REVOLVING CREDIT AGREEMENT
by and among
K. HOVNANIAN MORTGAGE, INC.,
THE LENDERS PARTY HERETO,
and
GUARANTY BANK,
As Agent
dated as of June 7, 2002
Table of Contents
ARTICLE I DEFINITIONS 1
ARTICLE II THE CREDITS 26
2.1 Commitment, Sublimits and Types of Advances 26
2.2 Primary Advances 27
2.3 Buy Down Loans 28
2.4 Swingline Loans 28
2.5 Fees 29
2.6 Method of Selecting Types and Interest Periods for New Advances 30
2.7 Conversion and Continuation of Outstanding Advances 30
2.8 Reductions to Aggregate Commitment 31
2.9 Principal Payments 31
2.10 Changes in Interest Rate, etc. 33
2.11 Rates Applicable After Default 33
2.12 Method of Payment 33
2.13 Noteless Agreement; Evidence of Indebtedness 34
2.14 Telephonic Notices 34
2.15 Interest Payment Dates; Interest and Fee Basis 35
2.16 Notification by the Agent 35
2.17 Lending Installations 35
2.18 Non-Receipt of Funds by the Agent 35
ARTICLE III CHANGE IN CIRCUMSTANCES 36
3.1 Yield Protection 36
3.2 Changes in Capital Adequacy Regulations 37
3.3 Availability of Types of Advances 37
3.4 Funding Indemnification 37
3.5 Taxes 37
3.6 Lender Statements; Survival of Indemnity 39
ARTICLE IV CONDITIONS PRECEDENT; WITHHOLDING TAX EXEMPTION 40
4.1 Effectiveness 40
4.2 Each Advance 41
ARTICLE V REPRESENTATIONS AND WARRANTIES 42
5.1 Existence and Standing 42
5.2 Authorization and Validity 42
5.3 No Conflict; Government Consent 42
5.4 Financial Statements 43
5.5 Material Adverse Change 43
5.6 Taxes 43
5.7 Litigation and Contingent Obligations 43
5.8 Subsidiaries 44
5.9 ERISA 44
5.10 Accuracy of Information 44
5.11 Regulation U 44
5.12 Material Agreements 44
5.13 Compliance With Laws 44
5.14 Ownership of Properties 44
5.15 Plan Assets; Prohibited Transactions 45
5.16 Investment Company Act 45
5.17 Public Utility Holding Company Act 45
5.18 GNMA, FHA, VA, FNMA, and FHLMC Eligibility 45
5.19 Approved Investor Commitments 45
ARTICLE VI COVENANTS 46
6.1 Financial Reporting 46
6.2 Use of Proceeds 48
6.3 Notice of Default 48
6.4 Conduct of Business 48
6.5 Taxes 49
6.6 Insurance 49
6.7 Compliance with Laws 49
6.8 Maintenance of Properties 49
6.9 Inspection 49
6.10 Dividends 49
6.11 Indebtedness 50
6.12 Merge 50
6.13 Sale of Assets 50
6.14 Investments and Acquisitions 50
6.15 Liens 51
6.16 Affiliates 51
6.17 Financial Covenants 51
6.18 Compliance with Security Agreement 52
6.19 Servicing Release 52
6.20 Federal Agency Approvals 53
6.21 Approved Investor Commitments 53
6.22 Negative Pledges 53
6.23 MERS 53
ARTICLE VII DEFAULTS 54
ARTICLE VIII COLLATERAL, ACCELERATION AND OTHER REMEDIES 56
8.1 Security and Collateral Agency Agreement 56
8.2 AP Mortgages 56
8.3 Release of Collateral 57
8.4 Settlement and Funding Accounts 57
8.5 Termination 57
8.6 Acceleration 57
8.7 Other Remedies 58
8.8 Application of Proceeds 59
8.9 Preservation of Rights 60
ARTICLE IX AMENDMENTS; WAIVERS; GENERAL PROVISIONS 60
9.1 Amendments and Waivers 60
9.2 Survival of Representations 61
9.3 Governmental Regulation 61
9.4 Headings 61
9.5 Entire Agreement 61
9.6 Several Obligations; Benefits of this Agreement 61
9.7 Expenses; Indemnification 62
9.8 Nonliability of Lenders 62
9.9 Severability of Provisions 63
9.10 Numbers of Documents 63
9.11 Accounting 63
9.12 Confidentiality 63
9.13 Nonreliance 63
9.14 Disclosure 64
ARTICLE X THE AGENT AND THE COLLATERAL AGENT 64
10.1 Appointment; Nature of Relationship 64
10.2 Powers 64
10.3 General Immunity 65
10.4 No Responsibility for Loans, Recitals, etc. 65
10.5 Action on Instructions of Lenders 65
10.6 Employment of Agents and Counsel 65
10.7 Reliance on Documents; Counsel 66
10.8 Agent's Reimbursement and Indemnification 66
10.9 Notice of Default 66
10.10 Rights as a Lender 66
10.11 Lender Credit Decision 67
10.12 Successor Agent 67
10.13 Delegation to Affiliates 67
10.14 Collateral Releases 68
ARTICLE XI SETOFF; RATABLE PAYMENTS 68
11.1 Setoff 68
11.2 68
11.3 Ratable Payments 68
11.4 Custodial Accounts 68
ARTICLE XII ASSIGNMENTS; PARTICIPATIONS; COMMITMENT INCREASES 69
12.1 Successors and Assigns 69
12.2 Participations 69
12.3 Assignments 70
12.4 Commitment Increases 71
12.5 Dissemination of Information 71
12.6 Tax Treatment 72
ARTICLE XIII NOTICES 72
13.1 Notices 72
13.2 Change of Address 72
ARTICLE XIV COUNTERPARTS 72
ARTICLE XV CHOICE OF LAW, CONSENT TO JURISDICTION, WAIVER OF
JURY TRIAL 73
15.1 CHOICE OF LAW 73
15.2 CONSENT TO JURISDICTION 73
15.3 WAIVER OF JURY TRIAL 73
15.4 No Tri-Party Accounts 73
15.5 Limitation on Interest 73
15.6 NO ORAL AGREEMENTS 74
REVOLVING CREDIT AGREEMENT
REVOLVING CREDIT AGREEMENT dated as of June 7, 2002 among
K. HOVNANIAN MORTGAGE, INC., a New Jersey corporation (the "Borrower"), the
banks identified on the signature pages hereof (together with any
successors and assigns thereof, hereinafter referred to individually as a
"Lender" and collectively as the "Lenders) and GUARANTY BANK, a federal
savings bank, as Agent for the Lenders.
In consideration of the Advances to be made hereunder by the Lenders
and for other good and valuable consideration, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Acquisition" means any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which
the Borrower or any of its Subsidiaries (i) acquires any going business or
all or substantially all of the assets of any firm, corporation or limited
liability company, or division thereof, whether through purchase of assets,
merger or otherwise or (ii) directly or indirectly acquires (in one
transaction or as the most recent transaction in a series of transactions)
at least a majority (in number of votes) of the securities of a corporation
which have ordinary voting power for the election of directors (other than
securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the
outstanding ownership interests of a partnership or limited liability
company.
"Additional Required Mortgage Documents" means the instruments and
documents described in Schedule "B" to the Security Agreement.
"Advance" means a borrowing hereunder (or conversion or continuation
thereof) consisting of the aggregate amount of the several Loans (other
than Swingline Loans) made on the same Borrowing Date (or date of
conversion or continuation) by some or all of the Lenders to the Borrower
of the same Type and, in the case of Eurodollar Advances, for the same
Interest Period.
"Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under common control with such
Person. A Person shall be deemed to control another Person if the
controlling Person owns 10% or more of any class of voting securities (or
other ownership interests) of the controlled Person or possesses, directly
or indirectly, the power to direct or cause the direction of the management
or policies of the controlled Person, whether through ownership of stock,
by contract or otherwise.
"Agent" means Guaranty Bank, with its main office in Dallas, Texas,
in its capacity as contractual representative of the Lenders pursuant to
Article X, and not in its individual capacity as a Lender, and any
successor Agent appointed pursuant to Article X.
"Aggregate Commitment" means, as of any date (i) prior to the
termination of the Bank One Credit Agreement and payment in full of all
obligations thereunder, the amount equal to $110,000,000 minus the
aggregate amount of Loans outstanding under the Bank One Credit Agreement
as most recently communicated to Agent by Bank One as agent under the Bank
One Agreement and (ii) after the termination of the Bank One Credit
Agreement and payment in full of all obligations thereunder, the aggregate
of the Lenders' then-current Commitments under this Agreement, as reduced
or increased from time to time, but in no event shall the Aggregate
Commitment exceed $150,000,000 without the approval of the Borrower, the
Agent and all of the Lenders.
"Agreement" means this credit agreement, as it may be amended or
modified and in effect from time to time.
"Agreement to Pledge" means a written pledge substantially in the
form of Exhibit "E" to this Agreement executed by the Borrower and
delivered by facsimile to the Collateral Agent, specifically identifying
all Mortgage Loans with respect to which the Required Mortgage Documents
are not being delivered on or before the Pledge Date of such Mortgage Loan.
"Alternate Base Rate" means, for any day, a rate of interest per
annum equal to the higher of (i) the Prime Rate for such day and (ii) the
sum of Federal Funds Effective Rate for such day plus 1/2% per annum.
"Alternate Base Rate Advance" means an Advance which bears interest
at the Alternate Base Rate.'
"Alternate Base Rate Loan" means a Primary Loan (or any portion
thereof) which bears interest at the Alternate Base Rate.
"AP Mortgage" means, on any date, any Mortgage Loan which has been
identified in an Agreement to Pledge and for which the Collateral Agent has
not received the Required Mortgage Documents for such Mortgage Loan by such
date.
"Applicable Fee Rate" means, at any time, the percentage rate per
annum at which "Facility Fees are accruing on the Aggregate Commitment
(without regard to usage) at such time as set forth in the Pricing
Schedule.
"Applicable Margin" means, with respect to Advances of any Type at
any time, the percentage rate per annum which is applicable at such time
with respect to Advances of such Type as set forth in the Pricing Schedule.
"Approved Investor" means, as of any time, any of the institutions
listed on Schedule "3" attached hereto and any other institution approved
in writing by the Agent (with prompt notice to the Lenders), such approval
not to be unreasonably withheld, which Approved Investor shall be approved
for the purchase of Non-Conforming Mortgage Loans if, and only if, it has a
"1" following its name and which Approved Investor shall be approved for
the purchase of Securities if, and only if, it has a "2" following its
name; provided that any such institutions listed on Schedule "3" or
previously approved by the Agent may be eliminated as an Approved Investor
(or as an Approved Investor of a specific type) by written notice to the
Borrower from the Agent, which elimination notice shall be given only for
reasonable cause or at the election of the Required Lenders, and in either
case any commitments issued by any such formerly-Approved Investor after
such elimination shall not constitute Approved Investor Commitments, but
commitments of such formerly-Approved Investor existing at the time of such
elimination shall continue to be Approved Investor Commitments.
"Approved Investor Commitment" means a commitment, issued by an
Approved Investor of the required type, to purchase Mortgage Loans, to
exchange Securities for Mortgage Loans or to purchase Securities.
"Approved MBS Custodian" is defined in Paragraph 7(b) of the Security
Agreement.
"ARM Mortgage Loan" means a Mortgage Loan which bears interest at a
rate that may be adjusted at one or more times during the term of such
Mortgage Loan.
"Assignment" means a duly executed assignment for the benefit of the
Lenders of a Mortgage, of the indebtedness secured thereby, and of all
documents and rights related to the Mortgage Loan secured by such Mortgage
in accordance with the requirements of the Security Agreement.
"Authorized Officer" means any of the Vice President, Senior Vice
President, Executive Vice President, President, or Chief Executive Officer
of the Borrower, acting singly.
"Available Deposits" means those free collected balances maintained
in accounts in the name of the Borrower (or held by the Borrower in trust
for third parties) with a Lender (after deducting float and balances
required by such Lender under its normal practices to compensate such
Lender for the maintenance of such accounts and taking into consideration
reserve requirements applicable to such accounts) and which balances are
not included in determining "Available Deposits" under any other
arrangements between such Lender and the Borrower.
"Bank One Credit Agreement" means the Fourth Amended and Restated
Revolving Credit Agreement dated as of July 16, 2001, among the Borrower,
the lenders party thereto and Bank One, NA as agent.
"Basic Eligibility Requirements" means a Pledged Item with respect to
which each of the following statements is accurate and complete:
(i) The Borrower is the legal and equitable owner and holder
of such Pledged Item and has full power and authority to pledge such
Pledged Item. Such Pledged Item and each commitment of a Person to
purchase Mortgage Loans and Securities from the Borrower (including
Approved Investor Commitments) has been duly and validly issued to
the Borrower, and each Pledged Item constitutes Eligible Collateral,
has been duly and validly pledged to the Collateral Agent for the
benefit of the Secured Parties and is subject to no Lien other than
the lien of the Security Agreement in favor of the Agent for the
benefit of the Lenders.
(ii) Each requirement of any federal, state or local law
including, without limitation, usury, truth-in-lending, real estate
settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws applicable to such Pledged Item has
been complied with .
(iii) With respect to each Pledged Item which is a Pledged
Mortgage:
(1) it has been duly executed and delivered by the
parties thereto at a closing,
(2) it is valid and enforceable in accordance with its
terms, without defense or offset, subject to bankruptcy and
similar laws and other general restrictions on creditors'
rights and equitable principles (whether raised in an equity
proceeding or an action at law),
(3) the property covered by said Mortgage Loan is free
and clear of all Liens except in favor of the Borrower subject
only to (a) the Lien of current real property taxes and
assessments not yet due and payable; (b) covenants, conditions
and restrictions, rights of way, easements and other matters of
the public record, as of the date of recording, as are
acceptable to mortgage lending institutions generally and
specifically referred to in a lender's title insurance policy
delivered to the originator of said Mortgage Loan and (i)
referred to or otherwise considered in the appraisal made for
the originator of said Mortgage Loan or (ii) which do not
materially adversely affect the appraised value of such
property as set forth in such appraisal; (c) other matters to
which like properties are commonly subject which do not
materially interfere with the benefits of the security intended
to be provided by said Mortgage Loan or the use, enjoyment,
value or marketability of the related property; and (d) a first
Lien to the extent permitted under the Borrowing Base
Sublimits,
(4) it has been correctly described in the Collateral
Transmittal submitted to the Collateral Agent in respect of
such Pledged Mortgage,
(5) it has been fully funded to the mortgagor or to an
escrow or closing agent by wire transfer, transmittal through
the "Automated Clearing House" or any similar private clearing
house for interbank transfers of funds, cashier's check or a
check written against the Borrower's controlled disbursement
account with the Agent, which has been identified as a check in
the related Collateral Transmittal and for which the Agent has
notified the Collateral Agent that such check has been
presented for payment and that good funds are available to fund
the controlled disbursement account to cover such check,
(6) the Collateral Agent has in its possession (other
than with respect to Pledged Mortgages which are then the
subject of an Agreement to Pledge) all Required Mortgage
Documents other than those documents and instruments which are
in the possession of the Borrower pursuant to a Trust Receipt
or in the possession of a Person to whom delivery was made
pursuant to an Investor Transmittal Letter,
(7) it has been or will be promptly duly recorded where
necessary and complies with all applicable state or local
recording, registration and filing laws and regulations,
(8) there are no defenses, counterclaims or offsets of
any nature whatsoever with respect to such Pledged Mortgage or
the indebtedness evidenced and secured thereby or with respect
to any Required Mortgage Document and, other than the related
Required Mortgage Documents and Additional Required Mortgage
Documents, there are no instruments or documents evidencing,
securing or guaranteeing payment of the indebtedness
constituting such Pledged Mortgage,
(9) (a) with respect to Mortgage Loans other than MERS
Mortgages, each Assignment (i) has been duly authorized by all
necessary corporate action by the Borrower, duly executed and
delivered by the Borrower and is the legal, valid and binding
obligation of the Borrower enforceable in accordance with its
terms, subject to bankruptcy and similar laws and other general
restrictions on creditors' rights and equitable principles, and
(ii) complies with all applicable laws including all applicable
recording, filing and registration laws and regulations and is
adequate and legally sufficient for the purpose intended to be
accomplished thereby, including, without limitation, the
assignment of the rights, powers and benefits of the Borrower
as mortgagee, and (b) with respect to MERS Mortgages, the
interest of the Collateral Agent and the Lenders in such
Mortgages has been registered on the MERS System
(10) upon the recordation of each Assignment and
assuming the possession of the Required Mortgage Documents by
the Collateral Agent and filing of Uniform Commercial Code
financing statements in proper form in the applicable filing
offices, the Collateral Agent, for the benefit of the Lenders,
will have a valid and perfected first priority security
interest in such Pledged Item and all proceeds, products and
profits derived therefrom, including, without limitation, all
moneys, goods, insurance proceeds and other tangible or
intangible property received upon liquidation thereof, subject
to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting the enforcement of
creditors' rights generally and to general principles of
equity,
(11) the Borrower has complied with all laws, rules and
regulations in respect of such Pledged Mortgage if it is
insured by FHA or guaranteed by VA and the related insurance or
guarantee is in full force and effect. Such Mortgage Loan
complies in all respects with all applicable requirements for
purchase under the GNMA standard form of selling contract for
FHA insured and VA guaranteed loans and any supplement thereto
then in effect,
(12) the Borrower has received an appraisal on the
property underlying such Pledged Mortgage, which appraisal
shall be in conformity with the applicable requirements of any
law or any governmental rule, regulation, policy, guideline or
directive (whether or not having the force of law), or any
interpretation thereof, including, without limitation, the
provisions of Title XI of the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, as amended, reformed or
otherwise modified from time to time, and any rules promulgated
to implement such provisions,
(13) all fire and casualty policies covering the
premises encumbered by each Pledged Mortgage (a) name the
Borrower as the insured under a standard mortgagee clause not
less favorable in coverage to the mortgagee than is customarily
used in the state where such premises is located, (b) are in
full force and effect, and (c) afford insurance against fire
and such other risks as are usually insured against in the
broad form of extended coverage insurance from time to time
available, as well as insurance against flood hazards as
required by FHA or VA,
(14) it is not a revolving credit facility, and
(15) with respect to MERS Loans, (i) the Borrower is in
full compliance with all terms and conditions of membership in
MERS, including the MERSCORP, Inc. "Rules of Membership" most
recently promulgated by MERSCORP, Inc., the "MERS Procedures
Manual" most recently promulgated by MERS, and any and all
other guidelines or requirements set forth by MERS or MERSCORP,
as each of the foregoing may be modified from time to time,
including, but in no way limited to compliance with guidelines
and procedures set forth with respect to technological
capabilities, drafting and recordation of Mortgages,
registration of Mortgages on the MERS System, including
registration of the interest of the Collateral Agent and the
Lenders in such Mortgages and membership requirements and (ii)
the Borrower employs officers who have the authority, pursuant
to a corporate resolution from MERS, to execute assignments of
mortgage in the name of MERS in the event deregistration from
the MERS System is necessary or desirable.
(iv) There shall be no breach of the covenants contained in
Paragraph 12 of the Security Agreement and there shall be no breach
of any of the following covenants (the sole remedy for which shall be
the removal of such Pledged Item as Eligible Collateral):
(1) The Borrower shall not (a) amend or modify, or
waive any of the terms and conditions of, or settle or
compromise any claim in respect of, any Pledged Item or any
rights related to any of the foregoing, if such amendment,
modification or waiver materially and adversely affects the
Collateral Value of such Pledged Item, or impairs the
marketability of such Pledged Item or (b) release any security
or obligor, or, through any other activity or inactivity, cause
any Pledged Mortgage which shall have been eligible for
purchase to become ineligible for purchase in accordance with
the Approved Investor Commitment related to such Pledged
Mortgage.
(2) The Borrower shall not sell, assign, transfer or
otherwise dispose of, or grant any option with respect to, or
pledge or otherwise encumber (except pursuant to the Security
Agreement), any of the Collateral or any interest therein,
except as provided in Section 8.3 with respect to releases of
Pledged Items.
(3) The Borrower is the servicer for and shall service
all Pledged Mortgages in accordance with the requirements of
the Approved Investor Commitments. The Borrower shall service
all Mortgage Loans which are the subject of Pledged Securities
in accordance with the standard requirements of the Federal
Agency issuing or guaranteeing such Securities and all
applicable FHA and VA requirements.
(4) The Borrower shall hold all escrow funds collected
in respect of Pledged Items in trust, without commingling the
same with any other fund, and apply the same for the purposes
for which such funds were collected provided that such
obligation with respect to Pledged Mortgages shall not arise
until 30 days after the origination or acquisition of the
applicable Mortgage Loan.
(5) The Borrower shall observe and perform all of its
obligations in connection with each Approved Investor
Commitment related to any Pledged Mortgage or Pledged Security.
Within forty-eight (48) hours after a request therefor by the
Agent, a copy of each Approved Investor Commitment certified by
the Borrower, or if requested by the Agent at any time after a
Default has occurred, the originals of such Approved Investor
Commitments shall be delivered to the Agent.
(6) The Borrower shall promptly notify the Agent and
the Collateral Agent if and when the Borrower receives any
partial or full prepayment (which term excludes the principal
portion of scheduled monthly payments made on a Mortgage Loan)
arising from or relating to any Pledged Mortgage and hold the
same in trust, as security for the Lenders, until such Mortgage
Loan is removed from the Borrowing Base in accordance with this
Agreement or, if a Default has occurred and is continuing under
this Agreement, then immediately remit to the Agent such
prepayments (and all interest and earnings thereon or with
respect thereto).
(7) The Borrower shall do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged and
delivered, all such other acts, instruments and transfers
(including, without limitation, Assignments) as the Agent or
the Collateral Agent may reasonably request from time to time
in order to create and maintain a perfected first priority
security interest in the Collateral in favor of the Lenders and
to create, maintain and preserve the security and benefits
intended to be afforded by this Agreement, subject to no prior
or equal security interest, lien, charge or encumbrance, or
agreement purporting to grant to any Person a security interest
in the Collateral.
(8) The Borrower shall promptly notify the Agent and
the Collateral Agent of the occurrence of any event which would
cause any Eligible Collateral to become Ineligible Collateral.
"Borrower" means K. Hovnanian Mortgage, Inc., a New Jersey
corporation, and its successors and assigns.
"Borrowing Base" means, as of any date, subject to the Borrowing Base
Sublimits, the sum of the amounts determined by applying the following
percentages to the Collateral Values of the following categories of
Eligible Collateral, without duplication as any asset is converted from one
category to another, as described below (and the Borrower, by including any
Pledged Item in any computation of the Borrowing Base, shall be deemed to
represent and warrant to the Agent, the Collateral Agent and the Lenders
that such Pledged Item constitutes Eligible Collateral):
(i) ninety-eight percent (98%) of the Collateral Value of
Eligible Conforming Mortgage Loans and Eligible Securities;
(ii) ninety-six percent (96%) of the Collateral Value of
Eligible Non-Conforming Mortgage Loans;
(iii) ninety-eight percent (98%) of the Collateral Value of
Eligible Jumbo Mortgage Loans;
(iv) ninety-five percent (95%) of the Collateral Value of
Eligible Oversize Jumbo Mortgage Loans; and
(v) ninety percent (90%) of the Collateral Value of Eligible
Aged Conforming Mortgage Loans.
In connection with the Borrowing Base, the Agent is hereby authorized by
the Lenders to grant temporary waivers of strict compliance by the Borrower
with the eligibility requirements regarding qualification of any Collateral
as Eligible Collateral or with the Lending Sublimits and Borrowing Base
Sublimits when the Agent deems it appropriate, in its sole discretion, (i)
as to all matters (other than (x) any requirement that a Mortgage Loan be
covered by an Approved Investor Commitment, (y) those described in the
definition "Basic Eligibility Requirement" (except that temporary waivers
may be granted for any of clauses (iii)(6), (9) or (10) or (iv) of such
definition) or (z) those described in the definition of "Residential
Mortgage Loan"), if the aggregate amount of deviation from strict
compliance, based on the Collateral Value so included in the Borrowing Base
and the amount of excess permitted over the Lending Sublimits or Borrowing
Base Sublimits does not exceed $5,000,000 at any time (provided, however,
that the duration of any such temporary waiver shall not exceed twenty (20)
days with respect to any AP Mortgage unless the note related to such
mortgage has been delivered to the Collateral Agent), or (ii) as to any
matter, up to any amount for up to three (3) Business Days, if the
satisfaction of such eligibility requirements or sublimits cannot be
independently determined because of events beyond the reasonable control of
the Borrower (i.e. natural disasters, transmission failures, etc.),
provided that, if such determination cannot be made for more than one (1)
Business Day, the Borrower certifies in writing that all such eligibility
requirements and sublimits are in fact satisfied.
"Borrowing Base Certificate" means a system generated report,
initially in the form attached hereto as Exhibit "G," prepared by the
Collateral Agent to reflect the Collateral Value Determination at the times
required by (and as such term is defined in) the Security Agreement, the
form of which report may be modified from time to time by the Collateral
Agent.
"Borrowing Base Sublimits" is defined in Section 2.1.3.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" is defined in Section 2.6.
"Business Day" means (i) with respect to any borrowing, payment or
rate selection of Eurodollar Advances, a day (other than a Saturday or
Sunday) on which banks generally are open in Dallas, Texas and New York,
New York for the conduct of substantially all of their commercial lending
activities, interbank wire transfers can be made on the Fedwire system and
dealings in United States dollars are carried on in the London interbank
market and (ii) for all other purposes, a day (other than a Saturday or
Sunday) on which banks generally are open in Dallas, Texas for the conduct
of substantially all of their commercial lending activities and interbank
wire transfers can be made on the Fedwire system.
"Buy-Down Agreement" means a written agreement between the Borrower
and a Lender setting forth the terms and conditions under which such Lender
has agreed to a reduced interest rate on account of Fed Funds Loans
outstanding hereunder based upon Available Deposits maintained by the
Borrower with such Lender.
"Buy-Down Lender" is defined in Section 2.3.
"Buy-Down Rate" means 1.375%.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with GAAP.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as
a liability on a balance sheet of such Person prepared in accordance with
GAAP.
"Cash Equivalent Investments" means (i) short-term obligations of, or
fully guaranteed by, the United States of America, (ii) commercial paper
rated A-I or better by S&P or P-1 or better-by Moody's, (iii) demand
deposit accounts maintained in the ordinary course of business, and (iv)
certificates of deposit issued by and time deposits with commercial banks
(whether domestic or foreign) having capital and surplus in excess of $
100,000,000; provided in each case that the same provides for payment of
both principal and interest (and not principal alone or interest alone) and
is not subject to any contingency regarding the payment of principal or
interest.
