EXHIBIT 10.6
LOAN AGREEMENT
among
NVR MORTGAGE FINANCE, INC.
a Virginia corporation,
U.S. BANK NATIONAL ASSOCIATION,
as Agent,
and
The Lenders Party Hereto
September 7, 1999
-----------
Initially $225,000,000
($200,000,000 Committed and $25,000,000 Uncommitted)
TABLE OF CONTENTS
-----------------
Page
SECTION 1. DEFINITIONS AND REFERENCES 1
1.1 Definitions 1
1.2 Time References 26
1.3 Other References 26
SECTION 2. AMOUNT AND TERMS OF CREDITS 26
2.1 Commitment 26
2.2 Notes 31
2.3 Notice and Manner of Obtaining Borrowings 31
2.4 Fees 35
2.5 Mandatory Repayments 35
2.6 Business Days 35
2.7 Payment Procedure 35
2.8 Payments Not in Full 37
2.9 Sharing of Payments, Etc 37
2.10 Requirements of Law 37
2.11 Interest 41
2.12 42
SECTION 3. COLLATERAL 43
3.1 Collateral 43
3.2 Delivery of Collateral 43
3.3 Power of Attorney 43
3.4 Disposition of Collateral 44
3.5 Concerning the Collateral Account and the Good Funds Wire
Clearing Account 45
3.6 Borrower Appointed Agent 45
SECTION 4. CONDITIONS PRECEDENT 45
4.1 Initial Borrowing 45
4.2 All Borrowings 46
SECTION 5. BORROWER REPRESENTATIONS AND WARRANTIES 47
5.1 Organization and Good Standing 47
5.2 Authorization and Power 47
5.3 No Conflicts or Consents 47
5.4 Enforceable Obligations 48
5.5 Priority of Liens 48
5.6 No Liens 48
5.7 Financial Condition 48
5.8 Full Disclosure 49
5.9 No Default 49
5.10 No Litigation 49
5.11 Taxes 49
5.12 Principal Office, etc 49
5.13 Compliance with ERISA 49
5.14 Ownership 51
5.15 Subsidiaries 51
5.16 Indebtedness 51
5.17 Permits, Patents, Trademarks, etc. 51
5.18 Status Under Certain Federal Statutes 51
5.19 Securities Acts and Securities Credit Transaction Regulations 52
5.20 Pollution Control 52
5.21 No Approvals Required 52
5.22 Material Agreements with Affiliates 52
5.23 Taxpayer Identification 52
5.24 Not an Insider 52
5.25 Survival of Representations 52
5.26 Year 2000 Compliance 53
SECTION 6. AFFIRMATIVE COVENANTS 53
6.1 Financial Statements and Reports 53
6.2 Taxes and Other Liens 54
6.3 Maintenance 55
6.4 Further Assurances 55
6.5 Reimbursement of Expenses 55
6.6 Insurance 56
6.7 Accounts and Records; Servicing Records 56
6.8 Appraisals 56
6.9 Right of Inspection 57
6.10 Notice of Certain Events 57
6.11 Performance of Certain Obligations 57
6.12 Use of Proceeds; Margin Stock 57
6.13 Notice of Default 58
6.14 Compliance with Loan Documents 58
6.15 Compliance with Material Agreements 58
6.16 Operations and Properties 58
6.17 ERISA and Plans 58
6.18 Environmental Matters 59
6.19 Take-Out Commitments; Coverage 59
6.20 Failure to Close a Wet Mortgage Loan 60
6.21 Year 2000 Compliance 60
SECTION 7. NEGATIVE COVENANTS 60
7.1 No Merger 60
7.2 Limitation on Indebtedness 60
7.3 Fiscal Year, Method of Accounting 61
7.4 Business 61
7.5 Liquidations, Consolidations and Dispositions of Substantial
Assets 61
ii
7.6 Loans, Advances and Investments 61
7.7 Use of Proceeds 62
7.8 Actions with Respect to Collateral 62
7.9 Adjusted Tangible Net Worth 62
7.10 Liabilities to Adjusted Tangible Net Worth Ratios 62
7.11 Restrictions on Dividends, Returns of Capital and Servicing
Proceeds Distributions 63
7.12 Transactions with Affiliates 63
7.13 Liens 63
7.14 Compliance with ERISA 63
7.15 Change of Principal Office 64
7.16 Tax Payments 64
7.17 Tax Allocation Agreement 64
7.18 Permitted Subordinated Indebtedness 64
SECTION 8. EVENTS OF DEFAULT 64
8.1 Nature of Event 64
8.2 Default Remedies 67
SECTION 9. AGENT 67
9.1 Authorization and Action 67
9.2 Agent's Reliance, Etc 68
9.3 Agent and Affiliates 68
9.4 Lender Credit Decision 68
9.5 Indemnification 69
9.6 Successor Agent 69
9.7 Right of Inspection 70
9.8 Reports 70
SECTION 10. INDEMNIFICATION OF LENDERS 70
10.1 Indemnification 70
10.2 Limitation of Liability 71
SECTION 11. MISCELLANEOUS 71
11.1 Notices 71
11.2 Amendments, Etc 72
11.3 Invalidity 74
11.4 Survival of Agreements 74
11.5 Renewal, Extension or Rearrangement 74
11.6 Waivers 74
11.7 Cumulative Rights 74
11.8 Construction 74
11.9 Interest 75
11.10 Right of Offset 76
11.11 Assignments, Additional Lenders, etc 76
11.12 Lender Covenants, Representations and Warranties 77
iii
11.13 Consent to Jurisdiction 77
11.14 Exhibits 78
11.15 Titles of Articles and Sections 78
11.16 Counterparts 78
11.17 Rights of Individual Lenders to Take Action 78
11.18 Entire Agreement 78
11.19 Agreement Regarding Effective Date 79
iv
SCHEDULES AND EXHIBITS
----------------------
Schedule 1.1(a) Addresses of Lenders and Amount of Commitments
Schedule 1.1(b) Investors
Schedule 1.1(c) Determination of Weighted Average Take-Out Price
Schedule 1.1(d) Lot Loan Program Description
Schedule 4.1 Other Conditions of Lenders
Schedule 5.10 Litigation
Schedule 5.22 Material Agreements with Affiliates
Exhibit A-1 Form of Committed Warehouse Promissory Note
Exhibit A-2 Form of Uncommitted Warehouse Promissory Note
Exhibit A-3 Form of Swing Promissory Note
Exhibit B Form of Confirmation of Borrowing, Paydown or Conversion
--------------- ---------------------
Exhibit C Form of Borrowing Notice
Exhibit D [Reserved]
Exhibit E-1 Form of Pool Shipping Instruction
Exhibit E-2 Form of Pool Transmittal Letter
Exhibit F [Reserved]
Exhibit G Form of Borrowing Base Report
Exhibit H Form of Take-Out Report
Exhibit I Form of NVR Mortgage Finance, Inc. Officer's Certificate
Exhibit J Form of Lender Addition Agreement
------
Exhibit K Form of Security Agreement
Exhibit L Form of Tax Allocation Agreement
Exhibit M Form of Subordinated Demand Revolving Credit Note
Exhibit N Form of Payoff Schedule
v
LOAN AGREEMENT
--------------
THIS AGREEMENT ("this Agreement") is made and entered into as of September 7,
1999, between NVR MORTGAGE FINANCE, INC., a Virginia corporation (the
"Borrower"), the several Persons listed on the signature pages to this Agreement
as Lenders, whether as original signatories or pursuant to Section 11.11(c)
hereto (collectively, the "Lenders" and each individually a "Lender"), and U.S.
BANK NATIONAL ASSOCIATION, a national banking association ("Agent"), as agent
for Lenders hereunder.
A. Borrower, Chase Bank of Texas, National Association as agent and certain
Lenders (including U.S. Bank National Association) are parties to that certain
Loan Agreement dated as of July 10, 1998 (as modified and amended, the "Existing
Loan Agreement").
B. Borrower, Agent, and Lenders wish to replace the Existing Loan Agreement in
its entirety.
Accordingly, for adequate and sufficient consideration, Borrower, Lenders, and
Agent entirely replace the Existing Loan Agreement as follows:
SECTION 1. DEFINITIONS AND REFERENCES. Unless stated otherwise, the following
--------- --------------------------
provisions apply to each Loan Document and annexes, exhibits, and schedules to
them and certificates, reports, and other writings delivered under them.
1.1 Definitions.
-----------
Additional Lender means any Person party to this Agreement as a Lender
which was not a Lender on the Agreement Date.
Adjusted Cash Flow of Borrower for the twelve-month period ending on
the date of determination means the amount equal to (a) the Cash Flow of
Borrower for such period plus (b) the amount of any non-cash additions
included in the Net Income of Borrower for such period which were
subtracted from such Net Income in determining the Cash Flow of Borrower
for such Period plus (c) 1% of the amount, if any, by which the aggregate
outstanding principal balance of the Mortgage Loans included in the
Servicing Portfolio of Borrower as of the last day of such period exceeds
the aggregate outstanding principal balance of the Mortgage Loans included
in the Servicing Portfolio of Borrower as of the last day of the twelve-
month period ending on the date one year prior to such date of
determination.
Adjusted Tangible Net Worth of Borrower means, as of any date of
determination, the sum of (a) the Tangible Net Worth of Borrower determined
as of such date in accordance with GAAP and (b) the outstanding principal
amount of Permitted Subordinated Indebtedness on such date.
Advance means a Warehouse Advance, an L/C Advance, or a Swing Advance.
Affiliate of any Person means any other Person which, directly or
indirectly, controls, is controlled by, or is under common control with,
such Person. For purposes of this definition, the term "control" (and the
terms "controlled by" and "under common control with"), as used with
respect to any Person, means the possession or ownership, directly or
indirectly, of the power either to (i) direct or cause the direction of the
management and policies of such Person, whether by contract or otherwise,
or (ii) vote 10% or more of the securities having ordinary power for the
election of directors of such Person.
Agency means FNMA, FHLMC or GNMA.
Agency Commitment means a binding and enforceable agreement on the
part of (a) FNMA or FHLMC to issue Mortgage-Backed Securities in exchange
for Mortgage Loans or (b) GNMA to guarantee Mortgage-Backed Securities to
be issued by Borrower. Agency Commitment includes the FNMA Guide, the
FHLMC Guide or the GNMA Guide, as applicable, pursuant to which such Agency
Commitment was issued.
Agency Custodian means U.S. Bank Trust National Association in its
capacity as document custodian on behalf of an Agency.
Agency Servicing Agreements means Servicing Agreements between
Borrower and FNMA, FHLMC, or GNMA pursuant to which Borrower undertakes to
service Mortgage Loans or pools of Mortgage Loans owned, insured or
guaranteed by FNMA, FHLMC or GNMA.
Agency Servicing Rights means all of Borrower's right, title and
interest in and under the Agency Servicing Agreements, including, without
limitation, the rights of Borrower to income and reimbursement thereunder.
Agent means, at any time, U.S. Bank National Association, or its
successor appointed under Section 9, acting as agent for Lenders under the
Loan Documents. References to Agent in respect of Swing Advances mean that
institution in its individual capacity. Agent is the representative of
Lenders within the meaning of (S)9.105(a)(13) of the UCC for purposes of
the Loan Documents and the UCC.
Agent Fee Letter means that certain letter from Agent to Borrower
dated as of the date of this Agreement, as agreed to by Borrower and
amended, modified, or supplemented from time to time.
Agreement Date means the date set forth as such on the counterpart
signature page of Agent for this Loan Agreement.
2
Agreement to Pledge has the meaning specified in the Security
Agreement.
Appraisal means a written statement as to the market value of the
property in which a Lien is granted pursuant to a mortgage to secure a
mortgage loan.
Appraisal Laws and Regulations means laws set forth in Title XI of the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 and the
Federal Deposit Insurance Corporation Improvement Act of 1991 and
regulations promulgated by the OCC or any other Governmental Authority in
connection therewith regarding Appraisals with respect to loans made by
Persons regulated by the OCC.
Bailee Letter has the meaning specified in the Security Agreement.
Balance Funded Rate Agreement has the meaning specified in Section
2.11(f).
Balance Funded Rate Segment means that portion of a Tranche which
bears interest at the applicable rate set forth in Section 2.11(b).
Borrower has the meaning specified in the preamble of this Agreement.
Borrowing means a borrowing consisting of (a) Advances (other than a
Swing Advance) by Lenders in connection with a Borrowing Request, (b) a
Swing Advance by Agent in connection with a Borrowing Request, or (c) an
L/C Advance.
Borrowing Base as of any time of determination means the sum of:
(a) the aggregate Collateral Value of all Eligible Gestation Mortgage
Loans;
(b) the aggregate Collateral Value of all Eligible Mortgage Loans; and
(c) the aggregate Collateral Value of all Eligible Mortgage-Backed
Securities;
provided, that for purposes of determining the Borrowing Base, the maximum
Collateral Value at any time attributable to
(i) Mortgage Loans the Mortgage Note and/or other Principal
Mortgage Document for which has been delivered to Borrower for
correction under a Trust Receipt pursuant to the Security Agreement
shall be $5,000,000,
(ii) Second Lien Loans shall be 5% of the then Total
Commitment,
(iii) Construction Loans and Lot Loans, in the aggregate, shall
be 5% of the then Total Commitment,
3
(iv) Jumbo Loans (without regard to Face Amount) shall be 20%
of the then Total Commitment,
(v) Super Jumbo Loans (without regard to Face Amount) shall be
25% of the then Total Commitment available for Jumbo Loans pursuant to
clause (iv) above,
(vi) Wet Mortgage Loans shall be (A) during the period
commencing on the third to last Business Day of any calender month and
continuing through and including the fourth Business Day of the
following calendar month, 50% of the then Total Commitment, and (B) at
any other time, 30% of the then Total Commitment, and
(viii) Investment Mortgage Loans shall be 5% of the then
Total Commitment, $1,000,000 of which may be used to finance REO.
Borrowing Base Report means a report substantially in the form of
Exhibit G.
Borrowing Date means the date on which the Advance or Advances in
respect of a Borrowing are to be made, as identified by Borrower in the
relevant Borrowing Request and by Agent in the relevant Borrowing Notice.
Borrowing Notice means a notice, substantially in the form of Exhibit C or such
other form as to which Agent and Lenders may agree.
Borrowing Request means a telephonic request by Borrower to Agent for a
Borrowing pursuant to Section 2, promptly confirmed by delivery by Borrower to
Agent of a duly completed and executed Confirmation. Each Borrowing Request
shall include the information called for with respect to a Borrowing by the form
of Confirmation.
Business Day means any day other than Saturdays, Sundays and other
days on which commercial banks are authorized or required by law to close
in the State of Minnesota.
Cash Equivalents means Eligible Deposits, Eligible Commercial Paper,
and U.S. Government Securities.
Cash Flow of Borrower for the twelve-month period ending on the date
of determination means the amount equal to the Net Income of Borrower for
such period plus all non-cash charges against income (such as deferred
taxes, depreciation and amortization of goodwill and acquisition of
servicing rights) and minus all non-cash additions to income included in
the Net Income of Borrower for such period.
Category refers to the category of Collateral Value which is deemed to
support a Tranche for interest rate pricing purposes under this Agreement.
The Categories of Tranches available with respect to the Notes under this
Agreement are Construction/Lot
4
Loan Tranches, Gestation Loan Tranches and Regular Tranches.
-----------------------------------------------------------
Code means the Internal Revenue Code of 1986, as amended from time to
time.
Collateral has meaning specified in the Security Agreement.
Collateral Account means account number 104756234357 of Borrower with Agent,
which shall be under the sole dominion and control of Agent and to which
Borrower shall have no access.
Collateral Value means:
(a) with respect to a pool of Eligible Gestation Mortgage Loans, an
amount equal to 99% of the Take-Out Price for such pool of Eligible
Gestation Mortgage Loans; provided, that to the extent that the aggregate
Collateral Value for all pools of Eligible Gestation Mortgage Loans is
greater than 33% of the then Total Commitment, such pools of Eligible
Gestation Mortgage Loans in excess of 33% of the then Total Commitment
shall be attributed Collateral Value as if they consisted of Eligible
Mortgage Loans rather than Eligible Gestation Mortgage Loans;
(b) with respect to an Eligible Mortgage Loan ( other than Investment
Mortgage Loans, REO, Lot Loans, and Construction Loans), an amount equal to
98% of the least of (i) the Cost of such Eligible Mortgage Loan, (ii) the
Weighted Average Take-Out Price of such Eligible Mortgage Loan, (iii) the
Face Amount of such Eligible Mortgage Loan, and (iv) if Agent or the
Required Lenders shall so require, the Market Value of such Eligible
Mortgage Loan;
(c) with respect to an Investment Mortgage Loan, an amount equal to
80% of the unpaid principal balance of such Investment Mortgage Loan,
unless such Mortgage Loan has become REO, in which case, an amount equal to
75% of the lesser of the unpaid principal balance of such Investment
Mortgage Loan or the Appraisal of such REO;
(d) with respect to a Construction Loan, an amount equal to 90% of
the Face Amount of such Construction Loan, to the extent that such amount
does not exceed (i) 80% of the contract price of the subject property or
(ii) 90% of hard cost;
(e) with respect to a Lot Loan, 100% of the sales price of the
related lot less the down payment attributed to such sales price; and
(f) with respect to an Eligible Mortgage-Backed Security, an amount
equal to 99% of the Take-Out Price for such Eligible Mortgage-Backed
Security.
Any item of Collateral which ceases to be or is not an Eligible Gestation
Mortgage Loan, Eligible Mortgage Loan or an Eligible Mortgage-Backed
Security shall have a Collateral Value of zero.
5
Commitment as to a Lender means the obligation of such Lender to make
Advances to Borrower pursuant to Section 2.1.
Commitment Amount as to a Lender means the amount set forth on
Schedule 1.1(a) as such Lender's Commitment Amount.
Commitment Percentage means the proportion to which any Lender's
Commitment Amount bears to the Total Commitment.
Committed Warehouse Promissory Notes means the promissory notes
delivered by Borrower to Lenders pursuant to Section 2.2 each in the form
attached hereto as Exhibit A-1 and all renewals, extensions, modifications
and rearrangements thereof.
Confirmation means a Confirmation of Borrowing, Paydown or Conversion
in the form attached hereto as Exhibit B.
Conforming Loan means a loan, including conventional, FHA Loans and
VA Loans, which complies with all applicable requirements for purchase
under the FNMA or FHLMC standard form of conventional mortgage purchase
contract then in effect.
Construction Loan means a Mortgage Loan that is otherwise an Eligible
Mortgage Loan but (i) which may be partially funded if fewer than four
Advances have been made with respect to the promissory note for the subject
property and (ii) for which Borrower has delivered Construction Loan
Documents.
Construction Loan Documents means, in addition to Principal Mortgage
Documents and Other Mortgage Documents, (i) a copy of an Appraisal on the
subject property, (ii) a copy of the contract for sale on the subject
property, and (iii) a copy of the builder's draw request/non-start of
construction affidavit.
Construction/Lot Loan Tranche means, with respect to any Note at any
time, that portion of the then outstanding principal balance of such Note
which is deemed to be supported by the Collateral Value of Construction
Loans and Lot Loans included in the Collateral held by Agent at that time,
as specified from time to time by Borrower in the Borrowing Requests and
Conversion Requests received by Agent from Borrower, provided, that (a) the
aggregate principal amount of all Construction/Lot Loan Tranches
outstanding under the Notes of all Lenders at any time shall not exceed the
aggregate Collateral Value of Construction Loans and Lot Loans included in
the Collateral held by Agent at such time, and (b) the aggregate principal
amount of all Construction/Lot Loan Tranches outstanding under any Lender's
Notes at any time shall not exceed the product of the aggregate Collateral
Value of Construction Loans and Lot Loans included in the Collateral held
by Agent at such time multiplied by a fraction the numerator of which is
the aggregate principal balance outstanding under such Lender's Notes at
such time and the denominator of which is the aggregate principal balance
outstanding under all Lenders' Notes at such time.
6
Conversion Request means a telephonic request by Borrower to Agent for
a conversion of Tranches and/or Borrowings pursuant to Section 2.12,
promptly confirmed by delivery by Borrower to Agent of a duly completed and
executed Confirmation. Each Borrowing Request shall include the
information called for with respect to a conversion by the form of
Confirmation.
Cost with respect to any Mortgage Loan means, as applicable, the
actual out-of-pocket cost to Borrower of such Mortgage Loan, if purchased,
or, if such Mortgage Loan was originated by Borrower, the original
principal amount of such Mortgage Loan minus any discount points paid to
Borrower in respect of such Mortgage Loan.
Custodial Fee Letter means that certain letter from Agent to Borrower
dated as of the date of this Agreement, as agreed to by Borrower and
amended, modified, or supplemented from time to time.
Debtor Laws means all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency,
reorganization, fraudulent conveyance or similar laws from time to time in
effect affecting the rights of creditors generally.
Default means any condition or event which, with the giving of notice
or lapse of time or both and unless cured or waived, would constitute an
Event of Default.
Delinquent with respect to any Mortgage Loan means that any payment in
respect of such Mortgage Loan is more than 30 days past due.
Deposit Holding Lenders means Lenders which both (a) hold deposits in
accounts in the name of Borrower and (b) have entered into a Balance
Funded Rate Agreement with Borrower.
Dividends means: (a) Cash distributions or any other distributions
on, or in respect of, any class of equity security of Borrower, except for
(i) distributions made solely in shares of securities of the same class and
(ii) Permitted Returns of Capital and Permitted Servicing Proceeds
Distributions; and (b) any and all funds, cash or other payments made in
respect of the redemption, repurchase or acquisition of (i) such securities
or (ii) any option, warrant, or other right to purchase any of such
securities.
Dollars means lawful money of the United States of America.
Eligible Commercial Paper means commercial paper and other short-term
money market instruments which are rated at least A-1 or the equivalent
thereof by Standard & Poors and P-1 or the equivalent thereof by Moody's.
