of Percentage Shares which is required for Agent, Lenders or
any of them to take any particular action under the Loan Documents, (6) release
Borrower from its obligation to pay such Lender's Note, (7) amend the
definitions of "Mortgage Collateral," "Collateral Value of Tranche A Borrowing
Base," "Collateral Value of Tranche B Borrowing Base" or "Aggregate Collateral
Value of the Borrowing Base," (8) release Guarantor from any of its obligations
under the Loan Documents, or (9) release any Collateral except in accordance
with and pursuant to the Loan Documents.
Section 10.03 Invalidity. In the event that any one or more of the
----------
provisions contained in the Notes, this Agreement or any other Loan Document
shall, for any reason, be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of such document.
Section 10.04 Survival of Agreements. All covenants and agreements herein
----------------------
and in any other Loan Document not fully performed before the date hereof or the
date thereof, and all representations and
warranties herein or therein, shall survive until payment in full of the
Obligations and termination of the Commitment.
Section 10.05 Renewal, Extension or Rearrangement. All provisions of this
-----------------------------------
Agreement and of the other Loan Documents shall apply with equal force and
effect to each and all promissory notes hereafter executed which in whole or in
part represent a renewal, extension for any period, increase or rearrangement of
any part of the Obligations originally represented by the Notes or of any part
of such other Obligations.
Section 10.06 Waivers. No course of dealing on the part of Agent or any
-------
Lender, or any of its officers, employees, consultants or agents, nor any
failure or delay by Agent or such Lender with respect to exercising any right,
power or privilege of Agent or any Lender under the Notes, this Agreement or any
other Loan Document shall operate as a waiver thereof, except as otherwise
provided in Section 10.02 hereof.
Section 10.07 Cumulative Rights. The rights and remedies of Agent and
-----------------
each Lender under the Notes, this Agreement, and any other Loan Document shall
be cumulative, and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 10.08 Construction. THIS AGREEMENT, THE NOTES AND EACH OTHER LOAN
------------
DOCUMENT IS A CONTRACT MADE UNDER AND SHALL BE CONSTRUED, INTERPRETED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED STATES OF
AMERICA AND THE STATE OF TEXAS. TEX. REV. CIV. STAT. ▇▇▇. ART. ▇▇▇▇, ▇▇. 15
(WHICH REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE NOTES.
Section 10.09 Limitation on Interest. Agent, Lenders, each Related Person
----------------------
and any other parties to the Loan Documents intend to contract in strict
compliance with applicable usury law from time to time in effect. In furtherance
thereof such Persons stipulate and agree that none of the terms and provisions
contained in the Loan Documents shall ever be construed to create a contract to
pay, for the use, forbearance or detention of money, interest in excess of the
maximum amount of interest permitted to be charged by applicable law from time
to time in effect. Neither each Related Person nor any present or future
guarantors, endorsers, or other Persons hereafter becoming liable for payment of
any Obligation shall ever be liable for unearned interest thereon or shall ever
be required to pay interest thereon in excess of the maximum amount that may be
lawfully charged under applicable law from time to time in effect, and the
provisions of this section shall control over all other provisions of the Loan
Documents which may be in conflict or apparent conflict herewith. Agent and
Lenders expressly disavow any intention to charge or collect excessive unearned
interest or finance charges in the event the maturity of any Obligation is
accelerated. If (a) the maturity of any Obligation is accelerated for any
reason, (b) any Obligation is prepaid and as a result any amounts held to
constitute interest are determined to be in excess of the legal maximum, or (c)
Agent or any Lender or any other holder of any or all of the Obligations shall
otherwise collect moneys which are determined to constitute interest which would
otherwise increase the interest on any or all of the Obligations to an amount in
excess of that permitted to be charged by applicable law then in effect, then
all such sums determined to constitute interest in excess of such legal limit
shall, without penalty, be promptly applied to reduce the then outstanding
principal of the related Obligations or, at Agent's or such Lender's or such
holder's option, promptly returned to each Related Person or the other payor
thereof upon such determination. In determining whether or not the interest paid
or payable, under any specific circumstance, exceeds the maximum amount
permitted under applicable law, Agent, Lenders and the each Related Persons (and
any other payors thereof) shall to the greatest extent permitted under
applicable law, (i) characterize any non-principal payment as an expense, fee or
premium rather than as interest, (ii) exclude voluntary prepayments and the
effects thereof, and (iii) amortize, prorate, allocate, and spread the total
amount of interest throughout the entire contemplated term of the instruments
evidencing the Obligations in accordance with the amounts outstanding from time
to time
thereunder and the maximum legal rate of interest from time to time in effect
under applicable law in order to lawfully charge the maximum amount of interest
permitted under applicable law. In the event applicable law provides for an
interest ceiling under Texas Revised Civil Statutes Annotated article 5069-1.04,
that ceiling shall be the indicated rate ceiling.
