EXHIBIT 10.4
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AMENDED AND RESTATED MORTGAGE LOAN WAREHOUSING AGREEMENT
THIS AMENDED AND RESTATED MORTGAGE LOAN WAREHOUSING AGREEMENT (the
"Agreement") is made and dated as of the 29th day of August, 1997, by and among
HEADLANDS MORTGAGE COMPANY, a California corporation (the "Company"), THE FIRST
NATIONAL BANK OF CHICAGO, a national banking association ("FNBC"), BANK OF
AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking association,
GUARANTY FEDERAL BANK, a federal savings bank, FIRST UNION NATIONAL BANK, a
national banking association, THE BANK OF NEW YORK, a banking corporation
organized under the laws of the State of New York, COMERICA BANK-CALIFORNIA, a
California banking corporation, any other lenders from time to time party
hereto, together with their respective successors and assigns (each a "Lender"
and collectively the "Lenders"), and FNBC as administrative agent for the
Lenders (in such capacity, the "Administrative Agent") and FIRST CHICAGO
NATIONAL PROCESSING CORPORATION, a Delaware corporation, as collateral agent for
the Administrative Agent and the Lenders (in such capacity, the "Collateral
Agent").
RECITALS
A. Pursuant to that certain Mortgage Loan Warehousing Agreement
dated as of October 24, 1994 by and among the Company, the Administrative Agent,
the Collateral Agent and the Lenders party thereto (as amended to date, the
"Existing Credit Agreement"), such Lenders agreed to extend credit to the
Company on the terms and subject to the conditions set forth therein.
B. The Company, the Administrative Agent, the Collateral Agent and
the Lenders currently party to the Existing Credit Agreement desire to amend the
Existing Credit Agreement and the documents, instruments and agreements relating
thereto in certain respects and, for convenience of reference, to restate the
Existing Credit Agreement in its entirety herein.
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT
1. Tranche A Credit Facility (Standard Pricing).
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1(a) Tranche A Lending Limit. On the terms and subject to the
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conditions set forth herein, the Tranche A Lenders severally agree that they
shall, from time to time up to but not including the Maturity Date, advance
their respective Tranche A Percentage
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Shares of loans (the "Tranche A Loans" or a "Tranche A Loan") to the Company in
amounts not to exceed, in the aggregate at any one time outstanding, the lesser
of:
(1) The Tranche A Credit Limit; and
(2) The lesser of: (i) the Aggregate Credit Limit, and (ii) the
Collateral Value of the Borrowing Base, minus, in each case, the aggregate
dollar amount of: all Tranche B Loans outstanding, all Tranche C Loans
outstanding, all Tranche D Loans outstanding, all Tranche E Loans
outstanding (including all Tranche B Loans, Tranche C Loans, Tranche D
Loans and Tranche E Loans to be funded on the proposed date of funding of
the requested Tranche A Loan), and all Funding Checks outstanding;
provided, however, that (x) in calculating the amount of Loans outstanding under
Paragraph 1(a)(2) above at any date, the aggregate amount of Loans outstanding
shall not include any Loans which will be repaid with Loans to be advanced on
such date in accordance with the terms of this Agreement, and (y) following the
funding of any requested Tranche A Loan, the aggregate dollar amount of each
Lender's Primary Loans outstanding shall not exceed such Lender's Maximum
Commitment.
1(b) Interest Rates Applicable to Tranche A Loans. Tranche A
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Loans shall be made and/or maintained, at the election of the Company made from
time to time as permitted herein, as Federal Funds Rate Loans and/or Eurodollar
Loans.
1(c) Calculation of Interest. The Company shall pay to the
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Administrative Agent for distribution to each Tranche A Lender interest on
Tranche A Loans outstanding hereunder from the date disbursed to but not
including the date of payment, calculated on such Tranche A Lender's Tranche A
Percentage Share of the principal amount of Tranche A Loans outstanding from
time to time hereunder during the interest calculation period, at a rate per
annum equal to, at the option of and as selected by the Company from time to
time (subject to the provisions of Paragraphs 6(a), 6(b) and 6(c) below): (i)
with respect to each Eurodollar Loan, the Applicable Eurodollar Rate for the
applicable Eurodollar Interest Period, and (ii) with respect to each Federal
Funds Rate Loan, a fluctuating rate per annum equal to the Applicable Federal
Funds Rate during the applicable computation period.
1(d) Payment of Interest. Interest accruing on Tranche A Loans
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which are Federal Funds Rate Loans shall be payable monthly, in arrears, as
provided in Paragraph 7(d) below and, in the case of Tranche A Loans which are
Eurodollar Loans, at the end of the applicable Eurodollar Interest Period.
2. Tranche B Credit Facility (Balance Sensitive Pricing).
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2(a) Tranche B Lending Limit. On the terms and subject to the
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conditions set forth herein, the Tranche B Lenders severally agree that they
shall, on each Tranche B Borrowing Date up to but not including the Maturity
Date, advance their respective Tranche B Percentage Shares of loans (the
"Tranche B Loans" or a "Tranche B Loan") to the Company in amounts not to
exceed, in the aggregate at any one time outstanding, the lesser of:
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(1) The Tranche B Aggregate Credit Allocation at such Tranche B
Borrowing Date; and
(2) The lesser of: (i) the Aggregate Credit Limit, and (ii) the
Collateral Value of the Borrowing Base, minus, in each case, the aggregate
dollar amount of: all Tranche A Loans outstanding, all Tranche C Loans
outstanding, all Tranche D Loans outstanding, all Tranche E Loans
outstanding (including all Tranche A Loans, Tranche C Loans, Tranche D
Loans and Tranche E Loans to be funded on the proposed date of funding of
the requested Tranche B Loan), and all Funding Checks outstanding;
provided, however, that (x) in calculating the amount of Loans outstanding under
Paragraph 2(a)(2) above at any date, the aggregate amount of Loans outstanding
shall not include any Loans which will be repaid with Loans to be advanced on
such date in accordance with the terms of this Agreement, and (y) following the
funding of any requested Tranche B Loan, the aggregate dollar amount of each
Lender's Primary Loans outstanding shall not exceed such Lender's Maximum
Commitment.
2(b) Calculation of Interest. The Company shall pay to the
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Administrative Agent for distribution to each Tranche B Lender interest on
Tranche B Loans outstanding hereunder from the date disbursed to but not
including the date of payment calculated on such Tranche B Lender's Tranche B
Percentage Share of Tranche B Loans outstanding from time to time hereunder
during any Tranche B Interest Period, at a rate per annum equal to the Buy-Down
Rate.
2(c) Payment of Interest. Interest accruing on Tranche B Loans
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during any Tranche B Interest Period shall be payable in arrears on the last day
of such Tranche B Interest Period as provided in Paragraph 7(d) below. The
Administrative Agent, in rendering any interest billing relating to Tranche B
Loans, shall have no obligation to verify the amount of any Buy-Down Deposits
supporting the pricing of Tranche B Loans.
2(d) Balance Requirements and Deficiency Fees. The Company agrees
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to maintain during each calendar month Buy-Down Deposits in non-interest bearing
accounts with each Tranche B Lender in an amount not less than one hundred
percent (100%) of the daily average amount of such Tranche B Lender's Tranche B
Percentage Share of Tranche B Loans outstanding during such monthly period. In
the event the Company shall fail to maintain the Buy-Down Deposits with any
Tranche B Lender required hereunder during any monthly period, the Company shall
pay to such Tranche B Lender upon demand such deficiency fees as may be
established pursuant to a Buy-Down Letter between such Tranche B Lender and the
Company from time to time. Any Tranche B Lender may elect not to make demand for
the payment of deficiency fees accruing in respect of Buy-Down Deposits or
Tranche B Loans from time to time and it is expressly agreed and understood
that: (1) such deficiency fee or fees shall not, by reason of such failure of
such Tranche B Lender or otherwise, be deemed to have been waived by such
Tranche B Lender (except as such waiver is expressly acknowledged in writing by
such Tranche B Lender from time to time), and (2) all deficiency fees accrued
and unpaid hereunder
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and not so expressly waived, whether or not previously declared due and owing by
any such Tranche B Lender, shall automatically be due and payable in full on the
Maturity Date.
2(e) Initial and Monthly Allocation; Reordering of Outstanding
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Obligations among Lenders. On or before the third Business Day preceding the
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date on which the first Loan(s) are to be funded hereunder, and on or before the
fifth Business Day preceding the first Business Day of each calendar month
thereafter up to but not including the Maturity Date, the Company shall deliver
to the Administrative Agent, the Collateral Agent and each Lender a Commitment
Schedule and Allocation Notice. Such Commitment Schedule and Allocation Notice
shall specify the dollar amount of the Tranche B Allocation for each Tranche B
Lender and the Tranche B Aggregate Credit Allocation and, based upon such
Tranche B Allocations, the resultant Tranche A Credit Limit and Tranche A
Percentage Share of each Tranche A Lender for the duration of the next
succeeding calendar month (or portion thereof in the event the Maturity Date
falls on a date other than the last day of a calendar month). Any reallocation
of Loans outstanding on the first day of each calendar month necessitated by any
change in a Lender's Tranche B Allocation pursuant to a Commitment Schedule and
Allocation Notice shall be effected on and as of the first Business Day of such
calendar month by the purchase and sale among the Lenders of the Obligations
outstanding on such date in such manner as the Administrative Agent shall
direct.
3. Tranche C Credit Facility (Swing Line).
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3(a) Tranche C Lending Limit. On the terms and subject to the
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conditions set forth herein, the Tranche C Lender agrees that it shall, from
time to time to but not including the Maturity Date, make loans (the "Tranche C
Loans" or a "Tranche C Loan") to the Company in amounts not to exceed, in the
aggregate at any one time outstanding, the lesser of:
(1) The Tranche C Credit Limit; and
(2) The lesser of: (i) the Aggregate Credit Limit, and (ii) the
Collateral Value of the Borrowing Base, minus, in each case, the aggregate
dollar amount of: all Tranche A Loans outstanding, all Tranche B Loans
outstanding, all Tranche D Loans outstanding, all Tranche E Loans
outstanding (including all Tranche A Loans, Tranche B Loans, Tranche D
Loans and Tranche E Loans to be funded on the proposed date of funding of
the requested Tranche C Loan), and all Funding Checks outstanding;
provided, however, that (x) in calculating the availability of Loans under
Paragraph 3(a)(2) above at any date, the aggregate amount of Loans outstanding
shall not include any Loans which will be repaid with Loans to be advanced on
such date in accordance with the terms of this Agreement, and (y) following the
funding of any requested Tranche C Loan, the aggregate dollar amount of the
Tranche C Lender's Primary Loans outstanding shall not exceed such Lender's
Maximum Commitment.
3(b) Interest Rates Applicable to Tranche C Loans. Tranche C
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Loans shall be made and/or maintained, at the election of the Company made from
time to time as
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permitted herein, at (i) the Overnight Transaction Loan Rate and/or (ii) to the
extent permitted pursuant to Paragraph 3(e) below, the Buy-Down Rate.
3(c) Calculation of Interest. The Company shall pay to the
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Administrative Agent for distribution to the Tranche C Lender interest on
Tranche C Loans outstanding hereunder from the date disbursed to but not
including the date of payment calculated on the principal amount of Tranche C
Loans outstanding from time to time hereunder during the interest calculation
period, at a rate per annum equal to, at the option of and as selected by the
Company from time to time (subject to the provisions of Paragraph 3(e) below):
(i) a fluctuating rate per annum equal to the Overnight Transaction Loan Rate
during the applicable computation period, and (ii) to the extent permitted
pursuant to Paragraph 3(e) below, the Buy-Down Rate during the applicable
computation period.
3(d) Payment of Interest. Interest accruing on Tranche C Loans
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shall be payable monthly, in arrears, as provided in Paragraph 7(d) below. The
Administrative Agent, in rendering any interest billing relating to Tranche C
Loans, shall have no obligation to verify the amount of any Buy-Down Deposits
supporting the pricing of Tranche C Loans.
3(e) Balance Pricing and Deficiency Fees. At the request of the
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Company, and with the prior written consent of the Tranche C Lender (which
consent shall not be unreasonably withheld), the Company may maintain during
each calendar month Buy-Down Deposits in non-interest bearing accounts with the
Tranche C Lender in such amounts as may be established from time to time
pursuant to a Buy-Down Letter between the Tranche C Lender and the Company. In
the event that the Company is permitted to maintain the required amounts of Buy-
Down Deposits with the Tranche C Lender hereunder during any monthly period, the
Company shall pay to the Tranche C Lender interest at the Buy-Down Rate with
respect to an aggregate principal amount of Tranche C Loans outstanding during
such monthly period equal to the aggregate daily average balance of Buy-Down
Deposits maintained with the Tranche C Lender during such monthly period. In
the event the Company shall fail to maintain sufficient Buy-Down Deposits with
the Tranche C Lender required pursuant to the Buy-Down Letter between them
during any monthly period, the Company shall pay to the Tranche C Lender upon
demand such deficiency fees (or additional interest accrued at an alternate
interest rate) as may be established in such Buy-Down Letter. The Tranche C
Lender may elect not to make demand for the payment of deficiency fees (or
additional interest) accruing in respect of Buy-Down Deposits or Tranche C Loans
from time to time and it is expressly agreed and understood that: (1) such
deficiency fee or fees (or additional interest) shall not, by reason of such
failure of the Tranche C Lender or otherwise, be deemed to have been waived by
the Tranche C Lender (except as such waiver is expressly acknowledged in writing
by the Tranche C Lender from time to time), and (2) all deficiency fees (or
additional interest) accrued and unpaid hereunder and not so expressly waived,
whether or not previously declared due and owing by the Tranche C Lender, shall
automatically be due and payable in full on the Maturity Date. Any Tranche C
Loans outstanding which are not matched by Buy-Down Deposits maintained with the
Tranche C Lender during the applicable monthly computation period pursuant to a
Buy-Down Letter shall accrue interest at the Overnight Transaction Loan Rate, as
provided in Paragraph 3(c) above.
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3(f) Reallocation of Tranche C Loans. The Tranche C Lender may at
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any time (and in any event no less frequently than weekly) in its sole and
absolute discretion request the Tranche A Lenders to advance Tranche A Loans,
pro rata in accordance with their respective Tranche A Percentage Shares, in the
aggregate amounts specified by the Tranche C Lender to repay all or any portion
of the Tranche C Loans outstanding. Subject to the provisions of Paragraph 15(n)
below, the Tranche A Lenders absolutely and unconditionally agree to advance
such Tranche A Loans, the proceeds of which shall be delivered directly to the
Tranche C Lender in same day funds at the office of the Tranche C Lender located
at One First National Plaza, Chicago, Illinois 60670 no later than 12:00 noon
(Los Angeles time) on the same Business Day as request therefor by the Tranche C
Lender if such request is made at or before 11:00 a.m. (Los Angeles time) or no
later than 12:00 noon (Los Angeles time) on the Business Day following request
therefor if such request is made after 11:00 a.m. (Los Angeles time), and such
proceeds shall be promptly applied against Tranche C Loans outstanding.
4. Tranche D Credit Facility (Shipped/Gestation).
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4(a) Tranche D Lending Limit. On the terms and subject to the
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conditions set forth herein, the Tranche D Lenders severally agree that they
shall, from time to time up to but not including the Maturity Date, advance
their respective Tranche D Percentage Shares of loans (the "Tranche D Loans" or
a "Tranche D Loan") to the Company in amounts not to exceed, in the aggregate at
any one time outstanding, the least of:
(1) The Tranche D Credit Limit;
(2) The Collateral Value of the Borrowing Base consisting of
Eligible Shipped Mortgage Loans and Eligible Gestation Mortgage Loans; and
(3) The lesser of: (i) the Aggregate Credit Limit, and (ii) the
Collateral Value of the Borrowing Base, minus, in each case, the aggregate
dollar amount of all Tranche A Loans outstanding, all Tranche B Loans
outstanding, all Tranche C Loans outstanding, all Tranche E Loans
outstanding (including all Tranche A Loans, Tranche B Loans, Tranche C
Loans and Tranche E Loans to be funded on the proposed date of funding of
the requested Tranche D Loan), and all Funding Checks outstanding;
provided, however, that (x) in calculating the amount of Loans outstanding under
Paragraph 4(a)(3) above at any date, the aggregate amount of Loans outstanding
shall not include any Loans which will be repaid with Loans to be advanced on
such date in accordance with the terms of this Agreement, and (y) following the
funding of any requested Tranche D Loan, the aggregate dollar amount of each
Lender's Primary Loans outstanding shall not exceed such Lender's Maximum
Commitment.
4(b) Interest Rate Applicable to Tranche D Loans. Tranche D Loans
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shall be made and/or maintained as Federal Funds Rate Loans.
4(c) Calculation of Interest. The Company shall pay to the
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Administrative Agent for distribution to each Tranche D Lender interest on
Tranche D Loans
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outstanding hereunder from the date disbursed to but not including the date of
payment calculated on such Tranche D Lender's Tranche D Percentage Share of the
principal amount of Tranche D Loans outstanding from time to time hereunder
during the interest calculation period, at a rate per annum equal to a
fluctuating rate per annum equal to the Applicable Federal Funds Rate during the
applicable computation period.
4(d) Payment of Interest. Interest accruing on Tranche D Loans
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shall be payable monthly, in arrears, as provided in Paragraph 7(d) below.
5. Tranche E Credit Facility (Negotiated Loan).
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5(a) Tranche E Lending Limit. On the terms and subject to the
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conditions set forth herein, any Lender may from time to time to but not
including the Maturity Date in its sole and absolute discretion offer to make
loans ("Tranche E Loans" or a "Tranche E Loan") to the Company in such amounts,
at such interest rates and for such terms that are not less than seven (7) and
not more than ninety (90) days and not to extend beyond the Maturity Date as
such Lender and the Company may agree; provided, however, that in no event will
any Lender advance any Tranche E Loan to the Company nor will the Company accept
the proceeds of any Tranche E Loan if upon the funding thereof the aggregate
amount of Tranche E Loans outstanding would exceed the lesser of: (1) the
Aggregate Credit Limit, and (2) the Collateral Value of the Borrowing Base,
minus, in each case, the aggregate dollar amount of all Tranche A Loans
outstanding, all Tranche B Loans outstanding, all Tranche C Loans outstanding,
all Tranche D Loans outstanding (including all Tranche A Loans, Tranche B Loans,
Tranche C Loans and Tranche D Loans to be funded on the proposed date of funding
of such Tranche E Loan), and all Funding Checks outstanding; provided, however,
that in calculating the amount of Loans outstanding under this Paragraph 5(a) at
any date, the aggregate amount of Loans outstanding shall not include any Loans
which will be repaid with Loans to be advanced on such date in accordance with
the terms of this Agreement.
5(b) Interest Rate Applicable to Tranche E Loans. Tranche E Loans
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shall be made and/or maintained at the Tranche E Loan Rate applicable thereto.
The Company and the Lenders acknowledge and agree that any Lender may utilized
Buy-Down Deposits to the extent such Buy-Down Deposits do not support Tranche B
Loans or Tranche C Loans, in determining such Lender's Tranche E Loan Rate.
5(c) Calculation of Interest. The Company shall pay to the
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Administrative Agent for distribution to each applicable Lender interest on each
Tranche E Loan outstanding hereunder extended by such Lender from the date
disbursed to but not including the date of payment, calculated on the principal
amount of such Tranche E Loan outstanding hereunder during the interest
calculation period, at a rate per annum equal to the Tranche E Loan Rate
applicable thereto.
5(d) Payment of Interest. Interest accruing on each Tranche E
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Loan shall be payable monthly, in arrears, as provided in Paragraph 7(d) below,
and at the end of the applicable Tranche E Interest Period relating thereto.
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5(e) Primary Loan Obligation. The agreement of a Lender to make a
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Tranche E Loan hereunder shall not to any extent reduce such Lender's obligation
to fund Primary Loans to the extent of such Lender's Maximum Commitment, it
being expressly acknowledged and agreed that the agreement to make Tranche E
Loans is optional on the part of such Lender and in addition to its Maximum
Commitment.
6. Eurodollar Provisions.
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6(a) Procedures for Interest Rate Election.
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(1) The Company may elect from time to time to have Tranche
A Loans funded as Eurodollar Loans or to convert Tranche A Loans
outstanding as Federal Funds Rate Loans to Eurodollar Loans by giving the
Administrative Agent at least three Eurodollar Business Days' prior
irrevocable notice of such election. All such elections shall be made by
delivery of a Loan Request by the Company to the Administrative Agent
within the required time period. The Company may elect from time to time to
convert Tranche A Loans outstanding as Eurodollar Loans to Federal Funds
Rate Loans effective upon the last day of the applicable Eurodollar
Interest Period. No Loan shall be funded as a Eurodollar Loan and no
Federal Funds Rate Loan shall be converted into a Eurodollar Loan if an
Event of Default or Potential Default has occurred and is continuing on the
day occurring three Eurodollar Business Days prior to the date of, or on
the date of, any requested funding or conversion.
(2) All or any part of Tranche A Loans may be funded or
converted as provided herein, provided that partial fundings or conversions
shall be in a principal amount of $5,000,000.00 or whole multiples of
$1,000,000.00 in excess thereof.
(3) Any Eurodollar Loan may be continued as such upon the
expiration of the Eurodollar Interest Period with respect thereto by the
Company giving the Administrative Agent at least three Eurodollar Business
Days' prior irrevocable notice of such election as set forth in a Loan
Request; provided, however, that no Eurodollar Loan may be continued as
such when any Event of Default or Potential Default has occurred and is
continuing, but shall be automatically converted to a Federal Funds Rate
Loan on the last day of the then current Eurodollar Interest Period
applicable thereto, and the Administrative Agent shall notify the
applicable Lenders and the Company promptly that such automatic conversion
will occur. If the Company shall fail to give notice as provided above, the
Company shall be deemed to have elected to convert any affected Eurodollar
Loan to a Federal Funds Rate Loan on the last day of the applicable
Eurodollar Interest Period.
6(b) Inability to Determine Rate. In the event that the
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Administrative Agent shall have reasonably determined (which determination shall
be conclusive and binding upon the Company) that by reason of circumstances
affecting the interbank market adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for any Eurodollar Interest
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Period, the Administrative Agent shall forthwith give telex notice of such
determination, confirmed in writing, to each affected Lender and to the Company.
If such notice is given: (1) no Loan may be funded as a Eurodollar Loan, (2) any
Federal Funds Rate Loan that was to have been converted to a Eurodollar Loan
shall, subject to the provisions hereof, be continued as a Federal Funds Rate
Loan and (3) any outstanding Eurodollar Loan shall be converted, on the last day
of the then current Eurodollar Interest Period applicable thereto, to a Federal
Funds Rate Loan. Until such notice has been withdrawn by the Administrative
Agent, the Company shall not have the right to convert a Federal Funds Rate Loan
to a Eurodollar Loan or to fund any Loan as a Eurodollar Loan or to continue a
Eurodollar Loan. The Administrative Agent shall withdraw such notice in the
event that the circumstances giving rise thereto no longer pertain and that
adequate and reasonable means exist for ascertaining the Eurodollar Rate for the
Eurodollar Interest Period requested by the Company, and following withdrawal of
such notice by the Administrative Agent, the Company shall have the right to
have any Tranche A Loan funded as a Eurodollar Loan or convert a Federal Funds
Rate Loan to a Eurodollar Loan or to continue a Eurodollar Loan in accordance
with the terms and conditions of this Agreement.
6(c) Illegality. Notwithstanding any other provisions herein, if
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any law, regulation, treaty or directive or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement: (1) the
commitment of such Lender hereunder to make or to continue Eurodollar Loans or
to convert Federal Funds Rate Loans to Eurodollar Loans shall forthwith be
cancelled and (2) such Lender's Loans then outstanding as Eurodollar Loans, if
any, shall be converted automatically to Federal Funds Rate Loans at the end of
their respective Eurodollar Interest Periods or within such earlier period as
required by law. In the event of a conversion of any such Loan prior to the end
of its applicable Eurodollar Interest Period, the Company hereby agrees promptly
to pay any Lender affected thereby, upon demand, the amounts required pursuant
to Paragraph 6(e) below, it being agreed and understood that such conversion
shall constitute a prepayment for all purposes hereof. The provisions hereof
shall survive the termination of this Agreement and payment of all other
Obligations.
6(d) Funding. Each Lender shall be entitled to fund all or any
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portion of its share of Loans in any manner it may determine in its sole
discretion, including, without limitation, in the Grand Cayman inter-bank
market, the London inter-bank market and within the United States, but all
calculations and transactions hereunder shall be conducted as though all Lenders
actually fund all Eurodollar Loans through the purchase of offshore dollar
deposits in the amount of the relevant Eurodollar Loan in maturities
corresponding to the applicable Eurodollar Interest Period.
6(e) Funding Indemnification. In addition to all other payment
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obligations hereunder, in the event: (1) any Eurodollar Loan is prepaid prior
to the last day of the applicable Eurodollar Interest Period, whether following
a voluntary prepayment, mandatory prepayment (including but not limited to
application of proceeds from the sale of Collateral or in connection with a
reallocation of Tranche B Allocations pursuant to Paragraph 2(e) above or in
connection with an increase in availability under Paragraph 15(k) below), or
otherwise, or (2) the Company shall fail to borrow a Eurodollar Loan or shall
fail to continue or to make a conversion
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to a Eurodollar Loan after the Company has given notice thereof as required
hereunder, then the Company shall immediately pay to each Lender holding the
Loans prepaid or not borrowed, continued or converted, through the
Administrative Agent, (x) a processing fee in the amount of $150.00 and (y) an
additional premium sum compensating such Lender for losses, costs and expenses
incurred by such Lender in connection with such prepayment or such failure to
borrow, continue or convert a Loan, including, without limitation, such as may
arise out of re-employment of funds obtained by such Lender and from fees
payable to terminate the deposits from which such funds were obtained, such
losses, actual costs and expenses and the method of calculation thereof being
set forth in reasonable detail in a statement delivered to the Company by such
Lender. Under no circumstances shall any Lender have any obligation to remit
monies to the Company upon prepayment of any Eurodollar Loan, even under
circumstances which do not result in the necessity for the payment by the
Company of any amount hereunder. The provisions hereof shall survive termination
of this Agreement and payment of all other Obligations.