7
Eligible Deposits means time deposits and certificates of deposit of
any Lender or of any domestic commercial bank or savings bank having
capital and surplus in excess of $200,000,000, in all such cases which has
a short-term certificate of deposit rating of at least A-1 or the
equivalent thereof by Standard & Poors and a short-term bank deposit rating
of least P-1 or the equivalent thereof by Moody's, or (ii) a rating of C or
better from Xxxxxxxx Bank Watch, Inc. or 75 or better from I.D.C. Financial
Publishing, as applicable.
Eligible Gestation Mortgage Loan means a Mortgage Loan: (a) in which
Agent has a perfected first-priority security interest for the benefit of
Lenders to secure the Obligations; (b) which (i) has been allocated to an
Agency Commitment; (ii) is part of a pool which the Agency Custodian has
certified (or initially certified) to the Agency obligated under such
Agency Commitment; and (iii) together with the other Mortgage Loans which
have been allocated to such Agency Commitment, satisfies all requirements
for delivery under such Agency Commitment; (c) with respect to which the
Mortgage-Backed Security to be issued or guaranteed pursuant to such Agency
Commitment will, upon the issuance thereof, constitute an Eligible
Mortgage-Backed Security; and (d) to which Borrower has allocated
Gestation Loan status in accordance with Section 3.4(b)
Eligible Mortgage-Backed Security means a Mortgage-Backed Security:
(a) in which Agent has a perfected first-priority security interest for the
benefit of Lenders to secure the Obligations; (b) which (i) evidences an
undivided interest in a pool of Mortgage Loans which constituted Eligible
Gestation Mortgage Loans or Eligible Mortgage Loans immediately prior to
the issuance of such Mortgage-Backed Security; (ii) has been allocated to
a Take-Out Commitment; (iii) satisfies all requirements for delivery under
such Take-Out Commitment and (iv) has not been owned by Borrower for more
than five (5) Business Days; and (c) with respect to which the Investor
under the Take-Out Commitment to which such Mortgage-Backed Security has
been allocated is not in default or in breach of its obligations under
such Take-Out Commitment.
Eligible Mortgage Loan means a Mortgage Loan (other than an Eligible
Gestation Mortgage Loan):
(a) in which Agent has been granted and continues to hold a perfected
first-priority security interest for the benefit of Lenders;
(b) which has been fully funded except in the case of Construction
Loans;
(c) which is "covered" (within the meaning given to such term in
Section 6.19) by a Take-Out Commitment, except in the case of Investment
Mortgage Loans, Lot Loans, and Construction Loans;
(d) which, in the case of an Eligible Mortgage Loan other than a
Construction Loan, an Investment Loan or a Lot Loan, has not been included
as an Eligible Mortgage
8
Loan in the Collateral held by Agent for more than 120 days;
(e) which, in the case of a Construction Loan, has not been
included in the Collateral held by Agent (i) for more than 270 days as a
Construction Loan or (ii) more than 360 days as an Eligible Mortgage Loan;
(f) which, in the case of an Investment Loan, has not been included
as an Eligible Mortgage Loan in the Collateral held by Agent for more than
364 days;
(g) which, in the case of a Lot Loan, has not been included as an
Eligible Mortgage Loan in the Collateral held by Agent for more than 270
days;
(h) which has not previously been sold to an Investor and
repurchased by Borrower ;
(i) which, except in the case of an Investment Mortgage Loan, is
not Delinquent or, to Borrower's knowledge, otherwise in default;
(j) which, in the case of a Lot Loan, has not been without a
construction contract on the lot at any time for more than 5 days;
(k) with respect to which no more than 180 days have elapsed since
the original funding of such Mortgage Loan to the Mortgagor;
(l) with respect to which there is an Appraisal which complies
with all applicable Appraisal Laws and Regulations ;
(m) with respect to which Agent has received the Principal
Mortgage Documents and, if applicable, the Construction Loan Documents or
Lot Loan Documents, as the case may be;
(n) with respect to which, if any Mortgage Note has been delivered
to an Investor under a Bailee Letter pursuant to the Security Agreement, no
more than 45 days have elapsed since the delivery of such Mortgage
Document without the Agent having received from such Investor either (i)
the Warehouse Purchase Price specified in such Bailee Letter or (ii) such
Mortgage Note and any related Mortgage Documents delivered to such Investor
therewith;
(o) with respect to which, if Agent shall have delivered a Mortgage
Note and/or any other Mortgage Document to Borrower for correction under a
Trust Receipt pursuant to the Security Agreement, no more than 21 days have
elapsed since the delivery of such Mortgage Note and/or other Mortgage
Document without such Mortgage Note and/or other Mortgage Document having
been returned to Agent; and
(p) with respect to a Wet Mortgage Loan, no more than 7 Business
Days have elapsed since the date on which such Wet Mortgage Loan was
funded.
9
ERISA means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
Event of Default has the meaning specified in Section 8.1.
Existing Loan Agreement has the meaning specified in the preamble.
Face Amount means: (a) in the case of a Mortgage Loan, the stated
principal amount of the Mortgage Note which evidences such Mortgage Loan,
without giving effect to any payments thereon; and (b) in the case of a
Mortgage-Backed Security, the par value of such Mortgage-Backed Security.
FHA means the Federal Housing Administration, or any successor
thereto.
FHA Loan means a loan, payment of which is partially or completely
insured by the FHA or with respect to which there is a current, binding and
enforceable commitment for such insurance issued by the FHA.
FHLMC means the Federal Home Loan Mortgage Corporation, or any
successor thereto.
FHLMC Guide means the FHLMC Sellers' & Servicers' Guide as amended,
modified, or supplemented from time to time.
FHLMC Securities means participation certificates representing
undivided interests in mortgage loans purchased by FHLMC pursuant to the
Emergency Home Finance Act of 1970, as amended.
FNMA means the Federal National Mortgage Association, or any successor
thereto.
FNMA Guide means the FNMA Selling Guide and the FNMA Servicing Guide
as amended, modified or supplemented from time to time.
FNMA Securities means modified pass-through mortgage-backed
certificates guaranteed by FNMA pursuant to the National Housing Act, as
amended
GAAP means generally accepted accounting principles in effect in the
United States on the Agreement Date.
Gestation Loan Tranche means, with respect to any Note at any time,
that portion of the then outstanding principal balance of such Note which
is deemed to be
10
supported by the Collateral Value of Eligible Gestation Mortgage Loans
included in the Collateral held by Agent at that time, as specified from
time to time by Borrower in the Borrowing Requests and Conversion Requests
received by Agent from Borrower, provided, that (a) the aggregate principal
amount of all Gestation Loan Tranches outstanding under the Notes of all
Lenders at any time shall not exceed the aggregate Collateral Value of
Eligible Gestation Mortgage Loans included in the Collateral held by Agent
at such time, and (b) the aggregate principal amount of all Gestation Loan
Tranches outstanding under any Lender's Notes at any time shall not exceed
the product of the aggregate Collateral Value of Eligible Gestation
Mortgage Loans included in the Collateral held by Agent at such time
multiplied by a fraction the numerator of which is the aggregate principal
balance outstanding under such Lender's Notes at such time and the
denominator of which is the aggregate principal balance outstanding under
all Lenders' Notes at such time.
GNMA means the Government National Mortgage Association, or any
successor thereto.
GNMA Guide means the GNMA I and GNMA II Mortgage-Backed Securities
Guides, GNMA Handbooks 5500.1 and 5500.2, as amended, modified or
supplemented from time to time.
GNMA Securities means modified pass through mortgage backed
certificates guaranteed by GNMA pursuant to Section 306(g) of the National
Housing Act, as amended.
Good Funds Wire Clearing Account means account number 000000000000
of Borrower with Agent, which shall be in the sole dominion and control of
the Agent and to which Borrower shall have no access.
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.
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, dividend or other
obligation, including any Mortgage Loan (the "Primary Obligation") 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:
(a) to purchase (or repurchase) such Primary Obligation or any
property constituting direct or indirect security therefore;
(b) to advance or supply funds (x) for the purchase or payment of any
such Primary Obligation, or (y) to maintain working capital or other
balance sheet conditions
11
of the Primary Obligor or otherwise to maintain the net worth or solvency
of the Primary Obligor;
(c) 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
(d) 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 (x) endorsements in
the ordinary course of business of negotiable instruments or documents for
deposit or collection, (y) obligations under the FNMA Guide, the FHLMC
Guide, the GNMA Guide and the related Servicing Agreements to make payments
due to the holders of Mortgage-Backed Securities from the Primary Obligors
on the Mortgage Loans to which such Mortgage-Backed Securities relate prior
to the receipt of such payments from such Primary Obligors, or (z) Ordinary
Recourse Obligations. 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.
Guidance Line means, for any Lender, the amount stated beside its name
and so designated on Schedule 1.1(a) as it may be amended under this
Agreement), as that amount may be canceled or terminated under this
Agreement.
Indebtedness of any Person means, without duplication, (i)
indebtedness of such Person for borrowed money; (ii) obligations of such
Person (a) evidenced by a note, bond, debenture, or similar instrument, (b)
to pay the deferred purchase price of property or services (other than
trade payables incurred and timely paid in the ordinary course of
business), (c) created or arising under any conditional sale or other title
retention agreement with respect to Property acquired by such Person, (d)
as lessee under any lease which has been or, in accordance with GAAP,
should be classified as a capital lease, (e) upon which interest is paid or
accrued, or (f) in respect of letters of credit, acceptances, or similar
obligations issued or created for the account of such Person, (iii)
Guaranty Obligations of such Person, (iv) 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, (v) liabilities
of such Person or any related Person in respect of unfunded vested benefits
under a Plan as determined in accordance with ERISA and (vi) obligations of
such Person in respect of interest rate protection agreements entered into
in connection with any of the items described in clauses (i), (ii), (iii),
(iv) or (v) of this definition; provided, that (x) Indebtedness does not
include any Ordinary Recourse Obligations, (y) the amount of Indebtedness
attributable to any Guaranty Obligation shall be determined as set forth in
the definition of Guaranty Obligation and (z) the amount of Indebtedness
attributed to liabilities secured by any Lien on any property owned by any
12
Person which liabilities are non-recourse to such Person shall be the
lesser of (i) the market value of such property, as determined by such
Person in good faith, and (ii) the outstanding amount of the liabilities so
secured.
Investment has the meaning specified in Section 7.6.
Investment Line of Credit Indebtedness means Indebtedness of Borrower
which satisfies each of the following criteria:
(i) the payee with respect thereto is a Lender;
(ii) the proceeds thereof are used solely to purchase Cash
Equivalents with a current maturity of 31 days or less;
(iii) the repayment of such Indebtedness is secured by a Lien on
the Cash Equivalents purchased with the proceeds thereof and by no
other Lien on the Property of Borrower;
(iv) the aggregate principal amount of such Indebtedness at any
one time outstanding to all Lenders does not exceed the amount equal
to the Total Commitment at such time; and
(v) that is on terms and pricing agreed upon at the time of
utilizing this Indebtedness.
Investment Mortgage Loan means a Mortgage Loan that is otherwise an
Eligible Mortgage Loan but for which there is no applicable Take-Out
Commitment.
Investor means each Person listed on Schedule 1.1(b), as the same may
be amended or supplemented from time to time pursuant to Section 11.2(b).
Jumbo Loan means a Mortgage Loan, the original principal amount of
which is greater than the Maximum Conforming Amount but no greater than
$1,000,000, which complies with all applicable requirements for purchase
under either (a) the FNMA or FHLMC standard form of conventional mortgage
purchase contract then in effect, except that the amount of such loan is
greater than the maximum loan amount under such requirements, or (b) a
Take-Out Commitment.
L/C means a standby letter of credit (a) relating to seller contracts
or other needs of Borrower acceptable to Agent, (b) having a maturity prior
to the Scheduled Termination Date, (c) issued by Agent for Borrower's
account under Section 2.1(e) and an L/C Agreement, and (d) subject to the
L/C Advance Limit.
L/C Advance means the issuance of an L/C pursuant to Section 2.1(e)
and any advance by a Lender under its Commitment Amount to refinance L/C
Obligations pursuant to Section 2.1(f).
13
L/C Advance Limit means $5,000,000.
L/C Agreement means, at any time, a letter of credit application and
agreement, in substantially the standard form customarily used by Agent at
that time, executed and delivered by Borrower for the issuance of an L/C
for Borrower's account.
L/C Exposure means, at any time and without duplication, the sum of
(a) the total undrawn and uncancelled face amount of all L/Cs plus (b) the
L/C Obligation.
L/C Obligation means, at any time, Borrower's total unpaid
reimbursement obligations to Agent for drafts or drawings paid under any
L/C.
Lender and Lenders shall have the meanings specified in the preamble
of this Agreement.
Lender Addition Agreement means a Lender Addition Agreement in the
form attached hereto as Exhibit J, together with such changes as Agent and
Lenders executing a particular Lender Addition Agreement may require.
Lender Addition Agreement with respect to a particular Additional Lender
means the Lender Addition Agreement by which such Additional Lender became
a Lender.
LIBOR means, on any date of determination, the average offered rate
for one month deposits in Dollars, which rate appears on the Reuters
Screen LIBO page as of 11:00 a.m., London time (or such other time as of
which such rate appears) on such date of determination, or the rate for
such deposits determined by Agent at such time based on such other
published service of general application as shall be selected by Agent for
such purpose; provided, that in lieu of determining the rate in the
foregoing manner, if not so determinable on such date, at the option of
Agent, Agent may determine the rate based on rates at which one month
Dollar deposits are offered to Agent in the interbank Eurodollar market at
such time in an amount approximately equal to the aggregate principal
amount of the LIBOR Rate Segments to which such rate is to apply. "Reuters
Screen LIBO page" means the display designated as page "LIBO" on the
Reuters Monitor Money Rate Screen (or such other page as may replace the
LIBO page on such service for the purpose of displaying London interbank
offered rates of major banks for Dollar deposits). For purposes of
determining any interest rate hereunder or under any other Loan Document
which is based on LIBOR, such interest rate shall change as and when LIBOR
shall change.
LIBOR Segment means any that portion of any Tranche which bears interest at the
applicable rate set forth in Section 2.11(c).
Lien means any mortgage, pledge hypothecation, assignment, deposit
arrangement, encumbrance, lien (whether statutory, consensual or
otherwise), or other security arrangement of any kind (including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same
14
economic effect as any of the foregoing, and any financing statement filed
under the uniform commercial code or comparable law of any jurisdiction in
respect of any of the foregoing).
Loan Document means any and Loan Documents means the collective
reference to each of this Agreement, the Notes, the Security Instruments
and any and all other agreements or instruments now or hereafter executed
and delivered by or on behalf of Borrower in connection with, or as
security for the payment or performance of any or all of the Obligations,
as any of such documents may be renewed, amended or supplemented from time
to time.
Loan to Value Ratio means, with respect to any Mortgage Loan as of any
date, a fraction, expressed as a percentage, the numerator of which is the
outstanding principal balance of such Mortgage Loan at the date of
determination and the related denominator of which is the value of the
related mortgaged property as set forth in the Appraisal. For purposes of
calculating the Loan to Value Ratio for a Mortgage Loan secured by a second
Mortgage, the outstanding principal balance of the related first Mortgage
as well as the second Mortgage shall be included in the numerator.
Lot Loan means a Mortgage Loan that is otherwise an Eligible Mortgage
Loan but (i) which may not exceed a Face Amount of $150,000, (ii) for
which Borrower also has delivered Lot Loan Documents, (iii) that otherwise
complies with the program set forth on Schedule 1.1(e), and (iv) that
covers property located in Pennsylvania, upon which a home is being
constructed by the Parent or its subsidiaries.
Lot Loan Documents means, in addition to the applicable Principal
Mortgage Documents and Other Mortgage Documents, (i) a deed of conveyance,
(ii) a coal clause for deed, (iii) a receipt evidencing down payment
amount, (iv) a lot sales agreement, (v) a Construction Agreement, and (vi)
any other documents reasonably requested by Agent or any of the Lenders.
Market Value means, at any time for Mortgage Loans, a market value
based upon the then most recent posted net yield for 30-day mandatory
future delivery furnished by FNMA and published and distributed by Telerate
Mortgage Services or Xxxxxx-Xxxxxx or (if that posted net yield is not
available from these services) obtained by the Agent from FNMA.
Material Adverse Effect means any material adverse effect on (i) the
validity or enforceability of this Agreement, any Note or any other Loan
Document, (ii) the business, operations, total Property or financial
condition of Borrower, (iii) the collateral, taken as a whole, under any
Security Instrument, (iv) the enforceability or priority of the Lien in
favor of Agent for the benefit of Lenders on the collateral, taken as a
whole, under any Security Instrument, or (v) the ability of Borrower timely
to perform the Obligations.
Maximum Conforming Amount for a particular Mortgage Loan means the
15
maximum principal amount for any Mortgage Loan which is eligible for
purchase by whichever of FNMA or FHLMC has the higher maximum principal
amount for Mortgage Loans secured by Mortgages on property located in the
state or region where the property covered by the Mortgage related to the
Mortgage Loan in question is located.
Maximum Rate has the meaning specified in Section 11.9.
Moody's means Xxxxx'x Investors Service, Inc.
Mortgage means a mortgage or deed of trust, on a standard form
approved by VA, FHA, FNMA or FHLMC , which grants, as security for a
Mortgage Loan, a perfected first-priority lien (or, in the case of Second
Lien Loans, second-priority lien) on residential real property consisting
of land and a one-to-four family dwelling thereon which is completed and
ready for occupancy.
Mortgage-Backed Securities means FNMA Securities, FHLMC Securities and
GNMA Securities.
Mortgage Collateral means, at any time, Mortgage Loans and Mortgage-
Backed Securities then subject to a Lien in favor of Agent for the benefit
of Lenders.
Mortgage Documents means, for any Mortgage Loan, the Principal
Mortgage Documents, the Other Mortgage Documents, and, if applicable, the
Construction Loan Documents and/or Lot Loan Documents relevant thereto.
Mortgage Loan means an FHA Loan, VA Loan, Conforming Loan, Investment
Mortgage Loan, Second Lien Loan, Construction Loan, Lot Loan, Jumbo Loan or
Super Jumbo Loan (i) which is secured by a Mortgage and has a maximum term
to maturity of thirty years and (ii) is not a commercial loan or, except as
otherwise permitted by this Agreement, a construction loan.
Mortgage Note means a promissory note, on a standard form approved by
VA, FHA, FNMA or FHLMC or other form approved in writing by the Required
Lenders, which evidences a Mortgage Loan.
Multiemployer Plan means a "multiemployer plan," as defined in Section
4001(a)(3) or Section 3(37) of ERISA or Section 414 of the Code, which is
maintained for the benefit of employees of Borrower or any Related Person.
Net Income of Borrower for any period means the net income (after
taxes) which would appear on an income statement of Borrower for such
period prepared in accordance with GAAP.
16
Notes means the Committed Warehouse Promissory Notes, the Uncommitted
Warehouse Promissory Notes, and the Swing Promissory Note.
Obligations means all of the present and future indebtedness,
obligations, and liabilities of Borrower to Agent and Lenders, and all
renewals, rearrangements 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
reasonable 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.
OCC means the Office of the Comptroller of the Currency of the United
States of America and any Governmental Authority succeeding to the
functions of such office.
Ordinary Recourse Obligation means an obligation of Borrower to
purchase a Mortgage Loan serviced by Borrower pursuant to a Servicing
Agreement in the event that:
(a) a material representation or warranty given by Borrower at
the time of the sale of such Mortgage Loans proves to have been false
or incorrect in any material respect when given;
(b) Borrower fails timely to perform its servicing obligations
with respect thereto;
(c) such Mortgage Loan is being serviced on behalf of FNMA or
FHLMC and the obligor on such Mortgage Loan fails timely to make any
payment due in connection therewith in the four-month period
commencing on the date of funding of such Mortgage Loan;
(d) such Mortgage Loan is an adjustable rate Mortgage Loan which
is being serviced on behalf of FNMA and the obligor on such Mortgage
Loan is exercising its right to convert the interest rate on such
Mortgage Loan to a fixed rate; or
(e) such Mortgage Loan is being serviced on behalf of GNMA and
the obligor on such Mortgage Loan fails timely to make any payment due
in connection therewith in the four-month period commencing on the
date of issuance of the GNMA Security backed by such Mortgage Loan.
Other Mortgage Documents has the meaning specified in the Security
Agreement.
17
Parent means NVR, Inc., a Virginia corporation.
Parent Note means that certain subordinated demand revolving credit
note issued by Borrower to the order of the Parent a true and correct copy
of which is attached as Exhibit M.
PBGC means the Pension Benefit Guaranty Corporation or any successor
thereto.
Permitted Dividends means Dividends the declaration and payment of
which is permitted under Section 7.11.
Permitted Intercompany Payables means amounts due to Affiliates of
Borrower in respect of Permitted Intercompany Transactions and the
Permitted Subordinated Indebtedness.
Permitted Intercompany Transactions means transactions with Affiliates
of Borrower (a) which comply in all respects with Section 7.12 without
regard to the proviso to such Section, and are identified on Schedule 5.22,
and (b) with respect to which the aggregate consideration paid by Borrower
in any month does not exceed the amount for each type of transaction set
forth on Schedule 5.22.
Permitted Investment means an Investment permitted pursuant to Section
7.6.