"Change in Control" means (i) the acquisition by any Person, or two
or more Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 50% or more of the outstanding shares
of voting stock of the Parent; or (ii) Parent shall cease to own, free and
clear of all Liens or other encumbrances, at least 100% of the outstanding
shares of voting stock of the Borrower on a fully diluted basis.
"Code" means the Internal Revenue Code of 1986, as amended, reformed
or otherwise modified from time to time.
"Collateral" means all right, title and interest of the Borrower, of
every kind and nature, in and to all of the following property, assets and
rights of the Borrower wherever located, whether now existing or hereafter
arising, and whether now or hereafter owned, acquired by or accruing or
owing to the Borrower, and all proceeds and products thereof:
(i) all Pledged Mortgages and Pledged Securities, whether
Eligible Collateral or Ineligible Collateral, including all Required
Mortgage Documents related thereto;
(ii) any commitments or other agreements issued by any private
mortgage insurer or by the FHA or VA to insure or guarantee any
Pledged Mortgage;
(iii) all Approved Investor Commitments to purchase Pledged
Securities or Pledged Mortgages (or any Securities to be issued based
on such Pledged Mortgages) from the Borrower;
(iv) any options to sell or purchase Securities, future
contracts, or any other interest rate protection products which
directly or indirectly protect the Borrower against reductions in
value of such Pledged Mortgages or Pledged Securities due to changes
in mortgage interest rates;
(v) the Settlement Account, the Funding Account and all
uncollected deposits into the Settlement Account and the Funding
Account, together with any Custodian Settlement Accounts then in
existence with Approved MBS Custodians, as described in Paragraph
7(c) of the Security Agreement, and all uncollected deposits in such
accounts;
(vi) all property related to the foregoing, including without
limitation, the right to service Pledged Mortgages while owned by the
Borrower, all accounts and general intangibles of whatsoever kind so
related and all documents or instruments delivered to the Collateral
Agent in respect of any Pledged Item, including, without limitation,
the right to receive all insurance proceeds and condemnation awards
which may be payable in respect of the premises encumbered by any
Pledged Mortgage; and
(vii) all proceeds and products of any of the foregoing.
"Collateral Agent" means Guaranty Bank in its capacity as contractual
representative of the Lenders pursuant to the Security Agreement, and any
successor Collateral Agent appointed pursuant to paragraph 17 of the
Security Agreement.
"Collateral Transmittal" means a transmittal from the Borrower to the
Collateral Agent in electronic form (or in written form delivered by fax)
or in the event that the Borrower is unable - due to a system failure or
other event beyond the Borrower's control - to transmit such information
electronically) and, if required by the Collateral Agent, written form
containing the following information for the following submissions or
special treatment of different types of Collateral: (i) the information
described on Exhibit "D" for each AP Mortgage covered by any Agreement to
Pledge, (ii) the information described on Exhibit "D" (other than the entry
thereon for "AP Status Code") for each Pledged Mortgage not covered by an
Agreement to Pledge, (iii) change of any Pledged Mortgage from wet to dry
(open) status, open to shipped status, shipped to paid and any cancellation
of wet status, (iv) whether the Mortgage Loan is to be funded by wire or
check or (v) such information as may be required from time to time by the
Collateral Agent for any Pledged Security.
"Collateral Value" means, with respect to each asset included in
Eligible Collateral on any given day, a value determined as follows:
(ii) Each Security shall be valued based upon the Collateral
Value of the underlying Pledged Mortgages as otherwise
determined hereunder; and
(iii) Each Pledged Mortgage shall be valued at the lowest of
(A) the unpaid principal balance of such Mortgage Loan on
its Pledge Date (or the unpaid principal balance on its
conversion date in the case of Conversion Mortgage
Loans), or (B) the net acquisition cost (including any
discounts and excluding any servicing released premium)
of such Mortgage Loan, if acquired by the Borrower, or
(C) the weighted average purchase price (expressed as a
percentage of par) committed to under those Approved
Investor Commitments which could cover such Mortgage Loan
applied to the unpaid principal balance of such Mortgage
Loan on its Pledge Date (or the unpaid principal balance
on its conversion date in the case of Conversion Mortgage
Loans) or (D) market value, as determined by the Agent
(in cooperation with the Collateral Agent), based upon
whole loan prices currently available, as and when the
Agent, in its sole discretion (with no requirement to do
so unless directed to do so by the Required Lenders),
chooses to calculate market value. The values described
in (A), (B) and (C) of the preceding sentence shall be as
determined by the Borrower as of the Pledge Date of the
applicable Pledged Mortgage and reported to the
Collateral Agent.
"Commitment" shall mean, with respect to each Lender, the commitment
of such Lender to make Primary Loans in an aggregate principal amount at
any time outstanding not to exceed such Lender's Commitment Amount.
"Commitment Amount" shall mean, as of any date and with respect to
each Lender, the amount set forth opposite the name of such Lender on
Schedule "2" as its "Commitment Amount" on such date, as such Schedule 2
may be revised in accordance with Section 2.8 or Section 12.4.
"Commitment Percentage" means, for each Lender as of any date, the
percentage of the Aggregate Commitment represented by such Lender's
Commitment, as it may be amended from time to time, which initially shall
be as set forth on Schedule "2".
"Conforming Mortgage Loan" means a first or second priority
Residential Mortgage Loan which (i) either is insured by the FHA or
guaranteed by the VA or which fully conforms to all underwriting and other
requirements for sale to FNMA, FHLMC or GNMA, and (ii) if said Mortgage
Loan is a first priority Residential Mortgage Loan and has a loan-to-value
ratio which is greater than eighty percent (80%), said Mortgage Loan is
covered by a policy of private mortgage insurance acceptable to FNMA and
the Agent; provided that no such insurance shall be required for second
lien Residential Mortgage Loans, and (iii) if said Mortgage Loan is a
second priority Residential Mortgage Loan, (A) said Mortgage Loan was made
contemporaneously with a first priority Residential Mortgage Loan to the
same mortgagee and for the same real estate and improvements, and (B) said
Mortgage Loan, together with said first Lien Mortgage Loan has a combined
loan-to-value ratio which is not greater than one hundred percent (100%).
"Consolidated Tangible Net Worth" means, as of any date of
determination thereof, the Net Worth less the book value of any assets of
the Borrower and its consolidated Subsidiaries which would be treated as
intangibles under GAAP including, without limitation, good-will, research
and development costs, trade-marks, trade names, copyrights, patents and
unamortized debt discount and expenses.
"Contingent Obligation" of a Person means any agreement, undertaking
or arrangement by which such Person assumes, guarantees, endorses,
contingently agrees to purchase or provide funds for the payment of, or
otherwise becomes or is contingently liable upon, the obligation or
liability of any other Person, or agrees to maintain the net worth or
working capital or other financial condition of any other Person, or
otherwise assures any creditor of such other Person against loss,
including, without limitation, any comfort letter, operating agreement,
take-or-pay contract or the obligations of any such Person as general
partner of a partnership with respect to the liabilities of the
partnership.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated)
under common control which, together with the Borrower or any of its
Subsidiaries, are treated as a single employer under Section 414 of the
Code.
"Conversion/Continuation Notice" is defined in Section 2.7.
"Conversion Mortgage Loan" means a Mortgage Loan which is originated
as an ARM Mortgage Loan, sold to an Approved Investor and subsequently
repurchased by the Borrower after an election by the obligor thereunder to
convert to a fixed rate loan.
"Coverage Requirement" means, as of any date, the aggregate unpaid
principal amount then outstanding under this Agreement
"Custodian Settlement Accounts" is defined in the Security Agreement.
"Default" means an event described in Article VII.
"Effective Date" is defined in Section 4.1.
"Electronic Tracking Agreement" shall mean the Electronic Tracking
Agreement dated the date hereof among the Agent, MERS, MERSCORP, the
Collateral Agent and the Borrower.
"Eligible Aged Conforming Mortgage Loan" shall mean an Eligible
Mortgage Loan that (i) has been included in the Borrowing Base for more
than 90 days after its Pledge Date and not more than 180 days after its
Pledge Date, and (ii) would be an Eligible Conforming Mortgage Loan if such
loan had been included in the Borrowing Base for not more than 90 days
after its Pledge Date.
"Eligible Collateral" means, as of any date, all Eligible Conforming
Mortgage Loans, Eligible Jumbo Mortgage Loans, Eligible Oversize Jumbo
Mortgage Loans, Eligible Non-Conforming Mortgage Loans, Eligible Aged
Conforming Mortgage Loans and Eligible Securities.
"Eligible Conforming Mortgage Loan" means an Eligible Mortgage Loan
which: (i) is a Conforming Mortgage Loan; and (ii) is subject to an
Approved Investor Commitment.
"Eligible Jumbo Mortgage Loan" means an Eligible Mortgage Loan which:
(i) is a Jumbo Mortgage Loan; and (ii) is subject to an Approved Investor
Commitment.
"Eligible Mortgage Loan" means any Pledged Mortgage:
(i) which meets the Basic Eligibility Requirements;
(ii) which has no monthly installment of principal and/or
interest which is more than 29 days past due;
(iii) which has been included in the Borrowing Base for not
more than ninety (90) days after its Pledge Date unless it is an
Eligible Aged Mortgage Loan;
(iv) which has a note date (or, in the case of Conversion
Mortgage Loan, a conversion date) which is one hundred twenty (120)
days or less prior to its Pledge Date;
(v) for which, if it is an AP Mortgage:
(1) the Borrower expects such AP Mortgage to close on
the Pledge Date and become a valid lien securing actual
indebtedness by funding to the order of the mortgagor
thereunder, has not learned of any information to the contrary
and has not received any returned proceeds of such AP Mortgage
from the escrow or closing agent for such Pledged Mortgage;
(2) if an AP Mortgage is not closed and funded as
required pursuant to clause (v) (1) above, the Borrower shall
so notify the Collateral Agent as soon as the Borrower becomes
aware of that fact but in any event no later than 12:00 noon
the next Business Day, unless the AP Mortgage has closed and
funded by that time, and the Collateral Agent shall delete said
AP Mortgage from the Borrowing Base;
(3) if an AP Mortgage was previously included in the
Borrowing Base and was subsequently deleted as required
pursuant to clause (v) (2) above, such AP Mortgage has not been
submitted for inclusion in the Borrowing Base for a total of
more than three times;
(4) the Collateral Agent has received the Required
Mortgage Documents within seven (7) Business Days after the
date of the related Agreement to Pledge;
(5) the Collateral Value attributable to all AP
Mortgages included in any category of the Borrowing Base does
not exceed forty percent (40%) of the Aggregate Commitment
during the first and last three Business Days in any calendar
month, and
(6) the Collateral Value attributable to all AP
Mortgages included in any category of the Borrowing Base does
not exceed thirty percent (30%) of the Aggregate Commitment for
any day other than the first and last three Business Days of
any calendar month;
(vi) which, if subject to an Investor Transmittal Letter or
Trust Receipt and if said Pledged Mortgage was:
(1) withdrawn by the Borrower for purposes of
correcting clerical or other non-substantive documentation
problems: (i) the promissory note and other documents relating
to said Pledged Mortgage were returned to the Collateral Agent
within fifteen calendar days from the date of withdrawal, (ii)
said Pledged Mortgage was released to the Borrower pursuant to
a Trust Receipt and (iii) the Collateral Value of said Pledged
Mortgage when added to the Collateral Value of all other
Pledged Mortgages which have been similarly released to the
Borrower does not exceed $1,000,000; or
(2) shipped by the Collateral Agent directly to an
Approved Investor for purchase pursuant to an Investor
Transmittal Letter which is a "Whole Loan Sale Transmittal
Letter" substantially in the form of Exhibit "4" to the
Security Agreement, the full purchase price therefor has been
received by the Collateral Agent (or said Pledged Mortgage has
been returned to the Collateral Agent) within forty-five (45)
calendar days (or sixty (60) calendar days for deliveries to
such Approved Investors as the Agent may have specifically
approved for extended Investor Transmittal Letters) from the
date of shipment by the Collateral Agent; or
(3) shipped by the Collateral Agent directly to a
custodian for purposes of formation of a pool supporting a
Security, the Security is issued and sold and the purchase
price therefor has been received by the Collateral Agent (or
said Pledged Mortgage has been returned to the Collateral
Agent) within forty-five (45) days (or sixty (60) days for
deliveries to such Approved Investors as the Agent may have
specifically approved for extended Investor Transmittal
Letters) from the date of shipment by the Collateral Agent; and
(vii) which has not previously been included in the Borrowing
Base, then shipped to an investor and returned, for whatever reason,
to the Collateral Agent.
"Eligible Non-Conforming Mortgage Loan" means an Eligible Mortgage
Loan which: (i)is a Non-Conforming Mortgage Loan; (ii) is subject to an
Approved Investor Commitment issued by an Approved Investor; and (iii) has
an unpaid principal balance on the applicable Pledge Date less than or
equal to $350,000.
"Eligible Oversize Jumbo Mortgage Loan" means an Eligible Mortgage
Loan which: (i)is an Oversize Jumbo Mortgage Loan; and (ii)is subject to
an Approved Investor Commitment specifically identified as covering such
Mortgage Loan.
"Eligible Security" means any Pledged Security: (i) which is covered
by an Approved Investor Commitment; and (ii) for which the Collateral Agent
shall have received such evidence as may be required under the Security
Agreement to confirm the existence of the security interest in favor of the
Collateral Agent for the benefit of the Lenders in such Pledged Security.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, judicial decisions, regulations, ordinances, rules,
judgments, orders, decrees, plans, injunctions, permits, concessions,
grants, franchises, licenses, agreements and other governmental
restrictions relating to (i) the protection of the environment, (ii) the
effect of the environment on human health, (iii) emissions, discharges or
releases of pollutants, contaminants, hazardous substances or wastes into
surface water, ground water or land, or (iv) the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, hazardous substances or wastes or the clean-up or
other remediation thereof
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which bears interest at a
Eurodollar Rate.
"Eurodollar Base Rate" means with respect to a Eurodollar Advance for
the relevant Interest Period, the rate appearing on Bloomberg Professional
(or, if not available, any other nationally recognized trading screen
reporting on-line trading in eurodollars) as the eurodollar rate for
deposits in dollars at 10:00 a.m. (Dallas time) two Business Days prior to
the first day of such Interest Period, having a maturity equal to such
Interest Period. In the event that such rate ceases to be published,
Eurodollar Base Rate shall mean a comparable rate of interest reasonably
selected by Lender.
"Eurodollar Loan" means a Loan which bears interest at a Eurodollar
Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar
Base Rate applicable to such Interest Period, divided by (b) one minus the
Reserve Requirement (expressed as a decimal) applicable to such Interest
Period, plus (ii) the Applicable Margin.
"Excluded Taxes" means, in the case of each Lender or applicable
Lending Installation and the Agent, taxes imposed on its overall net
income, and franchise taxes imposed on it, by (i) the jurisdiction under
the laws of which such Lender or the Agent is incorporated or organized or
(ii) the jurisdiction in which the Agent's or such Lender's principal
executive office or such Lender's applicable Lending Installation is
located.
"Exhibit" refers to an exhibit to this Agreement, unless another
document is specifically referenced.
"Federal Agency" means FHLMC, FNMA, GNMA, FHA or VA.
"Federal Funds Effective Rate" means, for any day, an interest rate
per annum equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System arranged by
Federal funds brokers on such day, as published for such day (or, if such
day is not a Business Day, for the immediately preceding Business Day) by
the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations at
approximately 10 a.m. (Dallas time) on such day on such transactions
received by the Agent from three Federal funds brokers of recognized
standing selected by the Agent in its sole discretion.
"Federal Funds Funding Rate" means, with respect to any Fed Funds
Loan for any day, the rate per annum equal to the consensus (or if no
consensus exists, the arithmetic average) of the rates at which reserves
are offered by first-class banks to other first-class banks (at
approximately 10:00 a.m. (Dallas time)) on such day (or if such day is not
a Business Day, on the immediately preceding Business Day) on overnight
federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, based on quotes received by the Agent
from three federal funds brokers of recognized standing selected by the
Agent in its sole discretion.
"Federal Funds Rate" means, for any day, an interest rate per annum
equal to the Federal Funds Funding Rate for such day plus the Applicable
Margin.
"Fed Funds Advance" means an Advance which bears interest at the
Federal Funds Rate.
"Fed Funds Loan" means any Loan made as a part of a Fed Funds
Advance.
"Fees" is defined in Section 2.5.
"FHA" means the Federal Housing Administration or other agency,
corporation or instrumentality of the United States to which the powers and
duties of the Federal Housing Administration have been transferred.
"FHA-Approved Mortgagee" means an institution that is approved by the
FHA to act as a servicer and mortgagee of record with respect to a Mortgage
Loan insured by the FHA.
"FHLMC" means the Federal Home Loan Mortgage Corporation or other
agency, corporation or instrumentality of the United States to which the
powers and duties of the Federal Home Loan Mortgage Corporation have been
transferred.
"FHLMC-Approved Lender" means an institution that is approved by the
FHLMC to act as a lender in connection with the origination of any Mortgage
Loan purchased by the FHLMC.
"FHLMC Security" means a security representing an undivided
fractional interest in a pool of Mortgage Loans, which security is issued
and guaranteed as to full and timely payment of interest and full
collection of principal by FHLMC.
"FNMA" means the Federal National Mortgage Association or other
agency, corporation or instrumentality of the United States to which the
powers and duties of the Federal National Mortgage Association have been
transferred.
"FNMA-Approved Lender" means an institution that is approved by the
FNMA to act as a lender in connection with the origination of any Mortgage
Loan purchased by the FNMA.
"FNMA Security" means a security representing an undivided fractional
interest in a pool of Mortgage Loans, which security is issued and
guaranteed as to full and timely payment of principal and interest by FNMA.
"Funding Account" means the account established pursuant to Section
8.4.
"GAAP" means generally accepted accounting principles as in effect
from time to time, consistently applied.
"GAAP Carrying Value" means, with respect to any asset of the
Borrower, the value at which such asset is carried on the books of the
Borrower in accordance with GAAP after excluding capitalized items. Any
changes in the methodology used for adjusting such book value shall be
subject to the prior approval of the Agent.
"GNMA" means the Government National Mortgage Association or other
agency, corporation or instrumentality of the United States as to which the
powers and duties of the Governmental National Mortgage Association have
been transfer-red.
"GNMA Security" means a security representing an undivided fractional
interest in a pool of Mortgage Loans, which security is issued by the
Borrower and guaranteed as to full and timely payment of principal and
interest by GNMA without regard as to whether the Borrower collects any
payments on such Mortgage Loans.
"Ineligible Collateral" means any Pledged Item that does not at the
time constitute Eligible Collateral.
"Indebtedness" of a Person means such Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price
of Property or services (other than accounts payable arising in the
ordinary course of such Person's business payable on terms customary in the
trade), (iii) obligations, whether or not assumed, secured by Liens or
payable out of the proceeds or production from Property now or hereafter
owned or acquired by such Person, (iv) obligations which are evidenced by
notes, acceptances, or other instruments, (v) Capitalized Lease
Obligations, (vi) Contingent Obligations, (vii) Letters of Credit, (viii)
obligations of such Person to purchase securities or other Property arising
out of or in connection with the sale of the same or substantially similar
securities or Property, (ix) Net Mark-to-Market Exposure under Rate
Management Transactions and (x) any other obligation for borrowed money
which in accordance with GAAP would be shown as a liability on the
consolidated balance sheet of such Person.
"Interest Period" means, with respect to a Eurodollar Advance, a
period of one, two or three-months commencing on a Business Day, all as
selected by the Borrower pursuant to this Agreement. An Interest Period of
one, two or three months shall end on the day which corresponds numerically
to such date one, two or three months thereafter, provided, however, that
if there is no such numerically corresponding day in such next, second or
third succeeding month, such Interest Period shall end on the last Business
Day of such next, second or third succeeding month. If an Interest Period
would otherwise end on a day which is not a Business Day, such Interest
Period shall end on the next succeeding Business Day, provided, however,
that if with respect to a one, two or three month Interest Period said next
succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.
"Interim Funder Category" shall mean the category of the same name on
the MERS System that reflects the security interest of inter alia, mortgage
warehouse lenders, in the Mortgage Loans that have been pledged by
borrowers of such mortgage warehouse lender.
"Investment" of a Person means any loan, advance (other than
commission, travel and similar advances to officers and employees made in
the ordinary course of business), extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in
the trade) or contribution of capital by such Person; stocks, bonds, mutual
funds, partnership interests, notes, debentures or other securities owned
by such Person; any deposit accounts and certificate of deposit owned by
such Person; and structured notes, derivative financial instruments and
other similar instruments or contracts owned by such Person.
"Investor Transmittal Letter" means either a "Whole Loan Sale
Transmittal Letter" or a "Warehouse-Related MBS Transmittal Letter"
substantially in the form of Exhibits "4" and "5" to the Security
Agreement.
"Jumbo Mortgage Loan" means a Conforming Mortgage Loan except for
size, but which has an original principal balance of less than or equal to
$650,000.
"Keep-Well" means that certain Keep-Well Agreement of even date
herewith executed by the Parent in favor of the Agent, for the ratable
benefit of the Lenders, as it may be amended or modified and in effect from
time to time.
"Lenders" means the lending institutions listed on the signature
pages of this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent,
the office, branch, subsidiary or affiliate of such Lender or the Agent
listed on the signature pages hereof or on a Schedule or otherwise selected
by such Lender or the Agent pursuant to Section 2.17.
"Lending Sublimits" is defined in Section 2.1.1.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon
which such Person is an account party or for which such Person is in any
way liable.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, the interest of a
vendor or lessor under any conditional sale, Capitalized Lease or other
title retention agreement).
"Loan" means a Primary Loan or a Swingline Loan and "Loans" means all
Primary Loans and all Swingline Loans (or any conversion or continuation
thereof).
"Loan Documents" means this Agreement, any Notes issued pursuant to
Section 2.15, the Security Agreement, the Buy-Down Agreements, the Keep-
Well, the Subordination Agreement and the other documents and agreements
contemplated hereby and executed by the Borrower or another Person in favor
of the Agent or any Lender.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of
operations, or prospects of the Borrower and its Subsidiaries taken as a
whole or of the Parent, (ii) the ability of the Parent or the Borrower to
perform its obligations under the Loan Documents to which it is a party, or
(iii) the validity or enforceability of any of the Loan Documents or the
rights or remedies of the Agent or the Lenders thereunder.
"Material Indebtedness" is defined in Section 7.5.
"MERS" shall mean the Mortgage Electronic Registration System, Inc.
"MERSCORP" shall mean MERSCORP, Inc.
"MERS Loan" shall mean any Mortgage Loan made by the Borrower which
is secured by a MERS Mortgage.
"MERS Member" shall mean any entity which is a member of MERS, in
good standing and in compliance with all rules, regulations, procedures and
requirements set forth by MERS, including, but not limited to the payment
of membership dues.
"MERS Mortgage" shall mean any Mortgage registered to the Borrower on
the MERS System.
"MERS System" shall mean the Mortgage Electronic Registration System
established by MERS.
"Moody's" means Moody's Investors Service, Inc. or any successor to
its business.
"Mortgage" means a mortgage, deed of trust, security deed or similar
instrument purporting to create a first or second lien or similar interest
in real estate and improvements thereon.
"Mortgage Loan" means a loan of money evidenced by a Mortgage Note
and secured by a Mortgage.
"Mortgage Note" means a note evidencing the indebtedness secured by a
Mortgage.
"Multi-employer Plan" means a Plan maintained pursuant to a
collective bargaining agreement or any other arrangement to which the
Borrower or any member of the Controlled Group is a party to which more
than one employer is obligated to make contributions.
"Net Income" means, as of any date of determination thereof, the net
income of the Borrower and the consolidated Subsidiaries, on a consolidated
basis, as determined in accordance with GAAP.
"Net Mark-to-Market Exposure" of a Person means, as of any date of
determination, the excess (if any) of all unrealized losses over all
unrealized profits of such Person arising from Rate Management
Transactions. "Unrealized losses" means the fair market value of the cost
to such Person of replacing such Rate Management Transactions as of the
date of determination (assuming the Rate Management Transactions were to be
terminated as of that date), and "unrealized profits" means the fair market
value of the gain to such Person of replacing such Rate Management
Transactions as of the date of determination (assuming such Rate Management
Transactions were to be terminated as of that date).
"Net Worth" means as of any date of determination thereof, the net
worth of the Borrower and its Subsidiaries on a consolidated basis as
determined in accordance with GAAP.
"Non-Conforming Mortgage Loan" means a first priority Residential
Mortgage Loan that (i) does not fully conform to the underwriting criteria
for sale to FNMA or FHLMC with respect to credit quality, (ii) meets the
general underwriting guidelines established in Exhibit "H" hereto, and
(iii)does not have a loan-to-value ratio which is greater than one hundred
percent (100%).
"Non-U.S. Lender" is defined in Section 3.5(iv).
"Note" means any promissory note issued at the request of a Lender
pursuant to Section 2.13 substantially the form of Exhibit "A" attached
hereto, including any amendment, modification, renewal or replacement of
any such promissory note.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the
Lenders or to any Lender, the Agent, the Collateral Agent or any
indemnified party arising under the Loan Documents.
"Operating Cash Flow" means, for any period, (i) the sum of the
following items for the Borrower and its consolidated Subsidiaries for such
period (with terms in quotes having the meanings given such terms in the
Borrower's consolidated financial statements): "net income", "net losses on
interest rate contracts" and other similar hedging instruments, "provision
for loan losses", "depreciation and amortization of good will", the
increase in deferred (but not current) taxes, and other non-cash losses or
deductions included in the computation of net income; minus (ii) the sum of
the following items for the Borrower and its consolidated Subsidiaries for
such period (with terms in quotes having the meanings given such terms in
the Borrower's consolidated financial statements): the decrease in
deferred (but not current) taxes and other non-cash gains included in the
computation of "net income".
"Other Taxes" is defined in Section 3.5(ii).
"Overnight Transaction Loan Effective Rate" means, as of any day, a
fluctuating rate of interest per annum determined by the Agent as its
overnight transaction loan rate for such day.
"Overnight Transaction Loan Rate" means, with respect to a Swingline
Loan, a rate equal to the sum of (i) the Overnight Transaction Loan
Effective Rate plus (ii) the Applicable Margin.