7. Miscellaneous Lending Provisions.
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7(a) Use of Proceeds. The proceeds of all Loans shall be
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utilized by the Company solely for the purposes of: (1) originating and/or
acquiring Mortgage Loans; (2) repaying Tranche C Loans; and (3) refinancing
Eligible Mortgage Loans inventory originated by the Company using its own funds.
7(b) Request For Loans; Making of Loans.
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(1) If the Company desires to borrow hereunder the Company
shall: (i) in the case of a Tranche A Loan that is to be funded as a
Federal Funds Rate Loan or a Tranche D Loan, deliver a Loan Request to the
Administrative Agent no later than 9:00 a.m. (Los Angeles time) on the
proposed funding date, which Loan Request shall be forwarded promptly by
the Administrative Agent to the Tranche A Lenders and/or Tranche D Lenders,
as applicable, (ii) in the case of a Tranche A Loan which is to be funded
as a Eurodollar Loan, deliver a Loan Request to the Administrative Agent no
later than 9:00 a.m. (Los Angeles time) not less than three Eurodollar
Business Days prior to the proposed funding date, which Loan Request shall
be forwarded promptly by the Administrative Agent to the Tranche A Lenders,
(iii) in the case of a Tranche B Loan, deliver a Loan Request to the
Administrative Agent no later than 10:00 a.m. (Los Angeles time) on the
related Tranche B Borrowing Date, which Loan Request shall be forwarded
promptly by the Administrative Agent to the Tranche B Lenders, (iv) in the
case of a Tranche E Loan, deliver a Loan Request to the Administrative
Agent no later than 12:00 noon (Los Angeles time) on the proposed funding
date, which Loan Request shall be forwarded promptly by the Administrative
Agent to the applicable Lender, and (v) in the case of a Tranche C Loan,
deliver a Loan Request to the Administrative Agent no later than 1:30 p.m.
(Los Angeles time) on the proposed funding date, which Loan Request shall
be forwarded promptly by the Administrative Agent to the Tranche C Lender.
All Loan Requests to be forwarded by the Administrative Agent to the
Lenders shall be forwarded by facsimile transmission. With respect to any
Loan Request, the
10
Company shall specify the principal amounts of the Loans requested, subject
to the provisions of Paragraphs 1(a), 2(a), 3(a), 4(a) and 5(a) above, and
in the case of any Eurodollar Loans, the respective Eurodollar Interest
Periods applicable thereto, and with respect to any Tranche E Loan, the
Lender which has agreed to fund such Tranche E Loan. The applicable Lenders
shall make available their respective percentage shares, as applicable, of
the proposed Loans by crediting the amount thereof, in immediately
available same day funds, to the Pre-Disbursement Account (x) in the case
of Loans other than Tranche C Loans and Tranche E Loans, no later than
12:30 p.m. (Los Angeles time) on the funding date and (y) in the case of
Tranche C Loans or Tranche E Loans, no later than 2:00 p.m. (Los Angeles
time) on the funding date, such funds to be held pending disbursement as
provided in subparagraph (5) below.
(2) With respect to the conversion or continuation of any
Eurodollar Loan as provided in Paragraph 6(a) above, the Company shall
deliver a Loan Request to the Administrative Agent no later than 9:00 a.m.
(Los Angeles time) on the day occurring at least three Eurodollar Business
Days prior to the date of the conversion or continuation requested therein,
and the Administrative Agent shall promptly notify the appropriate Lenders
of the contents of such Loan Request.
(3) In addition to the provisions of subparagraph (1) above
regarding the delivery of Loan Requests, (i) in the case of a Loan that is
to be utilized to fund an Eligible Mortgage Loan includable in the
Borrowing Base pursuant to a Collateral Confirmation Agreement, the Company
shall deliver the Collateral Confirmation Agreement related to such
Eligible Mortgage Loan to the Collateral Agent no later than 8:00 a.m. (Los
Angeles time) on the proposed funding date, and (ii) in the case of a
Tranche C Loan that is to be utilized to fund an Eligible Mortgage Loan
includable in the Borrowing Base pursuant to a Collateral Confirmation
Agreement, the Company shall deliver the Collateral Confirmation Agreement
related to such Eligible Mortgage Loan to the Collateral Agent no later
than 1:00 p.m. (Los Angeles time) on the proposed funding date; provided,
however, that no Loan requested to fund a Mortgage Loan includable in the
Borrowing Base pursuant to a Collateral Confirmation Agreement shall be
made prior to receipt of the applicable Collateral Confirmation Agreement.
(4) The failure of any Lender to make the Loan (or portion
thereof) to be made by it as part of any borrowing shall not relieve any
other Lender of its obligation hereunder to advance its applicable portion
of the principal amount thereof, but no Lender shall be responsible for the
failure of any other Lender to make any such Loan.
(5) Subject to the conditions set forth in Paragraph
7(b)(1) above and Paragraphs 7(o) and 9(b) below, the Administrative Agent
shall disburse amounts held in the Pre-Disbursement Account to the Funding
Account no later than 1:00 p.m. (Los Angeles time) in the case of a Tranche
A Loan, a Tranche B Loan or a Tranche D Loan and no later than 3:00 p.m.
(Los Angeles time) in the case of a Tranche
11
C Loan or a Tranche E Loan. Disbursements out of the Funding Account and/or
such other account chosen by the Company shall be controlled by the
Company, unless the Administrative Agent shall elect at any time and in its
sole discretion to control disbursements out of such accounts and shall
notify the Company of such election. The Company shall fully cooperate with
the Administrative Agent to effectuate such change of control. Amounts held
in the Pre-Disbursement Account which cannot be disbursed to the Company
because the conditions set forth in Paragraph 9(b) below are not met shall
constitute cash collateral for the Obligations and shall be transferred to
the Settlement Account prior to the opening of business of the
Administrative Agent on the Business Day following the date deposited in
the Pre-Disbursement Account and disbursed to the Company only at such time
as such conditions are met. Such amounts shall constitute "Loans" to the
Company for all purposes of the Loan Documents and shall be payable, with
interest from the date first deposited in the Pre-Disbursement Account to
the same extent as if such amounts had been fully disbursed.
(6) Concurrently with submitting any Loan Request to the
Administrative Agent hereunder, the Company shall provide information to
the Administrative Agent and the Collateral Agent as to Funding Checks
outstanding as of the time of submission of such Loan Request.
7(c) Notes. The obligation of the Company to repay the Loans
-----
shall be evidenced by promissory notes, which promissory notes shall be issued
in substitution and replacement of the "Notes" issued under the Existing Credit
Agreement, payable to the order of each Lender, as applicable, in the forms of
those attached hereto as Exhibit A-1 (the "Tranche A Notes"), Exhibit A-2 (the
----------- -----------
"Tranche B Notes"), Exhibit A-3 (the "Tranche C Note"), Exhibit A-4 (the
----------- -----------
"Tranche D Notes") and Exhibit A-5 (the "Tranche E Notes"). The Administrative
----
Agent shall deliver a monthly statement of account to the Company setting forth
the unpaid principal balance of Loans outstanding hereunder, and each Lender's
interest therein, which statement shall (absent clerical error) be deemed
conclusively correct and accepted by the Company unless the Company notifies the
Administrative Agent to the contrary within fifteen (15) Business Days following
delivery of such statement. Each Lender is hereby authorized to record the date
and amount of each advance, conversion and continuation and the date and amount
of each such payment or prepayment of principal of each Loan made by such
Lender, the applicable Eurodollar Interest Period, if any, and the interest rate
with respect thereto, on the schedules annexed to and constituting a part of its
respective Note or Notes (or by any analogous method any Lender may elect
consistent with its customary practices), and any such recordation shall
constitute conclusive evidence of the accuracy of the information so recorded
absent manifest error. The failure of any Lender to make any such notation shall
not affect in any manner or to any extent the Company's obligation to pay
and perform the Obligations.
7(d) Interest and Fee Billing and Payment. The Administrative
------------------------------------
Agent shall, on or before the fifth Business Day of each month for Tranche A
Loans funded as Federal Funds Rate Loans, Tranche D Loans and fees, and three
Business Days prior to the last day of the applicable Eurodollar Interest Period
for Tranche A Loans funded as Eurodollar Loans, deliver to the Company an
interest and fee billing for the immediately preceding month or then-
12
ending Eurodollar Interest Period, as the case may be, which billing shall set
forth interest accrued and payable on Loans and fees payable hereunder for such
period to be collected by the Administrative Agent, and the Company shall pay
the full amount of such interest and fee billing no later than (y) five Business
Days after receipt thereof in the case of Tranche A Loans funded as Federal
Funds Rate Loans, Tranche D Loans and fees, and (z) on the last day of the
applicable Eurodollar Interest Period for Tranche A Loans funded as Eurodollar
Loans. Prior to the occurrence of the Maturity Date, interest accruing on
Tranche B Loans, Tranche C Loans and Tranche E Loans shall be payable in
accordance with such billing and interest procedures as the Company and each
Tranche B Lender, the Tranche C Lender and each Tranche E Lender, respectively,
shall agree. Following the occurrence of the Maturity Date, interest accruing on
all Loans shall be billed by the Administrative Agent based, to the extent
deemed necessary in the case of Tranche B Loans, Tranche C Loans and Tranche E
Loans and without independent verification of the accuracy thereof, on
information provided to the Administrative Agent by the respective Lenders
holding such Loans. Whether or not any such interest or fee billing is delivered
to the Company, the Administrative Agent is hereby authorized to, and shall
unless the Company is otherwise notified in advance of a different method and/or
time of payment, debit the Operating Account in the amount of such interest and
fees billed by the Administrative Agent hereunder. In any event and both prior
to and following the Maturity Date, any deficiency fees payable by the Company
to a Tranche B Lender in respect of Tranche B Loans or to the Tranche C Lender
in respect of Tranche C Loans shall be paid directly to such Tranche B Lender or
the Tranche C Lender, respectively, pursuant to the terms of the applicable Buy-
Down Letter.
7(e) Repayment of Principal. Subject to the prepayment
----------------------
requirements of Paragraphs 7(f) and 7(p) below, and the required application of
proceeds from the sale or other disposition of Collateral as provided in the
Security Agreement, the Company shall pay the principal amount of each
Eurodollar Loan (unless continued or converted pursuant to Paragraph 6(a) above)
on the last day of the applicable Eurodollar Interest Period relating thereto,
shall pay the principal amount of each Tranche B Loan on the last day of the
applicable Tranche B Interest Period, shall pay the principal amount of each
Tranche E Loan on the last day of the applicable Tranche E Interest Period
relating thereto, and shall pay the principal amount of all other Loans on the
Maturity Date; provided, however, the Company shall pay the principal amount of
any Loan no earlier than one (1) Business Day after the advance thereof.
7(f) Borrowing Base Conformity.
-------------------------
(1) In support of its obligation to repay Loans, the
Company shall cause the Collateral Value of the Borrowing Base and, if so
required by the Majority Lenders in writing from time to time in their sole
and absolute discretion, the Fair Market Value of the Borrowing Base, to be
not less than, at any date, the aggregate principal amount of outstanding
Loans and Funding Checks outstanding.
(2) In support of its obligation to repay Tranche D Loans,
the Company shall cause the Collateral Value of the Borrowing Base
consisting of Eligible Shipped Mortgage Loans and Eligible Gestation
Mortgage Loans to be not less than, at any date, the aggregate principal
amount of all outstanding Tranche D Loans.
13
(3) The Company shall immediately prepay the applicable
Loans to the Administrative Agent on behalf of the Lenders, upon telephonic
demand by the Administrative Agent, on any day in the amount by which (i)
the aggregate principal amount of outstanding Loans and Funding Checks
exceeds the limitation of subparagraph (1) above and (ii) the aggregate
principal amount of outstanding Tranche D Loans exceeds the limitation of
subparagraph (2) above.
(4) If, but only if, at such time as the Company shall be
required to prepay Loans under this Paragraph 7(f) there shall not have
occurred and be continuing an Event of Default or Potential Default, in
lieu of prepaying the Loans as required above, the Company may deliver to
the Collateral Agent for the benefit of the Lenders additional Eligible
Mortgage Loans (and as applicable, additional Eligible Shipped Mortgage
Loans and Eligible Gestation Mortgage Loans for the benefit of the Tranche
D Lenders), such that the Collateral Value of the Borrowing Base or the
Fair Market Value of the Borrowing Base, as applicable, after giving effect
to the inclusion of such Eligible Mortgage Loans in the Borrowing Base (and
as applicable, the Collateral Value of the Borrowing Base consisting of
Eligible Shipped Mortgage Loans and Eligible Gestation Mortgage Loans,
after giving effect to the inclusion of such Eligible Shipped Mortgage
Loans and Eligible Gestation Mortgage Loans in the Borrowing Base), shall
be in compliance with the requirements of subparagraphs (1) and (2) above.
7(g) Nature and Place of Payments. All payments made on account
----------------------------
of the Obligations (other than amounts required to be paid to Tranche B Lenders
pursuant to Paragraph 2(d) above and their respective Buy-Down Letters with the
Company or amounts required to be paid to the Tranche C Lender pursuant to
Paragraph 3(e) above and its Buy-Down Letter with the Company) shall be made to
the Administrative Agent for prompt distribution to the Lenders. All payments
made on account of the Obligations shall be made without setoff or counterclaim
in lawful money of the United States of America in immediately available same
day funds, free and clear of and without deduction for any taxes, fees or other
charges of any nature whatsoever imposed by any taxing authority and must be
received by the Administrative Agent by 10:00 a.m. (Los Angeles time) on the
date of payment, it being expressly agreed and understood that if a payment is
received after 10:00 a.m. (Los Angeles time) by the Administrative Agent, such
payment will be considered to have been made on the next succeeding Business Day
and interest thereon shall be payable at the then applicable rate during such
extension; provided, however, that upon the request of the Company, and with the
consent of the Tranche C Lender, the Administrative Agent shall apply payments
made after 10:00 a.m. (Los Angeles time) and before 1:30 p.m. (Los Angeles time)
to the repayment of Tranche C Loans outstanding without such payment being
considered to have been made on the next succeeding Business Day. All payments
on account of the Obligations shall be made to the Administrative Agent through
its office located at One First National Plaza, Chicago, Illinois 60670. If any
payment required to be made by the Company hereunder becomes due and payable on
a day other than a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and interest thereon shall be payable at the then
applicable rate during such extension.
14
7(h) Post-Maturity Interest. Any Obligations not paid when due
----------------------
(whether at stated maturity, upon acceleration or otherwise) shall bear interest
from the date due until paid in full at a per annum rate equal to three percent
(3%) above the Corporate Base Rate.
7(i) Computations. All computations of interest and fees payable
------------
hereunder shall be based upon a year of 360 days for the actual number of days
elapsed.
7(j) Prepayments.
-----------
(1) The Company may prepay Loans hereunder (other than
Eurodollar Loans) in whole or in part at any time; provided, however, that
any such voluntary prepayment shall be in the amount of $100,000.00 or an
integral multiple of $100,000.00 in excess thereof.
(2) Loans hereunder are subject to mandatory prepayment
pursuant to Paragraphs 7(f) above and 7(p) below, and in addition, by
application of proceeds of the sale or other disposition of Collateral as
provided in the Security Agreement.
(3) The Company shall prepay Loans hereunder in an amount
equal to any and all payments received by the Company from Obligors on
account of any Eligible HELOC Assets included in the Borrowing Base within
one (1) Business Day of receipt of such amounts by the Company.
Concurrently with such prepayment, the Company shall provide written notice
to the Collateral Agent of such prepayment identifying the dollar amount
thereof and the Eligible HELOC Asset to which such prepayment related, and
the Collateral Agent shall thereafter recalculate the Unit Collateral Value
of such Eligible HELOC Asset for purposes of all subsequent Collateral
Value Determinations made by the Collateral Agent.
(4) The Company shall pay in connection with any prepayment
hereunder all interest accrued but unpaid on Loans to which such prepayment
is applied pursuant to Paragraph 7(k) below concurrently with payment to
the Administrative Agent of any principal amounts and, in addition, any
amounts payable on account thereof pursuant to Paragraph 6(e) above.
7(k) Distribution of Amounts Held In Settlement Account; Post-
---------------------------------------------------------
Default Distributions.
- ---------------------
(1) Prior to the occurrence of an Event of Default and
acceleration of the Obligations, upon request by the Company, the
Administrative Agent shall release any cash held in the Settlement Account
at such time (the "Available Cash Proceeds") to the Company as long as the
Borrowing Base requirements pursuant to Paragraphs 7(f)(1) and 7(f)(2) are
met. In addition, upon delivery of a Loan Request to the Administrative
Agent, the Company may request that the Administrative Agent determine the
Available Cash Proceeds and that the Administrative Agent:
15
(i) Transfer from the Settlement Account to the Funding
Account Available Cash Proceeds in an amount equal to the lesser of:
a. the aggregate dollar amount of Loans requested pursuant to such
Loan Request (the "Requested Loans") and b. the aggregate dollar
amount of such Available Cash Proceeds; and
(ii) Reduce the aggregate dollar amount of Requested
Loans by an amount equal to the amount transferred pursuant to
subparagraph (i) above (with such reduction being against such
Requested Loans as the Company may indicate in such Loan Request).
If but only if the Administrative Agent determines that upon such transfer
pursuant to subparagraph (i) above and following the funding of the
Requested Loans, as reduced pursuant to subparagraph (ii) above, the
aggregate dollar amount of outstanding Loans and Funding Checks outstanding
will not exceed the Collateral Value of the Borrowing Base, and, in the
case of Tranche D Loans, that the aggregate dollar amount of outstanding
Tranche D Loans will not exceed the Collateral Value of the Borrowing Base
consisting of Eligible Shipped Mortgage Loans and Eligible Gestation
Mortgage Loans, the Administrative Agent will effect such transfer and
notify each Lender pursuant to Paragraph 7(b) above of the Loans, if any,
to be funded by such Lender pursuant to such Loan Request.
(2) Prior to the occurrence of an Event of Default and
acceleration of the Obligations, the Company may direct the Administrative
Agent in writing to distribute amounts held in the Settlement Account or
any portion thereof to the Lenders on account of the Loans in such order as
the Company may elect (subject only to the requirements that: (i) any
payment on account of Tranche A Loans, Tranche B Loans and/or Tranche D
Loans be allocated pro rata among the Tranche A Lenders, the Tranche B
Lenders and/or the Tranche D Lenders, as applicable, in accordance with
their Tranche A Percentage Shares, Tranche B Percentage Shares and/or
Tranche D Percentage Shares, as applicable, and (ii) no payment be made on
account of a Tranche C Loan on the date funded. Any direction for a
distribution to the Tranche A Lenders, the Tranche B Lenders, the Tranche D
Lenders and/or any Lender which advanced Tranche E Loans must be received
by the Administrative Agent by 10:00 a.m. (Los Angeles time) on the
proposed distribution date, and any direction for a distribution to the
Tranche C Lender must be received by the Administrative Agent by 2:45 p.m.
(Los Angeles time) on the proposed distribution date.
(3) Following the occurrence of an Event of Default and
acceleration of the Obligations:
(i) All amounts received by the Administrative Agent on
account of the Obligations other than the Tranche D Obligations,
including funds deposited from time to time in the Settlement Account
and proceeds of the sale or other disposition of all Collateral except
Collateral in the Borrowing Base
16
relating to Eligible Shipped Mortgage Loans and Eligible Gestation
Mortgage Loans used to support Tranche D Loans and except the Pledged
Collateral, shall be allocated by the Administrative Agent as follows:
a. First, to the payment of expenses incurred by
the Administrative Agent and Collateral Agent in the performance
of their duties and enforcement of their rights under the Loan
Documents in respect of the Obligations other than the Tranche D
Obligations, including, without limitation, all costs and
expenses of collection, reasonable attorneys' fees, court costs
and foreclosure expenses;
b. Then, to the Lenders, pro rata in accordance
with their respective Outstanding Percentage Shares, until the
Obligations are paid in full; and
c. Then, to such Persons as may be legally
entitled thereto.
(ii) All amounts received by the Administrative Agent on
account of the Tranche D Obligations, including the proceeds of the
sale or other disposition of all Collateral in the Borrowing Base
relating to Eligible Shipped Mortgage Loans and Eligible Gestation
Mortgage Loans used to support Tranche D Loans but excepting the
Pledged Collateral, shall be allocated by the Administrative Agent as
follows:
a. First, to the payment of expenses incurred by
the Administrative Agent and Collateral Agent in the performance
of their duties and enforcement of their rights under the Loan
Documents in respect of the Tranche D Obligations, including,
without limitation, all costs and expenses of collection,
attorneys' fees, court costs and foreclosure expenses;
b. Then, to the Tranche D Lenders, pro rata in
accordance with their respective Tranche D Percentage Shares,
until the Tranche D Obligations are paid in full;
c. Then, to the Lenders, pro rata in accordance
with their respective Outstanding Percentage Shares, until the
Obligations are paid in full; and
d. Then, to such Persons as may be legally
entitled thereto.
17
(iii) All amounts received by the Administrative Agent
upon the sale or other disposition of the Pledged Collateral shall be
allocated by the Administrative Agent as follows:
a. First, to the payment of expenses incurred by
the Administrative Agent and the Collateral Agent in the
performance of their duties and enforcement of their rights under
the Pledge Agreement and the other Stock Pledge Documents;
b. Then, to the Lenders and the "Lenders" under
(and as the term "Lenders" is defined in) the Servicing Secured
Credit Agreement, pro rata in accordance with their respective
Combined Percentage Shares, until the Secured Obligations are
paid in full; and
c. Then, to such Persons as may be legally
entitled thereto.
7(l) Fees. The Company shall pay the following fees:
----
(1) To the Administrative Agent for the account of each
Lender, quarterly in advance, a non-refundable commitment fee equal to the
product of (i) one fifth of one percent (0.20%) per annum times (ii) such
Lender's Maximum Commitment on the Effective Date and on the first Business
Day of each calendar quarter thereafter, said fee to be payable on the
Effective Date for the period from such date to but not including October
1, 1997 and on the first Business Day of each January, April, July and
October thereafter for the applicable calendar quarter (or portion
thereof).
(2) To the Administrative Agent for the account of each
Lender which provides its written consent to an amendment, waiver or other
modification of the Loan Documents on or before the date such amendment,
waiver or other modification becomes effective as a result of the written
approval thereof by the requisite number of Lenders required by the Loan
Documents, a processing fee of $1,500.00, said fee to be payable promptly
following such effective date; provided, however, that such fee shall not
apply to the first two such amendments, waivers or other modifications
hereunder during any continuous one year period (calculated from the date
of this Agreement).
(3) To the Administrative Agent and the Collateral Agent,
such fees in such amounts and payable at such times as the Company and the
Administrative Agent and the Company and the Collateral Agent, as
applicable, may from time to time agree in writing.
7(m) Requirements of Law; Increased Costs. In the event that any
------------------------------------
applicable law, order, regulation, treaty or directive issued by any central
bank or other Governmental Authority, or in the governmental or judicial
interpretation or application thereof,
18
or compliance by any Lender with any request or directive (whether or not having
the force of law) issued subsequent to the date hereof by any central bank or
other Governmental Authority:
(1) Does or shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement or any Loans made hereunder, or
change the basis of taxation of payments to such Lender of principal, fee,
interest or any other amount payable hereunder (except for change in the
rate of tax on the overall net income of such Lender imposed by the
jurisdiction in which such Lender maintains its principal office);
(2) Does or shall impose, modify or hold applicable any
reserve, capital requirement, special deposit, compulsory loan or similar
requirements against assets held by, or deposits or other liabilities in or
for the account of, advances or loans by, or other credit extended by, or
any other acquisition of funds by, any office of such Lender which are not
otherwise included in the determination of the Applicable Eurodollar Rate,
the Federal Funds Funding Rate, the Buy-Down Rate, the Overnight
Transaction Loan Rate or the Tranche E Loan Rate; or
(3) Does or shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender of
making, renewing or maintaining any Loan or to reduce any amount receivable in
respect thereof or to reduce the rate of return on the capital of such Lender or
any Person controlling such Lender, then, in any such case, the Company shall
promptly pay to the Administrative Agent for remittance to such Lender, upon its
written demand made through the Administrative Agent, any additional amounts
necessary to compensate such Lender for such additional cost or reduced amounts
receivable or rate of return as reasonably determined by such Lender with
respect to this Agreement or Loans made hereunder. If a Lender becomes entitled
to claim any additional amounts pursuant to this Paragraph 7(m), it shall
promptly notify the Company through the Administrative Agent of the event by
reason of which it has become so entitled. In conjunction with such
notification, such Lender shall provide the Company with a certificate
specifying any additional amounts payable pursuant to the foregoing sentence,
which certificate shall set forth the calculation of such amounts in sufficient
detail and according to reasonable and customary computation methods. The
provisions hereof shall survive the termination of this Agreement and payment of
all other Obligations.
7(n) Reduction in Aggregate Credit Limit. The Company may from
-----------------------------------
time to time, effective as of any Eurodollar Business Day, permanently reduce,
in whole or in part, the Aggregate Credit Limit on a pro rata basis among the
Lenders, in an amount not less than $5,000,000.00 (and integral multiples of
$1,000,000.00 in excess thereof) upon not less than four Business Days prior
written notice to the Administrative Agent, the Collateral Agent and the
Lenders; provided, however, that on or before the effective date of any such
reduction the Company will pay to the Administrative Agent for distribution to
the applicable Lenders that dollar amount of Loans outstanding which, after
giving effect to such permanent reduction, will
19
exceed the Aggregate Credit Limit (and related Tranche A Credit Limit, Tranche B
Aggregate Credit Allocation, Tranche C Credit Limit and/or Tranche D Credit
Limit, as applicable).