Permitted Liens means:
(a) Liens on the Collateral which secure payment of the
Obligations (including Liens granted on the Collateral pursuant to the
Security Agreement in connection with the Existing Loan Agreement);
(b) Liens on the Collateral permitted under Section 7.8(d) and
Liens on Take-Out Commitments no longer included in the Collateral
permitted under Section 7.8(c);
(c) rights of FNMA, FHLMC and GNMA in each case in the Agency
Servicing Rights in connection with the Agency Servicing Agreements
under which Borrower services Mortgage Loans on behalf of such Person,
arising under the FNMA Guide, the FHLMC Guide or the GNMA Guide, as
applicable, and rights of any Person counterpart to a Servicing
Agreement other than an Agency Servicing Agreement in the Servicing
Rights arising thereunder;
(d) tax and other Liens permitted under Section 6.2;
(e) Liens in respect of office equipment (including without
limitation computers) leased or purchased by Borrower for an aggregate
amount no greater than $3,000,000;
(f) Liens in respect of claims regarding labor, materials,
services and
18
supplies provided in connection with REO;
(g) Liens on REO of the type permitted as exceptions under Part
IV, Section 105.05 of the FNMA Guide (Selling) and Section 1704 of the
FHLMC Guide;
(h) Liens to secure obligations of Borrower in respect of workers
compensation and other labor laws;
(i) Liens in respect of appeal or performance bond reimbursement
obligations of Borrower undertaken in the ordinary course of business;
(j) Repurchase Agreement Liens; and
(k) Liens on Property not included in the Collateral which secure
Investment Line of Credit Indebtedness incurred to finance the
acquisition of such Property.
provided, that Liens described in clauses (f), (h) and (i) of this
definition shall not constitute Permitted Liens to the extent that the
failure of Borrower timely to perform the underlying obligations,
individually or in the aggregate, would constitute a Material Adverse
Effect.
Permitted Returns of Capital means Returns of Capital which are
permitted under Section 7.11.
Permitted Subordinated Indebtedness means Indebtedness under the
Parent Note.
Permitted Subsidiaries means Subsidiaries which are engaged in some
aspect of the mortgage banking business, including, without limitation,
title companies and with respect to which the aggregate capital contributed
by Borrower to all such Subsidiaries does not exceed $1,000,000.
Permitted Tax Payments means payments to or on behalf of the Parent or
any Affiliate in respect of taxes, which payments are permitted under
Section 7.16.
Person means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization,
Governmental Authority, or other form of entity.
Plan means an "employee pension benefit plan" (as defined in Section
3(2) of ERISA) which is or has been established or maintained, or to which
contributions are or have been made, by Borrower or any of its Related
Persons, or an employee pension benefit plan as to which Borrower or any of
its Related Persons would be treated as a contributory sponsor under Title
IV of ERISA if it were to be terminated.
19
Pledged Mortgage Loan has the meaning specified in the Security
Agreement.
Principal Mortgage Documents has the meaning specified in the Security
Agreement.
Property means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
Reference Rate means the rate of interest from time to time publicly
announced by Agent as its "reference rate." Agent may lend to its
customers at rates that are at, above or below the Reference Rate. For
purposes of determining any interest rate hereunder or under any other
Loan Document which is based on the Reference Rate, such interest rate
shall change as and when the Reference Rate shall change.
Reference Rate Segment means that portion of a Tranche which bears
interest at the Reference Rate.
Regular Tranche means, with respect to any Note at any time, that
portion of the then outstanding principal balance of such Note which is
deemed to be supported by the Collateral Value of Collateral which is other
than Construction Loans, Lot Loans or Eligible Gestation Mortgage Loans, as
specified from time to time by Borrower in the Borrowing Requests and
Conversion Requests received by Agent from Borrower, provided, that (a) the
aggregate principal amount of all Regular Tranches outstanding under the
Notes of all Lenders at any time shall not exceed the remainder (the
"Remainder Collateral Value") of (i) the aggregate Collateral Value of all
Collateral held by Agent at that time minus (ii) the aggregate Collateral
Value of all Construction Loans, Lot Loans and Eligible Gestation Mortgage
Loans included in the Collateral held by the Agent at such time, and (b)
the aggregate principal amount of all Regular Tranches outstanding under
any Lender's Notes at any time shall not exceed the product of the
Remainder Collateral Value at such time multiplied by a fraction the
numerator of which is the aggregate principal balance outstanding under
such Lender's Notes at such time and the denominator of which is the
aggregate principal balance outstanding under all Lenders' Notes at such
time.
Regulation D means Regulation D of the Board of Governors of the
Federal Reserve System.
Related Person means any Person that is (a) a member of the same
controlled group of corporations (within the meaning of Section 414(b) of
the Code) as Borrower, (b) under common control (within the meaning of
Section 414(c) of the Code or Section 4001 of ERISA) with Borrower, (c) a
member of any affiliated service group (within the meaning of Section
414(m) of the Code) which includes Borrower, or (d) otherwise treated as
part of the controlled group which includes Borrower (within the
20
meaning of Section 414(o) of the Code).
Remainder Collateral Value has the meaning given such term in the
definition of the term "Regular Tranche" set forth in this Section 1.1.
REO means real estate owned by Borrower as the result of foreclosure
or other process in lieu of foreclosure on a Mortgage which secured a
Mortgage Loan.
Repurchase Agreement means an agreement with an Investor pursuant to
which Borrower sells and agrees to repurchase interests in Mortgage Loans.
Repurchase Agreement Liens means Liens granted pursuant to a
Repurchase Agreement on Mortgage Loans (and the proceeds thereof) sold by
Borrower thereunder and on no other property of Borrower.
Required Lenders means at any time Lenders whose Commitment Amounts
represent at least 66 and 2/3% of the then Total Commitment; provided, that
for purposes of determining Required Lenders when some but not all
Commitments have terminated, any Lender with outstanding Advances whose
Commitment has terminated shall be deemed to have a Commitment Amount equal
to its outstanding Advances.
Requirement of Law as to any Person means the articles of
incorporation 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 energy
regulations and occupational, safety and health standards or controls and
environmental, hazardous materials use or disposal and pollution standards
or controls) of any 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.
Returns of Capital means any and all payments made by Borrower to the
Parent which represent a return of cash capital contributions made by the
Parent to Borrower at any time on or after the Agreement Date.
Scheduled Termination Date means September 4, 2000.
Second Lien Loan means a Mortgage Loan that is otherwise an Eligible
Mortgage Loan but is secured by a second-priority security interest in the
property (but a first priority security interest in the Mortgage Loan) and
whose Loan to Value Ratio does not exceed 100%.
21
Securities Credit Transaction Regulations means Regulations T, U and X
issued by the Board of Governors of the Federal Reserve System as in effect
from time to time.
Security Agreement means that certain Pledge and Security Agreement
dated as of the date of this Agreement, as amended, between Borrower and
Agent in substantially the form of Exhibit K attached, as the same may
from time to time be amended, modified or supplemented.
Security Instruments 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 the
collateral described in the definition of "Collateral" set forth in the
Security Agreement, and any and all other agreements or instruments now or
hereafter executed and delivered by or on behalf of 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 documents 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 or pools of Mortgage Loans owned, insured or guaranteed by
such Persons; "Servicing Agreements" does not include any subservicing
agreements.
Servicing Portfolio of Borrower means at any time all Mortgage Loans
with respect to which Borrower acts as servicer pursuant to Servicing
Agreements.
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 Agreements
and the Servicing Portfolio.
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.
Segment means a Balance Funded Rate Segment, a LIBOR Segment or a Reference Rate
Segment.
Standard & Poors means Standard & Poor's Ratings Services.
Subsidiary of any Person (the "first Person") means any Person which
is properly treated as a subsidiary of the first Person under GAAP.
Super Jumbo Loan means a Mortgage Loan, the original principal amount
of which is greater than $1,000,000 but no greater than $1,500,000 (or such
greater amount as Agent, in its sole discretion, may permit on a case-by-
case basis, but no greater than $1,750,000), which complies with all
applicable requirements for purchase under either (a) the FNMA or FHLMC
standard form of conventional mortgage purchase contract
22
then in effect, except that the amount of such loan is greater than the
maximum loan amount under such requirements, or (b) a Take-Out Commitment.
Swing Advance means an advance by Agent to Borrower pursuant to
Section 2.1(c).
Swing Advance Limit means $50,000,000.
Swing Promissory Note means the promissory note delivered by Borrower
to Agent pursuant to the second sentence of Section 2.2 in the form
attached hereto as Exhibit A-3 and all renewals, extensions, modifications
and rearrangements thereof.
Take-Out Commitment means a current, valid, binding and enforceable
written commitment by an Investor to purchase from Borrower Mortgage Loans
or Mortgage-Backed Securities of specific characteristics within a specific
period at a specific price or yield.
Take-Out Price means:
(a) With respect to a pool of Eligible Gestation Mortgage Loans,
the Take-Out Price of the Mortgage-Backed Security to be issued or
guaranteed pursuant to the Agency Commitment to which such pool has
been Allocated; and
(b) with respect to an Eligible Mortgage-Backed Security, the
price for such Eligible Mortgage-Backed Security under the Take-Out
Commitment to which such Eligible Mortgage-Backed Security has been
Allocated.
Take-Out Report means the report substantially in the form of Exhibit
H hereto (or such other forms as to which Borrower and Agent may agree),
delivered by Borrower pursuant to Section 6.1(f).
Tangible Net Worth of Borrower means, as of any date of determination,
the sum of the amounts set forth on the balance sheet of Borrower as the
sum of the common stock, preferred stock, additional paid-in capital and
retained earnings of Borrower (excluding treasury stock), less the book
value of all intangible assets of Borrower, including all such items as
goodwill, trademarks, trade names, service marks, copyrights, patents,
licenses, unamortized debt discount and expenses and the excess of the
purchase price of the assets of any business acquired by the Borrower over
the book value of such assets.
Tax Allocation Agreement means that certain Amended and Restated Tax
Allocation Agreement dated as of March 7, 1996, among the Parent, Borrower
and certain Affiliates of Borrower, a true and correct copy of which is
attached as Exhibit L.
Termination Date means the Scheduled Termination Date or the earlier
date of termination in whole of the Commitments pursuant to Section 8.2.
23
Total Commitment at any time means the sum of the Commitment Amounts
in effect at such time.
Total Liabilities of Borrower means, as of any date of determination,
all amounts which would be included as liabilities on a balance sheet of
Borrower as of such date prepared in accordance with GAAP.
Tranche means a Construction/Lot Loan Tranche, a Gestation Loan
Tranche or a Regular Tranche.
Trust Receipt has the meaning specified in the Security Agreement.
Type refers to the type of interest rate option applicable to a
Segment of a Tranche. The Types of Segments available under Agreement are
Balance Funded Rate Segments, LIBOR Segments and Reference Rate Segments.
UCC means the Uniform Commercial Code as adopted in the State of
Minnesota, as amended from time to time.
Uncommitted Warehouse Promissory Notes means the promissory notes
delivered by Borrower to Lenders pursuant to Section 2.2 each in the form
attached hereto as Exhibit A-2 and all renewals, extensions, modifications
and rearrangements thereof.
U.S. Government Securities means securities of the United States
government or any agency thereof which are backed by the full faith and
credit of the United States and have a current maturity of ninety days or
less.
VA means the Department of Veterans Affairs, or any successor thereto.
VA Loan means a Mortgage Loan the payment of which is partially or
completely guaranteed by the VA under the Servicemen's Readjustment Act of
1944, as amended, or Chapter 37 of Title 38 of the United States Code or
with respect to which there is a current binding and enforceable commitment
for such a guaranty issued by the VA.
Warehouse Advance means an advance by a Lender to Borrower pursuant to
Section 2.1(b) or 2.1(d).
Weighted Average Take-Out Price means, with respect to a Mortgage
Loan, the weighted average Take-Out Commitment price, expressed as a
percentage, determined as set forth on Schedule 1.1(c).
Welfare Plan means an employee welfare benefit plan (as defined in
Section 3(1)
24
of ERISA) or a group health plan (as defined in Section 4980B(g)(2) of the
Code) which is or has been established or maintained, or to which
contributions are or have been made, by Borrower or any of its Related
Persons.
Wet Mortgage Loan means a Mortgage Loan (other than a Construction
Loan, a Lot Loan or REO) the Principal Mortgage Documents for which have
not been delivered to the Agent.
1.2 Time References. Time references (e.g., 9:30 a.m.) are to time in
---------------
Minneapolis, Minnesota. In calculating a period from one date to another, the
word "from" means "from and including" and the word "to" or "until" means "to
but excluding."
1.3 Other References. Where appropriate, the singular includes the plural
----------------
and vice versa, and words of any gender include each other gender. Heading and
caption references may not be construed in interpreting provisions. Monetary
references are to currency of the United States of America. Section, paragraph,
annex, schedule, exhibit, and similar references are to the particular Loan
Document in which they are used. References to "telecopy," "facsimile," "fax,"
or similar terms are to facsimile or telecopy transmissions. References to any
Person include that Person's heirs, personal representatives, successors,
trustees, receivers, and permitted assigns. References to any Requirement of Law
include every amendment or supplement to it, rule and regulation adopted under
it, and successor or replacement for it. References to any Loan Document or
other document include every renewal and extension of it, amendment and
supplement to it, and replacement or substitution for it. 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.
25
SECTION 2. AMOUNT AND TERMS OF CREDITS
---------------------------
2.1 Commitment.
----------
(a) Advances in General. Subject to the terms and conditions
-------------------
contained in this Agreement, each Lender severally agrees to make Warehouse
Advances (including Warehouse Advances to refinance Swing Advances) to or
for the account of Borrower on a revolving credit basis from time to time
on any Business Day from the Agreement Date through the earlier to occur of
the Termination Date and the Business Day preceding the Scheduled
Termination Date in an amount not to exceed at any one time outstanding the
Commitment Amount of such Lender. Subject to the terms and conditions
contained in this Agreement, Agent may elect to fund Swing Advances and L/C
Advances on a revolving credit basis from time to time on any Business Day
from the Agreement Date through the earlier to occur of the Termination
Date and the Business Day preceding the Scheduled Termination Date in an
amount not to exceed at any one time outstanding the Swing Advance Limit or
the L/C Advance Limit respectively. Subject to the terms and conditions
contained in this Agreement, any Lender may elect to fund under the
Guidance Line on a revolving credit basis from time to time on any Business
Day, so long as no Default or Event of Default exists, from the Agreement
Date through the earlier to occur of the Termination Date and the Business
Day preceding the Scheduled Termination Date in an amount not to exceed at
any one time outstanding the Guidance Line. Subject to the other terms and
conditions of this Agreement, Warehouse Advances made under each Lenders
Notes shall be allocated to Construction/Lot Loan Tranches, Gestation
Tranches and/or Regular Tranches under such Notes, which Tranches shall, at
the election of Borrower, bear interest as Balance Funded Rate Segments,
LIBOR Segments, Reference Rate Segments, or any combination thereof.
(b) Warehouse Advances. Each Borrowing under this Section 2.1(b)
------------------
shall be in an aggregate amount of not less than $100,000 and shall consist
of Warehouse Advances made on the Borrowing Date by Lenders ratably
according to their respective Commitment Amounts, provided, that:
(i) the aggregate amount of Warehouse Advances at any time
outstanding shall not exceed the amount equal to the sum of (A) the
Total Commitment plus (B) the total Guidance Line minus (x) the
aggregate amount of Swing Advances plus (y) the amount of the L/C
Exposure.
(ii) the sum of the aggregate amount of Warehouse Advances
(committed and Guidance Line) outstanding and the aggregate amount of
Swing Advances and L/C Advances outstanding shall not at any time
exceed the Borrowing Base; and
(iii) the aggregate amount of Guidance Line Advances at any time
outstanding shall not exceed the lesser of either (a) the total
Guidance Line or (b) the sum of the Borrowing Base minus the Total
Commitment.
26
Within the limits of each Lender's Commitment together with each Lender's
Guidance Line, and subject to the other terms and conditions hereof,
Borrower may borrow, repay (whether pursuant to Section 2.5 of this
Agreement or otherwise), and reborrow under this Section 2.1(b).
(c) Swing Advances. Each Borrowing under this Section 2.1(c) shall be
--------------
funded solely by Agent and shall consist of a Swing Advance by Agent on the
Borrowing Date, provided, that notwithstanding anything to the contrary in
this Agreement or any other Loan Document, Agent shall have no obligation,
whether to Borrower, any Lender or any other Person, to fund any Swing
Advance, the funding of any Swing Advance being entirely in the discretion
of Agent subject only to the limitations that Agent shall not fund any
Swing Advance if:
(i) The aggregate amount of Swing Advances outstanding after
giving effect to such Swing Advance would exceed the lesser of:
(A) The Swing Advance Limit; and
(B) the amount equal to the Total Commitment plus the
Guidance Line minus the aggregate amount of Warehouse Advances
and L/C Advances then outstanding;
(ii) the sum of the aggregate amount of Warehouse Advances
outstanding plus the aggregate amount of Swing Advances and L/C
Advances outstanding after giving effect to such Swing Advance would
exceed the Borrowing Base;
(iii) Agent has not received a Borrowing Request;
(iv) Agent has received written notice from Borrower or any
Lender that a Default or Event of Default exists and such Default or
Event of Default has not been waived or cured in accordance with this
Agreement; or
(v) the employee of Agent authorizing such Swing Advance has
actual knowledge that a Default or Event of Default exists or would
result from the funding thereof.
Notwithstanding the provisions of Section 4.2(a) regarding the timing of
delivery of Borrowing Requests, Borrower may request a Swing Advance at any
time on any Business Day by delivering a Borrowing Request at such time;
provided, that Agent shall have no obligation to receive or consider any
Borrowing Request which is delivered after 3:00 p.m. on the Borrowing Date
stated therein. In the event that Agent receives a Borrowing Request which
seeks a Swing Advance prior to 11:00 a.m. on the Borrowing Date stated
therein and Agent elects not to make the requested Swing Advance, such
Borrowing Request shall be deemed to constitute a request for Warehouse
Advances on
27
such Borrowing Date in an aggregate amount equal to the Swing Advance
requested and Agent shall notify each Lender of such Borrowing Request no
later than 1:00 p.m.on such Borrowing Date.
(d) Mandatory Refinancing or Purchase of Participations in Swing
------------------------------------------------------------
Advances. Subject only to compliance by Agent with the provisions of
--------
clauses (i) through (v) of Section 2.1(c) and the further proviso that no
Lender shall be required to make Warehouse Advances to refinance Swing
Advances if the sum of such Warehouse Advances and the outstanding
Warehouse Advances of such Lender would exceed such Lender's Commitment
Amount, and notwithstanding the termination of such Lender's Commitment
pursuant to Section 8.2, the existence or imminence of any Default or Event
of Default or any other fact or circumstance, upon the request of Agent
(which request shall be given no less frequently than once in each calendar
week) each Lender absolutely, irrevocably and unconditionally agrees to
make Warehouse Advances ratably according to its share of the Total
Commitment in an amount (assuming funding by each Lender of its ratable
share) sufficient to repay any Swing Advances then outstanding. Borrower
and each Lender hereby irrevocably authorize (i) Agent to request Warehouse
Advances on behalf of Borrower for the purpose of refinancing Swing
Advances as contemplated by this Section 2.1(d) and (ii) Agent to disburse
the proceeds of any Warehouse Advances so requested and funded to Agent for
payment of the Swing Advances then outstanding. Notwithstanding the
foregoing provisions of this Section 2.1(d), if Agent shall request that
each Lender purchase participations in the outstanding Swing Advances in
lieu of making Warehouse Advances to refinance such Swing Advances, each
Lender absolutely, irrevocably and unconditionally agrees to purchase from
Agent such participations in the Swing Advances owing as shall be necessary
to cause such purchasing Lender to share in the Swing Advances ratably
(according to its share of the Total Commitment) with each of Lenders.
Borrower agrees that any Lender so purchasing a participation from Agent
pursuant to this Section 2.1(d) may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off)
with respect to such participation as fully as if such Lender were the
direct creditor of Borrower in the amount of such participation.
(e) L/C Advances. Each L/C Advance under this Section 2.1(e) shall be
------------
made solely by Agent (in its individual capacity) on the Borrowing Date,
provided, that notwithstanding anything to the contrary in this Agreement
or any other Loan Document, Agent shall have no obligation to make any L/C
Advance if:
(i) The aggregate amount of L/C Exposure after giving effect to
such L/C Advance would exceed the lesser of:
(A) The L/C Advance Limit; and
(B) the amount equal to the Total Commitment minus the
aggregate amount of Warehouse Advances and Swing Advances then
outstanding;
28
(ii) the sum of the aggregate amount of Warehouse Advances
outstanding plus the aggregate amount of Swing Advances and L/C
Advances outstanding after giving effect to such L/C Advance would
exceed the Borrowing Base;
(iii) Agent has not received a Borrowing Request;
(iv) Agent has received written notice from Borrower or any
Lender that a Default or Event of Default exists and such Default or
Event of Default has not been waived or cured in accordance with this
Agreement; or
(v) the employee of Agent authorizing such L/C Advance has
actual knowledge that a Default or Event of Default exists or would
result from the funding thereof.
(f) Refinancing of L/C. Obligations. Provided that there is no
-------------------------------
Default, each L/C Obligation may be refinanced (and not otherwise paid on
demand pursuant to Section 2.3(d)) as a Borrowing, such Borrowing to be
advanced by each Lender pro rata in accordance with its Commitment
Percentage, upon the Borrower's request for such refinance and delivery to
the Agent of an appropriate Borrowing Request for such Borrowing, provided
that (i) the sum of such Borrowings under this Section 2.1(f), together
with all other L/C Exposure, shall not at any time exceed the L/C Advance
Limit, (ii) at the time of such Borrowing Request, the Borrower shall have
satisfied the conditions set forth in clauses (i) through (v) of Section
2.1(e), and (iii) after giving effect to such Borrowing, the total of all
Advances of any Lender would not exceed such Lender's Commitment Amount.
All advances made by the Lenders under this Section 2.1(f) or pursuant to
Section 2.3(c)(ii) shall constitute Advances under this Agreement, shall be
evidenced by the Notes, and shall be payable to the Lenders pursuant to
Section 2.7.
(g) Increases. Borrower may from time to time request any one or more
---------
Lenders to increase their respective Guidance Line or Commitment so that
the total Guidance Line may be increased to no more than $50,000,000, or so
that the total Commitment may be increased to no more than $250,000,000.