"Oversize Jumbo Loans" means a Conforming Mortgage Loan except for
size, but which has an original principal balance in excess of $650,000,
but less than or equal $1,250,000.
"Parent" means Hovnanian Enterprises, Inc., and its successors and
assigns.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each calendar month.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, limited liability company, enterprise, trust or
other entity or organization, or any government or political subdivision or
any agency, department or instrumentality thereof
"Plan" means an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code as to which the Borrower or any member of the Controlled
Group may have any liability.
"Pledge Date" means the date on which a Mortgage Loan or Security is
first delivered in pledge to the Collateral Agent or is otherwise made
subject to a security interest in favor of the Agent or Collateral Agent
for the benefit of the Lenders, provided that (i) the date of delivery of a
Mortgage Loan covered by an Agreement to Pledge shall be deemed to be the
date of delivery of such Agreement to Pledge even after subsequent delivery
of the related Required Mortgage Documents, (ii) the "Pledge Date" for all
Collateral previously held by the Collateral Agent under the Prior
Facilities shall be deemed to be the date on which such Collateral was
first delivered to the Collateral Agent under the Prior Facilities even
though such date is prior to the date of this Agreement and (iii) any AP
Mortgage which has been deleted and resubmitted as permitted pursuant to
clause (v)(3) of the definition of Eligible Mortgage Loan, shall have a
Pledge Date which is the date of the original Agreement to Pledge first
submitted.
"Pledged Item" means any Pledged Mortgage or Pledged Security.
"Pledged Mortgage" all Mortgage Loans that are from time to time
delivered (or, in the case of AP Mortgages, are committed to be delivered)
to the Collateral Agent pursuant to this Agreement and the Security
Agreement.
"Pledged Security" all Securities that are from time to time
delivered to the Collateral Agent pursuant to this Agreement and the
Security Agreement.
"Pricing Schedule" means the Schedule attached hereto identified as
Schedule "1".
"Primary Advance" means a Eurodollar Advance, a Fed Funds Advance or
an Alternate Base Rate Advance.
"Primary Loan" means a Loan (other than a Swingline Loan) consisting
of a portion of a Primary Advance.
"Prime Rate" means a rate per annum equal to the prime rate of
interest announced from time to time by Guaranty Bank or by its parent
(which is not necessarily the lowest rate charged to any customer),
changing when and as said prime rate changes.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person.
"Purchasers" is defined in Section 12.3.1.
"Rate Management Transaction" means any transaction (including an
agreement with respect thereto) now existing or hereafter entered into
between the Borrower and any Person which is a rate swap, basis swap,
forward rate transaction, commodity swap, commodity option, equity or
equity index swap, equity or equity index option, bond option, interest
rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, forward transaction, currency swap
transaction, cross-currency rate swap transaction, currency option or any
other similar transaction (including any option with respect to any of
these transactions) or any combination thereof, whether linked to one or
more interest rates, foreign currencies, commodity prices, equity prices or
other financial measures.
"Rate Management Obligations" of a Person means any and all
obligations of such Person, whether absolute or contingent and howsoever
and whensoever created, arising, evidenced or acquired (including all
renewals, extensions and modifications thereof and substitutions therefor),
under (i) any and all Rate Management Transactions, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any
Rate Management Transactions.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor
thereto or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of
the Federal Reserve System.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or
other regulation or official interpretation of said Board of Governors
relating to the extension of credit by banks for the purpose of purchasing
or carrying margin stocks applicable to member banks of the Federal Reserve
System.
"Reportable Event" means a reportable event as defined in Section
4043 of ERISA and the regulations issued under such section, with respect
to a Plan, excluding, however, such events as to which the PBGC has 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, however,
that a failure to meet the minimum funding standard of Section 412 of the
Code and of Section 302 of ERISA shall be a Reportable Event regardless of
the issuance of any such waiver of the notice requirement in accordance
with either Section 4043(a) of ERISA or Section 412(d) of the Code.
"Reports" is defined in Section 9.7.
"Required Lenders" means Lenders in the aggregate having at least 66
2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 66 2/3% of the
aggregate unpaid principal amount of the outstanding Advances.
"Required Mortgage Documents" means the instruments and documents
described in Schedule "A" to the Security Agreement, as applicable to a
particular Mortgage Loan, which are required to be delivered to the
Collateral Agent.
"Reserve Requirement" means, with respect to the Eurodollar Rate
applicable to an Interest Period, the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves) which is
imposed under Regulation D on eurocurrency liabilities.
"Residential Mortgage Loan" means a Mortgage Loan secured by a
Mortgage on a Single Family Residence.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc. or any successor to its business.
"Schedule" refers to a specific schedule to this Agreement, unless
another document is specifically referenced.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Secured Obligations" means, collectively, (i) the Obligations and
(ii) all Rate Management Obligations owing to one or more Lenders.
"Secured Parties" is defined in Paragraph 1 of the Security
Agreement.
"Security or Securities" means any FHLMC Security, FNMA Security or
GNMA Security.
"Security Agreement" means the Fourth Amended and Restated Security
and Collateral Agency Agreement as of even date herewith, substantially in
the form of Exhibit "I" attached hereto, by and among the Borrower, the
Agent, and the Collateral Agent, pursuant to which a security interest is
created in favor of the Collateral Agent for the Lenders under this
Agreement in certain Collateral to be pledged pursuant to this Agreement,
as the same may, from time to time, be further supplemented, modified or
amended.
"Settlement Account" means the account established pursuant to
Section 8.4.
"Single Employer Plan" means a Plan maintained by the Borrower or any
member of the Controlled Group for employees of the Borrower or any member
of the Controlled Group.
"Single Family Residence" means a one to four family dwelling unit,
which may be a condominium unit but which shall not be a mobile home,
manufactured housing or a dwelling unit in a cooperative apartment
building.
"Subordination Agreement" means that certain Subordination Agreement
of even date herewith made by Parent in favor of the Agent for the benefit
of the Lenders.
"Subsidiary" of a Person means (i) any corporation more than 50% of
the outstanding securities having ordinary voting power of which shall at
the time be owned or controlled, directly or indirectly, by such Person or
by one or more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (ii) any partnership, limited liability company,
association, joint venture or similar business organization more than 50%
of the ownership interests having ordinary voting power of which shall at
the time be so owned or controlled. Unless otherwise expressly provided,
all references herein to a "Subsidiary" shall mean a Subsidiary of the
Borrower.
"Substantial Portion" means, with respect to the Property of the
Borrower and its Subsidiaries, Property which (i) represents more than 10%
of the consolidated assets of the Borrower and its Subsidiaries as would be
shown in the consolidated financial statements of the Borrower and its
Subsidiaries as at the beginning of the twelve-month period ending with the
month in which such determination is made, or (ii) is responsible for more
than 10% of the consolidated net sales or of the consolidated net income of
the Borrower and its Subsidiaries as reflected in the financial statements
referred to in clause (i) above.
"Swingline Amount" means $3,000,000.
"Swingline Commitment" means the obligation of the Swingline Lender
under Section 2.4 to make Swingline Loans.
"Swingline Lender" means Guaranty Bank in its capacity as Swingline
Lender under this Agreement.
"Swingline Loan" has the meaning ascribed to such term in Section
2.4.1.
"Swingline Obligations" has the meaning ascribed to such term in
Section 2.4.2.
"Swingline Rate" means for any day, the Overnight Transaction Loan
Rate.
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities
with respect to the foregoing, but excluding Excluded Taxes.
"Termination Date" means June 6, 2003 or any earlier date on which
the Aggregate Commitment is reduced to zero or otherwise terminated
pursuant to the terms hereof
"Total Liabilities" means as of any date of determination thereof,
all liabilities (as such term is used under GAAP) of the Borrower and the
other consolidated Subsidiaries determined on a consolidated basis.
"Transferee" is defined in Section 12.5.
"Trust Receipt" means a trust receipt substantially in the form of
Exhibit "T' to the Security Agreement.
"Type" means, with respect to any Advance, its nature as an Alternate
Base Rate Advance, Eurodollar Advance or Fed Funds Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to
such benefits, all determined as of the then most recent valuation date for
such Plans using PBGC actuarial assumptions for single employer plan
terminations.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"VA" means the Veterans Administration or other agency, corporation
or instrumentality of the United States as to which the powers and duties
of the Veterans Administration have been transferred.
"VA-Approved Lender" means an institution that is approved by the VA
to act as a lender in connection with the origination of any Mortgage Loan
guaranteed by the VA.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-
Owned Subsidiaries of such Person, or by such Person and one or more
Wholly-Owned Subsidiaries of such Person, or (ii) any partnership, limited
liability company, association, joint venture or similar business
organization 100% of the ownership interests having ordinary voting power
of which shall at the time be so owned or controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
1.2 Commitment, Sublimits and Types of Advances
1.2.1 Commitment and Lending Sublimits.
From and including the date of this Agreement and prior to the
Termination Date, each Lender severally agrees, on the terms and conditions
set forth in this Agreement (including the lending sublimits (the "Lending
Sublimits") set forth below), to make Primary Loans to the Borrower from
time to time; provided that, on any date, after giving effect to such
Primary Loans and all other Loans that the Borrower has requested be made
on such date under this Agreement:
(1) the sum of (i) the aggregate principal balance then
outstanding of all Loans then held by such Lender plus (ii)
such Lender's Commitment Percentage of the then-outstanding
Swingline Loans shall not exceed the amount of such Lender's
then-current Commitment Amount;
(2) the aggregate principal balance of all outstanding
Swingline Loans held by the Swingline Lender on the date shall
not exceed the Swingline Amount; and
(3) the Coverage Requirement, on such date, shall not
exceed the lesser of the Aggregate Commitment or the then-
current Borrowing Base.
Subject to the terms of this Agreement, the Borrower may borrow, repay and
reborrow Primary Loans at any time prior to the Termination Date. The
Commitments of the Lenders and the Swingline Commitment of the Swingline
Lender to lend hereunder shall expire on the Termination Date.
1.2.2 Borrowing Base Sublimits by Category. The maximum amount
that can be credited toward the Borrowing Base from certain categories of
Eligible Collateral shall be limited so that the Borrowing Base value
determined under:
(i) clause (iii) of the definition thereof
(Eligible Non-Conforming Mortgage Loans) shall not exceed
five percent (5%) of the Aggregate Commitment;
(ii) clause (iv) of the definition thereof
(Eligible Jumbo Mortgage Loans) shall not exceed thirty
percent (30%) of the Aggregate Commitment; and
(iii) clause (v) of the definition thereof
(Eligible Oversize Jumbo Mortgage Loans) shall not exceed
five percent (5%) of the Aggregate Commitment.
1.2.3 Borrowing Base Sublimits by Asset Type. The maximum
amount that can be credited toward the Borrowing Base from certain types of
Collateral, regardless of category, shall be limited (collectively with the
limits set forth in Section 2.1.2, the "Borrowing Base Sublimits") so that
the Borrowing Base value attributable to:
(i) Eligible Conforming Aged Mortgage Loans shall
not exceed one and one half percent (1.5%) of the
Aggregate Commitment; and
(ii) Pledged Mortgages having a second lien
priority shall not exceed five percent (5%) of the
Aggregate Commitment.
1.2.4 Types of Advances. Each Advance hereunder shall consist
of one or more Primary Advances requested by the Borrower in accordance
with Sections 2.6. Primary Advances shall be available as provided in
Section 2.1 and Swingline Loans shall be available as provided in Section
2.4.
1.3 Primary Advances. Subject to the terms and conditions herein
(including the Lending Sublimits) the Borrower may request Primary Advances
from the Lenders on a pro rata basis in accordance with each such Lender's
Commitment Percentage. Primary Advances shall accrue interest at the
Eurodollar Rate, the Federal Funds Rate or the Alternate Base Rate, as
selected by the Borrower in accordance with Sections 2.6 and 2.7.
1.4 Buy Down Loans. Notwithstanding anything contained in this
Agreement, the Borrower and any individual Lender (a "Buy-Down Lender") may
notify the Agent in writing (which notice shall be given at least five (5)
Business Days prior to the end of any calendar month) that the Borrower and
such Buy-Down Lender have entered into a Buy-Down Agreement with respect to
all Fed Funds Loans from time to time outstanding and held by such Buy-Down
Lender, and, that, pursuant to said Buy-Down Agreement, the interest rate
applicable to such Fed Funds Loans during any interest calculation period
shall be the Buy-Down Rate and shall be based on the assumption that the
Borrower shall maintain sufficient Available Deposits with such Buy-Down
Lender. The Agent shall (until otherwise notified by the Borrower and Buy-
Down Lender to the contrary) accrue interest on such Fed Funds Loans at the
Buy-Down Rate and the Borrower shall pay such interest in accordance with
Section 2.18. The Agent shall have no obligation to verify the amount of
any Available Deposits supporting the pricing of such Fed Funds Loans held
by any Buy-Down Lender, including without limitation, any deficiency fees
or other amounts payable to such Lender by the Borrower under the
applicable Buy-Down Agreement. The Borrower shall pay all deficiency fees
or other amounts payable under its Buy-Down Agreement with each Buy-Down
Lender directly to such Buy-Down Lender within ten (10) calendar days of
receipt of a billing statement from such Buy-Down Lender. Any Buy-Down
Lender may elect not to make demand for the payment of deficiency fees
accruing in respect of any shortage of Available Deposits from time to time
and it is expressly agreed and understood that: (1) any such deficiency fee
shall not, by reason of such failure of such Buy-Down Lender or otherwise,
be deemed to have been waived by such Buy-Down Lender (except as such
waiver is expressly acknowledged in writing by such Buy-Down Lender from
time to time), and (2) all deficiency fees accrued and unpaid hereunder and
not so expressly waived, whether or not previously declared due and owing
by any such Buy-Down Lender, shall automatically be due and payable in full
upon the Termination Date.
1.5 Swingline Loans.
1.5.1 Swingline Loans. Subject to the terms and conditions
hereof, the Swingline Lender, in its sole discretion, may make loans (each
a "Swingline Loan" and collectively, the "Swingline Loans") to the Borrower
from time to time during the period from and including the date of this
Agreement and prior to the Termination Date, provided, however, that at no
time shall the Swingline Lender make a Swingline Loan if, immediately after
giving effect thereto, (i) the aggregate outstanding principal amount of
all Swingline Loans would exceed the Swingline Amount, or (ii) the
aggregate outstanding principal amount of all Swingline Loans and the
aggregate outstanding principal amount of all Primary Loans would exceed
either (A) the Aggregate Commitment, or (B) the Borrowing Base. All
Swingline Loans shall bear interest at the Swingline Rate.
1.5.2 Swingline Take-Out. By no later than 11:00 a.m., on (i)
the last Business Day of each calendar week or (ii) any Business Day
immediately succeeding any day upon which the Swingline Lender shall so
demand, the Agent shall notify each Lender of the aggregate outstanding
principal balance of the Swingline Loans as of the commencement of business
of the Agent on such Business Day (the "Swing Line Obligations") and,
subject only to its receipt of such notice and regardless of whether any
Default shall have occurred and be continuing, whether the Commitments
shall have been reduced or terminated or any other matter whatsoever, each
Lender shall (i) make a loan to the Borrower in an amount equal to its
Commitment Percentage of such Swing Line Obligations, and (ii) make the
amount of such loan available to the Agent for the account of the Borrower
at the Office not later than 1:00 p.m., on such Business Day, in funds
immediately available to the Agent at such office. The funds so made
available to the Agent on such Business Day in respect of such loans will
then be disbursed by the Agent directly to the Swingline Lender as payment
in respect of the Swing Line Obligations. Notwithstanding anything to the
contrary contained in this Agreement, to the extent that the Swingline
Lender, in its capacity as a Lender hereunder, shall be required to fund
its Commitment Percentage of any Swingline Loan take-out under this Section
2.4.2, the Swingline Lender and the Agent shall net out the funding thereof
against the payments to be received by the Swingline Lender in respect of
such take-out.
1.5.3 Swingline Loans to Pay Amounts Due to the Swingline
Lender. If any amounts are advanced by the Swingline Lender to cover
checks or wire transfers from Borrower accounts maintained with the
Swingline Lender when there are insufficient funds in such accounts to
cover the applicable check or wire transfer and sufficient funds are not
deposited in the applicable account before the close of business on the day
on which the applicable check or wire transfer request is honored, then the
Borrower shall be deemed to have requested, and the Swingline Lender may
(but shall not be obligated to) elect to make, a Swingline Loan to pay such
overdraft amount; provided, however, that the Swingline Lender shall not
make any such Swingline Loan if, after giving effect thereto, (x) the
Coverage Requirement would exceed the Borrowing Base or (y) the aggregate
principal balance of all outstanding Loans under this Agreement would
exceed the Aggregate Commitment.
1.5.4 Indemnification of Swingline Lender. The Lenders agree to
reimburse and indemnify the Swingline Lender ratably in proportion to their
respective Commitments (or, if the Commitments have been terminated, in
proportion to their Commitments immediately prior to such termination) from
and against any and all losses, liabilities (including liabilities for
penalties), actions, suits, judgments, demands, costs and expenses
(including, without limitation, reasonable attorneys' fees and
disbursements) arising out of or in connection with the Swingline,
(including the foregoing in respect of losses, liabilities or other
obligations suffered by the Swingline Lender resulting from its own
negligence and excluding the foregoing in respect of losses, liabilities
and other obligations resulting from its own gross negligence or willful
misconduct). If a Lender does not make available to the Swingline Lender
when due such Lender's Commitment Percentage of any such loss, liability,
judgment, cost or expense, such Lender shall be required to pay on demand
interest thereon for the account of the Swingline Lender at a rate of
interest per annum equal to the Federal Funds Funding Rate from the date
such Lender's payment is due until the date such payment is received by the
Swingline Lender.
1.6 Fees. The Borrower shall pay the following fees (the "Fees"):
1.6.1 Facility Fees. A facility fee based on the Aggregate
Commitment from time to time from and after the date hereof, calculated at
the Applicable Fee Rate, expressed as a per diem rate on the actual
Aggregate Commitment for each day during the preceding full or partial
calendar quarter, payable in arrears, on the last day of each calendar
quarter and on the Termination Date. This fee shall be paid to the Agent
and allocated among the Lenders on a pro rata basis in accordance with
their respective Commitments during such quarter.
1.6.2 Agent Fees. Any fees payable to the Agent pursuant to the
Borrower's letter agreement with the Agent of even date herewith.
1.6.3 Collateral Agent Fees. Any fees payable to Collateral
Agent for its services rendered pursuant to the Security Agreement as
agreed to by the Borrower and charged by Collateral Agent from time to
time.
1.6.4 Fees Payable in connection with Buy-Down Loans. The
Borrower shall pay any fees and other charges when due to any Buy-Down
Lender under a Buy-Down Agreement as described in Section 2.3.
1.7 Method of Selecting Types and Interest Periods for New Advances.
The Borrower shall select the Type of Advance and, in the case of each
Eurodollar Advance, the Interest Period applicable to each Advance from
time to time. The Borrower shall give the Agent irrevocable notice (a
"Borrowing Notice") not later than (i) 10:00 a.m. (Dallas time) on the
Borrowing Date of each Alternate Base Rate Advance or Fed Funds Advance,
(ii)3:00 p.m. (Dallas time) on the proposed Borrowing Date for each
Swingline Loan, and (iii) 2:00 p.m. (Dallas time) at least three Business
Days before the Borrowing Date for each Eurodollar Advance, specifying:
(a) the Borrowing Date, which shall be a Business Day, of such
Advance,
(b) the aggregate amount of such Advance, which shall not be less
than (1)$2,000,000 for any Eurodollar Advance,(2) $600,000 for
any Alternate Base Rate Advance or Fed Funds Advance, or (3)
$100,000 for any Swingline Loan,
(c) except in the case of a Swingline Loan, the Type of Advance
selected, and
(d) in the case of each Eurodollar Advance, the Interest Period
applicable thereto, and
Not later than noon (Dallas time) on each Borrowing Date, with respect to
all Advances other than Swingline Loans, each Lender shall make available
its Loan or Loans comprising such Advance, in funds immediately available
in Dallas to the Agent at its address specified pursuant to Article XIII;
provided that Swingline Loans may be made available up to the close of
business. The Agent will make the funds so received from the Lenders
available to the Borrower at the Agent's aforesaid address.
1.8 Conversion and Continuation of Outstanding Advances. An Alternate
Base Rate Advance shall continue as an Alternate Base Rate Advance unless
and until such Alternate Base Rate Advance is converted into another Type
of Advance. A Fed Funds Advance shall continue as a Fed Funds Advance
unless and until (a) such Advance is converted into a different Type of
Advance in accordance with the terms hereof or (b) the Borrower has paid
any such Fed Funds Advance prior to 10:00 a.m. (Dallas time) on any
Business Day or the Borrower has given notice by 10:00 a.m. (Dallas time)
that it intends to pay and has paid any such Fed Funds Advance prior to
12:00 noon (Dallas time) on any Business Day. A Swingline Loan shall
continue as a Swingline Loan unless and until the Borrower has paid any
Swingline Loan prior to 3:00 p.m. (Dallas time) on any Business Day. Each
Eurodollar Advance shall continue as a Eurodollar Advance until the end of
the then applicable Interest Period therefor, at which time such Eurodollar
Advance shall be automatically converted into an Alternate Base Rate
Advance unless the Borrower shall have given the Agent a
Conversion/Continuation Notice requesting that, at the end of such Interest
Period, such Eurodollar Advance either continue as a Eurodollar Advance for
the same or another Interest Period or be converted into an Advance of
another Type. Swingline Loans may be repaid out of new Advances hereunder
but may not be converted directly to a Type of Advance. The Borrower may
elect from time to time to convert all or any part of an Advance of any
Type into any other Type or Types of Advances; provided that any
conversion of any Eurodollar Advance shall be made on, and only on, the
last day of the Interest Period applicable thereto. The Borrower shall
give the Agent irrevocable notice (a "Conversion/Continuation Notice") of
each conversion of an Alternate Base Rate Advance or Fed Funds Advance or
conversion or continuation of a Eurodollar Advance not later than (i) 10:00
a.m. (Dallas time) on the date of the requested conversion, in the case of
a conversion into an Alternate Base Rate Advance or Fed Funds Advance or
(ii) 10:00 a.m. (Dallas time) at least three Business Days prior to the
date of the requested conversion into or continuation of a Eurodollar
Advance, specifying:
(i) the requested date which shall be a Business Day, of such
conversion or continuation,
(ii) the aggregate amount (which meets the minimums set forth
in Section 2.8(c)) and Type of the Advance which is to be converted
or continued, and
(iii) the amount and Type(s) of Advance(s) into which such
Advance is to be converted or continued and, in the case of a
conversion into or continuation of a Eurodollar Advance, the duration
of the Interest Period applicable thereto.
1.9 Reductions to Aggregate Commitment. The Borrower may from time to
time permanently reduce the Aggregate Commitment in whole, or in part
ratably among the Lenders in integral multiples of $5,000,000, upon at
least three Business Days' written notice to the Agent, which notice shall
specify the amount of any such reduction. On or before the effective date
of any such reduction, the Borrower shall, if necessary, repay sufficient
Loans to prevent the remaining outstanding Loans hereunder, after giving
effect to such permanent reduction, from exceeding the Lending Sublimits.
Upon any reduction of the Aggregate Commitment, upon the election of any
Swingline Lender, the reduction in such Lender's Commitment may be
allocated either solely to such Lender's Primary Commitment or in part to
its Primary Commitment and in part to its Swingline Commitment on a pro
rata basis.
1.10 Principal Payments.
1.10.1 Optional Principal Payments. The Borrower may from time
to time pay, without penalty or premium, all outstanding Alternate Base
Rate Advances or Fed Funds Advances, or, in a minimum aggregate amount of
$1,000,000, any portion of the outstanding Alternate Base Rate Advances or
Fed Funds Advances upon prior written notice to the Agent (and if a Fed
Funds Advance, within the timeframe described below). The Borrower may
from time to time pay, subject to the payment of any funding
indemnification amounts required by Section 3.4 but without penalty or
premium, all outstanding Eurodollar Advances, or, in a minimum aggregate
amount of $1,000,000 or any integral multiple of $500,000 in excess
thereof, any portion of the outstanding Eurodollar Advances upon three
Business Days' prior notice to the Agent. Fed Funds Advances and Swingline
Loans may be paid on any Business Day provided that the Borrower has given
the Agent written notice of such repayment on the date of such intended
payment by (i) 10:00 a.m. (Dallas time) for Fed Funds Advances and (ii)noon
(Dallas time) for Swingline Loans. All optional principal payments shall
be applied to the Swingline Loans or the Type of Advance designated by the
Borrower when making such payment, provided that any payments received
during the continuance of a Default or Unmatured Default shall be applied
first to Swingline Loans and then on a pro rata basis to all Advances then
outstanding. Payments so allocated to an Advance shall be distributed to
the Lenders holding the Loans comprising such Advance on a pro rata basis
in accordance with the respective unpaid principal balances of such Loans,
with such payments applied first to accrued interest and thereafter to
principal.
1.10.2 Required Payments Related to Borrowing Base. On any date
that the Coverage Requirement is in excess of the then-current Borrowing
Base, the Borrower shall, prior to the close of business on such date,
either deliver sufficient Eligible Collateral to eliminate such excess or
make a mandatory payment to the Agent for the benefit of the Lenders in the
amount of such excess. Any such payment shall be allocated as directed by
the Borrower unless a Default or Unmatured Default then exists in which
case such payment shall be allocated first to the Swingline Loans and then
to on a pro rata basis to all Advances then outstanding. Payments so
allocated to an Advance shall be distributed to the Lenders holding the
Loans comprising such Advance on a pro rata basis in accordance with the
respective unpaid principal balances of such Loans, with such payments
applied first to accrued interest and thereafter to principal.
1.10.3 Settlement Account Payments. Prior to the occurrence of
a Default, to the extent the amounts in the Settlement Account are not
needed to keep the Borrowing Base equal to or greater than the Coverage
Requirement, the Borrower may withdraw or otherwise direct the application
of such amounts. Upon the occurrence of a Default (and during the
continuance thereof), the Agent may declare a portion of the principal
balance of the Loans, equal to any amounts then on deposit in the
Settlement Account and any deposits made in the Settlement Account during
the continuance of such Default, to be due and payable without demand
(unless previously declared due and payable). Such amount shall be
withdrawn from the Settlement Account by the Agent and shall be applied to
the Obligations.