7(o) Assumption of Funding. The Administrative Agent may (but
---------------------
shall not be obligated to) assume that each Lender has made its Tranche A
Percentage Share, Tranche B Percentage Share or Tranche D Percentage Share, as
applicable, of Tranche A Loans, Tranche B Loans or Tranche D Loans available on
the funding date therefor and may, in reliance on such assumption, make
available to the Company on such date a corresponding amount. If and to the
extent any Lender shall not have made such amount available, such Lender and the
Company jointly and severally agree to repay to the Administrative Agent
forthwith on demand such amount together with interest thereon for each date
from the date such amount is funded by the Administrative Agent until the date
such amount is repaid to the Administrative Agent at the Federal Funds Funding
Rate. If such Lender shall repay to the Administrative Agent such amount, such
amount shall constitute such Lender's Tranche A Percentage Share, Tranche B
Percentage Share or Tranche D Percentage Share of such Tranche A Loan, Tranche B
Loan or Tranche D Loan, as applicable, for all purposes of the Loan Documents.
7(p) Mark-to-Market Requirement. At any time on the Business Day
--------------------------
following telephonic request therefor by the Administrative Agent at the request
of any Lender from time to time, the Company will provide to each Lender a
Borrowing Base Certificate setting forth the Fair Market Value of the Borrowing
Base as of the end of the preceding Business Day and the aggregate dollar amount
of Loans outstanding on such date. In the event the aggregate dollar amount of
Loans outstanding exceeds the Fair Market Value of the Borrowing Base, the
Company shall immediately pay to the Administrative Agent for distribution to
the Lenders as provided in Paragraph 7(k)(2) above the full amount of such
excess.
8. Reaffirmation of Security Agreement; Pledge Agreement; Additional
-----------------------------------------------------------------
Documents.
- ---------
8(a) Security Agreement. As collateral security for the
------------------
Obligations of the Company under (and as the term "Obligations" is defined in)
the Existing Credit Agreement, the Company executed and delivered to the
Collateral Agent that certain Security and Collateral Agency Agreement dated as
of October 24, 1994 (as amended from time to time, the "Existing Security
Agreement"). The Company hereby confirms that the first priority, perfected
security interest of the Collateral Agent for the benefit of the Lenders
participating in the Existing Credit Agreement shall continue in full force and
effect with respect to all Obligations hereunder. On or before the Effective
Date, the Existing Security Agreement shall be amended and, for convenience of
reference, restated in its entirety with a replacement security agreement in the
form of that attached hereto as Exhibit B (as amended, extended or replaced from
---------
time to time, the "Security Agreement"), which Security Agreement shall continue
the perfection and priority of the security interest of the Collateral Agent for
the benefit of the Lenders in the Collateral thereunder.
20
8(b) Pledge Agreement. As additional collateral security for the
----------------
Obligations and the Obligations of the Company under (and as the term
"Obligations" is defined in) the Servicing Secured Credit Agreement, the Company
shall execute and deliver to the Collateral Agent: (1) a pledge agreement in
the form of that attached hereto as Exhibit C (as amended, extended or replaced
---------
from time to time, the "Pledge Agreement") pursuant to which the Company shall
assign, transfer and pledge to the Collateral Agent for the benefit of the
Lenders a first priority security interest in and lien upon all now owned and
hereafter issued or acquired stock of all now existing and hereafter formed or
acquired Subsidiaries of the Company, including, without limitation, all
outstanding capital stock of HMSI, (2) stock certificates evidencing all
outstanding capital stock of Subsidiaries of the Company existing on the
Effective Date and blank stock transfer powers therefor, and (3) such UCC-1
financing statements as the Administrative Agent shall require (collectively,
the "Stock Pledge Documents").
8(c) Further Documents. The Company agrees to execute and
-----------------
deliver or to cause to be executed and delivered to the Administrative Agent on
behalf of the Lenders from time to time such confirmatory or supplementary
security agreements, financing statements, acknowledgments, consents and notices
to third parties and other documents, instruments or agreements as the
Administrative Agent on behalf of the Lenders may reasonably request, which are
in the Administrative Agent's reasonable judgment necessary or desirable to
obtain for the Lenders the benefit of the Loan Documents and the Collateral and
the Pledged Collateral.
9. Conditions to Making of Loans.
-----------------------------
9(a) Effectiveness. As conditions precedent to the effectiveness
-------------
of this Agreement and the other Loan Documents:
(1) The Company shall have delivered or shall have had
delivered to the Administrative Agent, in form and substance satisfactory
to the Lenders and their counsel, each of the following (with sufficient
copies for each of the Lenders):
(i) A duly executed copy of this Agreement;
(ii) Duly executed copies of the Notes;
(iii) A duly executed copy of the Security Agreement;
(iv) A duly executed copy of the Pledge Agreement and
the other Stock Pledge Documents;
(v) Duly executed copies of all financing statements
and other documents, instruments and agreements, properly executed,
deemed necessary or appropriate by the Administrative Agent, in its
reasonable discretion, to obtain and maintain in favor of the
Collateral Agent for the benefit of the Lenders a perfected security
interest in and lien upon the Collateral and the Pledged Collateral;
21
(vi) Such credit applications, financial statements,
authorizations and information concerning the Company and its
business, operation and condition (financial and otherwise) as any
Lender may reasonably request;
(vii) Certified copies of resolutions of the Board of
Directors of the Company approving the execution and delivery of the
Loan Documents, the performance of the Obligations and the
consummation of the transactions contemplated thereby;
(viii) A certificate of the Secretary or an Assistant
Secretary of the Company certifying the names and true signatures of
the officers of the Company authorized to execute and deliver the Loan
Documents;
(ix) An opinion of counsel for the Company in form
and substance satisfactory to the Administrative Agent and the
Lenders;
(x) A certificate of an executive officer of the
Company in the form of that attached hereto as Exhibit D dated as of
---------
the date of this Agreement;
(xi) Evidence satisfactory to the Administrative
Agent that each of the Funding Account, the Operating Account and the
Settlement Account has been opened;
(xii) A schedule of the current Approved Investors,
Approved Repo Lenders, Approved Non-Agency Investors, Approved HELOC
Investors, Approved High LTV Investors, Acceptable States and
Acceptable Manufactured Housing States, duly approved by the Majority
Lenders;
(xiii) A Borrowing Base Certificate, certified by the
chief financial officer, treasurer or controller of the Company,
demonstrating that the Company is in compliance with the requirements
of Paragraph 7(f) above (and assuming that all "Loans" outstanding
under the Existing Credit Agreement are Loans outstanding hereunder)
it being agreed and understood that on the Effective Date such "Loans"
and all other "Obligations" under (and as defined in) the Existing
Credit Agreement shall automatically be deemed to be Loans and
Obligations hereunder; and
(xiv) The current Commitment Schedule and Allocation
Notice.
(2) All acts and conditions (including, without limitation,
the obtaining of any necessary regulatory approvals and the making of any
required filings, recordings or registrations) required to be done and
performed and to have happened precedent to the execution, delivery and
performance of the Loan Documents and to
22
constitute the same legal, valid and binding obligations, enforceable in
accordance with their respective terms, shall have been done and performed
and shall have happened in due and strict compliance with all applicable
laws.
(3) All documentation, including without limitation,
documentation for corporate and legal proceedings in connection with the
transactions contemplated by the Loan Documents, shall be reasonably
satisfactory in form and substance to the Administrative Agent and its
counsel.
(4) All fees required to be paid pursuant to Paragraph 7(l)
above on or before the Effective Date shall have been paid prior to (or
will be paid concurrently with) the making of the initial Loans hereunder.
9(b) All Loans. As conditions precedent to each Lender's
---------
obligation to make any Loan hereunder, including the initial Loans and including
the conversion of any Loan to another type of Loan or the continuation of any
Eurodollar Loan after the end of its Eurodollar Interest Period, at and as of
the date of the funding, conversion or continuation thereof:
(1) There shall have been delivered to the Administrative
Agent a Loan Request therefor;
(2) The representations and warranties of the Company
contained in the Loan Documents shall be accurate and complete in all
respects as if made on and as of the date of such funding, conversion or
continuance;
(3) There shall not have occurred an Event of Default or
Potential Default;
(4) If the proceeds of a requested Loan are to be utilized
to make a progress or construction payment relating to an Eligible
Manufactured Housing Mortgage Loan, there shall have been delivered to the
Administrative Agent a certification from the Company representing and
warranting that all work associated with the construction and permanent
attachment of the related Manufactured Home has been completed on schedule
and in compliance with all specifications, and that such work has met all
necessary inspection standards to allow a certificate of occupancy to be
issued for such Manufactured Home upon completion; and
(5) Following the funding of the requested Loan: (i) the
aggregate principal amount of Primary Loans outstanding advanced by any
Lender will not exceed its respective Maximum Commitment, (ii) the
aggregate principal amount of Loans outstanding advanced by all Lenders
will not exceed the Aggregate Credit Limit, and (iii) the aggregate
principal amount of Loans outstanding will not exceed the applicable
limitations of Paragraphs 1(a), 2(a), 3(a), 4(a) and 5(a) above.
23
By delivering a Loan Request to the Administrative Agent hereunder, the Company
shall be deemed to have represented and warranted the accuracy and completeness
of the statements set forth in subparagraphs (b)(2) through (b)(5) above.
10. Representations and Warranties of the Company.
---------------------------------------------
As an inducement to the Agents and each Lender to enter into this
Agreement and to make Loans as provided herein, the Company represents and
warrants to the Agents and each Lender that:
10(a) Financial Condition. The financial statements, dated the
-------------------
Statement Date and the Interim Date, copies of which have heretofore been
furnished to each Lender, are complete and correct and present fairly in
accordance with GAAP, the financial condition of the Company and its
consolidated Subsidiaries, at such dates and the consolidated results of their
operations and changes in financial position for the fiscal periods then ended.
10(b) No Change. Since each of the Statement Date and the Interim
---------
Date, there has been no material adverse change in the business, operations,
assets or financial or other condition of the Company or the Company and its
consolidated Subsidiaries taken as a whole.
10(c) Corporate Existence; Compliance with Law. The Company and
----------------------------------------
each of its Subsidiaries: (1) is duly organized, validly existing and in good
standing as a corporation under the laws of the State of California and is
qualified to do business in each jurisdiction where its ownership of property or
conduct of business requires such qualification and where failure to qualify
could have a material adverse effect on the Company or its property and/or
business or on the ability of the Company to pay or perform the Obligations, (2)
has the corporate power and authority and the legal right to own and operate its
property and to conduct business in the manner in which it does and proposes so
to do, and (3) is in compliance with all Requirements of Law and Contractual
Obligations, the failure to comply with which could have a material adverse
effect on the business, operations, assets or financial or other condition of
the Company or the Company and its consolidated Subsidiaries taken as a whole or
on the Collateral or the Fair Market Value thereof.
10(d) Corporate Power; Authorization; Enforceable Obligations.
-------------------------------------------------------
The Company has the corporate power and authority and the legal right to
execute, deliver and perform the Loan Documents and borrow thereunder, and has
taken all necessary corporate action to authorize the execution, delivery and
performance of the Loan Documents and borrowing thereunder. The Loan Documents
have been duly executed and delivered on behalf of the Company and constitute
legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their respective terms, subject to the effect of
applicable bankruptcy and other similar laws affecting the rights of creditors
generally and the effect of equitable principles whether applied in an action at
law or a suit in equity.
10(e) No Legal Bar. The execution, delivery and performance of
------------
the Loan Documents, the borrowing thereunder and the use of the proceeds
thereof, will not violate
24
any Requirement of Law or any Contractual Obligation of the Company or any of
its Subsidiaries or create or result in the creation of any Lien (except the
Liens created by the Security Agreement and the Pledge Agreement) on any assets
of the Company or any of its Subsidiaries.
10(f) No Material Litigation. Except as disclosed on Exhibit E
---------------------- ---------
attached hereto, no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority or any other Person is pending or, to the
knowledge of the Company, threatened by or against the Company or any of its
Subsidiaries or against any of such Persons' properties or revenues which (1) is
likely to be adversely determined and which, if adversely determined, is likely
to have a material adverse effect on the business, operations, property or
financial or other condition of the Company or any of its Subsidiaries or (2)
questions the validity or enforceability of any of the Loan Documents.
10(g) Taxes. The Company and each of its Subsidiaries have filed
-----
or caused to be filed all tax returns that are required to be filed and have
paid all taxes shown to be due and payable on said returns or on any assessments
made against them or any of their property other than taxes which are being
contested in good faith by appropriate proceedings and as to which the Company
or applicable Subsidiary has established adequate reserves in conformity with
GAAP.
10(h) Investment Company Act. The Company is not an "investment
----------------------
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
10(i) Subsidiaries. Attached hereto as Exhibit F is an accurate
------------ ---------
and complete list of all presently existing Subsidiaries of the Company, their
respective jurisdictions of incorporation and the percentage of their capital
stock owned by the Company or other Subsidiaries of the Company. All of the
issued and outstanding shares of capital stock of such Subsidiaries have been
duly authorized and issued and are fully paid and non-assessable.
10(j) Federal Reserve Board Regulations. Neither the Company nor
---------------------------------
any of its Subsidiaries is engaged or will engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
such terms under Regulation U. No part of the proceeds of any Loan made
hereunder will be used for "purchasing" or "carrying" "margin stock" as so
defined or for any purpose which violates, or which would be inconsistent with,
the provisions of the Regulations of the Board of Governors of the Federal
Reserve System.
10(k) ERISA. The Company and each of its ERISA Affiliates are in
-----
compliance in all respects with the requirements of ERISA and no Reportable
Event has occurred under any Plan maintained by the Company or any of its ERISA
Affiliates which is likely to result in the termination of such Plan for
purposes of Title IV of ERISA.
10(l) Assets. The Company and each of its Subsidiaries has good
------
and marketable title to all property and assets reflected in the financial
statements referred to in
25
Paragraph 10(a) above, including without limitation, the Collateral, except
property and assets sold or otherwise disposed of in the ordinary course of
business subsequent to the respective dates thereof. Neither the Company nor any
of its Subsidiaries has outstanding Liens on any of its properties or assets,
including, without limitation, the Collateral and the Pledged Collateral, nor
are there any security agreements to which the Company or any of its
Subsidiaries is a party, or title retention agreements, whether in the form of
leases or otherwise, of any personal property except as reflected in the
financial statements referred to in Paragraph 10(a) above or as permitted under
Paragraph 12(a) below.
10(m) Securities Acts. The Company has not issued any
---------------
unregistered securities in violation of the registration requirements of Section
5 of the Securities Act of 1933, as amended, or any other law, and is not
violating any rule, regulation or requirement under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended. The Company is
not required to qualify an indenture under the Trust Indenture Act of 1939, as
amended, in connection with its execution and delivery of the Notes.
10(n) Consents, etc. No consent, approval or authorization of, or
-------------
registration, declaration or filing with, any Governmental Authority or any
other Person is required on the part of the Company in connection with the
execution and delivery of the Loan Documents (other than filings to perfect the
Liens granted pursuant to the Security Agreement) or the performance of or
compliance with the terms, provisions and conditions hereof or thereof or any
borrowing hereunder or to assure the validity and enforceability of any of the
Loan Documents.
10(o) Hedging Program. The Company's Hedging Program represents a
---------------
reasonable means for the Company to hedge certain interest rate risks associated
with the mortgage banking business, and is a customary and standard Hedging
Program comparable to that of other mortgage banking companies. The Company
shall not alter or modify its Hedging Program without the consent of the
Majority Lenders; provided, however, that consent shall be deemed given to any
new Hedging Program proposed in writing by the Company to the Lenders if the
Company is not notified of the objection to such new Hedging Program by Lenders
holding at least 33.3333% of the Aggregate Percentage Shares within five (5)
Business Days of receipt of notice thereof from the Company.
11. Affirmative Covenants. The Company hereby covenants and agrees
---------------------
with the Administrative Agent and each Lender that, as long as any Obligations
remain unpaid or any Lender has any obligation to make Loans hereunder, the
Company shall:
11(a) Financial Statements. Furnish or cause to be furnished to
--------------------
the Administrative Agent and each Lender directly:
(1) Within ninety-one (91) days after the last day of each
fiscal year of the Company, consolidated and consolidating statements of
income and cash flows for such year and balance sheets as of the end of
such year of the Company and its Subsidiaries presented fairly in
accordance with GAAP and accompanied by an unqualified report of a firm of
independent certified public accountants acceptable to the
26
Administrative Agent and including therewith a copy of any management
letter from such certified public accountants; and
(2) Within thirty (30) days after the last day of each calendar
month, consolidated and consolidating statements of income and cash flows
for such month and balance sheets as of the end of such month of the
Company and its Subsidiaries, accompanied in each case by a certificate of
the chief financial officer, treasurer or controller of the Company in the
form of that attached hereto as Exhibit G, stating that such financial
---------
statements are prepared fairly in accordance with GAAP and demonstrating in
detail satisfactory to the Administrative Agent the Company's compliance
with the financial covenants set forth in Paragraphs 12(f), 12(j), 12(k),
12(l), 12(m) and 12(n) below as of and at the end of such month, and
indicating whether the Company has been audited by any of FNMA or FHLMC.
11(b) Certificates; Reports; Other Information. Furnish or cause
----------------------------------------
to be furnished to the Collateral Agent, the Administrative Agent and each of
the Lenders directly:
(1) (i) No later than thirty (30) days after the last day of
each calendar month (setting forth information as of the last day of the
immediately preceding month), and at such other times as the Administrative
Agent or Majority Lenders may reasonably request, a. a Borrowing Base
--
Certificate (which shall be in addition to the Borrowing Base Certificates
delivered pursuant to Paragraph 7(p) above), and b. a pipeline report,
--
commitment position report, servicing delinquency report and production
report;
(ii) No later than 10:00 a.m. on the first Business Day of
each calendar week, and at such other times as the Administrative Agent or
Majority Lenders may reasonably request, a certificate in form and
substance satisfactory to each Lender, setting forth: (A) the aggregate
outstanding principal balance of all Eligible HELOC Assets included in the
Borrowing Base as of such date with a Loan-to-Value Ratio equal to or less
than ninety percent (90%), (B) the aggregate outstanding principal balance
of all Eligible HELOC Assets included in the Borrowing Base as of such date
with a Loan-to-Value Ratio greater than ninety percent (90%), (C) the
aggregate Unit Collateral Values of all Eligible HELOC Assets included in
the Borrowing Base as of such date secured by Property which is encumbered
by Liens in an amount greater than $300,000.00 but less than $650,000.00,
and (D) the aggregate Unit Collateral Values of all Eligible HELOC assets
included in the Borrowing Base as of such date secured by Property which is
encumbered by Liens in an amount equal to or greater than $650,000.00 but
less than $1,000,000.00; provided, however, that unless expressly so
requested by a Lender in writing, such certificate need not be delivered to
any Lender; and
(iii) In any calendar month in which there is a material change
in the Hedging Program, a written description of such change; all of the
foregoing to be in
27
form and substance satisfactory to the Administrative Agent and certified
as accurate and complete by a financial officer of the Company;
(2) Within five (5) Business Days of submission thereof by the
Company, copies of all documents submitted in connection with any audits by
any of FNMA or FHLMC (or GNMA if the Company becomes an approved GNMA
issuer), and, within ten (10) Business Days of receipt thereof by the
Company, copies of all compliance and audit reports received from any of
FNMA or FHLMC (or GNMA if the Company becomes an approved GNMA issuer),
and, within two (2) Business Days of receipt thereof by the Company, copies
of all notices received from FNMA or FHLMC (or GNMA if the Company becomes
an approved GNMA issuer), of any change in agency status or notices of any
withdrawal of approval of the Company as an issuer of Mortgage-Backed
Securities or a servicer of Mortgage Loans;
(3) No later than the last Business Day of the first month
following the end of each calendar quarter, and at such other times as the
Administrative Agent may reasonably request, a Servicing Contract Report
demonstrating to the satisfaction of the Administrative Agent that the
Mortgage Loans which are included in the Eligible Servicing Portfolio have
an outstanding principal balance of not less than the amount required by
Paragraph 12(l) below;
(4) Prior to the consummation thereof, notice of any bulk sale of
servicing rights owned by the Company with an outstanding principal balance
in excess of $50,000,000.00;
(5) On or before the first Business Day of each calendar month,
the Weighted Average Take-Out Price for each Type of Collateral as of the
last day of the immediately preceding calendar month and showing the basis
for the calculation thereof in detail satisfactory to the Administrative
Agent;
(6) Promptly, such additional financial and other information,
including, without limitation, financial statements of the Company and
information regarding the Collateral, as any Lender, through the
Administrative Agent, may from time to time reasonably request, including,
without limitation, such information as is necessary for any Lender to
assign or participate out any of its interests in the Loans hereunder or to
enable other financial institutions to become signatories hereto; and
(7) Promptly, and on a best efforts basis only, such additional
financial and other information regarding any Affiliate of the Company, any
Approved Investor (other than FNMA or FHLMC) or any Approved Repo Lender as
any Lender, through the Administrative Agent, may from time to time
reasonably request.
11(c) Payment of Indebtedness. And shall cause each of its
-----------------------
Subsidiaries to, pay, discharge or otherwise satisfy at or before maturity or
before it becomes delinquent, defaulted or accelerated, as the case may be, all
its Indebtedness (including taxes), except Indebtedness being contested in good
faith by appropriate proceedings and for which provision is
28
made to the satisfaction of the Administrative Agent for the payment thereof in
the event the Company is found to be obligated to pay such Indebtedness and
which Indebtedness is thereupon promptly paid by the Company.
11(d) Maintenance of Existence and Properties. And shall cause each of
---------------------------------------
its Subsidiaries to, maintain its corporate existence and obtain and maintain
all rights, privileges, licenses, approvals, franchises, properties and assets
necessary or desirable in the normal conduct of its business, including but not
limited to all approvals with respect to FNMA, FHLMC, FHA and VA, as applicable,
and comply with all Contractual Obligations and Requirements of Law, the failure
to comply with which could have a material adverse effect on the business,
operations, property or financial or other condition of the Company or any of
its Subsidiaries or on the Collateral. The Company will at all times be a FNMA
and FHLMC approved Seller/Servicer.
11(e) Inspection of Property; Books and Records; Audits. And shall
-------------------------------------------------
cause each of its Subsidiaries to:
(1) Keep proper books of record and account in which full, true
and correct entries in conformity with GAAP and all Requirements of Law
shall be made of all dealings and transactions in relation to its business
and activities; and
(2) Permit representatives of the Administrative Agent or any
Lender (at no cost or expense to the Company or any Subsidiary unless there
shall have occurred and be continuing an Event of Default), upon the giving
of reasonable prior written notice to: (i) visit and inspect any of its
properties and examine and make abstracts from any of its books and records
at any reasonable time and as often as may reasonably be desired by the
Administrative Agent or any Lender, (ii) discuss the business, operations,
properties and financial and other condition of the Company and any of its
Subsidiaries with officers and employees of such Persons, and with their
independent certified public accountants and (iii) conduct periodic
operational audits of the Company's and its Subsidiaries' business and/or
operations.
11(f) Notices. Promptly give written notice to each Lender of:
-------
(1) The occurrence of any Potential Default or Event of Default
and the proposed method of cure thereof;
(2) Any litigation or proceeding affecting the Company or any of
its Subsidiaries or the Collateral which (i) could have a material adverse
effect on the Collateral or the business, operations, property, or
financial or other condition of the Company or any of its Subsidiaries or
(ii) questions the validity or enforceability of the Loan Documents;
(3) A material adverse change in the business, operations,
property or financial or other condition of the Company or any of its
Subsidiaries;
29
(4) Any changes in the following senior management positions of
the Company: chief executive officer, manager of operations, manager of
production, manager of secondary marketing, chief financial officer, and
manager of servicing; and
(5) Any loss of delegated underwriting status with any Approved
Investor.
11(g) Expenses. Pay all reasonable out-of-pocket costs and expenses
--------
(including fees and disbursements of counsel): (1) of the Administrative Agent
and the Collateral Agent incident to the preparation, negotiation and
administration of the Loan Documents, any amendments or waivers thereto, and the
protection of the rights of the Lenders, the Administrative Agent and the
Collateral Agent under the Loan Documents, and (2) of the Administrative Agent,
the Collateral Agent and each of the Lenders incident to the enforcement of
payment of the Obligations, whether by judicial proceedings or otherwise,
including, without limitation, in connection with bankruptcy, insolvency,
liquidation, reorganization, moratorium or other similar proceedings involving
the Company or a "workout" of the Obligations. Notwithstanding any provision
herein to the contrary, the obligations of the Company under this Paragraph
11(g) shall be effective and enforceable whether or not any Loan is advanced by
any Lender hereunder and shall survive payment of all other Obligations.
11(h) Loan Documents. Comply with and observe all terms and
--------------
conditions of the Loan Documents.
11(i) Insurance. And shall cause each of its Subsidiaries to, obtain
---------
and maintain insurance with responsible companies in such amounts and against
such risks as are usually carried by corporations engaged in similar businesses
similarly situated, including, without limitation, errors and omissions coverage
and fidelity coverage in form and substance acceptable under FNMA or FHLMC
guidelines, and furnish the Administrative Agent on request full information as
to all such insurance.
11(j) Tax Refund. Contribute any tax refund received by the Company
----------
in any fiscal year towards the capital of the Company.
12. Negative Covenants. The Company hereby covenants and agrees with the
------------------
Administrative Agent and each Lender that, as long as any Obligations remain
unpaid or any Lender has any obligation to make Loans hereunder, the Company
shall not at any time, directly or indirectly:
12(a) Liens. And shall not permit any of its Subsidiaries to, create,
-----
incur, assume or suffer to exist any Lien upon the Collateral or the Pledged
Collateral except as contemplated by the Security Agreement and the Pledge
Agreement, respectively, or create, incur, assume or suffer to exist any Lien
upon any of its other property and assets (including servicing rights) except:
(1) Liens or charges for current taxes, assessments or other
governmental charges which are not delinquent or which remain payable
without penalty,
30
or the validity of which are contested in good faith by appropriate
proceedings upon stay of execution of the enforcement thereof, provided
that the Company or such Subsidiary shall have set aside on its books and
shall maintain adequate reserves for the payment of same in conformity with
GAAP;
(2) Liens, deposits or pledges made to secure statutory
obligations, surety or appeal bonds, or bonds for the release of
attachments or for stay of execution, or to secure the performance of bids,
tenders, contracts (other than for the payment of borrowed money) or leases
or for purposes of like general nature in the ordinary course of the
Company's or such Subsidiary's business;
(3) Purchase money security interests for property (except
Mortgage Loans) hereafter acquired, conditional sale agreements, or other
title retention agreements, with respect to property hereafter acquired;
provided, however, that no such security interest or agreement shall affect
any servicing rights or extend to any property other than the property
acquired; and
(4) Liens securing Permitted Other Secured Debt.
12(b) Indebtedness. And shall not permit any of its Subsidiaries to,
------------
create, incur, assume or suffer to exist, or otherwise become or be liable in
respect of, any Indebtedness except:
(1) The Obligations and the "Obligations" under (and as defined
in) the Servicing Secured Credit Agreement;
(2) Indebtedness reflected in the financial statements referred
to in Paragraph 10(a) above;
(3) Trade debt incurred in the ordinary course of business, paid
within forty-five (45) days after the same has become due and payable or
which is being contested in good faith, provided provision is made to the
satisfaction of the Administrative Agent for the eventual payment thereof
in the event it is found that such contested trade debt is payable by the
Company;
(4) Indebtedness secured by Liens permitted under Paragraph 12(a)
above; and
(5) Permitted Other Debt.
12(c) Mandatory Commitments. Hold Take-Out Commitments and/or Hedge
---------------------
Contracts in less than an aggregate amount necessary to provide for the sale
and/or coverage of one hundred percent (100%) of all closed Mortgage Loans owned
by the Company and held for sale.
31
12(d) Consolidation and Merger. And shall not permit any of its
--------------------- --
Subsidiaries to:
(1) Liquidate or dissolve or enter into any consolidation or
merger except: (i) consolidations or mergers of a Subsidiary into the
Company, with the Company being the surviving corporation and (ii) the
merger of Headlands Mortgage LLC into HMSI, with HMSI being the surviving
corporation; provided, however, that both before and after giving effect to
such transaction there shall not exist an Event of Default or Potential
Default; or
(2) Enter into any partnership, joint venture, syndicate or other
combination which involves a material amount of the assets of, or could
have a material effect on the business, operation, property or financial or
other condition of, the Company or such Subsidiary.
12(e) Acquisitions. And shall not permit any of its Subsidiaries to,
------------
purchase or acquire or incur liability for the purchase or acquisition of any or
all of the assets or business of any Person, other than in the normal course of
business for mortgage banking companies (it being expressly agreed and
understood that the acquisition of servicing is a normal course of business
activity).
12(f) Payment of Dividends. (1) Declare or pay any dividends upon any
--------------------
shares of the Company's stock now or hereafter outstanding, except dividends
payable in the capital stock of the Company, or (2) make any distribution of
assets to its stockholders as such, whether in cash, property or securities, or
(3) set aside any of its property for the purpose of doing any of the foregoing;
provided, however, that the Company may pay dividends (i) if the Company
maintains its status as a Subchapter S Corporation under the Code, for the
purpose of payment of shareholder level taxes then due and payable in amounts no
greater than necessary to allow each of its shareholders to pay his, her or its
actual tax liabilities attributable to the inclusion of income of the Company in
such shareholder's taxable income as set forth in his, her or its annual tax
returns, and provided that the Company shall on a timely basis supply on request
of the Administrative Agent or any Lender evidence demonstrating that (x) the
amount of any such dividend does not exceed such actual tax liabilities and (y)
the proceeds of any such dividend will be applied exclusively to the payment of
such actual tax liabilities, and (ii) during any fiscal year of the Company,
additional dividends and distributions in an aggregate amount not to exceed
twenty percent (20%) of Pre-Tax Income of the Company for such fiscal year
(calculated on a quarterly basis); and provided further, that no dividend
payment otherwise permitted pursuant to subparagraph (i) or (ii) above shall be
made if, immediately before or after giving effect to any such dividend payment,
any Event of Default or Potential Default exists or would exist.
12(g) Purchase or Retirement of Stock. Acquire, purchase, redeem or
-------------------------------
retire any shares of its capital stock now or hereafter outstanding.
12(h) Investments; Advances. And shall not permit any of its
---------------------
Subsidiaries to, make or commit to make any advance, loan or extension of credit
(other than
32
Mortgage Loans made in the ordinary course of the Company's
business) or capital contribution to, or purchase any stocks, bonds, notes,
debentures or other securities of, or make any other investment in, any Person;
provided, however, that the Company and its Subsidiaries may make or maintain
Permitted Investments.
12(i) Sale of Assets. And shall not permit any of its Subsidiaries to,
--------------
sell, lease, assign, transfer or otherwise dispose of any of its assets which
are material (individually or in the aggregate) (other than obsolete or worn out
property), whether now owned or hereafter acquired, other than in the ordinary
course of business as presently conducted and at fair market value (it being
expressly agreed and understood that the sale or other disposition of Mortgage-
Backed Securities and Mortgage Loans with or without servicing released and of
mortgage servicing rights is in the ordinary course of business).
12(j) Liabilities to Net Worth Ratio. Permit its consolidated ratio
------------------------------
at any date of (1) Total Liabilities to Effective Net Worth to be more than
20.0:1.0, or (2) Total Liabilities to Adjusted Tangible Net Worth to be more
than 8.0:1.0.
12(k) Minimum Net Worth. Permit at any date its consolidated: (1)
-----------------
Effective Net Worth to be less than $12,000,000.00, or (2) Adjusted Tangible Net
Worth to be less than $46,100,000.00.
12(l) Servicing Portfolio. Permit:
-------------------
(1) The aggregate outstanding principal balance of the Company's
Eligible Servicing Portfolio, minus the aggregate outstanding principal
balance of the Company's Encumbered Eligible Servicing Portfolio, to be
less than $1,000,000,000.00, or
(2) The aggregate outstanding principal amount of Mortgage Loans
which the Company services for, and has a direct obligation to repurchase
from, the applicable investor pursuant to a recourse arrangement to exceed
$10,000,000.00.
12(m) Current Ratio. Permit its consolidated Current Ratio at any date
-------------
to be less than 1.03:1.0.
12(n) Maximum Total Liabilities. Permit its consolidated Total
-------------------------
Liabilities at any date to exceed the sum of: (1) one hundred percent (100%) of
Cash and/or cash equivalents (excluding restricted cash), plus (2) ninety-eight
percent (98%) of the outstanding principal balance of all Eligible Mortgage
Loans other than Eligible HELOC Assets, plus (3) ninety-five percent (95%) of
the outstanding principal balance of all Eligible HELOC Assets, plus (4) eighty
percent (80%) of: (i) the outstanding principal balance of all Mortgage Loans
excluded from the definition of "Eligible Mortgage Loan," and (ii) REO net of
reserves, plus (5) eighty percent (80%) of its current advances and receivables,
plus (6) the lesser of: (i) seventy percent (70%) multiplied by the Quoted
Market Value of the Eligible Servicing Portfolio, and (ii) one percent (1%) of
the outstanding principal balance of the Eligible Servicing Portfolio, plus (7)
seventy percent (70%) of all REMIC-related Mortgage-Backed Securities held for
sale and
33
marked to market quarterly (as shown on the Company's financial statements),
plus (8) fifty percent (50%) of: (i) all other securities held for investment
(net of reserves), and (ii) excess servicing (as shown on the Company's
financial statements).
12(o) Limitation on Other Business. And shall not permit any of its
----------------------------
Subsidiaries to, engage in any business other than mortgage banking and
activities directly related thereto, or engage in the business of developing any
real property.
13. Events of Default. Upon the occurrence of any of the following events
-----------------
(an "Event of Default"):
13(a) The Company shall fail to pay any Obligation (including but not
limited to any prepayment required pursuant to Paragraph 7(f) above) on the date
when due; or
13(b) Any representation or warranty made or deemed made by the Company
in any Loan Document or in connection with any Loan Document shall be inaccurate
or incomplete in any respect on or as of the date made or deemed made; or
13(c) The Company shall fail to maintain its corporate existence or
shall default in the observance or performance of any covenant or agreement
contained in Paragraph 12 above or in the Security Agreement or the Pledge
Agreement; or
13(d) The Company shall fail to observe or perform any other term or
provision contained in the Loan Documents and such failure shall continue for
thirty (30) days after the earlier to occur of (i) receipt by the Company of
written notice of such failure, and (ii) the date the Company obtains knowledge
of such failure; or
13(e) The Company or any of its Subsidiaries shall default in any
payment of principal of or interest on any Indebtedness (other than the
Obligations), or any other event shall occur, the effect of which other event is
to permit such Indebtedness to be declared or otherwise to become due prior to
its stated maturity; or
13(f) (1) The Company or any of its Subsidiaries shall commence any
case, proceeding or other action (i) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or
(ii) seeking appointment of a receiver, trustee, custodian or other similar
official for it or for all or any substantial part of its assets, or the Company
or any of its Subsidiaries shall make a general assignment for the benefit of
its creditors; or (2) there shall be commenced against the Company or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (1) above which (i) results in the entry of an order for relief or any
such adjudication or appointment, or (ii) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or (3) there shall be commenced
against the Company or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or
34
substantially all of its assets which results in the entry of an order for any
such relief which shall not have been vacated, discharged, stayed, satisfied or
bonded pending appeal within sixty (60) days from the entry thereof; or (4) the
Company or any of its Subsidiaries shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in (other than in
connection with a final settlement), any of the acts set forth in clause (1),
(2) or (3) above; or (5) the Company or any of its Subsidiaries shall generally
not, or shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
13(g) (1) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan,
(2) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or nor waived, shall exist with respect to any Plan, (3) a Reportable
Event shall occur with respect to, or proceedings shall commence to have a
trustee appointed (or a trustee shall be appointed) to administer, or to
terminate, any Single Employer Plan, which Reportable Event or institution of
proceedings is, in the reasonable opinion of the Administrative Agent, likely to
result in the termination of such Plan for purposes of Title IV of ERISA, and,
in the case of a Reportable Event, the continuance of such Reportable Event
unremedied for ten days after notice of such Reportable Event pursuant to
Section 4043(a), (c) or (d) of ERISA is given or the continuance of such
proceedings for ten days after commencement thereof, as the case may be, (4) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA, (5) any
withdrawal liability to a Multiemployer Plan shall be incurred by the Company or
any of its ERISA Affiliates or (6) any other event or condition shall occur or
exist; and in each case in clauses (1) through (6) above, such event or
condition, together with all other such events or conditions, if any, is likely
to subject the Company or any of its ERISA Affiliates to any tax, penalty or
other liabilities in the aggregate material in relation to the business,
operations, property or financial or other condition of the Company or any of
its ERISA Affiliates; or
13(h) One or more judgments or decrees in an aggregate amount in excess
of $50,000.00 shall be entered against the Company or any of its Subsidiaries
and all such judgments or decrees shall not have been vacated, discharged,
stayed, satisfied or bonded pending appeal within sixty (60) days from the entry
thereof; or
13(i) Peter Paul and Dennis Hart shall collectively cease to own at
least fifty-one percent (51%) of the outstanding shares of capital stock of the
Company; or
13(j) There shall occur a material adverse change in the business,
operations, assets or financial or other conditions of the Company or the
Company and its Subsidiaries taken as a whole from the condition thereof at the
Effective Date; or
13(k) Any Person who is the holder of Subordinated Debt shall fail to
perform such Person's obligations under or shall cease to comply with the terms
of the subordination agreement covering such Subordinated Debt, or such Person
shall attempt to terminate, rescind or revoke any such subordination agreement;
THEN, automatically upon the occurrence of an Event of Default under
Paragraph 13(f) above, and in all other cases, at the option of the Majority
Lenders, the obligation of the
35
Lenders to make Loans hereunder shall terminate and/or the principal balance of
outstanding Loans and interest accrued but unpaid thereon and all other
Obligations shall become immediately due and payable, without demand upon or
presentment to the Company, which are expressly waived by the Company.
14. The Agents.
----------
14(a) Appointment. Each Lender hereby irrevocably designates and
-----------
appoints the Administrative Agent and the Collateral Agent (jointly and
severally, the "Agents" or, individually, an "Agent") as the agent of such
Lender under the Loan Documents and each Lender hereby irrevocably authorizes
each Agent to take such action on its behalf under the provisions of the Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to such Agent by the terms of the Loan Documents, together with such
other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in the Loan Documents, no Agent shall have
any duties or responsibilities except those expressly set forth in the Loan
Documents or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into the Loan Documents or otherwise exist against any Agent. The
Company shall pay to each Agent such fees as each Agent and the Company may from
time to time agree in writing.
14(b) Delegation of Duties. Each Agent may execute any of its duties
--------------------
under the Loan Documents by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
No Agent shall be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care.
14(c) Exculpatory Provisions. No Agent nor any of its officers,
----------------------
directors, employees, agents, attorneys-in-fact or affiliates shall be (1)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with the Loan Documents (except for its or such Person's
own gross negligence or willful misconduct), or (2) responsible in any manner to
any of the Lenders for any recitals, statements, representations or warranties
made by the Company or any officer thereof contained in the Loan Documents or in
any certificate, report, statement or other document referred to or provided for
in, or received by any Agent under or in connection with, the Loan Documents or
for the value, validity, effectiveness, genuineness, enforceability or
sufficiency of the Loan Documents or for any failure of the Company to perform
its obligations thereunder. No Agent shall be under any obligation to any
Lender to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, the Loan Documents or to inspect
the properties, books or records of the Company.
14(d) Reliance. Each Agent shall be entitled to rely, and shall be
--------
fully protected in relying, upon any note, writing, resolution, notice, consent,
certification, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or telephone call or
conversation reasonably believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
36
statements of legal counsel (including, without limitation, counsel to the
Company), independent accountants and other experts selected by such Agent.
Each Agent may deem and treat the payee of any Note as the owner thereof for all
purposes until notified of an assignment pursuant to Paragraph 15(h) below. As
to the Lenders: (1) each Agent shall be fully justified in failing or refusing
to take any action under the Loan Documents unless it shall first receive such
advice or concurrence of the Majority Lenders or all of the Lenders, as
appropriate, or it shall first be indemnified to its satisfaction by the Lenders
ratably in accordance with their respective Aggregate Percentage Shares against
any and all liability and expense which may be incurred by it by reason of
taking or continuing to take any action (except for liabilities and expenses
resulting from such Agent's gross negligence or willful misconduct), and (2)
each Agent shall in all cases be fully protected in acting, or in refraining
from acting, under the Loan Documents in accordance with a request of the
Majority Lenders or all of the Lenders, as appropriate, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Lenders.
14(e) Notice of Default. No Agent shall be deemed to have knowledge
-----------------
or notice of the occurrence of any Potential Default or Event of Default unless
such Agent has received notice from a Lender or the Company referring to the
Loan Documents, describing such Potential Default or Event of Default and
stating that such notice is a "notice of default." In the event that any Agent
receives such a notice, such Agent shall give notice thereof to the Lenders and
the other Agent. Each Agent shall take such action with respect to such
Potential Default or Event of Default as shall be reasonably directed by the
Majority Lenders or all Lenders, as applicable; provided that, unless and until
an Agent shall have received such directions, such Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Potential Default or Event of Default as it shall deem advisable in the
best interest of the Lenders.
14(f) Independent Decisions. Each Lender expressly acknowledges that
---------------------
neither of the Agents nor any of their respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representations
or warranties to it and that no act by any Agent hereafter taken, including any
review of the affairs of the Company, shall be deemed to constitute any
representation or warranty by either Agent to any Lender. Each Lender represents
to the Agents that it has, independently and without reliance upon either of the
Agents or any other Lender, and based on such documents and information as it
has deemed appropriate, made its own appraisal of and investigation into the
business, operations, property, financial and other condition and
creditworthiness of the Company and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon either Agent or any other Lender,
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement, and to make such investigation
as it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Company. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by an Agent under the Loan Documents, neither Agent shall have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other
37
condition or creditworthiness of the Company which may come into the possession
of such Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
14(g) Indemnification. The Lenders agree to indemnify each Agent in
---------------
its capacity as such (to the extent not reimbursed by the Company and without
limiting the obligation of the Company to do so), ratably according to the
respective amounts of their Aggregate Percentage Shares, from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (including, without
limitation, attorneys fees) of any kind whatsoever which may at any time
(including without limitation at any time following the payment of the
Obligations) be imposed on, incurred by or asserted against such Agent in any
way relating to or arising out of the Loan Documents or any documents
contemplated by or referred to therein or the transactions contemplated thereby
or any action taken or omitted by such Agent under or in connection with any of
the foregoing; provided that no Lender shall be liable for the payment of any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from any Agent's
gross negligence or willful misconduct. The provisions hereof shall survive the
termination of this Agreement and the payment of the Obligations.
14(h) Agents in Their Individual Capacities. Each Agent and its
-------------------------------------
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Company as though such Agent were not an Agent
hereunder. With respect to Loans made or renewed by them and any Note issued to
them, the Agents shall have the same rights and powers under the Loan Documents
as any Lender and may exercise the same as though they were not Agents hereunder
and the terms "Lender" and "Lenders" shall include the Agents in their
respective individual capacities if applicable.
14(i) Successor Agents. Either Agent may resign as an Agent under the
----------------
Loan Documents upon ninety (90) days' notice to the Lenders, the Company and
the other Agent, and the Administrative Agent agrees that it will so resign in
the event it ceases to hold any share of the Obligations. In addition, the
Majority Lenders may, for cause, effective upon not less than ninety (90) days'
notice to the Lenders, each Agent and the Company, remove and discharge either
Agent from the performance of such Agent's duties under this Agreement and/or
the Security Agreement. If any Agent shall resign or be removed, then within
said ninety-day notice period the Majority Lenders shall appoint from among the
Lenders a successor agent or if the Majority Lenders are unable to agree on the
appointment of a successor agent, the applicable Agent shall appoint a successor
agent for the Lenders (which successor agent, assuming that there does not exist
a Potential Default or Event of Default, shall be reasonably acceptable to the
Company), whereupon such successor agent shall succeed to the rights, powers and
duties of the applicable Agent and the term "Administrative Agent" or
"Collateral Agent" shall mean such successor agent, as applicable, effective
upon its appointment, and the former Agent's rights, powers and duties as Agent
shall be terminated, without any other or further act or deed on the part of
such former Agent or any of the parties to this Agreement or any of the other
Loan Documents or successors thereto. After any Agent's resignation or removal
hereunder, the
38
provisions of this Paragraph 14 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was an Agent under the Loan
Documents.
15. Miscellaneous Provisions.
------------------------
15(a) No Assignment. The Company may not assign its rights or
-------------
obligations under this Agreement and/or the other Loan Documents without the
prior written consent of one hundred percent (100%) of the Administrative Agent
and the Lenders. Subject to the foregoing, all provisions contained in this
Agreement or any document or agreement referred to herein or relating hereto
shall inure to the benefit of each Lender, its successors and assigns, and shall
be binding upon the Company, its successors and assigns.
15(b) Amendment. This Agreement and the other Loan Documents may not
---------
be amended or terms or provisions hereof or thereof waived unless such amendment
or waiver is in writing and signed by the Majority Lenders, the Administrative
Agent and the Company; provided, however, that without the prior written consent
of one hundred percent (100%) of the Lenders, the Administrative Agent and the
Company, no amendment or waiver shall: (1) waive or amend any term or provision
of Paragraph 12(f), 12(j), 12(k), 12(l), 12(m) or 12(n) above, (2) reduce the
principal of, or rate of interest on, the Loans or fees, (3) except as expressly
contemplated by Paragraphs 15(h) and 15(k) below, modify the Aggregate Credit
Limit, the Tranche A Credit Limit, the Tranche B Aggregate Credit Allocation,
the Tranche D Credit Limit or the Maximum Commitment of any Lender, (4) modify
the definition of "Majority Lenders", (6) extend or waive any scheduled payment
date for any principal, interest or fees, or the Maturity Date, (7) amend this
Paragraph 15(b), or (8) amend any provision of the Loan Documents which by its
terms requires the consent or approval of one hundred percent (100%) of the
Lenders; provided, further, that without the prior written consent of one
hundred percent (100%) of the Lenders, the Administrative Agent, the Collateral
Agent and the Company, no amendment or waiver shall amend or waive the
definition of the terms "Collateral Value of the Borrowing Base" or "Unit
Collateral Value." It is expressly agreed and understood that the failure by the
required Lenders to elect to accelerate amounts outstanding hereunder and/or to
terminate the obligation of the Lenders to make Loans hereunder shall not
constitute an amendment or waiver of any term or provision of this Agreement.
15(c) Cumulative Rights; No Waiver. The rights, powers and remedies
----------------------------
of the Lenders under the Loan Documents are cumulative and in addition to all
rights, powers and remedies provided under any and all agreements among the
Company and the Lenders relating hereto, at law, in equity or otherwise. Any
delay or failure by the Administrative Agent, the Collateral Agent or the
Lenders to exercise any right, power or remedy shall not constitute a waiver
thereof and no single or partial exercise by the Administrative Agent, the
Collateral Agent or the Lenders of any right, power or remedy shall preclude any
other or further exercise thereof or any exercise of any other rights, powers or
remedies.
15(d) Entire Agreement. The Loan Documents and the documents and
----------------
agreements referred to therein embody the entire agreement and understanding
between the
39
parties hereto and supersede all prior agreements and understandings relating to
the subject matter hereof and thereof.
15(e) Survival. All representations, warranties, covenants
--------
and agreements herein contained on the part of the Company shall survive the
termination of this Agreement and shall be effective until the Obligations are
paid and performed in full or longer as expressly provided herein.
15(f) Notices. All notices given by any party to the others
-------
shall be in writing unless otherwise provided for herein, delivered personally
or by depositing the same for delivery on the following Business Day, charges
prepaid, addressed to such party at the address set forth on Schedule I attached
----------
hereto, or by telefacsimile (and except for Loan Requests, to be confirmed by
mailed copy). Any party may change the address to which notices are to be sent
by notice of such change to each other party given as provided herein. Such
notices shall be effective on the date received or, if deposited for overnight
delivery, on the Business Day following the date mailed.
15(g) Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California.
15(h) Assignment; Addition of New Lender.
----------------------------------
(1) The Company or any Lender may at any time propose
that one or more commercial banks each of which is organized under the laws
of the United States or any State thereof or organized under the laws of
any other country, or a political subdivision thereof (provided that such
foreign bank is acting through a branch or agency located in the United
States, or is organized under the laws of a country that is a member of the
Organization for Economic Cooperation and Development or a political
subdivision of such country), is regularly engaged in the business of
mortgage warehouse lending, and has capital and surplus of at least
$300,000,000.00 (each, an "Applicant Financial Institution") become an
additional Lender hereunder. At such time, the Company or such Lender, as
applicable, shall notify the other parties hereto, including the
Administrative Agent, of the identity of such Applicant Financial
Institution and such Applicant Financial Institution's proposed Maximum
Commitment (which must be not less than $10,000,000.00). The addition of
any Applicant Financial Institution shall be subject to:
(i) The prior written consent of the
Administrative Agent (and if such Applicant Financial Institution is
proposed for inclusion as a Lender hereunder by a Lender, the prior
written consent of the Company), which consents shall not be
unreasonably withheld or delayed and which, if given, shall be given
in writing by the Administrative Agent (and, if applicable, the
Company) to the other Lenders no later than the tenth day following
receipt by the Administrative Agent (and, if applicable, the Company)
of a written request for the inclusion of such Applicant Financial
Institution as a Lender hereunder;
40
(ii) If such Applicant Financial Institution will be
acquiring a portion of an existing Lender's Maximum Commitment by way
of an assignment from such existing Lender, such existing Lender
holding a Maximum Commitment of not less than $5,000,000.00 following
the consummation of the contemplated assignment; and
(iii) Delivery of each of the items and the occurrence
of each of the events described in subparagraph (2) below.
(2) Assuming delivery of any consents required pursuant to
subparagraph (1)(i) above, the Administrative Agent and the Company shall
mutually agree on the Adjustment Date on which such Applicant Financial
Institution shall become a party hereto and a Lender hereunder. On such
Adjustment Date:
(i) The Company shall deliver to the Administrative
Agent, the Collateral Agent and each of the Lenders a Commitment
Schedule and Allocation Notice to be effective from such Adjustment
Date, with such Commitment Schedule and Allocation Notice to reflect
the Lenders' respective Maximum Commitments, Maximum Tranche B
Commitments, Tranche B Allocations, Tranche D Commitments (if any),
Tranche A Percentage Shares, Tranche B Percentage Shares and Tranche D
Percentage Shares (if any), as applicable.
(ii) Such Applicant Financial Institution shall pay
to the Administrative Agent, no later than 12:00 noon (Los Angeles
time), an amount equal to such Applicant Financial Institution's
Tranche A Percentage Share of Tranche A Loans outstanding, such
Applicant Financial Institution's Tranche B Percentage Share of
Tranche B Loans outstanding, and such Applicant Financial
Institution's Tranche D Percentage Share of Tranche D Loans
outstanding (if any) to be funded on such Adjustment Date, as
applicable. The Administrative Agent shall thereupon remit to the
Lenders their respective shares of such funds, as applicable.
Following such Adjustment Date, fees and interest accrued on Loans to
but not including such Adjustment Date shall be payable to the Lenders
in accordance with their respective Tranche A Percentage Shares,
Tranche B Percentage Shares and Tranche D Percentage Shares prior to
such Adjustment Date before giving effect to the readjustment thereof
pursuant to the Commitment Schedule and Allocation Notice provided by
the Company on such Adjustment Date.
(iii) The Administrative Agent, the Company and such
Applicant Financial Institution shall execute and deliver an
agreement in the form of that attached hereto as Exhibit H (an
---------
"Additional Lender Agreement"), which agreement shall constitute an
amendment to this Agreement to the extent necessary to reflect the
inclusion of such Applicant Financial Institution as a Lender
hereunder. In addition, if in connection with the inclusion of such
41
Applicant Financial Institution as a Lender hereunder, the Aggregate
Credit Limit will be increased, the parties hereto will execute any
additional amendments to the Loan Documents as the Administrative
Agent reasonably requests to reflect such increase.
(iv) The Company shall execute and deliver new Notes,
as applicable, to such Applicant Financial Institution.
(v) Subject to the requirements described above,
such Applicant Financial Institution shall become a party hereto and a
Lender hereunder and shall be entitled to all rights, benefits and
privileges accorded a Lender hereunder and under the other Loan
Documents and shall be subject to all obligations of a Lender
hereunder and under the other Loan Documents.
(vi) The Applicant Financial Institution shall pay to
the Administrative Agent a registration fee of $2,500.00 (said fee
covering the admission of the Applicant Financial Institution into
this Agreement).
15(i) Sub-Participations by Lenders. Any Lender may at any
-----------------------------
time sell to one or more Persons (each of such Persons being herein called a
"Participant") participating interests in any of the Obligations held by such
Lender and its commitments hereunder; provided, however, that:
(1) No participation contemplated by this Paragraph
15(i) shall relieve such Lender from its obligations hereunder or under any
other Loan Document;
(2) Such Lender shall remain solely responsible for
the performance of such obligations and such Lender shall grant no voting
rights to any Participant other than as to matters which require the
approval of one hundred percent (100%) of the Lenders pursuant to Paragraph
15(b) above; and
(3) The Company, the Administrative Agent, the
Collateral Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents; provided, however, that the Company
acknowledges and agrees that each Participant shall be considered a Lender
for purposes of Paragraphs 6(c), 6(d), 6(e) and 7(m) above.
15(j) Federal Reserve Bank. Notwithstanding the provisions
--------------------
of Paragraphs 15(h) and 15(i) above, any Lender may at any time pledge or assign
all or any portion of such Lender's rights under this Agreement and the other
Loan Documents to a Federal Reserve Bank.
15(k) Increases in Availability.
-------------------------
(1) From time to time the Company and any Lender (an
"Increasing Lender") may agree, with the prior written consent of the
Administrative
42
Agent, which consent shall not be unreasonably withheld or delayed, to
permanently or temporarily increase such Increasing Lender's Maximum
Commitment, the dollar amount of any such increase being subject to the
limitations specified in the defined term "Aggregate Credit Limit". Any
such increase shall be in the minimum dollar amount of, with respect to
such Lender's Maximum Commitment, $5,000,000.00 and integral multiples of
$5,000,000.00 in excess thereof. The Company, the Administrative Agent and
the Increasing Lender shall agree upon the Adjustment Date for such
increase and if such increase is a temporary rather than permanent
increase, the date on which said increase shall terminate (the "Temporary
Increase Termination Date").
(2) On the Adjustment Date for any increase in
availability provided by an Increasing Lender and as a condition precedent
thereto, the Company shall pay to the Administrative Agent for the benefit
of such Increasing Lender the full amount of any fees due in respect of
such increase, which fees shall be pro rated based upon the actual days
from such Adjustment Date to the Maturity Date or the Temporary Increase
Termination Date, as the case may be, and shall deliver to the
Administrative Agent, the Collateral Agent and each Lender a revised
Commitment Schedule and Allocation Notice specifying the Maximum
Commitment, Maximum Tranche B Commitment, Tranche B Allocation, Tranche D
Commitment (if any), Tranche A Percentage Share, Tranche B Percentage
Share, and Tranche D Percentage Share, as applicable, for each of the
Lenders from such Adjustment Date. Any reallocation of Loans outstanding on
such Adjustment Date necessitated by an increase in an Increasing Lender's
Maximum Commitment shall be effected on and as of such Adjustment Date by
the purchase and sale among the Lenders of the Obligations outstanding on
such date.
(3) If said increase was a temporary rather than
permanent increase, on the Temporary Increase Termination Date the
aggregate amount of such Increasing Lender's Tranche A Percentage Share of
Tranche A Loans outstanding, Tranche B Percentage Share of Tranche B Loans
outstanding and/or Tranche D Percentage Share of Tranche D Loans
outstanding in excess of its respective Maximum Commitment, Maximum Tranche
B Commitment and/or Tranche D Commitment shall, if but only if at such
Temporary Increase Termination Date there does not exist an Event of
Default, be payable in full. If at such Temporary Increase Termination Date
there exists an Event of Default, the temporary increase of the Increasing
Lender shall continue in effect and, unless otherwise agreed by one hundred
percent (100%) of the Lenders, shall be treated thereafter as a permanent
increase in said Increasing Lender's Maximum Commitment.
15(l) Counterparts. This Agreement and the other Loan
------------
Documents may be executed in any number of counterparts, all of which together
shall constitute one agreement.
15(m) Setoff; Sharing of Payments. Except as expressly
---------------------------
provided in Paragraphs 2(e), 3(f) and 7(k) above prior to the occurrence of an
Event of Default, and except as expressly provided in Paragraph 7(k) above
following the occurrence and during the continuance of an Event of Default, if
any Lender shall receive and retain any payment, whether by setoff,
43
application of deposit balance or security, or otherwise, in respect of the
Obligations in excess of such Lender's Outstanding Percentage Share thereof,
then such Lender shall purchase from the other Lenders for cash and at face
value and without recourse, such participation in the Obligations held by them
as shall be necessary to cause such excess payment to be shared ratably as
aforesaid with each of them; provided, that if such excess payment or part
thereof is thereafter recovered from such purchasing Lender, the related
purchases from the other Lenders shall be rescinded ratably and the purchase
price restored as to the portion of such excess payment so recovered, but
without interest. Each Lender agrees to exercise any and all rights of setoff,
counterclaim or bankers' lien first fully against the Obligations held by such
Lender, and only then to any other Indebtedness of the Company to such Lender;
provided, however, that to the extent any Lender has a right of set-off,
counterclaim or bankers' lien which arises specifically out of a relationship of
such Lender with the Company which is not related to the Obligations (excluding
the relationship under the Servicing Secured Credit Agreement), such rights may
be exercised first against any Indebtedness owing to such Lender arising out of
such relationship and then against the Obligations held by such Lender.
15(n) Post Acceleration Adjustment. Following the occurrence
----------------------------
of an Event of Default and acceleration of the Obligations, the Lenders hereby
absolutely and unconditionally agree to purchase or sell, as applicable, such
participations in the Primary Loans outstanding as shall be required to assure
that each Lender holds a percentage share of the principal amount of Primary
Loans outstanding equal to its Aggregate Percentage Share.
15(o) Indemnification by the Company.
------------------------------
(1) In addition to the payment of expenses pursuant to
Paragraph 11(g) above, whether or not the transactions contemplated hereby
shall be consummated, the Company agrees to pay, and indemnify and hold
harmless the Administrative Agent, the Collateral Agent and each Lender and
any holder of any of the Obligations, and the shareholders, officers,
directors, employees and agents of the Administrative Agent, the Collateral
Agent, the Lenders and such holders (individually, an "Indemnitee" and
collectively, the "Indemnitees") from and against, any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for any Indemnitee in connection with any
investigative, administrative or judicial proceeding, whether or not such
Indemnitee shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against such Indemnitee, in any manner relating to
or arising out of (i) the use or intended use of the proceeds of Loans
hereunder, or (ii) any of the Loan Documents or the transactions
contemplated by the Loan Documents, (iii) any funding or proposed funding,
or arrangements to obtain funding, made available or proposed to have been
made available, to the Company, or (iv) any action taken or omitted to be
taken by any such Indemnitee pursuant to the Loan Documents (collectively,
the "Losses"); provided, however, that the Company shall not be liable for
any Losses resulting directly from the gross negligence or willful
misconduct of the applicable Indemnitee. Attorneys' fees and disbursements
incurred in enforcing, or on appeal from, a judgment pursuant
44
hereto shall be recoverable separately from and in addition to any other
amount included in such judgment, and this subparagraph is intended to be
severable from the other provisions of this Agreement and to survive and
not be merged into such judgment.
(2) In the event that any Indemnitee asserts any
Losses against the Company, such Indemnitee shall submit a proof of claim
to the Company, and the Company shall promptly pay the full amount of such
Losses in immediately available funds, or if such Losses have not yet been
paid by such Indemnitee, such Indemnitee and the Company shall follow the
procedures set forth in the next succeeding sentences of this subparagraph
(2). If there is asserted any claim, liability or obligation that in the
judgment of an Indemnitee may give rise to any Losses or if such Indemnitee
determines the existence of the foregoing, whether or not the same shall
have been asserted, such Indemnitee shall give the Company notice within
thirty (30) Business Days in each case, of the assertion of any such claim,
liability or obligation, or of receipt of notice of the filing or of any
lawsuit based upon such assertion, or, with respect to a claim not yet
asserted against such Indemnitee, of the determination by an executive
officer of such Indemnitee of the existence of the same, and shall give
Company a reasonable opportunity of assuming the defense of such claim,
liability or obligation, using counsel acceptable to such Indemnitee;
provided, however, that such Indemnitee shall have the right to participate
in such defense, and to retain separate counsel. Failure by any Indemnitee
to give timely notice pursuant to this subparagraph shall not relieve the
Company of its obligations hereunder, except to the extent that the Company
is actually prejudiced by such failure to give timely notice. No settlement
or adjustment shall be made without the applicable Indemnitee's prior
written consent, which consent will not be unreasonably withheld. If the
Company fails to contest in good faith any such claim, liability or
obligation, the applicable Indemnitee shall have the right to defend,
settle or pay the same and pursue its remedies against the Company
hereunder. Each Indemnitee shall cooperate with the Company in any such
defense which the Company elects to assume in the event the Company makes
such request to such Indemnitee and such request is reasonable, provided
the Company will hold such Indemnitee harmless from all its out-of-pocket
expenses, including attorneys' fees, incurred in connection with such
cooperation.
(3) The provisions of this Paragraph 15(o) shall
survive the termination of this Agreement and payment of all other
Obligations. Attorneys' fees and disbursements incurred in enforcing, or on
appeal from, a judgment pursuant hereto shall be recoverable separately
from and in addition to any other amount included in such judgment, and
this Paragraph 15(o) is intended to be severable from the other provisions
of this Agreement and to survive and not be merged into such judgment.
15(p) Confidentiality. Each of the Administrative Agent and
---------------
each Lender agrees to take normal and reasonable precautions and exercise due
care to maintain the confidentiality of all non-public information provided to
it by the Company (or by the Administrative Agent on the Company's behalf) in
connection with the Loan Documents. The Administrative Agent or any Lender may
disclose such information: (1) at the request of any
45
Governmental Authority or in connection with an examination of the
Administrative Agent or such Lender by any such Governmental Authority, (2)
pursuant to subpoena or other court process, (3) when required to do so in
accordance with the provisions of any Requirements of Law, (4) to the
Administrative Agent's or such Lender's internal or independent auditors,
counsel and other professional advisors, (5) if such information has become
public other than through disclosure by the Administrative Agent or any Lender,
(6) in connection with any litigation involving the Administrative Agent or any
Lender, and (7) to any Affiliate of the Administrative Agent or such Lender.
Notwithstanding the foregoing, the Company authorizes the Administrative Agent
and each Lender to disclose to any Applicant Financial Institution or
prospective or actual Participant such financial and other information in its
possession (x) which has been delivered to the Administrative Agent and/or the
Lenders pursuant to the Loan Documents or which has been delivered to any such
Person by the Company prior to entering into the Loan Documents or (y) which is
reasonably necessary to effectuate the purposes of this Agreement.
16. Definitions. For purposes of the Loan Documents, the terms set
-----------
forth below shall have the following meanings:
"Acceptable Manufactured Housing State" shall mean any state: (1)
-------------------------------------
listed on a schedule of "Acceptable Manufactured Housing States" mutually agreed
to by the Company and the Administrative Agent, with the consent of the Majority
Lenders, from time to time, with the current such schedule attached hereto as
Schedule II, and (2) as to which the Administrative Agent shall have received an
- -----------
opinion of counsel to the Company in such state satisfactory in form and
substance to the Lenders.
"Acceptable State" shall mean any state listed on a schedule of
----------------
"Acceptable States" mutually agreed by the Company and the Administrative Agent,
with the consent of the Majority Lenders, from time to time, with the current
such schedule attached hereto as Schedule III.
------------
"Additional Lender Agreement" shall have the meaning given such term
---------------------------
in Paragraph 15(h)(2)(iii) above.
"Additional Required Documents" shall have the meaning given such term
-----------------------------
in subparagraph (q)(2) of the definition of "Eligible Mortgage Loan."
"Adjusted Tangible Net Worth" shall mean, at any date:
---------------------------
(a) Effective Net Worth; plus
(b) The lesser of (i) one percent (1.00%) of the Eligible
Servicing Portfolio and (ii) the Quoted Market Value of the Eligible Servicing
Portfolio; minus
(c) All assets which would be classified as intangible assets
under GAAP, including, without limitation, purchased and capitalized value of
servicing rights, goodwill (whether representing the excess cost over book value
of assets acquired or otherwise),
46
patents, trademarks, service marks, trade names, copyrights, franchises and
deferred charges (including, without limitation, unamortized debt discount and
expense, organization costs and research and product development costs).
"Adjustment Date" shall mean, with respect to the assignment of
---------------
Obligations by any Lender, or the addition of an Applicant Financial Institution
as a Lender hereunder pursuant to Paragraph 15(h) above, or the increase in
availability by an Increasing Lender pursuant to Paragraph 15(k) above, the
effective date thereof.
"Administrative Agent" shall have the meaning given such term in the
--------------------
introductory paragraph hereof.
"Affiliate" shall mean, as to any Person, any other Person directly or
---------
indirectly controlling, controlled by or under direct or indirect common control
with, such Person. "Control" as used herein means the power to direct the
management and policies of such Person.
"Agency Custodial Agreements" shall mean the FHLMC Custodial
---------------------------
Agreement, the FNMA Custodial Agreement and the GNMA Custodial Agreement.
"Agency Guide" shall mean the FHLMC Guide, the FNMA Guide or the GNMA
------------
Guide.
"Agent" shall have the meaning given such term in Paragraph 14(a)
-----
above.
"Aggregate Credit Limit" shall mean the sum of the Maximum Commitments
----------------------
of all the Lenders, as set forth in the most recent Commitment Schedule and
Allocation Notice delivered by the Administrative Agent to the Lenders and the
Company, with the Aggregate Credit Limit on the Effective Date being
$185,000,000.00; provided, however, that the Aggregate Credit Limit may be
increased pursuant to Paragraph 15(h) or 15(k) above up to a maximum of
$300,000,000.00 in the event any Lender or Lenders agree with the Company and
the Administrative Agent to increase such Lender's or Lenders' Maximum
Commitments and/or through the inclusion as a "Lender" hereunder of an Applicant
Financial Institution approved by the Company and the Administrative Agent.
"Aggregate Percentage Share" shall mean, for any Lender at any date,
--------------------------
that percentage which (a) the dollar amount of such Lender's Maximum Commitment
bears to (b) the Aggregate Credit Limit.
"Agreement" shall mean this Agreement, as the same may be amended,
---------
extended or replaced from time to time.
"Applicable Eurodollar Rate" shall mean, with respect to any
--------------------------
Eurodollar Loan for the Eurodollar Interest Period applicable to such Eurodollar
Loan, the rate per annum (rounded upward, if necessary, to the next higher 1/16
of one percent (.06250%)) calculated in accordance with the following formula:
47
ER +ES
----
Eurodollar Rate = 1-ERP
where
ER = Eurodollar Rate
ERP = Eurodollar Reserve Percentage
ES = Eurodollar Spread
"Applicable Federal Funds Rate" shall mean the Federal Funds Funding
-----------------------------
Rate plus the Federal Funds Pricing Spread.
"Applicant Financial Institution" shall have the meaning given such
-------------------------------
term in Paragraph 15(h)(1) above.
"Approved HELOC Investor" shall mean any Person pre-approved as such
-----------------------
in writing by the Majority Lenders and which approval has not been revoked by
the Majority Lenders in their sole discretion, any such revocation notice to be
given no later than ten (10) days prior to its intended effective date;
provided, however, than an Approved HELOC Investor shall be deemed to continue
as such following such revocation as to any Collateral shipped to such Approved
HELOC Investor by the Collateral Agent prior to or during such ten (10) day
period.
"Approved High LTV Investor" shall mean any Person pre-approved as
--------------------------
such in writing by the Majority Lenders and which approval has not been revoked
by the Majority Lenders in their sole discretion, any such revocation notice to
be given no later than ten (10) days prior to its intended effective date;
provided, however, than an Approved High LTV Investor shall be deemed to
continue as such following such revocation as to any Collateral shipped to such
Approved High LTV Investor by the Collateral Agent prior to or during such ten
(10) day period.
"Approved Investor" shall mean: FNMA, FHLMC, GNMA or any other Person
-----------------
pre-approved as such in writing (which pre-approval may be limited in dollar
amount, by type and otherwise) by the Majority Lenders and which approval has
not been revoked by the Majority Lenders in their sole discretion, any such
revocation notice to be given no later than ten (10) days prior to its intended
effective date; provided, however, than an Approved Investor shall be deemed to
continue as such following such revocation as to any Collateral shipped to such
Approved Investor by the Collateral Agent prior to or during such ten (10) day
period.
"Approved Non-Agency Investor" shall mean any Person pre-approved as
----------------------------
such in writing by the Majority Lenders and which approval has not been revoked
by the Majority Lenders in their sole discretion, any such revocation notice to
be given no later than ten (10) days prior to its intended effective date;
provided, however, than an Approved Non-Agency Investor shall be deemed to
continue as such following such revocation as to any Collateral shipped to such
Approved Non-Agency Investor by the Collateral Agent prior to or during such ten
(10) day period.
48
"Approved Repo Lender" shall mean any Approved Investor or any other
--------------------
Person pre-approved as such in writing by the Majority Lenders and which
approval has not been revoked by the Majority Lenders in their sole discretion,
any such revocation notice to be given no later than ten (10) days prior to its
intended effective date.
"Available Cash Proceeds" shall have the meaning given such term in
-----------------------
Paragraph 7(k) above.
"Book Net Worth" shall mean at any date consolidated net worth of the
--------------
Company and its Subsidiaries determined in accordance with GAAP.
"Borrowing Base" shall mean at any date all Eligible Mortgage Loans
--------------
which have been designated by the Company for inclusion in the computation of
the Collateral Value of the Borrowing Base, the Required Documents for which
have been delivered to the Collateral Agent and have been reviewed and verified
by the Collateral Agent as provided in Paragraph 5 of the Security Agreement
(or, to the extent the Company is permitted to utilize Collateral Confirmation
Agreements in connection with the delivery of Mortgage Loans to the Collateral
Agent, which Mortgage Loans have been so designated on a duly executed
Collateral Confirmation Agreement) and all cash in the Settlement Account (other
than cash which will be transferred to the Settlement Account or distributed to
the Lenders pursuant to Paragraph 7(k) above) on such date.
"Borrowing Base Certificate" shall mean a certificate in the form of
--------------------------
that attached hereto as Exhibit I.
---------
"Business Day" shall mean any day other than a Saturday, a Sunday or a
------------
day on which banks in Los Angeles, California, Chicago, Illinois, or New York,
New York are authorized or obligated to close their regular banking business.
"Buy-Down Deposits" shall mean, with respect to any calendar month,
-----------------
the average daily amount of free collected balances maintained in non-interest
bearing accounts in the name of the Company (or held by the Company in trust for
third parties) with a Tranche B Lender and/or the Tranche C 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 (including but not limited to any FDIC
premium) applicable to such accounts) and which balances are not included in
determining "Buy-Down Deposits" or other similar classification under any other
credit arrangements between such Lender and the Company.
"Buy-Down Letter" shall mean a letter agreement (a) between the
---------------
Company and each Tranche B Lender, individually, establishing the terms
applicable to such Tranche B Lender's agreement to make Tranche B Loans
hereunder, including fees, or (b) between the Company and the Tranche C Lender,
establishing the terms under which the Buy-Down Rate may be applicable to
Tranche C Loans hereunder.
49
"Buy-Down Rate" shall mean as to any Tranche B Loan or Tranche C Loan,
-------------
such rate per annum as the Company and the Lender which agreed to advance such
Tranche B Loan or Tranche C Loan shall have agreed.
"Cash" shall mean the dollar amount of "Cash" of the Company set forth
----
in the most recent balance sheet of the Company.
"Certificating Custodian" shall mean any Person, including, without
-----------------------
limitation, the Collateral Agent, acting as the Company's "document custodian,"
"custodian" or "certificating custodian," as such terms are used in the
applicable Agency Guide, for purposes of (a) certifying that the documentation
relating to Mortgage Loans received by such Person from the Company (or the
Collateral Agent) is complete and acceptable under the applicable Agency Guide
for purposes of including such Mortgage Loan in a pool of Mortgage Loans in
which Mortgage-Backed Securities will represent interests and (b) holding such
documentation following formation of such pools and issuance of such Mortgage-
Backed Securities. The Certificating Custodian shall at all times be party to
the Agency Custodial Agreements.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Collateral" shall have the meaning given such term in Paragraph 4 of
----------
the Security Agreement.
"Collateral Agent" shall have the meaning given such term in the
----------------
introductory paragraph hereof, or such other Person which may be designated as
such in accordance with the terms of the Security Agreement.
"Collateral Confirmation Agreement" shall have the meaning given such
---------------------------------
term in subparagraph (q)(1) of the definition of "Eligible Mortgage Loan."
"Collateral Value Determination" shall have the meaning given such
------------------------------
term in Paragraph 6 of the Security Agreement.
"Collateral Value of the Borrowing Base" shall mean at any date (a)
--------------------------------------
the sum of the Unit Collateral Values of all Eligible Mortgage Loans included in
the Borrowing Base at such date, plus (b) without duplication, the total dollar
amount of cash in the Settlement Account being held as cash collateral pursuant
to Paragraph 7(k)(1) above.
"Combined Percentage Shares" shall have the meaning given such term in
--------------------------
Paragraph 2 of the Pledge Agreement.
"Commitment Schedule and Allocation Notice" shall mean a notice in the
-----------------------------------------
form of the Commitment Schedule and Allocation Notice in effect on the Effective
Date attached hereto as Schedule IV.
-----------
50
"Commonly Controlled Entity" of a Person shall mean a Person, whether
--------------------------
or not incorporated, which is under common control with such Person within the
meaning of Section 414(c) of the Code.
"Company" shall have the meaning given such term in the introductory
-------
paragraph hereof.
"Contractual Obligation" as to any Person shall mean any provision of
----------------------
any security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Corporate Base Rate" shall mean a rate per annum equal to the
-------------------
corporate base rate of interest publicly announced by FNBC from time to time,
changing when and as said corporate base rate changes.
"Current Ratio" shall mean at any date the ratio of current assets to
-------------
current liabilities of the Company and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided, however, that in
determining the Company's current assets for purposes hereof, the aggregate
outstanding principal amount of all loans and advances outstanding to officers
and employees of the Company and its Subsidiaries shall be excluded.
"Current Weighted Average Take-Out Price" shall mean on any date the
---------------------------------------
Weighted Average Take-Out Price shown on the certificate most recently delivered
by the Company to the Administrative Agent as provided in Paragraph 11(b)(5)
above, unless otherwise agreed in writing by the Majority Lenders, the
Administrative Agent and the Collateral Agent.
"Effective Date" shall mean the date on which all of the conditions
--------------
set forth in Paragraph 9(a) above are satisfied and the initial Loans shall be
funded.
"Effective Net Worth" shall mean at any date, as to the Company and
-------------------
its Subsidiaries, (a) Book Net Worth (including the value of excess servicing
net of reserves), minus (b) the aggregate outstanding principal amount of all
loans and advances outstanding to officers and employees of the Company and its
Subsidiaries, plus (c) the aggregate outstanding principal amount of all
Subordinated Debt, minus (d) the capitalized value of the Company's servicing
portfolio, minus (e) fifteen percent (15%) of the aggregate unpaid principal
balance of all Mortgage Loans held by the Company for long-term investment
purposes, all determined on a consolidated basis in accordance with GAAP.
"Eligible Conforming Mortgage Loan" shall mean a Mortgage Loan with
---------------------------------
respect to which each of the following is accurate and complete (and the Company
by including said Mortgage Loan in any computation of the Collateral Value of
the Borrowing Base shall be deemed to so represent and warrant to the
Administrative Agent, the Collateral Agent and the Lenders at and as of the date
of such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan but not an
Eligible Shipped Mortgage Loan;
51
(b) Said Mortgage Loan is secured by a first priority deed of
trust (or mortgage) on the related Property;
(c) Said Mortgage Loan is insured by the FHA, guaranteed by the
VA (or subject to a binding commitment to issue such insurance or guarantee)
and/or conforms to all underwriting and other requirements of FNMA or FHLMC;
(d) Said Mortgage Loan is not an Eligible Gestation Mortgage
Loan; and
(e) Said Mortgage Loan has not been included in the Borrowing
Base for more than one hundred twenty (120) days; provided, however, that if
said Mortgage Loan has previously been included in the Borrowing Base as an
Eligible Manufactured Housing Mortgage Loan, said Mortgage Loan has not been
included in the Borrowing Base as an Eligible Conforming Mortgage Loan for more
than one hundred twenty (120) days.
"Eligible Gestation Mortgage Loan" shall mean a Mortgage Loan with
--------------------------------
respect to which each of the following statements is accurate and complete (and
the Company by including said Mortgage Loan in any computation of the Collateral
Value of the Borrowing Base shall be deemed to so represent and warrant to the
Administrative Agent, the Collateral Agent and the Lenders at and as of the date
of such computation):
(a) Said Mortgage Loan meets all of the requirements in the
definition of Eligible Conforming Mortgage Loan (except the requirement set
forth in subparagraph (d) of such definition) and was included in the Borrowing
Base as an Eligible Conforming Mortgage Loan prior to its inclusion as an
Eligible Gestation Mortgage Loan; and
(b) The documentation relating to said Mortgage Loan has been
certified, on the Business Day immediately preceding the date said Mortgage Loan
is to be included in the Borrowing Base as an Eligible Gestation Mortgage Loan
(or at the sole discretion of the Collateral Agent, on the same Business Day
said Mortgage Loan is to be included in the Borrowing Base as an Eligible
Gestation Mortgage Loan), by a Certificating Custodian as complete and
acceptable under the applicable Agency Guide for purposes of including said
Mortgage Loan in a pool of Mortgage Loans in which a Mortgage-Backed Security
will represent an interest.