That increase must be effected by an amendment executed by Borrower, Agent,
and the increasing Lender. Borrower shall execute and deliver to each such
Lender a Committed or an Uncommitted Warehouse Note in the stated amount of
its new Commitment or Guidance Line increase. No Lender is obligated to
increase its Commitment under any circumstances, and no Lender's Commitment
may be increased except by its execution of an amendment as stated above.
Each new Lender providing such additional Commitment or Guidance Line
increase shall be a "Lender" hereunder, entitled to the rights and
benefits, and subject to the duties, of a Lender under the Credit
Documents. All amounts advanced hereunder pursuant to any such additional
Commitment shall be secured by the Collateral on a pari passu basis with
all other amounts advanced hereunder. In the event the total Commitments
are increased, Borrower shall execute a new Committed Warehouse Note in
favor of the Lender extending such additional Commitment in a stated amount
of its
29
new Commitment and shall notify each Lender in writing of such additional
Commitment. In such case, each Lender's Commitment Percentage shall be
recalculated to reflect the new proportionate share of the revised total
Commitments and the Lender responsible for the additional Commitment shall,
immediately upon receiving notice from Agent, pay to each Lender an amount
equal to its pro rata share of the Borrowings outstanding as of such date.
All such payments shall reduce the outstanding principal balance of the
Committed Warehouse Note of each Lender receiving such payments and shall
represent Borrowings to Borrower under the purchasing Lender's Committed
Warehouse Note. The purchasing Lender shall be entitled to share ratably in
interest accruing on the balances purchased, at the rates provided herein
for such balances, from and after the date of purchase. All new Borrowings
occurring after an increase of the total Commitments shall be funded in
accordance with each Lender's revised Commitment Percentage.
2.2 Notes. The Warehouse Advances made by each Lender pursuant to Section 2.1(b)
-----
and 2.1(d) and the L/C Advances made by Agent pursuant to Section 2.1(e) shall
be evidenced by a Committed Warehouse Promissory Note payable to such Lender in
the principal amount of the Commitment Amount of such Lender and an Uncommitted
Warehouse Promissory Note payable to such Lender in the principal amount of the
Guidance Line of such Lender. Such Swing Advances as may be made by Agent in its
sole discretion (subject only to the limitations on such discretion set forth in
clauses (i) through (v) of Section 2.1(c)) shall be evidenced by the Swing
Promissory Note payable to Agent in the principal amount of the Swing Advance
Limit. Each Note shall be payable and bear interest as set forth in Sections
2.5, 2.11, and 11.9.
2.3 Notice and Manner of Obtaining Borrowings.
-----------------------------------------
(a) Borrowings Generally.
--------------------
(i) Borrower shall request each Borrowing by making a Borrowing
Request upon Agent in accordance with the provisions of Section 4.2.
If such Borrowing Request is not for a Swing Advance (or if such
Borrowing Request is for a Swing Advance but Agent has elected not to
fund the requested Swing Advance), then not later than 1:00 p.m.
following receipt by it of such Borrowing Request, Agent shall notify
each Lender of the Warehouse Advance to be made by such Lender in
connection with such Borrowing Request by telecopying a Borrowing
Notice to such Lender. Not later than 3:00 p.m. on the Borrowing
Date specified in the Borrowing Notice, and subject to the terms and
conditions of this Agreement, each Lender shall make available to
Agent at the office of Agent set forth in Section 11.1, in immediately
available funds, such Lender's Warehouse Advance by wire transfer of
federal funds or deposit of other immediately available funds to the
Collateral Account.
(ii) Notwithstanding the foregoing, unless Agent shall have
received notice from a Lender prior to 3:00 p.m. on the Borrowing
Date that such Lender will not make available to Agent such Lender's
Advance, Agent may assume that such Lender has made the full amount of
its Advance available to Agent in
30
accordance with this Section 2.3(a) and Agent may, in reliance upon
such assumption, make available to Borrower at such time such amount
in same day funds. If and to the extent that such Lender shall have
not so made the requested Advance available to Agent and Agent, in
reliance upon such assumption, has made available to Borrower the
amount of such Advance, such Lender and Borrower severally agree to
repay Agent forthwith on demand such amount together with interest
thereon (provided, that Agent shall only be entitled to repayment of
the amount so funded by it plus interest on such amount), for each day
from the date such amount is made available to Borrower until the date
such amount is repaid to Agent, at (i) for so much of such amount as
is repaid by Borrower, the interest rate at the time applicable
hereunder if such amount had been an additional Advance by U.S. Bank
National Association in its capacity as a Lender hereunder and (ii)
for so much of such amount as is repaid by such Lender, Average
Adjusted LIBOR. To the extent that such Lender repays Agent the amount
of the requested Advance, such amount so repaid shall constitute such
Lender's Advance as part of such Borrowing as of the applicable
Borrowing Date for purposes of this Agreement and all interest on such
Advance shall accrue to and be payable to such Lender.
(iii) The failure of any Lender to make the Advance to be made
by it as part of any Borrowing shall not relieve any other Lender of
its obligation, if any, hereunder to make its Advance on the Borrowing
Date, but neither Agent nor any Lender shall be responsible for the
failure of any other Lender to make the Advance to be made by such
other Lender on the Borrowing Date.
(iv) If a Borrowing Request is for a Swing Advance and Agent
elects to fund the Swing Advance so requested, Agent shall, as soon as
practicable after such election, notify Borrower and deposit the Swing
Advance in immediately available funds in the Collateral Account.
(b) L/C Advances. The following conditions and procedures apply to L/Cs:
------------
(i) Borrowing Request and L/C Agreement. Borrower may only
-----------------------------------
request a L/C by delivering to Agent a related Borrowing Request and
L/C Agreement before 11:30 a.m. on the second Business Day before the
L/C is to be issued.
(ii) Participations. Immediately upon Agent's issuance of any
--------------
L/C, Agent is deemed to have sold and transferred to each other
Lender, and each other Lender is deemed irrevocably and
unconditionally to have purchased and received from Agent, without
recourse or warranty, an undivided interest and participation in the
L/C and Agent's obligations under it to the extent of that Lender's
Commitment Percentage of the face amount of that L/C, which
participation must be paid for on Agent's demand if there is ever any
L/C Obligation outstanding in connection with it. Agent shall provide
a copy of each L/C to each other Lender promptly after issuance.
31
(iii) Reimbursement Obligation. To induce Agent to issue and
------------------------
maintain L/Cs and Lenders to participate in issued L/Cs, Borrower
agrees to reimburse Agent (i) on demand, on or after the date when any
draft or draw request is presented under any L/C, the amount paid by
Agent and (ii) promptly, upon demand, the amount of any additional
fees Agent customarily charges for the application and issuance of a
letter of credit, amending letter of credit applications and
agreements, honoring drafts and draw requests, and taking similar
action in connection with letters of credit. Until repaid by Borrower
by a payment or a Borrowing under Section 2.1, the L/C Obligation is a
demand obligation and bears interest at the Reference Rate while
outstanding. Borrower's obligations in respect of the L/C Obligation
are absolute and unconditional under any and all circumstances and
irrespective of any setoff, counterclaim, or defense to payment that
Borrower may have at any time against Agent or any other Person.
(iv) Payments Under L/Cs. Agent shall promptly notify Borrower
-------------------
of the date and amount of any draft or draw request presented for
honor under any L/C. Agent's failure to give that notice will not
affect Borrower's obligations under this Agreement. Agent shall pay
the requested amount upon presentment of a draft or draw request
unless presentment on its face does not comply with the terms of the
applicable L/C. When making payment, Agent may disregard (i) any
default or potential default that exists under any other agreement and
(ii) obligations under any other agreement that have or have not been
performed by the beneficiary or any other Person. Agent is not liable
for any of those obligations.
(v) Absolute Obligations. Borrower's reimbursement obligations
--------------------
to Agent and Lenders, and each Lender's obligations to Agent, under
this Section 2.3(c) are absolute and unconditional irrespective of,
and Agent is not responsible for, (i) the validity, enforceability,
sufficiency, accuracy, or genuineness of documents or endorsements
(even if they are in any respect invalid, unenforceable, insufficient,
inaccurate, fraudulent, or forged), (ii) any dispute by Borrower with,
or any claims, setoffs, defenses, counterclaims, or other rights by
Borrower against, Agent, any Lender, or any other Person, or (iii) the
occurrence of any Default or Event of Default. However, nothing in
this Agreement constitutes a waiver of Borrower's or any Lender's
rights to assert any claim or defense based upon the gross negligence
or willful misconduct of Agent.
(vi) Issuance and Cancellation. Each L/C is deemed issued upon
-------------------------
delivery to the beneficiary of Borrower. If Borrower requests any L/C
be delivered to Borrower rather than the beneficiary and later cancels
that L/C, then Borrower shall return it to Agent together with
Borrower's written certification that it has never been delivered to
the beneficiary. If any L/C is delivered to the beneficiary under
Borrower's instructions, Borrower's cancellation is ineffective
without Agent's receipt of the beneficiary's written consent and the
L/C.
32
Borrower shall indemnify Agent and each Lender for all losses, costs,
damages, expenses, and reasonable attorneys' fees suffered or incurred
by Agent or any Lender resulting from any dispute concerning
Borrower's cancellation of any L/C.
(vii) Agent's Responsibilities. Agent shall exercise and give
------------------------
the same care and attention to each L/C as it gives to its other
letters of credit. In paying any draft or draw under any L/C, Agent
has no responsibility to obtain any document (other than any documents
expressly required by the respective L/C) or to ascertain or inquire
as to any document's validity, enforceability, sufficiency, accuracy,
or genuineness or the authority of any Person delivering it. Neither
Agent nor its representatives will be liable to any Lender or Borrower
for any L/C's use or for any beneficiary's acts or omissions. Any
action, inaction, error, delay, or omission taken or suffered by Agent
or any of its representatives in connection with any L/C, applicable
draws, drafts, or documents, or the transmission, dispatch, or
delivery of any related message or advice, if in good faith and in
conformity with applicable Laws and in accordance with the standards
of care specified in the Uniform Customs and Practices for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication
No. 500 is binding upon the Company and Lenders and does not place
Agent or any of its representatives under any resulting liability to
either Company or any Lender. Agent is not liable to the Company or
any Lender for any action taken or omitted, in the absence of gross
negligence or willful misconduct, by Agent or its Representative in
connection with any L/C.
(viii) Cash Collateral. On the Termination Date, during the
---------------
continuance of any Default under Section 8.1(f), (g), or (h) or upon
any demand by Agent while any other Default exists, Borrower shall
provide to Agent, for the benefit of Lenders, cash collateral in an
amount equal to the then-existing L/C Exposure or other collateral
acceptable to Agent in its sole discretion.
(ix) Other Agreements. Although referenced in any L/C, terms of
----------------
any particular agreement or other obligation to the beneficiary are
not incorporated into this Agreement in any manner.
33
(x) Governing Provisions. The fees and other amounts payable
--------------------
with respect to each L/C are as provided in this Agreement, drafts and
draws under each L/C are part of the Obligation, and the terms of this
Agreement control any conflict between the terms of this Agreement and
any L/C Agreement.
2.4 Fees.
----
(a) Facility Fees. Borrower agrees to pay to Agent for the account of
-------------
each Lender a facility fee for each calendar quarter in an amount equal to
0.125% per annum of (i) such Lender's average Commitment Amount and (ii) on
such Lender's advanced portion of the Guidance Line. Facility fees accrued
through the last day of any calendar quarter shall be payable on the fifth
day of the following calendar quarter. Facility fees shall be computed on
the basis of actual days elapsed and a year of 360 days.
(b) L/C Issuance and Fronting Fee. In consideration of Agent serving
-----------------------------
as L/C issuer under this Agreement and the other Loan Documents, Borrower
agrees to pay Agent L/C fees as set forth in a separate Agent Fee Letter.
(c) Standby L/C Fee. Borrower shall pay to Agent, for the ratable
---------------
benefit of Lenders, a fee for each L/C equal to the product of (i) 1.00%
multiplied by (ii) the face amount of each L/C, payable at the issuance of
each L/C.
(d) Deficiency Fees. Borrower shall pay to each Deposit Holding
---------------
Lender from time to time for the account of such Deposit Holding Lender
any deficiency fees payable to such Deposit Holding Lender under its
Balance Funded Rate Agreement.
2.5 Mandatory Repayments. Borrower shall repay all outstanding Advances on the
--------------------
Termination Date. If at any time the aggregate amount of Advances outstanding
exceeds either the Total Commitment plus the Guidance Line or the Borrowing
Base, Borrower, upon the demand of Agent or any Lender, shall repay so much of
the outstanding Advances as may be necessary to eliminate such excess
2.6 Business Days. If the scheduled date for any payment hereunder falls on a
-------------
day which is not a Business Day, then for all purposes of the Notes and this
Agreement the same shall be deemed to have fallen on the next following Business
Day, and, except for such payments as to which interest had ceased to accrue
prior to the scheduled date for payment, such extension of times shall be
included in the computation of payments of interest.
2.7 Payment Procedure.
-----------------
(a) In General. All payments of the principal of and interest and
----------
fees upon the Notes shall be made by Borrower to Agent before 1:00 p.m. on
the respective dates when due in federal or other immediately available
funds at Agent's address set forth in Section 11.1. Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest or fees ratably to Lenders according to their
interests therein and like funds relating to the payment of any other
amount payable to any Lender
34
to such Lender, in each case to be applied in accordance with terms of this
Agreement. Funds received after 1:00 p.m. shall be treated for all purposes
as having been received by Agent on the Business Day next following the
date of receipt of such funds.
(b) Order and Notice of Payments. Contemporaneously with the making
----------------------------
of any payments in respect of the Advances, Borrower shall give Agent
telephonic notice of the amount being repaid and shall promptly confirm
such payment by a delivering a Confirmation to Agent, duly completed and
executed by Borrower. If no Event of Default exists and is continuing,
Borrower shall repay all Advances in the following order:
First, Warehouse Advances outstanding under the Uncommitted Warehouse Promissory
Notes,
Second, L/C Advances,
Third, Swing Advances,
Fourth, Warehouse Advances outstanding under the Committed Warehouse
Promissory Notes;
provided, that at the election of Agent, Warehouse Advances outstanding under
the Committed Warehouse Promissory Notes shall be repaid prior to repayment of
Swing Advances.
Subject to the preceding sentence, if no Event of Default exists and is
continuing, payments in respect of the Obligations shall be applied to specific
types of Obligations (e.g., fees, expenses, principal and interest) as Borrower
directs. At any time when an Event of Default exists and is continuing, all
payments in respect of the Obligations shall (unless Agent and Lenders shall
otherwise unanimously agree) be applied first to all reasonable costs, expenses,
fees and reasonable attorneys' fees incurred by, and agency or custodian fees
due to, Agent arising out of or in connection with this Agreement, the Notes or
the other Loan Documents, including, without limitation, all reasonable costs,
expenses, fees and reasonable attorneys' fees arising out of or in connection
with the negotiation, preparation and enforcement of such documents; second, to
the payment of all expenses due and payable under Section 6.5 ratably among
Lenders in accordance with such amounts; third, to the payment of fees due and
payable under Section 2.4(a) and 2.4(b), ratably in accordance with such
amounts; fourth, to the payment of interest then due and payable under the
Notes, ratably in accordance with the amount of interest owed to each Lender;
and fifth, to the payment of principal of the Notes ratably in accordance with
the outstanding Advances of each Lender; provided, that (x) payments due under
the preceding clause fourth to any Lender which has failed to make any Advance
or purchase any participation required to be made or purchased by such Lender
under Section 2.1(d) shall be allocated first to the payment of interest then
due and payable under the L/C Advances, then under the Swing Promissory Note,
and then to such Lender and (y) payments due under the preceding clause fifth to
any Lender which has failed to make any Advance or purchase any participation
required to be made or purchased by such Lender under Section 2.1(d) shall be
allocated first to the payment of principal of the L/C Advances, then under the
Swing Promissory Note, and then to such Lender. Agent shall promptly notify
Borrower and each of Lenders of the
35
application of any payment to anything other than the principal of or interest
on the Notes.
2.8 Payments Not in Full. Unless Agent shall have received notice from Borrower
--------------------
prior to the date on which any payment is to be made to Agent for the account of
Lenders hereunder that Borrower will not make such payment in full, Agent may
assume that Borrower has made such payment in full to Agent on such date and
Agent may, in reliance upon such assumption, cause to be distributed to each
Lender on such due date an amount equal to the amount then due such Lender. If
and to the extent that Borrower shall have not so made such payment in full to
Agent and Agent, in reliance on such assumption, has distributed such amounts to
Lenders, each Lender shall repay to Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to Agent, at Average Adjusted Libor.
2.9 Sharing of Payments, Etc. If any Lender shall obtain any payment (whether
------------------------
voluntary, involuntary, through the exercise of any right of set-off, or
otherwise) on account of the Advances owing to it (other than pursuant to
Sections 2.4(d), 2.7, or 2.10) in excess of its ratable portion of payments on
account of the Advances obtained by all Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in the Advances owing to
them as shall be necessary to cause such purchasing Lender to share the excess
payment ratable with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, each
such purchase shall be rescinded, and each Lender from which such a purchase was
made shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. Borrower agrees that any Lender so purchasing
a participation from another Lender pursuant to this Section 2.9 may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Lender were the direct creditor of Borrower in the amount of such participation.
2.10 Requirements of Law.
-------------------
(a) General. In the event that the adoption of any new Requirement of
-------
Law or any change in any existing Requirement of Law (other than any change
in the articles of incorporation, by-laws or other organizational or
governing documents of the relevant Lender) or in the interpretation or
application thereof or compliance by any Lender with any request or
directive (whether or not having the force of law) from any central bank or
other Governmental Authority issued after the Agreement Date:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Advance made by it, or
change the basis of taxation of payments to such Lender of principal,
facility fee, interest or any other amount payable hereunder (except
for changes in the rate of tax on the overall net income of such
Lender and changes in the computation of the overall net income of
such Lender that do not specifically involve payments to Lender
36
under this Agreement, any Note, or any Advance, even though such
changes have the effect of increasing the effective rate of tax
imposed on income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities in or for the account of,
commitments, advances or loans by, or other credit extended by, or any
other acquisition of funds by, any office of such Lender which are not
otherwise included in the determination of any interest rate under
such Lender's Notes;
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such
Lender, by any amount which such Lender deems to be material, of making,
renewing or maintaining its Commitment or Advances or to reduce any amount
receivable hereunder, in each case, in respect of its Advances, then,
Borrower shall promptly pay such Lender, upon its written demand setting
forth the basis for such demand, any additional amounts necessary to
compensate such Lender for such additional cost or reduced amount
receivable. A certificate as to any additional amounts payable pursuant to
the foregoing sentence submitted by such Lender, through Agent, to Borrower
shall be conclusive in the absence of manifest error. This covenant shall
survive the termination of this Agreement and payment of the Notes.
(b) Capital Adequacy. In the event that any Lender shall have
-----------------
determined that the adoption of any new law, rule, regulation or guideline
regarding capital adequacy, or any change therein or in the interpretation
or application thereof or compliance by any Lender or any corporation
controlling such Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) from any central bank or
Governmental Authority issued after the Agreement Date, including, without
limitation, the issuance of any final rule, regulation or guideline, does
or shall have the effect of reducing the rate of return on such Lender's or
such corporation's capital as a consequence of its obligations hereunder to
a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into
consideration such Lender's or such corporation's policies with respect to
capital adequacy) by an amount deemed by such Lender to be material, then
Borrower shall promptly pay such Lender, upon its written demand setting
forth the basis for such demand, any additional amounts necessary to
compensate such Lender or such corporation for such reduced rate of return.
A certificate as to any additional amounts payable pursuant to the
foregoing sentence submitted by such Lender, through Agent, to Borrower
shall be conclusive in the absence of manifest error. This covenant shall
survive the termination of this Agreement and payment of the Notes.
(c) Mandatory Suspensions and Conversions of LIBOR Segments. A
--------------------------------------------------------
Lender's obligations to make Advances as, or to continue or convert
Segments into, LIBOR Segments shall be suspended, all such outstanding
Segments under such
37
Lender's Notes shall be converted into, and all pending requests for the
making of Advances as, or for continuation of or conversion of Segments
into, LIBOR Segments by such Lender shall be deemed requests for, Reference
Rate Segments, if:
(i) on or prior to the determination of an interest rate for a
LIBOR Segment, Agent determines that appropriate information is not
available to it for purposes of determining LIBOR;
(ii) Agent or Lenders determine that LIBOR as determined by
Agent would not accurately reflect the cost to such Lender of making
an Advance as, or continuing or converting a Segment into, a LIBOR
Segment; or
(iii) at any time such Lender determines that any new
Requirement of Law or any change in any Requirement of Law existing on
the Agreement Date (other than any change in the articles of
incorporation, by-laws or other organizational or governing documents
of the relevant Lender) or in the interpretation or application
thereof or compliance by any Lender with any request or directive
(whether or not having the force of law) from any central bank or
other Governmental Authority issued after the Agreement Date makes it
unlawful or impossible for such Lender to make, an Advance as, or to
continue or convert a Segment into, a LIBOR Segment, or to comply
with its obligations hereunder in respect thereof.
If, as a result of this Section 2.10(c), any Advance of any Lender that
would otherwise be made as a LIBOR Segment, or any Segment of any Lender
that would otherwise be maintained as or converted into a LIBOR Segment is
instead made or maintained as or converted into a Reference Rate Segment,
then, unless the corresponding Advances and Segments of each of the other
Lenders are also to be made or maintained as or converted into Reference
Rate Segments, such Advance and/or Segment, as the case may be, shall be
treated as being a LIBOR Segment for all purposes of this Agreement
(including the timing, application and proration among Lenders of interest
payments, conversions and prepayments) except for the calculation of the
interest rate borne by such Advance or Segment. Agent shall promptly
notify Borrower and each Lender of the existence or occurrence of any
condition or circumstance specified in clause (i) above, and each Lender
shall promptly notify Borrower, through Agent, and Agent of the existence
or occurrence of any condition or circumstance specified in clause (ii) or
(iii) above applicable to such Lender's Advances and Segments, but the
failure by Agent or such Lender to give any such notice shall not affect
such Lender's rights hereunder.