1.10.4 Final Payment on Termination Date. Any outstanding
Advances and all other unpaid Obligations, unless required to be paid
earlier pursuant to the terms hereof, shall be paid in full by the Borrower
on the Termination Date.
1.11 Changes in Interest Rate, etc. Each Alternate Base Rate Advance
shall bear interest on the outstanding principal amount thereof, for each
day from and including the date such Advance is made or is automatically
converted from a Eurodollar Advance into an Alternate Base Rate Advance
pursuant to Section 2.7, to but excluding the date it is paid or is
converted into a Eurodollar Advance pursuant to Section 2.7 hereof, at a
rate per annum equal to the Alternate Base Rate for such day. Changes in
the rate of interest on that portion of any Advance maintained as an
Alternate Base Rate Advance will take effect simultaneously with each
change in the Alternate Base Rate. The interest rate on each Swingline
Loan or Fed Funds Advance shall be recalculated daily for each day that
such Swingline Loan or Fed Funds Advance is continued under Section 2.7.
Each Eurodollar Advance shall bear interest on the outstanding principal
amount thereof from and including the first day of the Interest Period
applicable thereto to (but not including) the last day of such Interest
Period at the interest rate determined by the Agent as applicable to such
Eurodollar Advance based upon the Borrower's selections under Section 2.6
and 2.7 and otherwise in accordance with the terms hereof. Not more than
six (6) different Interest Periods may be in effect at any time and no
Interest Period may end after the Termination Date.
1.12 Rates Applicable After Default. Notwithstanding anything to
the contrary contained in Section 2.8 or 2.9, during the continuance of a
Default or Unmatured Default the Required Lenders may, at their option, by
notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 9.1 requiring
unanimous consent of the Lenders to reductions in interest rates), declare
that no Advance may be made as, converted into or continued as a Eurodollar
Advance. During the continuance of a Default the Required Lenders may, at
their option, by notice to the Borrower (which notice may be revoked at the
option of the Required Lenders notwithstanding any provision of Section 9.1
requiring unanimous consent of the Lenders to reductions in interest rates)
declare that (i)each Eurodollar Advance shall bear interest for the
remainder of the applicable Interest Period at the rate otherwise
applicable to such Interest Period plus 2% per annum and (ii) each Advance
(other than those under clause (i) above) and each Swingline Loan shall
bear interest at a rate per annum equal to the Alternate Base Rate plus 2%
per annum; provided that, during the continuance of a Default under Section
7.6 or 7.7, the interest rates set forth in clauses (i) and (ii) above
shall be applicable to all Advances and Swingline Loans without any
election or action on the part of the Agent or any Lender.
1.13 Method of Payment. All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Agent at the Agent's address specified pursuant to
Article XIII, or at any other Lending Installation of the Agent specified
in writing by the Agent to the Borrower, on the date when due by (i) noon
(Dallas time) with respect to all Advances other than Swingline Loans and
(ii) 4:00 p.m. (Dallas time) with respect to Swingline Loans and all such
payments shall be applied in accordance with Section 2.9.1.
Notwithstanding the foregoing, if the Borrower fails to give the Agent
notice of repayment of a Fed Funds Advance before 10:00 a.m. (Dallas time)
on the Business Day that the Borrower intends to repay such Fed Funds
Advance, any payment of such Fed Funds Advance received by the Agent on
such Business Day shall be deemed to have been received by the Agent at the
opening of business on the following Business Day. Each payment delivered
to the Agent for the account of any Lender shall be delivered promptly by
the Agent to such Lender in the same type of funds that the Agent received
at its address specified pursuant to Article XIII or at any Lending
Installation specified in a notice received by the Agent from such Lender.
The Agent is hereby authorized to charge the account of the Borrower
maintained with Bank One for each payment of principal, interest and fees
as it becomes due hereunder.
1.14 Noteless Agreement; Evidence of Indebtedness.
(i) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the
Borrower to such Lender resulting from each Loan made by such Lender
from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder.
(ii) Subject to Section 2.3, the Agent shall also maintain
accounts in which it will record (a) the amount of each Loan made
hereunder, the Type thereof and the Interest Period with respect
thereto, (b) the amount of any principal or interest due and payable
or to become due and payable from the Borrower to each Lender
hereunder and (c) the amount of any sum received by the Agent
hereunder from the Borrower and each Lender's share thereof.
(iii) The entries maintained in the accounts maintained
pursuant to paragraphs (i) and (ii) above shall be prima facie
evidence of the existence and amounts of the Obligations therein
recorded; provided, however, that the failure of the Agent or any
Lender to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrower to repay the
Obligations in accordance with their terms.
(iv) Any Lender may request that its Loans be evidenced by a
Note. In such event, the Borrower shall prepare, execute and deliver
to such Lender a Note payable to the order of such Lender.
Thereafter, the Loans evidenced by such Note and interest thereon
shall at all times (including after any assignment pursuant to
Section 12.3) be represented by one or more Notes payable to the
order of the payee named therein or any assignee pursuant to Section
12.3, except to the extent that any such Lender or assignee
subsequently returns any such Note for cancellation and requests that
such Loans once again be evidenced as described in paragraphs (i) and
(ii) above.
1.15 Telephonic Notices. The Borrower hereby authorizes the Lenders
and the Agent to extend, convert or continue Advances, effect selections of
Types of Advances and to transfer funds based on telephonic notices made by
any person or persons the Agent or any Lender in good faith believes to be
acting on behalf of the Borrower, it being understood that the foregoing
authorization is specifically intended to allow Borrowing Notices and
Conversion/Continuation Notices to be given telephonically. The Borrower
agrees to deliver promptly to the Agent a written confirmation, if such
confirmation is requested by the Agent or any Lender, of each telephonic
notice signed by an Authorized Officer. If the written confirmation
differs in any material respect from the action taken by the Agent and the
Lenders, the records of the Agent and the Lenders shall govern absent
manifest error.
1.16 Interest Payment Dates; Interest and Fee Basis. Subject to
Section 2.3, interest shall be payable in accordance with the following
provisions. Interest accrued on each Advance other than a Eurodollar
Advance shall be payable on each Payment Date, commencing with the first
such date to occur after the date hereof and at maturity. Interest accrued
on each Eurodollar Advance shall be payable on the last day of its
applicable Interest Period, on any date on which the Eurodollar Advance is
prepaid, whether by acceleration or otherwise, and at maturity. Interest
accrued on each Eurodollar Advance having an Interest Period longer than
three months shall also be payable on the last day of each three-month
interval during such Interest Period. Interest and Fees shall be
calculated for actual days elapsed on the basis of a 360-day year.
Interest shall be payable for the day an Advance is made but not for the
day of any payment on the amount paid if payment is received at the place
of payment prior to the time required for payment as set forth in Section
2.14. If any payment of principal of or interest on an Advance shall
become due on a day which is not a Business Day, such payment shall be made
on the next succeeding Business Day and, in the case of a principal
payment, such extension of time shall be included in computing interest in
connection with such payment.
1.17 Notification by the Agent. Promptly after receipt thereof, the
Agent will notify each Lender of the contents of each Aggregate Commitment
reduction notice, Borrowing Notice, Conversion/Continuation Notice, and
repayment notice received by it hereunder. Promptly upon determination
thereof, the Agent will notify each Lender making a portion of any
Eurodollar Advance and the Borrower of the interest rate applicable to each
Eurodollar Advance. When any Fed Funds Advances or Alternate Base Rate
Advances are outstanding or have been requested, the Agent will give each
Lender making or holding any such Loans and the Borrower prompt notice of
each change in such rates.
1.18 Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to
any such Lending Installation and the Loans and any Notes issued hereunder
shall be deemed held by each Lender for the benefit of such Lending
Installation. Each Lender may, by written notice to the Agent and the
Borrower in accordance with Article XIII, designate replacement or
additional Lending Installation through which Loans will be made by it and
for whose account Loan payments are to be made.
1.19 Non-Receipt of Funds by the Agent. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which
it is scheduled to make payment to the Agent of (i) in the case of a
Lender, the proceeds of a Loan or an Advance or (ii) in the case of the
Borrower, a payment of principal (including but not limited to situations
in which the Borrower informs the Agent that the Agent will be receiving
proceeds of Collateral on a specific date and that the Borrower intends to
use such proceeds to make a payment of principal), interest or Fees to the
Agent for the account of the Lenders, that it does not intend to make such
payment, the Agent may assume that such payment has been made. The Agent
may, but shall not be obligated to, make the amount of such payment
available to the intended recipient in reliance upon such assumption. If
such Lender or the Borrower, as the case may be, has not in fact made such
payment to the Agent, the recipient of such payment shall, on demand by the
Agent, repay to the Agent the amount so made available together with
interest thereon in respect of each day during the period commencing on the
date such amount was so made available by the Agent until the date the
Agent recovers such amount at a rate per annum. equal to (x) in the case
of payment due from a Lender, the Federal Funds Effective Rate for such day
for the first three days and, thereafter, the interest rate applicable to
the relevant Loan or (y) in the case of payment due from the Borrower, the
interest rate applicable to the relevant Loan.
ARTICLE III
CHANGE IN CIRCUMSTANCES
1.20 Yield Protection. If, on or after the date of this Agreement,
the adoption of any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force
of law), or any change in the interpretation or administration thereof by
any governmental or quasi-governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender or applicable Lending Installation
with any request or directive (whether or not having the force of law) of
any such authority, central bank or comparable agency:
(i) subjects any Lender or any applicable Lending
Installation to any Taxes or changes the basis of taxation of
payments (other than with respect to Excluded Taxes) to any Lender in
respect of its Eurodollar Loans, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation (other
than reserves and assessments taken into account in determining the
interest rate applicable to Eurodollar Advances), or
(iii) imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending
Installation of making, funding or maintaining its Eurodollar Loans
or reduces any amount receivable by any Lender or any applicable
Lending Installation in connection with its Eurodollar Loans, or
requires any Lender or any applicable Lending Installation to make
any payment calculated by reference to the amount of its Eurodollar
Loans held or interest received by it, by an amount deemed material
by such Lender,
and the result of any of the foregoing is to increase the cost to such
Lender or applicable Lending Installation of making or maintaining its
Eurodollar Loans or Commitment or to reduce the return received by such
Lender or applicable Lending Installation in connection with such
Eurodollar Loans or Commitment, then, within 15 days of demand by such
Lender, the Borrower shall pay such Lender such additional amount or
amounts as will compensate such Lender for such increased cost or reduction
in an amount received.
1.21 Changes in Capital Adequacy Regulations. If a Lender
determines the amount of capital required or expected to be maintained by
such Lender, any Lending Installation of such Lender or any corporation
controlling such Lender is increased as a result of a Change, then, within
15 days of demand by such Lender, the Borrower shall pay such Lender the
amount necessary to compensate for any shortfall in the rate of return on
the portion of such increased capital which such Lender determines is
attributable to this Agreement, its Loans or its Commitment to make Loans
hereunder (after taking into account such Lender's policies as to capital
adequacy). "Change" means (i) any change after the date of this Agreement
in the Risk-Based Capital Guidelines or (ii) any adoption of or change in
any other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of
law) after the date of this Agreement which affects the amount of capital
required or expected to be maintained by any Lender or any Lending
Installation or any corporation controlling any Lender. "Risk-Based
Capital Guidelines" means (i) the risk-based capital guidelines in effect
in the United States on the date of this Agreement, including transition
rules, and (ii) the corresponding capital regulations promulgated by
regulatory authorities outside the United States implementing the July 1988
report of the Basle Committee on Banking Regulation and Supervisory
Practices Entitled "International Convergence of Capital Measurements and
Capital Standards," including transition rules, and any amendments to such
regulations adopted prior to the date of this Agreement.
1.22 Availability of Types of Advances. If any Lender determines
that maintenance of its Eurodollar Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation, or directive, whether
or not having the force of law, or if the Required Lenders determine that
(i) deposits of a type and maturity appropriate to match fund Eurodollar
Advances or Fed Funds Advances are not available or (ii) the interest rate
applicable to a Type of Advance does not accurately reflect the cost of
making or maintaining such Advance, then the Agent shall suspend the
availability of the affected Type of Advance and require any Advances of
the affected Type to be repaid or converted to Alternate Base Rate
Advances, subject to the payment of any funding indemnification amounts
required by Section 3.4.
1.23 Funding Indemnification. If any payment of a Eurodollar
Advance occurs on a date which is not the last day of the applicable
Interest Period, whether because of acceleration, prepayment or otherwise,
or a Eurodollar Advance is not made, continued or converted on the date
specified by the Borrower for any reason other than default by the Lenders,
the Borrower will indemnify each Lender for any loss or cost incurred by it
resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain the
Eurodollar Advance.
1.24 Taxes.
(i) All payments by the Borrower to or for the account of any
Lender or the Agent hereunder or under any Note shall be made free
and clear of and without deduction for any and all Taxes. If the
Borrower shall be required by law to deduct any Taxes from or in
respect of any sum payable hereunder to any Lender or the Agent, (a)
the sum payable shall be increased as necessary so that after making
all required deductions (including deductions applicable to
additional sums payable under this Section 3.5) such Lender or the
Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (b) the
Borrower shall make such deductions, (c) the Borrower shall pay the
full amount deducted to the relevant authority in accordance with
applicable law and (d) the Borrower shall furnish to the Agent the
original copy of a receipt evidencing payment thereof within 30 days
after such payment is made.
(ii) In addition, the Borrower hereby agrees to pay any
present or future stamp or documentary taxes and any other excise or
property taxes, charges or similar levies which arise from any
payment made hereunder or under any Note or from the execution or
delivery of, or otherwise with respect to, this Agreement or any Note
("Other Taxes").
(iii) The Borrower hereby agrees to indemnify the Agent and
each Lender for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed on amounts
payable under this Section 3.5) paid by the Agent or such Lender and
any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. Payments due under this
indemnification shall be made within 30 days of the date the Agent or
such Lender makes demand therefor pursuant to Section 3.6.
(iv) Each Lender that is not incorporated under the laws of
the United States of America or a state thereof (each a "Non-U.S.
Lender") agrees that it will, not less than ten Business Days after
the date of this Agreement, (i) deliver to each of the Borrower and
the Agent two duly completed copies of United States Internal Revenue
Service Form W-BEN or W-8ECI, certifying in either case that such
Lender is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes,
and (ii) deliver to each of the Borrower and the Agent a United
States Internal Revenue Form W-8 or W-9, as the case may be, and
certify that it is entitled to an exemption from United States backup
withholding tax. Each Non-U.S. Lender further undertakes to deliver
to each of the Borrower and the Agent (x) renewals or additional
copies of such form (or any successor form) on or before the date
that such form expires or becomes obsolete, and (y) after the
occurrence of any event requiring a change in the most recent forms
so delivered by it, such additional forms or amendments thereto as
may be reasonably requested by the Borrower or the Agent. All forms
or amendments described in the preceding sentence shall certify that
such Lender is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in
treaty, law or regulation) has occurred prior to the date on which
any such delivery would otherwise be required which renders all such
forms inapplicable or which would prevent such Lender from duly
completing and delivering any such form or amendment with respect to
it and such Lender advises the Borrower and the Agent that it is not
capable of receiving payments without any deduction or withholding of
United States federal income tax.
(v) For any period during which a Non-U.S. Lender has failed
to provide the Borrower with an appropriate form pursuant to clause
(iv), above (unless such failure is due to a change in treaty, law or
regulation, or any change in the interpretation or administration
thereof by any governmental authority, occurring subsequent to the
date on which a form originally was required to be provided), such
Non-U.S. Lender shall not be entitled to indemnification under this
Section 3.5 with respect to Taxes imposed by the United States;
provided that, should a Non-U.S. Lender which is otherwise exempt
from or subject to a reduced rate of withholding tax become subject
to Taxes because of its failure to deliver a form required under
clause (iv), above, the Borrower shall take such steps as such Non-
U.S. Lender shall reasonably request to assist such Non-U.S. Lender
to recover such Taxes.
(vi) Any Lender that is entitled to an exemption from or
reduction of withholding tax with respect to payments under this
Agreement or any Note pursuant to the law of any relevant
jurisdiction or any treaty shall deliver to the Borrower (with a copy
to the Agent), at the time or times prescribed by applicable law,
such properly completed and executed documentation prescribed by
applicable law as will permit such payments to be made without
withholding or at a reduced rate.
(vii) If the U.S. Internal Revenue Service or any other
governmental authority of the United States or any other country or
any political subdivision thereof asserts a claim that the Agent did
not properly withhold tax from amounts paid to or for the account of
any Lender (because the appropriate form was not delivered or
properly completed, because such Lender failed to notify the Agent of
a change in circumstances which rendered its exemption from
withholding ineffective, or for any other reason), such Lender shall
indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax, withholding therefor, or otherwise,
including penalties and interest, and including taxes imposed by any
jurisdiction on amounts payable to the Agent under this subsection,
together with all costs and expenses related thereto (including
attorneys fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent). The obligations of the
Lenders under this Section 3.5(vii) shall survive the payment of the
Obligations and termination of this Agreement.
1.25 Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Eurodollar Loans to reduce any liability
of the Borrower to such Lender under Sections 3.1, 3.2 and 3.5 or to avoid
the unavailability of a Type of Advance under Section 3.3, so long as such
designation is not, in the judgment of such Lender, disadvantageous to such
Lender. Each Lender shall deliver a written statement of such Lender to
the Borrower (with a copy to the Agent) as to the amount due, if any, under
Section 3.1, 3.2, 3.4 or 3.5. Such written statement shall set forth in
reasonable detail the calculations upon which such Lender determined such
amount and shall be final, conclusive and binding on the Borrower in the
absence of manifest error. Determination of amounts payable under such
Sections in connection with a Eurodollar Loan shall be calculated as though
each Lender funded its Eurodollar Loan through the purchase of a deposit of
the type and maturity corresponding to the deposit used as a reference in
determining the Eurodollar Rate or the Purchase Price applicable to such
Loan, whether in fact that is the case or not. Unless otherwise provided
herein, the amount specified in the written statement of any Lender shall
be payable on demand after receipt by the Borrower of such written
statement. The obligations of the Borrower under Sections 3.1, 3.2, 3.4
and 3.5 shall survive payment of the Obligations and termination of this
Agreement.
ARTICLE II
CONDITIONS PRECEDENT; WITHHOLDING TAX EXEMPTION
1.26 Effectiveness. This Agreement shall not be effective and no
Lender shall be required to make the initial Advance hereunder until a date
(the "Effective Date") upon which the Borrower has furnished or caused to
be furnished to the Agent (with sufficient copies for the Lenders) the
following:
(i) Copies of the articles or certificate of incorporation of
the Borrower, together with all amendments, and a certificate of good
standing, each certified by the appropriate governmental officer in
its jurisdiction of incorporation.
(ii) Copies, certified by the Secretary or Assistant Secretary
of the Borrower, of its by-laws and of its Board of Directors'
resolutions and of resolutions or actions of any other body
authorizing the execution of the Loan Documents to which the Borrower
is a party.
(iii) An incumbency certificate, executed by the Secretary or
Assistant Secretary of the Borrower, which shall identify by name and
title and bear the signatures of the Authorized Officers and any
other officers of the Borrower authorized to sign the Loan Documents
to which the Borrower is a party, upon which certificate the Agent
and the Lenders shall be entitled to rely until informed of any
change in writing by the Borrower.
(iv) A certificate, signed by the chief financial officer of
the Borrower, stating that on the initial Borrowing Date no Default
or Unmatured Default has occurred and is continuing.
(v) A written opinion of the Borrower's and the Parent's
counsel, addressed to the Lenders in substantially the form of
Exhibit "B" hereto.
(vi) Any Notes requested by a Lender pursuant to Section 2.13
payable to the order of each such requesting Lender.
(vii) A fully executed Security Agreement.
(viii) Copies of the articles or certificate of
incorporation of the Parent, together with all amendments, and a
certificate of good standing, each certified by the appropriate
governmental officer in its jurisdiction of incorporation.
(ix) Copies, certified by the Secretary or Assistant Secretary
of the Parent, of its by-laws and of its Board of Directors'
resolutions and of resolutions or actions of any other body
authorizing the execution of the Loan Documents to which the Parent
is a party.
(x) An incumbency certificate, executed by the Secretary or
Assistant Secretary of the Parent, which shall identify by name and
title and bear the signatures of the Authorized Officers and any
other officers of the Parent authorized to sign the Loan Documents to
which the Parent is a party, upon which certificate the Agent and the
Lenders shall be entitled to rely until informed of any change in
writing by the Parent.
(xi) The Keep-Well and the Subordination Agreement executed by
the Parent.
(xii) Payment of all Fees due and payable on or before the
Effective Date.
(xiii) Establishment of the Settlement Account and the
Funding Account.
(xiv) Copy of each form of Approved Investor Commitment that
the Borrower currently utilizes for any Mortgage Loan that is not a
Conforming Mortgage Loan.
(xv) An Electronic Tracking Agreement with MERS.
(xvi) An amendment to the Bank One Agreement duly executed and
delivered by the appropriate parties in form and substance
satisfactory to Lenders consistent with Section 6.24 of this
Agreement.
(xvii) Such other documents as any Lender or its counsel
may have reasonably requested.
1.27 Each Advance. The Lenders shall not be required to make any
Advance (other than an Advance that, after giving effect thereto and to the
application of the proceeds thereof, does not increase the aggregate amount
of outstanding Advances), unless on the applicable Borrowing Date:
(i) There exists no Default or Unmatured Default.
(ii) The representations and warranties contained in Article V
are true and correct as of such Borrowing Date except to the extent
any such representation or warranty is stated to relate solely to an
earlier date, in which case such representation or warranty shall
have been true and correct on and as of such earlier date.
(iii) All legal matters incident to the making of such Advance
shall be satisfactory to the Lenders and their counsel.
Each Borrowing Notice with respect to each such Advance shall
constitute a representation and warranty by the Borrower that each Pledged
Item included in the Borrowing Base constitutes Eligible Collateral, and
that after giving effect to the amount of the Advance being requested, (a)
the conditions contained in Sections 4.2(i) and (ii) have been satisfied,
(b) the Borrower has provided the Collateral Agent with the true and
correct information including the GAAP Carrying Values (correctly
calculated in accordance with the provisions of this Agreement) necessary
to calculate the Collateral Value for all Eligible Collateral, (c) the then
current Borrowing Base is equal to or greater than the Coverage Requirement
and (d) no Lending Sublimit has been exceeded. Any Lender may require a
duly completed compliance certificate in substantially the form of Exhibit
"F hereto as a condition to making an Advance.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
1.28 Existence and Standing. Each of the Parent, Borrower and the
Subsidiaries is a corporation, partnership (in the case of Subsidiaries
only) or limited liability company duly and properly incorporated or
organized, as the case may be, validly existing and (to the extent such
concept applies to such entity) in good standing under the laws of its
jurisdiction of incorporation or organization and has all requisite
authority to conduct its business in each jurisdiction in which its
business is conducted.
1.29 Authorization and Validity. Each of Borrower and the Parent
has the power and authority and legal right to execute and deliver the Loan
Documents to which it is a party and to perform its obligations thereunder.
The execution and delivery by each of the Borrower and the Parent of the
Loan Documents to which it is a party and the performance of its
obligations thereunder have been duly authorized by proper corporate
proceedings, and the Loan Documents to which each of the Borrower and the
Parent is a party constitute legal, valid and binding obligations of the
Borrower or the Parent, as applicable enforceable against the Borrower or
the Parent, as applicable in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
1.30 No Conflict; Government Consent. Neither the execution and
delivery by the Borrower of the Loan Documents to which it is a party, nor
the consummation of the transactions therein contemplated, nor compliance
with the provisions thereof will violate (i) any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on the Parent,
Borrower or any of their respective Subsidiaries or (ii) the Borrower's or
any Subsidiary's articles or certificate of incorporation, partnership
agreement, certificate of partnership, articles or certificate of
organization, by-laws, or operating or other management agreement, as the
case may be, or (iii)the provisions of any indenture, instrument or
agreement to which the Borrower or any of their respective Subsidiaries is
a party or is subject, or by which it, or their respective Property, is
bound, or conflict with or constitute a default thereunder, or result in,
or require, the creation or imposition of any Lien in, of or on the
Property of the Parent, Borrower or their respective Subsidiary pursuant to
the terms of any such indenture, instrument or agreement. No order,
consent, adjudication, approval, license, authorization, or validation of,
or filing, recording or registration with, or exemption by, or other action
in respect of any governmental or public body or authority, or any
subdivision thereof, which has not been obtained by the Parent, Borrower or
any of their respective Subsidiaries, is required to be obtained by the
Parent, Borrower or any of their respective Subsidiaries in connection with
the execution and delivery of the Loan Documents, the borrowings under this
Agreement, the payment and performance by the Borrower of the Obligations
or the legality, validity, binding effect or enforceability of any of the
Loan Documents (other than filings to perfect the Liens granted pursuant to
the Security Agreement).
1.31 Financial Statements. The April 30, 2002 and the October 31,
2001 consolidated financial statements of the Borrower and its Subsidiaries
heretofore delivered to the Lenders were prepared in accordance with GAAP
in effect on the date such statements were prepared and fairly present the
consolidated financial condition and operations of the Borrower and its
Subsidiaries at such date and the consolidated results of their operations
for the period then ended (subject to normal year-end adjustments for the
October 31, 2001 financial statements).
1.32 Material Adverse Change. Since October 31, 2001, there has
been no change in the business, Property, prospects, condition (financial
or otherwise) or results of operations of the Borrower and its Subsidiaries
which could reasonably be expected to have a Material Adverse Effect.
1.33 Taxes. The Parent, Borrower and the Subsidiaries have filed
all United States federal tax returns and all other tax returns which are
required to be filed and have paid all taxes due pursuant to said returns
or pursuant to any assessment received by the Parent, Borrower or any of
the Subsidiaries, except such taxes, if any, as are being contested in good
faith by appropriate proceedings and as to which adequate reserves have
been provided in accordance with GAAP and as to which no Lien exists. The
United States income tax returns of the Parent, Borrower and the
Subsidiaries have been audited by the Internal Revenue Service through the
fiscal year ended December 31, 2001. No tax liens have been filed and no
claims are being asserted with respect to any such taxes. The charges,
accruals and reserves on the books of the Borrower and the Subsidiaries in
respect of any taxes or other governmental charges are adequate.