Section 10.10 Bank Accounts; Offset. To secure the repayment of the
---------------------
Obligations each Related Person hereby grants to Agent, each Lender and to each
financial institution which hereafter acquires a participation or other interest
in the Loans or Notes (in this section called a "Participant") a security
interest, a lien, and a right of offset, each of which shall be in addition to
all other interests, liens, and rights of Agent, any Lender or Participant at
common law, under the Loan Documents, or otherwise, and each of which shall be
upon and against (a) any and all moneys, securities or other property (and the
proceeds therefrom) of any Related Person now or hereafter held or received by
or in transit to Agent, any Lender or Participant from or for the account any
Related Person, whether for safekeeping, custody pledge, transmission,
collection or otherwise, (b) any and all deposits (general or special, time or
demand, provisional or final) of any Related Person with Agent, any Lender or
Participant, and (c) any other credits and claims of any Related Person at any
time existing against Agent, any Lender or Participant, including claims under
certificates of deposit. Upon the occurrence of any Default, each of Agent,
Lenders and Participants is hereby authorized to foreclose upon, offset,
appropriate, and apply, at any time and from time to time, without notice to
Borrower, any and all items hereinabove referred to against the Obligations then
due and payable.
Section 10.11 Assignments, Participations.
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(a) Assignments. Each Lender shall have the right to sell, assign or
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transfer all or any part of such Lender's Note, Loans and rights and the
associated rights and obligations under all Loan Documents to one or more
financial institutions, pension plans, investment funds, or similar purchasers;
provided, that each such sale, assignment, or transfer shall be with the consent
of Agent, and the assignee, transferee or recipient shall have, to the extent of
such sale, assignment, or transfer, the same rights, benefits and obligations as
it would if it were such Lender and a holder of such Note, including, without
limitation, the right to vote on decisions requiring consent or approval of all
Lenders or Majority Lenders and the obligation to fund its Percentage Share of
any Loan directly to Agent; provided further, that (i) each Lender in making
each such sale, assignment, or transfer must dispose of a pro rata portion of
each Loan made by such Lender, (ii) each such sale, assignment, or transfer
shall be in a principal amount not less than $5,000,000, (iii) each Lender shall
at all times maintain Loans then outstanding in an aggregate amount at least
equal to $5,000,000, (iv) each Lender may not offer to sell its Note and Loans
or interests therein in violation of any securities laws, and (v) no such
assignments shall become effective until (i) the assigning Lender delivers to
Agent copies of all written assignments and other documents evidencing any such
assignment or related thereto and the assignee Lender becomes a party to this
Agreement. Notwithstanding the provisions of clauses (ii) and (iii) above, a
Lender may make a sale, assignment or transfer, or maintain Loans then
outstanding, in an amount which is less than that required above provided that
Borrower and such Lender have agreed to modify such requirements and have
delivered to Agent prior written evidence of their agreement to make such
modification. An assignment fee in the amount of $2,500 for each such assignment
will be payable to Agent by assignor or assignee. Within five (5) Business Days
after its receipt of notice that the Agent has received copies of any assignment
and the other documents relating thereto, the assignee shall notify Borrower of
the outstanding principal balance of the Notes payable to such Lender and shall
execute and deliver to Agent (for delivery to the relevant assignee) new Notes
evidencing such assignee's assigned Loans and, if the assignor Lender has
retained a portion of its Loans, replacement Notes in the principal amount of
the Loans retained by the assignor Lender (such Notes to be in exchange for, but
not in payment of, the Notes held by such Lender).
