EXHIBIT 10.31
186
UNCOMMITTED GESTATION FINANCING AGREEMENT
between
NVR MORTGAGE FINANCE, INC.
a Virginia corporation
and
BANK ONE, TEXAS, NATIONAL ASSOCIATION
March 15, 1996
187
TABLE OF CONTENTS
PRELIMINARY MATTERS........................................................................... 1
ARTICLE I GENERAL TERMS.................................................................... 1
Section 1.1 Loan Agreement Definitions........................................... 1
Section 1.2 Certain Definitions.................................................. 1
Section 1.3 Other Definitional Provisions........................................ 6
ARTICLE II AMOUNT AND TERMS OF CREDIT....................................................... 7
Section 2.1 No Commitment........................................................ 7
Section 2.2 Note................................................................. 7
Section 2.3 Manner of Requesting and Obtaining Borrowings........................ 7
Section 2.4 Mandatory Repayments................................................. 7
Section 2.5 Business Days........................................................ 7
Section 2.6 Payment Procedure.................................................... 7
Section 2.7 Requirements of Law.................................................. 8
Section 2.8 Interest............................................................. 9
ARTICLE III COLLATERAL....................................................................... 9
Section 3.1 Granting Clause...................................................... 9
Section 3.2 Borrowing Requests................................................... 9
Section 3.3 Power of Attorney.................................................... 10
Section 3.4 Disposition of Collateral............................................ 11
Section 3.5 Representations and Warranties Regarding Collateral.................. 12
Section 3.6 Borrower Appointed Agent............................................. 12
Section 3.7 Settlement Account................................................... 12
ARTICLE IV CONDITIONS PRECEDENT............................................................. 13
Section 4.1 Initial Borrowing Request............................................ 13
Section 4.2 All Borrowing Requests............................................... 13
ARTICLE V BORROWER REPRESENTATIONS AND WARRANTIES.......................................... 14
Section 5.1 Authorization and Power.............................................. 14
Section 5.2 No Conflicts or Consents............................................. 14
Section 5.3 Enforceable Obligations.............................................. 14
Section 5.4 Priority of Liens.................................................... 14
Section 5.5 No Liens............................................................. 14
Section 5.6 Full Disclosure...................................................... 14
Section 5.7 Securities Acts and Securities Credit Transaction Regulations........ 14
Section 5.8 No Approvals Required................................................ 15
Section 5.9 Loan Agreement Representations and Warranties........................ 15
Section 5.10 Survival of Representations.......................................... 15
ARTICLE VI AFFIRMATIVE COVENANTS.............................................................. 15
Section 6.1 Financial Statements and Reports..................................... 15
Section 6.2 Further Assurances................................................... 15
Section 6.3 Reimbursement of Expenses............................................ 15
Section 6.4 Appraisals........................................................... 16
Section 6.5 Right of Inspection.................................................. 16
188
Section 6.6 Notice of Certain Events............................................. 16
Section 6.7 Performance of Certain Obligations................................... 16
Section 6.8 Use of Proceeds; Margin Stock........................................ 16
Section 6.9 Notice of Default.................................................... 17
Section 6.10 Compliance with Loan Documents....................................... 17
Section 6.11 Compliance with Loan Agreement....................................... 17
ARTICLE VII NEGATIVE COVENANTS................................................................ 17
Section 7.1 Use of Proceeds...................................................... 17
Section 7.2 Actions with Respect to Collateral................................... 17
Section 7.3 Loan Agreement Covenants............................................. 17
ARTICLE VIII EVENTS OF DEFAULT................................................................ 18
Section 8.1 Nature of Event...................................................... 18
Section 8.2 Default Remedies..................................................... 18
ARTICLE IX CONCERNING BANK ONE................................................................ 19
Section 9.1 Indemnification...................................................... 19
Section 9.2 Limitation of Liability.............................................. 19
ARTICLE X MISCELLANEOUS....................................................................... 19
Section 10.1 Notices.............................................................. 19
Section 10.2 Amendments, Etc...................................................... 20
Section 10.3 Invalidity........................................................... 20
Section 10.4 Survival of Agreements............................................... 20
Section 10.5 Renewal, Extension or Rearrangement.................................. 20
Section 10.6 Waivers.............................................................. 20
Section 10.7 Cumulative Rights.................................................... 21
Section 10.8 Construction......................................................... 21
Section 10.9 Interest............................................................. 21
Section 10.10 Right of Offset...................................................... 21
Section 10.11 Successors and Assigns; Confidentiality.............................. 22
Section 10.12 Bank One Representations and Warranties.............................. 22
Section 10.13 Consent to Jurisdiction.............................................. 22
Section 10.14 Exhibits............................................................. 22
Section 10.15 Titles of Articles and Sections...................................... 23
Section 10.16 Counterparts......................................................... 23
Section 10.17 ENTIRE AGREEMENT..................................................... 23
189
UNCOMMITTED GESTATION FINANCING AGREEMENT
-----------------------------------------
THIS UNCOMMITTED GESTATION FINANCING AGREEMENT is made and entered into as
of March 15, 1996, between NVR Mortgage Finance, Inc., a Virginia corporation
(the "Borrower") and Bank One, Texas, National Association ("Bank One").
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PRELIMINARY MATTERS
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The Borrower and Bank One wish to set forth their agreement regarding
requests from time to time by the Borrower for certain credit and the terms and
conditions relevant to such credit as Bank One may, in its sole discretion,
extend pursuant to this Agreement.