1.34 Litigation and Contingent Obligations. There is no litigation,
arbitration, governmental investigation, proceeding or inquiry pending or,
to the knowledge of any of their officers, threatened against or affecting
the Borrower or any of its Subsidiaries which could reasonably be expected
to have a Material Adverse Effect or which seeks to prevent, enjoin or
delay the making of any Loans. Other than any liability incident to any
litigation, arbitration or proceeding which could not reasonably be
expected to have a Material Adverse Effect, the Borrower has no material
contingent obligations not provided for or disclosed in the financial
statements referred to in Section 5.4.
1.35 Subsidiaries. Schedule "4" hereto contains an accurate list of
all Subsidiaries of the Borrower as of the date of this Agreement, setting
forth their respective jurisdictions of organization and the percentage of
their respective capital stock or other ownership interests owned by the
Borrower or other Subsidiaries. All of the issued and outstanding shares
of capital stock or other ownership interests of such Subsidiaries have
been (to the extent such concepts are relevant with respect to such
ownership interests) duly authorized and issued and are fully paid and non-
assessable.
1.36 ERISA. The Unfunded Liabilities of all Single Employer Plans
do not in the aggregate exceed $250,000. Neither the Borrower nor any
other member of the Controlled Group has incurred, or is reasonably
expected to incur, any withdrawal liability to Multi-employer Plans in
excess of $250,000 in the aggregate. Each Plan complies in all material
respects with all applicable requirements of law and regulations, no
Reportable Event has occurred with respect to any Plan, neither the
Borrower nor any other members of the Controlled Group has withdrawn from
any Plan or initiated steps to do so, and no steps have been taken to
reorganize or terminate any Plan.
1.37 Accuracy of Information. No information, exhibit or report
furnished by the Parent, Borrower or any of the Subsidiaries to the Agent
or to any Lender in connection with the negotiation of, or compliance with,
the Loan Documents contained any material misstatement of fact or omitted
to state a material fact or any fact necessary to make the statements
contained therein not misleading.
1.38 Regulation U. Margin stock (as defined in Regulation U)
constitutes less than 25% of the value of those assets of the Borrower and
its Subsidiaries which are subject to any limitation on sale, pledge, or
other restriction hereunder.
1.39 Material Agreements. Neither the Borrower nor any Subsidiary
is a party to any agreement or instrument or subject to any charter or
other corporate restriction which could reasonably be expected to have a
Material Adverse Effect. Neither the Borrower nor any Subsidiary is in
default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in (i) any agreement to
which it is a party, which default could reasonably be expected to have a
Material Adverse Effect or (ii) any agreement or instrument evidencing or
governing Indebtedness.
1.40 Compliance With Laws. The Borrower and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality
or agency thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property except for any
failure to comply with any of the foregoing which could not reasonably be
expected to have a Material Adverse Effect.
1.41 Ownership of Properties. Except as set forth on Schedule "5"
hereto, on the date of this Agreement, the Borrower and its Subsidiaries
will have good title, free of all Liens other than those permitted by
Section 6.15, to all of the Property and assets reflected in the financial
statements provided to the Agent as owned by the Borrower and its
Subsidiaries.
1.42 Plan Assets; Prohibited Transactions. The Borrower is not an
entity deemed to hold "plan assets" within the meaning of 29 C.F.R. S
2510.3-101 of an employee benefit plan (as defined in Section 3(3) of
ERISA) which is subject to Title I of ERISA or any plan (within the meaning
of Section 4975 of the Code), and neither the execution of this Agreement
nor the making of Loans hereunder gives rise to a prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the Code.
The Borrower is an "operating company" as defined in 29 CRR 2510-101 (c)
and "benefit plan investors" (as defined in 29 C.F.R. S 2510.3-101(f)) do
not own 25% or more of the value of any class of equity interests in the
Borrower.
1.43 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended.
1.44 Public Utility Holding Company Act. Neither the Borrower nor
any Subsidiary is 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", within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
1.45 GNMA, FHA, VA, FNMA, and FHLMC Eligibility. The Borrower is:
(i) an FHA-Approved Mortgagee in good standing, a VA-Approved Lender, a
FHLMC-Approved Lender and a FNMA-Approved Lender and meets all eligible
requirements of law and governmental regulation so as to be eligible to
originate, purchase, hold and service Mortgage Loans insured by FHA or
supporting any Security; (ii) an approved seller and servicer in good
standing of Mortgage Loans to each Federal Agency; and (iii) an approved
issuer and servicer in good standing of Securities for FHLMC, FNMA and GNMA
and meets all FHLMC, FNMA and GNMA requirements, requirements of law and
governmental regulations so as to be able to issue Securities and to
originate and service the Mortgage Loans that secure such Securities.
1.46 Approved Investor Commitments. The forms of Approved Investor
Commitment with respect to Mortgage Loans, other than Conforming Mortgage
Loans, which were delivered to the Agent on the Effective Date are still
valid and currently in use and, except to the extent new forms or changes
to the existing forms of Approved Investor Commitment have been delivered
to the Agent, represent the only forms of Approved Investor Commitment used
by the Borrower for such purposes.
ARTICLE II
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
1.47 Financial Reporting. The Borrower will maintain, for itself
and each Subsidiary, a system of accounting established and administered in
accordance with generally accepted accounting principles, and furnish to
the Lenders:
(i) Within 90 days after the close of each of its fiscal
years, an unqualified audit report certified by independent certified
public accountants, acceptable to the Lenders, prepared in
accordance with GAAP on a consolidated and consolidating basis
(consolidating statements need not be certified by such accountants)
for itself and the Subsidiaries, including balance sheets as of the
end of such period, related profit and loss and changes in
shareholders' equity statements, and a statement of cash flows,
accompanied by (a) any management letter prepared by said accountants
and (b) a certificate of said accountants that, in the course of
their examination necessary for their certification of the foregoing,
they have obtained no knowledge of any Default or Unmatured Default,
or if, in the opinion of such accountants, any Default or Unmatured
Default shall exist, stating the nature and status thereof.
(ii) Within 45 days after the close of the first three
quarterly periods of each of its fiscal years, for itself and its
Subsidiaries, consolidated and consolidating unaudited balance sheets
as at the close of each such period and consolidated and
consolidating profit and loss statements (showing a breakout of
servicing sales gains attributed to servicing originated in prior
periods), a statement of changes in shareholders equity and a
statement of cash flows for the period from the beginning of such
fiscal year to the end of such quarter, all certified (subject to
normal year-end adjustments) by its chief financial officer.
(iii) Together with the financial statements required under
Sections 6.1(i) and (ii), a compliance certificate in substantially
the form of Exhibit "F" hereto signed by its chief financial officer
showing the calculations necessary to determine compliance with this
Agreement as currently in effect (regardless of whether this
Agreement was in effect at the date for which such financial
statements were prepared) and that no Default or Unmatured Defaults
exists, or if any Default or Unmatured Default exists, stating the
nature and status thereof.
(iv) Within thirty (30) days after the end of each month
(other than a month which is the last month of a fiscal quarter or
year), (1)consolidated unaudited balance sheets and income statements
of the Borrower and its Subsidiaries as of the end of such month,
(2)a report setting forth the Leverage Ratio (as defined in Section
6.17.2 hereof) and Cumulative Cash Flow (as defined Section 6.17.4
hereof) as of the end of such month, each certified as to fairness of
presentation, GAAP and consistency by the chief financial officer of
the Borrower.
(v) As soon as available but in any event within forty-five
(45) days after the end of each calendar quarter, a production
information report detailing geographic mix of all retail and
correspondent production for the reference quarter and year-to-day.
(vi) As soon as available but in any event within fifteen (15)
days after the end of each month, a secondary marketing report for
such month reasonably satisfactory to the Agent including, without
limitation, the following information:
i) Commitment Position - detailing investor,
type, original principal amount, rate, price/yield,
and expiration date.
ii) Pipeline Position - amount and rate of price
committed loans in pipeline, future contracts,
hedged positions, repurchase agreements, and profit
& loss.
(vii) As soon as available, but in any event within ninety (90)
days after the beginning of each fiscal year of the Borrower, a copy
of the plan and forecast (including a projected consolidated summary
balance sheet and income statement) of the Borrower for such fiscal
year.
(viii) Within five (5) Business Days of submission thereof
by the Borrower, copies of all documents submitted in connection with
any audits by any of FNMA, FHLMC or GNMA; within ten (10) Business
Days of receipt thereof by the Borrower, copies of all compliance and
audit reports received from any of FNMA, FHLMC or GNMA; and promptly
upon receipt, a copy of any notice from (i) any Federal Agency to the
effect that it is or is contemplating withdrawing its approval of the
Borrower as a FHA-Approved Mortgagee, FHLMC-Approved Lender, FNMA-
Approved Lender or VA-Approved Lender or as an approved seller and
servicer for FNMA, FHLMC or GNMA or (ii) any private mortgage insurer
which insures any of the Collateral to the effect that it is
contemplating withdrawing its approval of the Borrower as an approved
originator of insured Mortgage Loans.
(ix) At any time that the Borrower has a Single Employer Plan,
within 270 days after the close of each fiscal year, a statement of
the Unfunded Liabilities of each Single Employer Plan, certified as
correct by an actuary enrolled under ERISA.
(x) As soon as possible and in any event within 10 days after
the Borrower knows that any Reportable Event has occurred with
respect to any Plan, a statement, signed by the chief financial
officer of the Borrower, describing said Reportable Event and the
action which the Borrower proposes to take with respect thereto.
(xi) As soon as possible and in any event within 10 days after
receipt by the Borrower, a copy of (a) any notice or claim to the
effect that the Borrower or any of its Subsidiaries is or may be
liable to any Person as a result of the release by the Borrower, any
of its Subsidiaries, or any other Person of any toxic or hazardous
waste or substance into the environment, and (b) any notice alleging
any violation of any federal, state or local environmental, health or
safety law or regulation by the Borrower or any of its Subsidiaries,
which, in either case, could reasonably be expected to have a
Material Adverse Effect.
(xv) Promptly upon the furnishing thereof to the shareholders
of the Borrower or the Parent, copies of all financial statements,
reports and proxy statements so furnished.
(xv) Promptly upon the filing thereof, copies of all
registration statements and annual, quarterly, monthly or other
regular reports which the Parent, the Borrower or any of its
Subsidiaries files with the Securities and Exchange Commission.
(xvi) Such other information (including non-financial
information) as the Agent or any Lender may from time to time
reasonably request.
1.48 Use of Proceeds. The Borrower will, and will cause each of the
Parent and each Subsidiary to, only use the proceeds of the Advances for
the purposes of the funding or purchasing of Mortgage Loans, of paying
interest, Fees, expenses and other Obligations and of repaying outstanding
Advances. The Borrower will not, nor will it permit any Subsidiary to, use
any of the proceeds of the Advances to purchase or carry any "margin stock"
(as defined in Regulation U) or to make any Acquisition (other than those
permitted by Section 6.14) or to make any Acquisition for which the board
of directors of the Person being acquired has not consented to such
Acquisition.
1.49 Notice of Default. The Borrower will, and will cause the
Parent and each Subsidiary to, give prompt notice in writing to the Lenders
of the occurrence of any Default or Unmatured Default and of any other
development, financial or otherwise, which could reasonably be expected to
have a Material Adverse Effect.
1.50 Conduct of Business. The Borrower will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is
presently conducted and to do all things necessary to remain duly
incorporated or organized, validly existing and (to the extent such concept
applies to such entity) in good standing as a domestic corporation,
partnership or limited liability company in its jurisdiction of
incorporation or organization, as the case may be, and maintain all
requisite authority to conduct its business in each jurisdiction in which
its business is conducted. The Borrower will adhere in all material
respects to customary practices and standards in the industry insofar as
adherence to such practices and standards would require the Borrower to
cause obligors whose indebtedness is secured by Pledged Mortgages to comply
with their obligations under such Pledged Mortgages with respect to the
real estate securing such indebtedness, including without limitation, the
payment of all taxes and insurance premiums related thereto and maintenance
of such real estate in compliance with all laws.
1.51 Taxes. The Borrower will, and will cause each Subsidiary to,
timely file complete and correct United States federal and applicable
foreign, state and local tax returns required by law and pay when due all
taxes, assessments and governmental charges and levies upon it or its
income, profits or Property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate
reserves have been set aside in accordance with GAAP.
1.52 Insurance. The Borrower will, and will cause each Subsidiary
to, maintain with financially sound and reputable insurance companies
insurance on all their Property in such amounts and covering such risks as
is consistent with sound business practice, and the Borrower will furnish
to any Lender upon request full information as to the insurance carried.
The Borrower will at all times, upon request of the Agent, furnish to the
Agent copies of its, and each of its Subsidiaries', current Mortgage
Bankers Blanket Bond and of its, and each of its Subsidiaries', insurance
policy containing errors and omissions coverage or mortgage impairment
coverage, and such Bonds and policies, to the extent possible, shall each
provide that it is not cancelable without thirty (30) days prior written
notice to the Agent.
1.53 Compliance with Laws. The Borrower will, and will cause each
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject,
including, without limitation, all Environmental Laws.
1.54 Maintenance of Properties. The Borrower will, and will cause
each Subsidiary to, do all things necessary to maintain, preserve, protect
and keep its Property in good repair, working order and condition, and
make all necessary and proper repairs, renewals and replacements so that
its business carried on in connection therewith may be properly conducted
at all times.
1.55 Inspection. The Borrower will, and will cause each Subsidiary
to, permit the Agent, the Collateral Agent and the Lenders, by their
respective representatives and agents, to inspect any of the Property,
books and financial records of the Borrower and each Subsidiary, to examine
and make copies of the books of accounts and other financial records of the
Borrower and each Subsidiary, and to discuss the affairs, finances and
accounts of the Borrower and each Subsidiary with, and to be advised as to
the same by, their respective officers at such reasonable times and
intervals as the Agent, the Collateral Agent or any Lender may designate.
1.56 Dividends. The Borrower will not, nor will it permit any
Subsidiary to, declare or pay any dividends or make any distributions on
its capital stock (other than dividends payable in its own capital stock)
or redeem, repurchase or otherwise acquire or retire any of its capital
stock at any time outstanding, except that (i) any Subsidiary may declare
and pay dividends or make distributions to the Borrower or to a Wholly-
Owned Subsidiary and (ii) provided that (a) no Default then exists
hereunder, (b) the applicable action would not cause a Default to exist and
(c) the applicable action is not likely to cause Leverage Ratio as of the
end of a month to exceed the limits specified in Section 6.17.2 hereof
regardless of the thirty (30) day period for Parent to inject additional
capital into the Borrower to reduce the Leverage Ratio, the Borrower may
declare and pay dividends or make distributions.
1.57 Indebtedness. The Borrower will not, nor will it permit any
Subsidiary to, create, incur or suffer to exist any Indebtedness, except:
(i) The Loans.
(ii) Indebtedness arising under Rate Management Transaction
related to the Loans having a Net Mark to Market Exposure not
exceeding $2,000,000.
(iii) Other Indebtedness not exceeding $250,000.
1.58 Merge. The Borrower will not, nor will it permit any
Subsidiary to, merge or consolidate with or into any other Person, except
that a Subsidiary may merge into the Borrower or a Wholly-Owned Subsidiary.
1.59 Sale of Assets. The Borrower will not, nor will it permit any
Subsidiary to, lease, sell or otherwise dispose of its Property, to any
other Person, except:
(i) Sales of Mortgage Loans and Securities in the ordinary
course of business.
(ii) Leases, sales or other dispositions of its Property that,
together with all other Property of the Borrower and its Subsidiaries
previously leased, sold or disposed of (other than Mortgage Loans and
Securities in the ordinary course of business) as permitted by this
Section during the twelve-month period ending with the month in which
any such lease, sale or other disposition occurs, do not constitute a
Substantial Portion of the Property of the Borrower and its
Subsidiaries.
1.60 Investments and Acquisitions. The Borrower will not, nor will
it permit any Subsidiary to, make or suffer to exist any Investments
(including without limitation, loans and advances to, and other Investments
in, Subsidiaries), or commitments therefor, or to create any Subsidiary or
to become or remain a partner in any partnership or joint venture, or to
make any Acquisition of any Person, except:
(i) Cash Equivalent Investments.
(ii) Existing Investments in Subsidiaries and other
Investments in existence on the date hereof and described in Schedule
"4" hereto.
(iii) Investments in the ordinary course of the Borrower's
mortgage banking business to purchase: (a) Mortgage Loans,
collateralized mortgage obligations and Securities (and in connection
with commitments to purchase the same); (b) servicing rights and
mortgage servicing contracts of another Person engaged in mortgage-
related businesses; and (c) real estate acquired by foreclosure.
(iv) Investments in the ordinary course of the Borrower's
mortgage banking business to enter into Rate Hedging Agreements to
the extent permitted pursuant to Section 6.11.
(v) Subject in each case to approval by Required Lenders,
Acquisitions of and Investments in Homebuyer's Mortgage, Inc. and any
other company engaged in the mortgage banking business which Borrower
wishes to acquire.
1.61 Liens. The Borrower will not, nor will it permit any
Subsidiary to, create, incur, or suffer to exist any Lien in, of or on the
Property of the Borrower or any of its Subsidiaries, except:
(i) Liens for taxes, assessments or governmental charges or
levies on its Property if the same shall not at the time be
delinquent or thereafter can be paid without penalty, or are being
contested in good faith and by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside
on its books".
(ii) Liens imposed by law, such as carriers', warehousemen's
and mechanics' liens and other similar liens arising in the ordinary
course of business which secure payment of obligations not more than
60 days past due.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other
social security or retirement benefits, or similar legislation.
(iv) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature
generally existing with respect to properties of a similar character
and which do not in any material way affect the marketability of the
same or interfere with the use thereof in the business of the
Borrower or the Subsidiaries.
(v) Liens existing on the date hereof and described in
Schedule "5" hereto.
(vi) Liens in favor of the Agent and the Collateral Agent, for
the benefit of the Lenders, granted pursuant to the Security
Agreement.
1.62 Affiliates. The Borrower will not, and will not permit any
Subsidiary to, enter into any transaction (including, without limitation,
the purchase or sale of any Property or service) with, or make any payment
or transfer to, any Affiliate (other than the occurrence of Indebtedness by
the Borrower or any Subsidiary to the Parent) except in the ordinary course
of business and pursuant to the reasonable requirements of the Borrower's
or such Subsidiary's business and upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than the Borrower or such
Subsidiary would obtain in a comparable arms-length transaction.
1.63 Financial Covenants.
1.63.1 Current Ratio. The Borrower will not permit, at any
time, the ratio of current assets to current liabilities of the Borrower
and its Subsidiaries on a consolidated basis to fall below 1.0 to 1.0, as
determined in accordance with GAAP. For purposes of determining this
ratio, current assets include cash (including restricted cash), mortgage
loans held for sale, accounts receivable, investment securities, and any
other assets which are expected to be converted into cash within a twelve
month period.
1.63.2 Leverage Ratio. The Borrower will not permit, as of the
end of any calendar month, the ratio of Total Liabilities to Consolidated
Tangible Net Worth to exceed 10.0 to 1.0 (the "Leverage Ratio"). If the
Borrower's Leverage Ratio as of the end of a month exceeds the respective
limits then Parent will inject sufficient capital into the Borrower to
reduce the Leverage Ratio to the permitted level within 30 days after the
end of such month, in which case no Default or Unmatured Default shall be
deemed to have occurred, provided that no dividends or distributions shall
be made by the Borrower during such thirty (30) day period as provided in
Section 6.10. Such injection may at Parent's option be in the form of
subordinated debt which shall at all times be subject to the terms of the
Subordination Agreement (which shall not have been revoked or cancelled) or
capital, and shall be completed no later than thirty days after the end of
the month. If the injection of capital is in the form of subordinated debt
such debt shall not be counted as a liability of the Borrower for purposes
of determining the Leverage Ratio. The Borrower shall supply Agent no
later than 45 days after the end of each month with a certificate
certifying that the Leverage Ratio did not exceed the specified limit for
such month or that the required injection of capital was made within thirty
days after the end of such month.
1.63.3 Net Worth. At all times, maintain a Consolidated
Tangible Net Worth of at least Six Million Dollars ($6,000,000).
1.63.4 Minimum Cash Flow. Permit, as of the end of any calendar
month ending after the date hereof, the Borrower's and its consolidated
Subsidiaries' consolidated cumulative Net Income (positive or negative) for
the twelve calendar month period ending on, and including, the last day of
such calendar month, minus the Borrower's and its consolidated
Subsidiaries' consolidated non-cash revenues and plus non-cash expenses
("Cumulative Cash Flow"), as determined in accordance with GAAP, for the
twelve calendar month period ending on, and including, the last day of such
calendar month to be less than zero.
1.64 Compliance with Security Agreement. The Borrower will not fail
to perform in any material respect any of its obligations under the
Security Agreement or enter into similar security agreements for Mortgage
Loans not included in Collateral with any Person other than the Collateral
Agent. The Borrower will direct the Collateral Agent to ship Collateral
only to Approved Investors or otherwise consistent with the provisions of
the Loan Documents.
1.65 Servicing Release. All Mortgage Loans sold by the Borrower
shall be sold on a servicing released basis, unless otherwise specifically
approved in writing by the Agent in its sole discretion.
1.66 Federal Agency Approvals. The Borrower (i)will maintain its
status as a FHA Approved Mortgagee, remain eligible to obtain VA guaranties
of Mortgage Loans and remain approved by each Federal Agency as a
seller/servicer and (ii)will not permit any Federal Agency to withdraw its
approval of the Borrower.
1.67 Approved Investor Commitments. The Borrower shall maintain
Approved Investor Commitments which cover all Pledged Mortgages and Pledged
Securities and perform all of its obligations in connection with such
Approved Investor Commitments.
1.68 Negative Pledges. The Borrower shall not enter into any
agreement pursuant to which it agrees (i)not to grant a lien to third
parties unless such provision allows for the lien of the Agent, the
Collateral Agent and the Lenders contemplated under the Loan Documents or
(ii)to grant another creditor a pari passu security interest in and to the
Collateral when a security interest is granted to the Agent, the Collateral
Agent and the Lenders pursuant to the Loan Documents.
1.69 MERS.
(i) The Borrower shall, (a) at all times, maintain its status
as a MERS Member, (b) at all times remain in full compliance all
terms and conditions of membership in MERS, including the MERSCORP,
Inc. "Rules of Membership" most recently promulgated by MERSCORP,
Inc., the "MERS Procedures Manual" most recently promulgated by MERS,
and any and all other guidelines or requirements set forth by MERS or
MERSCORP, as each of the foregoing may be modified from time to time,
including, but in no way limited to compliance with guidelines and
procedures set forth with respect to technological capabilities,
drafting and recordation of Mortgages, registration of Mortgages on
the MERS System, including registration of the interest of the Agent
and the Lenders in such mortgages and membership requirements, (c)
promptly, upon the request of the Agent, execute and deliver to the
Agent an assignment of mortgage, in blank, with respect to any MERS
Mortgage that the Agent determines shall be removed from the MERS
System and (d) at all time, upon the Registration of any Mortgage on
the MERS System, designate the Collateral Agent, as agent for the
Agent, in the Interim Funder category.
(ii) The Borrower shall not de-register or attempt to de-
register any Mortgage from the MERS System unless the Borrower has
complied with the requirements set forth in the Electronic Tracking
Agreement and the requirements hereof and the Security Agreement
relating to a release of Collateral.
1.70 Borrower and Lenders agree that no new advances shall be made
under the Bank One Agreement after the date hereof and such Persons hereby
authorize Bank One, NA, and Bank One, NA hereby agrees, to notify Agent of
the amount outstanding under the Bank One Agreement on each Business Day
until the Bank One Agreement is terminated.
ARTICLE II
DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
1.71 Any representation or warranty made or deemed made by or on
behalf of the Borrower or any of its Subsidiaries to the Lenders or the
Agent under or in connection with this Agreement, any Loan, or any
certificate or information delivered in connection with this Agreement or
any other Loan Document shall be materially false on the date as of which
made (it being understood that if any of the representations and warranties
made pursuant to the definition of "Borrowing Base" are not true and
correct as of any date with respect to any Pledged Item, such Pledged Item
shall be removed from Eligible Collateral as the sole remedy for such
failure).
1.72 Nonpayment of principal of any Loan when due (including but not
limited to payments required pursuant to Section 2.11.2 and Section
2.11.4), or nonpayment of interest upon any Loan or of any Fee or other
obligations under any of the Loan Documents within five days after the same
becomes due.
1.73 The breach by the Borrower of any of the terms or provisions of
Article VI Section 6.2, 6.10, 6.11, 6.12, 6.13, 6.14, 6.15, 6.17, 6.19,
6.20, 6.21 or 6.22; provided, however, that if the Borrower breaches
Section 6.21 as a result of an Approved Investor withdrawing or failing to
perform its obligations under a commitment covering a Pledged Mortgage or
Pledged Security, then Borrower shall have twenty-four hours to cure such
breach.
1.74 The breach by the Borrower (other than a breach which
constitutes a Default under another Section of this Article VII) of any of
the terms or provisions of this Agreement which is not remedied within
fifteen days after the earlier to occur of (i)receipt of written notice
from the Agent or any Lender of such breach or (ii)the date that the
Borrower obtains knowledge of such breach.
1.75 Failure of the Borrower or any of its Subsidiaries to pay when
due (beyond any applicable notice and cure period) any Indebtedness
aggregating in excess of $250,000 ("Material Indebtedness"); or the default
by the Borrower or any of its Subsidiaries in the performance beyond the
applicable grace period with respect thereto, if any of any term, provision
or condition contained in any agreement under which any such Material
Indebtedness was created or is governed, or any other event shall occur or
condition exist, the effect of which default or event is to cause, or to
permit the holder or holders of such Material Indebtedness to cause, such
Material Indebtedness to become due prior to its stated maturity; or any
Material Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable or required to be prepaid or repurchased
(other than by a regularly scheduled payment) prior to the stated maturity
thereof, or the Borrower or any of its Subsidiaries or Parent shall not
pay, or admit in writing its inability to pay, its debts generally as they
become due.
1.76 The Borrower, Parent or any of the Subsidiaries shall (i) have
an order for relief entered with respect to it under the Federal bankruptcy
laws as now or hereafter in effect, (ii)make an assignment for the benefit
of creditors, (iii)apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any Substantial Portion of its Property,
(iv)institute any proceeding seeking an order for relief under the Federal
bankruptcy laws as now or hereafter in effect or seeking to adjudicate it a
bankrupt or insolvent, or seeking dissolution, winding up, liquidation,
reorganization, arrangement, adjustment or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or
relief of debtors or fail to file an answer or other pleading denying the
material allegations of any such proceeding filed against it, (v)take any
corporate, partnership or other action to authorize or effect any of the
foregoing actions set forth in this Section 7.6 or (vi)fail to contest in
good faith any appointment or proceeding described in Section 7.7.