(b) Participations. Each Lender shall have the right to grant
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participations in all or any part of such Lender's Note, Loans and the
associated rights and obligations under all Loan Documents to one or more
pension plans, investment funds, financial institutions or similar purchasers;
provided that (i) each Lender granting a participation shall use its best
efforts to give prior notice of any such participation, but in any event shall
promptly notify Agent and Borrower thereof, (ii) each Lender granting a
participation shall retain the right to vote hereunder, and no participant shall
be entitled to vote hereunder on decisions requiring consent or approval of
Majority Lenders (except as set forth in (iv) below), (iii) each Lender and
Borrower shall be entitled to deal with the Lender granting a participation in
the same manner as if no participation had been granted, and (iv) no participant
shall ever have any right by reason of its participation to exercise any of the
rights of Lenders hereunder, except that any Lender may agree with any
participant that such Lender will not, without the consent of such participant,
consent to any amendment or waiver described in Section 10.02 requiring approval
of 100% of the Lenders.
(c) Distribution of Information. It is understood and agreed that any
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Lender may provide to assignees and participants and prospective assignees and
participants financial information and reports and data concerning Borrower's
properties and operations which was provided to such Lender pursuant to this
Agreement.
Section 10.12 Exhibits. The exhibits attached to this Agreement are
--------
incorporated herein and shall be considered a part of this Agreement for the
purposes stated herein, except that in the event of any conflict between any of
the provisions of such exhibits and the provisions of this Agreement, the
provisions of this Agreement shall prevail.
Section 10.13 Titles of Articles, Sections and Subsections. All titles or
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headings to articles, sections, subsections or other divisions of this Agreement
or the exhibits hereto are only for the convenience of the parties and shall not
be construed to have any effect or meaning with respect to the other content of
such articles, sections, subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.
Section 10.14 Counterparts. This Agreement may be executed in
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counterparts, and it shall not be necessary that the signatures of both of the
parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all counterparts together shall constitute one
and the same instrument.
Section 10.15 ENTIRE AGREEMENT. THE NOTES, THIS AGREEMENT, AND THE OTHER
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LOAN DOCUMENTS EXECUTED AND DELIVERED AS OF EVEN DATE HEREWITH REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND THERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
Section 10.16 Termination; Limited Survival. In its sole and absolute
-----------------------------
discretion Borrower may at any time that no Obligations are owing elect in a
notice delivered to Agent to terminate this Agreement. Upon receipt by Agent of
such a notice, if no Obligations are then owing, this Agreement and all other
Loan Documents shall thereupon be terminated and the parties thereto released
from all prospective obligations thereunder. Notwithstanding the foregoing or
anything herein to the contrary, any waivers or admissions made by any Person in
any Loan Documents, any Obligations, and any obligations which any Person may
have to indemnify or compensate Agent and any Lender shall survive any
termination of this Agreement or any other Loan Document. At the request and
expense of Borrower, Agent shall prepare and execute all necessary instruments
to reflect and effect such termination of the Loan Documents. Agent is hereby
authorized to execute all such instruments on behalf of all Lenders, without the
joinder of or further action by any Lender.
Section 10.17 Joint and Several Liability. All Obligations which are
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incurred by two or more Related Persons shall be their joint and several
obligations and liabilities.
Section 10.18 Restatement. This Agreement amends and restates the
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Existing Credit Agreement in its entirety.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
BORROWER: MORTGAGE PORTFOLIO SERVICES, INC.
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By:______________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President
GUARANTOR: NAB ASSET CORPORATION
---------
By:______________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇
President
AGENT: GUARANTY FEDERAL BANK, F.S.B
-----
By:______________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Vice President
LENDERS:
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Percentage Share: 40% GUARANTY FEDERAL BANK, F.S.B.
By:______________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Vice President
Percentage Share: 40% RESIDENTIAL FUNDING CORPORATION
By:______________________________________
Name:
Title:
Percentage Share: 20% FIRST AMERICAN BANK TEXAS, SSB
By:______________________________________
Name:
Title:
