CONFORMED*
RESTATED LOAN AGREEMENT
between
ASSOCIATES MORTGAGE FUNDING CORPORATION,
BORROWER,
RYLAND MORTGAGE COMPANY,
GUARANTOR,
BANK ONE, TEXAS, N.A.,
AGENT,
and
CERTAIN LENDERS,
LENDERS
May 28, 1993
Amended through November 23, 1993
- ------------------------------
* Conformed to incorporate amendments dated as of September 30, 1993,
November 10, 1993, November 22, 1993, and November 23, 1993.
TABLE OF CONTENTS
SECTION 1. GENERAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Number and Gender of Words. . . . . . . . . . . . . . . . . . . . . . 13
1.3. Other References. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.4. Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 2. COMMITMENT AND TERMS OF BORROWING AND PAYMENT . . . . . . . . . . . . 13
2.1. Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2. Borrowing Procedure . . . . . . . . . . . . . . . . . . . . . . . . . 14
2.3. Wet Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.4. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.5. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.6. Payment Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . 15
2.7. Interest and Principal Payments . . . . . . . . . . . . . . . . . . . 17
2.8. Adjustments and Sharing of Payments, Etc. . . . . . . . . . . . . . . 18
2.9. Interest Options. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
2.10. Quotation of Rates. . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.11. Default Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.12. Interest Calculations . . . . . . . . . . . . . . . . . . . . . . . . 20
2.13. Maximum Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
2.14. Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.15. Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.16. Booking Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.17. Basis Unavailable or Inadequate for LIBOR Rate. . . . . . . . . . . . 21
2.18. Additional Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2.19. Change in Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.20. Foreign Lenders . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.21. Funding Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2.22. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3. GUARANTY AND COLLATERAL . . . . . . . . . . . . . . . . . . . . . . . 24
3.1. Guaranty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.2. Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.3. Delivery to Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.4. Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.5. Redemption of Mortgage Collateral . . . . . . . . . . . . . . . . . . 29
3.6. Correction of Mortgage Notes. . . . . . . . . . . . . . . . . . . . . 30
3.7. Collateral Value. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.8. Agent to Provide Collateral Report. . . . . . . . . . . . . . . . . . 30
3.9 Trust Receipt and Security Agreement Letters. . . . . . . . . . . . . 31
SECTION 4. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . 31
4.1. Initial Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.2. All Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(i)
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SECTION 5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . 32
5.1. Organization and Good Standing. . . . . . . . . . . . . . . . . . . . 32
5.2. Authorization and Power . . . . . . . . . . . . . . . . . . . . . . . 32
5.3. No Conflicts or Consents. . . . . . . . . . . . . . . . . . . . . . . 32
5.4. Enforceable Obligations . . . . . . . . . . . . . . . . . . . . . . . 32
5.5. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.6. Priority of Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.7. No Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.8. Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.9. Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.10. No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.11. No Material Litigation. . . . . . . . . . . . . . . . . . . . . . . . 33
5.12. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.13. Principal Office, etc . . . . . . . . . . . . . . . . . . . . . . . . 34
5.14. Employee Benefits Plans . . . . . . . . . . . . . . . . . . . . . . . 34
5.15. No Approvals Required . . . . . . . . . . . . . . . . . . . . . . . . 34
5.16. Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.17. Investment Company. . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.18. Government Approvals. . . . . . . . . . . . . . . . . . . . . . . . . 35
5.19. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.20. Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 6. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . 35
6.1. Financial Statements and Reports. . . . . . . . . . . . . . . . . . . 35
6.2. Taxes and Other Liens . . . . . . . . . . . . . . . . . . . . . . . . 36
6.3. Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.4. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.5. Reimbursement of Expenses . . . . . . . . . . . . . . . . . . . . . . 36
6.6. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.7. Accounts and Records. . . . . . . . . . . . . . . . . . . . . . . . . 37
6.8. Right of Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.9. Notice of Certain Events. . . . . . . . . . . . . . . . . . . . . . . 37
6.10. Performance of Certain Obligations. . . . . . . . . . . . . . . . . . 38
6.11. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.12. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . 38
6.13. Compliance with Agreements. . . . . . . . . . . . . . . . . . . . . . 38
6.14. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . 38
6.15. Benefit Plan Obligations. . . . . . . . . . . . . . . . . . . . . . . 39
6.16. Appraisals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.1. No Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.2. Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.3. Fiscal Year Accounting. . . . . . . . . . . . . . . . . . . . . . . . 40
7.4. Liquidations, Consolidations and Dispositions of Substantial Assets . 40
(ii)
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7.5. Loans, Advances, and Investments. . . . . . . . . . . . . . . . . . . 40
7.6. Use of Proceeds; Margin Stock . . . . . . . . . . . . . . . . . . . . 42
7.7. Collateral Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.8. Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
7.9. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
7.10. Related Party Transaction . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 8. FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.1. Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.2. Adjusted Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . 44
8.3. Total Liabilities to Adjusted Tangible Net Worth Ratio. . . . . . . . 44
8.4. Minimum Servicing Portfolio . . . . . . . . . . . . . . . . . . . . . 44
8.5. Minimum Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.6. Net Income Plus Non-Cash Charges. . . . . . . . . . . . . . . . . . . 44
8.7. Net Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 9. DEFAULTS AND REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 44
9.1. Nature of Event . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.3. Right of Offset . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.4. Private Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.5. Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.6. Performance by Agent. . . . . . . . . . . . . . . . . . . . . . . . . 49
9.7. No Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.8. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.9. Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 49
9.10. Application of Payments and Proceeds. . . . . . . . . . . . . . . . . 49
9.11. Rights of Individual Lenders. . . . . . . . . . . . . . . . . . . . . 50
9.12. Notice to Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9.13. Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 10. AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
10.1. Authorization and Action. . . . . . . . . . . . . . . . . . . . . . . 51
10.2. Agent's Reliance, Etc . . . . . . . . . . . . . . . . . . . . . . . . 52
10.3. Agent and Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . 53
10.4. Lender Credit Decision. . . . . . . . . . . . . . . . . . . . . . . . 53
10.5. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.6. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
10.7. Agent as Custodian. . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 11. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.1. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.2. Nonbusiness Days; Time. . . . . . . . . . . . . . . . . . . . . . . . 55
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12.3. Communications. . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
12.4. Form and Number of Documents. . . . . . . . . . . . . . . . . . . . . 55
12.5. Exceptions to Covenants . . . . . . . . . . . . . . . . . . . . . . . 56
12.6. Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.7. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.8. Invalid Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . 56
12.9. Amendments, Waivers, Etc., and Conflicts. . . . . . . . . . . . . . . 56
12.10. Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 57
12.11. Special Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
12.12. Successors and Assigns; Participation; Novation . . . . . . . . . . . 57
12.13. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 59
12.14. Renewal, Extension, or Rearrangement. . . . . . . . . . . . . . . . . 59
12.15. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . . 59
SECOND AMENDED SCHEDULE 2.1 LENDERS AND COMMITMENTS
Schedule 2.2 Wiring Instructions
Schedule 3.2 Certain Existing Loan Documents
Schedule 4.1 Closing Documents
Schedule 5.16 Subsidiaries of Guarantor
Exhibit A Promissory Note
Exhibit B Intercompany Note
Exhibit C-1 Credit Request
Exhibit C-2 Conversion Request
Exhibit C-3 Collateral Delivery Notification
Exhibit C-4 Payment Direction
Exhibit C-5 Collateral Report
Exhibit D-1 Trust Receipt and Security Agreement Letter
(Shipment to Direct Investors)
Exhibit D-2 Trust Receipt and Security Agreement Letter
(Shipment to Certificating Custodian)
Exhibit E Officer's Certificate
Exhibit F Management Report
Exhibit G-1 Opinion of Piper & Marbury
Exhibit G-2 Opinion of General Counsel for the Companies
Exhibit H Form of Amendment
(iv)
RESTATED LOAN AGREEMENT
THIS AGREEMENT is entered into as of May 28, 1993, between ASSOCIATES
MORTGAGE FUNDING CORPORATION, a Delaware corporation ("BORROWER"), RYLAND
MORTGAGE COMPANY, an Ohio corporation ("GUARANTOR"), the Lenders described
below, and BANK ONE, TEXAS, N.A., as agent for itself and the other Lenders
(sometimes referred to as Bank One, Texas, National Association, "AGENT").
RECITALS
A. Borrower, Guarantor, Lenders, and Agent have entered into the Loan
Agreement dated as of January 31, 1991 (as amended 16 times through the
amendment dated as of February 1, 1993, the "EXISTING LOAN AGREEMENT"),
providing for extensions of credit by Lenders to Borrower on a revolving basis.
B. Guarantor is the direct or indirect legal and beneficial owner of all
of Borrower's issued and outstanding shares of capital stock. The proceeds of
the extensions of credit under the Existing Loan Agreement were -- and under
this agreement are to be -- simultaneously advanced by Borrower to Guarantor
under the Intercompany Note described below and used by Guarantor in the
ordinary course of its business for funding and acquiring, as applicable,
Mortgage Notes and Mortgage-Backed Securities described below. Therefore,
Guarantor and Borrower each derive substantial direct and indirect benefit and
value from the extensions of credit under this agreement.
C. Borrower and Guarantor have requested Lenders and Agent -- and subject
to this agreement they have agreed -- to amend and restate entirely the Existing
Loan Agreement in order, among other things, to incorporate all the amendments
to it, to provide for a larger syndicate of Lenders than originally party to the
Existing Loan Agreement, to provide procedures and mechanics for terminating,
reducing, or increasing certain Lenders' commitments to lend and for adding new
Lenders from time to time, and to amend certain other provisions of the Existing
Loan Agreement.
AGREEMENTS
Accordingly, in consideration of valuable and acknowledged consideration,
Borrower, Guarantor, Lenders, and Agent agree that the Existing Loan Agreement
is entirely amended and restated as follows:
SECTION 1. GENERAL TERMS
1.1 DEFINED TERMS. As used in this agreement and -- unless otherwise
specified -- in each schedule to this agreement and each Loan Document,
certificate, report, or other writings delivered in connection with this
agreement:
ADJUSTED TANGIBLE NET WORTH of a Person means, at any time, the SUM of (a)
the Net Worth of that Person PLUS (b) the amount of long-term debt of that
Person, the maturity of which is no less than two years from the date of this
agreement, and the payment of which is subordinated to the satisfaction of
Determining Lenders to the payment of all of the Senior Obligations owed by that
Person (whether that Person is primarily or secondarily liable therefor), PLUS
(c) an amount equal to 1% of that Person's Servicing Portfolio, if any, MINUS
(d) the amount of purchased and deferred excess Servicing Rights that
are capitalized on that Person's balance sheet, MINUS (e) the book value of any
other assets reflected on that Person's then-most-current consolidated balance
sheet that should be properly treated under GAAP as intangible assets --
including, without limitation, goodwill, trademarks, trade names, service marks,
copyrights, patents, licenses, rights with respect to the foregoing, and the
excess of the purchase price over the net assets of businesses acquired by that
Person.
ADVANCE means an amount or amounts loaned to Borrower by a Lender under
this agreement or the Existing Loan Agreement.
AFFILIATE of a Person means any other individual or entity who (directly or
indirectly through ownership, voting securities, contract, or otherwise)
controls, is controlled by, or under common control with that Person, and, for
purposes of this definition (a) "CONTROL" or similar terms mean the (i) power to
direct or cause the direction of management or policies of that Person or (ii)
ownership or voting control of 10% or more of the Voting Shares of that Person,
and (b) Borrower and Guarantor are "AFFILIATES" of each other.
AGENT means, at any time, Bank One, Texas, N.A., as AGENT for Lenders under
this agreement or its successor appointed under SECTION 10.6 acting as Agent
under this agreement.
ARM LOAN means (a) an adjustable-rate loan represented by a Mortgage Note
that complies with all applicable requirements for purchase under either the
FNMA or FHLMC standard form of conventional mortgage purchase contract and any
supplement to it then in effect, (b) an adjustable-rate Jumbo Loan, or (c) an
adjustable-rate FHA Loan.
BANK ONE INVESTMENT FACILITY means the Loan and Security Agreement dated as
of June 10, 1992, between Borrower, Guarantor, and Bank One, Texas, N.A. as
renewed, extended, amended, and replaced but not increased to more than
$40,000,000 principal amount.
BASE RATE means the floating base rate of annual interest established by
Agent from time to time as its corporate-base-rate of interest, which may not be
the lowest rate of interest charged by Agent on loans similar to Borrowings.
BASE-RATE BORROWING means a Borrowing bearing interest at the Base Rate.
BORROWER is defined in the preamble of this agreement.
BORROWING means a borrowing consisting of Advances made on the same day by
one or more Lenders.
BORROWING DATE is defined in SECTION 2.2(a).
BUSINESS DAY means (a) for all purposes, any day OTHER THAN Saturday,
Sunday, and any other day that commercial banks are authorized by Requirement of
Law to be closed in Texas, New York, or any other city in the United States
where any Lender has its principal lending office and (b) for purposes of any
LIBOR-Rate Borrowing, a day when commercial banks are open for international
business in London.
2
CODE means the INTERNAL REVENUE CODE OF 1986, as amended.
COLLATERAL means all property of Guarantor or Borrower in which Guarantor
or Borrower grants a Lien to Agent for the benefit of Lenders, either under
SECTION 2.3 or 3.2, or under the Security Instruments, or otherwise.
COLLATERAL DELIVERY NOTIFICATION means a notification, in substantially the
form of the attached EXHIBIT C-3, to be delivered by Guarantor with a Credit
Request.
COLLATERAL VALUE means, for Eligible Collateral, a percentage -- which for
Wet Borrowing is 95% and otherwise is 98% -- of the LESSER of (i) the
outstanding principal amount of the Mortgage Note therefor AND (ii) the Market
Value thereof, provided that (for purposes of SECTION 2.1 only):
(a) the total Collateral Value attributed to all Mortgage Notes of
the type described in CLAUSE (k)(ii) of the definition of Eligible
Collateral may never exceed $5,000,000;
(b) the total Collateral Value attributed to all Mortgage Notes that
constitute ARM Loans that have been converted to Conforming Conventional
Loans, FHA Loans, or VA Loans may never exceed $25,000,000;
(c) the total Collateral Value attributed to all Jumbo Loans may
never exceed 33% of the total Commitments;
(d) the total Collateral Value attributed to all Jumbo Loans in
original amounts of (i) more than $500,000 but less than $850,000 each may
never exceed $25,000,000, and (ii) more than $850,000 may never exceed
$5,000,000;
(e) the total Collateral Value attributed to all Eligible Collateral
that RAC Income Fund, Inc. has an outstanding commitment to purchase
pursuant to a Take-Out Commitment shall never exceed $1,000,000; and
(f) the total Collateral Value attributed to all Eligible Collateral
(determined as of the date such Eligible Collateral was first delivered to
Agent by Guarantor or Borrower) delivered by Agent to any Investor and
outstanding at any one time under SECTION 3.5(b) (excluding Eligible
Collateral arising out of or forming, or being delivered in order to form a
part of, pools of Mortgages for GNMA, FNMA, FHLMC, or any other Investors
approved by Agent) shall never exceed either (i) for all Investors, a total
of 20% of the total Commitments or (ii) $20,000,000 for any one Investor
(other than GNMA, FNMA, and FHLMC).
COMMITMENT means, for any Lender, the amount stated beside its name on the
attached SCHEDULE 2.1 or any amended SCHEDULE 2.1 provided for in this
agreement.
COMMITMENT PERCENTAGE means, at any time for any Lender, the proportion --
stated as a percentage -- that its Commitment bears to the total Commitments.
COMPANIES means Borrower and Guarantor.
3
CONFORMING CONVENTIONAL LOAN means a conforming loan represented by a
Mortgage Note, excluding FHA Loans, VA Loans, and ARM Loans, which complies with
all applicable requirements for purchase under (a) the FNMA or FHLMC standard
form of conventional mortgage purchase contract and any supplement to either
thereof then in effect or (b) such other standard form of conventional mortgage
purchase contract acceptable to Lenders.
CONVERSION DATE is defined in SECTION 2.15.
CONVERSION REQUEST means a notice, substantially in the form of the
attached EXHIBIT C-2.
CREDIT REQUEST means a request, in substantially the form of the attached
EXHIBIT C-1, delivered by Borrower for a Borrowing.
CUSTODIAN means the Person holding custody of the Collateral to perfect the
Lien in favor of Agent (for the benefit of Lenders) as such Collateral is
delivered under SECTION 3.3.
DEBTOR LAWS means all applicable liquidation, conservatorship, bankruptcy,
moratorium, arrangement, receivership, insolvency, reorganization, or similar
laws from time to time in effect affecting the rights of creditors generally.
DEFAULT is defined in SECTION 9.
DEFAULT RATE means, for any day, an annual rate of interest equal from day
to day to the LESSER of (a) the Federal-Funds Rate PLUS 4.5% AND (b) the Maximum
Rate.
DETERMINING LENDERS means, at any time, any combination of Lenders whose
(a) Loan Percentages total at least 66 2/3% at any time on or after the
Termination Date, (b) Interim Percentages total at least 66 2/3% at any time
before the Termination Date but while any Lender is a Terminating Lender, and
(c) Commitment Percentages total at least 66 2/3% at all other times.
DIVIDENDS means, for any corporation or association: (a) Cash
distributions or any other distributions on, or in respect of, any class of
equity security of such corporation or association, except for distributions
made solely in shares of securities of the same class; and (b) any and all
funds, cash or other payments made in respect of the redemption, repurchase, or
acquisition of such securities.
ELIGIBLE COLLATERAL means, subject to the provisions of SECTIONS 3.5(b) and
3.7, all Mortgage Collateral:
(a) for which (in the case of Mortgage Notes) Guarantor holds a Take-
Out Commitment;
(b) in which Agent has been granted (pursuant to SECTION 3.2 or
otherwise) and continues to hold a perfected first-priority Lien for the
benefit of Lenders;
(c) which are in form and substance acceptable to Agent in its
reasonable discretion;
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(d) which are delivered to Agent or its designee not more than 30
days after the date of such Mortgage Note or Mortgage Backed Security;
(e) which (in the case of Mortgage Notes), together with all related
Mortgages, conform in all respects with all the requirements of any Take-
Out Commitments to purchase such Mortgage Notes and are valid and
enforceable in accordance with their respective terms;
(f) which (in the case of Mortgage Notes) are made payable to the
order of Guarantor or have been endorsed (without restriction or
limitation) payable to the order of Guarantor;
(g) with respect to which (in the case of Mortgage Notes), there has
been no default as to the payment of any installment of principal or
interest or any other default which has continued uncured for a period of
60 days, and no foreclosure or other similar proceedings shall have been
commenced with respect thereto;
(h) with respect to which (in the case of Mortgage Notes), there
shall be no pending claim for any credit, allowance, or adjustment, and
which Mortgage Notes are enforceable without offset, counterclaim, or
defense of any kind;
(i) which has been held by Agent for the benefit of Lenders as
Eligible Collateral for less than 180 days;
(j) which (in the case of each Jumbo Loan in the original amount of
$500,000 or more) has been held by Agent for the benefit of Lenders as
Eligible Collateral for less than 90 days; and
(k) which otherwise meet requirements of clauses (a) through (j)
above but which are either (i) held by Guarantor as bailee of Agent in
connection with any Wet Borrowing, PROVIDED THAT such Mortgage Notes shall
cease to be Eligible Collateral if any of the Principal Collateral
Documents set forth in SECTION 3.3(c), (d), and (e) have not been delivered
to Agent within five Business Days of the date of such Wet Borrowing or
(ii) secured by a Mortgage which is second in priority, to the extent that
Guarantor holds a Take-out Commitment for such Mortgage Note from either
FNMA or FHLMC.
ERISA means the EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, as
amended, together with all regulations issued pursuant thereto.
ERISA AFFILIATE means, for Borrower, any trade or business (whether or not
incorporated) which, together with Borrower, would be treated as a single
employer under SECTION 4001 of ERISA.
FEDERAL-FUNDS RATE means, for any day, the annual rate of interest equal to
the SUM of (a) an annual rate of interest (rounded upwards, if necessary, to the
nearest 0.01%) determined by Agent to be equal to either (i) the weighted
average of the rates on overnight federal funds transactions with member banks
of the Federal Reserve System arranged by federal funds brokers for such day
(or, if not a Business Day, for the preceding Business Day) as published by the
Federal Reserve Bank of New York on the succeeding Business Day, or (ii) if not
so published for any day, the average of the quotations for such
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day on such transactions received by Agent from three federal funds brokers of
recognized standing selected by it, PLUS (b) 1.5%.
FEDERAL-FUNDS-RATE BORROWING means a Borrowing bearing interest at the
Federal-Funds Rate.
FHA LOAN means a loan represented by a Mortgage Note (a) payment of which
is partially or completely insured by the Federal Housing Administration ("FHA")
under the NATIONAL HOUSING ACT, as amended, or TITLE V of the HOUSING ACT OF
1949, as amended, or (b) with respect to which there is a current, binding and
enforceable commitment for such insurance issued by the FHA, or (c) which is
eligible for direct endorsement under the FHA DIRECT ENDORSEMENT PROGRAM (other
than loans for mobile homes).
FHLMC means the Federal Home Loan Mortgage Corporation or its successor.
FHLMC SECURITIES means participation certificates representing undivided
interests in mortgage loans purchased by FHLMC pursuant to the EMERGENCY HOME
FINANCE ACT OF 1970, as amended.
FINANCIAL STATEMENTS means balance sheets, profit and loss statements,
statements of cash flow and any other financial statements, reports or
information specified by any Lender.
FNMA means the Federal National Mortgage Association or its successor.
FNMA SECURITIES means modified pass-through mortgage-backed certificates
guaranteed by FNMA pursuant to the NATIONAL HOUSING ACT, as amended.
FUNDING ACCOUNT means the non-interest bearing demand checking account
established by Borrower with Agent to be used for (a) the deposit of proceeds of
Advances and payments constituting the proceeds of Collateral (other than
principal and interest payments on the Mortgage Collateral), (b) the funding of
advances under the Intercompany Note by Borrower, and (c) the payment of the
Obligations.
FUNDING LOSS means any reasonable, out-of-pocket loss or expense that any
Lender incurs because (a) Borrower fails or refuses (for any reason whatsoever
OTHER THAN a default by either Agent or the Lender claiming such loss or
expense) to take any LIBOR-Rate Borrowing that it has requested under this
agreement, or (b) Borrower prepays or pays any LIBOR-Rate Borrowing or converts
any LIBOR-Rate Borrowing to another Type of Borrowing in each case, at any time
other than the last day of the applicable Interest Period.