1.77 Without the application, approval or consent of the Borrower or
any of its Subsidiaries, or Parent a receiver, trustee, examiner,
liquidator or similar official shall be appointed for the Borrower or any
of its Subsidiaries or Parent or any Substantial Portion of its Property,
or a proceeding described in Section 7.6(iv) shall be instituted against
the Borrower or any of its Subsidiaries or Parent and such appointment
continues undischarged or such proceeding continues undismissed or unstayed
for a period of 30 consecutive days.
1.78 Any court, government or governmental agency shall condemn,
seize or otherwise appropriate, or take custody or control of all or any
portion of the Property of the Borrower and its Subsidiaries or Parent
which, when taken together with all other Property of the Borrower and its
Subsidiaries or Parent so condemned, seized, appropriated, or taken custody
or control of, during the twelve-month period ending with the month in
which any such action occurs, constitutes a Substantial Portion.
1.79 The Borrower or any of its Subsidiaries shall fail within 60
days to pay, bond or otherwise discharge one or more (i) judgments or
orders for the payment of money in excess of $250,000 the aggregate, or
(ii) non-monetary judgments or orders which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect,
which judgments, in any case, is/are not stayed on appeal or otherwise
being appropriately contested in good faith.
1.80 Any Change in Control shall occur.
1.81 The occurrence of any "default", as defined in any Loan
Document (other than this Agreement) or the breach of any of the terms or
provisions of any Loan Document (other than this Agreement), which default
or breach continues beyond any period of grace therein provided.
1.82 The Security Agreement shall for any reason fail to create a
valid and perfected first priority security interest in any collateral
purported to be covered thereby, except as permitted by the terms of the
Security Agreement, or the Security Agreement shall fail to remain in full
force or effect or any action shall be taken to discontinue or to assert
the invalidity or unenforceability of the Security Agreement, or the
Borrower shall fail to comply with any of the terms or provisions of the
Security Agreement.
1.83 The Unfunded Liabilities of all Single Employer Plans shall
exceed in the aggregate $250,000 or any Reportable Event shall occur in
connection with any Plan.
1.84 The Borrower or any other member of the Controlled Group shall
have been notified by the sponsor of a Multi-employer Plan that it has
incurred withdrawal liability to such Multi-employer Plan in an amount
which, when aggregated with all other amounts required to be paid to Multi-
employer Plans by the Borrower or any other member of the Controlled Group
as withdrawal liability (determined as of the date of such notification),
exceeds $250,000.
1.85 The Borrower or any of its Subsidiaries shall (i)be the subject
of any proceeding or investigation pertaining to the release by the
Borrower or any of its Subsidiaries or any other Person of any toxic or
hazardous waste or substance into the environment, or (ii)violate any
Environmental Law, which, in the case of an event described in clause (i)
and (ii), could reasonably be expected to have a Material Adverse Effect.
1.86 The Keep-Well or the Subordination Agreement shall fail to
remain in full force or effect or any action shall be taken to discontinue
or to assert the invalidity or unenforceability of the Keep-Well or the
Subordination Agreement, or the Parent shall fail to comply with any of the
terms or provisions of the Keep-Well or the Subordination Agreement, or the
Parent shall deny that it has any further liability under any the Keep-
Well, or shall give notice to such effect.
1.87 The representations and warranties set forth in "Section 5.15
Plan Assets; Prohibited Transactions" shall at any time not be true and
correct.
1.88 The Borrower and/or the Parent shall terminate its existence or
suspend or discontinue its business; or
1.89 The Parent shall be in default under any document evidencing or
relating to any Indebtedness of Parent greater than $1,000,000, beyond any
applicable notice and cure period provided in the documents evidencing such
Indebtedness; or
1.90 A change occurs, or is reasonably likely to occur, in the
Borrower's or Parent's business condition (financial or otherwise),
operations, properties or prospects, or ability to repay amounts owed to
the Agent and Lenders under the Loan Documents which could reasonably be
expected to have a Material Adverse Effect.
ARTICLE II
COLLATERAL, ACCELERATION AND OTHER REMEDIES
1.91 Security and Collateral Agency Agreement. Pursuant to the
Security Agreement, a security interest in and a continuing lien upon the
Collateral has been created in favor of the Collateral Agent for the
benefit of the Lenders.
1.92 AP Mortgages. The Borrower agrees that while it is in
possession of any Required Mortgage Documents for an AP Mortgage, it will
hold same in trust and as agent and bailee for the Collateral Agent,
without authority to make any other disposition thereof, or of the proceeds
thereof, except as may be otherwise permitted in writing by the Collateral
Agent. The Borrower assumes the responsibility for loss or destruction of
any such Required Mortgage Documents until the same are delivered to the
Collateral Agent.
1.93 Release of Collateral. Upon the request of the Borrower
delivered from time to time to the Agent and the Collateral Agent in
connection with the proposed sale of any Collateral, the Agent shall
authorize the Collateral Agent to release Collateral specified in such
notice from the lien of this Agreement, if, but only if, (i) at the time of
such release no Default shall have occurred and then be continuing, (ii)
the Borrowing Base, after giving effect to such release, is at least equal
to the Coverage Requirement or any payment under Section 2.9 which may be
required as a result of such release has been made and (iii) the release of
such Collateral will not create a violation of any Lending Sublimit or
Borrowing Base Sublimit.
1.94 Settlement and Funding Accounts. There is hereby established
with the Agent, for the benefit of the Lenders, a "cash collateral" account
of the Borrower, Account #3801990619 ("Settlement Account") into which
shall be deposited all cash proceeds from the sale of any Pledged Item and
which account shall be pledged as Collateral. All such cash proceeds shall
be deposited directly into the Settlement Account by the applicable
investor or purchaser of each Pledged Item and the Borrower agrees to give
notice of such to each such investor or purchaser. Only the Agent shall
have access to the Settlement Account. All amounts in the Settlement
Account shall be applied as described in Section 2.9.3. There is also
hereby established with the Agent, for the benefit of the Lenders, a second
account of the Borrower, Account #3801990627 ("Funding Account") into which
shall be deposited all Advances and from which all AP Mortgages shall be
funded (by wire transfer from such Funding Account) and which account shall
be pledged as Collateral.
1.95 Termination. If all Commitments under this Agreement shall
have expired or been terminated pursuant to the express terms hereof and no
Obligations shall be outstanding, the Agent shall promptly deliver or cause
to be delivered all cash standing to the credit of the Settlement Account
and Pledged Items to the Borrower. The receipt by the Borrower of any cash
in the Settlement Account and of all Pledged Items returned or delivered to
the Borrower pursuant to any provision of this Agreement, together with
UCC3 termination statements executed by the Agent, shall be a complete and
full acquittance for the Pledged Items so delivered.
1.96 Acceleration. If any Default described in Section 7.6 or 7.7
occurs with respect to the Borrower, the obligations of the Lenders to make
Loans hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the
part of the Agent or any Lender. If any other Default occurs, the Required
Lenders (or the Agent with the consent of the Required Lenders) may
(i)terminate or suspend the obligations of the Lenders to make Loans
hereunder and they shall, upon notice to the Borrower, terminate or be
suspended, and/or (ii)declare the Obligations to be due and payable,
whereupon the Obligations shall become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which the
Borrower hereby expressly waives.
1.97 Other Remedies.
(i) Unless a Default shall have occurred and then be
continuing, the Borrower shall be entitled to receive and collect
directly all sums payable to the Borrower in respect of the
Collateral except proceeds from the sale thereof.
(ii) Upon the occurrence of a Default, the Agent and the
Collateral Agent, on behalf of the Lenders, shall be entitled to all
the rights and remedies hereunder and in the Security Agreement,
subject to the limitations and requirements of Paragraph 16 thereof,
and all other rights or remedies at law or in equity existing or
conferred upon the Lenders by other jurisdictions or other applicable
law.
(iii) Following the occurrence and during the continuance of a
Default or an Unmatured Default, no Lender shall be obligated to fund
any Loan hereunder.
(iv) Following the occurrence a Default, the Borrower agrees
that the Borrower and the Agent shall, if the Agent shall request
implement certain procedures with respect to the Borrower's funding
of AP Mortgages, all at the Borrower's sole expense. Such procedures
may include, but are not limited to: (i) reducing the advance rate
against any Eligible Collateral for purposes of determining the
Collateral Value component of the Borrowing Base, (ii) requiring that
wire transfers from the Funding Account only be released upon the
secondary authorization of the Agent, (iii) requiring the closing
agents for such AP Mortgages to enter into escrow or other agreements
regarding the monies used to fund such AP Mortgages, and (iv)
requiring the Borrower to provide the Agent and the Lenders with such
information regarding the funding of such AP Mortgages as the Agent
may reasonably request. The Borrower, at its expense, shall from
time to time execute and deliver to the Agent or the Collateral Agent
all such assignments, certificates, supplemental documents, and
financing statements, and shall do all other acts or things, as the
Agent may reasonably request in order to more fully implement such
procedures.
(v) The Borrower waives, to the extent permitted by law, any
right to require the Agent or any Lender to (i) proceed against any
Person, (ii) proceed against or exhaust any of the Collateral or
pursue its rights and remedies as against the Collateral in any
particular order or (iii) pursue any other remedy in its power.
(vi) The Agent on behalf of the Lenders may, but shall not be
obligated to, advance any sums or do any act or thing necessary to
uphold and enforce the lien and priority of, or the security intended
to be afforded by, any Pledged Item, including, without limitation,
payment of delinquent taxes or assessments and insurance premiums.
The Borrower shall provide any and all information required by the
Agent to administer this Agreement or collect on the Collateral. All
advances, charges, costs and expenses, including reasonable attorneys
fees, incurred or paid by the Agent in exercising any right, power or
remedy conferred by this Agreement, or in the enforcement hereof (or
by any Lender acting on instruction of the Required Lenders in the
enforcement hereof), together with interest thereon at the rate per
annum of 2% plus the Alternate Base Rate from the time of payment
until repaid, shall become a part of the Obligations.
(vii) Following the occurrence of a Default and the
acceleration of the Obligations the Agent shall be entitled to
receive and collect all sums payable to the Borrower in respect of
the Collateral and (a) the Agent, at the request of the Required
Lenders, may in its own name or in the name of the Borrower or
otherwise, demand, sue for, collect or receive any money or property
at any time payable or receivable on account of or in exchange for
any of the Collateral, (b) the Borrower shall receive and hold in
trust for the Lenders any amounts thereafter received by the Borrower
upon or in respect of any of the Collateral, advising the Agent as to
the source of such funds and, if the Agent so requests at the
direction of the Required Lenders, forthwith paying such amounts to
the Agent, and (c) any and all amounts so received and collected by
the Agent either directly or from the Borrower shall be deposited in
the Settlement Account.
1.98 Application of Proceeds. After a Default and acceleration of
the Obligations, the proceeds of any sale or enforcement of all or any part
of the Collateral pursuant to the Security Agreement and the balance of any
moneys in the Settlement Account and the Funding Account shall be applied
by the Agent:
FIRST, to the payment of all costs and expenses of such sale or
enforcement, including reasonable compensation to the Agent's agents
and counsel, and all expenses, liabilities and advances made or
incurred by the Agent or any Lender acting on instructions of the
Required Lenders in connection therewith;
SECOND, to the payment of all costs and expenses incurred by
the Collateral Agent under the Security Agreement;
THIRD, to the payment of the outstanding principal balance of,
and all accrued and unpaid interest on and Fees attributable to, all
Loans under this Agreement, ratably according to the amount so due to
each Lender;
FOURTH, to the extent proceeds remain after application under
the preceding subparagraphs, to the payment of all remaining
Obligations, until such amounts are paid in full; and
FIFTH, to the payment to the Borrower, or to its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
The Agent shall have absolute discretion as to the time of
application of any such proceeds, moneys or balances in accordance with
this Agreement. If the proceeds of any such sale are insufficient to cover
the costs and expenses of such sale, as aforesaid, and the payment in full
of the Obligations, the Borrower shall remain liable for any deficiency.
1.99 Preservation of Rights. No delay or omission of the Lenders or
the Agent to exercise any right under the Loan Documents shall impair such
right or be construed to be a waiver of any Default or an acquiescence
therein, and the making of a Loan notwithstanding the existence of a
Default or the inability of the Borrower to satisfy the conditions
precedent to such Loan shall not constitute any waiver or acquiescence.
Any single or partial exercise of any such right shall not preclude other
or further exercise thereof or the exercise of any other right, and no
waiver, amendment or other variation of the terms, conditions or provisions
of the Loan Documents whatsoever shall be valid unless in writing signed by
the Lenders required pursuant to Section 9.1, and then only to the extent
in such writing specifically set forth. All remedies contained in the Loan
Documents or by law afforded shall be cumulative and all shall be available
to the Agent and the Lenders until the Obligations have been paid in full.
ARTICLE II
AMENDMENTS; WAIVERS; GENERAL PROVISIONS
1.100 Amendments and Waivers. Other than (a) Commitment increases
pursuant to Section 12.4 (which may be accomplished solely by the Borrower,
the Agent and the subject Lender) and (b) temporary waivers of Collateral
eligibility permitted pursuant to the definition of "Borrowing Base" (which
may be accomplished solely by the Agent), the Required Lenders (or the
Agent with the consent in writing of the Required Lenders) and the Borrower
may enter into agreements supplemental hereto for the purpose of adding or
modifying any provisions to the Loan Documents or changing in any manner
the rights of the Lenders or the Borrower hereunder or waiving any Default
hereunder; provided, however, that no such supplemental agreement shall,
without the consent of each Lender directly or indirectly affected thereby:
(i) Extend the final maturity of any Loan or postpone
any regularly scheduled payment of principal of any Loan
or forgive all or any portion of the principal amount
thereof, or reduce the rate or extend the time of payment
of interest or fees thereon.
(ii) Reduce the percentage specified in the definition
of Required Lenders.
(iii) Extend the Termination Date, or reduce the amount
of or extend the payment date for the mandatory payments
required under Section 2.9, or increase the amount of the
Aggregate Commitment or of the Commitment of any Lender
hereunder (other than in accordance with Section 12.4).
(iv) Amend this Section 9.1.
(v) Release any guarantor of any Advance or, except as
provided herein or in the Security Agreement, release any
Collateral.
(vi) Amend the definition of "Borrowing Base" or
"Collateral Value".
(vii) Permit the Borrower to assign its rights under this
Agreement or amend or waive any restriction on the
Borrower's ability to assign its rights or obligations
under any of the Loan Documents.
(viii) Amend or waive any Lending Sublimits or Borrowing
Base Sublimits.
(ix) Amend or waive any provision herein regarding the
indemnification of the Agent, the Collateral Agent or any
Lender.
(x) Amend or waive any provision herein regarding the
allocation among the Lenders of any payments or proceeds
received by the Agent hereunder.
No amendment of any provision of this Agreement relating to the Agent or
the Collateral Agent shall be effective without the written consent of the
Agent or the Collateral Agent, as the case may be. In addition, the
consent of the Collateral Agent shall be required for the effectiveness of
any amendment referred to in Section 9.1 (iv), (v), (vi), (viii) and/or
(ix) above. The Agent may waive payment of the fee required under Section
12.3.2 without obtaining the consent of any other party to this Agreement.
1.101 Survival of Representations. All representations and
warranties of the Borrower contained in this Agreement shall survive the
making of the Loans herein contemplated.
1.102 Governmental Regulation. Anything contained in this Agreement
to the contrary notwithstanding, no Lender shall be obligated to extend
credit to the Borrower in violation of any limitation or prohibition
provided by any applicable statute or regulation.
1.103 Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of
any of the provisions of the Loan Documents.
1.104 Entire Agreement. The Loan Documents embody the entire
agreement and understanding among the Borrower, the Agent, the Collateral
Agent and the Lenders and supersede all prior agreements and understandings
among the Borrower, the Agent and the Lenders relating to the subject
matter thereof, other than the fee letter described in Section 2.5.2 and
any other agreement entered into in connection with the fees described in
Section 2.5.3.
1.105 Several Obligations; Benefits of this Agreement. The
respective obligations of the Lenders hereunder are several and not joint
and no Lender shall be the partner or agent of any other (except to the
extent to which the Agent is authorized to act as such). The failure of
any Lender to perform any of its obligations hereunder shall not relieve
any other Lender from any of its obligations hereunder. This Agreement
shall not be construed so as to confer any right or benefit upon any Person
other than the parties to this Agreement and their respective successors
and assigns, provided, however, that the parties hereto expressly, agree
that the Collateral Agent shall enjoy the benefits of the provisions of
Sections 9.1, 9.7 and 9.8 to the extent specifically set forth therein and
shall have the right to enforce such provisions on its own behalf and in
its own name to the same extent as if it were a party to this Agreement.
1.106 Expenses; Indemnification. (i)The Borrower shall reimburse the
Agent, the Arranger and the Collateral Agent for any costs, internal
charges and out-of-pocket expenses (including reasonable attorneys' fees
and time charges of attorneys for the Agent and the Collateral Agent, which
attorneys may be employees of the Agent or the Collateral Agent) paid or
incurred by the Agent or the Collateral Agent in connection with the
preparation, negotiation, execution, delivery, syndication, review,
amendment, modification, and administration of the Loan Documents. The
Borrower also agrees to reimburse the Agent, the Collateral Agent and the
Lenders for any costs, internal charges and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Agent, the
Collateral Agent and the Lenders, which attorneys may be employees of the
Agent, the Collateral Agent or the Lenders) paid or incurred by the Agent,
the Collateral Agent or any Lender in connection with the collection and
enforcement of the Loan Documents. Expenses being reimbursed by the
Borrower under this Section include, without limitation, costs and expenses
incurred in connection with the Reports described in the following
sentence. The Borrower acknowledges that from time to time Guaranty Bank
may prepare and may distribute to the Lenders (but shall have no obligation
or duty to prepare or to distribute to the Lenders) certain audit reports
(the "Reports") pertaining to the Borrower's assets for internal use by
Guaranty Bank from information furnished to it by or on behalf of the
Borrower, after Guaranty Bank has exercised its rights of inspection
pursuant to this Agreement.
(ii) The Borrower hereby further agrees to indemnify the
Agent, the Collateral Agent and each Lender, their respective affiliates,
and each of their directors, officers and employees against all losses,
claims, damages, penalties, judgments, liabilities and expenses (including,
without limitation, all expenses of litigation or preparation therefor
whether or not the Agent, the Collateral Agent, any Lender or any affiliate
is a party thereto) which any of them may pay or incur arising out of or
relating to this Agreement, the other Loan Documents, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Loan hereunder, including the foregoing
to the extent that they result from the negligence of the party seeking
indemnification but excluding the foregoing to the extent that they are
determined in a final and non-appealable judgment by a court of competent
jurisdiction to have resulted from the gross negligence or willful
misconduct of the party seeking indemnification. The obligations of the
Borrower under this Section 9.7 shall survive the termination of this
Agreement.
1.107 Nonliability of Lenders. The relationship between the Borrower
on the one hand and the Lenders, the Agent and the Collateral Agent on the
other hand shall be solely that of borrower and lender. Neither the Agent,
the Collateral Agent nor any Lender shall have any fiduciary
responsibilities to the Borrower. Neither the Agent, the Collateral Agent
nor any Lender undertakes any responsibility to the Borrower to review or
inform the Borrower of any matter in connection with any phase of the
Borrower's business or operations. The Borrower agrees that neither the
Agent, the Collateral Agent nor any Lender shall have liability to the
Borrower (whether sounding in tort, contract or otherwise) for losses
suffered by the Borrower in connection with, arising out of, or in any way
related to, the transactions contemplated and the relationship established
by the Loan Documents, or any act, omission or event occurring in
connection therewith, unless it is determined in a final and non-appealable
judgment by a court of competent jurisdiction that such losses resulted
from the gross negligence or willful misconduct of the party from which
recovery is sought. Neither the Agent, the Collateral Agent nor any Lender
shall have any liability with respect to, and the Borrower hereby waives,
releases and agrees not to sue for, any special, indirect or consequential
damages suffered by the Borrower in connection with, arising out of, or in
any way related to the Loan Documents or the transactions contemplated
thereby.
1.108 Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable,
or invalid without affecting the remaining provisions in that jurisdiction
or the operation, enforceability, or validity of that provision in any
other jurisdiction, and to this end the provisions of all Loan Documents
are declared to be severable.
1.109 Numbers of Documents. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Agent with
sufficient counterparts so that the Agent may furnish one to each of the
Lenders.
1.110 Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP, except that
any calculation or determination which is to be made on a consolidated
basis shall be made for the Borrower and all its Subsidiaries, including
those Subsidiaries, if any, which are unconsolidated on the Borrower's
audited financial statements.
1.111 Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this
Agreement in confidence, except for disclosure (i) to its Affiliates and to
other Lenders and their respective Affiliates, (ii) to legal counsel,
accountants, and other professional advisors to such Lender or to a
Transferee, (iii) to regulatory officials, (iv) to any Person as requested
pursuant to or as required by law, regulation, or legal process, (v) to any
Person in connection with any legal proceeding to which such Lender is a
party, (vi) to such Lender's direct or indirect contractual counterparties
in swap agreements or to legal counsel, accountants and other professional
advisors to such counterparties, (vii)permitted by Section 12.5 and (viii)
to rating agencies if requested or required by such agencies in connection
with a rating of such lender or an Affiliate of such Lender.
1.112 Nonreliance. Each Lender hereby represents that it is not
relying on or looking to any margin stock (as defined in Regulation U of
the Board of Governors of the Federal Reserve System) for the repayment of
the Loans provided for herein.
1.113 Disclosure. The Borrower and each Lender hereby (i)
acknowledge and agree that Bank One and/or its Affiliates from time to time
may hold investments in, make other loans to or have other relationships
with the Parent, the Borrower and their respective Affiliates, and (ii)
waive any liability of Guaranty Bank or such Affiliate to the Parent, the
Borrower or any Lender, respectively, arising out of or resulting from such
investments, loans or relationships other than liabilities arising out of
the gross negligence or willful misconduct of Guaranty Bank or its
Affiliates.
ARTICLE II
THE AGENT AND THE COLLATERAL AGENT
1.114 Appointment; Nature of Relationship. Guaranty Bank is hereby
appointed by each of the Lenders as its contractual representative (herein
referred to as the "Agent") hereunder and under each other Loan Document,
and each of the Lenders irrevocably authorizes the Agent to act as the
contractual representative of such Lender with the rights and duties
expressly set forth herein and in the other Loan Documents. The Agent is
hereby authorized to enter into the Security Agreement thereby appointing
the Collateral Agent to act on behalf of the Lenders and all obligations of
the Lenders under the Security Agreement shall be binding upon each Lender
as if such Lender had executed the Security Agreement. The Agent agrees to
act as such contractual representative upon the express conditions
contained in this Article X. Notwithstanding the use of the defined term
"Agent" throughout the Agreement, it is expressly understood and agreed
that the Agent shall have not have any fiduciary responsibilities to any
Lender by reason of this Agreement or any other Loan Document and that the
Agent is merely acting as the representative of the Lenders with only those
duties as are expressly set forth in this Agreement and the other Loan
Documents. In its capacity as the Lenders' contractual representative, the
Agent (i) does not hereby assume any fiduciary duties to any of the
Lenders, (ii) is a "representative" of the Lenders within the meaning of
the term "secured party" as defined in the Illinois Uniform Commercial Code
as in effect from time to time and (iii) is acting as an independent
contractor, the rights and duties of which are limited to those expressly
set forth in this Agreement and the other Loan Documents. Each of the
Lenders hereby agrees to assert no claim against the Agent on any agency
theory or any other theory of liability for breach of fiduciary duty, all
of which claims each Lender hereby waives.
1.115 Powers. The Agent shall have and may exercise such powers
under the Loan Documents as are specifically delegated to the Agent by the
terms of each thereof, together with such powers as are reasonably
incidental thereto. The Agent shall have no implied duties to the Lenders,
or any obligation to the Lenders to take any action thereunder except any
action specifically provided by the Loan Documents to be taken by the
Agent.
1.116 General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders
or any Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith, whether sounding in tort, contract or otherwise except to the
extent such action or inaction is determined in a final non-appealable
judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.
1.117 No Responsibility for Loans, Recitals, etc. Neither the Agent
nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (i)
any statement, warranty or representation made in connection with any Loan
Document or any borrowing hereunder; (ii) the performance or observance of
any of the covenants or agreements of any obligor under any Loan Document,
including, without limitation, any agreement by an obligor to furnish
information directly to each Lender; (iii) the satisfaction of any
condition specified in Article IV, except receipt of items required to be
delivered solely to the Agent; (iv) the existence or possible existence of
any Default or Unmatured Default; (v) the validity, enforceability,
effectiveness, sufficiency or genuineness of any Loan Document or any other
instrument or writing furnished in connection therewith; (vi) the value,
sufficiency, creation, perfection or priority of any Lien in any collateral
security; or (vii) the financial condition of the Borrower or any guarantor
of any of the Obligations or of any of the Borrower's or any such
guarantor's respective Subsidiaries. The Agent shall have no duty to
disclose to the Lenders information that is not required to be furnished by
the Borrower to the Agent at such time, but is voluntarily furnished by the
Borrower to the Agent (either in its capacity as Agent or in its individual
capacity).
1.118 Action on Instructions of Lenders. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder
and under any other Loan Document in accordance with written instructions
signed by the Required Lenders, and such instructions and any action taken
or failure to act pursuant thereto shall be binding on all of the Lenders.
The Lenders hereby acknowledge that the Agent shall be under no duty to
take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement or any other Loan Document unless it shall be
requested in writing to do so by the Required Lenders. The Agent shall be
fully justified in failing or refusing to take any action hereunder and
under any other Loan Document unless it shall first be indemnified to its
satisfaction by the Lenders pro rata against any and all liability, cost
and expense that it may incur by reason of taking or continuing to take any
such action.
1.119 Employment of Agents and Counsel. The Agent may execute any of
its duties as Agent hereunder and under any other Loan Document by or
through employees, agents, and attorneys-in-fact and shall not be
answerable to the Lenders, except as to money or securities received by it
or its authorized agents, for the default or misconduct of any such agents
or attorneys-in-fact selected by it with reasonable care. The Agent shall
be entitled to advice of counsel concerning the contractual arrangement
between the Agent and the Lenders and all matters pertaining to the Agent's
duties hereunder and under any other Loan Document.