(d) Payment of Additional Amounts. Any additional amounts payable
-----------------------------
pursuant to this Section 2.10 shall be payable, in the case of those
applicable to prior periods, within 15 days after request by such Lender
for such payment and, in the case of those applicable to future periods, on
the dates specified, or determined in accordance with a method specified,
by such Lender.
(e) Certain Determinations; Notice. In making the determinations
------------------------------
38
contemplated by Sections 2.10(a), (b), and (c), each Lender may make such
estimates, assumptions, allocations and the like that such Lender in good
faith determines to be appropriate, and such Lender's selection thereof in
accordance with this Section 2.10(e), and the determinations made by such
Lender on the basis thereof, shall be final, binding and conclusive upon
Borrower, except, in the case of such determinations, for manifest errors
in computation or transmission. Each Lender shall furnish to Borrower,
through Agent, a certificate outlining in reasonable detail the computation
of any amounts claimed by it under Section 2.10(a), (b), and (c) and the
assumptions underlying such computations. Each Lender will promptly notify
Borrower, through Agent, of any determination made by it referred to in
Section 2.10(a), (b), and (c) above, but the failure to give such notice
shall not affect such Lender's right to compensation.
(f) Mitigation of Circumstances. Each Lender shall promptly notify
---------------------------
Borrower and Agent of any event of which it has knowledge which will result
in, and will use reasonable commercial efforts available to it (and not, in
such Lender's sole judgment, otherwise disadvantageous to such Lender) to
mitigate or avoid, (i) any obligation by Borrower to pay any amount
pursuant to Section 2.10(a) or Section 2.10(b) or (ii) the occurrence of
any circumstances described in Section 2.10(c) (and, if any Lender has
given notice of any such event described in clause (i) or (i) of this
sentence and thereafter such event ceases to exist, such Lender shall
promptly so notify Borrower and Agent). Without limiting the foregoing,
each Lender will designate a different funding office if such designation
will avoid (or reduce the cost to Borrower of) any event described in
clause (i) or (ii) of the preceding sentence and such designation will not,
in such Lender's sole judgment, be otherwise disadvantageous to such
Lender.
(g) Replacement of Lenders. If Borrower becomes obligated to pay
----------------------
additional amounts to an Lender pursuant to Section 2.10(a) or Section
2.10(b), or any Lender gives notice of the occurrence of any circumstances
described in Section 2.10(c), Borrower may designate another lender which
is acceptable to Agent in its reasonable discretion (such other lender
being called a "Replacement Lender") to purchase the Advances of such
Lender and such Lender's rights hereunder, without recourse to or warranty
by, or expense to, such Lender, for a purchase price equal to the
outstanding principal amount of the Advances payable to such Lender plus
any accrued but unpaid interest on such Advances and all accrued but unpaid
fees owed to such Lender and any other amounts payable to such Lender under
this Agreement, and to assume all the obligations of such Lender hereunder,
and, upon such purchase and assumption (pursuant to a Lender Addition
Agreement), such Lender shall no longer be a party hereto or have any
rights hereunder (other than rights with respect to indemnities and similar
rights applicable to such Lender prior to the date of such purchase and
assumption) and shall be relieved of all obligations to Borrower hereunder,
and the Replacement Lender shall succeed to the rights and obligations of
such Lender hereunder.
2.11 Interest.
--------
(a) In General. Interest accrued on the Notes through the last day
----------
of each calendar month shall be paid on the fifth day of the following
calendar month. Accrued
39
interest shall also be paid on the Termination Date. Interest shall be
computed on the basis of the actual number of days elapsed and a year of
360 days.
(b) Balance Funded Rate Segment. A Balance Funded Rate Segment consisting of
---------------------------
any portion of a Construction/Lot Loan Tranche shall bear interest at the rate
of 1.75% per annum. A Balance Funded Rate Segment consisting of any portion of a
Gestation Loan Tranche shall bear interest at the rate of 0.65% per annum. A
Balance Funded Rate Segment consisting of any portion of a Regular Tranche shall
bear interest at the rate of 1.25% per annum.
(c) LIBOR Segments. A LIBOR Segment consisting of any portion of a
--------------
Construction/Lot Loan Tranche shall bear interest at a rate per annum
equal to the sum of LIBOR plus 1.75% per annum. A LIBOR Segment consisting
of any portion of a Gestation Loan Tranche shall bear interest at a rate
per annum equal to the sum of LIBOR plus 0.65% per annum. A LIBOR Segment
consisting of any portion of a Regular Tranche shall bear interest at a
rate per annum equal to the sum of LIBOR plus 1.25% per annum.
(d) Reference Rate Segment. Each Reference Rate Segment (whether
----------------------
consisting of a portion of a Construction/Lot Loan Tranche, a Gestation
Loan Tranche or a Regular Tranche) shall bear interest at a rate per annum
equal to the Reference Rate.
(e) Overdue Amounts. Overdue principal, interest and other amounts
---------------
shall bear interest for each day that such amounts are overdue (after, as
and 4.00% per annum. Interest payable on overdue amounts shall be payable
on demand.
(f) Balance Funded Rate Agreements. If they so elect, Borrower and any Deposit
------------------------------
Holding Lender may enter into additional written agreements (each an Balance
Funded Rate Agreement) providing for the maintenance by Borrower of deposit
account balances with such Deposit Holding Lender in amounts sufficient to
support Balance Funded Rate Segments from such Lender and the payment of any
balance deficiency fees, provided, that (i) nothing in such Balance Funded Rate
Agreement shall modify the circumstances under which interest due such Deposit
Holding Lender shall be paid to Agent for the account of such Deposit Holding
Lender, as set forth in Section 2.7(a); (ii) upon the written request of Agent
following the occurrence of any Event of Default, Borrower and each Deposit
Holding Lender shall deliver to Agent a certified copy of such Deposit Holding
Lender's Balance Funded Rate Agreement, and Borrower and each Lender which is
not a Deposit Holding Lender shall certify to Agent the absence of any such
Balance Funded Rate Agreement; and (iii) the provisions of this Section 2.11(f)
shall be controlling in the event of any conflict between such provisions and
any such Balance Funded Rate Agreement.
2.12 Conversions. On the terms and subject to the limitations hereof, Borrower
-----------
shall have the option at any time and from time to time to convert all or any
portion of a Segment of one Type into a Segment or Segments of another Type or
Types and to convert all or any portion of a Tranche of one Category into a
Tranche or Tranches of another Category or Categories by making a Conversion
Request upon Agent prior to 11:00 a.m. on the date on which such conversion is
to be effective (which shall be a Business Day), which Conversion Request shall
be
40
promptly confirmed by Borrower by delivering to Agent a duly completed and
executed Confirmation; provided, that after giving effect to such Conversion
Request, (a) the aggregate principal amount of all Construction/Lot Loan
Tranches outstanding under the Notes of all Lenders at any time shall not exceed
the aggregate Collateral Value of Construction Loans and Lot Loans included in
the Collateral held by Agent at such time, (b) the aggregate principal amount of
all Construction/Lot Loan Tranches outstanding under any Lender's Notes at any
time shall not exceed the product of the aggregate Collateral Value of
Construction Loans and Lot Loans included in the Collateral held by Agent at
such time multiplied by a fraction the numerator of which is the aggregate
principal balance outstanding under such Lender's Notes at such time and the
denominator of which is the aggregate principal balance outstanding under all
Lenders' Notes at such time, (c) the aggregate principal amount of all Gestation
Loan Tranches outstanding under the Notes of all Lenders at any time shall not
exceed the aggregate Collateral Value of Eligible Gestation Mortgage Loans
included in the Collateral held by Agent at such time, (d) the aggregate
principal amount of all Gestation Loan Tranches outstanding under any Lender's
Notes at any time shall not exceed the product of the aggregate Collateral Value
of Eligible Gestation Mortgage Loans included in the Collateral held by Agent at
such time multiplied by a fraction the numerator of which is the aggregate
principal balance outstanding under such Lender's Notes at such time and the
denominator of which is the aggregate principal balance outstanding under all
Lenders' Notes at such time, (e) the aggregate principal amount of all Regular
Tranches outstanding under the Notes of all Lenders at any time shall not exceed
the remainder the Remainder Collateral Value at such time, and (f) the aggregate
principal amount of all Regular Tranches outstanding under any Lender's Notes at
any time shall not exceed the product of the Remainder Collateral Value at such
time multiplied by a fraction the numerator of which is the aggregate principal
balance outstanding under such Lender's Notes at such time and the denominator
of which is the aggregate principal balance outstanding under all Lenders' Notes
at such time. Any Conversion Request made Borrower under this Section shall be
irrevocable. All conversions of Segments and Tranches must be made uniformly and
ratably among Lenders.
SECTION 3. COLLATERAL
----------
3.1 Collateral.
----------
(a) In General. Pursuant to this Agreement and the Security
----------
Agreement, and to secure the payment of the Obligations, Borrower grants
Agent a security interest for the benefit of Lenders in and to certain
"Collateral," as such term is defined in the Security Agreement. Borrower
hereby confirms such grant in all respects and acknowledges and agrees
that:
(i) this Agreement as amended, modified, restated, or extended
constitutes the "Loan Agreement" as defined in the Security Agreement;
(ii) the Obligations (as defined herein) constitute
"Obligations" secured by the security interests granted under the
Security Agreement; and
(iii) each of the Lenders now or in the future party to this
Agreement
41
constitutes a "Lender" (as defined in the Security Agreement) for all
purposes of the Security Agreement.
(b) Additional Collateral. From time to time Borrower may grant Agent
---------------------
for the benefit of Lenders a security interest in additional collateral
pursuant to this Agreement and the Security Agreement. Borrower hereby
agrees to execute all documents and instruments, and perform all other acts
reasonably deemed necessary by Agent or the Required Lenders, to perfect
the security interest of Agent for the benefit of Lenders in and to the
collateral identified in the granting clause of the Security Agreement.
3.2 Delivery of Collateral. The Collateral shall be delivered to Agent for the
----------------------
benefit of the Lenders in accordance with the Security Agreement and the
Attachments thereto.
3.3 Power of Attorney. Effective upon the occurrence of an Event of Default,
-----------------
Borrower hereby irrevocably appoints Agent its attorney-in-fact, with full power
of substitution, for and on behalf and in the name of Borrower, to (i) indorse
and deliver to any Person any check, instrument or other paper coming into
Agent's or any Lender's possession and representing payment made in respect of
any Mortgage Note or Mortgage-Backed Security included in the Collateral or in
respect of any other collateral for the Obligations including any Take-Out
Commitment; (ii) prepare, complete, execute, deliver and record any assignment
to Agent or to any other Person of any Mortgage relating to any Mortgage Note
included in the Collateral; (iii) indorse and deliver any Mortgage Note or
Mortgage-Backed Security included in the Collateral and do every other thing
necessary or desirable to effect transfer of all or any part of the Collateral
to Agent or to any other Person; (iv) take all necessary and appropriate action
with respect to all Obligations and the items of Collateral to be delivered to
Agent or held by Borrower in trust for Agent and Lenders including, without
limitation, instruct any title company or closing agent to deliver any Mortgage
Note or Mortgage Document held by it directly to Agent or its agent; (v)
commence, prosecute, settle, discontinue, defend, or otherwise dispose of any
claim relating to any Take-Out Commitment or any other part of the Collateral;
and (vi) sign Borrower's name wherever appropriate to effect the performance of
this Agreement. This section shall be liberally, not restrictively, construed so
as to give the greatest latitude to Agent's power, as Borrower's attorney-in-
fact, to collect, sell, and deliver any of the Collateral and all other
documents relating thereto. The powers and authorities herein conferred on Agent
may be exercised by Agent through any Person who, at the time of the execution
of a particular instrument, is an authorized officer of Agent. The power of
attorney conferred by this Section 3.3 shall become effective upon the
occurrence, and remain effective during the continuance, of an Event of Default
and is granted for a valuable consideration and is coupled with an interest and
irrevocable so long as the Obligations, or any part thereof, shall remain unpaid
or any Commitment is outstanding. All Persons dealing with Agent, any officer
thereof, or any substitute attorney, acting pursuant hereto shall be fully
protected in treating the powers and authorities conferred by this Section 3.3
as existing and continuing in full force and effect until advised by Agent that
the Obligations have been fully and finally paid and satisfied and the
Commitments have terminated.
42
3.4 Disposition of Collateral.
-------------------------
(a) Generally. The disposition of Collateral shall be governed by the
---------
Security Agreement.
(b) Allocation of Mortgage Loans to Agency Pools; Eligible Gestation
----------------------------------------------------------------
Mortgage Loan Status. From time to time Borrower may, and prior to the
--------------------
delivery of any Pledged Mortgage Loans into an Agency Commitment Borrower
shall, by execution and delivery to Agent of a duly completed Shipping
Instruction Letter for Pools in the form of Exhibit E-1 hereto (a "Pool
Shipping Instruction") and duly completed a transmittal letter in the form
of Exhibit E-2 hereto (a "Pool Transmittal Letter"), together with the
enclosures referred to therein, instruct Agent to deliver the Mortgage
Notes relating to specific Pledged Mortgage Loans to the Agency Custodian
for inclusion in a pool of Mortgage Loans backing Mortgage-Backed
Securities issued or guaranteed by an Agency and may allocate such Pledged
Mortgage Loans to status as Eligible Gestation Mortgage Loans for purposes
of this Agreement and the Borrowing Base.
3.5 Concerning the Collateral Account and the Good Funds Wire Clearing Account.
--------------------------------------------------------------------------
Borrower hereby expressly acknowledges that the Collateral Account, the Good
Funds Wire Clearing Account, and any other of Borrower's accounts with any
Lender are subject in all respects to the right of offset in favor of Agent
granted under Section 11.10.
3.6 Borrower Appointed Agent. Each Lender hereby appoints Borrower (and, in the
------------------------
case of any Pledged Mortgage Loan originated by a Person other than Borrower
also appoints such other Person) as its agent at the sole cost and expense of
Borrower for purposes of (a) obtaining Appraisals with respect to the property
covered by the Mortgages which relate to the Pledged Mortgage Loans and (b)
otherwise complying with Appraisal Laws and Regulations.
SECTION 4. CONDITIONS PRECEDENT
--------------------
The obligation of each Lender to make Advances hereunder is subject to
fulfillment of the conditions precedent stated in this Section 4.
4.1 Initial Borrowing. The obligation of each Lender to make its initial
-----------------
Advance hereunder shall be subject to, in addition to the conditions precedent
specified in Section 4.2 hereof, delivery to Agent of the following (each of the
following documents being duly executed and delivered by each of the parties
thereto and in form and substance satisfactory to Agent and Lenders, and, with
the exception of the Notes, each in a sufficient number of originals that each
Lender may have an executed original of each document):
(a) this Agreement;
(b) the Notes;
43
(c) the Security Agreement;
(d) a copy of the articles of incorporation of Borrower as amended
through the Agreement Date and as certified by the Secretary of State of
the Commonwealth of Virginia as of a date no earlier than _____, 1999;
(e) a certificate of the Secretary or Assistant Secretary of
Borrower, dated as of the Agreement Date and certifying as to (i)
resolutions of the board of directors of Borrower which authorize the
execution and delivery on behalf of Borrower by certain officers of
Borrower of this Agreement and the Notes, (ii) the incumbency of such
officers, (iii) the validity of specimen signatures of such officers, (iv)
the absence of any amendments to or rescission of the articles of
incorporation of Borrower since _____, 1999, and since the date of the copy
thereof certified by the Secretary of State of the Commonwealth of
Virginia, and (v) the completeness and validity of the copy of the by-laws
of Borrower (as amended through the Agreement Date) attached as an exhibit
to such certificate;
(f) a certificate from the Secretary of State of the Commonwealth of
Virginia as to (i) the good standing of Borrower of a date no earlier than
_____, 1999, and (ii) the existence of Borrower as of a date no earlier
than _____, 1999;
(g) a certificate from the Secretary of the Commonwealth of
Pennsylvania as to (i) the good standing of Borrower of a date no earlier
than _____, 1999, and (ii) the authority of Borrower to do business in
Pennsylvania as of a date no earlier than _____, 1999;
(h) a written opinion of legal counsel to Borrower as to the matters
set forth in Schedule 4.1(h) and such other matters as Agent or its counsel
may require;
(i) tax, judgment and Uniform Commercial Code lien searches in the
appropriate offices in the State of Virginia [and Uniform Commercial Code
lien searches in the appropriate offices in the State of Pennsylvania];
(j) Uniform Commercial Code financing statements prepared for filing
in the appropriate offices in the State of Virginia [and the State of
Pennsylvania]; and
(k) such other documents Agent or any Lender may reasonably request
hereunder or as referenced in Schedule 4.1(k).
In addition, the obligation of each Lender to make its initial Advance shall be
subject to the condition that Borrower shall have paid, or reimbursed Agent for,
the fees, service charges and expenses of Xxxxxx & Xxxxxxx LLP, Agent's legal
counsel, in connection with the preparation, negotiation, execution and delivery
of this Agreement, the Notes and the other Loan Documents, if and to the extent
that Borrower has received a statement therefor prior to the making of such
44
Advance.
4.2 All Borrowings. The obligation of each Lender to make any Advance and to
--------------
fund any Borrowing pursuant to this Agreement is subject to the following
further conditions precedent:
(a) prior to 11:00 a.m. on the Borrowing Date, Agent shall have
received a Borrowing Request from Borrower, which Borrowing Request shall
be promptly confirmed by Borrower by delivering to Agent a duly completed
and executed Confirmation;
(b) subject to the provisions of the Security Agreement, all Property
in which Borrower has granted a Lien to Agent for the benefit of Lenders
shall have been physically delivered to the possession of Agent or any
bailee acceptable to Agent to the extent that such possession is necessary
or appropriate for the purpose of perfecting the Lien of Agent for the
benefit of Lenders in such collateral;
(c) the representations and warranties of Borrower contained in this
Agreement or any other Loan Document (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 Borrowing Date;
(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 Borrowing Date; and
(e) the Collateral Account and the Good Funds Wire Clearing Account
shall be established and in existence.
Each Borrowing Request shall be deemed to constitute a representation and
warranty by Borrower on the Borrowing Date set forth therein as to the
facts specified in Sections 4.2(c) and (d).
SECTION 5. BORROWER REPRESENTATIONS AND WARRANTIES
---------------------------------------
Borrower represents and warrants as follows:
5.1 Organization and Good Standing. Borrower (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,
reasonably be expected to have a Material Adverse Effect.
5.2 Authorization and Power. Borrower has the corporate power and requisite
-----------------------
authority to execute, deliver and perform this Agreement, the Notes and the
other Loan Documents to which it is a party; Borrower is duly authorized to and
has taken all corporate action necessary to
45
authorize it to, execute, deliver and perform this Agreement, the Notes and the
other Loan Documents to which it is a party and is and will continue to be duly
authorized to perform this Agreement, the Notes and such other Loan Documents.
5.3 No Conflicts or Consents. Neither the execution and delivery by Borrower of
------------------------
this Agreement, the Notes or the other 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 Borrower is subject, or any indenture, mortgage,
deed of trust, or other agreement or instrument to which Borrower is a party or
by which Borrower may be bound, or to which the Property of Borrower may be
subject, or (b) result in the creation or imposition of any Lien, other than the
Liens granted to Agent for the benefit of Lenders pursuant to the Security
Agreement and this Agreement, on the Property of Borrower.
5.4 Enforceable Obligations. This Agreement, the Notes and the other Loan
-----------------------
Documents to which Borrower is a party are the legal, valid and binding
obligations of Borrower, enforceable in accordance with their respective terms,
except as limited by Debtor Laws.
5.5 Priority of Liens. Agent has a valid, enforceable, perfected, first-
-----------------
priority Lien and security interest for the benefit of Lenders in (i) each
Mortgage Loan heretofore identified on a Agreement to Pledge delivered to Agent
and not subsequently released by Agent pursuant to the Existing Loan Agreement,
or this Agreement, and (ii) each Take-Out Commitment of Borrower. Upon delivery
to Agent of a Agreement to Pledge identifying a Wet Mortgage Loan and the
funding by Lenders of the Warehouse Advances (or by Agent of the Swing Advance
or L/C Advance) requested in connection therewith, Agent will have valid,
enforceable, perfected, first priority Liens and security interests for the
benefit of Lenders in such Wet Mortgage Loan and in all Mortgage Documents
related thereto.
5.6 No Liens. Borrower has good and indefeasible title to the Collateral. All
--------
of the Collateral is free and clear of all Liens and other adverse claims of any
nature, other than Liens of the type set forth in clauses (a), (b), (c), (d),
and (k) of the definition of Permitted Liens.
5.7 Financial Condition. Borrower has delivered to Agent and Lenders copies of
-------------------
the balance sheet of Borrower as of December 31, 1998, and the related
statements of income, stockholders' equity and cash flows for the fiscal year
ended such date; such financial statements fairly present the financial
condition of Borrower 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; except as has been disclosed in writing to Agent and Lenders, as of the
date thereof, there were no material obligations, liabilities or Indebtedness
(including material contingent and indirect liabilities and obligations and
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 Borrower since the date
of such financial statements. Borrower has also delivered to Agent and Lenders
copies of the balance sheet of Borrower dated as of July 31, 1999 and the
related statements of income, and cash flows as of such date; such financial
statements fairly present the financial condition of Borrower as of such date
and have been prepared in accordance with GAAP, subject to normal year-end
adjustments;
46
except as has been disclosed in writing to Agent and Lenders as of the date
thereof, there were no material obligations, liabilities or Indebtedness
(including material contingent and indirect liabilities and obligations and
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 Borrower since the date
of such financial statements.