GAAP means generally accepted accounting principles consistently applied as
set forth in Opinions of the Accounting Principles Board of the American
Institute of Certified Public Accountants or in statements of the Financial
Accounting Standards Board and as in effect at the time of application of the
provisions hereof so as to properly reflect the financial condition, and the
results of operation and changes in cash flow, of Borrower or such other Person
as may be applicable; PROVIDED THAT wherever in this agreement principles of
accounting different from those required by GAAP are specified, the principles
of accounting specified in this agreement shall govern.
GNMA means the Government National Mortgage Association or its successor.
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GNMA SECURITIES means modified pass-through mortgage-backed certificates
guaranteed by GNMA pursuant to SECTION 306(g) of the NATIONAL HOUSING ACT, as
amended.
GOVERNMENTAL AUTHORITY means any nation or government, any agency,
department, state or other political subdivision thereof, and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
GUARANTOR is defined in the preamble hereof.
INDEBTEDNESS of any Person means, at any time, the SUM (without
duplication) of (i) all indebtedness of that Person for borrowed money or for
the deferred purchase price of Property or services or which is evidenced by a
bond, debenture, note or other instrument, (ii) all obligations of that Person
under any capitalized lease, (iii) all obligations of that Person in respect of
letters of credit, acceptances, or similar obligations issued or created for the
account of that Person, (iv) all of that Person's direct and indirect guaranties
of indebtedness of others, (v) all liabilities secured by any Lien existing on
Property owned by that Person, including liabilities so secured which have not
been assumed by such Person or with respect to which that Person is not
personally liable, and (vi) all liabilities of that Person in respect of
unfunded vested benefits under Plans.
INTERCOMPANY NOTE means the promissory note, substantially in the form of
the attached EXHIBIT B, executed by Guarantor, payable to the order of Borrower,
and endorsed to the order of Agent.
INTEREST PERIOD is determined in accordance with SECTION 2.14.
INTERIM PERCENTAGE means, for any Lender, the proportion -- stated as a
percentage -- that (a) its portion of the Loan (if it is a Terminating Lender)
or its Commitment (if it is not a Terminating Lender) bears to (b) the SUM of
the Loan owed to all Terminating Lenders PLUS the Commitments of all the other
Lenders.
11/22/93
INVESTMENT FACILITIES MEANS ANY CREDIT FACILITY (AS ANY OF THOSE FACILITIES
MAY BE RENEWED, EXTENDED, AMENDED, OR RESTATED) NOW OR IN THE FUTURE ENTERED
INTO -- BETWEEN EITHER COMPANY AND ANY COMMERCIAL OR SAVINGS BANK ORGANIZED
UNDER THE LAWS OF THE UNITED STATES OF AMERICA WITH A COMBINED CAPITAL AND
UNIMPAIRED SURPLUS OF AT LEAST $250,000,000, AND A RATING OF C OR BETTER BY
THOMPSON BANK WATCH, INC., OR AN IDC FINANCIAL PUBLISHING RATING OF AT LEAST 75
- -- TO ENABLE THAT COMPANY TO MAKE INVESTMENTS HAVING A MAXIMUM MATURITY OF 31
DAYS IN (A) COMMERCIAL PAPER GIVEN THE HIGHEST RATING (AT LEAST A-1 OR P-1 OR
THE EQUIVALENT) BY A NATIONALLY RECOGNIZED CREDIT RATING AGENCY, (B) UNITED
STATES GOVERNMENTAL OBLIGATIONS, OR (C) CERTIFICATES OF DEPOSIT, BANKERS
ACCEPTANCES, AND REPURCHASE AGREEMENTS -- ISSUED BY THE COMMERCIAL BANK
PROVIDING THE "INVESTMENT FACILITY" MEETING THE REQUIREMENTS ABOVE -- IN
CONNECTION WITH WHICH THERE EXISTS MUTUAL RIGHTS OF OFFSET.
INVESTOR means GNMA, FNMA, FHLMC, Resource Mortgage Capital, Inc.,
Residential Funding Corporation, RAC Income Fund, Inc., or any other Person
approved by Agent who agrees to purchase Eligible Collateral pursuant to a Take-
Out Commitment.
JUMBO LOAN means a loan represented by a Mortgage Note, excluding FHA Loans
and VA Loans, which complies with all applicable requirements for purchase under
the FNMA or FHLMC
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standard form of conventional mortgage purchase contract and any supplement to
either thereof then in effect, except that the amount of such loan exceeds the
maximum loan amount under such requirements.
LENDERS means the financial institutions named on the attached SCHEDULE 2.1
or on the most recently amended SCHEDULE 2.1, if any, prepared by Agent under
this agreement, and, subject to this agreement, their respective successors and
assigns (but not any Participant who is not otherwise a party to this
agreement).
LIBOR RATE means, for a LIBOR-Rate Borrowing, an annual interest rate equal
to the SUM of (a) an annual interest rate (rounded upward, if necessary, to the
nearest 0.01%) equal to the LESSER of (i) the rate determined by Agent -- at
approximately 10:00 a.m. Dallas, Texas, time on the second Business Day before
the applicable Interest Period -- as the rate reported by Telerate Mortgage
Services for deposits in United States dollars in the London interbank market
that are comparable in amount and maturity of that Borrowing, AND (ii) the rate
that deposits in United States dollars are offered to the Lender of that LIBOR-
Rate Borrowing in the London interbank market -- at approximately 11:00 a.m.,
London time on the third Business Day before the applicable Interest Period --
for deposits comparable in amount and maturity of that Borrowing, PLUS (b)
1.25%.
LIBOR-RATE BORROWING means a Borrowing bearing interest at the LIBOR Rate
and which must be an integral multiple of $100,000 and a minimum of $1,000,000.
LIEN means any lien, mortgage, security interest, pledge or encumbrance,
conditional sale or title retention agreement, any lease in the nature thereof,
or any other interest in Property designed to secure the repayment of
Indebtedness, whether arising by agreement or under any statute or law, or
otherwise.
LOAN means, as of the date of any determination thereof, the aggregate
outstanding principal amount of all Advances made hereunder.
LOAN DOCUMENTS means (a) this agreement, the Notes, the Security
Instruments, (b) all other agreements (including, but not limited to, Pricing
Agreements), documents, or instruments ever executed and delivered by Borrower
or any other Person in connection with, or as security for the payment or
performance of, any or all of the Obligations, and (c) all renewals, extensions,
amendments, and restatements of or to any of the foregoing.
LOAN PERCENTAGE means, at any time for any Lender, the proportion -- stated
as a percentage -- that the portion of the Loan owed to that Lender bears to the
Loan owed to all Lenders.
MARKET VALUE means:
(a) For any Mortgage Note, at any time, either (i) the weighted average of
the commitment prices of all Take-Out Commitments relating to such Mortgage
Note, or (ii) at Agent's sole discretion (or if Determining Lenders object, as
determined by Determining Lenders) the market value thereof determined upon the
then-most recent posted net yield furnished by FNMA and published and
distributed by Telerate Mortgage Services, or, if such posted net yield is not
available from Telerate Mortgage Services, upon the posted net yield stated by
FNMA as determined by Agent, or, for any Mortgage Note not eligible for purchase
by FNMA, upon the posted net yield as reasonably established by Agent; and
8
(b) For any Mortgage Backed Security, the PRODUCT of (i) either (A) the
most recent percentage published and distributed by Telerate Mortgage Services
as the bid price for mandatory delivery within thirty days for securities
bearing interest at the same rate and of the same type as the subject security,
or (B) if no such bid price can be obtained from Telerate Mortgage Services, the
average of the percentages obtained from three brokerage firms selected in good
faith by Agent (or if Determining Lenders object, as selected in good faith by
Determining Lenders) as the bid price for mandatory delivery within thirty days
for such GNMA Securities, FNMA Securities, or FHLMC Securities, as the case may
be, bearing interest at the same rate and of the same type as the subject
security, TIMES (ii) the PRODUCT of (A) the factor obtained from Telerate
Mortgage Service representing the percentage of the principal balance
outstanding on the subject security, TIMES (B) the face amount of the subject
security; PROVIDED THAT, if such factor is not available from Telerate Mortgage
Services, Agent will obtain such information from GNMA, FNMA, or FHLMC, as is
applicable.
If Agent is unable to obtain any yield, price, or factor from the source or
alternative source called for under this definition, such yield, price or factor
shall be that established in good faith by Agent (or if Determining Lenders
object, as established in good faith by Determining Lenders).
MATERIAL ADVERSE EFFECT means any material adverse effect on (i) the
validity or enforceability of this agreement, any Note, Pricing Agreement, or
any Security Instrument, (ii) the operations or consolidated financial condition
of Borrower and Guarantor, (iii) the Collateral (or its value), taken as a
whole, or (iv) the ability of Borrower or Guarantor to fulfill its obligations
under this agreement, any Note or any Security Instrument.
MAXIMUM RATE means, for a Lender, the maximum non-usurious interest rate
and the maximum non-usurious amount that, at any time, a Lender may contract
for, take, charge, reserve, or receive on the Obligation under the applicable
laws of the United States and the State of Texas.
MORTGAGE means a mortgage or deed of trust, in compliance with FNMA or
FHLMC guidelines (except, in the case of mortgages or deeds of trust securing
Jumbo Loans, that the amount of such loans exceeds the maximum loan amount under
such requirements) and otherwise in form and substance satisfactory to Agent,
securing a Mortgage Note and granting a perfected first-priority Lien (subject
to the Permitted Exception) on residential real property consisting of land and
a one to four family dwelling thereon, or consisting of a condominium unit, that
is completed and ready for occupancy and specifically excluding multi-family
dwellings for more than four families.
MORTGAGE-BACKED SECURITIES means FHLMC Securities, FNMA Securities and GNMA
Securities, whether such securities are issued in certificated form or book
entry form.
MORTGAGE COLLATERAL means all Mortgage Notes, Mortgage-Backed Securities,
and related Principal Collateral Documents offered as Collateral under SECTION
3.3.
MORTGAGE NOTE means a promissory note representing a Conforming
Conventional Loan, a Jumbo Loan, an ARM Loan, an FHA Loan, or a VA Loan
(including FHA graduated payment mortgage loans and VA graduated payment
Mortgage loans) in each case secured by a Mortgage that is (subject to the
Permitted Exception) a first priority Lien; PROVIDED THAT in no event shall
Mortgage Note mean a promissory note representing a construction loan or
commercial loan.
NATIONSBANK AGREEMENT means the Credit Agreement among NationsBank of
North Carolina, N.A., as agent, and other banks, Ryland Group, Guarantor, and
RMC Asset Management Company, dated June 26, 1992, as renewed, extended,
amended, and replaced but not increased to more than $60,000,000 principal
amount.
NET INCOME for any Person means, for any period, the net income or loss
of that Person for such period, determined in accordance with GAAP.
NET WORTH for any Person means, at any date, the SUM of (a) total
shareholder's equity (including capital stock, additional paid-in capital and
retained earnings after deducting treasury stock) which would appear on a
balance sheet of that Person prepared as of such date in accordance with GAAP
MINUS (b) any amount to be deducted therefrom in accordance with SECTION
7.5(G).
NOTES means the promissory notes, in substantially the form of the
attached EXHIBIT A, and all renewals, extensions, amendments, increases,
decreases, and replacements of, to, or for any of them.
OBLIGATIONS means all present and future indebtedness, obligations, and
liabilities of Borrower or Guarantor to Agent or any Lender before or after
the date of this agreement and related to any Loan Document -- whether
principal, interest, fees, costs, attorneys' fees, or otherwise -- and all
renewals, extensions, and modifications of any of the foregoing.
PARTICIPANT is defined in SECTION 12.12(B).
PAYMENT DIRECTION means a written direction from Borrower, substantially
in the form of the attached EXHIBIT C-4, delivered by Borrower to the Agent
as provided in SECTION 2.6(A) or (B).
PBGC means the Pension Benefit Guaranty Corporation and any successor to
any or all of the Pension Benefit Guaranty Corporation's functions under
ERISA.
PERMITTED EXCEPTION means Mortgage Collateral for which the Mortgage is
of the type described in CLAUSE (K)(II) of the definition of Eligible
Collateral.
PERSON means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization,
Governmental Authority or any other form of entity.
PLAN means any employee benefit plan or other plan which is subject to
the provisions of TITLE IV of ERISA or to the minimum funding standards under
SECTION 412 of the Code and which is maintained for employees of Borrower or
Guarantor.
POTENTIAL DEFAULT means the occurrence of any event or existence of any
circumstances that would, upon notice or lapse of time or both, become a
Default.
PRICING AGREEMENT means a separate written agreement (effective only
while a Default does not exist) between Borrower, Guarantor, and a Lender,
which is substantially similar in form to -- and does not provide for an
interest rate different from that provided in -- the pricing agreement
executed by Borrower, Guarantor, and Agent, dated as of the date of this
agreement, but which may contain different payment terms.
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PRINCIPAL COLLATERAL DOCUMENTS is defined in SECTION 3.3.
PROHIBITED TRANSACTION means any transaction described in SECTION 406 of
ERISA which is not exempt under SECTION 408 of ERISA, and any transaction
described in SECTION 4975(C) of the Code which is not exempt under SEC-
TION 4975(C)(2) or 4975(D) of the Code or by the transitional rules of
SECTIONS 414(C) and 2003(C) of ERISA.
PROPERTY means any interest of Borrower or Guarantor in any kind of
property or asset, whether real, personal or mixed, or tangible or
intangible, including, without limitation, the Collateral.
PURCHASER is defined in SECTION 12.12(C).
REGULATION U means REGULATION U promulgated by the Board of Governors of
the Federal Reserve System, 12 C.F.R. PART 221, or any other regulation when
promulgated by said Board to replace the prior Regulation U and having
substantially the same function.
REGULATION X means REGULATION X promulgated by the Board of Governors of
the Federal Reserve System, 12 C.F.R. PART 224, or any other regulation when
promulgated by said Board to replace the prior Regulation X and having
substantially the same function.
RELATED PERSON means any Person that is a member of the same controlled
group of corporations (within the meaning of SECTION 414(B) of the Code) as
Borrower or Guarantor or is under common control (within the meaning of
SECTION 414(C) of the Code or SECTION 4001 of ERISA) with Borrower or
Guarantor or is a member of any affiliated service group (within the meaning
of SECTION 414(M) of the Code) which includes Borrower or Guarantor or is
otherwise treated as part of the controlled group which includes Borrower or
Guarantor (within the meaning of SECTION 414(O) of the Code).
REPORTABLE EVENT means a reportable event described in SECTION 4043 of
ERISA or the regulations thereunder for which the 30-day notice is not waived
by such regulations, a withdrawal from a Plan described in SECTION 4063 or
4064 of ERISA, or a cessation of operations described in SECTION 4062(F) of
ERISA.
REQUIREMENT OF LAW means, for any Person, the articles of incorporation
and bylaws or other organizational or governing documents of that Person, and
any law, statute, code, ordinance, order, rule, regulation, judgment, decree,
injunction, franchise, permit, certificate, license, authorization or other
determination, direction or requirement (including, without limitation, any
of the foregoing which relate to environmental standards or controls, energy
regulations and occupational, safety and health standards or controls) of any
(domestic or foreign) arbitrator, court or other Governmental Authority, in
each case applicable to or binding upon that Person or any of its Property or
to which that Person or any of its Property is subject.
RYLAND GROUP means The Ryland Group, Inc., a Maryland corporation and
Guarantor's parent corporation.
SECURITY INSTRUMENTS means any and all agreements, documents, and
instruments now or hereafter executed and delivered by Borrower, Guarantor,
or any other Person in connection with, or as security for the payment or
performance of, the Obligations, as those agreements, documents, and
instruments
11
may be renewed, extended, amended, or substituted from time to time,
including, without limitation, the agreements, documents, and instruments
described on SCHEDULE 3.2.
SENIOR OBLIGATIONS means (a) the Obligations, (b) the obligations of the
Companies under the NationsBank Agreement and (c) the obligations of the
Companies under the Bank One Investment Facility.
SERVICING PORTFOLIO means, for Guarantor, at any time, an amount equal
to the aggregate unpaid principal amount of all loans with respect to which
Guarantor owns Servicing Rights, OTHER THAN loans serviced on behalf of the
Resolution Trust Corporation.
SERVICING RIGHTS means all of Guarantor's right, title and interest in
agreements between Guarantor and Persons other than Guarantor and Borrower
pursuant to which Guarantor undertakes to service one to four family dwelling
mortgage loans and pools of one to four family dwelling mortgage loans for
such Persons.
SPECIAL PURPOSE SUBSIDIARY means each Subsidiary of Ryland Group and
Guarantor which facilitates the financing of mortgage loans and mortgage
backed securities and the securitization of mortgage loans and other related
activities.
SUBORDINATED DEBT is defined in SECTION 3.1(E).
SUBSIDIARY of a Person means, at any time, any corporation more than 50%
of the Voting Shares of which is owned, directly or indirectly, by that
Person.
TAKE-OUT COMMITMENT means a written and binding commitment (with respect
to which there shall be no condition which cannot be reasonably anticipated
to be satisfied or complied with prior to its expiration) from an Investor to
purchase (i) Mortgage-Backed Securities or (ii) Mortgage Notes within a
period of not more than twelve months from the date of such Mortgage Notes.
TERMINATION DATE means the earlier of (a) May 27, 1994 and (b) the date
all commitments or obligations of all Lenders to make Advances under this
agreement have terminated or been cancelled.
TERMINATING LENDER means a Lender that has terminated its Commitment
before the Termination Date under SECTION 9.2(B).
TOTAL LIABILITIES of a Person means, at any time, all amounts which
would, in accordance with GAAP, be included as liabilities on a balance sheet
of that Person; PROVIDED THAT reverse repurchase agreements secured by
Mortgage-Backed Securities arising from the call of bonds issued by
Affiliates of Guarantor may be excluded from those liabilities so long as,
(a) the underlying collateral value is at least 100.5% of the obligations of
the Companies under those agreements, or (b) the Companies have provided
evidence satisfactory to Agent that the underlying collateral is subject to a
hedging agreement.
TYPE means any type of Borrowing determined with respect to the
applicable interest option.
UCC means the Uniform Commercial Code or similar laws of the applicable
jurisdiction, as amended from time to time.
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VA LOAN means a loan represented by a Mortgage Note, payment of which is
partially or completely guaranteed by the Department of Veterans Affairs
("VA") under the SERVICEMEN'S READJUSTMENT ACT OF 1944, as amended, or
CHAPTER 37 of TITLE 38 OF THE UNITED STATES CODE or with respect to which
there is a current binding and enforceable commitment for such a guaranty
issued by the VA or which is subject to automatic guarantee by the VA, the
applicable guaranty or commitment to guarantee being in the maximum amount
permitted by applicable law.
VOTING SHARES means, for any corporation, shares of any class or classes
(however designated) having ordinary voting power for the election of at
least a majority of the board of directors (or other governing body) of that
corporation, OTHER THAN shares having such power only by reason of the
happening of a contingency.
WET BORROWING means a Borrowing provided for under SECTION 2.3.
WET-BORROWING SUBLIMIT means, at any time, the maximum total outstanding
Wet Borrowings permitted under SECTION 2.3(B).
1.2. NUMBER AND GENDER OF WORDS. The singular number includes the
plural where appropriate and VICE VERSA, and words of any gender include each
other gender where appropriate.
1.3. OTHER REFERENCES. The words "HEREOF," "HEREIN," "HEREUNDER," and
similar terms when used in this agreement shall refer to this agreement as a
whole and not to any particular provision of this agreement, and section,
schedule, and exhibit references are to this agreement unless otherwise
specified.
1.4. ACCOUNTING PRINCIPLES. Under the Loan Documents -- unless
otherwise stated -- (a) GAAP determines all accounting and financial terms
and compliance with financial reporting covenants, (b) GAAP in effect on the
date of this agreement determines compliance with financial covenants, and
(c) otherwise, all accounting principles applied in a current period must be
comparable in all material respects to those applied during the preceding
comparable period OTHER THAN changes concurred in by the Companies'
independent public accountants.
SECTION 2. COMMITMENT AND TERMS OF BORROWING AND PAYMENT.
2.1. COMMITMENT. Subject to the provisions in the Loan Documents
(including, without limitation, the conditions set forth in SECTION 4), each
Lender severally and not jointly agrees to make Advances as requested by
Borrower under SECTION 2.2 SO LONG AS:
(a) The portion of the Loan owed to that Lender never exceeds the
LESSER of (i) its Commitment AND (ii) its Loan Percentage of the
Collateral Value for all Eligible Collateral.
(b) The Loan never exceeds the LESSER of (i) the total Commitments
AND (ii) the Collateral Value for all Eligible Collateral.
(c) Advances which are part of Wet Borrowings and outstanding for
that Lender never exceed its Commitment Percentage of the Wet-Borrowings
Sublimit.
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(d) The total Wet Borrowings outstanding never exceeds the Wet-
Borrowings Sublimit.
(e) Advances may be made only on Business Days before the
Termination Date.
The outstanding Advances owed to any Lender under the Existing Loan Agreement
are deemed to be Advances by that Lender -- and are renewed and extended --
under this agreement. All accrued and unpaid interest owed to any Lender
under the Existing Loan Agreement is renewed and extended under this
agreement and payable in accordance with the Loan Documents. As provided in
this agreement, Borrower may borrow, repay, and reborrow Advances.
2.2. BORROWING PROCEDURE. The following conditions and procedures apply
to all Borrowings:
(a) A Borrowing may be requested by Borrower by its delivery to
Agent and to the Lender from which the Borrowing is being requested of a
Credit Request -- which is irrevocable and binding on Borrower -- and
Guarantor's delivery to Agent and each Lender of a Collateral Delivery
Notification. Agent and each Lender from which the Borrowing is being
requested must receive a (i) Credit Request by no later than 1:30 p.m.,
Dallas, Texas time and (ii) Collateral Delivery Notification by no later
than 10:30 a.m. Dallas, Texas time, for both cases, on either (x) the
third Business Day before the date on which funds are requested (the
"BORROWING DATE") for any LIBOR-Rate Borrowing or (y) the Borrowing Date
for any Federal-Funds-Rate Borrowing or Base-Rate Borrowing.
(b) Except as permitted for Wet Borrowings, Agent must
concurrently receive, along with a Collateral Delivery Notification, all
of the Principal Collateral Documents for each Mortgage Note or
Mortgage-Backed Security offered in it as Collateral.
(c) Each Lender shall remit its Advance requested in any Credit
Request to Agent's principal office in Dallas, Texas, by wire transfer
into the Funding Account according to Agent's wiring instructions on the
attached SCHEDULE 2.2, in funds that are available for immediate use by
Agent by 2:30 p.m. Dallas, Texas time on the applicable Borrowing Date.
Subject to receipt of those funds, Agent shall (unless to its actual
knowledge any of the applicable conditions precedent have not been
satisfied by Borrower or waived by Determining Lenders) make such funds
available to Borrower as directed in that Credit Request.
(d) Absent contrary written notice from a Lender received by Agent
by 2:30 p.m. Dallas, Texas time on the applicable Borrowing Date, Agent
may assume that each Lender has made its Advance part of a requested
Borrowing available to Agent on the applicable Borrowing Date, and Agent
may, in reliance upon such assumption (but shall not be required to),
make available to Borrower a corresponding amount. If a Lender fails to
make its Advance available to Agent on the applicable Borrowing Date,
then Agent may recover the applicable amount on demand (i) from that
Lender, TOGETHER WITH interest (so long as Borrower's Credit Request was
timely made) at an annual rate of interest equal to the SUM of the
Federal-Funds Rate MINUS 1.5%, during the period commencing on the date
the amount was made available to Borrower by Agent and ending on (but
excluding) the date Agent recovers the amount from that Lender -- which
payment is then deemed to be that Lender's Advance part of that
Borrowing-- or (ii), if that Lender fails to pay its amount upon demand,
then from Borrower , TOGETHER WITH interest at an annual interest rate
equal to the rate applicable to the requested Borrowing during the
period
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commencing on the Borrowing Date and ending on (but excluding)
the date Agent recovers the amount from Borrower.
(e) Although no Lender is responsible for the failure of any other
Lender to make its Advance part of any Borrowing, the failure of any
Lender to make its Advance part of any Borrowing does not excuse any
other Lender from making its requested Advance part of that Borrowing.
2.3. WET BORROWINGS. Borrower may from time to time request that
certain Borrowings be funded before delivery to Agent of the applicable
Principal Collateral Documents. The following conditions and procedures
apply to those Borrowings:
(a) All conditions and procedures for Borrowings under SECTION 2.2
must be complied with OTHER THAN in SECTION 2.2(B).
(b) No Wet Borrowing may be made at any time if, after it were
funded, the total outstanding principal amount of all Wet Borrowings --
for which the applicable Principal Collateral Documents have not yet
been delivered to Agent -- would exceed 20% -- or, only on the first
three and last two Business Days of any calendar month, 25% -- of the
total Commitments.
(c) Guarantor hereby grants to Agent, from the Borrowing Date for
each Wet Borrowing, a first-priority Lien in the Mortgage Notes (and
related Take-Out Commitments) offered as Collateral in the Collateral
Delivery Notification delivered to Agent for that Wet Borrowing that is
perfected subject to the delivery of the Mortgage Notes to Agent or its
bailee.
(d) The Collateral Delivery Notification delivered by Guarantor to
Agent for a Wet Borrowing must identify and describe the Collateral
Value of each Mortgage Note described in SCHEDULE II to it.
2.4. TERMINATION. Upon giving at least three Business Days prior
written and irrevocable notice to Agent and each Lender, Borrower may
terminate any Lender's Commitment in full, whereupon the obligation to make
the mandatory prepayment under SECTION 2.7(C) becomes absolute and
irrevocable. If not terminated earlier by Borrower, the total Commitments
automatically terminate on the stated Termination Date. Once terminated, no
Commitment may be reinstated except by an amendment to this agreement under
SECTION 12.9.
2.5. NOTES. The Loan shall be evidenced by the Notes, one payable to
each Lender in the stated principal amount of its Commitment.
2.6. PAYMENT PROCEDURES.
(a) While no Default exists, Borrower shall pay principal of and
interest on the Loan in immediately available funds as follows:
(i) Borrower shall pay each principal payment to Agent for
the account of the one or more specific Lenders designated in the
Payment Direction that accompanies
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the payment, which designation need not be on the basis of
Lenders' Loan Percentages. When received, Agent shall distribute
that payment by wire transfer to those Lenders in accordance with
that Payment Direction reasonably
promptly after receipt but by no later than 3:00 p.m. on the
Business Day that payment is deemed to be received by Agent under
CLAUSE (C) below. If a Payment Direction does not accompany a
payment, then that amount is not deemed a payment in reduction of
the Loan and Agent shall not distribute the amount thereof to any
Lender but shall deposit that amount into the Funding Account, and
interest shall continue to accrue on the entire balance of the Loan
without taking that amount into consideration at the applicable
rates until Agent receives a Payment Direction applicable to that
amount which directs that payment in accordance with this clause be
made.
(ii) Borrower shall pay each interest payment directly to each
Lender in immediately available funds pursuant to each Lender's
Note and Pricing Agreement, which payment need not be on the basis
of Lenders Loan Percentages.
(b) While a Default exists, Borrower shall pay all principal and
interest payments to Agent in immediately available funds for Lenders'
accounts in accordance with the provisions of SECTION 9.10 and the
following provisions:
(i) When received, Agent shall distribute each principal
payment by wire transfer to each appropriate Lender, in accordance
with each Lender's share under SECTION 9.10, reasonably promptly
after receipt but by no later than 3:00 p.m. on the Business Day
the payment is deemed to be received by Agent under CLAUSE (C)
below.
(ii) Borrower shall deliver a Payment Direction with each
interest payment as to the amount of interest owed to each Lender
(OTHER THAN at the Default Rate). When received, Agent shall
distribute each interest payment by wire transfer to each Lender,
in accordance with each Lender's share under SECTION 9.10,
reasonably promptly after receipt but by no later than 3:00 p.m. on
the Business Day the payment is deemed to be received by Agent
under CLAUSE (C) below.
(c) Borrower shall make all payments under CLAUSES (A)(I), (B)(I),
and (B)(II) above to Agent by wire transfer in immediately available
funds. Payments under those clauses that are received by Agent,
together with any applicable Payment Direction (i) by 1:30 p.m. on a
Business Day shall be deemed to be received on that Business Day, or
(ii) after 1:30 p.m. on a Business Day shall be deemed to be received on
the next Business Day. Interest shall continue to accrue for the
benefit of the applicable Lender through the Business Day immediately
before the Business Day on which the payment is deemed to be received by
Agent under this clause.
(d) If Agent fails to transfer any payment to any Lender as
required by CLAUSES (A) or (B) above, then Agent shall pay to that
Lender on demand interest on that payment, from the date due until paid,
at an annual rate of interest equal to the SUM of the Federal-Funds Rate
MINUS 1.5%
(e) Each payment received by Agent or any Lender, as the case may
be, in accordance with this agreement is valid and effective to satisfy
and discharge the Companies'
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liability under the Loan Documents to the extent of that payment. Agent
shall have no liability whatsoever for any payments so received
(including, without limitation, the accuracy of any amounts stated in any
Payment Direction), except as provided in this agreement.
(f) Agent shall maintain a daily record of (i) the total unpaid
Advances owed to each Lender and (ii) the Loan balance.
(g) Notwithstanding any sale by any Lender of participating
interests in its portion of the Obligations under SECTION 12.12 (i) the
Companies and Agent may deem and treat each Lender as the absolute owner
of its respective Note (whether or not that Note is overdue) for all
purposes, and (ii) Borrower and Agent shall not be affected by any
notice to the contrary.
2.7. INTEREST AND PRINCIPAL PAYMENTS.
(a) Except where specifically provided differently in this
agreement or -- only if no Default exists -- in a Lender's Pricing
Agreement, accrued interest is due and payable:
(i) For each LIBOR-Rate Borrowing, as it accrues on its
Interest Period's last day and -- if the Interest Period is longer
than three months -- 90 days after its Interest Period's first day
and each 90 days thereafter;
(ii) For each Base-Rate Borrowing and Federal-Funds-Rate
Borrowing, and for interest at the rate provided in a Pricing
Agreement, as it accrues (A) through the last day of the calendar
month preceding the payment date, on the 15th day of each calendar
month beginning June 15, 1993, and (B) on the Termination Date --
except that any payment under this CLAUSE (II) may be deferred
until three days after the applicable Lender notifies Borrower of
the amount accrued for Base-Rate Borrowings and Federal-Funds-Rate
Borrowings; and
(iii) For interest at the Default Rate, on demand as it
accrues.
(b) Borrower shall repay the Loan on the Termination Date.
(c) Borrower shall -- on the date that termination of a Lender's
Commitment becomes effective under SECTION 2.4 -- pay to that Lender the
full Obligations owed to it.
(d) If at any time any of the limitations of SECTION 2.1(A)
through (D) are exceeded, Borrower shall, prior to the close of business
on the third succeeding Business Day after Borrower receives written
notice from Agent of the amount of the excess take any combination of
the actions that are applicable under CLAUSES (I) through (III) below
that will eliminate that excess except that the actions under
CLAUSE (III) below are not available to Borrower to the extent that an
excess would continue under SECTION 2.1(A) or (B) as to a Lender's
Commitment or the total Commitments:
(i) For an excess under either SECTION 2.1(A) or (C), repay
Advances to the appropriate Lender in a total amount at least equal
to that excess (TOGETHER WITH any related Funding Loss);
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(ii) For an excess under either SECTION 2.1(B) or (D) repay
Advances to Lenders as Borrower may select in a total amount at
least equal to that excess (TOGETHER WITH any related Funding
Loss); or
(iii) For an excess under either SECTION 2.1(A), (B), (C), or
(D) either (A) deliver to Agent, in accordance with this agreement,
Eligible Collateral (and the relevant Principal Collateral
Documents) with a Collateral Value at least equal to that excess,
(B) deposit into the Funding Account an amount at least equal to
that excess, or (C) any combination of the actions under
CLAUSES (A) or (B) at least equal to that excess.
e. Borrower may voluntarily prepay all or any part of any Advance
at any time without premium or penalty, but with any applicable Funding
Loss.
2.8. ADJUSTMENTS AND SHARING OF PAYMENTS, ETC.
(a) If (i) EITHER Borrower does not repay any portion of the Loan
remaining on the Business Day after the Termination Date OR any Lender gives
notice that it is terminating its Commitment in accordance with SECTION
9.2(B), then (ii) Agent shall promptly calculate (which calculations shall be
binding absent manifest error) and notify Lenders about the adjustment
payments owing between Lenders in accordance with the following provisions,
and (iii) on the Business Day after Agent gives that notice to Lenders, each
Lender (including the Lender giving the notice of termination, if applicable)
shall purchase from the other appropriate Lenders by paying to Agent -- and,
when received, Agent shall distribute to each appropriate Lender -- amounts
that are necessary to conform to the following provisions:
- each Lender's portion of the Loan is to be adjusted to the
PROPORTION that (A) its daily-average portion of the Loan from the
date of this agreement through the date of that purchase BEARS to
(B) the daily-average amount of the Loan for that same period; but
- if immediately after that adjustment (A) any Lender's Commitment
Percentage of the Collateral Value attributable to all Eligible
Collateral that is of the type subject to the sublimits stated in
CLAUSES (A) through (F) of the definition of Collateral Value and
the Wet-Borrowing Sublimit to the extent that such Eligible
Collateral must be included in the determination of Collateral
Value for purposes of complying with SECTIONS 2.1(B) and (D) WOULD
EXCEED (B) its portion of the Loan; then
- that Lender's adjustment payments shall be increased or its
adjustment receipts shall be reduced, as the case may be, by the
total amount of the excess determined under the immediately
preceding provision, and all other Lender's adjustment receipts
shall be increased proportionately based upon the ratio that each
such other Lender's portion of the Loan bears to all such other
Lenders' portions of the Loan; PROVIDED THAT
- no Lender is required to make any payments under this section that
would exceed the limits applicable to it under SECTION 2.1 above,
and Agent shall then calculate all other Lenders' payments to
include a ratable portion of that Lender's payments that would have
exceeded its Commitment; and FURTHER PROVIDED THAT
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- no Terminating Lender in respect of which an adjustment has already
been made under this section because of its termination of its
Commitment is required to make any payments or is entitled to
receive any payments in connection with any other adjustment under
this section, and its portion of the Loan is excluded from
calculation of any other such adjustment.
(b) If while a Default exists any Lender obtains any payment --
whether voluntary, involuntary, through the exercise of any right of
set-off or other right, realization against any Collateral, or otherwise
-- of the Obligations owed to it that exceeds the amount it should have
otherwise received under SECTION 9.10 below (an "EXCESS PAYMENT"), then
that Lender (the "PURCHASING LENDER") shall purchase from each other
Lender a participation in the Obligations then owed to that other Lender
as is necessary to cause each Lender to receive its share of that excess
payment in accordance with SECTION 9.10 below. The Companies agree that
any Lender that purchases a participation from another Lender may, to
the fullest extent permitted by law, exercise all its rights of payment
(including, without limitation, the right of set-off) with respect to
that participation as fully as if that Lender were the direct creditor
of the Companies in the amount of that participation.
(c) If any part of an excess payment is recovered from the
purchasing Lender under CLAUSE (B) above, then (i) each purchase of a
participation in respect of the received portion of the excess payment
shall be rescinded -- and the Lender from whom that purchase was made
shall repay to the purchasing Lender the purchase price -- to the extent
of that recovery from the purchasing Lender, and (ii) that Lender shall
also pay to the purchasing Lender an amount equal to that Lender's
ratable share -- according to the proportion that (A) the amount of that
Lender's required repayment to the purchasing Lender bears to (B) the
total amount so recovered from the purchasing Lender -- of any interest
or other amount paid or payable by the purchasing Lender in respect of
the total amount so recovered from it.
2.9. INTEREST OPTIONS.
(a) Borrower, Guarantor, and a Lender may from time to time enter
into a Pricing Agreement. A LIBOR-Rate Borrowing is never subject to
the pricing terms of any Pricing Agreement. No Pricing Agreement (i)
may alter the relative Rights of Agent and Lenders in this agreement, or
(ii) is binding on Agent or the other Lenders not party to it. Agent
may, without any investigation, rely that all Payment Directions and all
notices from Lenders about interest owed to them before a Default are in
compliance with each applicable Pricing Agreement. The Companies may
not enter into any agreement with any Lender regarding pricing terms
other than this agreement or a Pricing Agreement.
(b) Except where specifically otherwise provided in this agreement
or a Pricing Agreement, Borrowings bear interest at an annual rate equal
to the LESSER OF (i) the Base Rate, the Federal-Funds Rate, or the LIBOR
Rate -- as designated by Borrower in a Credit Request or a Conversion
Request or otherwise designated according to this agreement -- AND (ii)
the Maximum Rate. Each change in the Base Rate, the Federal-Funds Rate,
and the Maximum Rate is effective, without notice to Borrower,
Guarantor, or any other Person, upon the effective date of change.
19
(c) No Lender is required to make an Advance at the Federal-Funds
Rate if that Lender is unable to borrow through overnight federal-funds-
transactions with member banks of the Federal Reserve System.
2.10. QUOTATION OF RATES. Borrower may call Agent or any Lender from
which Borrower is considering requesting an Advance before delivering a
Credit Request or Conversion Request to receive an indication of the interest
rates then in effect, but the indicated rates do not bind Agent or Lenders or
affect the interest rate that is actually in effect on the applicable
Borrowing Date or Conversion Date.
2.11. DEFAULT RATE. To the extent permitted by applicable law, all past-
due principal of the Loan and accrued interest on it bears interest from
maturity (stated or by acceleration) at the Default Rate until paid,
regardless whether payment is made before or after entry of a judgment.
2.12. INTEREST CALCULATIONS.
(a) Interest is to be calculated on the basis of actual number of
days (including the first day but excluding the last day) elapsed but
computed as if each calendar year consisted of 360 days for LIBOR-Rate
Borrowings (unless the calculation would result in an interest rate
greater than the Maximum Rate, in which event interest will be
calculated on the basis of a year of 365 or 366 days, as the case may
be), and 365 or 366 days, as the case may be, for all other Borrowings.
All interest rate determinations and calculations by Agent or any Lender
shall be presumed correct.
(b) The provisions of this agreement relating to calculation of
the Base Rate, the Federal-Funds Rate, and the LIBOR Rate are included
only for the purpose of determining the rate of interest or other
amounts to be paid under this agreement that are based upon those rates.
Each Lender may fund and maintain its funding of all or any part of each
Borrowing as it selects.
2.13. MAXIMUM RATE. Regardless of any provision contained in any Loan
Document, no Lender is entitled to contract for, charge, take, reserve,
receive, or apply, as interest on all or any part of the Obligations any
amount in excess of the Maximum Rate, and, if Lender ever does so, then any
excess shall be treated as a partial prepayment of principal and any
remaining excess shall be refunded to Borrower. In determining if the
interest paid or payable exceeds the Maximum Rate, the Companies and Lenders
shall, to the maximum extent permitted under applicable law, (a) treat all
Borrowings as but a single extension of credit (and Lenders and the Companies
agree that this is the case and that provision in this agreement for multiple
Borrowings is for convenience only), (b) characterize any nonprincipal
payment as an expense, fee, or premium rather than as interest, (c) exclude
voluntary prepayments and their effects, and (d) amortize, prorate, allocate,
and spread the total amount of interest throughout the entire contemplated
term of the Obligations. However, if the Obligations are paid in full before
the end of the full contemplated term, and if the interest received for its
actual period of existence exceeds the Maximum Amount, Lenders shall refund
any excess (and Lenders may not, to the extent permitted by applicable law,
be subject to any penalties provided by any laws for contracting for,
charging, taking, reserving, or receiving interest in excess of the Maximum
Amount). If the laws of the State of Texas are applicable for purposes of
determining the "MAXIMUM RATE" or the "MAXIMUM AMOUNT," then those terms mean
the "INDICATED RATE CEILING" from time to time in effect under ARTICLE 1.04,
TITLE 79, REVISED CIVIL STATUTES OF TEXAS, as amended. The Companies agree
that CHAPTER 15, SUBTITLE 79, REVISED CIVIL STATUTES OF TEXAS, 1925, as
amended (which regulates certain revolving credit loan accounts and revolving
triparty accounts), does not apply to the Obligations.
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2.14. INTEREST PERIODS. When Borrower requests any LIBOR-Rate Borrowing,
Borrower may elect the applicable interest period (each an "INTEREST PERIOD")
- -- which may be either one, two, three, or six months at Borrower's option or
such other period agreed upon by Borrower and the Lender from which Borrower
has requested a LIBOR Rate Borrowing -- subject to the following conditions:
(a) The initial Interest Period commences on the applicable Borrowing Date or
Conversion Date, and each subsequent applicable Interest Period commences on
the day when the next preceding applicable Interest Period expires; (b) if
any Interest Period begins on a day for which no numerically corresponding
Business Day in the calendar month at the end of the Interest Period exists,
then the Interest Period ends on the last Business Day of that calendar
month; (c) no Interest Period for any portion of the Loan may extend beyond
the scheduled repayment date for that portion of the Loan; and (d) no more
than five Interest Periods may be in effect for any one Lender at any time,
unless otherwise agreed by that Lender.
2.15. CONVERSIONS. Borrower may (a) convert a LIBOR-Rate Borrowing on
the last day of the applicable Interest Period to another Type of Borrowing,
(b) convert another Type of Borrowing (subject to SECTION 2.14) at any time
to a LIBOR-Rate Borrowing, and (c) elect a new Interest Period for a LIBOR-
Rate Borrowing, by giving a Conversion Request to Agent and each Lender no
later than 10:00 a.m. Dallas, Texas time on the day (the "CONVERSION DATE")
that is the third Business Day before the last day of the applicable Interest
Period. Absent Borrower's timely Conversion Request, a LIBOR-Rate Borrowing
shall be deemed converted to a Federal-Funds-Rate Borrowing effective when
the applicable Interest Period expires unless that Borrowing is from a Lender
that is subject to SECTION 2.9(C), in which case a LIBOR-Rate Borrowing shall
be deemed converted to a LIBOR-Rate Borrowing with an Interest Period of one
month.
2.16. BOOKING BORROWINGS. To the extent permitted by applicable law, any
Lender may make, carry, or transfer its Advances at, to, or for the account
of any of its branch offices or the office of any of its Affiliates.
However, no Affiliate of any Lender is entitled to receive any greater
payment under SECTION 2.18 than the transferor Lender would have been
entitled to receive with respect to those Advances, and no Lender is entitled
to receive any greater payment under SECTION 2.18 on account of a transfer of
an Advance to or for the account of a branch office other than the one
specified on SCHEDULE 2.1, than it would have been entitled to receive with
respect to those Advances if such transfer had not been made. Each Lender
agrees that it will use its reasonable efforts (consistent with its internal
policies and applicable law) to make, carry, maintain, or transfer its part
of any Advances with its Affiliates or branch offices in an effort to
eliminate or reduce to the extent possible the aggregate amounts due to it
under SECTIONS 2.18 and 2.19 if, in its reasonable judgment, those efforts
will not be disadvantageous to it.
2.17. BASIS UNAVAILABLE OR INADEQUATE FOR LIBOR RATE. If, on or before
any date when a LIBOR Rate is to be determined for a Borrowing, the Lender in
respect of that Borrowing determines that the basis for determining the
applicable rate is not available or that the resulting rate does not
accurately reflect the cost to that Lender of making or converting Borrowings
at that rate for the applicable Interest Period, then that Lender shall
promptly notify the Companies of that determination (which is conclusive and
binding on the Companies absent manifest error) and that Borrowing shall be
at the Federal-Funds Rate. Until that Lender notifies the Companies that
those circumstances no longer exist, that Lender's commitment under this
agreement to make or convert to LIBOR-Rate Borrowings is suspended.
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2.18. ADDITIONAL COSTS.
(a) With respect to any LIBOR-Rate Borrowing, (i) if any change
after the date of this agreement in any present Requirement of Law (and
for purposes of this SECTION 2.18, Requirement of Law includes
interpretations and guidelines of any central bank or similar authority
whether or not having the force of law) or any future Requirement of Law
imposes, modifies, or deems applicable (or if compliance by any Lender
with any requirement of any Governmental Authority results in) any
requirement that any reserves (including, without limitation, any
marginal, emergency, supplemental, or special reserves) be maintained,
and if (ii) those reserves reduce any sums receivable by that Lender
under this agreement or increase the costs incurred by that Lender in
advancing or maintaining any portion of any LIBOR-Rate Borrowing and
(iii) that Lender determines that the reduction or increase is material
(and it may, in determining the material nature of the reduction or
increase, utilize reasonable assumptions and allocations of costs and
expenses and use any reasonable averaging or attribution method), then
that Lender (through Agent) shall deliver to Borrower a certificate
setting forth in reasonable detail the calculation of the amount
necessary to compensate it for its reduction or increase (which
certificate is conclusive and binding absent manifest error), and
Borrower shall pay that amount to that Lender within ten days after
demand. The provisions of and undertakings and indemnification set
forth in this CLAUSE (A) shall survive the satisfaction and payment of
the Obligations and termination of this agreement.
(b) With respect to any Borrowing, if any change after the date of
this agreement in any present Requirement of Law or any future
Requirement of Law regarding capital adequacy or compliance by any
Lender with any request, directive, or requirement now existing or
hereafter imposed by any Governmental Authority regarding capital
adequacy, or any change in its written policies or in the risk category
of this transaction, reduces the rate of return on its capital as a
consequence of its obligations under this agreement to a level below
that which it otherwise could have achieved (taking into consideration
its policies with respect to capital adequacy) by an amount deemed by it
to be material (and it may, in determining the amount, utilize
reasonable assumptions and allocations of costs and expenses and use any
reasonable averaging or attribution method), then (unless the effect is
already reflected in the rate of interest then applicable under this
agreement) that Lender (through Agent) shall notify Borrower and deliver
to Borrower a certificate setting forth in reasonable detail the
calculation of the amount necessary to compensate it (which certificate
shall be presumed correct), and Borrower shall pay that amount to Lender
within ten days after demand. The provisions of and undertakings and
indemnification set forth in this CLAUSE (B) shall survive the
satisfaction and payment of the Obligations and termination of this
agreement.
(c) Any taxes payable by Agent or any Lender or ruled (by a
Governmental Authority) payable by Agent or any Lender in respect of
this agreement or any other Loan Document shall -- if permitted by
applicable law and if deemed material by Agent or that Lender (who may,
in determining the material nature of the amount payable, utilize
reasonable assumptions and allocations of costs and expenses and use any
reasonable averaging or attribution method) -- be paid by Borrower,
together with interest and penalties, if any (except for taxes payable
on the overall net income of Agent or that Lender and except for
interest and penalties incurred as a result of the gross negligence or
willful misconduct of Agent or any Lender). Agent or that Lender
(through Agent) shall notify Borrower and deliver to Borrower a
certificate setting forth in reasonable detail the calculation of the
amount of payable taxes, which certificate
22
is conclusive and binding (absent manifest error), and Borrower shall
pay that amount to Agent for the account of Agent or that Lender, as the
case may be, within ten days after demand. If Agent or that Lender
subsequently receives a refund of the taxes paid to it by Borrower, then
the recipient shall promptly pay the refund to Borrower.
2.19. CHANGE IN LAWS. If any change after the date of this
agreement in any present Requirement of Law or any future Requirement of Law
makes it unlawful for any Lender to make or maintain LIBOR-Rate Borrowings,
then that Lender shall promptly notify Borrower and Agent, and (a) as to
undisbursed funds, any requested Borrowing shall be made as a Federal-Funds
Rate Borrowing, (b) as to any outstanding Borrowing (i) if maintaining the
Borrowing until the last day of the applicable Interest Period is unlawful,
the Borrowing shall be converted to a Federal-Funds-Rate Borrowing as of the
date of notice, but Borrower shall not be obligated to pay any related
Funding Loss, or (ii) if not prohibited by law, the Borrowing shall be
converted to an Federal-Funds-Rate Borrowing as of the last day of the
applicable Interest Period, or (iii) if any conversion will not resolve the
unlawfulness, Borrower shall promptly prepay the Borrowing, without penalty,
and without payment of any related Funding Loss. No Conversion Request is
required to be delivered in connection with any conversion under this SECTION
2.19.
2.20. FOREIGN LENDERS. Each Lender that is organized under the laws
of any jurisdiction OTHER THAN the United States of America or any State
thereof (a) represents to Agent and Borrower that (i) no taxes are required
to be withheld by Agent or Borrower with respect to any payments to be made
to it in respect of the Obligations and (ii) it has furnished to Agent and
Borrower two duly completed copies of either U.S. Internal Revenue Service
FORM 4224 or FORM 1001 (wherein it claims entitlement to complete exemption
from U.S. federal withholding tax on all interest payments under the Loan
Documents), and (b) covenants to (i) provide Agent and Borrower a new FORM
4224 or FORM 1001 upon the expiration or obsolescence of any previously
delivered form according to law, duly executed and completed by it, and (ii)
comply from time to time with all laws with regard to the withholding tax
exemption. If any of the foregoing is not true or the applicable forms are
not provided, then Borrower and Agent (without duplication) may deduct and
withhold from interest payments under the Loan Documents United States
federal income tax at the full rate applicable under the Code.
2.21. FUNDING LOSS. The Companies jointly and severally agree to
indemnify each Lender against, and pay to it upon demand, any Funding Loss of
that Lender. When any Lender demands that the Companies pay any Funding
Loss, that Lender shall deliver to the Companies and Agent a certificate
setting forth in reasonable detail the basis for imposing Funding Loss and
the calculation of the amount, which calculation shall be presumed correct.
The provisions of and undertakings and indemnification set forth in this
SECTION 2.21 shall survive the satisfaction and payment of the Obligations
and termination of this agreement.
2.22. FEES. The following fees are not compensation for the use,
detention, or forbearance of money, are in addition to, and not in lieu of,
interest and expenses otherwise described in this agreement, are non-
refundable, to the fullest extent permitted by applicable law, bear interest,
if not paid when due, at the Default Rate, and are calculated on the basis of
actual number of days (including the first day but excluding the last day)
elapsed, but computed as if each calendar year consisted of 360 days, unless
computation would result in an interest rate in excess of the Maximum Rate in
which event the computation is made on the basis of a year of 365 or 366
days, as the case may be:
23
(a) Borrower shall pay to Agent -- for its sole account -- an
annual administrative fee and a custodial fee in an amount and on such
payment terms as may be agreed upon by Borrower and Agent in writing.
(b) Borrower shall pay to each Lender a commitment fee, payable as
it accrues on the last day of each August, November, February, and May -
- beginning August 31, 1993 -- and on the Termination Date, equal to
0.18% per annum of that Lender's daily average Commitment during the
period that (i) begins with the date of this agreement or the preceding
commitment fee payment date, as the case may be, and (ii) ends with and
includes the day before the applicable commitment fee payment date.
SECTION 3. GUARANTY AND COLLATERAL
3.1. GUARANTY.
(a) Guarantor hereby unconditionally and irrevocably guarantees to
each Lender for good and valuable consideration (including, but not
limited to, the facts stated in the recitals to this agreement) (i) the
due and punctual payment in full (and not merely the collectibility) of
the principal of each Lender's Note and the interest thereon, in each
case when due and payable, whether on any installment payment date or at
the stated or accelerated maturity, all according to the terms of the
Notes, Pricing Agreement, and this agreement; (ii) the due and punctual
payment in full (and not merely the collectibility) of all other sums
and charges which may at any time be due and payable in accordance with
the Loan Documents; and (iii) the due and punctual performance of all of
the other terms, covenants and conditions contained in the Loan
Documents.
(b) The obligations and liabilities of Guarantor under this
SECTION 3.1 shall be absolute and unconditional, irrespective of the
genuineness, validity, priority, regularity or enforceability of the
Notes or the other Loan Documents or any other circumstance which might
otherwise constitute a legal or equitable discharge of a surety or
guarantor. Guarantor expressly agrees that any Lender (and when
authorized pursuant to SECTION 10.1(A), Agent on behalf of any Lender)
may, in its sole and absolute discretion, intentionally or
unintentionally, without notice to or further assent of Guarantor and
without in any way releasing, affecting or in any way impairing the
obligations and liabilities of Guarantor hereunder: (i) waive
compliance with, or any defaults under, or grant or permit any other
indulgences under or with respect to that Lender's Note or the other
Loan Documents; (ii) modify, amend, change or terminate any provisions
of that Lender's Note or the other Loan Documents; (iii) grant
extensions or renewals of or with respect to that Lender's Note or the
other Loan Documents; (iv) effect any release, subordination, compromise
or settlement in connection with that Lender's Note or the other Loan
Documents; (v) permit the substitution, exchange, release, loss,
impairment or other disposition of the Collateral or any part of the
Collateral, or the subordination of any Lien or security interest
therein; (vi) make advances for the purpose of performing any term,
provision or covenant contained in that Lender's Note or the other Loan
Documents with respect to which Borrower or Guarantor shall then be in
default; (vii) assign, pledge, hypothecate or otherwise transfer that
Lender's Note or any other Loan Document or any interest therein; and
(viii) deal in all respects with Borrower as if this SECTION 3.1 were
not in effect.
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(c) The obligations and liabilities of Guarantor under this
SECTION 3.1 shall be primary, direct and immediate, shall not be subject
to any counterclaim, recoupment, set off, reduction or defense based
upon any claim that Guarantor may have against Borrower or any Lender
and shall not be conditional or contingent upon pursuit or enforcement
by Agent or Lenders of any remedies they may have against Borrower with
respect to the Notes or the other Loan Documents, whether pursuant to
the terms thereof or by operation of law. Without limiting the
generality of the foregoing, neither Agent nor any Lender shall be
required to make any demand upon Borrower, or to sell the Collateral or
otherwise pursue, enforce or exhaust its remedies against Borrower or
the Collateral either before, concurrently with or after pursuing or
enforcing its rights and remedies under this SECTION 3.1. Any one or
more successive or concurrent actions or proceedings may be brought
against Guarantor under this SECTION 3.1, either in the same action, if
any, brought against Borrower or in separate actions or proceedings, as
often as Agent or any Lender may deem expedient or advisable. Without
limiting the foregoing, it is specifically understood that any
modification, limitation, or discharge of any of the Obligations arising
out of, or by virtue of, any bankruptcy, arrangement, reorganization, or
similar proceeding for relief of debtors under any Debtor Laws initiated
by or against Borrower shall not modify, limit, lessen, reduce, impair,
discharge, or otherwise affect the liability of Guarantor hereunder in
any manner whatsoever, and this SECTION 3.1 shall remain and continue in
full force and effect. It is the intent and purpose of this SECTION 3.1
that Guarantor shall and does hereby waive all rights and benefits which
might accrue to Guarantor by reason of any such proceeding, and
Guarantor agrees that it shall be liable for the full amount of the
Obligations, regardless of, and irrespective to, any modification,
limitation, or discharge of the liability of Borrower that may result
from any such proceedings.
(d) Guarantor hereby unconditionally, irrevocably and expressly
waives (i) presentment and demand for payment of the principal of or
interest on any Note, protest of non-payment, notice of intent to
accelerate any Note and notice of acceleration thereof; (ii) notice of
acceptance of the guaranty set forth in this SECTION 3.1 and of
presentment, demand, and protest thereof; (iii) notice of any Default or
Potential Default hereunder (except as otherwise set forth herein) and
notice of all indulgences; (iv) demand for observance, performance, or
enforcement of any of the terms or provisions of the Loan Documents;
(v) any right or claim of right to cause a marshalling of the assets of
Borrower; and (vi) all other notices and demands otherwise required by
law which Guarantor may lawfully waive.
(e) In the event Guarantor shall advance any sums to Borrower, or
in the event Borrower has heretofore or shall hereafter become indebted
to Guarantor before the Obligations have been paid in full and the
Commitments of Lenders shall have terminated, repayment of any and all
such Indebtedness (the "SUBORDINATED DEBT") shall be subordinate in all
respects to repayment of the Obligations. Any payment to Guarantor on
account of the Subordinated Debt shall be collected and received by
Guarantor in trust for Lenders and shall be paid over to Agent for the
benefit of Lenders on account of the Obligations without impairing or
releasing the obligations of Guarantor under this SECTION 3.1. It is
the intention of the parties hereto that Guarantor shall not be deemed
to be a "CREDITOR" (as defined in SECTION 101 of the FEDERAL BANKRUPTCY
CODE) of Borrower by reason of the existence of the guaranty in this
SECTION 3.1 in the event that Borrower becomes a debtor in any
proceeding under the Federal Bankruptcy Code. Guarantor hereby
irrevocably waives any and all rights it may now or hereafter have under
any agreement at law or in equity (including, without limitation, any
law subrogating Guarantor to
25
the rights of Lenders) to assert any claim against or seek contribution,
indemnification, or any other form of reimbursement from Borrower for
any payment made by Guarantor under or in connection with this
agreement.
(f) Without the prior written consent of Determining Lenders,
Guarantor shall not ask, demand, receive, accept, sue for, set off,
collect or enforce any Subordinated Debt or any collateral and security
therefor. Guarantor represents and warrants to Lenders that the
Subordinated Debt is unsecured and agrees not to receive or accept any
collateral or security for any Subordinated Debt without the prior
written permission of Determining Lenders. Guarantor shall not assign,
transfer, hypothecate, or dispose of any Subordinated Debt while this
guaranty under this SECTION 3.1 is in effect. In the event of any sale,
receivership, insolvency, or bankruptcy proceeding, or assignment for
the benefit of creditors, or any proceeding by or against Borrower for
any relief under any Debtor Law, then and in any such event any payment
or distribution of any kind or character, either in cash, securities or
other property, which shall be payable or deliverable upon, or with
respect to, all or any part of the Subordinated Debt or otherwise shall
be paid or delivered directly to Agent for application to the
Obligations (whether due or not due and in such order and manner as
Lenders may determine in the exercise of their sole discretion) until
the Obligations shall have been fully paid and satisfied. Guarantor
hereby irrevocably authorizes and empowers Agent, upon the occurrence
and continuance of a Default, to demand, sue for, collect and receive
every such payment or distribution and give acquittance therefor and to
file claims and take such other proceedings in Agent's own name or in
the name of Guarantor or otherwise, as Determining Lenders may deem
necessary or advisable to carry out the provisions of this SECTION 3.1.
Guarantor hereby agrees to execute and deliver to Agent such powers of
attorney, assignments, endorsements, or other instruments as may be
requested by Agent in order to enable Agent to enforce any and all
claims upon, or with respect to, the Subordinated Debt, and to collect
and receive any and all payments or distributions which may be payable
or deliverable at any time upon or with respect thereto.
(g) Upon the occurrence and continuance of a Default and upon the
request of Agent, Guarantor shall endorse, assign and deliver to Agent
all notes, instruments and agreements evidencing, securing, guarantying
or made in connection with the Subordinated Debt.
(h) If at any time any payment, or portion thereof, made by, or
for the account of, Borrower or Guarantor on account of the Obligations
is set aside by any court or trustee having jurisdiction as a voidable
preference or fraudulent conveyance or must otherwise be restored or
returned by Agent or Lenders under any Debtor Law or as a result of any
dissolution, liquidation or reorganization of Borrower or upon, or as a
result of, the appointment of any receiver, intervenor or conservator
of, or trustee or similar officer for, Borrower or any substantial part
of its properties or assets, Guarantor hereby agrees that the guaranty
set forth in this SECTION 3.1 shall continue and remain in full force
and effect or be reinstated, as the case may be, all as though such
payment(s) had not been made.
3.2. COLLATERAL.
(a) As security for the Obligations and the performance by the
Companies of their respective obligations under this agreement and under
the other Loan Documents, Guarantor grants and conveys a first and prior
security interest and collaterally assigns to Agent, on behalf of
Lenders, any and all right, title, interest, security interest, power
and privilege which
26
Guarantor may now or hereafter have in and to any of
the following property: (i) All Mortgage Notes and Mortgages securing
those Mortgage Notes delivered to, or held by or for Agent from time to
time under this agreement; (ii) all Mortgage-Backed Securities delivered
to, or registered by book-entry in the name of, Agent from time to time
under this agreement; (iii) all other promissory notes or other
instruments which are executed and delivered to or for the benefit of or
payable to Guarantor and which are in the possession of, required to be
delivered to, in transit to or are held by or for Agent for the benefit
of Lenders, and all collateral and security for any such notes and
instruments and all mortgages, security agreements and other documents
granting a lien on or interest in any collateral or security for any
such notes or instruments, (iv) all payments and prepayments of
principal, interest, penalties and other income or payments due or to
become due with respect to any of the foregoing, (v) all Take-Out
Commitments covering any of the foregoing, (vi) all files, documents,
instruments, surveys, certificates, correspondence, appraisals, tapes,
discs, cards, accounting records and other records, information and data
of Guarantor relating to any of the foregoing, (vii) all guaranty or
insurance proceeds of any nature whatsoever paid or payable to Guarantor
with respect to any of the foregoing or with respect to any mortgaged
property securing payment thereof, and (viii) all other proceeds of any
of the foregoing, including all accounts, general intangibles,
instruments, real or personal property, documents, chattel paper and
proceeds arising from or by virtue of or collections with respect to, or
comprising part of, any of the foregoing.
(b) As security for the Obligations and the performance by
Borrower and Guarantor of their respective obligations hereunder and
under the other Loan Documents, Borrower grants and conveys a first and
prior security interest and collaterally assigns to Agent, on behalf of
Lenders, the following Property: (i) any and all right, title,
interest, security interest, power and privilege which Borrower may now
or hereafter have in and to the Funding Account and any funds ever
deposited therein; (ii) any and all right, title, interest, power and
privilege which Borrower may now or hereafter have in and to the
Intercompany Note and any payments or proceeds thereon; and (iii) all
proceeds of any Collateral, including all accounts, general intangibles,
instruments, real or personal property, documents, chattel paper and
proceeds arising from or by virtue of or collections with respect to, or
comprising part of, any of the foregoing.
(c) In furtherance of the foregoing, the Companies (i) hereby
ratify and confirm that all liens and security interests heretofore or
concurrently herewith granted or conveyed to Agent or Lenders by the
Companies in connection with the Existing Loan Documents, this
agreement, or otherwise (as any thereof have been renewed, extended,
amended, or supplemented), whether or not described on SCHEDULE 3.2,
were intended to, did, do, and shall continue to secure the full and
complete payment and performance of the Obligations (including, without
limitation, all amounts now or hereafter evidenced by the Notes),
(ii) agree that the financing statements described on SCHEDULE 3.2 shall
continue in full force and effect, (iii) shall perform such acts and
duly authorize, execute, acknowledge, deliver, file, and record such
additional assignments, security agreements, deeds of trust, mortgages,
modifications or amendments to any of the foregoing, and such other
agreements, documents, and instruments as Agent or any Lender may
reasonably request in order to perfect and protect such liens and
security interests and preserve and protect the rights of Agent and
Lenders in respect of all present and future collateral for the
Obligations.
3.3. DELIVERY TO AGENT. Each Collateral Delivery Notification shall
include a schedule that identifies the Mortgage Notes and Mortgage-Backed
Securities offered as security for the Obligations and
27
states the Collateral Value attributed to each such item. Except as
otherwise set forth in SECTION 2.3 with regard to Wet Borrowings, no later
than 10:30 a.m. Dallas, Texas time on the date of the requested Borrowing,
the following items shall be delivered to Agent (collectively, the
"PRINCIPAL COLLATERAL DOCUMENTS") with respect to each Mortgage Note or
Mortgage Backed Security offered as security:
(a) in the case of Mortgage-Backed Securities, the original of
each certificated form Mortgage Backed Security, accompanied by
appropriate instruments of transfer duly executed in blank;
(b) in the case of Mortgage-Backed Securities, with respect to
each Mortgage Backed Security in book entry form, confirmation
satisfactory to Agent that such Mortgage Backed Security has been
transferred to the account of Agent and that it is not subject to any
lien, encumbrance or adverse claim or any right of transfer in any
Person other than Agent;
(c) in the case of Mortgage Notes, the original of each Mortgage
Note endorsed in blank (without restriction or limitation);
(d) in the case of Mortgage Notes, an original executed assignment
in blank for each Mortgage Note and the Mortgage securing such Mortgage
Note, in recordable form, and otherwise in form satisfactory to Agent;
(e) in the case of Mortgage Notes, to the extent applicable and
requested by Agent, the original executed Take-Out Commitment relating
to each Mortgage Note or a schedule which designates the Take-Out
Commitment relating to such Mortgage Note; and
(f) to the extent a Mortgage Note is not originated by Guarantor,
original executed copies of all intervening assignments to Guarantor.
Guarantor shall hold in trust for Agent the original recorded copy of the
Mortgage relating to each Mortgage Note, a mortgagee policy of title
insurance (or binding unexpired and unconditional commitment to issue such
insurance if the policy has not yet been delivered to Borrower) insuring
Guarantor's perfected, first priority Lien (subject to the Permitted
Exception) created by such Mortgage securing such Mortgage Note, the original
insurance policies referred to in SECTION 6.6, and all other original
documents, including any undelivered Take-Out Commitments, Mortgage Notes,
and Mortgage-Backed Securities, and Guarantor shall specifically identify
such items in the Collateral Delivery Notification. Guarantor must deliver
to Agent any of the foregoing items as soon as reasonably practicable upon
Agent's request. For purposes of SECTION 4.2(B), Guarantor shall be deemed
an approved bailee of Agent to the extent it holds Collateral which
constitutes Eligible Collateral within the meaning of CLAUSE (K)(I) of the
definition of Eligible Collateral.
3.4. POWER OF ATTORNEY. Borrower and Guarantor each hereby irrevocably
appoints Agent, acting on behalf of Lenders, its attorney in fact, with full
power of substitution, for and on behalf and in the name of Borrower or
Guarantor, as the case may be, to (i) endorse and deliver to any Person any
check, instrument or other paper coming into Agent's or any Lender's
possession and representing payment made in respect of any Mortgage Note or
Mortgage Backed Security included in the Collateral or in respect of any
other Collateral or Take-Out Commitment; (ii) prepare, complete, execute,
deliver and record any assignment of any Mortgage relating to any Mortgage
Note, or Mortgage Backed Security
28
to Agent or to any other Person; (iii) endorse and deliver or otherwise
transfer any Mortgage Note or Mortgage Backed Security, and do every other
thing necessary or desirable to effect transfer of all or any part of the
Mortgage Collateral to Agent or to any other Person; (iv) take all necessary
and appropriate action with respect to all Obligations and the Mortgage
Collateral to be delivered to Agent or held by Borrower in trust for Agent;
(v) commence, prosecute, settle, discontinue, defend, or otherwise dispose
of any claim relating to any Take-Out Commitment or any part of the Mortgage
Collateral; and (vi) sign Borrower's or Guarantor's name wherever appropriate
to effect the performance of this agreement. This section shall be liberally,
not restrictively, construed so to give the greatest latitude to Agent's power,
as Borrower's or Guarantor's attorney in fact, to collect, sell, and deliver
any of the Mortgage Collateral and all other documents relating thereto. The
powers and authorities herein conferred on Agent may be exercised by Agent
through any Person who, at the time of the execution of a particular
instrument, is an officer of Agent. The power of attorney conferred by this
SECTION 3.4 shall not be exercised by Agent prior to the occurrence of a
Default and is granted for a valuable consideration and is coupled with an
interest and irrevocable so long as the Obligations, or any part thereof, shall
remain unpaid or any Commitment is outstanding. All Persons dealing with
Agent, or any officer thereof acting pursuant hereto, or any substitute, shall
be fully protected in treating the powers and authorities conferred by this
SECTION 3.4 as existing and continuing in full force and effect until advised
by Agent that the Obligations have been fully and finally paid and satisfied
and all Commitments have been terminated.
3.5. Redemption of Mortgage Collateral.
(a) GENERALLY. So long as no Default or Potential Default shall
be in existence, Borrower or Guarantor may obtain the release of Agent's
security interest in all or any part of the Mortgage Collateral at any
time, and from time to time, by paying to Agent, as a repayment
hereunder, the Collateral Value of the Mortgage Collateral to be so
released (such Collateral Value being determined as of the date such
Mortgage Collateral was first delivered to Agent). Promptly upon
receipt of any such repayment, Agent shall distribute same in accordance
with SECTION 2.6.
(b) REDEMPTION PURSUANT TO SALE. Borrower or Guarantor may from
time to time request that Agent permit the sale of Mortgage Collateral.
Upon the receipt by Agent of such a request from Borrower or Guarantor,
and so long as no Default shall be in existence, Agent shall deliver to
the Investor, under Agent's Trust Receipt and Security Agreement Letter,
in the form of EXHIBIT D-1 or EXHIBIT D-2, as applicable, the items of
Mortgage Collateral being sold which are held by Agent, with the release
of Agent's security interest in those items being conditioned upon
delivery to Agent, within 45 days after delivery by Agent of those items
of Mortgage Collateral, by that Investor of an amount equal to the
Collateral Value of those items of Mortgage Collateral (determined as of
the date such Mortgage Collateral was first delivered by Guarantor or
Borrower to Agent), or, in the case of Mortgage Notes being sold or
exchanged for Mortgage-Backed Securities, Mortgage-Backed Securities
with a Collateral Value (determined as of the date of delivery to Agent)
equal to the Collateral Value of the released Mortgage Notes (determined
as of the date such Mortgage Notes were first delivered by Guarantor or
Borrower to Agent). The delivery of Mortgage-Backed Securities and all
payments made in relation to such Mortgage Collateral by Investors shall
be made directly to Agent, and Guarantor or Borrower shall, as agent for
Agent and only upon the express prior written request of Agent, deliver
to that Investor the items held by Guarantor or Borrower under SECTION
3.3. Items of Mortgage Collateral delivered by Agent to any Investor
under this SECTION 3.5(B) shall cease to be Eligible
29
Collateral upon the EARLIER to occur of (i) the delivery to Agent by that
Investor of either an amount equal to, or Mortgage-Backed Securities with
a Collateral Value (determined as of the date of such delivery) equal to,
the Collateral Value of such Mortgage Collateral (determined as set forth
above), AND (ii) the expiration of 45 days after delivery by Agent of
those items of Mortgage Collateral.
(c) CONTINUATION OF LIEN; APPLICATION OF PROCEEDS. Agent's Liens
in all Mortgage Collateral transmitted to any Investor under SECTION
3.5(B) shall continue in effect until Agent shall have received the
payments or Mortgage-Backed Securities as provided therein. Promptly
upon receipt of any such payment, Agent shall distribute such payments
in accordance with SECTION 2.6. If Agent shall receive Mortgage-Backed
Securities as provided in SECTION 3.5(B), those Mortgage-Backed
Securities shall be Collateral as provided in this agreement.
(d) CERTAIN CREDITS. No Lender shall be under any duty at any
time to credit Borrower for any amounts due from any Investor in respect
of any purchase of any Mortgage Collateral contemplated under SECTION
3.5(B) above, until that Lender has actually received immediately
available funds for such Mortgage Collateral in the amount required
pursuant thereto, and neither Agent nor any Lender shall be under any
duty at any time to collect any amounts or otherwise enforce any
obligations due from any Investor in respect of any such purchase.
3.6. CORRECTION OF MORTGAGE NOTES. The Borrower may from time to time
request that the Agent deliver a Mortgage Note that constitutes Collateral so
that such Mortgage Note may be replaced by a corrected Mortgage Note. Upon
receipt by the Agent of such a request from the Borrower, and so long as no
Default shall be in existence, the Agent shall deliver to the Borrower, under
the Agent's Trust Receipt and Security Agreement Letter, the Mortgage Note to
be corrected, upon the express condition of receipt by Agent of a corrected
Mortgage Note that conforms to the requirements of this agreement; PROVIDED,
that (i) at no time shall more than $2,000,000 of Mortgage Notes (such amount
being the aggregate outstanding principal balances of the Mortgage Notes) be
so delivered and not have been replaced with corrected Mortgage Notes
hereunder, (ii) the corrected Mortgage Note must be delivered to Agent
endorsed in blank (without restriction or limitation) within 21 days of the
release by Agent of the Mortgage Note to be replaced, and (iii) until the
corrected Mortgage Note has been delivered to Agent, the Collateral Value
attributed to the corresponding Mortgage Note that is to be replaced shall be
the lesser of (x) the Collateral Value of the Mortgage Note to be replaced
without giving effect to this proviso and (y) 98% of the principal balance of
the corrected Mortgage Note.
3.7. COLLATERAL VALUE. If at any time any item of Collateral shall
cease to meet any of the requirements for Eligible Collateral or otherwise
ceases to be Eligible Collateral under this agreement, then that item will be
excluded from Eligible Collateral for purposes of determining the aggregate
Collateral Value of all Eligible Collateral, and Agent will notify Borrower
and Guarantor that that item no longer constitutes Eligible Collateral.
3.8. AGENT TO PROVIDE COLLATERAL REPORT. Agent shall send to Guarantor
and each Lender a Collateral Report in the form attached as EXHIBIT C-5 on
each Business Day. Agent shall send the Collateral Report by telecopy by
11:30 a.m. Dallas time.
30
3.9. TRUST RECEIPT AND SECURITY AGREEMENT LETTERS. Agent and the
Companies agree that all Trust Receipt and Security Agreement Letters Agent
receives in connection with this agreement are received in its capacity as
Agent for the benefit of Lenders to secure the Obligations.
SECTION 4. CONDITIONS PRECEDENT. Each Lender's commitment to make
Advances is subject to fulfillment of the following conditions:
4.1. INITIAL BORROWING. Each Lender's commitment to make Advances to
fund the initial Borrowing is subject to, in addition to the conditions
precedent specified in SECTION 4.2, delivery to Agent of all of the
agreements, documents, instruments, and other items described on
SCHEDULE 4.1.
4.2. ALL BORROWINGS. Each Lender's commitment to make any Advance to
fund any Borrowing is subject to the following further conditions precedent:
(a) Borrower has delivered to Agent and Lenders a Credit Request
completed and executed by Borrower, and Guarantor delivered to Agent and
Lenders a Collateral Delivery Notification, all within the applicable
time period set forth in SECTION 2.2.
(b) All Principal Collateral Documents with respect to each
Mortgage Note or Mortgage Backed Security in which Borrower or Guarantor
has granted a Lien to Agent, on behalf of Lenders, has been physically
delivered to the possession of Agent in accordance with SECTION 3.3.
(c) The representations and warranties by the Companies in the
Loan Documents are true and correct in all material respects on and as
of the date of that Borrowing and after giving effect to that Borrowing
EXCEPT to the extent that (i) a representation or warranty speaks to a
specific date or (ii) the facts on which a representation or warranty is
based have changed by transactions or conditions contemplated or
expressly permitted by the Loan Documents.
(d) No Default or Potential Default is continuing as of the date
of any Borrowing and after giving effect to that Borrowing.
(e) The Funding Account is established and in existence.
(f) No limitation set forth in SECTIONS 2.1(A) through (D) is
exceeded as of the date of any Borrowing and after giving effect to that
Borrowing.
(g) Delivery to Agent of the Intercompany Note endorsed to the
order of Agent.
(h) Delivery to Agent of executed financing statements as required
by Agent in order to perfect or maintain the priority of any Lien
granted under this agreement.
(i) Delivery to Agent in sufficient copies for each Lender of any
other documents and opinions of counsel, including any documents as may
be necessary or desirable to perfect or maintain the priority of any
Lien granted or intended to be granted under this agreement whether due
to any change in any Requirement of Law (including any change in the
Requirements of Law
31
applicable to Mortgage-Backed Securities) or otherwise and including
favorable written opinions of counsel as to the perfection, maintenance
and priority of any such Lien, as any Lender through Agent may reasonably
request.
Each Credit Request constitutes a representation and warranty by Borrower on
the date of the requested Borrowing as to the facts specified in CLAUSES (C),
(D), and (F) of this SECTION 4.2.
SECTION 5. REPRESENTATIONS AND WARRANTIES. The Companies jointly and
severally represent and warrant to Agent and Lender as follows:
5.1. ORGANIZATION AND GOOD STANDING. Each Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, is duly qualified as a foreign corporation
and in good standing in all jurisdictions in which its failure to be so
qualified could have a Material Adverse Effect and has the corporate power
and authority to own its properties and assets and to transact the business
in which it is engaged and will be so qualified in those states wherein it
transacts business in the future, except where the failure to be so qualified
would not result in a Material Adverse Effect.
5.2. AUTHORIZATION AND POWER. Each Company has the corporate power and
requisite authority to execute, deliver and perform this agreement, the Notes
and other Loan Documents to which it is a party.
5.3. NO CONFLICTS OR CONSENTS. Neither the execution and delivery of
this agreement, the Notes or the other Loan Documents to which it is a party,
nor the consummation of any of the transactions herein or therein
contemplated, nor compliance with the terms and provisions hereof or with the
terms and provisions thereof, will materially contravene or conflict with any
Requirement of Law to which either Company is subject or any indenture,
mortgage, deed of trust, or other agreement or instrument of which either
Company is a party or by which either Company or any of their respective
Property may be bound, or to which either Company or any of their respective
Property may be subject.
5.4. ENFORCEABLE OBLIGATIONS. This agreement, the Notes and the other
Loan Documents to which it is a party are the legal, valid and binding
obligations of each Company, enforceable in accordance with their respective
terms, except as limited by Debtor Laws and general principles of equity.
5.5. USE OF PROCEEDS. Neither the proceeds of any Advance nor the
proceeds of the intercompany loans under the Intercompany Note has previously
been or is to be used for any purpose other than as described in the recitals
to this agreement.
5.6. PRIORITY OF LIENS. Upon delivery to Agent of each Mortgage Note,
Agent, on behalf of Lenders, shall have valid, enforceable, perfected, first
priority Liens and security interests therein. Upon delivery to Agent or its
bailee of each Mortgage Backed Security in certificated form, Agent, on
behalf of Lenders, shall have valid, enforceable, perfected, first priority
Liens and security interests therein. Upon notice of the Lien of Agent in
each Mortgage Backed Security in book entry form to the financial institution
in whose favor such securities have been issued, and confirmation thereof by
such financial institution, Agent, on behalf of Lenders, shall have valid,
enforceable, perfected, first priority Liens and security interests therein.
Agent, on behalf of Lenders, shall have valid, enforceable, perfected, first
32
priority Liens (a) for a period of 21 days, upon the funding of each Wet
Borrowing, in each corresponding Mortgage Note and related Take-Out
Commitment in accordance with SECTION 2.3, and (b) in all Mortgage Collateral
transmitted to any Investor under SECTION 3.5(B) which shall continue
uninterrupted and in full force in effect until Agent shall have received the
payments or Mortgage-Backed Securities as provided in SECTION 3.5(B).
5.7. NO LIENS. Guarantor has good and indefeasible title to the
Mortgage Collateral and all the Mortgage Collateral is free and clear of all
Liens and other adverse claims of any nature, other than the Liens of Agent
on behalf of Lenders.
5.8. FINANCIAL CONDITION. Each Company has delivered to Lenders copies
of its balance sheet as of December 31, 1992, and the related statements of
income and cash flows for the period ended on such date; such financial
statements are complete and correct in all material respects and fairly
present its financial condition as of such date and its results of operations
for the period ended on such date, and have been prepared in accordance with
GAAP, subject to normal year-end adjustments; as of the date thereof, there
were no obligations, liabilities or Indebtedness (including material
contingent and indirect liabilities and obligations or unusual forward or
long-term commitments) of Borrower or of Guarantor, respectively, which are
not reflected in such financial statements and are required to be reflected
based upon GAAP; and no change having a Material Adverse Effect has occurred
since the date of such financial statements. Each Company has also delivered
to Lenders a management report for the month ended February 28, 1993; such
report fairly and accurately in all material respects presents its commitment
position, pipeline position, mortgage servicing and production, balance
sheet, and income statement as of the end of that month.
5.9. FULL DISCLOSURE. There is no material fact that either Company has
not disclosed to Lenders which could reasonably be expected to have a
Material Adverse Effect, except that no warranty is made regarding general
economic conditions. To the best of each of Company's knowledge, neither the
financial statements referred to in SECTION 5.8, nor any Credit Request or
Collateral Delivery Notification, officer's certificate or written statement
(other than any financial projections) authored by either Company and
delivered by either Company to Agent or any Lender in connection with this
agreement, contains any untrue statement of material fact.
5.10. No DEFAULT. Neither Company is in default under any material loan
agreement, mortgage, security agreement or other material agreement to which
it is a party or by which any of its Property is bound, which default could
reasonably be expected to have a Material Adverse Effect.
5.11. NO MATERIAL LITIGATION. There are no material actions, suits or
legal, equitable, arbitration or administrative proceedings against either
Company or any of their respective Property the adverse determination of
which, in either Company's opinion, will constitute a Material Adverse Effect
and which are (a) pending, or (b) to the knowledge of either Company on the
date of this agreement, threatened.
5.12. TAXES. All tax returns required to be filed by Companies in any
jurisdiction have been filed and all taxes, assessments, fees and other
governmental charges upon either Company or upon any of their respective
Property, income or franchises have been paid prior to the time that such
taxes could give rise to a Lien thereon, unless protested in good faith by
appropriate proceedings and such Lien has been stayed and continues to be
stayed, or unless the failure to have filed such tax returns or to have made
such payment could not reasonably be expected to have a Material Adverse
Effect. Neither
33
Company has any knowledge of any proposed tax assessment against either
Company in a material amount.
5.13. PRINCIPAL OFFICE, ETC. The principal office, chief executive
office and principal place of business of Borrower is at 1201 Market Street,
Wilmington, Delaware 19801, and of Guarantor is at 11000 Broken Land
Parkway, Columbia, Maryland 21044.
5.14. EMPLOYEE BENEFITS PLANS.
(a) Neither Company nor any of their ERISA Affiliates, nor any
Plan, is in material violation of any provision of ERISA or any other
applicable state or federal law, including the Code.
(b) No Prohibited Transaction or Reportable Event has occurred
with respect to any Plan.
(c) No notice of intent to terminate a Plan has been filed, nor
has any Plan been terminated under SECTION 4041(C) of ERISA since
September 2, 1974.
(d) To the best of the Companies' knowledge, the PBGC has not
instituted proceedings to terminate, or appoint a trustee to administer,
any Plan, and no event or condition has occurred or exists which might
constitute grounds under SECTION 4042 of ERISA for the termination of,
or the appointment of a trustee to administer, any Plan.
(e) Neither Company, nor any of their respective ERISA Affiliates
has incurred or expects to incur any withdrawal liability to any
multiemployer plan within the meaning of SECTION 4001(A)(3) of ERISA.
(f) Each Plan meets the minimum funding requirements of
SECTION 412 of the Code and no waiver from such minimum funding
requirements has been applied for or approved pursuant to SECTION 412(D)
of the Code.
5.15. NO APPROVALS REQUIRED. Other than consents and approvals
previously obtained and actions previously taken, neither the execution and
delivery of this agreement, the Notes and the other Loan Documents, nor the
consummation of any of the transactions contemplated by any of the foregoing
requires the consent or approval of, the giving of notice to, or the
registration, recording or filing of any document with (except as necessary
to perfect the Liens granted to Agent for the benefit of Lenders), or the
taking of any other action in respect of, any Governmental Authority which
exercises jurisdiction over either Company or any of their respective
Property.
5.16. SUBSIDIARIES. As of the date of this agreement, other than the
Subsidiaries of Guarantor listed on SCHEDULE 5.16, neither Company has any
Subsidiaries.
5.17. INVESTMENT COMPANY. Neither Company is an "INVESTMENT COMPANY"
within the meaning of the INVESTMENT COMPANY ACT OF 1940, as amended.
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5.18. GOVERNMENT APPROVALS. Guarantor is approved and qualified and in
good standing as an issuer, mortgagee, or seller/servicer, as set forth
below, and meets all requirements applicable to its status as such:
(a) GNMA approved issuer of Mortgage-Backed Securities guaranteed
by GNMA;
(b) FNMA approved seller/servicer of Mortgage Loans, eligible to
originate, purchase, hold, sell, and service Mortgage Loans to
be sold to FNMA;
(c) FHLMC approved seller/servicer of Mortgage Loans, eligible to
originate, purchase, hold, sell, and service Mortgage Loans to
be sold to FHLMC;
(d) FHA approved mortgagee, eligible to originate, purchase, hold,
sell, and service FHA Loans; and
(e) VA approved mortgagee, eligible to originate, purchase, hold,
sell, and service VA Loans.
5.19. SURVIVAL. All representations and warranties by the Companies
herein shall survive delivery of the Notes and the making of the Loan, and
any investigation at any time made by or on behalf of Agent or Lenders shall
not diminish Agent's and Lenders' right to rely thereon.
5.20 APPRAISALS. With respect to the property encumbered by any
Mortgage securing part of the Mortgage Collateral, the Companies have
obtained appraisals or other evaluations of that property, as agent for
Lenders, in compliance with CHAPTER 34A of TITLE 12 of the UNITED STATES
CODE, as hereafter amended, and any regulations promulgated thereunder.
SECTION 6. AFFIRMATIVE COVENANTS. Until the Commitments are all
terminated and the Obligations are paid and performed in full, the Companies
shall comply with the following:
6.1 FINANCIAL STATEMENTS AND REPORTS. The Companies shall furnish to
Lenders the following, all in form and detail reasonably satisfactory to
Lenders:
(a) Promptly when available but at least within 92 days after each
fiscal-year end of Ryland Group, consolidated Financial Statements of
Ryland Group and of Guarantor (including consolidation with -- and
consolidating at least as to -- Borrower) as of that year end, each
reflecting the corresponding figures for the preceding fiscal year in
comparative form, accompanied by the related report prepared by
independent certified public accountants acceptable to Agent and stating
that the consolidated portion of those statements were prepared in
accordance with GAAP applied on a basis consistent with prior periods
except for such changes in GAAP concurred in by the Companies'
independent public accountants;
(b) Promptly when available but at least within 47 days after each
fiscal quarter of Guarantor, consolidated Financial Statements of
Guarantor (including consolidation with -- and consolidating at least as
to -- Borrower) as of that quarter end, each accompanied by (i) a
certificate of the applicable Company's principal financial officer
stating that those statements were prepared in accordance with GAAP,
subject to normal year-end adjustments, and (ii) a
35
completed Officer's Certificate substantially in the form of EXHIBIT E,
executed by the President or any Vice President of the Companies;
(c) Promptly and in any event within 30 days after the end of each
month, a management report substantially in the form of EXHIBIT F
regarding Guarantor's commitment position, pipeline position, mortgage
servicing/delinquency, balance sheet, and income statement prepared as
of the end of such month; and
(d) Such other information concerning the Collateral, the
business, properties or financial condition or operations of the
Companies and Ryland, or otherwise relating to this agreement, as any
Lender may reasonably request.
6.2. TAXES AND OTHER LIENS. Each Company shall pay and discharge
promptly all taxes, assessments and governmental charges or levies imposed
upon either of them or any of their respective Property and all claims of any
kind (including claims for labor, materials, supplies and rent) which, if
unpaid, might become a Lien upon any of their respective Property and which,
if unpaid, could reasonably be expected to have a Material Adverse Effect,
PROVIDED THAT neither Company shall be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
diligently conducted by or on behalf of either Company, that Lien is stayed
and continues to be stayed and each Company shall have set up reserves
therefor adequate under GAAP.
6.3. MAINTENANCE. Each Company shall (a) except as permitted by SECTION
7.1, maintain its corporate existence in good standing and all of its rights,
privileges, licenses and franchises necessary or desirable in the normal
conduct of its business, including, without limitation, Guarantor's
eligibility as lender, seller/servicer and issuer under SECTION 5.18,
(b) observe and comply with all governmental regulations and other
Requirements of Law if the failure to so observe or comply would result in a
Material Adverse Effect, and (c) provide to Agent copies of all audits
conducted by GNMA, FNMA, or FHLMC.
6.4. FURTHER ASSURANCES. Each Company shall promptly, and in any event
within three Business Days after Agent's request, or such longer period as
permitted under SECTION 3.6, cure any defects in the execution and delivery
of the Notes, this agreement and the other Loan Documents and each Company
shall, at their expense, promptly execute and deliver to Agent upon request
all such other and further documents, agreements and instruments in
compliance with or accomplishment of the covenants and agreements of the
Companies in this agreement and in the other Loan Documents or to further
evidence and more fully describe the Collateral intended as security for the
Notes, or to correct any omissions in this agreement or the other Loan
Documents, or more fully to state the security obligations set out herein or
in any of the other Loan Documents, or to perfect, protect or preserve any
Liens created (or intended to be created) pursuant hereto or to any of the
other Loan Documents, or to make any recordings, to file any notices, or
obtain any consents.
6.5. REIMBURSEMENT OF EXPENSES. The Companies jointly and severally
agree to pay (a) all reasonable legal fees incurred by Agent and all
reasonable legal fees in an amount not exceeding $2,500 for each other Lender
in connection with the preparation, negotiation, or execution of this
agreement, the Notes and the other Loan Documents, (b) all reasonable legal
fees in an amount not exceeding $5,000 incurred by Agent and all reasonable
legal fees in an amount not exceeding $1,200 incurred by each other
36
Lender in connection with each separate future amendment, consent, waiver, or
approval executed in connection with this agreement, (c) all fees, charges or
taxes for the recording or filing of the Security Instruments, (d) all other
reasonable out-of-pocket expenses of Agent or any Lender in connection with
the preparation, negotiation, execution or administration of this agreement,
the Notes and the other Loan Documents, including courier expenses incurred
in connection with the Mortgage Collateral, and (e) all amounts expended,
advanced or incurred by Agent or any Lender to satisfy any obligation of
either Company under this agreement or any of the other Loan Documents or to
collect Notes, or to enforce the rights of Agent or any Lender under this
agreement or any of the other Loan Documents, which amounts shall include all
court costs, attorneys' fees (including, without limitation, for trial,
appeal or other proceedings), fees of auditors and accountants, and
investigation expenses reasonably incurred by Agent or any Lender in
connection with any such matters, together with interest at the post-maturity
rate specified in each Note on each item specified in CLAUSES (A) through (E)
from 30 days after the date of written demand or request for reimbursement
until the date of reimbursement. In addition, the Companies jointly and
severally agree to pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of
this agreement, the Notes and the other Loan Documents, and agrees to save
Agent and each Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such
taxes.
6.6. INSURANCE. Each Company shall maintain with financially sound and
reputable insurers, insurance with respect to their respective Properties and
business against such liabilities, casualties, risks and contingencies and in
such types and amounts as satisfy prevailing FNMA, FHLMC, and GNMA
requirements applicable to a qualified mortgage institution and otherwise as
is customary in the case of Persons engaged in the same or similar businesses
and similarly situated. Such insurance shall include, without limitation, a
fidelity bond or bonds in form and with coverage, with a company, and with
respect to such individuals or groups of individuals as satisfy prevailing
FNMA, FHLMC, and GNMA requirements applicable to a qualified mortgage
institution. Upon request of Agent, each Company shall furnish or cause to
be furnished to Agent from time to time a summary of their respective
insurance coverage, in form and substance satisfactory to Agent, and if
requested shall furnish Agent originals or copies of the applicable policies.
6.7. ACCOUNTS AND RECORDS. Each Company shall keep books of record and
account in which full, true and correct entries will be made of all dealings
or transactions in relation to their respective business and activities, in
accordance with GAAP.
6.8. RIGHT OF INSPECTION. Each Company shall permit any officer,
employee or agent of any Lender, during regular business hours and upon three
days prior notice, to visit and inspect any of their respective Property,
examine their respective books of record and accounts, take copies and
extracts therefrom, and discuss their respective affairs, finances and
accounts with their respective officers, accountants and auditors, all as
often as any Lender may desire.
6.9. NOTICE OF CERTAIN EVENTS. Each Company agrees to promptly notify
each Lender upon obtaining knowledge of (a) any notice from, or the taking of
any other action by, the holder of any promissory note, debenture or other
evidence of Indebtedness of either Company (but only if such Indebtedness is
in the amount specified in SECTION 9.1(D)) with respect to a claimed default,
together with a detailed statement by a responsible officer of each Company,
as applicable, specifying the notice given or other action taken by such
holder and the nature of the claimed default and what action each Company, as
applicable, is taking or proposes to take with respect thereto; (b) the
commencement of, or any determination in, any legal, judicial or regulatory
proceedings which, if adversely determined, could
37
reasonably be expected to result in a Material Adverse Effect; or (c) any
dispute between either Company, as applicable, and any Governmental Authority
or any other Person which, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect.
6.10. PERFORMANCE OF CERTAIN OBLIGATIONS. Each Company shall
perform and observe in all material respects each of the provisions of each
Take-Out Commitment and each of its mortgage servicing contracts on its part
to be performed or observed and will cause all things to be done which are
necessary to have each item of Mortgage Collateral and Principal Collateral
Documents covered by a Take-Out Commitment comply with the requirements of
that Take-Out Commitment.
6.11. USE OF PROCEEDS. The proceeds of Advances shall be used by
Borrower solely as represented in this agreement and for no other purposes.
6.12. NOTICE OF DEFAULT. Each Company agrees to furnish to Agent
and to each Lender immediately upon becoming aware of the existence of any
Default or Potential Default (other than any Potential Default with respect
to any payment obligations hereunder), a written notice specifying the nature
and period of existence thereof and the action which Borrower or Guarantor,
as applicable, is taking or proposes to take with respect thereto.
6.13. COMPLIANCE WITH AGREEMENTS. Each Company shall comply with
all agreements, indentures, mortgages or documents binding on it or affecting
its Property or business, except where the failure to so comply would not
result in a Material Adverse Effect.
6.14. EMPLOYEE BENEFIT PLANS. The Companies agree to promptly
furnish to Agent and to each Lender:
(a) Within 10 Business Days after the occurrence of a Reportable
Event with respect to any Plan, a copy of any materials required to be
filed with the PBGC with respect to such Reportable Event;
(b) A copy of any notice of intent to terminate a Plan, no later
than the date such notice is required to be provided to participants of
such Plan under SECTION 4041(A)(2) of ERISA, and copies of any notices
of noncompliance received from the PBGC under SECTION 4041(B)(2)(C) of
ERISA, within 10 Business Days after the receipt by Borrower of such
notice;
(c) Not later than 10 Business Days after the receipt thereof by
either Company, any ERISA Affiliate of either Company, or the
administrator of any Plan, a copy of any notice to either Company or
such ERISA Affiliate that the PBGC has instituted proceedings to
terminate such Plan or to appoint a trustee to administer such Plan;
(d) A statement from the chief financial officer of either
Company, as applicable, describing any event or condition which might
constitute grounds under SECTION 4042 of ERISA for the termination of
any Plan or for the appointment of a trustee to administer any Plan,
within 10 Business Days after either Company knows or has reason to know
such event or condition exists; and
38
(e) Within 10 Business Days after receipt thereof by either
Company or any ERISA Affiliate of either Company, a copy of any notice
concerning the imposition of any withdrawal liability under SECTION 4202
of ERISA.
6.15. BENEFIT PLAN OBLIGATIONS. Each Company shall reduce future
contributions or benefits to each Plan if and to the extent necessary to
avoid the occurrence of a Default under this agreement, to the extent that
reduction may be effected without causing a default under such Plan or a
"PARTIAL TERMINATION", as that term is used in SECTION 411(D) of the Code and
the regulations promulgated pursuant thereto, and without causing the Plan to
become disqualified or violating the provisions of ERISA.
6.16. APPRAISALS. Each Company shall promptly (i) permit any
Lender's authorized representatives to discuss with Borrower's officers or
with the appraisers furnishing appraisals concerning Mortgage Collateral the
procedures for preparation, review, and retention of -- and to review and
obtain copies of -- the appraisals, and (ii) upon any Lender's request,
cooperate with it to ascertain that the appraisals comply with CHAPTER 34A of
TITLE 12 of the UNITED STATES CODE, as hereafter amended, and any regulations
promulgated thereunder.
SECTION 7. NEGATIVE COVENANTS. Until the Commitments are all terminated
and the obligations are paid and performed in full, the Companies shall
comply with the following:
7.1. NO MERGER. (a) Neither Company may merge or consolidate with or
into any corporation except as follows:
(i) any merger solely for the purpose of accomplishing a re-
incorporation in another jurisdiction;
(ii) either Company may merge into the other;
(iii) any subsidiary of either Company may merge into either
Company.
7.2. INDEBTEDNESS. Neither Company may directly or indirectly create,
incur, or suffer to exist any Indebtedness EXCEPT present and future
Indebtedness that is or arises under:
(a) The Senior Obligations;
(b) The Intercompany Note;
(c) Indebtedness owed by Guarantor to Ryland Group that never
exceeds $50,000,000 principal amount, is unsecured, and is subordinated
to the Senior Obligations pursuant to the terms of the Demand Promissory
Note, dated November 25, 1992, executed by Guarantor and payable to the
order of Ryland Group, in form and substance satisfactory to Agent;
(d) Guaranties of an Affiliate's Indebtedness so long as, if the
guaranty is for more than $2,500,000 of Indebtedness, the Company to be
obligated first gives to Agent at least ten days notice of the proposed
guaranty;
(e) Repurchase and reverse repurchase agreements;
39
(f) Letters of credit never in total face amount of more than
$15,000,000 used solely either to (i) replace cash on deposit with any
bond trustee or (ii) support master servicing agreements;
(g) Indebtedness -- used solely to fund on an overnight basis
either Company's California wholesale operations -- that is unsecured
and never exceeds $5,000,000 principal amount;
(h) Other Indebtedness of Guarantor that (i) is unsecured, (ii)
never exceeds $100,000,000, (iii) is subordinated to the Senior
Obligations upon terms satisfactory to Determining Lenders, and (iv) may
not have a maturity (or sinking fund provision) earlier than the
Termination Date;
(i) Other Indebtedness of the Companies incurred after the date of
this agreement that never exceeds $5,000,000 for both of them together;
(j) Other Indebtedness if first approved in writing by all
Lenders; and
09/30/93
(K) INDEBTEDNESS OWED BY GUARANTOR (I) TO A PERSON APPROVED BY
AGENT (II) FOR THE PURPOSE OF FINANCING THE REDEMPTION OF BONDS ISSUED
BY A SPECIAL PURPOSE SUBSIDIARY OF RYLAND GROUP, (III) THAT NEVER
EXCEEDS $60,000,000 PRINCIPAL AMOUNT AT ANY ONE TIME, AND (IV) WHICH
SHALL NOT BE OUTSTANDING FOR MORE THAN 21 CONSECUTIVE BUSINESS DAYS AT
ANY ONE TIME; AND
11/22/93
(L) INVESTMENT FACILITIES.
7.3. FISCAL YEAR ACCOUNTING. Neither Company may change its fiscal year
nor use any accounting method other than GAAP.
7.4. LIQUIDATIONS, CONSOLIDATIONS AND DISPOSITIONS OF SUBSTANTIAL
ASSETS. Neither Company may dissolve or liquidate or sell, transfer, lease
or otherwise dispose of any material portion of its Property or business,
EXCEPT sales or other dispositions by Guarantor, in the ordinary course of
its business, of (a) subject to SECTION 8.4, part of its Servicing Portfolio,
or (b) subject to SECTION 3.5(B), Mortgage Notes or Mortgage-Backed
Securities that are Collateral, or (c) Mortgage Notes or Mortgage-Backed
Securities that are not Collateral.
7.5. LOANS, ADVANCES, AND INVESTMENTS. Neither Company may make or hold
any loan (other than loans made in the ordinary course of its business as a
mortgage company), advance, or capital contribution to, or investment in
(including any investment in any Subsidiary) or purchase or otherwise acquire
any of the capital stock, securities, or evidences of indebtedness of, any
Person (collectively, "INVESTMENTS"), or otherwise acquire any interest in,
or control of, another Person, except for the following:
(a) Investments having a maturity of one year or less in
commercial paper given the highest rating by a nationally recognized
credit rating agency; United States governmental obligations having
maturities of one year or less; certificates of deposit, bankers
acceptances and repurchase agreements issued by a Lender or any
commercial bank having a combined capital and surplus in excess of
$250,000,000, and a rating of C or better by Thompson Bank Watch, Inc.;
40
(b) Any acquisition of securities or evidences of indebtedness of
others when acquired by either Company in settlement of accounts
receivable or other debts arising in the ordinary course of business, so
long as the aggregate amount of any such securities or evidences of
indebtedness is not material to the Companies' financial condition taken
as a whole;
(c) The acquisition of Servicing Rights (including rights to
service multi-family dwelling mortgage loans and pools of multi-family
dwelling mortgage loans for purposes of this SECTION 7.5 only),
Mortgage-Backed Securities, and Mortgage Notes in the ordinary course of
business, and purchases of the stock, or assets of any persons
conducting a mortgage servicing business;
(d) Eurodollar Investments with any Lender or financial
institutions that have (i) combined capital, surplus, and undivided
profits of not less than U.S. $100,000,000, and (ii) a Moody's Investors
Service, Inc. or Standard & Poor's Corporation commercial paper rating
of at least P-1 or A-1 or (if it does not have a commercial paper
rating) a bond rating of at least A-1 or A-, respectively;
(e) Investments in joint ventures by Guarantor with homebuilders
and realtors, for the purpose of originating residential mortgage loans
which do not in the aggregate exceed $5,000,000 at any one time;
(f) Advances or loans by either Company, other than in the
ordinary course of business, to its officers or employees in an
aggregate principal amount outstanding at any one time not in excess of
$500,000;
(g) Loans or advances to Ryland Group up to $50,000,000; PROVIDED
THAT:
(i) no Default may exist at the time of, or as a result of,
any such loan or advance;
(ii) no default by Ryland Group in respect of any material
indebtedness may exist at the time of, or would occur as a result
of, any such loan or advance;
(iii) if the total of those loans and advances in any fiscal
quarter ending after the date of this agreement exceeds 50% of
Guarantor's Net Worth for then-preceding fiscal quarter, then that
excess (A) is deducted from Guarantor's Net Worth for purposes of
this agreement, and (B) must be repaid upon the EARLIER of three
Business Days from the date of that loan or advance AND the last
Business Day of the fiscal quarter;
(h) Extensions of trade credit and other payables in the ordinary
course of business;
(i) Loans and advances to employees of Guarantor or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business;
(j) Investments by Guarantor in any of its present or future
Subsidiaries or investments by any such Subsidiary in Guarantor or in
any other such Subsidiary;
(k) Extensions of credit under the Intercompany Note; and
41
(l) Acquisitions by Guarantor of Mortgage-Backed Securities and
mortgage-backed securities issued by any Subsidiary of Guarantor
resulting from Guarantor's exercise of call rights with respect to such
Mortgage-Backed Securities or mortgage-backed securities.
7.6. USE OF PROCEEDS; MARGIN STOCK. Neither Company may permit the
proceeds of the Advances to be used for any purpose other than those
permitted by SECTION 6.11. Neither the proceeds of any Advance nor the
proceeds of the intercompany loans evidenced by the Intercompany Note shall
be used (a) for the funding or acquisition of construction or commercial
loans, or (b) for the purpose of purchasing or carrying any "MARGIN STOCK" as
defined in Regulation U, or for the purpose of reducing or retiring any
Indebtedness which was originally incurred to purchase or carry margin stock
or for any other purpose which might constitute this transaction a "PURPOSE
CREDIT" within the meaning of Regulation U. Neither the Companies, nor any
Person acting on behalf of the Companies shall take any action in violation
of Regulation U or Regulation X or shall violate SECTION 7 of the SECURITIES
EXCHANGE ACT OF 1934 or any rule or regulation thereunder, in each case as
now in effect or as the same may hereinafter be in effect.
7.7. COLLATERAL MATTERS. Neither Company may:
(a) Relocate its principal office, chief executive office, or
principal place of business or change its corporate name or name under
which its is doing business without first (i) giving Agent 30 days prior
written notice of the proposed relocation or change and (ii) executing
and delivering all additional documents and performing all additional
acts as Agent, in its sole discretion, may request in order to continue
or maintain the existence and priority of the Liens intended to be
created under the Loan Documents in favor of Agent for the benefit of
Lenders.
(b) Compromise, extend, release, or adjust payments on any
Mortgage Collateral, accept a conveyance of mortgaged property in full
or partial satisfaction of any Mortgage Collateral, or release any
Mortgage securing or underlying any Mortgage Collateral;
(c) Agree to the amendment or termination of any Take-Out
Commitment in which Agent has a Lien or to the substitution of a Take-
Out Commitment for a Take-Out Commitment in which Agent has a Lien
hereunder, if that amendment, termination or substitution may reasonably
be expected (as determined by Agent in its discretion) to have a
Material Adverse Effect;
(d) Transfer, sell, assign, or deliver any Mortgage Collateral
pledged to Agent to any Person other than Agent, except pursuant to SEC-
TION 3.5; or
(e) Grant, create, incur, assume, permit, or suffer to exist any
Lien upon any Collateral except for Liens granted to Agent to secure the
Notes and Obligations and any non-consensual Liens as may be deemed to
arise as a matter of law pursuant to any Take-Out Commitment.
7.8. DIVIDENDS. Neither Company may pay or declare any Dividend on its
capital stock during any fiscal year if, immediately after giving effect to
it, the total Dividends paid and Dividends declared but not paid during that
year exceed the SUM of (a) its Net Income for the portion of that fiscal year
through the date that the Dividend is paid or declared, as the case may be,
plus the amount of any cash
42
or cash-equivalent capital contribution made to such Company in such
portion of that fiscal year, plus (b) the remainder of its Net Income
for the preceding fiscal year plus the amount of any cash or
cash-equivalent capital contributions made to such Company in the
preceding fiscal year minus Dividends paid and Dividends declared but not
paid during that fiscal year (OTHER THAN Dividends paid and Dividends
declared but not paid during that preceding fiscal year, as permitted under
this section because of its remaining Net Income for the fiscal year before
that fiscal year).
7.9. LIENS. Neither Company may directly or indirectly create, incur,
or suffer to exist any Lien on any of its Property EXCEPT:
(a) Present and future Liens securing the Obligations;
(b) Present and future Liens on the stock of RMC Asset Management
Company arising under the NationsBank Agreement;
(c) Present and future Liens granted on, or in the nature of a
sale subject to, an obligation to repurchase Mortgage-Backed Securities;
(d) Present and future Liens on all but at least $1,000,000,000 of
unpaid principal balance of Guarantor's Servicing Portfolio;
(e) Present and future Liens securing the Indebtedness under the
NationsBank Agreement but covering only the present and future
collateral that is described in that agreement as of the date of this
agreement and not covering any of the Collateral;
(f) Present and future Liens securing the Indebtedness under the
Bank One Investment Facility but covering only the present and future
collateral described in that agreement as of the date of this agreement
and not covering any of the Collateral;
09/30/93
(G) PRESENT AND FUTURE LIENS SECURING THE INDEBTEDNESS PERMITTED
UNDER SECTION 7.2(E), (F), (I), AND (K); THAT DO NOT COVER ANY OF THE
COLLATERAL; AND
(h) Other present and future Liens that secure Indebtedness that
never exceeds $10,000,000 total in principal amount and do not cover any
of the Collateral.
7.10. RELATED PARTY TRANSACTION. Neither Company may enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate
unless such transaction is otherwise permitted under this agreement, or is in
the ordinary course of the Company's business, or is upon fair and reasonable
terms no less favorable to the Company than it would obtain in a comparable
arms- length transaction with a Person not an Affiliate.
SECTION 8. FINANCIAL COVENANTS. The Companies jointly and severally
agree to comply with the covenants contained in this SECTION 8, from the date
of this agreement and for so long as any part of the Obligations or any
Commitment is outstanding:
8.1. NET WORTH. Borrower's Net Worth may not be less than $1,000,000 as
of the end of any quarter in Borrower's fiscal year.
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8.2. ADJUSTED TANGIBLE NET WORTH. Guarantor's Adjusted Tangible Net
Worth may not be less than $70,000,000 as of the end of any quarter in
Guarantor's fiscal year.
8.3. TOTAL LIABILITIES TO ADJUSTED TANGIBLE NET WORTH RATIO. The ratio
of Guarantor's Total Liabilities to Guarantor's Adjusted Tangible Net Worth
may not be more than 8.0 to 1.0 as of the end of any quarter in Guarantor's
fiscal year.
8.4. MINIMUM SERVICING PORTFOLIO. The unpaid principal balance of
Guarantor's Servicing Portfolio shall not be less than $2,500,000,000 at any
time, PROVIDED THAT Guarantor may be permitted to sell portions of its
Servicing Portfolio and thereby reduce the unpaid principal balance of its
Servicing Portfolio to an amount less than $2,500,000,000 (but in no event
less than $1,500,000,000), if (a) Guarantor has given Agent and Lenders
15 days prior written notice of its intent to sell such portion and (b) the
proceeds of that sale are necessary to allow Guarantor to make payments under
the NationsBank Agreement.
8.5. MINIMUM NET WORTH. Guarantor's Net Worth may not be less than
$50,000,000 as of the end of any quarter in Guarantor's fiscal year.
8.6. NET INCOME PLUS NON-CASH CHARGES. The SUM of Guarantor's Net
Income PLUS all non-cash charges (including depreciation and amortization)
must be greater than $1.00 for Guarantor's current fiscal year and for each
fiscal year of Guarantor thereafter.
8.7. NET INCOME. Borrower's Net Income must be greater than $1.00 for
Borrower's current fiscal year and for each fiscal year of Borrower
thereafter.
SECTION 9. DEFAULTS AND REMEDIES.