AGREEMENT
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The parties hereto hereby agree as follows:
Article I
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GENERAL TERMS
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Section 1.1 Loan Agreement Definitions. Capitalized terms used and not
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otherwise defined in this Agreement have the meanings specified in the Loan
Agreement, together with such changes thereto as to which Bank One may consent.
Section 1.2 Certain Definitions. As used in this Agreement, the following
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terms have the meanings specified:
"Advance" means an advance by Bank One pursuant to Section 2.1.
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"Agency" means FNMA, FHLMC or GNMA.
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"Agency Commitment" means a binding and enforceable agreement on the
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part of (a)FNMA or FHLMC to issue Mortgage Backed Securities in exchange
for Mortgage Loans or (b) GNMA to guarantee Mortgage Backed Securities to
be issued by the Borrower. Agency Commitment includes the FNMA Guide, the
FHLMC Guide or the GNMA Guide, as applicable, pursuant to which such Agency
Commitment was issued.
"Agency Custodian" means Bank One, First Chicago National Processing
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Corporation or such other Person as to whom Bank One may consent, in its
capacity as document custodian on behalf of an Agency and bailee on behalf
of the Agent.
"Agency Forms" means forms promulgated by an Agency for use in
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connection with the delivery of Mortgage Loans and the issuance or guaranty
of a Mortgage Backed Security pursuant to an Agency Commitment.
"Agreement" means this Uncommitted Gestation Financing Agreement, as
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amended, modified or supplemented from time to time.
"Allocated" has the meaning specified in Section 3.2.
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"Average Advances" for a particular Computation Period means the
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amount equal to (a) the sum of the outstanding Advances for each day in
such Computation Period divided by (b) the number of days in such
Computation Period.
"Average Borrowing Base" for a particular Computation Period means the
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amount equal to (a) the sum of the Borrowing Base for each day in such
Computation Period divided by (b) the number of days in such Computation
Period.
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"Average MBS Collateral Value" for a particular Computation Period
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means the amount equal to (a) the sum of the Collateral Value attributable
to Eligible Mortgage Backed Securities for each day in such Computation
Period divided by (b) the number of days in such Computation Period.
"Average ML Collateral Value" for a particular Computation Period
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means the amount equal to (a) the sum of the Collateral Value attributable
to Eligible Mortgage Loans for each day in such Computation Period divided
by (b) the number of days in such Computation Period.
"Bank One" has the meaning specified in the preamble of this
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Agreement. "Borrower" has the meaning specified in the preamble of this
Agreement.
"Borrowing" means a borrowing consisting of an Advance by Bank One.
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"Borrowing Base" as of any time of determination means the sum of:
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(a) The aggregate Collateral Value of all pools of Eligible Mortgage
Loans; and
(b) the aggregate Collateral Value of all Eligible Mortgage Backed
Securities.
"Borrowing Request" means a request, in the form of Exhibit "B", for a
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Borrowing pursuant to Article II.
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"Business Day" means any day other than Saturdays, Sundays and other
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days on which commercial banks are authorized or required by law to close
in the State of Texas.
"Collateral" means all right, title and interest of the Borrower in
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and to each of the following items or types of property, whether now owned
or hereafter acquired, wherever located, however arising or created, and
whether now existing or hereafter arising, existing or created:
(a) any Pledged Mortgage Loan;
(b) any Instrument delivered by or on behalf of the Borrower to Bank
One or which the Borrower has agreed to deliver or cause to be delivered to
Bank One pursuant to this Agreement, including the Mortgage Notes which
evidence the Pledged Mortgage Loans;
(c) all General Intangibles, Principal Mortgage Documents and Other
Mortgage Documents (including, without limitation, any Required Mortgage
Documents) which relate to the Pledged Mortgage Loans;
(d) any Pledged Agency Commitment;
(e) any Pledged Take-Out Commitment;
(f) the Settlement Account and all sums on deposit therein; and
(g) all Proceeds of any of the foregoing, including, without
limitation, any Mortgage Backed Security issued in exchange for or to
represent an undivided interest in any Pledged Mortgage Loan.
"Collateral Value" means:
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(a) With respect to a pool of Eligible Mortgage Loans, an amount
equal to ninety-nine percent (99%) of the Take-Out Price for such pool of
Eligible Mortgage Loans; and
(b) with respect to an Eligible Mortgage Backed Security, an amount
equal to ninety-nine percent (99%) of the Take-Out Price for such Eligible
Mortgage Backed Security.
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Any item of Collateral which ceases to be or is not an Eligible Mortgage
Loan or an Eligible Mortgage Backed Security shall have a Collateral Value
of zero.
"Computation Period" means a calendar month during the term of this
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Agreement, or if applicable for the month which includes the date of actual
execution and delivery of this Agreement and the month which includes the
Termination Date, the period during such month when one or more Advances is
outstanding.
"Default" means any condition or event which, with the giving of
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notice or lapse of time or both and unless cured or waived, would
constitute an Event of Default.
"Eligible Mortgage Backed Security" means a Mortgage Backed Security:
---------------------------------
(a) In which Bank One has a perfected first-priority security interest to
secure the Obligations; (b) which constitutes Proceeds of Pledged Mortgage
Loans and which satisfies all requirements for purchase under the Pledged
Take-Out Commitment to which it has been Allocated; (c) which has not been
owned by the Borrower for more than five Business Days; (d) with respect to
which the Investor under the Pledged Take-Out Commitment to which such
Mortgage Backed Security has been Allocated is not in default of its
obligations under such Pledged Take-Out Commitment; and (e) with respect to
which such Pledged Take-Out Commitment is not subject to any Lien other
than a Permitted Lien.
"Eligible Mortgage Loan" means a Pledged Mortgage Loan: (a) In which
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Bank One has a perfected first-priority security interest to secure the
Obligations; (b) which satisfies all requirements for delivery under the
Pledged Agency Commitment to which it has been Allocated; (c) which is a
part of a pool with respect to which the Agency Custodian has notified Bank
One that such pool has been certified (or initially certified) to the
Agency obligated under such Pledged Agency Commitment and (d) with respect
to which such Pledged Agency Commitment is not subject to any Lien other
than a Permitted Lien.
"Event of Default" has the meaning specified in Section 8.1.
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"Excess Advances" for a particular Computation Period means the amount
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equal to (a) the Average Advances for such Computation Period minus (b) the
sum of (i) the MBS Advances for such Computation Period and (ii) the ML
Advances for such Computation Period.
"General Intangible" has the meaning given to such term in Article 9
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of the UCC.
"Instrument" has the meaning given to such term in Article 9 of the
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UCC. "Loan Agreement" means that certain Amended and Restated Loan
Agreement dated as of November 1, 1993, among the Borrower, Bank One as
agent and the Persons party thereto as Lenders, as in effect on March 15,
1996 and without regard to whether such agreement has terminated.
"Loan Agreement Bailee Letter" means a "bailee letter and trust
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receipt" under the Loan Agreement.
"Loan Agreement Event of Default" means an "event of default" as
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defined in the Loan Agreement.
"Loan Document" means any and "Loan Documents" means the collective
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reference to each of this Agreement, the Note, the Security Instruments and
any and all other agreements or instruments now or hereafter executed and
delivered by or on behalf of the Borrower in connection with, or as
security for the payment or performance of any or all of the Obligations,
as any of such documents may be renewed, amended or supplemented from time
to time. Notwithstanding anything to the contrary in the Loan Agreement,
the Loan Agreement is not a Loan Document.
"Material Adverse Effect" means any material adverse effect on (i) the
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validity or enforceability of this Agreement, the Note or any other Loan
Document, (ii) the business, operations, total Property or financial
condition of the Borrower, (iii) the collateral under any Security
Instrument, (iv) the enforceability or priority of the Lien in favor of
Bank One on the collateral under any Security Instrument, or (v) the
ability of the Borrower timely to perform the Obligations.
"Maximum Credit Amount" means FIFTY MILLION DOLLARS ($50,000,000).
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192
"Maximum Rate" has the meaning specified in Section 10.9.
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"MBS Advances" for a particular Computation Period means the amount
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equal to (a) the product of the MBS Factor for such Computation Period
times (b) the lesser of (i) the Average Advances for such Computation
Period and (ii) the Average Borrowing Base for such Computation Period.
"MBS Factor" for a particular Computation Period means the amount
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equal to the ratio of (a) the Average MBS Collateral Value for such
Computation Period to (b) Average Borrowing Base for such Computation
Period.
"MBS Rate" for a particular Computation Period means the per annum
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rate of interest equal to the sum of (a) the Average Federal Funds Rate for
such Computation Period and (b) thirty-five one-hundredths of one percent
(0.35%).
"ML Advances" for a particular Computation Period means the amount
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equal to (a)the product of the ML Factor for such Computation Period times
(b) the lesser of (i) the Average Advances for such Computation Period and
(ii) the Average Borrowing Base for such Computation Period.
"ML Factor" for a particular Computation Period means the amount equal
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to the ratio of (a) the Average ML Collateral Value for such Computation
Period to (b) Average Borrowing Base for such Computation Period.
"ML Rate" for a particular Computation Period means the per annum rate
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of interest equal to the sum of (a) the Average Federal Funds Rate for such
Computation Period and (b) seven-tenths of one percent (0.70%).
"Note" means the Uncommitted Gestation Financing Promissory Note
----
delivered by the Borrower to Bank One pursuant to Section 2.2 in the form
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attached hereto as Exhibit "A" and all renewals, extensions, modifications
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and rearrangements thereof.
"Obligations" means all present and future indebtedness, obligations,
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and liabilities of the Borrower to Bank One, and all renewals,
rearrangements and extensions thereof, or any part thereof, arising
pursuant to this Agreement or any other Loan Document, and all interest
accrued thereon, and reasonable attorneys' fees and other reasonable costs
incurred in the drafting, negotiation, enforcement or collection thereof,
regardless of whether such indebtedness, obligations, and liabilities are
direct, indirect, fixed, contingent, joint, several or joint and several.
"Permitted Liens" means:
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(a) Liens on the Collateral which secure payment of the Obligations;
(b) tax and other Liens permitted under Section 6.2 of the Loan
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Agreement;
(c) Liens to secure obligations of the Borrower in respect of workers
compensation and other labor laws; and
(d) financing statements of record which name the Agent as "secured
party."
"Pledged Agency Commitment" means an Agency Commitment identified on a
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Borrowing Request as an Agency Commitment in which the Borrower is granting
Bank One a security interest to secure the Obligations.
"Pledged Mortgage Loan" means a Mortgage Loan identified on a
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Borrowing Request as a Mortgage Loan in which the Borrower is granting Bank
One a security interest to secure the Obligations.
"Pledged Take-Out Commitment" means a Take-Out Commitment identified
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on a Borrowing Request as a Take-Out Commitment in which the Borrower is
granting Bank One a security interest to secure the Obligations.
"Proceeds" means all "proceeds" as such terms is defined in Section
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9.306(a) of the UCC, and, in any event, shall include all interest or other
income received by the Borrower in respect of any item of Collateral.
193
"Release of Lien" means a release of lien in the form of Exhibit "C".
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"Requested Borrowing Date" means the date on which an Advance in
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respect of a Borrowing is to be made, as identified by the Borrower in the
relevant Borrowing Request.
"Required Mortgage Documents" means, with respect to a Pledged
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Mortgage Loan, any Mortgage Documents not then in the possession of Bank
One which must be certified to the Agency under the Agency Commitment to
which such Pledged Mortgage Loan has been Allocated.
"Scheduled Termination Date" means March 13, 1997.
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"Security Instruments" means (i) this Agreement and (ii) such other
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executed documents as are or may be necessary to grant to Bank One a
perfected first, prior and continuing security interest in and to the
Collateral, and any and all other agreements or instruments now or
hereafter executed and delivered by or on behalf of the Borrower in
connection with, or as security for the payment or performance of, all or
any of the Obligations, including the Borrower's obligations under the Note
and this Agreement, as such documents may be amended, modified or
supplemented from time to time.
"Settlement Account" means the non-interest bearing demand deposit
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account (Account Number 0100139187) established by the Borrower with Bank
One to be used for (i) the deposit of the proceeds from the sale of
Mortgage Backed Securities; (ii) disbursements on behalf of the Borrower in
accordance with Section 3.7; and (iii) the payment of the Obligations.
"Take-Out Price" means:
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(a) With respect to a pool of Eligible Mortgage Loans which has been
Allocated to an Agency Commitment, the Take-Out Price of the Mortgage
Backed Security to be issued or guaranteed pursuant to such Agency
Commitment; and
(b) with respect to an Eligible Mortgage Backed Security, the price
for such Eligible Mortgage Backed Security under the Take-Out Commitment to
which such Eligible Mortgage Backed Security has been Allocated.
"Termination Date" means the Scheduled Termination Date or the date,
----------------
if any, on which the maturity of the Obligations is accelerated pursuant to
Section 8.2.
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Section 1.3 Other Definitional Provisions.
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(a) Unless otherwise specified therein, all terms defined in this
Agreement have the above-defined meanings when used in the Note or any
other Loan Document, certificate, report or other document made or
delivered pursuant hereto.
(b) Each term defined in the singular form in the Loan Agreement or
Section 1.2 shall mean the plural thereof when the plural form of such term
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is used in this Agreement, the Note or any other Loan Document,
certificate, report or other document made or delivered pursuant hereto,
and each term defined in the plural form in the Loan Agreement or Section
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1.2 shall mean the singular thereof when the singular form of such term is
---
used herein or therein.
(c) The words "hereof," "herein," "hereunder" and similar terms when
used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and section, schedule and
exhibit references herein are references to sections, schedules and
exhibits to this Agreement unless otherwise specified.
(d) As used herein, in the Note or in any other Loan Document,
certificate, report or other document made or delivered pursuant hereto,
accounting terms relating to any Person and not specifically defined in
this Agreement or therein shall have the respective meanings given to them
under GAAP.
(e) Unless otherwise specified herein, all times set forth herein are
Dallas, Texas time.
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(f) Unless otherwise specified herein, all Section references are to
Sections in this Agreement.
Article II
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AMOUNT AND TERMS OF CREDIT
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Section 2.1 No Commitment. Notwithstanding anything in this Agreement
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or in any other Loan Document to the contrary, (i) until such time, if any, as
Bank One shall make an Advance (or notify the Borrower that it will make an
Advance) in respect of a particular Borrowing Request under this Agreement, Bank
One shall have no obligation to make an Advance in respect of such Borrowing
Request, and (ii) the making of one or more Advances in respect of one or more
particular Borrowing Requests shall not create any obligation on the part of
Bank One to make an Advance in respect of any other Borrowing Request. The
parties intend and the Borrower agrees and acknowledges that nothing in this
Agreement shall constitute any commitment on the part of Bank One to make
Advances. Subject to the foregoing provisions of this Section 2.1, and subject
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to the other terms and conditions contained in this Agreement, Bank One may, if
it so elects, make Advances to or for the account of the Borrower on a revolving
credit basis from time to time on any Business Day from the date of this
Agreement through the earlier to occur of the Termination Date and the Business
Day preceding the Scheduled Termination Date in an amount not to exceed at any
one time outstanding the Maximum Credit Amount. Each Borrowing funded shall be
in an aggregate amount of not less than $500,000 and shall consist of an Advance
made on the Requested Borrowing Date by Bank One; provided, that the aggregate
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amount of Advances at any time outstanding shall not exceed the lesser of (i)
the Maximum Credit Amount and (ii) the Borrowing Base. Subject to the other
terms and conditions hereof, the Borrower may borrow, repay (whether pursuant to
Section 2.4, Section 3.4, or otherwise), and reborrow under this Section 2.1.
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Section 2.2 Note. The Advances made by Bank One pursuant to Section 2.1
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shall be evidenced by a Note payable to Bank One in the principal amount of the
Maximum Credit Amount. The Note shall be payable and bear interest as set forth
in Sections 2.4, 2.8 and 10.9.
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Section 2.3 Manner of Requesting and Obtaining Borrowings. The Borrower
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shall request each Borrowing by delivering a Borrowing Request to Bank One in
accordance with the provisions of Section 4.2. Not later than 1:00 p.m. on the
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Requested Borrowing Date specified in the Borrowing Notice, and subject to the
terms and conditions of this Agreement, Bank One shall either (a) notify the
Borrower that such Borrowing Request is being denied and that no Advance is to
be made in respect thereof or (b) initiate the Advance in respect of such
Borrowing in accordance with the deposit or wire instructions of the Borrower
set forth in such Borrowing Request.
Section 2.4 Mandatory Repayments. The Borrower shall repay all outstanding
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Advances on the Termination Date. If at any time the aggregate amount of
Advances outstanding exceeds either the Maximum Credit Amount or the Borrowing
Base, the Borrower, upon the demand of Bank One, shall repay so much of the
outstanding Advances as may be necessary to eliminate such excess.
Section 2.5 Business Days. If the scheduled date for any payment hereunder
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falls on a day which is not a Business Day, then for all purposes of the Note
and this Agreement the same shall be deemed to have fallen on the next following
Business Day, and, except for such payments as to which interest had ceased to
accrue prior to the scheduled date for payment, such extension of time shall be
included in the computation of payments of interest.
Section 2.6 Payment Procedure. All payments of the principal of and
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interest upon the Note shall be made by the Borrower to Bank One before 2:00
p.m. on the respective dates when due in federal or other immediately available
funds at Bank One's address set forth in Section 10.1. Payments received on any
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day which is not a Business Day and payments received after 2:00 p.m. on any
Business Day shall be treated for all purposes as having been received on the
Business Day next following receipt of such payment. If no Event of Default
exists or would result therefrom, payments in respect of the Obligations shall
be applied to specific types of Obligations (e.g., fees, expenses, principal and
interest) as the Borrower directs. At any time when an Event of Default exists
or would result from following the payment directions of the Borrower, payments
in respect of the Obligations shall be applied to specific types of Obligations
in such order as Bank One may elect.
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Section 2.7 Requirements of Law. (a) In the event that the adoption of any
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new Requirement of Law or any change in any existing Requirement of Law (other
than any change in the articles of incorporation, by-laws or other
organizational or governing documents of Bank One) or in the interpretation or
application thereof or compliance by Bank One with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority issued after March 15, 1996:
(i) Shall subject Bank One to any tax of any kind whatsoever
with respect to this Agreement, the Note or any Advance made by it, or
change the basis of taxation of payments to Bank One of principal, facility
fee, interest or any other amount payable hereunder (except for changes in
the rate of tax on the overall net income of Bank One and changes in the
computation of the overall net income of Bank One that do not specifically
involve payments to Bank One under this Agreement, the Note, or any
Advance, even though such changes have the effect of increasing the
effective rate of tax imposed on income of Bank One);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held
by, or deposits or other liabilities in or for the account of, commitments,
advances or loans by, or other credit extended by, or any other acquisition
of funds by, any office of Bank One which are not otherwise included in the
determination of any interest rate under the Note; or
(iii) shall impose on Bank One any other condition;
and the result of any of the foregoing is to increase the cost to Bank One, by
any amount which Bank One deems to be material, of making, renewing or
maintaining this Agreement or any Advances or to reduce any amount receivable
hereunder, in each case, in respect of its Advances, then, the Borrower shall
promptly pay Bank One, upon its written demand setting forth the basis for such
demand, any additional amounts necessary to compensate Bank One for such
additional cost or reduced amount receivable. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by Bank
One to the Borrower shall be conclusive in the absence of manifest error. This
covenant shall survive the termination of this Agreement and payment of the
Note.
(b) In the event that Bank One shall have determined that the adoption of
any new law, rule, regulation or guideline regarding capital adequacy, or any
change therein or in the interpretation or application thereof or compliance by
Bank One or any corporation controlling it with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
central bank or Governmental Authority issued after March 15, 1996, including,
without limitation, the issuance of any final rule, regulation or guideline,
does or shall have the effect of reducing the rate of return on Bank One's or
such corporation's capital as a consequence of its obligations hereunder to a
level below that which Bank One or such corporation could have achieved but for
such adoption, change or compliance (taking into consideration Bank One's or
such corporation's policies with respect to capital adequacy) by an amount
deemed by Bank One to be material, then the Borrower shall promptly pay Bank
One, upon its written demand setting forth the basis for such demand, any
additional amounts necessary to compensate Bank One or such corporation for such
reduced rate of return. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Bank One to the Borrower shall
be conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and payment of the Note.
Section 2.8 Interest.
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(a) In General. Interest on the Advances from time to time outstanding
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shall accrue during each Computation Period and shall be payable on the earlier
of the fifteenth day of the following Computation Period and the Termination
Date. As soon as practicable after the end of each Computation Period, and in
any event no later than fourteenth day of the following Computation Period, Bank
One shall give the Borrower written notice of the interest due for such
Computation Period.
(b) MBS Advances. The MBS Advances for each Computation Period shall bear
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interest at the per annum rate of interest equal to the lesser of (i) the
applicable MBS Rate for such Computation Period and (ii) the Maximum Rate.
(c) ML Advances. The ML Advances for each Computation Period shall bear
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interest at the per annum rate of interest equal to the lesser of (i) the
applicable ML Rate for such Computation Period and (ii) the Maximum Rate.
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(d) Excess Advances; Overdue Amounts. The Excess Advances for each
--------------------------------
Computation Period shall bear interest at the per annum rate of interest equal
to the lesser of (i) the sum of four percent (4.00%) and the Base Rate and (ii)
the Maximum Rate. Overdue principal, interest and other amounts shall bear
interest for each day such amounts are overdue at the per annum rate of interest
equal to the lesser of (i) the sum of four percent (4.00%) and the Base Rate and
(ii) the Maximum Rate; all such interest shall be payable upon demand.
(e) 360 Day Year; Maximum Rate. For purposes of calculating any interest
--------------------------
rate which is based on the Base Rate or the Federal Funds Rate, interest shall
be calculated on the basis of the actual number of days elapsed over a 360-day
year. For purposes of calculating interest at the Maximum Rate, interest shall
be calculated on the basis of the actual number of days elapsed over whichever
of a 365-day or a 366-day year is applicable. Reference is made to Section 10.9
------------
for certain provisions limiting the rate of interest which may be charged under
this Agreement and the other Loan Documents. The provisions of Section 10.9
------------
shall be controlling in the event of any conflict between such provisions and
(i) the provisions of this Section 2.8, (ii) any other provision of this
-----------
Agreement, or (iii) any provision of any other Loan Document.
Article III
-----------
COLLATERAL
----------
Section 3.1 Granting Clause. To secure the punctual payment and
---------------
performance of the Obligations, the Borrower hereby grants Bank One a security
interest in the Collateral.
Section 3.2 Borrowing Requests. Each Borrowing Request shall identify
------------------
the Mortgage Loans which are to provide the Collateral Value necessary to
support the requested Borrowing, the Agency Commitment pursuant to which the
Mortgage Backed Securities to be backed by such Mortgage Loans are to be issued
by FNMA or FHLMC or guaranteed by GNMA (such Agency Commitment being the Agency
Commitment to which such Mortgage Loans have been "Allocated") and the Take-Out
---------
Commitment pursuant to which such Mortgage Backed Securities are to be sold
(such Take-Out Commitment being the Take-Out Commitment to which such Mortgage
Backed Securities have been "Allocated") and shall be accompanied by:
---------
(a) any Required Mortgage Documents with respect to such Mortgage
Loans not then in the possession of Bank One (whether in its capacity as
Agent under the Loan Agreement or otherwise);
(b) a Loan Agreement Bailee Letter, duly executed by the Borrower and
the Agent, or other evidence satisfactory to Bank One that such Mortgage
Loans are not, or upon funding of the requested Borrowing will not be,
subject to any Lien other than Permitted Liens;
(c) a Release of Lien for such Agency Commitment and such Take-Out
Commitment, duly executed by the Borrower and the Agent; and
(d) the relevant Agency Forms, duly completed (but for certification
by the Agency Custodian where applicable) and in sufficient quantity to
satisfy applicable Agency requirements.
The Borrower shall (x) hold in trust for Bank One, with respect to each such
Mortgage Loan, the original recorded Mortgage relating to such Mortgage Loan, a
mortgagee policy of title insurance (or binding and unexpired commitment to
issue such insurance if the policy has not yet been delivered to the Borrower)
insuring the Borrower's perfected, first-priority Lien created by the Mortgage
securing such Mortgage Loan (subject only to exceptions permitted by the Agency
obligated under the Agency Commitment to which such Mortgage Loan has been
Allocated), any Appraisals and any insurance policies which relate to such
Mortgage Loan, and all other original documents executed in connection with such
Mortgage Loan and not delivered to Bank One and (y) upon request of Bank One,
immediately deliver to Bank One such documents, together with an index
specifically identifying each such document. Bank One in its reasonable
discretion may reject as unsatisfactory any items so delivered by written notice
to the Borrower specifying the reasons therefor, whereupon the Borrower agrees
promptly to use all reasonable efforts to correct any defects therein identified
by Bank One and whereupon any Pledged Mortgage Loan with respect to which any
such defect may not be corrected and any Pledged Mortgage Loan with respect to
which any such defect which may be corrected but for which such defect is not
corrected within fifteen (15) days after the request for such correction by Bank
One
197
shall have a Collateral Value of zero. For so long as the Loan Agreement
remains in effect, simultaneously with the delivery of any Borrowing Request,
the Borrower shall deliver to the Agent a Request for Release of Security
Interest for processing in accordance with Section 3.12 of the Loan Agreement.
------------
Section 3.3 Power of Attorney. Effective upon the occurrence of
-----------------
an Event of Default, the Borrower hereby irrevocably appoints Bank One its
attorney in fact, with full power of substitution, for and on behalf and in the
name of the Borrower, to (i) indorse and deliver to any Person any check,
instrument or other paper coming into Bank One's possession and representing
payment made in respect of any Mortgage Note or Mortgage Backed Security
included in the Collateral or in respect of any other collateral for the
Obligations including any Agency Commitment and any Take-Out Commitment; (ii)
prepare, complete, execute, deliver and record any assignment to Bank One or to
any other Person of any Mortgage relating to any Mortgage Note included in the
Collateral; (iii) indorse and deliver any Mortgage Note or Mortgage Backed
Security included in the Collateral and do every other thing necessary or
desirable to effect transfer of all or any part of the Collateral to Bank One or
to any other Person; (iv) take all necessary and appropriate action with respect
to all Obligations and the items of Collateral to be delivered to Bank One or
held by the Borrower in trust for Bank One including, without limitation,
instruct any title company or closing agent to deliver any Mortgage Note or
Mortgage Document held by it directly to Bank One or its agent; (v) commence,
prosecute, settle, discontinue, defend, or otherwise dispose of any claim
relating to any Agency Commitment or any Take-Out Commitment or any other part
of the Collateral; and (vi) sign the Borrower's name wherever appropriate to
effect the performance of this Agreement. This section shall be liberally, not
restrictively, construed so as to give the greatest latitude to Bank One's
power, as the Borrower's attorney in fact, to collect, sell, and deliver any of
the Collateral and all other documents relating thereto. The powers and
authorities herein conferred on Bank One may be exercised by Bank One through
any Person who, at the time of the execution of a particular instrument, is an
authorized officer of Bank One. The power of attorney conferred by this Section
-------
3.3 shall become effective upon the occurrence, and remain effective during the
- ---
continuance, of an Event of Default and is granted for a valuable consideration
and is coupled with an interest and irrevocable so long as the Obligations, or
any part thereof, shall remain unpaid. All Persons dealing with Bank One, any
officer thereof, or any substitute attorney, acting pursuant hereto shall be
fully protected in treating the powers and authorities conferred by this Section
-------
3.3 as existing and continuing in full force and effect until advised by Bank
- ---
One that the Obligations have been fully and finally paid.