5.8 Full Disclosure. There is no material fact that Borrower has not disclosed
---------------
to Agent and Lenders which could have a Material Adverse Effect. Neither the
financial statements referred to in Section 5.7 hereof, nor any Borrowing
Request, officer's certificate or statement delivered by Borrower to Agent or
any Lender in connection with this Agreement, contains any untrue statement of
material fact.
5.9 No Default. Borrower is not 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, which default could have a
Material Adverse Effect.
5.10 No Litigation. Except as set forth on Schedule 5.10, there are no material
-------------
actions, suits or legal, equitable, arbitration or administrative proceedings
pending, or to the knowledge of Borrower threatened, against Borrower the
adverse determination of which could constitute a Material Adverse Effect and as
to which there is a reasonable likelihood of an adverse determination.
5.11 Taxes. All tax returns required to be filed by Borrower in any
-----
jurisdiction and which, if not filed, could have a Material Adverse Effect have
been filed and all taxes, assessments, fees and other governmental charges upon
Borrower or upon any of its properties, income or franchises which, if not
paid, could give rise to a Lien thereon having a Material Adverse Effect, have
been paid prior to the time that such taxes could give rise to such Lien, 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 Borrower.
Borrower has no knowledge of any proposed or threatened tax assessment against
Borrower which could have a Material Adverse Effect.
5.12 Principal Office, etc. As of the date hereof, the principal office, chief
---------------------
executive office and principal place of business of Borrower is located at 0000
Xxxxxxxxxxx Xxxx, Xxxxx 000, XxXxxx, Xxxxxxxx 00000, County of
Fairfax.
5.13 Compliance with ERISA.
---------------------
(a) Borrower has not violated the fiduciary responsibility rules of
Subtitle B of Title I of ERISA with respect to any Plan or any Welfare Plan
in a manner that could subject Borrower to, or cause Borrower to incur,
liability in respect of an action or a suit for damages, or a penalty,
under ERISA, or an excise tax under Section 4975 of the Code, which action,
suit, penalty or tax, in any case, would be materially adverse to Borrower.
(b) Each of Borrower and each Related Person has fulfilled its
obligations under the minimum funding standards of Section 412 of the Code
and Section 302 of
47
ERISA with respect to each Plan as to which a failure to fulfill such
obligations could have a Material Adverse Effect; neither Borrower nor any
Related Person has incurred, nor are any of them aware of facts which would
cause them reasonably to conclude that any of them are likely to incur any
material liability to the PBGC, other than for the payment of premiums; and
neither Borrower nor any Related Person has incurred, nor are any of them
aware of facts which would cause them reasonably to conclude that any of
them are likely to incur, any material liability to any Plan or any Welfare
Plan, other than for the payment of contributions in the ordinary course.
Each Plan and each Welfare Plan is in compliance in all respects with, and
has been operated and administered in accordance with the applicable
provisions of, ERISA, the Code and each other applicable Federal or state
law except to the extent the failure to so comply, or to so operate or
administer any such Plan and any such Welfare Plan, would not be materially
adverse to Borrower. No event or condition is occurring or exists and
neither Borrower nor any Related Person is aware of any facts which would
cause them reasonably to conclude that any event or condition will likely
occur or exist with respect to any Plan concerning which Borrower would be
under an obligation to furnish a report to Agent in accordance with Section
6.17 hereof.
(c) Full payment has been timely made of all amounts which Borrower or
any Related Person is required under applicable law, the terms of each Plan
or any applicable collective bargaining agreement to have paid as
contributions to each Plan with respect to which a failure to make such
payment could have a Material Adverse Effect and no accumulated funding
deficiency under Section 412 of the Code or Section 302 of ERISA, whether
or not waived, exists or is expected to exist with respect to any Plan
which could have a Material Adverse Effect. As of the most recent
valuation date of each Plan, each Plan was "fully funded." For purposes of
this Section 5.13, "fully funded" means that the fair market value of the
assets of each Plan (determined separately for each Plan and not in the
aggregate) is not less than the present value of the accrued benefits of
all participants in each Plan (determined separately for each Plan and not
in the aggregate), computed on a Plan termination basis by more than
$2,000,000.
(d) Neither Borrower nor any Related Person is or has ever been
obligated to contribute to any "multiple employer plan" (within the meaning
of Section 4063 of ERISA) or to any Multiemployer Plan.
(e) The present value (determined in accordance with FAS 106 and using
actuarial and other assumptions which are reasonable in respect of the
benefits provided and the participants) of the liability of Borrower and
each Related Person for post-retirement benefits under any and all Welfare
Plans, whether written or unwritten, which are or have been established or
maintained, or to which contributions are or have been made, by Borrower or
any of its Related Persons does not materially exceed the assets under all
such Welfare Plans allocable to such benefits.
(f) No failure to comply with Code Section 4980B or Part 6 of Title I
of ERISA exists or has occurred with respect to any Welfare Plan.
48
5.14 Ownership. The Parent owns, beneficially, of record and either directly or
---------
indirectly, 100% of the issued and outstanding shares of capital stock of
Borrower. Neither any "person" nor any "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities and Exchange Act of 1934, as amended) is
the "beneficial owner" (as defined in Rule 13d-3 under such act) of more than
50% of the total aggregate voting power of all classes of voting stock of the
Parent and/or warrants or options to acquire such voting stock, calculated on a
fully diluted basis.
5.15 Subsidiaries. Borrower has no Subsidiaries other than Permitted
------------
Subsidiaries. Neither Borrower nor any Subsidiary has any interest in any joint
venture, partnership or other Person, except to the extent that such an interest
is a Permitted Investment.
5.16 Indebtedness. Borrower has no Indebtedness outstanding other than the
------------
Obligations and the other Indebtedness permitted by Section 7.2.
5.17 Permits, Patents, Trademarks, etc.
----------------------------------
(a) Borrower has all permits, licenses and governmental authorization
necessary for the operation of its business. All such permits, licenses
and governmental authorizations are in good standing and Borrower is in
compliance with all material terms of such permits, licenses and
governmental authorizations.
(b) Borrower owns or possesses (or is licensed or otherwise has the
necessary right to use) all patents, trademarks, service marks, trade names
(including the name "NVR Mortgage Finance, Inc.") 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 others. The consummation of
the transactions contemplated hereby will not alter or impair in any
material respect any of such rights of Borrower.
5.18 Status Under Certain Federal Statutes. Borrower is not (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 1940,
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., or a "carrier" to
which 49 U.S.C. (S)11301(b)(1) is applicable.
5.19 Securities Acts and Securities Credit Transaction Regulations. Borrower has
-------------------------------------------------------------
not 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. Borrower is not required to qualify an indenture under the
Trust Indenture Act of 1939, as amended, in connection with its execution and
delivery of the Notes. Borrower is not a party, whether as a customer or a
creditor, to any transaction that is
49
subject to the Securities Credit Transaction Regulations.
5.20 Pollution Control. Borrower is in compliance with, and to the best of
-----------------
Borrower's knowledge, Borrower has, at all times since its incorporation, been
in material compliance with, all Requirements of Law relating to the
environment, hazardous material or pollution control.
5.21 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 Borrower 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 Borrower of any document with, or the
taking of any other action in respect of, any Governmental Authority which has
jurisdiction over Borrower or any of its Property.
5.22 Material Agreements with Affiliates. Except as set forth on Schedule 5.22,
-----------------------------------
Borrower is not party to any material agreement, whether written or oral, with
the Parent or any other Affiliate of Borrower. As used in the preceding
sentence, "material agreement" includes any agreement in which the fair value of
the consideration paid or performance due any party exceeds $100,000 and "with
the Parent or any other Affiliate of Borrower" includes any direct or indirect
agreement with the Parent or any other Affiliate of Borrower.
5.23 Taxpayer Identification. The Federal tax employer identification number of
-----------------------
Borrower is 00-0000000.
5.24 Not an Insider. Neither Borrower nor the Parent, or any other Affiliate of
--------------
Borrower is, and no person having "control" as defined in 12 U.S.C. (S)375(b)(9)
of Borrower or of any of the Parent or any other Affiliate of Borrower is, an
"executive officer," "director," or "principal shareholder" (as such terms are
defined in 12 U.S.C. (S)375(b)(9) and the regulations promulgated pursuant
thereto) of any Lender, of any bank holding company of which any Lender is a
Subsidiary, or of any Subsidiary of any bank holding company of which any Lender
is a Subsidiary.
5.25 Survival of Representations. All representations and warranties by Borrower
---------------------------
herein shall survive delivery of the Notes and the making of the Advances, and
any investigation at any time made by or on behalf of Agent or any Lender shall
not diminish the right of Agent or any Lender to rely thereon.
5.26 Year 2000 Compliance. Borrower has (i) initiated a review and assessment of
--------------------
all areas within its and each of its Subsidiaries' business and operations
(including those affected by suppliers and vendors) that could be adversely
affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by the Borrower or any of its Subsidiaries (or its suppliers
and vendors) may be unable to recognize and perform properly date-sensitive
functions involving certain dates prior to, including and after December 31,
1999), (ii) developed a plan and time line for addressing the Year 2000 Problem
on a timely basis, and (iii) implemented in all material respects that plan in
accordance with that timetable. Based on the foregoing, Borrower has no reason
to believe that the Year 2000 Problem will result in a material adverse change
in the business, condition (financial or otherwise), operations or prospects of
Borrower
50
and its Subsidiaries, or Borrower's ability to repay Lenders.
SECTION 6. AFFIRMATIVE COVENANTS
---------------------
Borrower shall at all times comply with the covenants contained in this Section
6, from the date hereof and for so long as any part of the Obligations or any
Commitment is outstanding.
6.1 Financial Statements and Reports. Borrower shall furnish to each Lender the
--------------------------------
following, all in form and detail reasonably satisfactory to Lenders:
(a) Promptly after becoming available, and in any event within 90 days
after the close of each fiscal year of Borrower, the consolidated balance
sheet of Borrower and its Subsidiaries, if any, as of the end of such year,
and the related consolidated statement of income of Borrower and its
Subsidiaries accompanied by the related report of independent certified
public accountants reasonably acceptable to the Required Lenders which
report shall be unqualified and 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, and accompanied by
audited financials (including balance sheets, profit and loss statements,
statements of cash flow, and any other financial statements, reports, or
information specified by Agent) of the Parent reflecting the corresponding
figures as of the end of and for the preceding fiscal year in comparative
form, together with the related report prepared by an independent certified
public accountant reasonably acceptable to Required Lenders;
(b) Promptly after becoming available, and in any event within 30 days
after the end of each month, a consolidated balance sheet of Borrower and
its Subsidiaries, if any, as of the end of such month and the related
consolidated statements of income, stockholders' equity and cash flows of
Borrower and its Subsidiaries, if any, for such month and the period from
the beginning of the current fiscal year of Borrower through the end of
such month, (i) certified by the chief financial 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, and (ii)
accompanied by a completed Officer's Certificate in the form of Exhibit I
hereto, executed by the president or chief financial officer of Borrower;
(c) Promptly (i) upon receipt thereof, a copy of each other report
submitted to Borrower or any affiliate of Borrower by independent
accountants in connection with any annual, interim or special audit of the
books of such Person and (ii) upon preparation thereof, a copy of each
audit report regarding Borrower submitted to FNMA, FHLMC or GNMA;
(d) Simultaneously with the delivery of the financial information set
forth in Section 6.1(b), a report in detail satisfactory to Agent setting
forth, for the calendar month to which such financial information relates,
all Permitted Intercompany Payables, all receivables from Affiliates, all
transactions of Borrower which give rise to Permitted
51
Intercompany Payables, all receivables from affiliates, all transactions of
Borrower which give rise to Permitted Intercompany Payables and all
transactions of Borrower with any Affiliate of Borrower;
(e) Promptly and in any event within 30 days after the end of each
month, management report regarding Borrower's commitment position, pipeline
position, mortgage servicing/delinquency and production;
(f) No later than 11:00 a.m. on each Business Day, a Take-Out Report,
properly completed by an officer of Borrower, setting forth, as of the
close of business on the preceding Business Day, the Weighted Average Take-
Out Price; and
(g) Such other information concerning the business, Properties or
financial condition of Borrower, any Affiliate or any Investor as Agent or
any Lender may reasonably request.
6.2 Taxes and Other Liens. Borrower 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 and could have a Material Adverse Effect;
provided, however, that Borrower 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 Borrower and if Borrower shall have set
up reserves therefor which are adequate under GAAP.
6.3 Maintenance. Borrower shall (i) maintain its corporate existence, rights
-----------
and franchises; (ii) observe and comply in all material respects with all
Requirements of Law, 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.
6.4 Further Assurances. Borrower shall, within 3 Business Days (or, in the case
------------------
of Mortgage Notes or other Mortgage Documents returned to Borrower under a Trust
Receipt, the period specified in such Trust Receipt), after the request of Agent
or any Lender, cure any defects in the execution and delivery of any Note, this
Agreement or any other Loan Document and Borrower shall, at its expense,
promptly execute and deliver to Agent and Lenders upon request all such other
and further documents, agreements and instruments in compliance with or
accomplishment of the covenants and agreements of Borrower 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
perfect, protect or preserve any Liens created (or intended to be created)
pursuant to any of the other Loan Documents, or to make any recordings, to file
any
52
notices, or obtain any consents.
6.5 Reimbursement of Expenses. Borrower shall, within 10 Business Days of
-------------------------
notice of the amount thereof (which notice shall include appropriate evidence of
the amount of such reimbursable item) pay (i) all reasonable legal fees incurred
by Agent (including, without limitation, the fees, service charges and expenses
of Xxxxxx & Xxxxxxx LLP, legal counsel to the Agent) in connection with the
preparation, negotiation, execution and delivery of this Agreement, the Notes
and the other Loan Documents and any amendments, consents or waivers executed in
connection therewith, (ii) all fees, charges or taxes for the recording or
filing of the Security Instruments, (iii) all shipping, postage and transfer
costs incurred by Agent in connection with the administration of this Agreement,
the Notes and the other Loan Documents, including courier expenses incurred in
connection with the Collateral as provided in the Custodial Fee Letter, and (iv)
all amounts expended, advanced or incurred by Agent or any Lender to satisfy any
obligation of Borrower under this Agreement or any of the other Loan Documents
or to collect any 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 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 each Note on each item specified in clauses (i) through (iv) from
30 days after the date of written demand or request for reimbursement until the
date of reimbursement; provided, however, that Borrower shall, prior to the
first Advance (if and to the extent that Borrower has received a statement
therefor, which statement shall constitute appropriate evidence of the amount
thereof), pay, or reimburse Agent for, the fees, service charges and expenses of
Xxxxxx & Whitney LLP, Agent's legal counsel, in connection with the preparation,
negotiation, execution and delivery of this Agreement, the Notes and the other
Loan Documents.
6.6 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. Borrower shall cause the improvements on the
land covered by each Mortgage relevant to Mortgage Loans included in the
Mortgage Collateral to 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 no
less than the lesser of the maximum insurable value of the improvements or the
original principal amount of the relevant Mortgage Loan, without reduction by
reason of any co-insurance, reduced rate contribution, or similar clause of the
policies or binders. Upon request of Agent or any Lender, Borrower shall furnish
or cause to be furnished to Agent from time to time a summary of the insurance
coverage of Borrower in form satisfactory to the Person requesting such summary
and if requested shall furnish Agent copies of the applicable policies. Agent
shall promptly distribute copies of any summaries and policies received by it
under this Section 6.6 to any Lender which so requests.
53
6.7 Accounts and Records; Servicing Records. Borrower 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 activities, in accordance
with GAAP. Borrower shall implement and maintain administrative and operating
procedures (including without limitation, an ability to recreate all material
records pertaining to the performance of Borrower'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
Borrower of its obligations under the Servicing Agreements.
6.8 Appraisals. Borrower shall obtain and maintain a copy of an Appraisal with
----------
respect to the underlying property covered by the Mortgage which relates to each
Pledged Mortgage Loan, shall require that all Appraisals delivered to it in
connection with the Pledged Mortgage Loans (whether originated by Borrower or
purchased by it) comply in all respects with the Appraisal Laws and Regulations,
shall implement and maintain administrative and operating procedures which
permit Borrower, Agent and Lenders to verify such compliance, and shall permit
and shall use all reasonable efforts to cause each Person from whom it purchases
Mortgage Loans to permit any officer, employee or agent of Agent or any Lender
to visit and inspect the Properties of Borrower and such Person relevant to such
compliance, to inspect the records of Borrower and such Person relevant to such
compliance, to take copies and extracts therefrom, and to discuss the Appraisals
relevant to the Mortgage Loans from time to time pledged to Agent for the
benefit of Lenders with the responsible officers, employees and agents
(including any third party appraisers) of Borrower and such Person, at all such
reasonable times (which may include unannounced "spot" checks) and as often as
Agent or any Lender may desire.
6.9 Right of Inspection. Borrower shall permit any officer, employee or agent
-------------------
of Agent or any Lender to visit and inspect any of the Properties of Borrower,
examine Borrower's Servicing Records and books of record and accounts, take
copies and extracts therefrom, and discuss the affairs, finances and accounts of
Borrower with Borrower's officers, accountants and auditors, all at such
reasonable times upon reasonable notice and as often as Agent or any Lender may
desire.
6.10 Notice of Certain Events. Borrower shall promptly notify Agent and each
------------------------
Lender (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 Borrower 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 determined, could have a Material Adverse
Effect; (iii) the occurrence of any dispute between Borrower and any
Governmental Authority or any other Person which, if adversely determined, could
have a Material Adverse Effect; (iv) the occurrence of any event or condition
which, if adversely determined, would have a Material Adverse Effect; or (v)
obtaining knowledge of any event or condition if the effect thereof is to cause
or permit with the giving of notice or lapse of time or both the holder of any
promissory note, debenture or other evidence of Indebtedness of Borrower
54
to cause such Indebtedness to become due prior to its stated maturity.
6.11 Performance of Certain Obligations. Borrower shall perform and observe
----------------------------------
in all material respects each of the provisions of each Agency Commitment, 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" (within the meaning given
such term in Section 6.20) by an Agency Commitment or a Take-Out Commitment
comply with the requirements thereof.
6.12 Use of Proceeds; Margin Stock. The proceeds of the Advances shall be used
-----------------------------
by Borrower solely for the funding and acquisition of Mortgage Loans in the
ordinary course of Borrower's business, including the refinancing of Eligible
Mortgage Loans funded or acquired by Borrower in the ordinary course of business
with its own funds. None of such proceeds shall be used for the purpose of
purchasing or carrying any "margin stock" as defined in Regulation U of the
Board of Governors of the Federal Reserve System, 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 (i) take any action in violation
of Regulation U or Regulation X of the Board of Governors of the Federal Reserve
System, (ii) violate Section 7 of the Securities Exchange Act of 1934, as
amended, or any rule or regulation thereunder, or (iii) engage in any
transaction which is subject to the Securities Credit Transaction Regulations.
6.13 Notice of Default. Borrower shall furnish to Agent and to 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.
6.14 Compliance with Loan Documents. Borrower shall promptly comply with any
------------------------------
and all covenants and provisions of this Agreement, the Notes and the other Loan
Documents.
6.15 Compliance with Material Agreements. Borrower shall comply in all
-----------------------------------
material respects with all material agreements, indentures, or documents binding
on it or affecting its Property or business.
6.16 Operations and Properties. Borrower shall act in accordance, in all
-------------------------
material respects, with all Requirements of Law and customary industry standards
in managing and operating its Property.
6.17 ERISA and Plans. As soon as practicable, and in any event within 10 days
---------------
after an officer of Borrower or any Related Person knows or reasonably should
know that any of the events or conditions specified below has occurred or
exists, or is expected to occur or exist, Borrower shall deliver to Agent an
officer's certificate executed by the president or any vice president of
Borrower and setting forth details respecting such event or condition and the
action, if any, that Borrower or any Related Person proposes to take with
respect thereto (and a copy of any notice or report filed with, given to or
received from the PBGC, the Internal Revenue
55
Service or the Department of Labor with respect to such event or condition);
(a) any reportable event, as defined in Section 4043(b) of ERISA and
the regulations issued thereunder, with respect to a Plan, as to which the
PBGC has not by regulation waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of such event
(provided that a failure to meet the minimum funding standard of Section
412 of the Code or Section 302 of ERISA shall be a reportable event
regardless of the issuance of any waivers in accordance with Section 412(d)
of the Code and shall be required to be reported pursuant to this
subsection (a));
(b) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan or the amendment of any
Plan in a manner which would be treated as a termination of such Plan under
Section 4041(e) of ERISA;
(c) a substantial cessation of operations within the meaning of
Section 4062(e) of ERISA under circumstances which could result in the
treatment of Borrower or any Related Person as a substantial employer under
a "multiple employer Plan" or the application of the provisions of Section
4062, 4063 or 4064 of ERISA to Borrower or any Related Person;
(d) the institution by the PBGC of proceedings under Section 4062 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or the receipt by Borrower or any Related Person of a
notice from a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan;
(e) the complete or partial withdrawal by Borrower or any Related
Person under Section 4063, 4203 or 4205 or ERISA from a Plan which is a
"multiple employer Plan" or a Multiemployer Plan, or the receipt by
Borrower or any Related Person of notice from a Multiemployer Plan that it
is in reorganization or it is insolvent pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate under Section 4041A of ERISA or from
a "multiple employer Plan" that it intends to terminate; and
(f) any event or series of events occurs or exists which could
reasonably by expected to result in (i) a material liability on the part of
Borrower or any Related Person under Title IV of ERISA, (ii) the
institution of a proceeding against Borrower or any Related Person to
enforce Section 515 of ERISA, or (iii) the imposition of a Lien on any
Property of Borrower or any Related Person pursuant to Section 4068 of
ERISA or Section 412(n) of the Code.
6.18 Environmental Matters. Borrower shall comply in all material respects
---------------------
with all Requirements of Law relating to the environment, hazardous materials or
pollution control and where noncompliance could have a Material Adverse Effect
and shall furnish to Agent and to each Lender immediately upon becoming aware of
any claim under any such Requirement of Law, a written notice specifying the
nature of such claim, the Person bringing such claim and the action which
Borrower is taking or proposes to take with respect thereto.
56
6.19 Take-Out Commitments; Coverage. Borrower shall enter into and maintain
------------------------------
Agency Commitments and Take-Out Commitments sufficient at all times to cover
each Mortgage Loan (except Investment Mortgage Loans, Construction Loans, and
Lot Loans) and Mortgage-Backed Security included in the Mortgage Collateral
(including any Mortgage-Backed Security to be issued or guaranteed pursuant to
an Agency Commitment by which Mortgage Loans included in the Collateral are
covered). For purposes of this Agreement, a Mortgage Loan or Mortgage-Backed
Security shall be "covered" by an Agency Commitment or a Take-Out Commitment if
and only if (i) such Mortgage Loan or Mortgage-Backed Security is of a type,
including as to amount, maturity and rate or yield, which satisfies the
requirements of such Agency Commitment or Take-Out Commitment, (ii) the sum of
the principal amount of such Mortgage Loan or Mortgage-Backed Security and the
principal amounts of the Mortgage Loans or Mortgage-Backed Securities previously
assigned to such Agency Commitment or Take-Out Commitment for purposes of
determining coverage do not exceed the maximum amount thereof, (iii) with
respect to Mortgage Loans, the documentation and underwriting of each such
Mortgage Loan complies in all respects with the requirements of such Agency
Commitment or Take-Out Commitment and (iv) with respect to Mortgage Loans
covered by an Agency Commitment, any Mortgage-Backed Security to be issued or
guaranteed pursuant thereto is covered by a Take-Out Commitment. For purposes of
Sections 3.7 and 3.8 and any Agreement to Pledge , a Mortgage Loan shall be
"covered" by a Take-Out Commitment only if it is either (x) saleable directly
into a Take-Out Commitment as a Mortgage Loan rather than as part of a Mortgage-
Backed Security or (y) covered by both an Agency Commitment and a Take-Out
Commitment.
6.20 Failure to Close a Wet Mortgage Loan. Borrower shall make a mandatory
------------------------------------
repayment in an amount equal to the Collateral Value (determined as if such Wet
Mortgage Loan had closed) of any Wet Mortgage Loan listed in a Agreement to
Pledge within one (1) Business Day of the date such Mortgage Loan was to have
closed, if (i) such Wet Mortgage Loan shall not have closed before the close of
business on the Business Day after the date of delivery of such Agreement to
Pledge) and (ii) Borrower shall have received Advances to fund the payment of
the proceeds of such Mortgage Loan. Borrower shall give Agent notice of each
repayment pursuant to this Section 6.20, which notice shall identify the Wet
Mortgage Loan which has not closed, contemporaneously with the making of such
repayment.
6.21 Year 2000 Compliance. Borrower will promptly notify the Agent in the
--------------------
event Borrower discovers or determines that any computer application (including
those of its suppliers and vendors) that is material to its or any of its
Subsidiaries' business and operations will not be Year 2000 compliant on a
timely basis, except to the extent that such failure is not reasonably expected
to cause a Material Adverse Effect.
SECTION 7. NEGATIVE COVENANTS
------------------
Borrower shall at times comply with the covenants contained in this Section 7,
from the date hereof and for so long as any part of the Obligations or any
Commitment is outstanding.
7.1 No Merger. Borrower shall not merge or consolidate with or into any
---------
corporation, nor shall Borrower acquire by purchase or otherwise all or
substantially all of the assets (except to the extent that such assets consist
solely of Mortgage Notes, Mortgage-Backed Securities and
57
rights to service Mortgage Loans) or capital stock of any Person.
7.2 Limitation on Indebtedness. Borrower shall not incur, create, contract,
--------------------------
assume, have outstanding, guarantee or otherwise be or become, directly or
indirectly, liable in respect of any Indebtedness except (a) Repurchase
Agreements, (b) Permitted Intercompany Payables, (c) Indebtedness, including the
Obligations, secured by Permitted Liens and by no other Liens on the Property of
Borrower, (d) liabilities in respect of unfunded vested benefits under a Plan as
determined in accordance with ERISA, to the extent permitted under Section 7.16,
(e) liabilities as lessee under leases which have been or, in accordance with
GAAP, should be classified as capitalized leases in an aggregate amount not
greater than $5,000,000, (f) Investment Line of Credit Indebtedness, (g) other
Indebtedness in an aggregate amount at any time outstanding not greater than
$1,000,000.
7.3 Fiscal Year, Method of Accounting. Borrower shall not change its fiscal
---------------------------------
year or method of accounting.
7.4 Business. Borrower shall not, directly or indirectly, engage in any
--------
business other than that currently engaged in by Borrower or any other business
customarily engaged in by other Persons in the mortgage banking business.
7.5 Liquidations, Consolidations and Dispositions of Substantial Assets.
-------------------------------------------------------------------
Borrower shall not dissolve or liquidate or sell, transfer, lease or otherwise
dispose of any material portion of its property or assets or business; provided,
however, that subject to the Security Agreement nothing in this Section 7.5
shall be construed to prohibit Borrower from selling Servicing Rights, Mortgage
Notes or Mortgage-Backed Securities in the ordinary course of its business.
7.6 Loans, Advances and Investments. Borrower shall not make any loan (other
-------------------------------
than loans made in the ordinary course of its business as a mortgage company),
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 evidence of indebtedness is not
material to the business or financial condition of Borrower;
(c) Mortgage-Backed Securities and Mortgage Notes acquired in the
ordinary course of Borrower's business;
(d) Loans and advances to (i) employees, officers and directors of
Borrower or any Affiliate of Borrower or (ii) the Parent and other
Affiliates of Borrower which are
58
neither Subsidiaries nor Persons which would, if organized as a corporation
and Borrower owned a sufficient interest therein, constitute a Subsidiary
of Borrower, in an aggregate principal amount outstanding at any one time
not to exceed $250,000 (or such larger amount as Agent may, in its sole
discretion, approve in writing prior to the making thereof); and
(e) Capital contributions to Permitted Subsidiaries, and other
Persons which would, if organized as a corporation and Borrower owned a
sufficient interest therein, constitute a Permitted Subsidiary in an
aggregate amount not greater than $1,000,000.
7.7 Use of Proceeds. Borrower shall not permit the proceeds of the Advances to
---------------
be used for any purpose other than those permitted by Section 6.12. Borrower
shall not, directly or indirectly, use any of the proceeds of the Advances for
the purpose of engaging in any transaction which is subject to the Securities
Credit Transaction Regulations.
7.8 Actions with Respect to Collateral. Borrower shall not:
----------------------------------
(a) Compromise, extend, release, or adjust payments on any Mortgage
Loan included in the Collateral, accept a conveyance of mortgaged property
in full or partial satisfaction of any such Mortgage Loan, or release any
Mortgage securing any Mortgage Loan;
(b) other than pursuant to pair-offs in the ordinary course of
business, agree to the amendment or termination of any Take-Out Commitment
included in the Collateral or to the substitution of any Take-Out
Commitment for such a Take-Out Commitment without the consent of Agent;
(c) transfer, sell, assign, or deliver any Collateral pledged to
Agent to any Person other than Agent, except in accordance with the
Security Agreement; or
(d) grant, create, incur, permit or suffer to exist any Lien upon any
Mortgage Collateral except for (i) Liens granted to Agent for the benefit
of Lenders to secure the Obligations, (ii) such non-consensual Liens may be
deemed to arise as a matter of law pursuant to any Take-Out Commitment,
(iii) Liens permitted under Section 6.2 to the extent that such Liens
constitute Permitted Liens, (iv) Liens which constitute Permitted Liens
under clauses (f) and (g) of the definition of Permitted Liens.
7.9 Adjusted Tangible Net Worth. The Adjusted Tangible Net Worth of Borrower at
---------------------------
any date shall not be less than $11,500,000.
7.10 Liabilities to Adjusted Tangible Net Worth Ratios. The ratio of (a) the
-------------------------------------------------
Total Liabilities, excluding (i) net deferred taxes, (ii) Advances to the extent
of the aggregate Collateral Value of all Eligible Gestation Mortgage Loans, and
(iii) obligations of Borrower in respect of Repurchase Agreements, of Borrower
to (b) the Adjusted Tangible Net Worth of Borrower shall not average more than
12.0 to 1.0 at any reporting time pursuant to Section 6.1, and never, at any
time, exceed 17.5 to 1.0.
59
7.11 Restrictions on Dividends, Returns of Capital and Servicing Proceeds
--------------------------------------------------------------------
Distributions. Borrower shall not directly or indirectly declare or make, or
-------------
incur any liability to make, any Dividend, Return of Capital unless, prior
thereto, Borrower shall have submitted to Agent a certificate of its President
or Chief Financial Officer certifying that no Default or Event of Default exists
or would result therefrom and, in the case of any Return of Capital,
demonstrating the amount and source of such return or distribution.
7.12 Transactions with Affiliates.
----------------------------
(a) Borrower shall not enter into any transactions, including,
without limitation, any purchase, sale, lease or exchange of property or
services with or the incurring of Indebtedness to 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; and
(b) the aggregate amount paid or payable by Borrower to Affiliates of
Borrower exclusive of Permitted Dividends, Permitted Tax Payments, payments
in respect of Permitted Intercompany Payables, Permitted Returns of
Capital, and Permitted Servicing Proceeds Distributions shall not exceed
$250,000 in the aggregate in any twelve month period.
7.13 Liens. Borrower shall not grant, create, incur, assume, permit or suffer
-----
to exist any Lien which is not a Permitted Lien upon any of its Property,
including without limitation any and all of Borrower's Mortgage Loans, Mortgage-
Backed Securities (except as permitted under Section 7.8(d)) and Servicing
Rights and the proceeds from any thereof.
7.14 Compliance with ERISA. Borrower shall not, and shall not permit any
---------------------
Related Person to:
(a) (i) engage in any transaction in connection with which Borrower
or any Related Person could be subject to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by Section 4975 of the
Code, (ii) fail to make full payment when due of all amounts which would be
deductible by Borrower or any Related Person and which, under the
provisions of any Plan, applicable law or applicable collective bargaining
agreement, Borrower or any Related Person is required to pay as
contributions thereto, or (iii) permit to exist any accumulated funding
deficiency, whether or not waived, with respect to any Plan (other than a
Multiemployer Plan or a "multiple employer Plan"), if, in the case of any
of clause (i), (ii) or (iii) above such penalty or tax, or the failure to
make such payment, or the existence of such deficiency, as the case may be,
will likely have a material adverse effect on the financial position of
Borrower;
(b) permit the amount of unfunded benefit liabilities (within the
meaning of Section 4001(a)(18) of ERISA) under each Plan maintained,
established or contributed to at such time by Borrower or any of its
Related Persons (other than Multiemployer Plans or "multiple employer
plans") to exceed $2,000,000; or
60
(c) permit the aggregate complete or partial withdrawal liability
under Title IV of ERISA with respect to all Plans which are "multiple
employer plans" and all Multiemployer Plans incurred by Borrower or any
Related Person to exceed $50,000.
7.15 Change of Principal Office. Borrower shall not (a) change the location of
--------------------------
its principal office, chief executive office and principal place of business
from that specified in Section 5.12 or (b) change its name, identity or
corporate structure to such an extent that any financing statement filed by
Agent in connection with this Agreement would become seriously misleading,
unless it shall have given Agent at least 30 days prior written notice thereof
and prior to effecting any such change, taken such steps as Agent or the
Required Lenders may deem necessary or desirable to continue the perfection and
priority of the Liens in favor of Agent for the benefit of Lenders granted in
connection herewith.
7.16 Tax Payments. Except in accordance with the Tax Allocation Agreement,
------------
Borrower shall not make any payments to or on behalf of the Parent or any
Affiliate of Borrower in respect of taxes.
7.17 Tax Allocation Agreement. Borrower shall not permit the amendment or
------------------------
modification of the Tax Allocation Agreement in any way which has an adverse
effect on Borrower.
7.18 Permitted Subordinated Indebtedness. Borrower shall not increase the
-----------------------------------
outstanding amount of the Permitted Subordinated Indebtedness, modify or amend
the Parent Note without providing a copy of the Parent Note, as modified, to
Agent within 20 days after execution of the Parent Note, or make any payment in
respect of the Parent Note; provided, that so long as no Default or Event of
Default exists or would result therefrom, Borrower may borrow, repay and
reborrow under the Parent Note.
SECTION 8. EVENTS OF DEFAULT
-----------------
8.1 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
any Note, or payment of any fee, expense or other amount due hereunder,
under any of the Notes or under any other Loan Document, on or before the
date such payment is due;
(b) Borrower fails to observe or perform (i) any term, covenant or
agreement set forth in Sections 2.3(b)(iii), 2.5, 6.13, 6.17, 6.19, or 6.20
or Section 7 (other than Sections 7.11, 7.12, 7.16, 7.18, and 7.14, which
Section 7.14 is governed by Section 8.1(i) regarding payments of
judgments), and (ii) any term, covenant or agreement set forth in Sections
6.22, 7.11, 7.12, 7.14, or 7.16, or 7.18 if such failure shall remain
unremedied for 20 days, and (iii) any other term, covenant or agreement in
this Agreement on its part to be performed or observed if the failure to
perform or observe such other term, covenant or agreement shall remain
unremedied for 20 days after written notice thereof shall have been given
to Borrower by Agent or the Required Lenders;
61
(c) Borrower fails to observe or perform any of the covenants or
agreements contained in any other Loan Document, and (unless such default
otherwise constitutes a Default pursuant to other provisions of this
Section 8.1) such default continues unremedied beyond the expiration of any
applicable grace period which may be expressly allowed under such other
Loan Document;
(d) any material statement, warranty or representation by or on
behalf of Borrower contained in this Agreement, the Notes or any other Loan
Document or 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;
(e) Borrower fails to make when due or within any applicable grace
period any payment on any Indebtedness with an unpaid principal balance of
over $500,000; or any event or condition occurs under any provision
contained in any such obligation or any agreement securing or relating to
such obligation (or any other 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
Borrower with unpaid principal balances exceeding, in the aggregate,
$500,000;
(f) Borrower shall generally not pay its debts as they become due or
shall admit in writing its inability to pay its debts, or shall make a
general assignment for the benefit of creditors;
(g) Borrower shall (i) apply for or consent to the appointment of a
receiver, trustee, custodian, intervenor or liquidator of it or of all or a
substantial part of its assets, (ii) file a voluntary petition in
bankruptcy, (iii) file a petition or answer seeking reorganization or an
arrangement with creditors or to take advantage of any Debtor Laws, (iv)
file an answer admitting the material allegations of, or consent to, or
default in answering, a petition filed against it in any bankruptcy
reorganization or insolvency proceeding, or (v) take corporate action for
the purpose of effecting any of the foregoing;
(h) an involuntary petition or complaint shall be filed against
Borrower seeking bankruptcy or reorganization of Borrower or the
appointment of a receiver, custodian, trustee, intervenor or liquidator of
Borrower, or all or substantially all of its assets, and such petition or
complaint shall not have been dismissed within 60 days of the filing
thereof; or an order, order for relief, judgment or decree shall be entered
by any court of competent jurisdiction or other competent authority
approving a petition or complaint seeking reorganization of Borrower or
appointing a receiver, custodian, trustee, intervenor or liquidator of
Borrower, or of all or substantially all of its assets;
(i) Borrower fails within 30 days to pay, bond or otherwise discharge
any
62
final judgment or order for payment of money in excess of $250,000 or
Borrower fails within 30 days to pay, bond or otherwise discharge final
judgments or orders for payment of money which exceed in the aggregate
$250,000, or Borrower fails within 30 days to timely appeal or pay, bond or
otherwise discharge any judgments or orders for payment of money which
exceed, in the aggregate, $250,000 and which Borrower may appeal;
(j) any default or event of default occurs under any other
Indebtedness of Borrower to any Lender;
(k) any Person levies on, seizes or attaches all or any material
portion of the assets of Borrower and within 30 days thereafter Borrower
shall not have dissolved such levy or attachment, as the case may be, and,
if applicable, regained possession of such seized assets;
(l) an event or condition specified in Section 7.14 occurs or exists
and, as a result of such event or condition, together with all other such
events or conditions, Borrower or any Related Person incurs or is
reasonably likely to incur a liability to a Plan, a participant or the PBGC
(or any combination of the foregoing) that is material in relation to the
financial position of Borrower;
(m) any change in the senior management of Borrower shall occur or
any reason other than death or disability;
(n) Borrower shall cease to be an eligible seller or servicer under
the FNMA Guide or the FHLMC Guide, or FNMA or FHLMC shall impose any
sanctions upon or take any action to terminate or revoke any servicing of
Borrower, or FNMA or FHLMC shall take any action to initiate the transfer
of any servicing from Borrower to another Person (including, without
limitation, the giving of notice to Borrower that it intends to terminate
or transfer any servicing) or FNMA or FHLMC shall seek any judicial relief
with respect to Borrower;
(o) GNMA shall revoke or terminate any servicing of Borrower, or GNMA
shall issue a letter of extinguishment under any GNMA guaranty agreement or
GNMA shall notify Borrower that it intends to revoke or terminate any
servicing of Borrower or issue a letter of extinguishment, or GNMA shall
seek any judicial relief with respect to Borrower;
(p) the Parent shall cease to own beneficially, of record and either
directly or indirectly, 100% of the issued and outstanding shares of
capital stock of Borrower, or any "person" or "group" (within the meaning
of Sections 13(d) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended) shall become the "beneficial owner" (as defined in Rule 13d-3
under such act) of more than 50% of the total aggregate voting power of all
classes of the voting stock of the Parent and/or warrants or options to
acquire such stock, calculated on a fully diluted basis; or
(q) any provision of this Agreement, the Notes or any other Loan
Document
63
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; or the validity or
enforceability of any such document shall be challenged or denied.
8.2 Default Remedies. Upon the occurrence of an Event of Default, Agent, at
----------------
the request of the Required Lenders, provided such Event of Default has not been
previously cured by Borrower, may (i) declare each of the Commitments to be
terminated and/or declare the entire principal of and all interest accrued on
the Notes to be, and the Notes, together with all Obligations, shall thereupon
become, forthwith due and payable, without 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 and (ii)
exercise any other right or remedy available at law or pursuant to any Loan
Document. Notwithstanding the foregoing, if an Event of Default specified in
Section 8.1(f), (g), (h) or (p) above occurs, the Commitment of each Lender
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 Note to
the contrary notwithstanding.
SECTION 9. AGENT.
-----
9.1 Authorization and Action. Each Lender hereby appoints U.S. Bank National
------------------------
Association, as Agent under this Agreement and the other Loan Documents and
authorizes Agent to take such action on its behalf and to exercise such powers
and perform such duties as are expressly delegated to Agent by the terms of this
Agreement and such other Loan Documents, together with such powers as are
reasonably incidental thereto. As to any matter not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lenders
and all holders of the Notes; provided, however, that Agent shall not be
required to take any action which exposes Agent to personal liability or which
is contrary to this Agreement or applicable law. Agent agrees to give to each
Lender prompt notice of each notice given to it by Borrower pursuant to the
terms of this Agreement.
9.2 Agent's Reliance, Etc. Notwithstanding anything to the contrary in this
---------------------
Agreement or any other Loan Document, neither Agent nor any of its directors,
officers, agents, employees, attorneys-in-fact or Affiliates shall be liable for
any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan Documents, except for its or their own
gross negligence or willful misconduct. Without limitation of the generality of
the foregoing, Agent: (a) may treat the payee of any Note as the holder thereof;
(b) may consult with legal counsel (including counsel for Borrower), independent
public accountants and other experts selected by it or Borrower 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 this Agreement;
64
(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 this Agreement on the
part of Borrower or to inspect the property (including the books and records) of
Borrower, except receipt of delivery of the items required under the Security
Agreement and Sections 4.1, 4.2, and 6.1; (e) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; and (f) shall incur no liability under or in respect
of this Agreement by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telecopy) believed by it to be genuine
and signed or sent by the proper party or parties.
9.3 Agent and Affiliates. With respect to its Commitment, the Advances made by
--------------------
it and the Notes issued to it, Agent shall have the same rights and powers under
this Agreement and the other Loan Documents as any other Lender and may exercise
the same as though it were not Agent; and the term "Lender" or "Lenders" shall,
unless otherwise expressly indicated, include Agent in its individual capacity.
Agent and the Affiliates of Agent may accept deposits from, lend money to, act
as trustee under indentures of, and generally engage in any kind of business
with, Borrower, any of its Affiliates and any Person who may do business with or
own securities of Borrower or any of its Affiliates, all as if Agent were not
Agent and without any duty to account therefor to Lenders.
9.4 Lender Credit Decision. Each Lender acknowledges that it has,
----------------------
independently and without reliance upon Agent or any other Lender and based on
the financial statements referred to in Sections 5.7 and 6.1 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter this Agreement. 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, to make its own credit decisions in taking or not taking action under this
Agreement.
9.5 Indemnification. Lenders agree to indemnify Agent (to the extent not
---------------
reimbursed by Borrower), ratably according to their respective Commitments, from
and against any and all liabilities, obligations, losses, damages, penalties,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against Agent in
any way relating to or arising out of this Agreement or any action taken or
omitted by Agent under this agreement (including any of same which may result
from the negligence, but not gross negligence, of Agent), provided that no
Lender shall be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, but subject to the proviso clause of the preceding
sentence, each Lender agrees to reimburse Agent promptly upon demand for its
ratable share of any out-of-pocket expenses (including counsel fees) incurred by
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that Agent is not
65
reimbursed for such expenses by Borrower.