9.1. NATURE OF EVENT. As used in this agreement, "DEFAULT" means the
occurrence of any one or more of the following:
(a) Borrower fails to make any payment of principal on any Note
within one Business Day of the date that payment is due, or Borrower
fails to make any payment of interest on any Note or any fee, expense,
or other amount due under this agreement, under any Note or Pricing
Agreement, or under any Security Instrument within three Business Days
of the date that payment is due;
(b) Either Company fails to duly observe and perform any of the
other covenants or agreements contained in this agreement or any of the
other Loan Documents, and that failure continues for a period of 15 days
after either Company first knows of that failure;
(c) Any material statement, warranty, or representation by or on
behalf of either Company or Ryland Group contained in this agreement,
the Notes, or any other Loan Document or any Credit Request or
Collateral Delivery Notification, officer's certificate or other writing
(other than financial projections) authored by either Company or Ryland
Group and furnished in connection with this agreement, proves to have
been incorrect or misleading in any material respect as of the date made
or deemed made;
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(d) Borrower, Guarantor, or Ryland Group fails to make within any
applicable grace period any payment on any other Indebtedness with an
unpaid principal balance of over $500,000 in the case of Borrower,
$1,000,000 in the case of Guarantor, or $20,000,000 in the case of
Ryland Group (and, in the case of any such Indebtedness arising with
respect to a letter of credit issued for the account of Guarantor or
Borrower, such failure continues for a period of 90 days from the date
such payment is due); or any event or condition occurs under any
provision contained in any document or agreement evidencing, governing,
securing, or relating to any such Indebtedness (or any other material
breach or default under any such document or agreement occurs) if as a
result thereof, any such Indebtedness becomes due (other than by
regularly scheduled payments) prior to its stated maturity; or any of
the foregoing occurs with respect to any Indebtedness of Borrower,
Guarantor, or Ryland Group with unpaid principal balances exceeding, in
the aggregate, $2,500,000 in the case of Borrower, $5,000,000 in the
case of Guarantor, or $20,000,000 in the case of Ryland Group; PROVIDED,
however, that the cure of any such default under any such other
Indebtedness, or the waiver of any such default by the holder of such
Indebtedness, shall cure or constitute a waiver of the Default under
this agreement, and provided further that the provisions of this SECTION
9.1(D) do not apply to any Indebtedness which is nonrecourse to
Borrower, Guarantor, or Ryland Group;
(e) Either Company or Ryland Group shall generally not pay its
debts as they become due or shall admit in writing its inability to pay
its debts, or shall make a general assignment for the benefit of
creditors (other than non-recourse debt obligations);
(f) Either Company or Ryland Group shall (i) apply for or consent
to the appointment of a receiver, trustee, custodian, intervenor, or
liquidator of it or of all or a substantial part of its assets,
(ii) file a voluntary petition in bankruptcy, (iii) file a petition or
answer seeking reorganization or an arrangement with creditors or to
take advantage of any Debtor Laws, (iv) file an answer admitting the
material allegations of, or consent to, or default in answering, a
petition filed against it in any bankruptcy, reorganization, or
insolvency proceeding, or (v) take any action for the purpose of
effecting any of the foregoing;
(g) An involuntary petition or complaint shall be filed against
either Company or Ryland Group seeking bankruptcy or reorganization of
that Person or the appointment of a receiver, custodian, trustee,
intervenor, or liquidator of that Person or all or substantially all of
its assets, and such petition or complaint shall not have been
dismissed, within sixty days of the filing thereof; or an order, order
for relief, judgment or decree shall be entered by any court of
competent jurisdiction or other competent authority approving a petition
or complaint seeking reorganization of that Person or appointing a
receiver, custodian, trustee, intervenor, or liquidator of, that Person
or of all or substantially all of its assets;
(h) Either Company or Ryland Group shall fail within 30 days to
appeal, pay, bond, or otherwise discharge any final judgments or orders
for payment of money which (after subtracting from the amount of such
judgment or order the amount of any insurance coverage) exceed
$1,000,000 in the case of Borrower or Guarantor, or $5,000,000
individually in the case of Ryland Group, or $5,000,000 in the aggregate
in the case of Borrower or Guarantor, or $15,000,000 in the aggregate in
the case of Ryland Group;
(i) Any Person shall levy on, seize, or attach all or any material
portion of the assets of either Company or Ryland Group and within 30
days thereafter neither Company shall have
45
dissolved such levy or attachment, as the case may be, and, if
applicable, regained possession of such seized assets;
(j) A Reportable Event or Prohibited Transaction shall have
occurred with respect to a Plan resulting in a liability which has a
Material Adverse Effect;
(k) A notice of intent to terminate a Plan under a "DISTRESS
TERMINATION" as described in SECTION 4041(C) of ERISA shall be filed
resulting in a liability which has a Material Adverse Effect;
(l) The Plan administrator or either Company shall receive a
notice that the PBGC has instituted proceedings to terminate a Plan or
appoint a trustee to administer a Plan, which is reasonably likely to
result in a liability which has a Material Adverse Effect;
(m) Either Company or any of their ERISA Affiliates shall withdraw
from a multiemployer Plan, which withdrawal is reasonably likely to
result in a liability which has a Material Adverse Effect;
(n) Any material provision of this agreement, any Note, or any
other Loan Document shall for any reason cease to be in full force and
effect, or be declared null and void or unenforceable in whole or in
part, or the validity or enforceability of any such document shall be
challenged or denied by either Company;
(o) Any change in the ownership of either Company shall occur, the
result of which is that Borrower ceases to be directly or indirectly
wholly beneficially owned by Guarantor, or Guarantor ceases to be
directly or indirectly wholly beneficially owned by Ryland Group;
(p) Guarantor shall fail to meet any GNMA seller or servicing
standard or requirement which results in a Material Adverse Effect, or
GNMA shall revoke or terminate Guarantor's right to service for GNMA, or
GNMA shall issue a letter of extinguishment under any GNMA guaranty
agreement; or
(q) Guarantor shall cease to be an eligible issuer or servicer
under any FNMA or FHLMC guide, or FNMA or FHLMC shall impose any
sanctions upon Guarantor resulting in a Material Adverse Effect, or FNMA
or FHLMC shall terminate or revoke Guarantor's right to service for FNMA
or FHLMC, or FNMA or FHLMC shall initiate any transfer of servicing from
Guarantor to another Person other than in the ordinary course of
business.
9.2. REMEDIES.
(a) Upon the occurrence of a Default described in SECTION 9.1(E),
(F), (G), or (O), the commitments of Lenders to lend hereunder shall be
terminated and the outstanding Loan, and the accrued and unpaid interest
thereon, and the other Obligations shall automatically become due and
payable, without presentment, demand, notice of default, notice of
acceleration, or other requirements of any kind, all of which are
expressly waived by the Companies.
(b) While a Default exists -- other than those described in
SECTION 9.1(E), (F), (G), or (O) -- and regardless of whether any one or
more Lenders have waived that Default as to
46
themselves, upon prior written notice to Agent, Lenders, and the
Companies, any Lender may terminate its Commitment as of the date
provided in that notice. No termination by any Lender shall be
effective unless and until Lenders have complied with the provisions of
SECTION 2.8(A). Upon that Lender's termination, it may reduce any claim
in respect of its Note to judgment and the outstanding portion of the
Loan owed to that Lender and the accrued and unpaid interest thereon
shall automatically become due and payable, without presentment, demand,
notice of default, notice of acceleration, or other requirements of any
kind, all of which are expressly waived by the Companies.
(c) While a Default exists (other than those described in SECTION
9.1(E), (F), (G), or (O)), Agent shall, upon the direction of
Determining Lenders, declare the Loan, the accrued and unpaid interest
thereon, and all other Obligations, or any part thereof, to be
immediately due and payable, whereupon they shall be due and payable,
and the commitments of Lenders to lend under this agreement shall be
automatically terminated.
(d) Following the termination of the commitments of Lenders to
lend under this agreement, and upon the acceleration of the Obligations,
Agent may, and at the direction of Determining Lenders shall, do any one
or more of the following:
(i) Reduce any claim to judgment;
(ii) Foreclose upon or otherwise enforce any Liens on
Collateral in favor of Agent for the benefit of Lenders;
(iii) Notify all obligors of Collateral serviced by either
Company and all servicers of other Collateral that the Collateral
has been assigned to Agent and that all payments thereon are to be
made directly to Agent or any other party as may be designated by
Agent; settle, compromise, or release, in whole or in part, any
amounts owing on the Collateral by any obligor, servicer or any
Investor of any portion of the Collateral, on terms acceptable to
Agent; enforce payment and prosecute any action or proceeding with
respect to any and all Collateral and where any such Collateral is
in default, foreclose on and enforce liens in such Collateral by
any available judicial procedure or without judicial process and
sell property acquired as a result of any such foreclosure;
(iv) Act, or contract with a third party to act, as servicer
of each item of Collateral serviced by either Company and perform
all obligations required in connection with Take-Out Commitments;
(v) Exercise all rights and remedies of a secured creditor
under the TEXAS BUSINESS & COMMERCE CODE, including without
limitation selling the Collateral at public or private sale,
including sale pursuant to any applicable Take-Out Commitment. To
the extent that applicable law requires that either Company receive
notice of or prior to any such sale (or any other disposition of
Collateral) the Companies agree that 10 days notice shall be
reasonable notice. At any sale or other disposition, the
Collateral may be sold or disposed of as an entirety or in separate
parts, as Agent may determine. Agent may, without notice or
publication, adjourn any public or private sale or cause the same
to be adjourned from time to time by announcement at the time and
place fixed for the sale,
47
and that sale may be made at any time or place to which the same
may be so adjourned. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold
may be retained by Agent until the selling price is paid by the
purchaser thereof, but Agent shall not incur any liability in case
of the failure of that purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, that
Collateral may again be sold upon like notice. Agent may, however,
instead of exercising the power of sale herein conferred upon it,
proceed by a suit or suits at law or in equity to collect all
amounts due upon the Collateral or to foreclose on and sell the
Collateral or any portion of the Collateral under a judgment or
decree of a court or courts of competent jurisdiction, or both; and
(vi) Exercise, any other rights, remedies, and privileges in
this agreement or provided at law or otherwise that Determining
Lenders may direct.
Should any Default be continuing which, in Agent's opinion, materially
and adversely affects the Collateral or the interests of the Lenders under
this agreement, Agent may, in a notice to the Lenders of that Default set
forth one or more actions that Agent, in its opinion, believes should be
taken. Unless otherwise directed by Determining Lenders (excluding the
Lender serving as agent hereunder) within ten days following the date of the
notice setting forth the proposed action or actions, Agent may, but shall not
be obligated to, take the action or actions set forth in that notice.
9.3. RIGHT OF OFFSET. The Companies hereby grant to Agent and to each
Lender a right of offset, to secure the repayment of the Obligations, upon
any and all monies, securities, or other property of the Companies, and the
proceeds therefrom now or hereafter held or received by or in transit to
Agent or such Lender from or for the account of the Companies, whether for
safekeeping, custody, pledge, transmission, collection, or otherwise, and
also upon any and all deposits (general or special, time or demand,
provisional, or final) and credits of the Companies, and any and all claims
of the Companies against Agent or such Lender, at any time existing. Upon
the occurrence of any Default, Agent and each Lender is hereby authorized at
any time and from time to time, without notice to either Company, to offset,
appropriate, and apply any and all items hereinabove referred to against the
Obligations, subject to SECTION 2.8. Notwithstanding anything in this
section or elsewhere in this agreement to the contrary, neither Agent nor any
other Lender shall have any right to offset, appropriate, or apply any
accounts of the Companies which consist of escrowed funds (except and to the
extent of any beneficial interest which the Companies have in such escrowed
funds) which have been so identified by either Company in writing at the time
of deposit thereof.
9.4. PRIVATE SALES. Agent shall incur no liability as a result of the
sale of the Collateral, or any part of the Collateral, at any private sale
made in a commercially reasonable manner. The Companies hereby waive any
claims either of them may have against Agent arising because the price at
which the Collateral may have been sold at that private sale was less than
the price which might have been obtained at a public sale or was less than
the Obligations.
9.5. WAIVERS. The Companies waive any right to require Agent to (a)
proceed against any Person, (b) proceed against or exhaust any of the
Collateral or pursue its rights and remedies as against the Collateral in any
particular order, or (c) pursue any other remedy in its power. Agent shall
not be required to take any steps necessary to preserve any rights of either
Company against any Person from which either Company purchased any Mortgages,
Mortgage Notes, or Mortgage-Backed Securities, or to preserve rights against
prior parties. The Companies and each surety, endorser, guarantor, pledgor,
48
and other party ever liable or whose Property is ever liable for payment of
any of the Obligations jointly and severally waive presentment and demand for
payment, protest, notice of intention to accelerate, notice of acceleration,
and notice of protest and nonpayment, and agree that their or their
Property's liability with respect to the Obligations, or any part thereof,
shall not be affected by any renewal or extension in the time of payment of
the Obligations, by any indulgence, or by any release or change in any
security for the payment of the Obligations, and hereby consent to any and
all renewals, extensions, indulgences, releases, or changes, regardless of
the number thereof.
9.6 PERFORMANCE BY AGENT. Should any covenant, duty, or agreement of
either Company fail to be performed in accordance with the terms of this
agreement or of any document delivered under this agreement, Agent may, at
its option, after notice to Borrower or Guarantor, as the case may be,
perform, or attempt to perform, such covenant, duty, or agreement on behalf
of that Company and shall notify each Lender that it has done so. In such
event, the Companies shall jointly and severally, at the request of Agent,
promptly pay any amount expended by Agent in such performance or attempted
performance to Agent at its principal place of business, together with
interest thereon at the Maximum Rate from the date of such expenditure by
Agent until paid. Notwithstanding the foregoing, it is expressly understood
that Agent does not assume and shall never have, except by express written
consent of Agent, any liability or responsibility for the performance of any
duties of either Company under this agreement or under any other document
delivered under this agreement.
9.7. NO RESPONSIBILITY. Except in the case of fraud, gross negligence,
or willful misconduct, Agent nor any of its officers, directors, employees,
or attorneys shall assume, and shall ever have any liability or
responsibility for, any diminution in the value of the Collateral or any part
of the Collateral.
9.8. NO WAIVER. The acceptance by Agent or any Lender at any time and
from time to time of partial payment or performance by either Company of any
of their respective obligations under this agreement or under any Loan
Document shall not be deemed to be a waiver of any Default then existing. No
waiver by Agent or any Lender shall be deemed to be a waiver of any other
then existing or subsequent Default. No delay or omission by Agent or any
Lender in exercising any right under this agreement or under any other
document required to be executed under or in connection with this agreement
shall impair such right or be construed as a waiver thereof or any
acquiescence therein, nor shall any single or partial exercise of any such
right preclude other or further exercise thereof, or the exercise of any
other right under this agreement or otherwise.
9.9. CUMULATIVE RIGHTS. All rights available to Agent and the Lenders
under this agreement or under any other document delivered under this
agreement shall be cumulative of and in addition to all other rights granted
to Agent and the Lenders at law or in equity, whether or not the Notes be due
and payable and whether or not Agent shall have instituted any suit for
collection, foreclosure, or other action in connection with this agreement or
any other document delivered under this agreement.
9.10. APPLICATION OF PAYMENTS AND PROCEEDS.
(a) While a Default exists, all payments and proceeds -- whether
voluntary, involuntary, through the exercise of any right of set-off or
other right, realization against any Collateral, or otherwise -- shall
be applied in the following order:
(i) All costs and expenses incurred by Agent in connection
with its duties under the Loan Documents, including, without
limitation, fees and expenses paid by
49
Agent to any servicing companies retained by Agent to assist it in
servicing any Collateral required to be serviced, to any attorneys,
or to any agents.
(ii) Accrued and unpaid interest on the Loan, to be applied in
the proportion that the amount of interest owed to each Lender
bears to the total of all interest owed to all Lenders.
(iii) If all the Commitments are not then terminated, the
portion of the Loan owed to each Terminating Lender, to be applied
in the proportion that each Terminating Lender's portion of the
Loan bears to the total portions of the Loan owed to all
Terminating Lenders.
(iv) The Loan, to be applied based upon each Lender's Loan
Percentage.
(v) All costs and expenses incurred by any Lender in
connection with the Loan Documents, to be applied in the proportion
that each Lender's share of those costs and expenses bears to the
total of those costs and expenses for all Lenders.
(vi) All other portions of the Obligations, to be applied in
the proportion that each Lender's share of those amounts bears to
the total of those amounts for all Lenders.
(vii) Either (A) to Guarantor or to its successors or assigns,
or (B) as a court of competent jurisdiction may direct.
(b) Upon Agent's request, each Lender shall provide to Agent that
Lender's certificate as to any amounts owed to it under (i) CLAUSE
(A)(II) above, OTHER THAN interest payments accompanied by a Payment
Direction and interest at the Default Rate, and (ii) CLAUSES (A)(V), and
(VI) above -- which certificate shall be conclusive absent manifest
error. Agent shall distribute payments and proceeds to Lenders under
those clauses based upon the certificates it receives. If a Lender
fails to provide to Agent any certificate within three Business Days
after the request, Agent may continue to distribute payments and
proceeds in the order in SECTION 9.10(A) above without regard to amounts
that may be owed to that Lender for which that certificate was requested
until Agent receives that certificate.
(c) If the proceeds of any sale or exercise of any rights are
insufficient to satisfy the full Obligations, then the Companies shall
remain liable jointly and severally for any deficiency.
9.11. RIGHTS OF INDIVIDUAL LENDERS. No Lender shall have any right
by virtue, or by availing itself, of any provision of this agreement to
institute any action or proceedings at law or in equity or otherwise
(excluding any actions in bankruptcy and any actions authorized by SECTION
9.2(B)), upon or under or with respect to this agreement, or for the
appointment of a receiver, or for any other remedy under this agreement,
unless the Determining Lenders previously shall have given to Agent written
notice of a Default and of the continuance thereof and made written request
upon Agent to institute such action or proceedings in its own name as Agent
and shall have offered to Agent reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or
thereby, and Agent, for 10 business days after its receipt of such notice,
request and offer of indemnity, shall have failed to institute any such
action or proceeding and no direction inconsistent with such written request
shall have been
50
given to Agent by Determining Lenders; it being understood and intended, and
being expressly covenanted by the taker and holder of every Note with every
other taker and holder and Agent, that no one or more holders of Notes shall
have any right in any manner whatever by virtue, or by availing itself, of
any provision of this agreement to affect, disturb or prejudice the rights of
any other Lenders, or to obtain or seek to obtain priority over or preference
to any other such Lender, or to enforce any right under this agreement,
except in the manner herein provided and for the equal, ratable and common
benefit of all Lenders. For the protection and enforcement of the provisions
of this SECTION 9.11, each and every Lender and Agent shall be entitled to
such relief as can be given either at law or in equity.
9.12. NOTICE TO AGENT. Should any Default or Potential Default
occur and be continuing, any Lender having actual knowledge thereof shall
notify Agent and the Companies of the existence thereof, but the failure of
any Lender to provide that notice shall not prejudice that Lender's rights
under this agreement.
9.13. COSTS. All court costs, reasonable attorneys' fees, other
costs of collection, and other sums spent by Agent or any Lender in the
exercise of any right or remedy (including, without limitation, any effort to
collect or enforce any Note) provided in this agreement shall be payable to
Agent or such Lender, as the case may be, on demand, shall become part of the
Obligations, and shall bear interest, at a rate equal to the LESSER of the
Maximum Rate AND the Federal Funds Rate (as defined in the Notes) plus 6%,
from the date paid by Agent or any Lender until the date repaid by either
Company.
SECTION 10. AGENT.
10.1. AUTHORIZATION AND ACTION.
(a) Each Lender hereby appoints Bank One, Texas, N.A., as Agent,
in its name and on its behalf, to (i) receive all documents and items to
be furnished to it under this agreement; (ii) act as Agent for and on
its behalf in and under all of the Loan Documents (other than the
Notes); (iii) arrange the means of distributing the funds to be provided
to Borrower and to each Lender; (iv) distribute to Lenders information,
requests, payments, prepayments, documents, and items received from
Borrower, Guarantor and others under this agreement; and (v) deliver to
the Companies and others (as is appropriate) requests, demands,
approvals, and consents received from each Lender; PROVIDED THAT the
Companies shall forward directly to each Lender all reports (financial
or otherwise) required to be furnished to each Lender by the Companies,
under this agreement. Each Lender recognizes and understands that, if
Agent exercises the remedies provided under SECTION 9 and Agent does not
have adequate facilities (and Agent shall have no obligation to develop
adequate facilities) to service any Collateral required to be serviced,
it will be necessary for Agent to contract with a third party to service
such Collateral, and the fees paid for such services will be a prior
charge against the Collateral pursuant to SECTION 9.10(A)(I). As to any
matter not expressly provided for by this agreement (including, without
limitation, enforcement or collection of the Notes), Agent shall not be
required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected
in so acting or refraining from acting) upon the instructions of
Determining Lenders; PROVIDED, HOWEVER, that Agent shall not be required
to take any action which exposes Agent to liability or which is contrary
to this agreement or applicable law. Agent agrees to give to each
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Lender prompt notice of (a) each notice given to it by either Company
under this agreement, and (b) its approval of any Person as an Investor.
(b) In conjunction with SECTION 10.1(A), Agent shall collect, as
agent for each of the Lenders, (i) all principal payments of or on
account of the aggregate outstanding Advances owing to such Lender and
(ii) after a Default, all interest on the Note held by such Lender plus
all other amounts due to such Lender on account of the Obligations under
this agreement. After a Default, each of the Lenders shall advise Agent
upon the request of Agent of the rate of interest such Lender is
charging Borrower pursuant to each Lender's Note and Pricing Agreement.
To the extent any Lender charges interest in excess of the Maximum Rate,
that Lender hereby indemnifies Agent and holds it harmless from and
against any and all liabilities, losses, damages, penalties, actions,
judgments, suits, costs, expenses, and disbursements of any kind or
nature whatsoever which may be imposed on, asserted against, or incurred
by Agent in any way relating thereto.
10.2. AGENT'S RELIANCE, ETC. Neither Agent nor any of its
directors, officers, agents or employees shall be liable for any action taken
or omitted to be taken by it or them under or in connection with this
agreement, except for its or their own gross negligence or willful
misconduct, except as otherwise set forth in SECTION 10.7 when acting in its
capacity as Custodian. Without limitation of the generality of the
foregoing, Agent (a) may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (b) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for
any statements, warranties or representations made in or in connection with
this agreement; (c) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions of
this agreement on the part of the Companies or to inspect the Property
(including the books and records) of the Companies (except as specifically
set forth in SECTION 10.7); (d) shall not be responsible to any Lender for
the due execution (by any party hereto other than Agent), legality, validity,
enforceability, genuineness, sufficiency or value of this agreement or any
other instrument or document furnished pursuant hereto (except as
specifically set forth in SECTION 10.7); and (e) shall incur no liability
under or in respect of this agreement by acting in accordance with this
agreement upon any notice, consent, certificate or other instrument or
writing (which may be by telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties. Agent shall not
be compelled to do any act or to take any action toward the execution or
enforcement of the powers hereby created, or to prosecute or defend any suit
in respect hereof, unless indemnified to its satisfaction against any and all
loss, cost, liability, and expense it may incur. Subject to the foregoing
limitations and to any direction of the Determining Lenders to take action in
accordance with SECTION 9, Agent shall perform the duties imposed upon it
under this agreement with respect to the Collateral with the same amount of
diligence and using the same amount of judgment and discretion as if Agent
were acting solely for its own account, and, in connection therewith, Agent
is hereby authorized (a) to settle, compromise, and release claims against
the makers of, and any Person obligated with respect to, any Collateral, (b)
to foreclose on, and enforce security interests in, any Collateral or
Property secured thereby, (c) to sell Collateral and Property acquired as the
result of foreclosure under this agreement and the Security Instruments, and
(d) to do all other acts and things as Agent, in its sole discretion, may
deem necessary or appropriate to protect the rights and interests of itself
and the Lenders and to realize the benefits of the Collateral.
52
10.3. AGENT AND AFFILIATES. With respect to its Commitment, the
Advances made by it and the Note issued to it, Bank One, Texas, N.A. shall
have the same rights and power under this agreement as any other Lender and
may exercise the same as though it were not Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Bank One,
Texas, N.A. in its individual capacity. Bank One, Texas, N.A. and its
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, the
Companies or any of their respective Subsidiaries and any Person who may do
business with or own securities of Borrower or any such Subsidiary, all as if
Bank One, Texas, N.A. were not Agent and without any duty to account therefor
to Lenders. Each Lender and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any
kind of business with, the Companies or any of their respective Subsidiaries
and any Person who may do business with or own securities of Borrower or any
such Subsidiary, all as if each Lender were not a Lender under this agreement
and without any duty to account therefor to any other Lender.
10.4. LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based
on the financial statements referred to in SECTION 5.8 and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this agreement. Each Lender also
acknowledges that it will, independently and without reliance upon Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action under this agreement.