Section 3.4 Disposition of Collateral.
-------------------------
(a) Pursuant to Agency Commitments. Subject to the provisions of this
------------------------------
Agreement and compliance with the FNMA Guide, the FHLMC Guide or the GNMA Guide,
as applicable, Bank One shall deliver the Mortgage Documents which relate to
Pledged Mortgage Loans Allocated to a particular Agency Commitment to or for the
account of the relevant Agency and shall release the security interest of Bank
One to secure the Obligations therein. The Borrower shall complete each Agency
Form such that the Mortgage Backed Security to be issued or guaranteed pursuant
to a Pledged Agency Commitment is issued in the name of Bank One or its
designee, or, if issued in the name of the Borrower, is issued to an account
subject to the sole dominion and control of Bank One or its designee and shall
take such other steps as may be requested by Bank One to cause the security
interest of Bank One in and to any Mortgage Backed Security which constitutes
Proceeds of one or more Pledged Mortgage Loans to be a perfected, first-
priority, security interest. Without limiting the generality of the preceding
sentence, unless otherwise instructed by Bank One, the Borrower shall complete
each GNMA form Schedule of Subscribers such that "Manuf/Cust/FAO/Bank One"
appears as the Subscriber/PTC Participant; complete each FNMA form Delivery
Schedule such that "Bank One, Texas/Cust" appears as the Depository Institution
and Telegraphic Abbreviation and "1110-0061-4" appears as the ABA Number and
"NVR Mortgage Finance, Inc. 310118" appears as the Owners Account Name/Account
Number; and shall complete each FHLMC form Warehouse Lender Release of Security
Interests and FHLMC form Guarantor Program: Security Settlement Information and
Delivery Authorization such that "Bank One, Texas/Cust/NVR Mortgage Finance,
Inc./310118" appears as the Depository Institution/Type of
Account/Beneficiary/Account Number and such that "1110-0061-4" appears as the
ABA Number. Upon completion of its review of the Required Mortgage Documents and
the Agency Forms relevant to a particular Agency Commitment, Bank One shall
deliver such Agency Forms to the applicable Agency and shall deliver the
Required Mortgage Documents to or for the account of such Agency under a bailee
letter or such other form of transmittal letter as such Agency may require;
provided, that the release of the security interest in favor of Bank One in such
- --------
Required Mortgage Documents and the Mortgage Loans evidenced thereby shall be
conditioned upon receipt by Bank One or its designee of Mortgage Backed
Securities in the amount specified in the relevant Agency Commitment.
(b) Pursuant to Take-Out Commitments. Mortgage Backed Securities
--------------------------------
which constitute Proceeds of Pledged Mortgage Loans shall be sold pursuant to
the Take-Out Commitments to which such Mortgage Backed Securities have been
Allocated. The Borrower agrees to take all steps necessary to satisfy the
conditions to the sale of any Mortgage Backed Security which constitutes
Proceeds of Pledged Mortgage Loans pursuant to the Take-Out Commitment to which
it has been
198
Allocated. Mortgage Backed Securities from time to time included in the
Collateral shall be sold versus payment (and not "free"). In connection with the
sale of any Mortgage Backed Security included in the Collateral, Bank One shall
not be under any duty at any time to credit the Borrower for any amounts due
from any Person in respect of any purchase until Bank One has actually received
immediately available funds. Any funds so received will be treated as payments
under and processed and applied in accordance with Section 2.6. Bank One shall
-----------
not be under any duty at any time to collect any amounts or otherwise enforce
any obligations due from any Person in respect of any such purchase.
(c) Mandatory Redemption. In the event that the issuance of any
--------------------
Mortgage Backed Security pursuant to an Agency Commitment has not occurred
within five (5) Business Days of the scheduled date for such issuance (as set
forth on the relevant Borrowing Request), the Borrower agrees to make a
prepayment of the Advances in an aggregate amount equal to the Collateral Value
(but for any event or circumstance which caused such failure) of the Mortgage
Loans intended to back such Mortgage Backed Security. In the event the sale of a
Mortgage Backed Security pursuant to a Take-Out Commitment has not settled
within five (5) Business Days of the scheduled settlement date for such sale (as
set forth in the relevant Borrowing Request), the Borrower agrees to make a
prepayment of the Advances in an aggregate amount equal to the Collateral Value
(but for any event or circumstance which caused such failure) of such Mortgage
Backed Security.
Section 3.5 Representations and Warranties Regarding Collateral.
---------------------------------------------------
Each Borrowing Request shall be deemed to constitute a representation and
warranty by the Borrower on the Requested Borrowing Date set forth therein that
the Agency Commitment and the Take-Out Commitment identified thereon are both in
full force and effect and that all representations and warranties made or deemed
made by the Borrower to the Agency or Investor thereunder are true and correct.