1.120 Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and
correct and to have been signed or sent by the proper person or persons,
and, in respect to legal matters, upon the opinion of counsel selected by
the Agent, which counsel may be employees of the Agent.
1.121 Agent's Reimbursement and Indemnification. The Lenders agree
to reimburse and indemnify the Agent ratably in proportion to their
respective Commitments (or, if the Commitments have been terminated, in
proportion to their Commitments immediately prior to such termination) (i)
for any amounts not reimbursed by the Borrower for which the Agent is
entitled to reimbursement by the Borrower under the Loan Documents, (ii)
for any other expenses incurred by the Agent on behalf of the Lenders, in
connection with the preparation, execution, delivery, administration and
enforcement of the Loan Documents (including, without limitation, for any
expenses incurred by the Agent in connection with any dispute between the
Agent and any Lender or between two or more of the Lenders) and (iii) for
any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the
Agent in any way relating to or arising out of the Loan Documents or any
other document delivered in connection therewith or the transactions
contemplated thereby (including, without limitation, for any such amounts
incurred by or asserted against the Agent in connection with any dispute
between the Agent and any Lender or between two or more of the Lenders), or
the enforcement of any of the terms of the Loan Documents or of any such
other documents, provided that (i) no Lender shall be liable for any of the
foregoing to the extent any of the foregoing is found in, a final non-
appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the Agent and (ii) any
indemnification required pursuant to Section 3.5(vii) shall,
notwithstanding the provisions of this Section 10.8, be paid by the
relevant Lender in accordance with the provisions thereof The obligations
of the Lenders under this Section 10.8 shall survive payment of the
Obligations and termination of this Agreement.
1.122 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Unmatured Default
hereunder unless the Agent has received written notice from a Lender or the
Borrower referring to this Agreement describing such Default or Unmatured
Default and stating that such notice is a "notice of default". In the
event that the Agent receives such a notice, the Agent shall give prompt
notice thereof to the Lenders.
1.123 Rights as a Lender. In the event the Agent is a Lender, the
Agent shall have the same rights and powers hereunder and under any other
Loan Document with respect to its Commitment and its Loans as any Lender
and may exercise the same as though it were not the Agent, and the term
"Lender" or "Lenders" shall, at any time when the Agent is a Lender, unless
the context otherwise indicates, include the Agent in its individual
capacity. The Agent and its Affiliates may accept deposits from, lend
money to, and generally engage in any kind of trust, debt, equity or other
transaction, in addition to those contemplated by this Agreement or any
other Loan Document, with the Borrower or any of its Subsidiaries in which
the Borrower or such Subsidiary is not restricted hereby from engaging with
any other Person. The Agent, in its individual capacity, is not obligated
to be or remain a Lender.
1.124 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger or any
other Lender and based on the financial statements prepared by the Borrower
and such other documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement and the
other Loan Documents. Each Lender also acknowledges that it will,
independently and without reliance upon the Agent, the Arranger or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement and the other Loan
Documents.
1.125 Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, such resignation to
be effective upon the appointment of a successor Agent or, if no successor
Agent has been appointed, forty-five days after the retiring Agent gives
notice of its intention to resign. Upon any such resignation, the Required
Lenders shall have the right to appoint, on behalf of the Borrower and the
Lenders, a successor Agent. If no successor Agent shall have been so
appointed by the Required Lenders within thirty days after the resigning
Agent's giving notice of its intention to resign, then the resigning Agent
may appoint, on behalf of the Borrower and the Lenders, a successor Agent.
Notwithstanding the previous sentence, the Agent may at any time without
the consent of the Borrower or any Lender, appoint any of its Affiliates
which is a commercial bank as a successor Agent hereunder. If the Agent
has resigned and no successor Agent has been appointed, the Lenders may
perform all the duties of the Agent hereunder and the Borrower shall make
all payments in respect of the Obligations to the applicable Lender and for
all other purposes shall deal directly with the Lenders. No successor
Agent shall be deemed to be appointed hereunder until such successor Agent
has accepted the appointment. Any such successor Agent shall be a
commercial bank having capital and retained earnings of at least
$100,000,000. 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
resigning Agent. Upon the effectiveness of the resignation of the Agent,
the resigning Agent shall be discharged from its duties and obligations
hereunder and under the Loan Documents. After the effectiveness of the
resignation of an Agent, the provisions of this Article X shall continue in
effect for the benefit of such Agent in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent hereunder and
under the other Loan Documents. In the event that there is a successor to
the Agent by merger, or the Agent assigns its duties and obligations to an
Affiliate pursuant to this Section 10.12, then the term "'Prime Rate" as
used in this Agreement shall mean the prime rate, base rate or other
analogous rate of the new Agent.
1.126 Delegation to Affiliates. The Borrower and the Lenders agree
that the Agent may delegate any of its duties under this Agreement to any
of its Affiliates. Any such Affiliate (and such Affiliate's directors,
officers, agents and employees) which performs duties in connection with
this Agreement shall be entitled to the same benefits of the
indemnification, waiver and other protective provisions to which the Agent
is entitled under Articles IX and X.
1.127 Collateral Releases. The Lenders hereby empower and authorize
the Agent to execute and deliver to the Borrower on their behalf any
agreements, documents or instruments as shall be necessary or appropriate
to effect any releases of Collateral which shall be permitted by the terms
hereof or of any other Loan Document or which shall otherwise have been
approved by the Required Lenders (or, if required by the terms of Section
9.1, all of the Lenders) in writing.
ARTICLE II
SETOFF; RATABLE PAYMENTS
1.128 Setoff. In addition to, and without limitation of, any rights
of the Lenders under applicable law,
1.129 If the Borrower becomes insolvent, however evidenced, or any
Default occurs, any and all deposits (including all account balances,
whether provisional or final and whether or not collected or available) and
any other Indebtedness at any time held or owing by any Lender or any
Affiliate of any Lender to or for the credit or account of the Borrower may
be offset and applied toward the payment of the Obligations owing to such
Lender, whether or not the Obligations, or any part hereof, shall then be
due.
1.130 Ratable Payments. If any Lender, whether by setoff or
otherwise, has payment made to it upon its Loans (other than payments
received pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion
than that received by any other Lender, such Lender agrees, promptly upon
demand, to purchase a portion of the Loans held by the other Lenders so
that after such purchase each Lender will hold its ratable proportion of
Loans. If any Lender, whether in connection with setoff or amounts which
might be subject to setoff or otherwise, receives collateral or other
protection for its Obligations or such amounts which may be subject to
setoff, such Lender agrees, promptly upon demand, to take such action
necessary such that all Lenders share in the benefits of such collateral
ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments
shall be made.
1.131 Custodial Accounts. The Borrower agrees that funds received
and held by the Borrower as custodian for FNMA, GNMA or other mortgage
pools which are deposited into accounts with any Lender shall be clearly
identified as custodial accounts, and each Lender agrees that each
provision of the foregoing subsections of this Article XI shall not apply
to such custodial accounts. The Borrower shall not deposit any of its
general funds in any custodial accounts or otherwise commingle funds in any
custodial accounts.
ASSIGNMENTS; PARTICIPATIONS; COMMITMENT INCREASES
1.132 Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower
and the Lenders and their respective successors and assigns, except that
(i) the Borrower shall not have the right to assign its rights or
obligations under the Loan Documents and (ii) and assignment by any Lender
must be made in compliance with Section 12.3. The parties to this
Agreement acknowledge that clause (ii) of this Section 12.1 relates only to
absolute assignments and does not prohibit assignments creating security
interests, including, without limitation, any pledge or assignment by any
Lender of all or any portion of its rights under this Agreement and any
Note to a Federal Reserve Bank; provided, however, that no such pledge or
assignment creating a security interest shall release the transferor Lender
from its obligations hereunder unless and until the parties hereto have
complied with the provisions of Section 12.3. The Agent may treat the
Person which made any Loan or which holds any Note as the owner thereof for
all purposes hereof unless and until such Person complies with Section
12.3, provided, however, that the Agent may in its discretion (but shall
not be required to) follow instructions from the Person which made any Loan
or which holds any Note to direct payments relating to such Loan or Note to
another Person. Any assignee of the rights to any Loans or any Note agrees
by acceptance of such transfer or assignment to be bound by all the terms
and provisions of the Loan Documents. Any request, authority or consent of
any Person, who at the time of making such request or giving such authority
or consent is the owner of the Rights to any Loan (whether or not a Note
has been issued in evidence thereof), shall be conclusive and binding on
any subsequent holder, or assignee of the rights to such Loan.
1.133 Participations.
1.133.1 Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at
any time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Note held by
such Lender, any Commitment of such Lender or any other interest of such
Lender under the Loan Documents. In the event of any such sale by a Lender
of participating interests to a Participant, such Lender's obligations
under the Loan Documents shall remain unchanged, such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, such Lender shall remain the owner of its Loans and the holder
of any Note issued to it in evidence thereof for all purposes under the
Loan Documents, all amounts payable by the Borrower under this Agreement
shall be determined as if such Lender had not sold such participating
interests, and the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents.
1.133.2 Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than
any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees payable
with respect to any such Loan or Commitment, extends the Termination Date,
postpones any date fixed for any regularly-scheduled payment of principal
of, or interest or fees on, any such Loan or Commitment, releases any
guarantor of any such Loan or releases all or substantially all of the
Collateral (other than as expressly permitted pursuant to the Loan
Documents).
1.133.3 Benefit of Setoff. The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in Section
11.1 in respect of its participating interest in amounts owing under the
Loan Documents to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under the Loan Documents,
provided that each Lender shall retain the right of setoff provided in
Section 11.1 with respect to the amount of participating interests sold to
each Participant. The Lenders agree to share with each Participant, and
each Participant, by exercising the right of setoff provided in Section
11.1, agrees to share with each Lender, any amount received pursuant to the
exercise of its right of setoff, such amounts to be shared in accordance
with Section 11.2 as if each Participant were a Lender.
1.134 Assignments.
1.134.1 Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time
assign to one or more banks or other entities ("Purchasers") all or any
part of its rights and obligations under the Loan Documents. Such
assignment shall be substantially in the form of Exhibit "J' hereto or in
such other form as may be agreed to by the parties thereto. The consent of
the Borrower and the Agent shall be required prior to an assignment
becoming effective with respect to a Purchaser which is not a Lender or an
Affiliate thereof, provided, however, that if a Default has occurred and is
continuing, the consent of the Borrower shall not be required. Such
consent shall not be unreasonably withheld or delayed. Each such
assignment shall (unless it is to a Lender or an Affiliate thereof or each
of the Borrower and the Agent otherwise consents) be in an amount not less
than the lesser of (i) $10,000,000 or (ii) the remaining amount of the
assigning Lender's Commitment (calculated as at the date of such
assignment).
1.134.2 Effect; Effective Date. Upon (i) delivery to the Agent
of a notice of assignment, substantially in the form attached as Annex "I"
to Exhibit "J' hereto (a "Notice of Assignment"), together with any
consents required by Section 12.3.1, and (ii) payment of a $3,500 fee to
the Agent for processing such assignment, such assignment shall become
effective on the effective date specified in such Notice of Assignment.
The Notice of Assignment shall contain a representation by the Purchaser to
the effect that none of the consideration used to make the purchase of the
Commitment and Loans under the applicable assignment agreement are "plan
assets" as defined under ERISA and that the rights and interests of the
Purchaser in and under the Loan Documents will not be "plan assets" under
ERISA. On and after the effective date of such assignment, such Purchaser
shall for all purposes be a Lender party to this Agreement and any other
Loan Document executed by or on behalf of the Lenders and shall have all
the rights and obligations of a Lender under the Loan Documents, to the
same extent as if it were an original party hereto, and no further consent
or action by the Borrower, the Lenders or the Agent shall be required to
release the transferor Lender with respect to the percentage of the
Aggregate Commitment and Loans assigned to such Purchaser. Upon the
consummation of any assignment to a Purchaser pursuant to this Section
12.3.2, the transferor Lender, the Agent and the Borrower shall, if the
transferor Lender or the Purchaser desires that its Loans be evidenced by
Notes, make appropriate arrangements so that new Notes or, as appropriate
replacement Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each case
in principal amounts reflecting their respective Commitments, as adjusted
pursuant to such assignment. In addition, within a reasonable time after
the effective date of any assignment, the Agent shall, and is hereby
authorized and directed to, revise Schedule "2' reflecting the revised
commitments and percentages of each of the Lenders and shall distribute
such revised Schedule "2' to each of the Lenders and the Borrower,
whereupon such revised Schedule shall replace the old Schedule and become
part of this Agreement.
1.135 Commitment Increases.
1.135.1 Increases to Aggregate Commitment. The Borrower shall
have the right to increase the Aggregate Commitment by obtaining additional
Commitments, either from one or more of the Lenders or another lending
institution provided that (A) the Agent has approved the identity of any
such new Lender, such approval not to be unreasonably withheld, (B) any
such new Lender assumes all of the rights and obligations of a "Lender"
hereunder, and (C) the procedure described in Section 12.4.2 has been
complied with, provided further that the Aggregate Commitment shall not at
any time exceed $150,000,000 without the approval of the Agent and all of
the Lenders.
1.135.2 Procedure for Increases and Addition of New Lenders.
This Agreement permits certain increases in a Lender's Commitment and the
admission of new Lenders providing new Commitments, none of which require
any consents or approvals from the other Lenders. Any amendment hereto for
such an increase or addition shall be in the form attached hereto as
Exhibit "K" and shall only require the written signatures of the Agent, the
Borrower and the Lender(s) being added or increasing their Commitment,
subject only to the approval of all Lenders if any such increase would
cause the Aggregate Commitment to exceed $150,000,000. In addition, within
a reasonable time after the effective date of any increase, the Agent
shall, and is hereby authorized and directed to, revise Schedule "2"
reflecting such increase and shall distribute such revised Schedule to each
of the Lenders and the Borrower, whereupon such revised Schedule shall
replace the old Schedule and become part of this Agreement. On the
Business Day following any such increase, all outstanding Fed Funds
Advances and Alternate Base Rate Advances shall be reallocated among the
Lenders (including any newly added Lenders) in accordance with the Lenders'
respective revised Primary Commitment Percentages. Eurodollar Advances
shall not be reallocated among the Lenders prior to the expiration of the
applicable Interest Period in effect at the time of any such increase.
1.136 Dissemination of Information. The Borrower authorizes each
Lender to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in
such Lender's possession concerning the creditworthiness of the Borrower
and its Subsidiaries, including without limitation any information
contained in any Reports; provided that each Transferee and prospective
Transferee agrees to be bound by Section 9.12 of this Agreement.
1.137 Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the
transferor Lender shall cause such Transferee, concurrently with the
effectiveness of such transfer, to comply with the provisions of Section
3.5(iv).
NOTICES
1.138 Notices. Except as otherwise permitted by Section 2.6 with
respect to borrowing notices, all notices, requests and other
communications to any party hereunder shall be in writing (including bank
wire, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of the Borrower, the Agent or any Lender, at its
address or facsimile number set forth on the signature pages hereof, (y) in
the case of the Collateral Agent, at its address or facsimile number set
forth on the signature pages of the Security Agreement or (z) in the case
of any party, at such other address or facsimile number as such party may
hereafter specify for the purpose by notice to the Agent and the Borrower
in accordance with the provisions of this Section 13.1. Each such notice,
request or other communication shall be effective (i) if given by facsimile
transmission., when transmitted to the facsimile number specified in this
Section and confirmation of receipt is received, (ii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other
means, when delivered at the address specified in this Section; provided
that notices to the Agent under Article 11 shall not be effective until
received.
1.139 Change of Address. The Borrower, the Agent, the Collateral
Agent and any Lender may each change the address for service of notice upon
it by a notice in writing to the other parties hereto.
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrower, the
Agent and the Lenders and each party has notified the Agent by facsimile
transmission or telephone, that it has taken such action.
CHOICE OF LAW, CONSENT TO JURISDICTION, WAIVER OF JURY TRIAL
1.140 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING
A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE
STATE OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS.
1.141 CONSENT TO JURISDICTION. THE BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
TEXAS STATE COURT SITTING IN DALLAS IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO ANY LOAN DOCUMENTS AND THE BORROWER HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT
MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT
FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY LENDER TO
BRING PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION. ANY JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE AGENT OR
ANY LENDER OR ANY AFFILIATE OF THE AGENT OR ANY LENDER INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN
DALLAS, TEXAS.
1.142 WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE)
IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT
OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
1.143 No Tri-Party Accounts. Section 346 of the Texas Finance Code
(which regulates certain revolving loan accounts and revolving triparty
accounts) shall not apply to this Agreement or the other loan documents.
1.144 Limitation on Interest. Agent, Lenders, and Borrower, and any
other parties to the Loan Documents intend to contract in strict compliance
with applicable usury law from time to time in effect. In furtherance
thereof such Persons stipulate and agree that none of the terms and
provisions contained in the Loan Documents shall ever be construed to
create a contract to pay, for the use, forbearance or detention of money,
interest in excess of the maximum amount of interest permitted to be
charged by applicable law from time to time in effect. Neither Borrower
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for
unearned interest thereon or shall ever be required to pay interest thereon
in excess of the maximum amount that may be lawfully charged under
applicable law from time to time in effect, and the provisions of this
section shall control over all other provisions of the Loan Documents which
may be in conflict or apparent conflict herewith. Lenders expressly
disavow any intention to charge or collect excessive unearned interest or
finance charges in the event the maturity of any Obligation is accelerated.
If (a) the maturity of any Obligation is accelerated for any reason, (b)
any Obligation is prepaid and as a result any amounts held to constitute
interest are determined to be in excess of the legal maximum, or (c)
Lenders or any other holder of any or all of the Obligations shall
otherwise collect moneys which are determined to constitute interest which
would otherwise increase the interest on any or all of the Obligations to
an amount in excess of that permitted to be charged by applicable law then
in effect, then all such sums determined to constitute interest in excess
of such legal limit shall, without penalty, be promptly applied to reduce
the then outstanding principal of the related Obligations or, at Lenders'
or such holder's option, promptly returned to each Borrower or the other
payor thereof upon such determination. In determining whether or not the
interest paid or payable, under any specific circumstance, exceeds the
maximum amount permitted under applicable law, Lenders and Borrower (and
any other payors thereof) shall to the greatest extent permitted under
applicable law, (i) characterize any non-principal payment as an expense,
fee or premium rather than as interest, (ii) exclude voluntary prepayments
and the effects thereof, and (iii) amortize, prorate, allocate, and spread
the total amount of interest throughout the entire contemplated term of the
instruments evidencing the Obligations in accordance with the amounts
outstanding from time to time thereunder and the maximum legal rate of
interest from time to time in effect under applicable law in order to
lawfully charge the maximum amount of interest permitted under applicable
law. In the event applicable law provides for an interest ceiling under
Section 303 of the Texas Finance Code, that ceiling shall be the weekly
ceiling.
1.145 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.
K. HOVNANIAN MORTGAGE, INC.
By:
Name:
Title:
Address for Notices:
1800 S. Australian Avenue
Suite 400
West Palm Beach, Florida 33409
Telephone: (561) 478-4900
Telecopier:
GUARANTY BANK, Agent and Lender
By:
Name: Randall S. Reid
Title: Vice President
Address for Notices Regarding Fundings:
3333 Douglas Avenue
Dallas, Texas 75225
Attn: Ronny O'Neal
Telephone No.: (214) 360-4802
Telephone No.: (214) 360-1659
Address for Other Notices:
3333 Douglas Avenue
Dallas, Texas 75225
Attn: Randall S. Reid
Telephone No.: (214) 360-2735
Telephone No.: (214) 360-1661
BANK ONE, NA
By:
Name: Rodney S. Davis
Title: Associate Director
Address for Notices Regarding Fundings:
1 Bank One Plaza
Chicago, Illinois 60670-0098
Attn: Ky Yoo
Telephone No.: (312)732-1068
Telecopier No.: (312)732-3852 or
7326774
Address for Other Notices:
1 Bank One Plaza
Mail Suite IL1-0098
Chicago, Illinois 60670
Attn: Todd Ritz
Director
Telephone No.: (312) 732-3953
Telecopier No.: (312) 732-6222
BANK OF AMERICA, N.A.
By:
Name: Agnes McAlpine
Title: Principal
Address for Notices Regarding Fundings:
901 Main Street
66th Floor
Dallas, Texas 75202-3714
Mail Code TX1-492-66-02
Attn: Barbara Allen
Telephone No.: (214) 209-1551
Telecopier No.: (214) 209-2710
Address for Other Notices:
901 Main Street
66th Floor
Dallas, Texas 75202-3714
Mail Code TX1-492-66-02
Attn: Mark Short
Telephone No.: (214) 209-0670
Telecopier No.: (214) 209-0338
COMERICA BANK
By:
Name: Robert W. Marr
Title: Assistant Vice President
Address for Notices Regarding Fundings:
500 Woodward Avenue
7th Floor, MC 3256
Detroit, MI 48226
Attention: Janet Nowicki
Telephone No.: (313) 222-9294
Telecopier No.: (313) 222-3697
Address for Other Notices:
500 Woodward Avenue
7th Floor, MC 3256
Detroit, MI 48226
Attention: Rob Marr
Telephone No.: (313) 222-4119
Telecopier No.: (313) 222-9295
SCHEDULE "1"
PRICING SCHEDULE*
APPLICABLE MARGIN &
APPLICABLE FEE RATE
Eurodollar Advance 1.25%
Fed Funds Advance 1.375%
Swingline Loan 1.625%
Facility Fee .25%
* There shall be no Applicable Margin for Alternate Base Rate Advances.
SCHEDULE "2"
COMMITMENTS AND COMMITMENT PERCENTAGES
LENDER
(A)
COMMITMENT
(B)
COMMITMENT
PERCENTAGE
(A?Aggregate
Commitment)
(C
SWINGLINE
AMOUNT
Guaranty Bank
Bank of America, N.A.
Bank One, NA
Comerica Bank $30,000,000
$30,000,000
$30,000,000
$20,000,000 27.272727%
27.272727%
27.272727%
18.181818% $3,000,000
SCHEDULE "3"
LIST OF APPROVED INVESTORS
BANK OF AMERICA MORTGAGE
BANK BRANCH AND TRUST (BB&T)
CHASE MANHATTAN MORTGAGE CORPORATION
CITICORP MORTGAGE, INC.
COUNTRYWIDE HOME LOAN, INC.
DIME MORTGAGE SERVICES
FLAGSTAR BANCORP
FLEET MORTGAGE GROUP, INC.
FEDERAL HOME LOAN MORTGAGE CORPORATION
FEDERAL NATIONAL MORTGAGE ASSOCIATION
FIRST HORIZON BANCORP
FIRST NATIONWIDE MORTGAGE
FIRST UNION MORTGAGE GROUP
FLEET MORTGAGE CORP.
GE CAPITAL MORTGAGE SERVICES, INC.
GREENPOINT MORTGAGE CORPORATION
ILLINOIS HOUSING AND DEVELOPMENT AUTHORITY
IMPAC FUNDING CORPORATION
OHIO SAVINGS BANK
NATIONSBANC MORTGAGE CORP.
NEW JERSEY MORTGAGE FINANCE AGENCY
NORWEST FUNDING
PNC BANK, N.A.
REGION'S MORTGAGE
RESIDENTIAL FUNDING CORP.
ROSLYN NATION MORTGAGE CORP.
SIERRA WESTERN
SOMERSET SAVINGS BANK
SOVEREIGN BANK FSB
SUMMIT MORTGAGE CO. / SUMMIT BANK
VALLEY NATIONAL BANK
ALLIANCE FUNDING CORP.
CHASE MANHATTAN FUNDING1
COUNTRYWIDE HOME LOAN, INC.1
GE CAPITAL MORTGAGE SERVICES, INC.1
IMPAC FUNDING CORP.1
DIRECTORS ACCEPTANCE, A DIVISION OF NORWEST MORTGAGE1
RESIDENTIAL FUNDING CORP.1
FANNIE MAE TRADING DESK
PAINEWEBBER, INC.2
ADVEST, INC.2
STIFEL FINANCIAL CORP.2
SCHEDULE "4"
SUBSIDIARIES AND OTHER INVESTMENTS
(See Sections 5.8 and 6.14)
Investment
In Owned
By Amount of
Investment Percent
Ownership Jurisdiction of
Organization
None
SCHEDULE "5"
LIENS
(See Sections 5.14 and 6.15)
Indebtedness
Incurred By
Indebtedness
Owed To
Property
Encumbered (If Any) Maturity and
Amount of
Indebtedness
None
EXHIBIT "A"
NOTE
June 7, 2002
K. Hovnanian Mortgage, Inc. a New Jersey corporation (the
"Borrower"), promises to pay to the order of (the "Lender")
the lesser of the Lender's Commitment under the Agreement (as hereinafter
defined) or the aggregate unpaid principal amount of all Loans made by the
Lender to the Borrower pursuant to Article II of the Agreement in
immediately available funds at the main office of Guaranty Bank, in Dallas,
Texas, as Agent, together with interest on the unpaid principal amount
hereof at the rates and on the dates set forth in the Agreement. The
Borrower shall pay the principal of and accrued and unpaid interest on the
Loans in full on the Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual
practice, the date and amount of each Loan and the date and amount of each
principal payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Credit Agreement dated as of June 7, 2002 (which, as
it may be amended or modified and in effect from time to time, is herein
called the "Agreement"), among the Borrower, the lenders party thereto,
including the Lender, and Guaranty Bank, as Agent, to which Agreement
reference is hereby made for a statement of the terms and conditions
governing this Note, including the terms and conditions under which this
Note may be prepaid or its maturity date accelerated. This Note is secured
pursuant to the Security Agreement, all as more specifically described in
the Agreement, and reference is made thereto for a statement of the terms
and provisions thereof Capitalized terms used herein and not otherwise
defined herein are used with the meanings attributed to them in the
Agreement.
This Note is to be governed by and construed and enforced in
accordance with the laws of the State of Texas.
K. HOVNANIAN MORTGAGE, INC.
By:
Name:
Title:
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF ,
DATED , 2002
Date Principal
Amount of
Loan Maturity
of Interest
Period Principal
Amount
Paid
Unpaid
Balance
EXHIBIT "B"
FORM OF OPINION
, 2002
The Agent and the Lenders who are parties to the
Credit Agreement described below.