"Eligible HELOC Asset" shall mean a Mortgage Loan with respect to
--------------------
which each of the following statements is accurate and complete (and the Company
by including said Mortgage Loan in any computation of the Collateral Value of
the Borrowing Base shall be deemed to so represent to the Administrative Agent,
the Collateral Agent and the Lenders at and as of the date of such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan;
(b) Said Mortgage Loan is secured by a first or second
priority deed of trust (or mortgage) on the related Property;
52
(c) Said Mortgage Loan has not been previously included in the
Borrowing Base;
(d) Said Mortgage Loan is not a graduated payment Mortgage Loan
and the Unit Collateral Value of said Mortgage Loan, when added to the Unit
Collateral Values of all other Eligible HELOC Assets included in the Borrowing
Base, does not exceed twenty percent (20%) of the Aggregate Credit Limit;
(e) Said Mortgage Loan does not have a Loan-to-Value Ratio of
greater than one hundred percent (100%);
(f) Said Mortgage Loan has not been included in the Borrowing
Base for more than one hundred twenty (120) days;
(g) If the face amount of the promissory note relating to said
Mortgage Loan is greater than $100,000, then the Unit Collateral Value of said
Mortgage Loan, when added to the Unit Collateral Values of all other such
Eligible HELOC Assets included in the Borrowing Base, does not exceed five
percent (5%) of the Aggregate Credit Limit;
(h) If the Loan-to-Value Ratio of said Mortgage Loan is greater
than ninety percent (90%), then the Unit Collateral Value of said Mortgage Loan,
when added to the Unit Collateral Values of all other such Eligible HELOC Assets
included in the Borrowing Base, does not exceed six percent (6%) of the
Aggregate Credit Limit;
(i) (1) If the face amount of the promissory note relating to
said Mortgage Loan plus the principal amount outstanding under the first
priority deed of trust (or mortgage) on the related Property is greater than
$300,000.00 but less than $650,000.00, then the Unit Collateral Value of said
Mortgage Loan, when added to the Unit Collateral Values of all other such
Eligible HELOC Assets included in the Borrowing Base, does not exceed ten
percent (10%) of the Aggregate Credit Limit, and (2) if the face amount of the
promissory note relating to said Mortgage Loan plus the principal amount
outstanding under the first priority deed of trust (or mortgage) on the related
Property is equal to or greater than $650,000.00 but less than $1,000,000.00,
then the Unit Collateral Value of said Mortgage Loan, when added to the Unit
Collateral Values of all other such Eligible HELOC Assets included in the
Borrowing Base, does not exceed three percent (3%) of the Aggregate Credit
Limit; and
(j) Said Mortgage Loan generally conforms to all underwriting and
other requirements of an Approved HELOC Investor.
"Eligible High LTV Mortgage Loan" shall mean a Mortgage Loan with
-------------------------------
respect to which each of the following statements is accurate and complete (and
the Company by including said Mortgage Loan in any computation of the Collateral
Value of the Borrowing Base shall be deemed to so represent to the
Administrative Agent, the Collateral Agent and the Lenders at and as of the date
of such computation):
53
(a) Said Mortgage Loan is an Eligible Mortgage Loan;
(b) The Unit Collateral Value of said Mortgage Loan, when added
to the Unit Collateral Values of all other Eligible High LTV Mortgage Loans
included in the computation of the Collateral Value of the Borrowing Base, does
not exceed five percent (5%) of the Aggregate Credit Limit;
(c) Said Mortgage Loan is secured by a first or second priority
deed of trust (or mortgage) on the related Property;
(d) Said Mortgage Loan does not have a Loan-to-Value Ratio of
greater than one hundred twenty-five percent (125%);
(e) The Obligor on said Mortgage Loan had a FICO score of not
less than 680 or, if the Obligor on said Mortgage Loan had a FICO score of less
than 680, the Unit Collateral Value of said Mortgage Loan, when added to the
Unit Collateral Values of all other Eligible High LTV Mortgage Loans the Obligor
on which had a FICO score of less than 680 included in the computation of the
Collateral Value of the Borrowing Base does not exceed one half of one percent
(0.50%) of the Aggregate Credit Limit;
(f) Said Mortgage Loan has not been included in the Borrowing
Base for more than forty-five (45) days;
(g) The original principal balance of said Mortgage Loan did not
exceed $75,000.00; and
(h) Said Mortgage Loan generally conforms to all underwriting and
other requirements of an Approved High LTV Investor and, in addition, if the
Obligor on said Mortgage Loan had a FICO score of less than 680, said Mortgage
Loan generally conforms to all underwriting standards of FNMA or FHLMC.
"Eligible Manufactured Housing Mortgage Loan" shall mean a Mortgage
-------------------------------------------
Loan with respect to which each of the following statements is accurate and
complete (and the Company by including said Mortgage Loan in any computation of
the Collateral Value of the Borrowing Base shall be deemed to so represent to
the Administrative Agent, the Collateral Agent and the Lenders at and as of the
date of such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan;
(b) Said Mortgage Loan is secured by a first priority deed of
trust (or mortgage) on the related Property;
(c) Said Mortgage Loan has not been previously included in the
Borrowing Base;
54
(d) The face amount of the promissory note underlying said
Mortgage Loan, when added to the face amount of all promissory notes underlying
all other Eligible Manufactured Housing Mortgage Loans included in the Borrowing
Base, does not exceed ten percent (10%) of the Aggregate Credit Limit;
(e) Said Mortgage Loan does not have a Loan-to-Value Ratio of
greater than ninety-seven percent (97%);
(f) Said Mortgage Loan has not been included in the Borrowing
Base for more than one hundred fifty (150) days;
(g) The face amount of the promissory note underlying said
Mortgage Loan does not exceed the maximum principal amount allowed by FNMA,
FHLMC or FHA and VA, as applicable, and the proceeds of said Mortgage Loan are
utilized by the related Obligor to facilitate the permanent attachment of a new
Manufactured Home on the related Property;
(h) All work required to be done in accordance with the timeframe
set forth in the related construction loan agreement has been and will be
completed on time and in conformance with all required specifications and
standards necessary to allow a certificate of occupancy to be issued for the
completed Manufactured Home on or before the completion date set forth in the
related construction loan agreement;
(i) The Property securing said Mortgage Loan is located in an
Acceptable Manufactured Housing State;
(j) Upon completion and attachment of the related Manufactured
Home to the related Property, said Mortgage Loan will meet all underwriting and
other criteria for purchase by FNMA, FHLMC or FHA and VA, as applicable, under
the Take-Out Commitment relating to said Mortgage Loan;
(k) The Manufactured Home financed with the proceeds of said
Mortgage Loan is a new Manufactured Home which has not previously been financed;
(l) The Company has advanced the Required Manufactured Housing
Mortgage Loan Disbursement for said Mortgage Loan; and
(m) All actions required to create a valid and enforceable first
priority perfected security interest in and lien upon said Mortgage Loan, the
related Manufactured Home, the related Property and all documents and
instruments relating to said Mortgage Loan, in favor of the Collateral Agent for
the benefit of the Lenders, have been taken.
"Eligible Mortgage Loan" shall mean a Mortgage Loan with respect to
----------------------
which each of the following statements is accurate and complete (and the Company
by including said Mortgage Loan in any computation of the Collateral Value of
the Borrowing Base shall be deemed to so represent and warrant to the
Administrative Agent, the Collateral Agent and the Lenders at and as of the date
of such computation):
55
(a) Said Mortgage Loan is a binding and valid obligation of the
Obligor thereon, in full force and effect and enforceable in accordance with its
terms;
(b) Said Mortgage Loan is genuine in all respects as appearing on
its face and as represented in the books and records of the Company, and all
information set forth therein is true and correct;
(c) Except to the extent permitted under subparagraph (d) below,
said Mortgage Loan is free of any default of any party thereto (including the
Company), counterclaims, offsets and defenses and from any rescission,
cancellation or avoidance, and all right thereof, whether by operation of law or
otherwise;
(d) Unless said Mortgage Loan is an Eligible Manufactured Housing
Mortgage Loan no payment under said Mortgage Loan is more than thirty (30) days
past due the payment due date set forth in the underlying promissory note and
deed of trust (or mortgage) and if said Mortgage Loan is an Eligible
Manufactured Housing Mortgage Loan no payment under said Mortgage Loan is past
due the payment due date set forth in the underlying promissory note and deed of
trust (or mortgage);
(e) Said Mortgage Loan contains the entire agreement of the
parties thereto with respect to the subject matter thereof, has not been
modified or amended in any respect and is free of concessions or understandings
with the Obligor thereon of any kind not expressed in writing therein;
(f) Said Mortgage Loan is in all respects as required by and in
accordance with all applicable laws and regulations governing the same,
including, without limitation, the federal Consumer Credit Protection Act and
the regulations promulgated thereunder and all applicable usury laws and
restrictions, and all notices, disclosures and other statements or information
required by law or regulation to be given, and any other act required by law or
regulation to be performed, in connection with said Mortgage Loan have been
given and performed as required;
(g) All advance payments and other deposits on said Mortgage
Loan, which are represented as actually paid by the Obligor thereon, have been
paid in cash, and no part of said sums has been loaned, directly or indirectly,
by the Company to the Obligor thereon and, other than as disclosed to the
Administrative Agent in writing, there have been no prepayments on said Mortgage
Loan;
(h) At all times said Mortgage Loan is free and clear of all
Liens, except in favor of the Lenders;
(i) The Property covered by said Mortgage Loan is insured against
loss or damage by fire and all other hazards normally included within standard
extended coverage in accordance with the provisions of said Mortgage Loan with
the Company named as a loss payee thereon;
56
(j) The Property covered by said Mortgage Loan is free and clear
of all Liens except in favor of the Company subject only to (1) the Lien of
current real property taxes and assessments not yet due and payable; (2)
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; (3)
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 (4) a prior first Lien to the extent said Mortgage Loan is
an Eligible HELOC Asset or an Eligible High LTV Mortgage Loan;
(k) If said Mortgage Loan has been withdrawn from the possession
of the Collateral Agent on terms and subject to conditions set forth in the
Security Agreement:
(1) If said Mortgage Loan was withdrawn by the Company for
purposes of correcting clerical or other non-substantive documentation
problems: (i) the promissory note and other documents relating to said
Mortgage Loan were returned to the Collateral Agent within ten (10)
calendar days from the date of withdrawal, (ii) said Mortgage Loan was
released to the Company pursuant to the trust receipt procedure described
in Paragraph 6 of the Security Agreement, and (iii) the Unit Collateral
Value of said Mortgage Loan when added to the Unit Collateral Values of all
other Mortgage Loans included in the Borrowing Base which have been
similarly released to the Company does not exceed $1,000,000.00;
(2) If said Mortgage Loan was shipped by the Collateral Agent
directly to a permanent investor for purchase, the full purchase price
therefor has been received by the Collateral Agent (or said Mortgage Loan
has been returned to the Collateral Agent) within forty-five (45) days from
the date of shipment by the Collateral Agent; provided, however, that if
such permanent investor is FHLMC, FNMA or GNMA, then the purchase price
therefor has been received by the Collateral Agent (or said Mortgage Loan
has been returned to the Collateral Agent) within sixty (60) days from the
date of shipment by the Collateral Agent; and
(3) If said Mortgage Loan was shipped by the Collateral
Agent directly to a custodian for purposes of formation of a pool
supporting a Warehouse-Related MBS, the Warehouse-Related MBS is issued and
sold and the purchase price therefor has been received by the Collateral
Agent (or said Mortgage Loan has been returned to the Collateral Agent)
within forty-five (45) days from the date of shipment by the Collateral
Agent; provided, however, that if the guarantor or issuer of such
Warehouse-Related MBS is GNMA, FNMA or FHLMC, then the purchase price
therefor has been received by the Collateral Agent (or said Mortgage Loan
has been returned to
57
the Collateral Agent) within sixty (60) days from the date of shipment by
the Collateral Agent;
(l) Unless said Mortgage Loan is an Eligible Manufactured Housing
Mortgage Loan, said Mortgage Loan is covered by a Take-Out Commitment which is
in full force and effect, the Company and said Mortgage Loan are in full
compliance therewith and, if such Take-Out Commitment constitutes a delivery
commitment, such Take-Out Commitment is for a price not less than the Take-Out
Commitment under which the Unit Collateral Value of said Mortgage Loan was
originally determined, or said Mortgage Loan is subject to a Hedging Program;
provided, however, that if said Mortgage Loan is an Eligible Manufactured
Housing Mortgage Loan, then upon completion and permanent attachment of the
related Manufactured Home to the related Property, said Mortgage Loan is covered
by a Take-Out Commitment which is in full force and effect and the Company and
said Mortgage Loan are in full compliance therewith;
(m) The date of the underlying promissory note is no earlier than
one hundred eighty (180) days prior to the date said Mortgage Loan is first
included in the Borrowing Base; provided, however, that if the date of the
underlying promissory note is earlier than sixty (60) days prior to the date
said Mortgage Loan is first included in the Borrowing Base, the Unit Collateral
Value of said Mortgage Loan when added to the Unit Collateral Values of all
other such Mortgage Loans included in the computation of the Collateral Value of
the Borrowing Base, does not exceed one percent (1%) of the Aggregate Credit
Limit and, provided further, that if said Mortgage Loan is an Eligible
Repurchase Mortgage Loan, the Unit Collateral Value of said Mortgage Loan, when
added to the Unit Collateral Values of all other Eligible Repurchase Mortgage
Loans included in the Borrowing Base with a note date earlier than sixty (60)
days prior to the date such other Eligible Repurchase Mortgage Loans were first
included in the Borrowing Base, does not exceed $1,000,000.00;
(n) If said Mortgage Loan is FHA insured or VA guaranteed, such
insurance or guaranty (or a binding commitment to issue such insurance or
guaranty) is in full force and effect;
(o) The Property securing said Mortgage Loan is located in an
Acceptable State;
(p) The improvements on the related Property consist of a
completed one-to-four family residence; provided, however, that if said Mortgage
Loan is an Eligible Manufactured Housing Mortgage Loan, then upon completion and
permanent attachment of the related Manufactured Home, the improvements on the
related Property shall consist of a completed one-to-four family residence;
(q) There has been delivered to the Collateral Agent for said
Mortgage Loan:
(1) Those items described on Exhibit J attached hereto (the
---------
"Required Documents") prior to the inclusion of said Mortgage Loan in the
Borrowing
58
Base or, if such items have not been delivered to the Collateral Agent, (i)
the Collateral Agent has received an agreement in the form of that attached
hereto as Exhibit K (a "Collateral Confirmation Agreement") relating to
---------
said Mortgage Loan on or prior to the date said Mortgage Loan is first
included in the Borrowing Base, (ii) such items are received by the
Collateral Agent within eight (8) Business Days after said Mortgage Loan is
first included in the Borrowing Base, (iii) the Unit Collateral Value of
said Mortgage Loan, when added to the Unit Collateral Values of all other
Mortgage Loans included in the computation of the Collateral Value of the
Borrowing Base for which the Required Documents have not been received by
the Collateral Agent, does not exceed (x) during the period from the fifth
Business Day preceding the last day of each calendar month to and including
the fifth Business Day of the next calendar month, thirty percent (30%) of
the Aggregate Credit Limit and (y) at all other times, twenty percent (20%)
of the Aggregate Credit Limit; and (iv) if the Required Documents for said
Mortgage Loan are received by the Collateral Agent later than five (5)
Business Days after said Mortgage Loan is first included in the Borrowing
Base, the Unit Collateral Value of said Mortgage Loan, when added to the
Unit Collateral Values of all other Mortgage Loans included in the
computation of the Collateral Value of the Borrowing Base for which the
Required Documents are received by the Collateral Agent later than five (5)
Business Days after said Mortgage Loan is first included in the Borrowing
Base, does not exceed $5,000,000.00;
(2) If the Collateral Agent has so requested in writing, the
additional items described on Exhibit L attached hereto (the "Additional
---------
Required Documents"); and
(3) If said Mortgage Loan is to be included in the Borrowing
Base as an Eligible Gestation Mortgage Loan, a FHLMC Custodial
Certification Schedule (Form 1034), a FNMA Schedule of Mortgages (Form
2005) or a GNMA Schedule of Pooled Mortgages (HUD Form 11706) (or any
comparable or successor form thereto) listing said Mortgage Loan as a
Mortgage Loan to be pooled in a Mortgage-Backed Security, in each case
completed and duly executed by a Certificating Custodian on or prior to the
inclusion of said Mortgage Loan in the Borrowing Base as an Eligible
Gestation Mortgage Loan; provided, however, that the Collateral Agent may
accept such other evidence satisfactory to it in its sole discretion,
including, without limitation, FHLMC's "Contract Delivery Status" report,
in lieu of an executed FHLMC Custodial Certification Schedule (Form 1034)
for the purpose of including said Mortgage Loan in the Borrowing Base as an
Eligible Gestation Mortgage Loan;
(r) The Collateral Agent has had an opportunity to review for
said Mortgage Loan the items delivered to the Collateral Agent referred to in
subparagraph (q) above;
(s) Said Mortgage Loan is not subject to any servicing
arrangement with any Person other than the Company nor are any servicing rights
relating to said Mortgage Loan subject to any Lien, claim, interest or negative
pledge in favor of any Person, except for subservicing arrangements approved by
the Majority Lenders;
59
(t) Unless said Mortgage Loan is an Eligible High LTV Mortgage
Loan, the appraisal obtained by the Company in connection with the origination
of said Mortgage Loan satisfies all appraisal requirements under the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 for similar loans
originated by federally insured depository institutions and if said Mortgage
Loan is an Eligible High LTV Mortgage Loan: (1) the appraisal obtained by the
Company in connection with the origination of said Mortgage Loan is in a form
customarily required as a matter of prudent industry practice for similar
Mortgage Loans and (2) in any event, the Company is not relying on the value of
the underlying Property as the source of repayment of said Mortgage Loan;
(u) The Loan-to-Value Ratio of said Mortgage Loan does not exceed
the following limits: (i) if said Mortgage Loan is a No-Equity Mortgage Loan or
an Eligible HELOC Asset, one hundred percent (100%); (ii) if said Mortgage Loan
is an Eligible Conforming Mortgage Loan subject to a Take-Out Commitment from
FNMA covering said Mortgage Loan, or if said Mortgage Loan is an Eligible
Manufactured Housing Mortgage Loan, ninety-seven percent (97%); (iii) if said
Mortgage Loan is an Eligible High LTV Mortgage Loan, one hundred twenty-five
percent (125%), (iv) if said Mortgage Loan is an Eligible Non-Agency Mortgage
Loan, ninety percent (90%) and (v) in all other cases, ninety-five percent
(95%);
(v) If said Mortgage Loan has a Loan-to-Value Ratio greater than
eighty percent (80%) and: (i) is not an Eligible HELOC Asset, (ii) is not
subject to a commitment by the VA or FHA to guarantee or insure repayment
thereof, and (iii) is not to be included in the Borrowing Base as an Eligible
Non-Agency Mortgage Loan, then said Mortgage Loan is covered by a policy of
private mortgage insurance acceptable to FNMA or the Approved Investor issuing
the Take-Out Commitment for said Mortgage Loan; and
(w) Said Mortgage Loan is included in the Borrowing Base as only
one Type of Mortgage Loan.
In determining the eligibility of any Mortgage Loan, any of the requirements for
eligibility (other than the requirements contained in subparagraphs (h), (i),
(l), (n), (o) and (p) above) may be waived by the Administrative Agent in its
sole discretion (with such waiver to be expressly given by the Administrative
Agent to the Collateral Agent and notice of such waiver to be given by the
Collateral Agent to all Lenders in the next collateral report provided to the
Lenders pursuant to Paragraph 8 of the Security Agreement if such waiver is in
force on the date of such collateral report); provided, however, that any
Mortgage Loan which is accepted by the Administrative Agent as an Eligible
Mortgage Loan pursuant to such waiver (an "Eligible Waiver Mortgage Loan") shall
cease to be an Eligible Waiver Mortgage Loan upon written notice of the
retraction of such waiver given to the Company by the Administrative Agent
unless at the time of giving such notice the deficiency which originally
required such waiver has been cured and such Eligible Waiver Mortgage Loan meets
all other requirements for an Eligible Mortgage Loan; provided further, that the
Unit Collateral Value of any Mortgage Loan accepted by the Administrative Agent
as an Eligible Waiver Mortgage Loan, when added to the Unit Collateral Values of
all other Eligible Waiver Mortgage Loans accepted by the Administrative Agent,
does not exceed $10,000,000.00. Notwithstanding anything set forth herein, the
Administrative Agent
60
may grant temporary waivers of strict compliance by the Company with the
eligibility requirements regarding qualification of Mortgage Loans as Eligible
Mortgage Loans or with any lending or Borrowing Base sublimits set forth herein
when the Administrative Agent deems it appropriate, in its sole discretion, 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 Company (i.e. natural disasters,
transmission failures, etc.), provided that, if such determination cannot be
made for more than one (1) Business Day, the Company certified in writing that
all such eligibility requirements and sublimits are in fact satisfied.
"Eligible Non-Agency Mortgage Loan" shall mean a Mortgage Loan with
---------------------------------
respect to which each of the following is accurate and complete (and the Company
by including said Mortgage Loan in any computation of the Collateral Value of
the Borrowing Base shall be deemed to so represent and warrant to the
Administrative Agent, the Collateral Agent and the Lenders at and as of the date
of such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan but not an
Eligible Shipped Mortgage Loan, and if said Mortgage Loan has a Loan-to-Value
Ratio greater than eighty-five percent (85%), said Mortgage Loan is covered by a
policy of private mortgage insurance acceptable to the Approved Non-Agency
Investor issuing the Take-Out Commitment for said Mortgage Loan;
(b) Said Mortgage Loan is secured by a first priority deed of
trust (or mortgage) on the related Property;
(c) Said Mortgage Loan does not conform to the underwriting or
other criteria for purchase by FNMA or FHLMC;
(d) Said Mortgage Loan has not been previously included in the
Borrowing Base;
(e) Said Mortgage Loan is covered by a Take-Out Commitment under
which said Mortgage Loan will be sold to the Approved Non-Agency Investor
issuing such Take-Out Commitment on a non-recourse basis;
(f) Said Mortgage Loan has been expressly pre-approved in writing
by the Approved Non-Agency Investor issuing the Take-Out Commitment for said
Mortgage Loan, or is underwritten by the Company pursuant to delegated
underwriting authority granted to the Company by the Approved Non-Agency
Investor issuing such Take-Out Commitment;
(g) Said Mortgage Loan has not been included in the Borrowing
Base for more than one hundred and twenty (120) days; and
(h) The Unit Collateral Value of said Mortgage Loan, when added
to the Unit Collateral Values of all other Eligible Non-Agency Mortgage Loans,
does not exceed fifteen percent (15%) of the Aggregate Credit Limit.
61
"Eligible Non-Conforming Mortgage Loan" shall mean a Mortgage Loan
-------------------------------------
with respect to which each of the following is accurate and complete (and the
Company by including said Mortgage Loan in any computation of the Collateral
Value of the Borrowing Base shall be deemed to so represent and warrant to the
Administrative Agent, the Collateral Agent and the Lenders at and as of the date
of such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan but not an
Eligible Shipped Mortgage Loan;
(b) Said Mortgage Loan is secured by a first priority deed of
trust (or mortgage) on the related Property;
(c) Said Mortgage Loan generally conforms to all underwriting and
other requirements of FNMA or FHLMC with respect to credit quality, and
otherwise conforms in all material respects to all underwriting and other
requirements of the applicable Approved Investor;
(d) Said Mortgage Loan has not been included in the Borrowing
Base for more than: (1) if said Mortgage Loan has an original principal balance
not in excess of $650,000.00, one hundred twenty (120) days; and (2) if said
Mortgage Loan has an original principal balance in excess of $650,000.00, ninety
(90) days;
(e) If said Mortgage Loan had an original principal balance in
excess of $650,000.00, said Mortgage Loan has been pre-approved in writing by an
Approved Investor as acceptable for purchase under its Take-Out Commitment or,
if an Approved Investor has granted the Company written delegated underwriting
authority as to said Mortgage Loan, said Mortgage Loan complies with the
underwriting standards specified by such Approved Investor;
(f) If said Mortgage Loan had an original principal balance in
excess of $650,000.00, the Unit Collateral Value of said Mortgage Loan, when
added to the Unit Collateral Value of all other Eligible Non-Conforming Mortgage
Loans with an original principal balance in excess of $650,000.00 included in
the Borrowing Base, does not exceed ten percent (10%) of the Aggregate Credit
Limit;
(g) If said Mortgage Loan had an original principal balance in
excess of $1,000,000.00 but less than $1,750,000.00, the Unit Collateral Value
of said Mortgage Loan, when added to the Unit Collateral Values of all other
Eligible Non-Conforming Mortgage Loans with an original principal balance in
excess of $1,000,000.00 but less than $1,750,000.00 included in the Borrowing
Base, does not exceed five percent (5%) of the Aggregate Credit Limit;
(h) If said Mortgage Loan had an original principal balance in
excess of $1,750,000.00, the Unit Collateral Value of said Mortgage Loan, when
added to the Unit Collateral Values of all other Eligible Non-Conforming
Mortgage Loans with an original principal balance in excess of $1,750,000.00
included in the Borrowing Base, does not exceed three and one-half percent
(3.5%) of the Aggregate Credit Limit; and
62
(i) The original principal balance of said Mortgage Loan does not
exceed $3,000,000.00.
"Eligible Repurchase Mortgage Loan" shall mean a Mortgage Loan with
---------------------------------
respect to which each of the following statements is accurate and complete (and
the Company by including said Mortgage Loan in any computation of the Collateral
Value of the Borrowing Base shall be deemed to so represent and warrant to the
Administrative Agent, the Collateral Agent and the Lenders at and as of the date
of such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan but not an
Eligible Shipped Mortgage Loan;
(b) Said Mortgage Loan has been rejected for purchase by an
Approved Investor or has been repurchased from an Approved Investor;
(c) Said Mortgage Loan has not been included in the Borrowing
Base for more than two hundred and seventy (270) days; and
(d) The Unit Collateral Value of said Mortgage Loan, when added
to the Unit Collateral Values of all other Eligible Repurchase Mortgage Loans,
does not exceed the lesser of: (i) $10,000,000.00 and (ii) five percent (5%) of
the Aggregate Credit Limit.
"Eligible Servicing Portfolio" shall mean the Company's mortgage/trust
----------------------------
deed servicing portfolio, exclusive of the following: (a) any servicing of
Mortgage Loans owned by the Company, (b) any servicing performed pursuant to
subservicing arrangements (other than that technically styled as subservicing
but performed under a contract directly between the Company and FNMA, FHLMC or
the master servicer under a private mortgage-related security program), (c) any
servicing of Mortgage Loans which the Company has a direct obligation to
repurchase from the applicable investor pursuant to a recourse arrangement, (d)
any servicing subject to any Lien (other than the Liens in favor of the
"Collateral Agent" for the benefit of the "Lenders" under the Servicing Secured
Credit Agreement), (e) any servicing of Mortgage Loans in foreclosure or the
payments in respect of which are past due more than sixty (60) days, and (f) any
servicing of Mortgage Loans which are not first priority Mortgage Loans and
which have an aggregate outstanding principal balance in excess of
$350,000,000.00.
"Eligible Shipped Mortgage Loan" shall mean a Mortgage Loan with
------------------------------
respect to which each of the following statements is accurate and complete (and
the Company by including said Mortgage Loan in any computation of the Collateral
Value of the Borrowing Base shall be deemed to so represent and warrant to the
Administrative Agent, the Collateral Agent and the Lenders at and as of the date
of such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan; and
63
(b) Said Mortgage Loan has been shipped by the Collateral Agent
pursuant to a bailee letter directly to an Approved Investor for purchase and
the purchase price therefor has not yet been received by the Collateral Agent.
"Eligible Waiver Mortgage Loan" shall have the meaning given such term
-----------------------------
in the last paragraph of the defined term "Eligible Mortgage Loan."
"Encumbered Eligible Servicing Portfolio" shall mean that portion of
---------------------------------------
the Eligible Servicing Portfolio consisting of all now existing and hereafter
arising rights of the Company to service, collect and administer Mortgage Loans
under all servicing contracts pledged from time to time as collateral security
under the Servicing Secured Credit Agreement and the "Security Agreement" in
connection therewith.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as the same may from time to time be supplemented or amended.
"ERISA Affiliate" shall mean, with respect to any Person, any trade or
---------------
business (whether or not incorporated) that is a member of the group of which
such Person is a member and which is treated as a single employer under Section
414 of the Code and the rules and regulations thereunder in effect from time to
time.
"Eurodollar Business Day" shall mean a Business Day on which
-----------------------
commercial banks in London, England are open for domestic and international
business.
"Eurodollar Interest Period" shall mean with respect to any Eurodollar
--------------------------
Loan, the period commencing on the date advanced and ending fourteen days, one
month, two months or three months thereafter, as designated in the related Loan
Request; provided, however, that (a) any Eurodollar Interest Period which would
otherwise end on a day which is not a Eurodollar Business Day shall be extended
to the next succeeding Eurodollar Business Day unless by such extension it would
fall in another calendar month, in which case such Eurodollar Interest Period
shall end on the immediately preceding Eurodollar Business Day; (b) any one-
month, two-month or three-month Eurodollar Interest Period which begins on a day
for which there is no numerically corresponding day in the calendar month during
which such Eurodollar Interest Period is to end shall, subject to the provisions
of clause (a) hereof, end on the last day of such calendar month; and (c) no
Eurodollar Interest Period shall extend beyond the Maturity Date.
"Eurodollar Loans" shall mean Tranche A Loans during such time as they
----------------
are being maintained at a rate of interest based upon the Eurodollar Rate.
"Eurodollar Rate" shall mean: (a) with respect to any fourteen-day
---------------
Eurodollar Interest Period, the rate determined by the Administrative Agent as
the rate at which deposits in immediately available U.S. dollars in an amount
equal to the aggregate amount of Eurodollar Loans proposed to be subject to such
rate having a maturity approximately equal to such Eurodollar Interest Period
are offered by FNBC to first-class banks in the interbank market at or about
10:00 a.m. (Chicago time) two Eurodollar Business Days prior to the first day of
such Eurodollar Interest Period, for delivery on the first day of such
Eurodollar Interest Period, or (b)
64
with respect to any one-month, two-month or three-month Eurodollar Interest
Period, the rate at which deposits in immediately available U.S. dollars in an
amount equal to the aggregate amount of Eurodollar Loans proposed to be subject
to such rate and having a maturity approximately equal to such Eurodollar
Interest Period are offered by FNBC to first-class banks in the London interbank
market at approximately 11:00 a.m. (London time) two Eurodollar Business Days
prior to the first day of such Eurodollar Interest Period, for delivery on the
first day of such Eurodollar Interest Period.
"Eurodollar Reserve Percentage" shall mean for any day, that
-----------------------------
percentage, expressed as a decimal, which is in effect on such day, as specified
by the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed on eurocurrency
liabilities.
"Eurodollar Spread" shall mean three-quarters of one percent (0.75%).
-----------------
"Event of Default" shall have the meaning set forth in Paragraph 13
----------------
above.
"Existing Credit Agreement" shall have the meaning given such term in
-------------------------
Recital A above.
"Existing Security Agreement" shall have the meaning given such term
---------------------------
in Paragraph 8(a) above.
"Fair Market Value" shall mean at any date with respect to any
-----------------
Mortgage Loan, the market price for thirty (30) day mandatory future delivery of
such Mortgage Loan quoted by Telerate or, if not so quoted, the bid price quoted
in writing to the Administrative Agent as of the computation date by any two
nationally recognized dealers selected by the Administrative Agent who at the
time are making a market in similar Mortgage Loans, multiplied, in any case, by
the par amount thereof.
"Fair Market Value of the Borrowing Base" shall mean at any date (a)
---------------------------------------
the sum of the Fair Market Values of all Eligible Mortgage Loans included in the
Borrowing Base at such date, plus (b) without duplication, the total dollar
amount of cash in the Settlement Account being held as cash collateral pursuant
to Paragraph 7(k)(1) above.
"Federal Funds Funding Rate" shall mean for any Federal Funds Rate
--------------------------
Loan on any day such Federal Funds Rate Loan is outstanding, 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. (Chicago 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, received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
65
"Federal Funds Pricing Spread" shall mean: (a) for any Tranche A Loan
----------------------------
maintained as a Federal Funds Rate Loan, seven-eighths of one percent (0.875%),
and (b) for any Tranche D Loan, one-half of one percent (0.50%).
"Federal Funds Rate Loans" shall mean Tranche A Loans and Tranche D
------------------------
Loans during such time as they are being maintained at the Applicable Federal
Funds Rate.
"FHA" shall mean the Federal Housing Administration and any successor
---
agency.
"FHLMC" shall mean the Federal Home Loan Mortgage Corporation and any
-----
successor agency.
"FHLMC Custodial Agreement" shall mean the agreement, as amended,
-------------------------
modified or supplemented from time to time, among FHLMC, the Company and any
Person meeting the eligibility requirements set forth in the FHLMC Guide to
serve as a "custodian," as such term is used in the FHLMC Guide, pursuant to
which such Person is authorized to act as a Certificating Custodian.
"FHLMC Guide" shall mean the "Sellers & Servicers' Guide" published by
-----------
FHLMC, as amended, modified or supplemented from time to time.
"FNBC" shall have the meaning given such term in the introductory
----
paragraph hereof.
"FNMA" shall mean the Federal National Mortgage Association and any
----
successor agency.
"FNMA Custodial Agreement" shall mean the agreement, as amended,
------------------------
modified or supplemented from time to time, among FNMA, the Company and any
Person meeting the eligibility requirements set forth in the FNMA Guide to serve
as a "document custodian," as such term is used in the FNMA Guide, pursuant to
which such Person is authorized to act as a Certificating Custodian.
"FNMA Guide" shall mean, collectively, the "Selling Guide" and the
----------
"Servicing Guide" published by FNMA, as amended, modified or supplemented from
time to time.
"Funding Account" shall mean Account No. 5268192 maintained in the
---------------
Company's name alone with the Administrative Agent at its office at One First
National Plaza, Chicago, Illinois 60670.
"Funding Check" shall mean a check issued by or on behalf of the
-------------
Company the proceeds of which will be used to close the origination of a
Mortgage Loan designated for inclusion in the Borrowing Base and which check has
not been presented for payment and cleared.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America in effect from time to time.
66
"Gestation Certificate" shall have the meaning given such term in
---------------------
Paragraph 2(b) of the Security Agreement.
"GNMA" shall mean the Government National Mortgage Association and any
----
successor agency.
"GNMA Custodial Agreement" shall mean the agreement, as amended,
------------------------
modified or supplemented from time to time, among GNMA, the Company and any
Person meeting the eligibility requirements set forth in the GNMA Guide to serve
as a "certificating custodian," as such term is used in the GNMA Guide, pursuant
to which such Person is authorized to act as a Certificating Custodian.
"GNMA Guide" shall mean, collectively, the "GNMA I Mortgage-Backed
----------
Securities Guide" and the "GNMA II Mortgage-Backed Securities Guide" published
by HUD, as amended, modified or supplemented from time to time.
"Governmental Authority" shall mean any nation or government, any
----------------------
state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hedge Contract" shall mean a bona fide, existing contract to buy or
--------------
sell an instrument on the futures market, the options market or the forward
mortgage-backed securities market or an option or financial future purchased
over the counter for future delivery of such instrument, each of the above
issued in accordance with the requirements of a Hedging Program.
"Hedging Program" shall mean a program for hedging interest rate risks
---------------
of the Company, which program shall provide, without limitation, that all Hedge
Contracts will be placed with futures commission merchants or clearing houses,
if applicable, with whom the Company has written, assignable agreements.
"HMSI" shall mean Headlands Mortgage Securities, Inc., a Delaware
----
corporation.
"HUD" shall mean the Department of Housing and Urban Development and
---
any successor thereto.
"Increasing Lender" shall have the meaning given such term in
-----------------
Paragraph 15(k) above.
"Indebtedness" of any Person shall mean all items of indebtedness
------------
which, in accordance with GAAP and practices, would be included in determining
liabilities as shown on the liability side of a statement of condition of such
Person as of the date as of which indebtedness is to be determined, including,
without limitation, all obligations for money borrowed and capitalized lease
obligations, and shall also include all indebtedness and liabilities of others
assumed or guaranteed by such Person or in respect of which such Person is
secondarily or contingently liable (other than by endorsement of instruments in
the course of collection)
67
whether by reason of any agreement to acquire such indebtedness or to supply or
advance sums or otherwise.
"Interim Date" shall mean July 31, 1997.
------------
"Lender" shall have the meaning given such term in the introductory
------
paragraph hereof.
"Lien" shall mean any security interest, mortgage, pledge, lien, claim
----
on property, charge or encumbrance (including any conditional sale or other
title retention agreement), any lease in the nature thereof, and the filing of
or agreement to give any financing statement under the Uniform Commercial Code
of any jurisdiction.
"Loan" shall mean a Tranche A Loan, Tranche B Loan, Tranche C Loan,
----
Tranche D Loan or Tranche E Loan, as applicable, and "Loans" shall mean all such
-----
Loans, collectively and severally.
"Loan-to-Value Ratio" shall mean:
-------------------
(a) With respect to any Mortgage Loan other than an Eligible HELOC
Asset or an Eligible Manufactured Housing Mortgage Loan, the ratio of the
principal amount of said Mortgage Loan outstanding at the date of origination
thereof divided by (1) the lesser of (i) the most recent selling price of the
related Property, and (ii) the appraised value of the related Property, or (2)
in the case of a Mortgage Loan which constitutes a refinancing of an existing
Mortgage Loan on the related Property, the appraised value of the related
Property;
(b) With respect to any Mortgage Loan which is an Eligible HELOC
Asset, the ratio of the face amount of the promissory note underlying said
Mortgage Loan (plus, in the case of a Mortgage Loan secured by a second priority
deed of trust (or mortgage), the principal amount outstanding at such date under
the first Mortgage Loan affecting the related Property), divided by the lesser
of: (1) the most recent selling price of the related Property, and (2) the
appraised value of the related Property; and
(c) With respect to any Mortgage Loan which is an Eligible
Manufactured Housing Mortgage Loan, the ratio of the face amount of the
promissory note underlying said Mortgage Loan, divided by the lesser of: (1) the
sum of the most recent selling price of the related Property and all costs and
expenses necessary to acquire, construct and permanently affix the related
Manufactured Home to such Property, and (2) the projected appraised value of the
related Property after the related Manufactured Home has been completed and
permanently affixed to such Property, as determined and utilized by the Company
in underwriting said Mortgage Loan.
"Loan Documents" shall mean this Agreement, the Notes, the Security
--------------
Agreement, the Pledge Agreement and each other document, instrument or agreement
executed by the Company in connection herewith or therewith, as any of the same
may be amended, extended or replaced from time to time.
68
"Loan Request" shall mean a request in form acceptable to the
------------
Administrative Agent for a Loan which is conveyed to the Administrative Agent by
telephone or telefax from a duly authorized officer of the Company, with such
request to be confirmed in writing upon the request of the Administrative Agent.
"Majority Lenders" shall mean: (a) prior to the occurrence of an
----------------
Event of Default and termination of the obligation of the Lenders to fund
additional Loans hereunder, the Lenders holding not less than sixty-six and two-
thirds percent (66.6666667%) of the Aggregate Percentage Shares, and (b)
thereafter, the Lenders holding not less than sixty-six and two-thirds percent
(66.6666667%) of Loans outstanding.
"Manufactured Home" shall mean a structure, transportable in one or
-----------------
more sections, which is built on a permanent chassis and designed to be used as
a dwelling with a permanent foundation when affixed to real property and
connected to the required utilities, including, without limitation, plumbing and
electrical systems.
"Maturity Date" shall mean the earlier of: (a) November 4, 1998, as
-------------
such date may be extended from time to time in writing by one hundred percent
(100%) of the Lenders, in their sole discretion, and (b) the date the Lenders
terminate their obligation to make further Loans hereunder pursuant to Paragraph
13 above.
"Maximum Commitment" shall mean, with respect to any Lender, the
------------------
dollar amount agreed to in writing from time to time by the Company and such
Lender and specified as such Lender's "Maximum Commitment" in the most recent
Commitment Schedule and Allocation Notice delivered by the Administrative Agent
to the Lenders and the Company; provided, however, that no Lender's Maximum
Commitment may exceed a dollar amount which, when added to the Maximum
Commitments of all the Lenders, would exceed the maximum permitted Aggregate
Credit Limit.
"Maximum Tranche B Commitment" shall mean for any Tranche B Lender
----------------------------
that amount agreed to in writing from time to time by the Company and such
Tranche B Lender and specified as such Tranche B Lender's Maximum Tranche B
Commitment in the most recent Commitment Schedule and Allocation Notice
delivered by the Administrative Agent to the Lenders and the Company.
"Mortgage-Backed Security" shall mean (a) any security (including,
------------------------
without limitation, a participation certificate) guaranteed by GNMA that
represents an interest in a pool of mortgages, deeds of trusts or other
instruments creating a Lien on Property which is improved by a completed single
family residence, including but not limited to a condominium, planned unit
development or townhouse, (b) a security (including a participation certificate)
issued by FNMA or FHLMC that represent interests in such a pool, and (c) a
privately-placed security representing undivided interests in or otherwise
supported by such a pool.
"Mortgage Loan" shall mean a residential real estate secured loan,
-------------
including, without limitation: (a) a promissory note, any reformation thereof
and related deed of trust (or mortgage) and/or security agreement; (b) all
guaranties and insurance policies, including, without
69
limitation, all mortgage and title insurance policies and all fire and extended
coverage insurance policies and rights of the Company to return premiums or
payments with respect thereto; and (c) all right, title and interest of the
Company in the Property covered by said deed of trust (or mortgage).
"Multiemployer Plan" shall mean, as to the Company or any of its ERISA
------------------
Affiliates, a Plan of such Person which is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"No-Equity Mortgage Loan" shall mean an Eligible Conforming Mortgage
-----------------------
Loan, or an Eligible Non-Conforming Mortgage Loan, which in each case (a) is
secured by a first priority deed of trust, (b) has a Loan-to-Value Ratio in
excess of ninety-five percent (95%) and less than or equal to one hundred
percent (100%), (c) is subject to a Take-Out Commitment by any Approved
Investor, and (d) has not been included in the Borrowing Base for more than
sixty (60) days; provided, however, that the aggregate Unit Collateral Values of
all No-Equity Mortgage Loans included in the Borrowing Base at any time does not
exceed ten percent (10%) of the Aggregate Credit Limit.
"Notes" shall mean any of the Tranche A Notes, the Tranche B Notes,
-----
the Tranche C Note, the Tranche D Notes and/or the Tranche E Notes.
"Obligations" shall mean any and all debts, obligations and
-----------
liabilities of the Company to the Administrative Agent, the Collateral Agent and
the Lenders (whether now existing or hereafter arising, voluntary or
involuntary, whether or not jointly owed with others, direct or indirect,
absolute or contingent, liquidated or unliquidated, and whether or not from time
to time decreased or extinguished and later increased, created or incurred),
arising out of or related to the Loan Documents.
"Obligor" shall mean the Person or Persons obligated to pay the
-------
Indebtedness which is the subject of a Mortgage Loan.
"Operating Account" shall mean Account No. 5240204 maintained in the
-----------------
Company's name alone with the Administrative Agent at its office at One First
National Plaza, Chicago, Illinois 60670.
"Outstanding Percentage Share" shall mean, for any Lender at any date,
----------------------------
that percentage which the dollar amount of Loans outstanding held by such Lender
bears to the aggregate dollar amount of Loans outstanding held by all the
Lenders.
"Overnight Transaction Loan Rate" shall mean for any Tranche C Loan on
-------------------------------
any day such Tranche C Loan is outstanding the rate per annum determined by the
Administrative Agent for such day to be its overnight transaction loan rate plus
one percent (1.00%).
"Participant" shall have the meaning given such term in Paragraph
-----------
15(i) above.
70
"Paul Subordinated Debt" shall mean that Indebtedness of the Company
----------------------
described in Paragraph 5 of the schedule of Permitted Other Debt.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA and any successor thereto.
"Permitted Investments" shall mean those investments of the Company
---------------------
described on Exhibit M attached hereto.
---------
"Permitted Other Debt" shall mean that Indebtedness of the Company
--------------------
described as "Permitted Other Debt" on Exhibit N attached hereto.
---------
"Permitted Other Secured Debt" shall mean that Indebtedness which is
----------------------------
the subject of a Lien and described as "Permitted Other Secured Debt" on Exhibit
-------
N attached hereto.
- -
"Person" shall mean any corporation, natural person, firm, joint
------
venture, limited liability company, partnership, trust, unincorporated
organization or Governmental Authority.
"Plan" shall mean, as to the Company or any of its ERISA Affiliates,
----
any pension plan that is covered by Title IV of ERISA and in respect of which
such Person or a Commonly Controlled Entity of such Person is an "employer" as
defined in Section 3(5) of ERISA.
"Pledge Agreement" shall have the meaning given such term in Paragraph
----------------
8(b) above.
"Pledged Collateral" shall mean the collateral which is the subject of
------------------
the Pledge Agreement.
"Potential Default" shall mean an event which but for the lapse of
-----------------
time or the giving of notice, or both, would constitute an Event of Default.
"Pre-Disbursement Account" shall mean DCS Clearing Account No. 247165
------------------------
maintained in the Administrative Agent's name with FNBC at its office at One
First National Plaza, Chicago, Illinois 60670.
"Pre-Tax Income" shall mean for any period the positive consolidated
--------------
net income of the Company for such period, determined in accordance with the
methodology described on Schedule V.
----------
"Primary Loan" shall mean a Tranche A Loan, Tranche B Loan, Tranche C
------------
Loan or Tranche D Loan, as applicable, and "Primary Loans" shall mean all such
-------------
Primary Loans, collectively and severally.
"Proceeds" shall mean whatever is receivable or received when
--------
Collateral or proceeds are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes, without
limitation, all rights to payment, including return premiums, with respect to
any insurance relating thereto.
71
"Property" shall mean the real property, including the improvements
--------
thereon, and the personal property (tangible and intangible) which are
encumbered pursuant to a Mortgage Loan.
"Quoted Market Value" shall mean with respect to each of the Eligible
-------------------
Servicing Portfolio and the Encumbered Eligible Servicing Portfolio, at any
date, the value of such Eligible Servicing Portfolio or Encumbered Eligible
Servicing Portfolio, as applicable, as determined by an independent consulting
firm acceptable to the Administrative Agent and set forth in a Servicing
Contract Report. If, at any time, the value of such Eligible Servicing
Portfolio or Encumbered Eligible Servicing Portfolio, as applicable, is
expressed in terms of a range of values, the Quoted Market Value thereof shall
be equal to the weighted average of the values quoted.
"Regulation U" shall mean Regulation U of the Board of Governors of
------------
the Federal Reserve System (12 C.F.R. (S) 221), as the same may from time to
time be amended, supplemented or superseded.
"Reportable Event" shall mean a reportable event as defined in Title
----------------
IV of ERISA, except actions of general applicability by the Secretary of Labor
under Section 110 of ERISA.
"Requested Loans" shall have the meaning given such term in Paragraph
---------------
7(k)(l)(i) above.
"Required Documents" shall have the meaning given such term in
------------------
subparagraph (q) of the definition of "Eligible Mortgage Loan".
"Required Manufactured Housing Mortgage Loan Disbursement" shall mean
--------------------------------------------------------
for any Eligible Manufactured Housing Mortgage Loan that amount which the
Company is required to disburse relating to said Mortgage Loan prior to
submitting said Mortgage Loan for inclusion in the Borrowing Base. The amount
of the Required Manufactured Housing Mortgage Loan Disbursement shall be ten
percent (10%) of the face amount of the promissory note underlying said Mortgage
Loan.
"Requirements of Law" shall mean, as to any Person, the Articles or
-------------------
Certificate of Incorporation and Bylaws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or a final
and binding determination of an arbitrator or a determination of a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Secured Parties" shall have the meaning given such term in Paragraph
---------------
1 of the Security Agreement.
"Secured Obligations" shall have the meaning given such term in
-------------------
Paragraph 2 of the Pledge Agreement.
72
"Security Agreement" shall have the meaning given such term in
------------------
Paragraph 8(a) above.
"Servicing Contract Report" shall mean a report in form acceptable to
-------------------------
the Administrative Agent setting forth the Quoted Market Value of each of the
Eligible Servicing Portfolio and the Encumbered Eligible Servicing Portfolio.
"Servicing Secured Credit Agreement" shall mean that certain Amended
----------------------------------
and Restated Servicing Secured Credit Agreement dated as of August 29, 1997 by
and among the Company, FNBC as "Administrative Agent" and others Lenders party
thereto, as such agreement may be amended from time to time.
"Settlement Account" shall mean Account No. 1919113 maintained with
------------------
the Administrative Agent at its office at One First National Plaza, Chicago,
Illinois 60670.
"Single Employer Plan" shall mean, as to the Company or any of its
--------------------
ERISA Affiliates, any Plan of such Person which is not a Multiemployer Plan.
"Statement Date" shall mean December 31, 1996.
--------------
"Stock Pledge Documents" shall have the meaning given such term in
----------------------
Paragraph 8(b) above.
"Subordinated Debt" shall mean all Indebtedness of the Company and its
-----------------
Subsidiaries which is expressly subordinated to the Obligations in the manner
and to the extent required by the Lenders pursuant to written subordination
agreements satisfactory in form and substance to the Lenders.
"Subsidiary" shall mean any corporation, partnership or joint venture
----------
more than fifty percent (50%) of the stock or other ownership interest of which
having by the terms thereof ordinary voting power to elect the board of
directors, managers or trustees of such corporation, partnership or joint
venture (irrespective of whether or not at the time stock of any other class or
classes of such corporation, partnership or joint venture shall have or might
have voting power by reason of the happening of any contingency) shall, at the
time as of which any determination is being made, be owned, either directly or
through Subsidiaries.
"Take-Out Commitment" with respect to any Mortgage Loan shall mean a
-------------------
bona fide current, unused and unexpired forward sale whole loan commitment or
forward sale Mortgage-Backed Security commitment issued by an Approved Investor
of in favor of and held by the Company, and any related delivery commitments, if
applicable, under which said Approved Investor agrees, prior to the expiration
thereof, upon the satisfaction of certain terms and conditions therein, to
provide for the purchase of such Mortgage Loan or related Mortgage-Backed
Security or to purchase such Mortgage Loan or related Mortgage-Backed Security
at a specified price, which commitment is not subject to any term or condition
which is not customary in commitments of like nature or which, in the reasonably
anticipated course of events, cannot be fully complied with prior to the
expiration thereof.
73
"Total Liabilities" shall mean at any date consolidated total
-----------------
liabilities of the Company and its Subsidiaries less the amount of any
Subordinated Debt, determined in accordance with GAAP.
"Tranche" shall mean the Loans made under the Tranche A Credit Limit,
-------
the Tranche B Aggregate Credit Allocation, the Tranche C Credit Limit, the
Tranche D Credit Limit or the limitations pertinent to Tranche E Loans, as
applicable.
"Tranche A Commitment" shall mean, for any Tranche A Lender, the
--------------------
dollar amount set forth next to the name of such Lender on the most recent
Commitment Schedule and Allocation Notice delivered by the Administrative Agent
to the Lenders and the Company.
"Tranche A Credit Limit" shall mean at any date the Aggregate Credit
----------------------
Limit minus the sum of (a) the Tranche B Aggregate Credit Allocation and (b) the
Tranche C Credit Limit.
"Tranche A Lender" shall mean any Lender designated as such in
----------------
Schedule II attached hereto and any Applicant Financial Institution which shall
- -----------
become a Tranche A Lender hereunder.
"Tranche A Loan" shall have the meaning given such term in Paragraph
--------------
1(a) above.
"Tranche A Notes" shall have the meaning given such term in Paragraph
---------------
7(c) above.
"Tranche A Percentage Share" shall mean at any date with respect to
--------------------------
each Tranche A Lender the ratio, expressed as a percentage, which (a) such
Lender's Tranche A Commitment bears to (b) the Tranche A Credit Limit.
"Tranche B Aggregate Credit Allocation" shall mean at any date the sum
-------------------------------------
of the Tranche B Allocations on such date; provided that in no event shall the
sum of the Tranche B Allocations at any date exceed $50,000,000.00.