10.5. INDEMNIFICATION. Lenders agree to indemnify Agent severally
and not jointly (to the extent not reimbursed by Borrower or Guarantor),
ratably according to their Loan Percentages (or if no Notes are at the time
outstanding, ratably according to the ratio of each Lender's Commitment to
the total Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any or nature whatsoever which may be imposed
on, incurred by, or asserted against Agent in any way relating to or arising
out of this agreement or any action taken or omitted by Agent under this
agreement, PROVIDED THAT no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from Agent's gross
negligence or willful misconduct (or, with respect to Agent's duties as
Custodian, such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting from
Custodian's negligence or willful misconduct). Without limitation of the
foregoing, each Lender agrees to reimburse Agent promptly upon demand its
ratable share of any out-of-pocket expenses (including counsel fees) incurred
by Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect
of rights or responsibilities under, this agreement, to the extent that Agent
is not reimbursed for such expenses by the Companies. After such amounts
have been imposed upon or incurred by any Lender, such amounts shall be
payable upon demand and shall bear interest, from the date of demand until
paid, at a fluctuating interest rate per annum equal for each day during such
period to the Federal-Funds Rate.
10.6. SUCCESSOR AGENT. Agent may resign at any time by giving
written notice to Lenders and the Companies and may be removed at any time
with or without cause by Determining Lenders other than Agent. Any
resignation of Agent will become effective upon the appointment of a
successor. Upon any such resignation or removal, Determining Lenders shall
have the right to appoint a successor Agent. If no successor Agent shall
have been so appointed by Lenders, and shall have accepted that appointment,
within 30 days after the retiring Agent's giving of notice of resignation or
Lenders' removal of the
53
retiring Agent, then the retiring Agent may, on behalf of Lenders, appoint a
successor Agent, which shall be a commercial or savings bank organized under
the laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $250,000,000. No resignation or
removal of Agent shall become effective until a successor agent is appointed
pursuant to the provisions of, and has accepted the appointment as provided
in, this SECTION 10.6. Any successor agent appointed as provided in this
SECTION 10.6 shall execute and deliver to the Companies and their predecessor
agent an instrument accepting such appointment, and thereupon the resignation
or removal of the predecessor agent shall become effective and that successor
agent, without any further act, deed or conveyance, shall become vested with
all the rights and obligations of its predecessor under this agreement, with
like effect as if originally named as Agent; but, nevertheless, on the
written request of Borrower or of the successor agent, Agent ceasing to act
shall execute and deliver an instrument transferring to that successor agent
all the rights of Agent so ceasing to act and shall execute and deliver to
that successor agent such instruments as are necessary (including assignments
of all Collateral and Security Instruments) to transfer the Collateral to
that successor agent. Upon request of any successor agent, the Companies
shall execute any and all instruments in writing for more fully and certainly
vesting in and confirming to that successor agent all such rights. No
successor agent shall accept appointment as provided in this section unless
at the time of such acceptance that successor agent shall be eligible under
the provisions of this SECTION 10.6. Any Person into which Agent may be
merged or converted or with which it may be consolidated, or any Person
surviving or resulting from any merger, conversion, or consolidation to which
Agent shall be a party, or any Person succeeding to the corporate trust
business of Agent, shall be the successor Agent under this agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto. After any retiring Agent's resignation or removal as
Agent, the provisions of this SECTION 10 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
agreement.
10.7. AGENT AS CUSTODIAN. Each Lender hereby appoints Agent to act
as Custodian to take such action as Custodian on its behalf and to exercise
such powers under this agreement as are delegated to the Custodian by the
terms hereof, together with such powers as are reasonably incidental thereto.
Custodian's duties hereunder shall include (a) review of the Collateral
delivered to Custodian and verification that such Collateral meets the
definitional requirements for such Collateral set forth in this agreement and
that such Collateral meets the requirements of SECTION 3.3, (b) storage of
such Collateral in an area standard in the industry or other area as
requested by Lenders, (c) determination of the value of such Collateral, on a
daily basis, (d) preparation of periodic reports whenever required by any
Lender regarding the status of such Collateral, and (e) release of such
Collateral in accordance with the terms of SECTION 3.5 or SECTION 3.6.
Neither Agent acting in its capacity as Custodian nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted
to be taken by it or them under or in connection with this agreement, except
for its or their own negligence or willful misconduct. Custodian shall incur
no liability under or in respect of this agreement by acting in accordance
with this agreement upon any notice, consent, certificate or other instrument
or writing (which may be by telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
SECTION 11. INDEMNIFICATION. In consideration of Lender's Commitments, the
Companies jointly and severally agree to indemnify and defend each Lender and
any Person deemed to control any Lender and their respective directors,
officers, agents, and employees from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages, deficiencies, interest,
judgments, costs, or expenses (including but not limited to reasonable
attorneys' fees) incurred by any of them -- including,
54
without limitation, those resulting from or based upon ORDINARY NEGLIGENCE of
any of them -- arising from or because of (a) any investigation, litigation,
or other proceeding brought or threatened in connection with any Loan Document
or the transactions contemplated by the Loan Documents, including, without
limitation, any use by Borrower of the proceeds of Borrowings or by Guarantor
of the proceeds of advances under the Intercompany Note, (b) any impoundment,
attachment, or retention of any Mortgage Collateral or any failure of any
Investor to pay the entire purchase price of any Mortgage Collateral under
any Take-Out Commitment, (c) any alleged violation of any federal or state
law relating to usury in connection with any Mortgage Collateral, and (d) any
representation made by either Company under any Loan Document; PROVIDED THAT
this section may not be construed to apply to any indemnitee's own gross
negligence, willful misconduct, or fraud. The Companies shall provide
indemnification and defense under this section upon written request by Agent
or any Lender.
SECTION 12. MISCELLANEOUS.
12.1. HEADINGS. The headings, captions, and arrangements used in
any of the Loan Documents are, unless specified otherwise, for convenience
only and shall not be deemed to limit, amplify, or modify the terms of the
Loan Documents, nor affect the meaning thereof.
12.2. NONBUSINESS DAYS; TIME. Any payment or action that is due
under any Loan Document on a non-Business Day may be delayed until the next-
succeeding Business Day (but interest shall continue to accrue on any
applicable payment until payment is in fact made) unless the payment concerns
a LIBOR-Rate Borrowing, in which case if the next-succeeding Business Day is
in the next calendar month, then such payment shall be made on the next-
preceding Business Day. Unless otherwise indicated, all time references
(E.G., 10:00 a.m.) are to Dallas, Texas, time.
12.3. COMMUNICATIONS. Unless otherwise stated, when a Loan Document
requires or permits any consent, approval, notice, request, objection, or
demand from one party to another, it must be written and is deemed given:
- for Credit Requests, Conversion Requests, Collateral Delivery
Notifications, and Payment Directions, only when actually received
by Agent;
- otherwise, if by telecopy, when transmitted to the appropriate
telecopy number (but, without affecting the date deemed given, a
telecopy communication must be promptly confirmed by telephone);
- otherwise, if by mail, on the third Business Day after enclosed in
a properly addressed, stamped, and sealed envelope deposited in the
appropriate official postal service; and
- otherwise if by other means, when actually delivered.
Until changed by notice, the address and telecopy number are stated for (a)
the Companies and Agent, beside their names on the signature pages below, and
(b) each Lender, beside its name on SCHEDULE 2.1.
12.4. FORM AND NUMBER OF DOCUMENTS. The form, substance, and number
of counterparts of each writing to be furnished under this agreement must be
satisfactory to Agent and its counsel.
55
12.5. EXCEPTIONS TO COVENANTS. No party to a Loan Document may take
or fail to take any action that is permitted as an exception to any of the
covenants contained in any Loan Document if that action or omission would
result in the breach of any other covenant contained in any Loan Document.
12.6. SURVIVAL. All covenants, agreements, undertakings,
representations, and warranties made in any of the Loan Documents (a) survive
all closings under the Loan Documents until the total Commitments have been
terminated and the Obligations have been paid in full, and (b) except as
otherwise indicated, are not affected by any investigation made by any party.
12.7. GOVERNING LAW. The laws (OTHER THAN conflict-of-laws
provisions) of the State of Texas and of the United States of America govern
the rights and duties of the parties to the Loan Documents and the validity,
construction, enforcement, and interpretation of the Loan Documents.
12.8. INVALID PROVISIONS. Any provision in any Loan Document held
to be illegal, invalid, or unenforceable is fully severable; the appropriate
Loan Document shall be construed and enforced as if that provision had never
been included; and the remaining provisions shall remain in full force and
effect and shall not be affected by the severed provision. Agent, Lenders,
the Companies, and each other party to the affected Loan Document shall
negotiate, in good faith, the terms of a replacement provision as similar to
the severed provision as may be possible and be legal, valid, and enforce-
able.
12.9. AMENDMENTS, WAIVERS, ETC., AND CONFLICTS. An amendment of --
or an approval, consent, or waiver by one or more Lenders under -- any Loan
Document must be in writing and must be:
(a) Executed by the Companies and Agent if it purports to remove
as a party to this agreement any Lender whose Commitment has been
terminated in accordance with SECTION 2.4.
(b) Executed by the Companies, Agent, and the particular Lender if
it purports to (i) reduce or increase that Lender's Commitment and is
accompanied by any prepayment to that Lender due because of that
reduction and by a replacement Note payable to that Lender in the amount
of its reduced or increased Commitment or (ii) change the payment terms
of a Lender's Pricing Agreement.
(c) Executed by the Companies, Agent, and any financial
institution becoming a Lender under this agreement if it purports only
to add that Lender and its Commitment to this agreement and is
accompanied by a Note payable to that new Lender in the amount of its
Commitment.
(d) Executed by the Companies and Agent if it purports to reduce
or increase any fees payable to Agent by the Companies.
(e) Executed by the Companies and Agent and executed or approved
in writing by all Lenders if it purports to (i) extend the due date,
decrease the amount of any scheduled payment (except in respect of a
particular Lender, under that Lender's Pricing Agreement), change any
rate or amount of interest, decrease fees, or decrease other amounts
payable to Agent or any Lender under the Loan Documents (OTHER THAN fees
payable only to Agent), (ii) change the definition of "COMMITMENT
PERCENTAGE," "COLLATERAL VALUE," "DETERMINING LENDERS," "ELIGIBLE
COLLATERAL," "LOAN PERCENTAGE," "MARKET VALUE," or "TERMINATION DATE,"
56
(iii) partially or fully release any guaranty or any Collateral (OTHER
THAN releases of Collateral contemplated in this agreement), or
(iv) change SECTION 2.6, 2.8, 3.5, 3.6, 3.7, 4.2, 8, 9.1, 9.2, 9.9,
9.10, 12.2, OR 12.9 or any other matter specifically requiring action by
all Lenders under the Loan Documents.
(f) Otherwise (i) for this agreement, executed by the Companies,
Agent, and Determining Lenders or (ii) for other Loan Documents,
approved in writing by Determining Lenders and executed by the
Companies, Agent, and any other party to that Loan Document.
Amendments under CLAUSES (A), (B)(I), and (C) above shall be substantially in
the form of the attached EXHIBIT H and under CLAUSE (D) above shall be in the
form acceptable to the Companies and Agent. Upon any amendment or change
under CLAUSES (A), (B)(I), or (C) that results in the change of Lenders under
this agreement or any of their Commitments, SCHEDULE 2.1 is deemed
automatically to be amended to reflect those changes, and Agent shall
circulate to the parties to this agreement an amended SCHEDULE 2.1 reflecting
those changes. Agent's and Lender's Rights under the Loan Documents may not
be waived by course of dealing or failure or delay in the exercise of those
Rights. An approval, consent, or waiver is only effective for the specific
instance and purpose for which it is given. The Loan Documents may only be
supplemented by agreements, documents, and instruments delivered according to
their respective express terms. Any conflict or ambiguity between this
agreement's provisions and any other Loan Document's provisions must be
resolved in favor of this agreement's provisions.
12.10. MULTIPLE COUNTERPARTS. Any Loan Document may be executed in a
number of identical counterparts, each of which shall be deemed an original
for all purposes and all of which constitute, collectively, one agreement;
but, in making proof of any Loan Document, it shall not be necessary to
produce or account for more than one counterpart. Each initial Lender need
not execute the same counterpart of this agreement so long as identical
counterparts are executed by the Companies, each initial Lender, and Agent.
This agreement shall become effective when counterparts of this agreement
have been executed and delivered to Agent by each initial Lender, Agent, and
the Companies, or, in the case only of those Lenders, when Agent has received
telecopied or other evidence satisfactory to it that each Lender has executed
and is delivering to Agent a counterpart of this agreement.
12.11. SPECIAL AGENT. Each Lender appoints Borrower and Guarantor as
its special agent for the sole and limited purpose of obtaining and
maintaining appraisals in respect of Mortgage Collateral otherwise required
in this agreement.
12.12. SUCCESSORS AND ASSIGNS; PARTICIPATION; NOVATION.
(a) This agreement binds and inures to the Companies, Agent, and
Lenders and their respective successors and assigns, EXCEPT THAT
(i) neither Company may, directly or indirectly, assign or transfer (or
attempt to do so) any of its Rights, duties, or obligations under any
Loan Document without the express written consent of all Lenders, and
(ii) except as permitted in this SECTION 12.12, no Lender may transfer,
pledge, assign, sell any participation in, or otherwise encumber its
Commitment or portion of the Obligations:
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell
to one or more Persons (each a "PARTICIPANT") participating interests in
its Commitment and its portion of the Obligations so long as: (i) the
57
selling Lender must remain -- and the Participant does not become -- a
"LENDER" under this agreement, (ii) the selling Lender's obligations
under the Loan Documents remain unchanged, (iii) the selling Lender
remains solely responsible for the performance of those obligations,
(iv) the selling Lender remains the holder of its share of the Loan for
all purposes under the Loan Documents, and (v) the Companies and Agent
may continue to deal solely and directly with the selling Lender in
connection with those Rights and obligations. Participants have no
Rights under the Loan Documents except certain voting Rights provided
below. Subject to the following, each Lender may obtain (on behalf of
its Participants) the benefits of the Loan Documents with respect to all
participations in its part of the Obligations so long as Borrower is
never obligated to pay any amount in excess of the amount that would be
due to the selling Lender under the Loan Documents calculated as though
no participation had been made. No Lender may sell any participating
interest under which the Participant has any Rights to approve any
amendment of or approval, consent, or waiver under any Loan Document,
EXCEPT to the extent such amendment, consent, approval, or waiver
extends the due date for payment of any principal, interest, or fees due
to that Lender, reduces the amount or rate of interest payable to that
Lender, or releases any guaranty or Collateral (OTHER THAN releases of
Collateral contemplated in this agreement). In those cases where a
Participant is entitled to the benefits of this agreement or entitled to
vote upon certain matters, that Lender must include a voting mechanism
in the relevant participation agreement providing that a majority of
that Lender's portion of the Loan (whether held by that Lender or
participated) controls the vote for all of that Lender's Commitment
Percentage or Loan Percentage, as the case may be. Except in the case
of the sale of a participating interest to a Lender, the relevant
participation agreement must not permit the Participant to transfer,
pledge, assign, sell participation in, or otherwise encumber its portion
of the Obligations.
(c) Subject to the provisions of this section, if no Default is
continuing, and upon the prior written consent of Borrower (which will
not be unreasonably withheld) and Agent, and except that the aggregate
Commitment for Bank One, Texas, N.A., and its Affiliates must at all
times be at least $25,000,000 unless reduced by a reduction in the total
Commitments, then any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable law, sell
to one or more financial institutions (each a "PURCHASER") a
proportionate part (not less than $15,000,000) of all or any part of its
Rights and obligations under the Loan Documents. That Purchaser shall
assume such rights and obligations, pursuant to an assignment agreement
reasonably acceptable to Agent and Borrower. Upon (i) delivery of an
executed copy of the assignment agreement to Borrower and Agent and
(ii) payment of a fee of $1,000 from such transferor to Agent, from and
after the assignment's effective date (which must be after the date of
such delivery): (A) That Purchaser is for all purposes a Lender party
to -- with all the Rights and obligations of a Lender under -- this
agreement, with a Commitment as stated in the assignment agreement; (B)
the transferor Lender is released from its obligations under the Loan
Documents to a corresponding extent (which may be 100% if it has sold
100% of its interest in the Obligations and Loan Documents); (C)
SCHEDULE 2.1 is automatically deemed to reflect the name, address, and
Commitment of that Purchaser, and Agent shall deliver to the Companies
and Lenders an amended SCHEDULE 2.1 reflecting those changes; (D)
Borrower shall execute and deliver to each of the transferor Lender and
such Purchaser a Note in the face amount of its Commitment following
such transfer, and, upon receipt of such Note, such transferor Lender
shall return to Borrower the Note previously delivered to such Lender
under this agreement; and (E) a Purchaser is subject to all the
provisions in this agreement, the same as if it were a Lender that
executed this agreement on its original date.
58
(d) Any Lender may at any time, without the consent of either
Company, Agent, or any other Lenders, assign all or any part of its
Rights under the Loan Documents to a Federal Reserve Bank, but no such
assignment releases the transferor Lender from its obligations under the
Loan Documents.
(e) Notwithstanding anything to the contrary contained herein, a
Lender may not sell or participate any of its interests for a purchase
price which, directly or indirectly, reflects a discount from face
value, without first offering such sale or participation to the other
Lenders on ratable basis according to their Commitment Percentages.
(f) Any purported assignment, transfer, or sale in contravention
of the foregoing provisions is void from beginning and not effective.
(g) Neither the Companies nor Agent shall be required to incur any
cost or expense incident to any sale to a Participant or Purchaser of
any interest in the Obligations, and all such costs and expenses shall
be for the account of Lender selling its rights in the Obligations to
such Participant.
(h) If pursuant to CLAUSE (B) above any interest in the
Obligations is transferred to any Participant or Purchaser which is
organized under the laws of any jurisdiction other than the United
States of America or any state thereof, the transferor Lender shall
cause such Participant, concurrently with the effectiveness of such
transfer, (i) to represent to the transferor Lender (for the benefit of
the transferor Lender, Agent, and Borrower) that under applicable laws
no taxes will be required to be withheld by Agent, Borrower, or the
transferor Lender with respect to any payments to be made to such
Participant in respect of the Obligations, (ii) to furnish to each of
the transferor Lender, Agent, and Borrower two duly completed copies of
either U.S. INTERNAL REVENUE SERVICE FORM 4224 or U.S. INTERNAL REVENUE
SERVICE FORM 1001 (wherein such Participant claims entitlement to
complete exemption from U.S. federal withholding tax on all interest
payments hereunder), and (iii) to agree (for the benefit of the
transferor Lender, Agent, and Borrower) to provide the transferor
Lender, Agent, and Borrower a new FORM 4224 or FORM 1001 upon the
obsolescence of any previously delivered form and comparable statements
in accordance with applicable United States laws and regulations and
amendments duly executed and completed by such Participant, and to
comply from time to time with all applicable laws with regard to such
withholding tax exemption.
12.13. ENTIRE AGREEMENT. THE NOTES, THIS AGREEMENT, AND THE OTHER
LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES HERETO AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS AMONG THE
PARTIES.
12.14. RENEWAL, EXTENSION, OR REARRANGEMENT. All provisions of this
agreement and of the other Loan Documents shall apply with equal force and
effect to each and all Notes hereby executed which in whole or in part
represent a renewal or extension for any period, increase or rearrangement of
any part of the Obligations originally represented by the Notes or of any
part of such other Obligations.
12.15. WAIVER OF JURY TRIAL. Each Company and each Lender hereby
knowingly and voluntarily waive any and all rights it may have to a trial by
jury with respect to any litigation based on, or arising
59
out of, under, or in connection with, the Loan Documents. Each Lender is
hereby authorized to submit, as conclusive evidence of such waiver of jury
trial, this agreement to a court that has jurisdiction over the subject
matter of such litigation and the parties to this agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
60
ASSOCIATES MORTGAGE FUNDING RYLAND MORTGAGE COMPANY,
CORPORATION, BORROWER GUARANTOR
Associates Mortgage Funding Ryland Mortgage Company
Corporation 11000 Broken Land Parkway
1201 Market Street Columbia, Maryland 21044
Wilmington, Delaware 19801 Attention: President
Attention: President Telecopy No. (410) 715-7195
By /S/ ALEXANDER J. STAVROLAKIS By /S/ ROBERT J. GAW
---------------------------- --------------------------
Alexander J. Stavrolakis, Robert J. Gaw,
Assistant Treasurer President
BANK ONE, TEXAS, NATIONAL FIRST UNION NATIONAL BANK OF
ASSOCIATION, a LENDER and NORTH CAROLINA, a LENDER
AGENT
Bank One, Texas, National
Association
1717 Main Street By /S/ JOSEPH A. MATYSEK
Dallas, Texas 75201 ---------------------
Telecopy No. (214) 290-2275 Jospeh A. Matysek,
Attention: Ms. Pamela E. Skinner Vice President
Vice President
By /S/ PAMELA E. SKINNER
----------------------
Pamela E. Skinner,
Vice President
TEXAS COMMERCE BANK NATIONAL DRESDNER BANK AG, NEW YORK
ASSOCIATION, a LENDER BRANCH, a LENDER
By /S/ WILLIAM J. CLARK By /S/ CHARLES H. HILL
-------------------- -------------------
William J. Clark, Charles H. Hill,
Vice President Vice President
By /S/ PETER BECKER
----------------
Peter Becker,
Vice President
61
GUARANTY FEDERAL BANK, F.S.B., THE BANK OF TOKYO TRUST
a LENDER COMPANY, a LENDER
By /S/ JAMES E. ROBERTSON By /S/ J.J. WALLACE, JR.
---------------------- ---------------------
James E. Robertson, J.J. Wallace, Jr.,
Vice President Executive Vice President
THE INDUSTRIAL BANK OF JAPAN THE FIRST NATIONAL BANK OF
TRUST COMPANY, a LENDER MARYLAND,
a LENDER
By /S/ TAKESHI KAWANO By /S/ F. WINFIELD TRICE, JR.
------------------ --------------------------
Takeshi Kawano, F. Winfield Trice, Jr.,
Senior Vice President Vice President
and Senior Manager
KLEINWORT BENSON LIMITED, a NBD BANK, N.A., a LENDER
LENDER
By /S/ PATRICK F. DONELAN By /S/ ANDREW HEINECKE
---------------------- -------------------
Patrick F. Donelan, Andrew H. Heinecke,
Director First Vice President
TRUST COMPANY BANK, a LENDER
By /S/ JOHN H. VINCENT
-------------------
John H. Vincent,
Banking Officer
By /S/ HOLLIS LINGINFELTER
-----------------------
Hollis Linginfelter,
Vice President
62