Gentlemen/Ladies:
We are counsel for K. Hovnanian Mortgage, Inc., a New Jersey
corporation (the "Borrower") and Hovnanian Enterprises, Inc., a Delaware
corporation (the "Parent") and have represented the Borrower in connection
with its execution and delivery of a Credit Agreement dated as of ,
2002 (the "Agreement") among the Borrower, the Lenders named therein, and
Guaranty Bank, as Agent, and providing for Advances in an aggregate
principal amount not exceeding $150,000,000 at any one time outstanding and
the Parent in connection with its execution and delivery of the Keep-Well
Agreement dated as of , 2002 and the Subordination Agreement dated
as of
, 2002 related to the Agreement. All capitalized terms used
in this opinion and not otherwise defined herein shall have the meanings
attributed to them in the Agreement.
We have examined the Borrower's "(describe constitutive documents of
Borrower and appropriate evidence of authority to enter into the
transaction)", the Parent's "(describe constitutive documents of Borrower
and appropriate evidence of authority to enter into the transaction)", the
Loan Documents and such other matters of fact and law which we deem
necessary in order to render this opinion. Based upon the foregoing, it is
our opinion that:
1. Each of the Parent, the Borrower and its Subsidiaries is a
corporation, partnership or limited liability company duly and properly
incorporated or organized, as the case may be, validly existing and (to the
extent such concept applies to such entity) in good standing under the laws
of its jurisdiction of incorporation or organization and has all requisite
authority to conduct its business in each jurisdiction in which its
business is conducted.
2. A. The execution and delivery by the Borrower of the Loan
Documents to which it is a party and the performance by the Borrower of its
obligations thereunder have been duly authorized by proper corporate
proceedings on the part of the Borrower and will not:
(a) require any consent of the Borrower's shareholders or
members (other than any such consent as has already been given and
remains in full force and effect);
(b) violate (i) any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on the Borrower or any
of its Subsidiaries or (ii) the Borrower's or any Subsidiary's
articles or certificate of incorporation, partnership agreement,
certificate of partnership, articles or certificate of organization,
by-laws, or operating or other management agreement, as the case may
be, or (iii) the provisions of any indenture, instrument or agreement
to which the Borrower or any of its Subsidiaries is a party or is
subject, or by which it, or its Property, is bound, or conflict with
or constitute a default thereunder; or
(c) result in, or require, the creation or imposition of any
Lien in, of or on the Property of the Borrower or a Subsidiary
pursuant to the terms of any indenture, instrument or agreement
binding upon the Borrower or any of its Subsidiaries.
B. The execution and delivery by the Parent of the Loan
Documents to which it is a party and the performance by the Parent of its
obligations thereunder have been duly authorized by proper corporate
proceedings on the part of the Parent and will not:
(a) require any consent of the Parent's shareholders or
members (other than any such consent as has already been given and
remains in full force and effect);
(b) violate (i) any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on the Parent or any of
its Subsidiaries or (ii) the Parent's or any of its Subsidiary's
articles or certificate of incorporation, partnership agreement,
certificate of partnership, articles or certificate of organization,
by-laws, or operating or other management agreement, as the case may
be, or (iii) the provisions of any indenture, instrument or agreement
to which the Parent or any of its Subsidiaries is a party or is
subject, or by which it, or its Property, is bound, or conflict with
or constitute a default thereunder; or
(c) result in, or require, the creation or imposition of any
Lien in, of or on the Property of the Parent or any of its
Subsidiaries pursuant to the terms of any indenture, instrument or
agreement binding upon the Parent or any of its Subsidiaries.
3. A. The Loan Documents to which the Borrower is a party have
been duly executed and delivered by the Borrower and constitute legal,
valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their terms except to the extent the
enforcement thereof may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally and subject
also to the availability of equitable remedies if equitable remedies are
sought.
B. The Loan Documents to which the Parent is a party have been
duly executed and delivered by the Parent and constitute legal, valid and
binding obligations of the Parent enforceable against the Parent in
accordance with their terms except to the extent the enforcement thereof
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally and subject also to the
availability of equitable remedies if equitable remedies are sought.
4. There is no litigation, arbitration, governmental
investigation, proceeding or inquiry pending or, to the best of our
knowledge after due inquiry, threatened against the Parent, the Borrower or
any of its Subsidiaries which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect.
5. No order, consent, adjudication, approval, license,
authorization, or validation of, or filing, recording or registration with,
or exemption by, or other action in respect of any governmental or public
body or authority, or any subdivision thereof, which has not been obtained
by the Parent, the Borrower or any of its Subsidiaries, is required to be
obtained by the Parent, the Borrower or any of its Subsidiaries in
connection with the execution and delivery of the Loan Documents, the
borrowings under the Agreement, the payment and performance by the Borrower
of the Secured Obligations, or the legality, validity, binding effect or
enforceability of any of the Loan Documents.
6. The Secured Obligations constitute senior indebtedness which is
entitled to the benefits of the subordination provisions contained in the
Subordination Agreement.
7. The provisions of the Collateral Documents are sufficient to
create in favor of the Lenders a security interest in all right, title and
interest of the Borrower in those items and types of collateral described
in the Collateral Documents in which a security interest may be created
under Article 9 of the Uniform Commercial Code as in effect from time to
time in New Jersey and Delaware, as applicable. Financing statements on
Form UCC-l's have been duly executed by the Borrower and have been duly
filed in each filing office indicated in Exhibit A hereto under the Uniform
Commercial Code in effect in each state in which said filing offices are
located. The description of the collateral set forth in said financing
statements is sufficient to perfect a security interest in the items and
types of collateral described therein in which a security interest may be
perfected by the filing of a financing statement under the Uniform
Commercial Code as in effect from time to time in such states. Such
filings are sufficient to perfect the security interest created by the
Collateral Documents in all right, title and interest of the Borrower in
those items and types of collateral described in the Collateral Documents
in which a security interest may be perfected by the filing of a financing
statement under the Uniform Commercial Code from time to time in effect in
such states, except that we express no opinion as to personal property
affixed to real property in such manner as to become a fixture under the
laws of any state in which the collateral may be located and we call your
attention to the fact that the Lenders' security interest in certain of
such collateral may not be perfected by filing financing statements under
the Uniform Commercial Code.
This opinion may be relied upon by the Agent, the Lenders and their
participants, assignees and other transferees.
Very truly yours,
EXHIBIT "C"
(RESERVED)
EXHIBIT "D"
COLLATERAL TRANSMITTAL
1. CUSTOMER NAME
2. LOAN NUMBER
AND "MIN" (IF APPLICABLE)
3. MORTGAGOR
SURNAME ONLY
4. AP STATUS CODE
5. PLEDGE DATE
6. ORIGINAL NOTE AMOUNT $
7. OUTSTANDING PRINCIPAL BALANCE $
8. ACQUISITION COST $
9. TAKE-OUT VALUE $
10. NOTE DATE OR CONVERSION DATE
11. NOTE RATE
12. LOAN TYPE
EXHIBIT "E"
AGREEMENT TO PLEDGE
SECURITY AGREEMENT AS PROVIDED FOR BY
THE UNIFORM COMMERCIAL CODE OF TEXAS
K. Hovnanian Mortgage, Inc. (the "Borrower") pursuant to that certain
Credit Agreement dated as of , 2002 (as amended, extended and
replaced from time to time, the "Credit Agreement") among the Borrower,
Guaranty Bank, as Agent, and certain other Lenders, and pursuant to that
certain Security and Collateral Agency Agreement among the Borrower, the
Agent, the Lenders and Guaranty Bank (the "Collateral Agent") for new value
this day received, and as security for the payment of any and all
indebtedness and obligations of the Borrower under the Credit Agreement,
hereby creates and grants to the Collateral Agent for the benefit of the
lenders under the Credit Agreement a security interest in and to the
mortgage loans identified as AP Mortgages by the inclusion of an "AP Status
Code" on the Borrower's Collateral Transmittals on the date indicated below
which provide the information concerning the AP Mortgages required by the
Credit Agreement. All capitalized terms used herein shall have the
meanings given to them in the Credit Agreement.
K. HOVNANIAN MORTGAGE, INC.
By:
Name:
Title:
Dated: , 200 .
EXHIBIT "F"
COMPLIANCE CERTIFICATE
To: The Lenders parties to the
Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that certain
Credit Agreement dated as of , 2002 (as amended, modified, renewed
or extended from time to time, the "Agreement") among the K. Hovnanian
Mortgage, Inc. (the "Borrower"), the lenders party thereto and Guaranty
Bank, as Agent for the Lenders. Unless otherwise defined herein,
capitalized terms used in this Compliance Certificate have the meanings
ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. 1 am the duly elected of the Borrower;
2. 1 have reviewed the terms of the Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Borrower and its Subsidiaries during the
accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and
I have no knowledge of, the existence of any condition or event which
constitutes a Default or Unmatured Default during or at the end of the
accounting period covered by the attached financial statements or as of the
date of this Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and
computations evidencing the Borrower's compliance with certain covenants of
the Agreement, all of which data and computations are true, complete and
correct.
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Borrower has taken, is
taking, or proposes to take with respect to each such condition or event:
The foregoing certifications, together with the computations set
forth in Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this day of
, 20 .
SCHEDULE I TO COMPLIANCE CERTIFICATE
Compliance as of , 200 with
Provisions of and of
the Agreement
EXHIBIT "G"
BORROWING BASE CERTIFICATE
EXHIBIT "H"
NON-CONFORMING UNDERWRITING GUIDELINES
SEE ATTACHED
EXHIBIT "I"
SECURITY AGREEMENT
EXHIBIT "J'
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between
(the "Assignor") and (the "Assignee") is dated
as of , 200 . The parties hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit
Agreement (which, as it may be amended, modified, renewed or extended from
time to time is herein called the "Credit Agreement") described in Item 1
of Schedule 1 attached hereto ("Schedule 1). Capitalized terms used herein
and not otherwise defined herein shall have the meanings attributed to them
in the Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and
assigns to the Assignee, and the Assignee hereby purchases and assumes from
the Assignor, an interest in and to the Assignor's rights and obligations
under the Credit Agreement such that after giving effect to such assignment
the Assignee shall have purchased pursuant to this Assignment Agreement the
percentage interest specified in Item 3 of Schedule 1 of all outstanding
rights and obligations under the Credit Agreement relating to the
facilities listed in Item 3 of Schedule 1 and the other Loan Documents.
The aggregate Commitment (or Loans, if the applicable Commitment has been
terminated) purchased by the Assignee hereunder is set forth in Item 4 of
Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment
Agreement (the "Effective Date") shall be the later of the date specified
in Item 5 of Schedule 1 or two Business Days (or such shorter period agreed
to by the Agent) after a Notice of Assignment substantially in the form of
Annex "I" attached hereto has been delivered to the Agent. Such Notice of
Assignment must include any consents required to be delivered to the Agent
by Section 12.3.1 of the Credit Agreement. In no event will the Effective
Date occur if the payments required to be made by the Assignee to the
Assignor on the Effective Date under Sections 4 and 5 hereof are not made
on the proposed Effective Date. The Assignor will notify the Assignee of
the proposed Effective Date no later than the Business Day prior to the
proposed Effective Date. As of the Effective Date, (i) the Assignee shall
have the rights and obligations of a Lender under the Loan Documents with
respect to the rights and obligations assigned to the Assignee hereunder
and (ii) the Assignor shall relinquish its rights and be released from its
corresponding obligations under the Loan Documents with respect to the
rights and obligations assigned to the Assignee hereunder.
4. PAYMENT OBLIGATIONS. On and after the Effective Date, the
Assignee shall be entitled to receive from the Agent all payments of
principal, interest and fees with respect to the interest assigned hereby.
The Assignee shall advance funds directly to the Agent with respect to all
Loans and reimbursement payments made on or after the Effective Date with
respect to the interest assigned hereby. **[In consideration for the sale
and assignment of Loans hereunder, (i) the Assignee shall pay the Assignor,
on the Effective Date, an amount equal to the principal amount of the
portion of all Alternate Base Rate Loans assigned to the Assignee hereunder
and (ii) with respect to each Eurodollar Loan made by the Assignor and
assigned to the Assignee hereunder which is outstanding on the Effective
Date, (a) on the last day of the Interest Period therefor or (b) on such
earlier date agreed to by the Assignor and the Assignee or (c) on the date
on which any such Eurodollar Loan becomes due (by acceleration or
otherwise) (the date as described in the foregoing clauses (a), (b) or (c)
being hereinafter referred to as the "Payment Date"), the Assignee shall
pay the Assignor an amount equal to the principal amount of the portion of
such Eurodollar Loan assigned to the Assignee which is outstanding on the
Payment Date. If the Assignor and the Assignee agree that the Payment Date
for such Eurodollar Loan shall be the Effective Date, they shall agree to
the interest rate applicable to the portion of such Loan assigned hereunder
for the period from the Effective Date to the end of the existing Interest
Period applicable to such Eurodollar Loan (the "Agreed Interest Rate") and
any interest received by the Assignee in excess of the Agreed Interest Rate
shall be remitted to the Assignor. In the event interest for the period
from the Effective Date to but not including the Payment Date is not paid
by the Borrower with respect to any Eurodollar Loan sold by the Assignor to
the Assignee hereunder, the Assignee shall pay to the Assignor interest for
such period on the portion of such Eurodollar Loan sold by the Assignor to
the Assignee hereunder at the applicable rate provided by the Credit
Agreement. In the event a prepayment of any Eurodollar Loan which is
existing on the Payment Date and assigned by the Assignor to the Assignee
hereunder occurs after the Payment Date but before the end of the Interest
Period applicable to such Eurodollar Loan, the Assignee shall remit to the
Assignor the excess of the prepayment penalty paid with respect to the
portion of such Eurodollar Loan assigned to the Assignee hereunder over the
amount which would have been paid if such prepayment penalty was calculated
based on the Agreed Interest Rate. The Assignee will also promptly remit
to the Assignor (i) any principal payments received from the Agent with
respect to Eurodollar Loans prior to the Payment Date and (ii) any amounts
of interest on Loans and fees received from the Agent which relate to the
portion of the Loans assigned to the Assignee hereunder for periods prior
to the Effective Date, in the case of Alternate Base Rate Loans or fees, or
the Payment Date, in the case of Eurodollar Loans, and not previously paid
by the Assignee to the Assignor.]** In the event that either party hereto
receives any payment to which the other party hereto is entitled under this
Assignment Agreement, then the party receiving such amount shall promptly
remit it to the other party hereto.
**Each Assignor may insert its standard payment provisions in lieu of the
payment terms included in this Exhibit.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the
Assignor a fee on each day on which a payment of interest or fees is made
under the Credit Agreement with respect to the amounts assigned to the
Assignee hereunder (other than a payment of interest or commitment fees for
the period prior to the Effective Date or, in the case of Eurodollar Loans,
the Payment Date, which the Assignee is obligated to deliver to the
Assignor pursuant to Section 4 hereof). The amount of such fee shall be
the difference between (i) the interest or fee, as applicable, paid with
respect to the amounts assigned to the Assignee hereunder and (ii) the
interest or fee, as applicable, which would have been paid with respect to
the amounts assigned to the Assignee hereunder if each interest rate was
of 1% less than the interest rate paid by the Borrower or if the commitment
fee was
of 1% less than the commitment fee paid by the Borrower, as
applicable. In addition, the Assignee agrees to pay % of the
recordation fee required to be paid to the Agent in connection with this
Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim created by the
Assignor. It is understood and agreed that the assignment and assumption
hereunder are made without recourse to the Assignor and that the Assignor
makes no other representation or warranty of any kind to the Assignee.
Neither the Assignor nor any of its officers, directors, employees, agents
or attorneys shall be responsible for (i) the due execution, legality,
validity, enforceability, genuineness, sufficiency or collectability of any
Loan Document, including without limitation, documents granting the
Assignor and the other Lenders a security interest in assets of the
Borrower or any guarantor, (ii) any representation, warranty or statement
made in or in connection with any of the Loan Documents, (iii) the
financial condition or creditworthiness of the Borrower or any guarantor,
(iv) the performance of or compliance with any of the terms or provisions
of any of the Loan Documents, (v) inspecting any of the Property, books or
records of the Borrower, (vi) the validity, enforceability, perfection,
priority, condition, value or sufficiency of any collateral securing or
purporting to secure the Loans or (vii) any mistake, error of judgment, or
action taken or omitted to be taken in connection with the Loans or the
Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms
that it has received a copy of the Credit Agreement, together with copies
of the financial statements requested by the Assignee and such other
documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment Agreement, (ii)
agrees that it will, independently and without reliance upon the Agent, the
Assignor or any other Lender and based on such documents and information at
it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Loan Documents, (iii)
appoints and authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under the Loan Documents as are
delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto, (iv) agrees that it will perform in
accordance with their terms all of the obligations which by the terms of
the Loan Documents are required to be performed by it as a Lender, (v)
agrees that its payment instructions and notice instructions are as set
forth in the attachment to Schedule 1, (vi) confirms that none of the
funds, monies, assets or other consideration being used to make the
purchase and assumption hereunder are "plan assets" as defined under ERISA
and that its rights, benefits and interests in and under the Loan Documents
will not be "plan assets" under ERISA, **[(vii) confirms that it is an
Eligible Assignee,]** **[and (viii) attaches the forms prescribed by the
Internal Revenue Service of the United States certifying that the Assignee
is entitled to receive payments under the Loan Documents without deduction
or withholding of any United States federal income taxes].**
*(vii) to be inserted if required by the Credit Agreement.
**(viii) to be inserted if the Assignee is not incorporated under the laws
of the United States, or a state thereof.
8. INDEMNITY. The Assignee agrees to indemnify and hold the
Assignor harmless against any and all losses, costs and expenses
(including, without limitation, reasonable attorneys' fees) and liabilities
incurred by the Assignor in connection with or arising in any manner from
the Assignee's non-performance of the obligations assumed under this
Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee
shall have the right pursuant to Section 12.3.1 of the Credit Agreement to
assign the rights which are assigned to the Assignee hereunder to any
entity or person, provided that (i) any such subsequent assignment does not
violate any of the terms and conditions of the Loan Documents or any law,
rule, regulation, order, writ, judgment, injunction or decree and that any
consent required under the terms of the Loan Documents has been obtained
and (ii) unless the prior written consent of the Assignor is obtained, the
Assignee is not thereby released from its obligations to the Assignor
hereunder, if any remain unsatisfied, including, without limitation, its
obligations under Sections 4, 5 and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
Aggregate Commitment occurs between the date of this Assignment Agreement
and the Effective Date, the percentage interest specified in Item 3 of
Schedule 1 shall remain the same, but the dollar amount purchased shall be
recalculated based on the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached
Notice of Assignment embody the entire agreement and understanding between
the parties hereto and supersede all prior agreements and understandings
between the parties hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by
the internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment
Agreement in the manner set forth in the Credit Agreement. For the purpose
hereof, the addresses of the parties hereto (until notice of a change is
delivered) shall be the address set forth in the attachment to Schedule 1.
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above
written.
[NAME OF ASSIGNOR]
By:
Title:
[NAME OF ASSIGNEE]
By:
Title:
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
2. Date of Assignment Agreement: , 200
3. Amounts (As of Date of Item 2 above):
a.
Total of Commitments
(Loans)* under
Credit Agreement Primary
Commitment Swingline
Commitment
$ $
b. Assignee's Percentage
of each Facility purchased
under the Assignment
Agreement**
% %
c. Amount of Assigned Share in
each Facility purchased under
the Assignment
Agreement
$ $
4. Assignee's Aggregate (Loan Amount)* Commitment Amount Purchased
Hereunder:
$
$
5. Proposed Effective Date:
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
Title: Title:
* If a Commitment has been terminated, insert outstanding Loans in
place of Commitment
** Percentage taken to 10 decimal places
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
ADMINISTRATIVE INFORMATION SHEET
Attach Assignor's Administrative Information Sheet, which must
include notice addresses for the Assignor and the Assignee
(Sample form shown below)
ASSIGNOR INFORMATION
Contact:
Name: Telephone No.:
Fax No.: Telex No.:
Answerback:
Payment Information:
Name & ABA # of Destination Bank:
Account Name & Number for Wire Transfer:
Other Instructions:
Address for Notices for Assignor:
ASSIGNEE INFORMATION
Credit Contact:
Name: Telephone No.:
Fax No.: Telex No.:
Answerback:
Key Operations Contacts:
Booking Installation: Booking Installation:
Name: Name:
Telephone No.: Telephone No.:
Fax No.: Fax No.:
Telex No.: Telex No.:
Answerback: Answerback:
Payment Information:
Name & ABA # of Destination Bank:
Account Name & Number for Wire Transfer:
Other Instructions:
Address for Notices for Assignee:
GUARANTY BANK INFORMATION
Assignee will be called promptly upon receipt of the signed agreement.
Initial Funding Contact: Subsequent Operations
Contact:
Name: Name:
Telephone No.: (214) Telephone No.: (214)
Fax No.: (214) Fax No.: (214)
Initial Funding Standards:
Libor - Fund 2 days after rates are set.
GUARANTY BANK Wire Instructions: Guaranty Bank ABA #
Account No.:
Account Name:
Ref: K. Hovnanian
Address for Notices for GUARANTY BANK:
ANNEX "I"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
, 200
To: K. HOVNANIAN MORTGAGE, INC.
[NAME OF AGENT]
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Credit Agreement (the "Credit
Agreement") described in Item 1 of Schedule 1 attached hereto ("Schedule
1"). Capitalized terms used herein and not otherwise defined herein shall
have the meanings attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and
delivered to **[the Borrower and]** the Agent pursuant to Section 12.3.2 of
the Credit Agreement.
3. The Assignor and the Assignee have entered into an
Assignment Agreement, dated as of , 200 (the "Assignment"),
pursuant to which, among other things, the Assignor has sold, assigned,
delegated and transferred to the Assignee, and the Assignee has purchased,
accepted and assumed from the Assignor the percentage interest specified in
Item 3 of Schedule 1 of all outstandings, rights and obligations under the
Credit Agreement relating to the facilities listed in Item 3 of Schedule 1.
The Effective Date of the Assignment shall be the later of the date
specified in Item 5 of Schedule 1 or two Business Days (or such shorter
period as agreed to by the Agent) after this Notice of Assignment and any
consents and fees required by Sections **[12.3.1 and 12.3.2]** of the
Credit Agreement have been delivered to the Agent, provided that the
Effective Date shall not occur if any condition precedent agreed to by the
Assignor and the Assignee has not been satisfied.
*To be included only if consent must be obtained from the Borrower pursuant
to Section 12.3.1 of the Credit Agreement.
4. The Assignor and the Assignee hereby give to the Borrower
and the Agent notice of the assignment and delegation referred to herein.
The Assignor will confer with the Agent before the date specified in Item 5
of Schedule 1 to determine if the Assignment Agreement will become
effective on such date pursuant to Section 3 hereof, and will confer with
the Agent to determine the Effective Date pursuant to Section 3 hereof if
it occurs thereafter. The Assignor shall notify the Agent if the
Assignment Agreement does not become effective on any proposed Effective
Date as a result of the failure to satisfy the conditions precedent agreed
to by the Assignor and the Assignee. At the request of the Agent, the
Assignor will give the Agent written confirmation of the satisfaction of
the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or
before the Effective Date the processing fee of $3,500 required by Section
12.3.2 of the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the
Assignor and the Assignee request and direct that the Agent prepare and
cause the Borrower to execute and deliver new Notes or, as appropriate,
replacement notes, to the Assignor and the Assignee. The Assignor and, if
applicable, the Assignee each agree to deliver to the Agent the original
Note received by it from the Borrower upon its receipt of a new Note in the
appropriate amount.
7. The Assignee advises the Agent that notice and payment
instructions are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of
the funds, monies, assets or other consideration being used to make the
purchase pursuant to the Assignment are "plan assets" as defined under
ERISA and that its rights, benefits, and interests in and under the Loan
Documents will not be "plan assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent
under the Loan Documents in accordance with the terms thereof. The
Assignee acknowledges that the Agent has no duty to supply information with
respect to the Borrower or the Loan Documents to the Assignee until the
Assignee becomes a party to the Credit Agreement.*
*May be eliminated if Assignee is a party to the Credit Agreement prior to
the Effective Date.
NAME OF ASSIGNOR
By:
NAME OF ASSIGNEE
By:
Title:
Title:
ACKNOWLEDGED [AND CONSENTED TO]
ACKNOWLEDGED [AND CONSENTED TO]
BY [NAME OF AGENT]
BY:
By:
Title:
K. HOVNANIAN MORTGAGE, INC.
By:
Name:
Title:
[Attach photocopy of Schedule 1 to Assignment]
EXHIBIT "K"
FORM OF AMENDMENT FOR AN INCREASED OR NEW COMMITMENT
This AMENDMENT is made as of the day of ,
200 by and among K. Hovnanian Mortgage, Inc. (the "Borrower"), Guaranty
Bank, as Agent under the "Credit Agreement" (as defined below) (the
"Agent") and
(the "Supplemental Lender").
The Borrower, the Agent and certain other Lenders, as described
therein, are parties to a Credit Agreement dated as of , 2002 (the
"Credit Agreement"). All terms used herein and not otherwise defined shall
have the same meaning given to them in the Credit Agreement.
Pursuant to Section 12.4.1 of the Credit Agreement, the Borrower has
the right to increase the Aggregate Commitment by obtaining additional
Commitments upon satisfaction of certain conditions. This Amendment
requires only the signature of the Borrower, the Agent and the Supplemental
Lender so long as the Aggregate Commitment is not increased above
$150,000,000.
The Supplemental Lender is either (a) an existing Lender which is
increasing its Commitment or (b) a new Lender which is a lending
institution whose identity the Agent will approve by its signature below.
In consideration of the foregoing, such Supplemental Lender, from and
after the date hereof shall have a Commitment of $ , resulting in a new
Aggregate Commitment of $ as of the date hereof, and if it is a new
Lender, the Supplemental Lender hereby assumes all of the rights and
obligations of a Lender under the Credit Agreement.
The Borrower has executed and delivered to the Supplemental Lender as
of the date hereof, if requested by the Supplemental Lender, a new or
amended and restated Note in the form attached to the Credit Agreement as
Exhibit A to evidence the new or increased Commitment of the Supplemental
Lender.
IN WITNESS WHEREOF, the Agent, the Borrower and the Supplemental
Lender have executed this Amendment as of the date shown above.
K. HOVNANIAN MORTGAGE, INC.
By:
Name:
Title:
[SUPPLEMENTAL LENDER]
By:
Its:
Guaranty Bank, as Agent
By:
Its:
Approved for the purchase of Non-Conforming Mortgage Loans.
Approved for the purchase of Securities.
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