9.6 Successor Agent. Agent may resign at any time by giving written notice
---------------
thereof to Lenders and Borrower and may be removed at any time with or without
cause by the Required Lenders. Upon any such resignation or removal, the
Required Lenders shall have the right to appoint a successor Agent with the
written consent of Borrower, which consent shall not be unreasonably withheld or
delayed, provided that the consent of the Borrower shall not be required if a
Default or an Event of Default shall have occurred and is continuing. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the retiring Agent's giving
of notice of resignation or the Required Lenders' removal of the retiring Agent,
then the retiring Agent may, on behalf of Lenders, appoint a successor Agent,
which shall be a commercial bank or savings bank organized under the laws of the
United States of America or of any State thereof which has a combined capital
and surplus of at least $200,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from any
further duties and obligations under this Agreement. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Section 9
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under this Agreement. The appointment of a Successor Agent
shall not release the retiring Agent from any liability it may have for any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
9.7 Right of Inspection. Agent shall permit any officer, employee or agent of
-------------------
Borrower or any Lender, upon written request by such party to the Agent, to
visit and inspect the premises on which the custodial duties of Agent hereunder
are performed at a time which is mutually satisfactory to Agent and such
requesting party, and allow such requesting party to examine the books and
records of Agent which pertain to such custodial duties, take copies and
extracts therefrom, and discuss the performance of such custodial duties with
the officers, accountants and auditors of Agent that are responsible therefor,
all at such reasonable times and as often as Borrower or any Lender may desire.
9.8 Reports. On the fifth (5th) day of each calendar month (or if such day is
not a Business Day, the next succeeding Business Day), Agent shall deliver to
each Lender and Borrower (a) a report of the Pledged Mortgage Loans (noting any
document exceptions) for the month ended (a "Basic Status Report"); and (b) a
report of the Pledged Mortgage Loans shipped to Investors for which Agent has
not received the full purchase price in cash (a "Shipped Not Paid Report"). The
information on the Basic Status Report and the Shipped Not Paid Report shall be
dated as of the end of the immediately preceding month.
66
SECTION 10. INDEMNIFICATION OF LENDERS
--------------------------
10.1 Indemnification.
---------------
(a) Borrower will indemnify and hold harmless Agent, each Lender,
and Agent's and each Lender's directors, officers, employees and each
Person, if any, who is deemed to control any Lender (any and all whom are
referred to as the "Indemnified Party") from and against any and all
losses, claims, damages and liabilities, joint or several (including all
losses, claims, damages and liabilities resulting from the negligence, but
not the gross negligence of such Indemnified Party, and including all legal
fees or other expenses reasonably incurred by any Indemnified Party in
connection with the preparation for or defense of any pending or threatened
claim, action or proceeding, whether or not resulting in any liability), to
which such Indemnified Party may become subject (whether or not such
Indemnified Party is a party thereto) under any applicable Federal, state
or local law or otherwise caused by or arising out of, or allegedly caused
by or arising out of, this Agreement any L/C or L/C Agreement, any other
Loan Document or any transaction contemplated hereby, including, without
limitation, any liability or penalty arising out of any fact or
circumstance which causes the representations or warranties set forth in
SECTION 5 OF THE SECURITY AGREEMENT to be false or incorrect, excepting
only losses, claims, damages or liabilities arising from the gross
negligence or willful misconduct or fraud of such Indemnified Party.
(b) Promptly after receipt by an Indemnified Party of notice of
any claim or proceeding with respect to which an Indemnified Party is
entitled to indemnity hereunder, such Indemnified Party will notify
Borrower of such claim or the commencement of such action or proceeding,
provided that the failure of an Indemnified Party to give notice as
provided herein shall not relieve Borrower of its obligations under this
Section 10.1 with respect to such Indemnified Party, except to the extent
that Borrower is actually prejudiced by such failure. Borrower will assume
the defense of such claim, action or proceeding and will employ counsel
reasonably satisfactory to the Indemnified Party and will pay the
reasonable fees and expenses of such counsel. Notwithstanding the preceding
sentence, the Indemnified Party will be entitled, at the expense of
Borrower, to employ counsel separate from counsel for Borrower and for any
other party in such action if the Indemnified Party reasonably determines
that a conflict of interest or other reasonable basis exists which makes
representations by counsel chosen by Borrower not advisable, provided that
Borrower shall not be obligated to pay for the fees and expenses of more
than one counsel for all Indemnified Parties in respect of a particular
controversy. In the event an Indemnified Party appears as a witness in any
action or proceeding brought against Borrower or any of its Subsidiaries
(or any of its officers, directors or employees) in which an Indemnified
Party is not named as a defendant, Borrower agrees to reimburse such
Indemnified Party for all reasonable expenses
67
incurred by it (including reasonable fees and expenses of counsel) in
connection with its appearing as a witness.
10.2 Limitation of Liability. Neither any Lender nor the directors, officers,
-----------------------
agents or employees of any Lender shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement,
except for such actions taken or omitted to be taken as constitute gross
negligence or willful misconduct on the party of such Lender or its directors,
officers, agents or employees.
SECTION 11. MISCELLANEOUS
-------------
11.1 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 or overnight messenger, 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: NVR Mortgage Finance, Inc.
0000 Xxxxxxxxxxx Xxxx, Xxxxx 000
XxXxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telecopy: (000) 000-0000
Agent: U.S. Bank National Association
U.S. Bank Place
000 Xxxxxx Xxxxxx Xxxxx
Xxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxx X. Xxxxxx
Telecopy: (000) 000-0000
Lenders: The address listed for each Lender
on Schedule 1.1(a)
or at such other addresses or to such individual's or department's attention as
any party may have furnished the other parties in writing. Any communications
so addressed and mailed shall be deemed to be given when so mailed, sent or
delivered, except that communications given pursuant to Sections 2.5 and 6.13,
Borrowing Requests, Conversion Requests and Agreements to Pledge and
communications related thereto shall not be effective until actually received by
Agent, a Lender or Borrower, as the case may be, any communication mailed by
first class shall be deemed to have been given on the third day following the
day it is mailed, any communication sent by rapid transmission shall be deemed
to be given when receipt of such
68
transmission is confirmed, and any communication delivered in person shall be
deemed to be given when receipted for by, or actually received by, an officer of
Borrower, Agent or a Lender, as the case may be.
11.2 Amendments, Etc.
---------------
(a) In General. Neither this Agreement, any Note or any other Loan
----------
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 11.2.
With the written consent of the Required Lenders, Agent and Borrower may,
from time to time, enter into written amendments, supplements or
modifications hereto for the purpose of adding any provisions to this
Agreement, the Notes, or the other Loan Documents to which Borrower is a
party or changing in any manner the rights of Lenders or of Borrower
hereunder or thereunder or waiving, on such terms and conditions as Agent
may specify in such instrument, any of the requirements of this Agreement
or the Notes or the other Loan Documents to which Borrower is a party or
any Default or Event of Default and its consequences; provided, however,
that no such waiver and no such amendment, supplement or modification shall
(i)(A) waive any condition set forth in Section 4, (B) extend the maturity
of any Note or any installment thereof, or reduce the rate or extend the
time of payment of interest thereon, or reduce the principal amount
thereof, (C) reduce any fee payable to any Lender under this Agreement, (D)
change any Lender's Commitment Amount, (E) amend, modify or waive any
provision of this Section 11.2, (F) consent to the assignment or transfer
by Borrower of any of its rights and obligations under this Agreement, (G)
waive any Event of Default specified in Section 8.1 (f), (g), (h) or (p),
(H) amend, supplement or modify the definition of Borrowing, Borrowing
Base, Collateral Value, Eligible Gestation Mortgage Loan, Eligible Mortgage
Loan, Wet Mortgage Loan, Jumbo Loan, Super Jumbo Loan or Required Lenders
or of any component of any thereof, or any provision of Section 2.1 or
Section 6.12, (I) change the several nature of Lenders' obligations under
this Agreement, (J) release any Collateral except as expressly permitted by
the Loan Documents, or (K) change any release provision in any Loan
Document, in each of the foregoing cases without the written consent of all
Lenders, (ii) amend, modify or waive any provision pertaining to Swing
Advances without the written consent of Agent, or (iii) amend, modify or
waive any provision of Section 4 without the written consent of all Persons
then serving or having served as Agent; and provided, further, Borrower and
Agent may, without the approval of the Required Lenders, add Additional
Lenders pursuant to Section 11.11(c); provided, that such addition does not
result in the Total Commitment exceeding $250,000,000. Any such waiver and
any such amendment, supplement or modification shall apply equally to each
of Lenders and shall be binding upon Borrower, Lenders, Agent and all
future holders of the Notes. In the case of the waiver of any Default or
Event of Default, Borrower, Lenders and Agent shall be restored to their
former position and rights hereunder and under the outstanding Notes, and
any Default or Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other
Default or Event of Default, or impair any right consequent thereon.
(b) Regarding Investors. Notwithstanding anything in Section 11.2(a)
-------------------
to the
69
contrary:
(i) The Required Lenders may, at any time and from time to time,
without the consent of Borrower but effective upon thirty (30) days'
prior written notice by Agent to Borrower, amend Schedule 1.1(b) to
delete any Person which, in the sole discretion of the Required
Lenders, is no longer acceptable as an Investor; provided, that (A)
any Investor with respect to which any proceeding of the types
described in Sections 8.1(g) and (h) has been commenced shall,
immediately upon notice to Borrower from Agent or any Lender (with a
copy to Agent) be automatically deleted from Schedule 1.1(b) without
the necessity for any other action (including prior written notice of
any duration to Borrower) by Agent or any lender and (B) upon any
Investor being deleted from Schedule 1.1(b), Borrower shall not enter
into any new Take-Out Commitments or Repurchase Agreements with such
Investor; and
(ii) At any time and from time to time at the request of Borrower
and with the consent of Agent , Schedule 1.1(b) may be supplemented to
include any Person not then an Investor which, in the sole discretion
of Agent, is acceptable as an Investor.
(c) Commitment Amount. Notwithstanding anything in Section 11.2(a)
-----------------
to the contrary, Borrower, Agent and any Lender (the "Increasing Lender") may,
at any time and from time to time, without the consent of any other Lender or
Lenders but by written agreement with notice to each Lender, increase the
Commitment Amount of such Increasing Lender for up to one hundred and twenty
days; provided, that after giving effect to such increase, the Total Commitment
at such time does not exceed the Total Commitment on the Agreement Date by more
than $25,000,000.
11.3 Invalidity. In the event that any one or more of the provisions contained
----------
in any Note, 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.
11.4 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 all of the
Commitments.
11.5 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 any part of such other
Obligations.
11.6 Waivers. No course of dealing on the part of Agent or any Lender, or any
-------
of their officers, employees, consultants or agents, nor any failure or delay by
Agent or any Lender with
70
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 11.2.
11.7 Cumulative Rights. The rights and remedies of Lenders and Agent 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.
11.8 Construction. THIS AGREEMENT, EACH NOTE AND EACH OTHER LOAN DOCUMENT IS A
------------
CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY
THE LAWS OF THE UNITED STATES OF AMERICA AND THE STATE OF MINNESOTA, AS SUCH
LAWS ARE NOW IN EFFECT, EXCEPT AS OTHERWISE SPECIFIED HEREIN OR THEREIN, AND,
WITH RESPECT TO USURY LAWS, IF ANY, APPLICABLE TO LENDERS AND TO THE EXTENT
ALLOWED THEREBY, AS SUCH LAWS MAY HEREAFTER BE IN EFFECT WHICH ALLOW A HIGHER
MAXIMUM NONUSURIOUS INTEREST RATE THAN SUCH LAWS NOW ALLOW. CHAPTER 346 OF THE
TEXAS FINANCE CODE (WHICH REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND
REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR ANY NOTE.
11.9 Interest. Any provisions herein, in any Note, or in any other Loan
--------
Document, or any other document executed or delivered in connection herewith, or
in any other agreement or commitment, whether written or oral, expressed or
implied, to the contrary notwithstanding, no Lender shall in any event be
entitled to receive or collect, nor shall or may amounts received hereunder be
credited, so that such Lender shall be paid, as interest, a sum greater than the
maximum amount permitted by applicable law to be charged to the Person primarily
obligated to pay such Note at the time in question. If any construction of this
Agreement, any Note or any other Loan Document, or any and all other papers,
agreements or commitments indicate a different right given to any Lender to ask
for, demand or receive any larger sum as interest, such is a mistake in
calculation or wording which this clause shall override and control, it being
the intention of the parties that this Agreement, each Note, and all other Loan
Documents or other documents executed or delivered in connection herewith shall
in all things comply with applicable law and proper adjustments shall
automatically be made accordingly. In the event that any Lender shall ever
receive, collect or apply as interest, any sum in excess of the maximum
nonusurious rate permitted by applicable law (the "Maximum Rate"), if any, such
excess amount shall be applied to the reduction of the unpaid principal balance
of the Note or Notes held by such Lender, and if the same be paid in full, any
remaining excess shall be paid to Borrower. In determining whether or not the
interest paid or payable, under any specific contingency, exceeds the Maximum
Rate, if any, Borrower and each Lender shall, to the maximum extent permitted
under the applicable law: (a) characterize any nonprincipal payment as an
expense or fee rather than as interest, (b) exclude voluntary prepayments and
the effects thereof, and (c) "spread" the total amount of interest throughout
the entire term of such Lender's Note or Notes; provided that if a Note is paid
and performed in full prior to the end of the full contemplated term hereof, and
if the interest received for the actual period of existence thereof exceeds the
Maximum Rate, if any, the Lender holding such Note shall refund to Borrower the
amount of such excess.
71
If Texas Laws are applicable for purposes of determining the "Maximum Rate" or
the "Maximum Amount," then those terms mean the "weekly ceiling" from time to
time in effect under Article 5069-1D.001, et seq., Title 79, Texas Revised Civil
Statutes, as amended. Chapter 346 of the Texas Finance Code, as amended (which
regulates certain revolving credit loan accounts and revolving triparty
accounts), does not apply to the Obligation.
11.10 Right of Offset. Borrower hereby grants to Agent, to each Lender and to
---------------
any assignee or participation of any Lender a right of offset, to secure the
repayment of Obligations, upon any and all monies, securities or other property
of Borrower, and the proceeds therefrom now or hereafter held or received by or
in transit to such Person, from or for the account of Borrower, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, and also
upon any and all deposits (general or special, time or demand, provisional or
final) and credits of Borrower, and any and all claims of Borrower against such
Person at any time existing. Upon the occurrence of any Event of Default, such
Person is hereby authorized at any time and from time to time, without notice to
Borrower, to offset, appropriate, and apply any and all items hereinabove
referred to against the Obligations. Notwithstanding anything in this Section
11.10 or elsewhere in this Agreement to the contrary, Agent, Lenders and any
assignee or participant of any Lender shall not have any right to offset,
appropriate or apply any accounts of Borrower which consist of escrowed funds
(except and to the extent of any beneficial interest of Borrower in such
escrowed funds) on deposit in accounts which accounts have been identified on
the books and records of the Person with whom such accounts are maintained as
containing escrowed funds.
11.11 Assignments, Additional Lenders, etc.
------------------------------------
(a) Assignments and Participations. All covenants and agreements by
------------------------------
or on behalf of Borrower in the Notes, this Agreement, or any other Loan
Document shall bind Borrower's successors and assigns and shall inure to
the benefit of Agent and Lenders and their successors and assigns.
Borrower shall not, however, have the right to assign its rights or
obligations under this Agreement or any interest herein, without the prior
written consent of Agent and each Lender. Each Lender may assign to one or
more Persons all or any part of, and may grant Participations to one or
more Persons in all or any part of, its rights and obligations under this
Agreement (including without limitation, its Commitment, the Advances owing
to it and the Note or Notes held by it); provided, however, in respect of
each such Participation, that (i) such Lender's obligations under this
Agreement (including without limitation, its Commitment to Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
obligations, (iii) whether or not such Lender shall remain the holder of
any such Note, such Lender shall retain all voting rights with respect to
such Note, the Advances thereunder and the Commitment relevant thereto and
Borrower, Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and in connection with any rights or
obligation of the holder of any such Note. In the case of an assignment by
any Lender, Borrower retains the right to approve the assignment, which
approval may not be unreasonably withheld.
72
(b) Confidentiality. Any Lender may, in connection with any
---------------
assignment or participation or proposed assignment or participation
pursuant to this Section 11.11, disclose to the actual or proposed assignee
or participant any information relating to Borrower furnished to such
Lender by or on behalf of Borrower; provided, that prior to any such
disclosure, the actual or proposed assignee or participant shall agree to
preserve the confidentiality of any information relating to Borrower that
has been identified in writing by Borrower to be confidential.
(c) Additional Lenders. From time to time additional lenders may be
------------------
added hereto upon (i) the request of Borrower and the consent of Agent and
(ii) execution by Borrower, Agent and such additional lenders of a Lender
Addition Agreement. Each Lender hereby agrees to execute each Lender
Addition Agreement for purposes of acknowledging the terms and provisions
thereof.
11.12 Lender Covenants, Representations and Warranties. Each Lender severally
------------------------------------------------
covenants to return its Note or Notes to Borrower upon receipt of its
replacement Notes. Each Lender severally represents and warrants that it:
(a) is either a banking association duly organized and validly
existing under the laws of the United States of America or a State therein,
or is a Federal savings bank duly organized and validly existing under the
laws of the United States of America;
(b) has the power and authority to own its properties and assets and
to transact the business in which it is engaged;
(c) has the power and requisite authority to execute, deliver and
perform this Agreement and the other Loan Documents to which it is a party,
and is duly authorized to, and has taken all action necessary to authorize
it to, execute, deliver and perform this Agreement and the other Loan
Documents to which it is a party and will continue to be authorized to so
perform; and
(d) will continuously maintain all components of this Agreement and
the other Loan Documents as an official record of such Lender.
11.13 Consent to Jurisdiction. Borrower hereby agrees that any action or
-----------------------
proceeding under this agreement or any other Loan Document may be commenced
against it in any court of competent jurisdiction SITTING IN HENNEPIN COUNTY OR
XXXXXX COUNTY, Minnesota, by service of process upon Borrower by first-class
registered or certified mail, return receipt requested, addressed to Borrower at
its address last known to Agent. Borrower agrees that any such suit, action, or
proceeding arising out of or relating to this agreement or any other Loan
Document may be instituted in the courts of the State of Minnesota, or in the
United States District Court for the District of Minnesota, sitting, in either
case, in Hennepin County or Xxxxxx County, Minnesota, at the option of any
Lender; and Borrower hereby waives any objection to the venue of any such
73
suit, action, or proceeding. Nothing herein shall affect the right of each
Lender to accomplish service of process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against Borrower in any other
jurisdiction or court.
11.14 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.
11.15 Titles of Articles and Sections. All titles or headings to articles,
-------------------------------
sections, 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.
11.16 Counterparts. This Agreement may be executed in two or more counterparts,
------------
and it shall not be necessary that the signatures of each 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.
11.17 Rights of Individual Lenders to Take Action. Notwithstanding any
-------------------------------------------
provision in the Loan Documents to the contrary, no Lender shall have any right
by virtue of (or by availing itself of) any provision of this Agreement or any
other Loan Document to institute any action or proceedings at law or in equity
or otherwise (excluding any actions in bankruptcy and the exercise of any rights
of offset) upon or under or with respect to this Agreement or any other Loan
Document or for the appointment of a receiver or for any other remedy unless
after an Event of Default has occurred and before Agent has declared in writing
that it has been cured or waived, (a) the Required Lenders have (i) made a
written request that Agent institute such action or proceeding in its own name
as agent under this Agreement and (ii) offered to Agent such reasonable
indemnity as it may require against any costs, expenses and liabilities to be
incurred therein or thereby, and (b) Agent, for 30 days after its receipt of
such request and offer of indemnity, shall have failed to institute any such
action or proceedings and no direction inconsistent with such request shall have
been given to Agent by the Required Lenders. Lenders intend and mutually
covenant that no one or more of Lenders or other holders of the Notes shall have
any right in any manner whatever to affect, disturb or prejudice the rights of
any other Lender or to obtain or seek to obtain priority over or preference to
any other Lender, or to enforce any right under this Agreement or any other Loan
Document, except in the manner provided in this Agreement and for the ratable
benefit of all Lenders. For the protection and enforcement of this Section
11.17, Agent and each Lender shall be entitled to such relief as can be given
either at law or in equity.
11.18 Entire Agreement. The Notes, this Agreement, and the other Loan
----------------
Documents executed and delivered as of even date herewith represent the final
agreement between the parties and may not be contradicted by evidence of prior,
contemporaneous, or subsequent oral agreements of the parties. There are no
74
unwritten oral agreements among the parties.
11.19 Agreement Regarding Effective Date. Notwithstanding the date of this
----------------------------------
Agreement or any other Loan Document, this Agreement and the other Loan
Documents dated as of the date hereof are being executed and delivered on the
Agreement Date and each of the terms and provisions of this Agreement and of
each of the other Loan Documents shall become effective on the Agreement Date
and not prior thereto.
[REMAINDER OF PAGE INTENTIONALLY BLANK
SIGNATURE PAGES TO FOLLOW]
75
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly
executed as of the Agreement Date below.
Agreement Date: September 7, 1999
NVR MORTGAGE FINANCE, INC., as U.S. BANK, NATIONAL
Borrower ASSOCIATION, as Agent and Lender
By __________________________ By _________________________
Its________________________ Its_______________________
THE BANK OF NEW YORK, as Lender BANK BOSTON, N.A., as Lender
By __________________________ By __________________________
Its________________________ Its________________________
CHASE BANK OF TEXAS, NATIONAL GUARANTY FEDERAL BANK, F.S.B.,
----- --------
ASSOCIATION, as Lender as Lender
By __________________________ By __________________________
Its________________________ Its________________________