"Tranche B Allocation" shall mean for any Tranche B Lender during any
--------------------
calendar month, the lesser of: (a) that amount specified as such for such
Tranche B Lender in the applicable Commitment Schedule and Allocation Notice
delivered pursuant to Paragraph 2(e) above effective for such calendar month,
and (b) such Tranche B Lender's Maximum Tranche B Commitment; provided that no
Tranche B Lender may have a Tranche B Allocation which, when added to the
Tranche B Allocations of all other Tranche B Lenders, would exceed the Tranche B
Aggregate Credit Allocation.
"Tranche B Borrowing Date" shall mean the first day of each Tranche B
------------------------
Interest Period during the term of this Agreement with the initial Tranche B
Borrowing Date being the Effective Date.
74
"Tranche B Interest Period" shall mean the period commencing on each
-------------------------
Tranche B Borrowing Date and ending one month thereafter, with Tranche B
Interest Periods to be continuous and without interruption throughout the term
of this Agreement; provided, however, that (a) any Tranche B Interest Period
which begins on a day for which there is no numerically corresponding day in the
calendar month during which such Tranche B Interest Period is to end shall end
on the last day of such calendar month; (b) no Tranche B Interest Period shall
extend beyond the Maturity Date; and (c) if the Effective Date is not the first
day of a calendar month, the last day of the initial Tranche B Interest Period
shall be that date which it would have been had the first day of such initial
Tranche B Interest Period been the first day of the calendar month following the
Effective Date.
"Tranche B Lender" shall mean any Lender designated as such on
----------------
Schedule II attached hereto and any Applicant Financial Institution which shall
- -----------
become a Tranche B Lender hereunder.
"Tranche B Loan" shall have the meaning given such term in Paragraph
--------------
2(a) above.
"Tranche B Notes" shall have the meaning given such term in Paragraph
---------------
7(c) above.
"Tranche B Percentage Share" shall mean for any Tranche B Lender at
--------------------------
any date the ratio, expressed as a percentage, which such Tranche B Lender's
Tranche B Allocation bears to the Tranche B Aggregate Credit Allocation.
"Tranche C Credit Limit" shall mean $20,000,000.00, as such amount may
----------------------
be increased or decreased by written agreement of FNBC and the Company.
"Tranche C Lender" shall mean FNBC.
----------------
"Tranche C Loans" shall have the meaning given such term in Paragraph
---------------
3(a) above.
"Tranche C Note" shall have the meaning given such term in Paragraph
--------------
7(c) above.
"Tranche D Commitment" shall mean, for any Tranche D Lender, the
--------------------
dollar amount set forth next to the name of such Lender on the most recent
Commitment Schedule and Allocation Notice delivered by the Administrative Agent
to the Lenders and the Company.
"Tranche D Credit Limit" shall mean the sum of the Tranche D
----------------------
Commitments of all the Tranche D Lenders, as set forth in the most recent
Commitment Schedule and Allocation Notice delivered by the Administrative Agent
to the Lenders and the Company.
75
"Tranche D Lender" shall mean any Lender designated as such in
----------------
Schedule II attached hereto and any Applicant Financial Institution which shall
- -----------
become a Tranche D Lender hereunder.
"Tranche D Loan" shall have the meaning given such term in Paragraph
--------------
4(a) above.
"Tranche D Notes" shall have the meaning given such term in Paragraph
---------------
7(c) above.
"Tranche D Obligations" shall mean any and all debts, obligations and
---------------------
liabilities of the Company to the Administrative Agent, the Collateral Agent and
the Lenders (whether now existing or hereafter arising, voluntary or
involuntary, whether or not jointly owed with others, direct or indirect,
absolute or contingent, liquidated or unliquidated, and whether or not from time
to time decreased or extinguished and later increased, created or incurred),
arising out of or related to the Tranche D Loans, including but not limited to
principal, interest, fees, premiums and other charges due in connection
therewith.
"Tranche D Percentage Share" shall mean for any Tranche D Lender at
--------------------------
any date the ratio, expressed as a percentage, which (a) such Lender's Tranche D
Commitment bears to (b) the Tranche D Credit Limit.
"Tranche E Interest Period" shall mean as to any Tranche E Loan the
-------------------------
period of time from the date such Tranche E Loan is advanced until the principal
amount thereof is payable in full, as agreed by the Company and the Lender which
makes such Tranche E Loan; provided, however, that in no event shall any Tranche
E Interest Period be shorter than seven (7) days or longer than ninety (90) days
or extend beyond the Maturity Date.
"Tranche E Loan" shall have the meaning given such term in Paragraph
--------------
5(a) above.
"Tranche E Loan Rate" shall mean as to any Tranche E Loan such fixed
-------------------
rate per annum as the Company and the Lender which agreed to advance such
Tranche E Loan have agreed.
"Type" for any Mortgage Loan shall mean one of the following: an
----
Eligible Conforming Mortgage Loan, an Eligible Gestation Mortgage Loan, an
Eligible HELOC Asset, an Eligible Non-Agency Mortgage Loan, an Eligible Non-
Conforming Mortgage Loan, an Eligible Repurchase Mortgage Loan, an Eligible
Manufactured Housing Mortgage Loan, an Eligible Shipped Mortgage Loan, an
Eligible Waiver Mortgage Loan or an Eligible High LTV Mortgage Loan.
"Unit Collateral Value" shall mean, with respect to each Eligible
---------------------
Mortgage Loan, other than an Eligible HELOC Asset, calculated as of the date
such Eligible Mortgage Loan is first included in the Borrowing Base in its
current category, and with respect to each Eligible HELOC Asset, as of any date,
the sum of:
76
(a) If such Eligible Mortgage Loan is an Eligible Conforming Mortgage
Loan (other than a No-Equity Mortgage Loan), ninety-eight percent (98%) of the
least of: (1) the unpaid principal balance thereof, (2) the unpaid principal
balance thereof multiplied by the Current Weighted Average Take-Out Price, and
(3) the acquisition price thereof (minus any discount and rebate points and
minus any servicing released premium) or origination cost thereof.
(b) If such Eligible Mortgage Loan is an Eligible Shipped Mortgage
Loan, ninety-eight percent (98%) of the Take-Out Commitment covering such
Mortgage Loan, and if such Eligible Mortgage Loan is an Eligible Gestation
Mortgage Loan, ninety-nine percent (99%) of the purchase price under the Take-
Out Commitment covering such Mortgage Loan.
(c) If such Eligible Mortgage Loan is an Eligible Non-Conforming
Mortgage Loan (other than a No-Equity Mortgage Loan), ninety-seven percent (97%)
of the least of: (1) the unpaid principal balance thereof, (2) the unpaid
principal balance thereof multiplied by the Current Weighted Average Take-Out
Price, and (3) the acquisition price thereof (minus any discount and rebate
points and minus any servicing released premium) or origination cost thereof;
(d) If such Eligible Mortgage Loan is a No-Equity Mortgage Loan,
eighty percent (80%) of the unpaid principal balance thereof.
(e) If such Eligible Mortgage Loan is an Eligible Non-Agency Mortgage
Loan that has been pre-approved by an Approved Non-Agency Investor or under its
delegated underwriting authority, ninety-seven percent (97%) of the least of:
(1) the unpaid principal balance thereof, (2) the unpaid principal balance
thereof multiplied by the Current Weighted Average Take-Out Price, and (3) the
acquisition price thereof (minus any discount and rebate points and minus any
servicing released premium) or origination cost thereof.
(f) If such Eligible Mortgage Loan is an Eligible Repurchase Mortgage
Loan, eighty percent (80%) of the least of: (1) the unpaid principal balance
thereof, (2) the unpaid principal balance thereof multiplied by the Current
Weighted Average Take-Out Price, and (3) the acquisition price thereof (minus
any discount and rebate points and minus any servicing released premium) or
origination cost thereof.
(g) If such Eligible Mortgage Loan is an Eligible HELOC Asset with a
Loan-to-Value Ratio equal to or less than ninety percent (90%), the lesser of:
(1) $200,000.00, and
(2) Ninety-six percent (96%) of the lesser of: (i) the
outstanding principal balance of said Mortgage Loan as of a given date, and
(ii) if the Take-Out Commitment for said Mortgage Loan constitutes a
delivery commitment, the purchase price under such Take-Out Commitment as
of such date.
77
(h) If such Eligible Mortgage Loan is an Eligible HELOC Asset with a
Loan-to-Value Ratio greater than ninety percent (90%), the lesser of:
(1) $200,000.00, and
(2) Ninety-five percent (95%) of the lesser of: (i) the
outstanding principal balance of said Mortgage Loan as of a given date, and
(ii) if the Take-Out Commitment for said Mortgage Loan constitutes a
delivery commitment, the purchase price under such Take-Out Commitment as
of such date.
(i) If such Eligible Mortgage Loan is an Eligible Manufactured
Housing Mortgage Loan, (1) the outstanding principal balance of said Mortgage
Loan, plus (2) the dollar amount of any Loan requested by the Company on such
date the proceeds of which Loan shall be utilized to make a progress or
construction payment relating to said Mortgage Loan, minus (3) the Required
Manufactured Housing Mortgage Loan Disbursement relating to said Mortgage Loan.
(j) If such Eligible Mortgage Loan is an Eligible High LTV Mortgage
Loan, ninety percent (90%) of the lesser of (1) the unpaid principal balance of
said Mortgage Loan, (2) the Current Weighted Average Take-Out Price and (3) the
origination cost thereof.
"VA" shall mean the Veterans Administration and any successor agency.
--
"Warehouse Related MBS" shall have the meaning given such term in
---------------------
Paragraph 6(b)(2) of the Security Agreement.
"Weighted Average Take-Out Price" shall mean, in each case, the
-------------------------------
weighted average reflected as a percentage (which percentage shall not exceed
one hundred percent (100%)) of the unfilled purchase price (net of commitment
fees) of all Take-Out Commitments held by the Company and applicable to each of
the following types of Mortgage Loans (determined separately with respect to
each type): (a) all Eligible Conforming Mortgage Loans secured by a first
priority deed of trust, (b) all Eligible Non-Conforming Mortgage Loans, (c) all
78
Eligible Non-Agency Mortgage Loans, (d) all Eligible Repurchase Mortgage Loans
and (e) all Eligible High LTV Mortgage Loans.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
HEADLANDS MORTGAGE COMPANY,
a California corporation
By_______________________________________
Name_____________________________________
Title____________________________________
THE FIRST NATIONAL BANK OF CHICAGO, a
national bank association, as
Administrative Agent and a Lender
By_______________________________________
Name_____________________________________
Title____________________________________
FIRST CHICAGO NATIONAL PROCESSING
CORPORATION, a Delaware corporation,
as Collateral Agent
By_______________________________________
Name_____________________________________
Title:___________________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association,
as a Lender
By_______________________________________
Name_____________________________________
Title____________________________________
79
GUARANTY FEDERAL BANK, F.S.B., a federal
savings bank, as a Lender
By ______________________________________
Name ____________________________________
Title ___________________________________
FIRST UNION NATIONAL BANK, a national
banking association, as a Lender
By_______________________________________
Name_____________________________________
Title____________________________________
THE BANK OF NEW YORK, a banking corporation
organized under the laws of the State of
New York, as a Lender
By_______________________________________
Name_____________________________________
Title____________________________________
COMERICA BANK-CALIFORNIA, a California
banking corporation, as a Lender
By_______________________________________
Name_____________________________________
Title____________________________________
80
LIST OF SCHEDULES AND EXHIBITS
------------------------------
Schedule I Schedule of Addresses, Etc.
Schedule II Schedule of Acceptable Manufactured Housing States
Schedule III Schedule of Acceptable States
Schedule IV Commitment Schedule and Allocation Notice as of Effective Date
Schedule V Methodology for Computation of Pre-Tax Income
Exhibit A-1 Form of Tranche A Note
Exhibit A-2 Form of Tranche B Note
Exhibit A-3 Form of Tranche C Note
Exhibit A-4 Form of Tranche D Note
Exhibit A-5 Form of Tranche E Note
Exhibit B Form of Security Agreement
Exhibit C Form of Pledge Agreement
Exhibit D Form of Officer's Certificate
Exhibit E Litigation Schedule
Exhibit F List of Subsidiaries
Exhibit G Form of Compliance Certificate
Exhibit H Form of Additional Lender Agreement
Exhibit I Form of Borrowing Base Certificate
Exhibit J Schedule of Required Documents
81
Exhibit K Form of Collateral Confirmation Agreement
Exhibit L Schedule of Additional Required Documents
Exhibit M Schedule of Permitted Investments
Exhibit N Schedule of Permitted Other Debt and Permitted Other Secured Debt
FIRST AMENDMENT TO AMENDED AND RESTATED
MORTGAGE LOAN WAREHOUSING AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED MORTGAGE LOAN WAREHOUSING
AGREEMENT (the "Amendment") is made and dated as of the 4/th/ day of November,
1997, by and among THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association ("FNBC"), BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a
national banking association, THE BANK OF NEW YORK, a banking corporation
organized under the laws of the State of New York, COMERICA BANK - CALIFORNIA, a
California banking corporation, FIRST UNION NATIONAL BANK, a national banking
association, and GUARANTY FEDERAL BANK, a federal savings bank (all of the above
individually a "Lender" and, collectively, the "Lenders"), FNBC, as
administrative agent for the Lenders (in such capacity, the "Administrative
Agent"), FIRST CHICAGO NATIONAL PROCESSING ASSOCIATION, a Delaware corporation,
as collateral agent for the Administrative Agent and the Lenders (in such
capacity, the "Collateral Agent"), and HEADLANDS MORTGAGE COMPANY, a California
corporation (the "Company").
RECITALS
A. Pursuant to that certain Amended and Restated Mortgage Loan
Warehousing Agreement dated as of August 29, 1997 among the Administrative
Agent, the Collateral Agent, the Lenders and the Company (the "Agreement"), the
Lenders agreed to extend credit to the Company on the terms and subject to the
conditions set forth therein. All capitalized terms not otherwise defined
herein shall have the meanings given to such terms in the Agreement.
B. The Company and the Lenders desire to amend certain provisions of the
Agreement as more particularly described below.
NOW, THEREFORE, in consideration of the foregoing Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Extension of Maturity Date. To reflect the agreement of the parties
--------------------------
hereto to extend the term of the credit facility evidenced by the Agreement,
effective as of the Effective Date (as defined in Paragraph 8 below),
subparagraph (a) of the definition of "Maturity Date" set forth in Paragraph 16
of the Agreement is hereby amended to delete the date "November 4, 1998" set
forth therein and to replace the same with the date "November 4, 1999".
2. Increase in Credit Limit. To reflect the agreement of the Lenders to
------------------------
increase the dollar amount of credit available to the Company under the
Agreement, effective as of the Effective Date:
1
(a) The definition of "Aggregate Credit Limit" set forth in Paragraph
16 of the Agreement is hereby amended to delete the dollar amount
"$185,000,000.00" set forth in line 4 thereof and to replace the same with the
dollar amount "$215,000,000.00".
(b) The current Commitment Schedule and Allocation Notice in effect
immediately prior to the Effective Date shall be amended and replaced with the
Commitment Schedule and Allocation Notice attached hereto as Amendment Schedule
------------------
I.
- -
3. Addition of New Type of Collateral; Modification of Collateral
--------------------------------------------------------------
Eligibility Requirements. To reflect the agreement of the parties hereto to
- ------------------------
include a new Type of Eligible Mortgage Loan in the calculation of the
Collateral Value of the Borrowing Base and to modify certain eligibility
requirements applicable to Eligible Non-Conforming Mortgage Loans:
(a) A new definition of "Eligible A- Mortgage Loan" is hereby added,
in correct alphabetical order, to Paragraph 16 of the Agreement to read in its
entirety as follows:
"Eligible A- Mortgage Loan" shall mean a Mortgage Loan
-------------------------
with respect to which each of the following statements is
accurate and complete (and the Company by including said Mortgage
Loan in any computation of the Collateral Value of the Borrowing
Base shall be deemed to so represent to the Administrative Agent,
the Collateral Agent and the Lenders at and as of the date of
such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan;
(b) The Unit Collateral Value of said Mortgage Loan,
when added to the Unit Collateral Values of all other Eligible A-
Mortgage Loans included in the computation of the Collateral
Value of the Borrowing Base, does not exceed five percent (5%) of
the Aggregate Credit Limit;
(c) Said Mortgage Loan is secured by a first priority
deed of trust (or mortgage) on the related Property;
(d) The Obligor on said Mortgage Loan had a FICO score
of not less than 575;
(e) Said Mortgage Loan has not been included in the
Borrowing Base for more than ninety (90) days; and
(f) Said Mortgage Loan generally conforms to all
underwriting and other requirements of an Approved Investor.
(b) Subparagraph (v) of the definition of "Eligible Mortgage Loan" is
hereby amended to add the following proviso immediately following the semi-colon
and preceding the word "and" in the last line thereof:
2
"provided, however, that: (y) in the event said Mortgage Loan is an
Eligible Non-Conforming Loan which otherwise complies with all requirements
of an Eligible Non-Conforming Mortgage Loan, said Mortgage Loan may have a
Loan-to-Value Ratio of up to eighty-five percent (85%) notwithstanding that
it is not covered by a policy of private mortgage insurance as otherwise
required pursuant to this subparagraph (v) so long as the Unit Collateral
Value of said Mortgage Loan when added to the Unit Collateral Values of all
other Eligible Non-Conforming Mortgage Loans with a Loan-to-Value Ratio in
excess of eighty percent (80%) which are not covered by private mortgage
insurance does not exceed five percent (5%) of the Aggregate Credit Limit,
and (z) if said Mortgage Loan is an Eligible A- Mortgage Loan, the dollar
amount of said Mortgage Loan in excess of seventy percent (70%) of the
lesser of a. the most recent selling price of the related Property, and b.
- -
the appraised value of the related Property is covered by a policy of
private mortgage insurance acceptable to the Approved Investor issuing the
Take-Out Commitment for said Mortgage Loan;"
(c) Subparagraph (c) of the definition of "Unit Collateral Value" set
forth in Paragraph 16 of the Agreement is hereby amended to read in its entirety
as follows:
"(c) If such Eligible Mortgage Loan is an Eligible Non-Conforming
Mortgage Loan (other than a No-Equity Mortgage Loan), ninety-seven percent (97%)
(or if such Eligible Mortgage Loan has a Loan-to-Value Ratio in excess of eighty
percent (80%) and is not covered by private mortgage insurance, ninety-six
percent (96%)) of the least of: (1) the unpaid principal balance thereof, (2)
the unpaid principal balance thereof multiplied by the Current Weighted Average
Take-Out Price, and (3) the acquisition price thereof (minus any discount and
rebate points and minus any servicing released premium) or origination cost
thereof."
(d) A new subparagraph (k) is added to the definition of "Unit
Collateral Value" to read in its entirety as follows:
"(k) If such Eligible Mortgage Loan is an Eligible A- Mortgage
Loan, ninety five percent (95%) of the least of: (1) the unpaid principal
balance thereof, (2) the unpaid principal balance thereof multiplied by the
Current Weighted Average Take-Out Price, and (3) the origination cost
thereof."
(e) The definition of "Type" set forth in Paragraph 16 of the
Agreement is hereby amended to insert the phrase ", an Eligible A- Mortgage
Loan" immediately preceding the phrase "or an Eligible High LTV Mortgage Loan"
in the last line thereof.
(f) The definition of "Weighted Average Take-Out Price" set forth in
Paragraph 16 of the Agreement is hereby amended to add a new subparagraph (f) to
read as follows: ", and (f) all Eligible A-Mortgage Loans".
(g) The form of Borrowing Base Certificate attached to the Agreement
as Exhibit I is replaced by the form of Borrowing Base Certificate attached
---------
hereto as Replacement Exhibit I.
----------- ---------
3
4. Addition of Approved Repo Lender. Effective as of the Effective Date,
--------------------------------
the Lenders hereby approve C.S. First Boston as an additional Approved Repo
Lender for all purposes of the Agreement.
5. Permitted Secured Other Debt. To reflect the agreement of the parties
----------------------------
to permit the maximum aggregate amount of Indebtedness owed under repurchase
agreements and gestation repurchase credit facilities entered into by the
Company from time to time to increase from $300,000,000.00 to $450,000,000.00,
effective as of the Effective Date Exhibit N to the Agreement is hereby replaced
---------
by Replacement Exhibit N attached hereto.
---------------------
6. Reaffirmation of Other Loan Documents. The Company hereby affirms and
-------------------------------------
agrees that (a) the execution and delivery by the Company of and the performance
of its obligations under this Amendment shall not in any way amend, impair,
invalidate or otherwise affect any of the obligations of the Company or the
rights of the Administrative Agent, the Collateral Agent or the Lenders under
the Agreement, the Security Agreement or any other Loan Document, (b) the term
"Obligations" as defined in Paragraph 16 of the Agreement includes, without
limitation, the Obligations of the Company under the Agreement as amended by
this Amendment, (c) the Security Agreement remains in full force and effect and
such agreement constitutes a continuing first priority security interest in and
lien upon the Collateral, and (d) for any and all purposes, any reference to the
Agreement following the effective date of this Amendment shall constitute a
reference to the Agreement as amended to date, including, without limitation, by
this Amendment.
7. Modification of Related Documents. All reports and other forms
---------------------------------
utilized in connection with the day-to-day operations of the credit facility
evidenced by the Agreement shall be deemed modified consistent with the
provisions of this Amendment.
8. Effective Date. This Amendment shall be effective (with such
--------------
effectiveness being retroactive to the day and year first above written) on the
earliest date (the "Effective Date") upon which the Administrative Agent has
received (a) duly executed copies of this Amendment from each of the Lenders,
the Administrative Agent, the Collateral Agent and the Company, and (b) such
board resolutions, incumbency certificates and other additional documentation as
the Administrative Agent may request in connection herewith.
9. Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Administrative Agent and the Lenders as follows:
(a) The Company has the corporate power and authority and the legal
right to execute, deliver and perform this Amendment and has taken all necessary
corporate action to authorize the execution, delivery and performance of this
Amendment. This Amendment has been duly executed and delivered on behalf of the
Company and constitutes the legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms. The execution,
delivery and performance of this Amendment will not violate any Requirement of
Law or Contractual Obligation or require any consent, approval or authorization
of, or registration, declaration or filing with, any Governmental Authority.
4
(b) At and as of the date of execution hereof and at and as of the
effective date of this Amendment and both prior to and after giving effect
hereto: (1) the representations and warranties of the Company contained in the
Loan Documents are accurate and complete in all respects, and (2) there has not
occurred an Event of Default or Potential Default.
10. No Other Amendment. Except as expressly amended herein, the Loan
------------------
Documents shall remain in full force and effect as currently written.
11. Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first above written.
HEADLANDS MORTGAGE COMPANY,
a California corporation
By_______________________________________
Name_____________________________________
Title____________________________________
THE FIRST NATIONAL BANK OF CHICAGO,
a national banking association, as
Administrative Agent and a Lender
By_______________________________________
Name_____________________________________
Title____________________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, a national banking association,
as a Lender
By_______________________________________
Name_____________________________________
Title____________________________________
5
THE BANK OF NEW YORK, a banking corporation
organized under the laws of the State of
New York, as a Lender
By_______________________________________
Name_____________________________________
Title____________________________________
COMERICA BANK-CALIFORNIA,
a California banking corporation, as a Lender
By_______________________________________
Name_____________________________________
Title____________________________________
FIRST UNION NATIONAL BANK,
a national banking association, as a Lender
By_______________________________________
Name_____________________________________
Title____________________________________
GUARANTY FEDERAL BANK,
a federal savings bank, as a Lender
By_______________________________________
Name_____________________________________
Title____________________________________
6
FIRST CHICAGO NATIONAL PROCESSING
CORPORATION, a Delaware corporation, as
Collateral Agent
By_______________________________________
Name_____________________________________
Title____________________________________
7
REPLACEMENT EXHIBIT N
---------------------
SCHEDULE OF
PERMITTED OTHER DEBT
AND
(*) PERMITTED OTHER SECURED DEBT
1. Indebtedness owed under repurchase agreements and gestation repurchase
credit facilities entered into by the Company from time to time with
financial institutions approved by the Administrative Agent and the
Majority Lenders in an aggregate amount not to exceed at any one time
outstanding $450,000,000.00.*
2. Indebtedness owed under any servicing secured facility (including the
Servicing Secured Credit Agreement) in an aggregate amount not to exceed at
any one time outstanding $30,000,000.00.*
3. Indebtedness owed under credit facilities entered into by and between the
Company and Residential Funding Corporation ("RFC") from time to time
secured by Mortgage Loans that are delinquent or in foreclosure or subject
to a Take-Out Commitment issued by RFC, manufactured housing loans and REO
properties in an aggregate amount not to exceed at any one time outstanding
$15,000,000.00.*
4. Indebtedness owed under any deposit-backed interest rate exchange
agreements and/or investment arbitrage lines, entered into in the ordinary
course of business.*
5. Unsecured Indebtedness of the Company to Peter Paul and/or Jessica Paul in
an amount not to exceed $10,000,000.00 in the aggregate at any time
outstanding and which Indebtedness is Subordinated Debt, it being agreed
and understood that the required subordination shall be on terms and
subject to conditions substantially similar to the terms and conditions set
forth in that certain Subordination Agreement dated as of July 26, 1996
executed by Peter Paul and Jessica Paul.
6. Unsecured Indebtedness of the Company to Peter Paul in an amount not to
exceed $5,000,000.00 in the aggregate at any time outstanding, the proceeds
of which Indebtedness shall be used by the Company for funding short-term
liquidity needs and which Indebtedness is Subordinated Debt, it being
agreed and understood that the required subordination shall prohibit
payments on account of such Indebtedness only if there shall either before
or after such payment is made exist and Event of Default or Potential
Default.
7. Indebtedness of HMSI to third party lenders in an amount not to exceed
$5,000,000.00 in the aggregate at any time outstanding, the proceeds of
which Indebtedness shall be used by HMSI to finance advance receivables.*
1
8. Indebtedness of HMSI secured by liens on the retained interests in
securitizations of HMSI in connection with yield maintenance arrangements
on securities issued through HMSI.
2