Upon the delivery of the Borrowing Request by which such Pledged Mortgage Loan
is identified, the Borrower represents and warrants with respect to each Pledged
Mortgage Loan that:
(a) The Borrower (and, if the Borrower did not originate such Pledged
Mortgage Loan, the originator of such Pledged Mortgage Loan) complied, and
the Principal Mortgage Documents and Other Mortgage Documents relevant to
such Pledged Mortgage Loan comply, in all material respects with all
applicable Requirements of Law, including, without limitation, (i) any
usury laws, (ii) the Real Estate Settlement Procedures Act of 1974, as
amended, (iii) the Equal Credit Opportunity Act, as amended, (iv) the
Federal Truth in Lending Act, as amended, (v) Regulation Z of the Board of
Governors of the Federal Reserve System, as amended, and (vi) any consumer
protection laws;
(b) the full Face Amount of such Pledged Mortgage Loan (less any
discount points paid by or on behalf of the borrower under such Pledged
Mortgage Loan) was funded to the borrower thereunder;
(c) such Pledged Mortgage Loan was underwritten in compliance with
the requirements of the Agency under the Pledged Agency Commitment to which
it has been Allocated and the Mortgage Backed Security to be issued or
guaranteed pursuant to such Agency Commitment satisfies (or upon issuance
thereof will satisfy) all requirements for purchase under the Pledged Take-
Out Commitment to which it has been Allocated;
(d) the Mortgage related to such Pledged Mortgage Loan creates a
perfected first-priority lien (subject only to exceptions permitted by the
Agency obligated under the Agency Commitment to which such Mortgage Loan
has been Allocated) on residential real property consisting of land and a
one-to-four family dwelling thereon which is completed and ready for
occupancy and such Mortgage, the other Principal Mortgage Documents, the
title policy relevant thereto and the Other Mortgage Documents relevant
thereto comply in all respects with the requirements of the Agency under
the applicable Agency Commitment;
(e) such Pledged Mortgage Loan is an Eligible Mortgage Loan; and
(f) the Borrower has all requisite power and authority to grant Bank
One a security interest to secure the Obligations in such Pledged Mortgage
Loan.
Section 3.6 Borrower Appointed Agent. Bank One hereby appoints
------------------------
the Borrower (and, in the case of any Pledged Mortgage Loan originated by a
Person other than the Borrower, also appoints such other Person) as its agent at
the sole cost and expense of the Borrower for purposes of (a) obtaining
Appraisals with respect to the property covered by the Mortgages which relate to
the Pledged Mortgage Loans and (b) otherwise complying with Appraisal Laws and
Regulations.
199
Section 3.7 Settlement Account. The Borrower hereby expressly
------------------
acknowledges that the Settlement Account is subject in all respects to the right
of offset in favor of Bank One granted under Section 10.10. The Settlement
-------------
Account shall be subject to the sole dominion and control of Bank One, provided,
--------
that so long as no Default or Event of Default exists or would result therefrom,
Bank One shall disburse sums on deposit in the Settlement Account in accordance
with the instructions of the Borrower.
Article IV
----------
CONDITIONS PRECEDENT
--------------------
The obligation of Bank One to consider Borrowing Requests hereunder is
subject to fulfillment of the conditions precedent stated in this Article IV.
----------
Section 4.1 Initial Borrowing Request. The obligation of Bank One
-------------------------
to consider the initial Borrowing Request hereunder shall be subject to, in
addition to the conditions precedent specified in Section 4.2, delivery to Bank
-----------
One of the following (each of the following documents being duly executed and
delivered by the Borrower and in form and substance satisfactory to Bank One
and, with the exception of the Note, each in a sufficient number of originals
that the Borrower and Bank One may have an executed original of each document):
(a) This Agreement;
(b) the Note;
(c) a certificate of the Secretary or Assistant Secretary of the
Borrower, dated on or after the date of this Agreement and certifying as to
(i) resolutions of the board of directors of the Borrower which authorize
the execution and delivery on behalf of the Borrower by certain officers of
the Borrower of this Agreement and the Note, (ii) the incumbency of such
officers, (iii) the validity of specimen signatures of such officers, and
(iv) the articles of incorporation and by-laws of the Borrower as in effect
on the date thereof; and
(d) such other documents as Bank One may reasonably request at any
time at or prior to the Requested Borrowing Date of the initial Borrowing
Request hereunder.
Section 4.2 All Borrowing Requests. The obligation of Bank One to
----------------------
consider any Borrowing Request pursuant to this Agreement is subject to the
following further conditions precedent:
(a) prior to 11:00 a.m. on the third Business Day preceding the
Requested Borrowing Date, the Borrower shall deliver to Bank One a duly
executed Borrowing Request;
(b) all Property in which the Borrower has granted a Lien to Bank One
to secure the Obligations shall have been physically delivered to the
possession of Bank One or any bailee acceptable to Bank One to the extent
that such possession is necessary or appropriate for the purpose of
perfecting the Lien of Bank One in such collateral;
(c) the representations and warranties of the Borrower contained in
this Agreement, any other Loan Document or the Loan Agreement (other than
those representations and warranties which are by their terms limited to
the date of the agreement in which they are initially made) shall be true
and correct in all material respects on and as of the Requested Borrowing
Date; and
(d) no Default or Event of Default shall have occurred and be
continuing and no change or event which constitutes a Material Adverse
Effect shall have occurred as of the Requested Borrowing Date set forth
therein.
Each Borrowing Request shall be deemed to constitute a representation and
warranty by the Borrower on the Requested Borrowing Date set forth therein as to
the facts specified in Sections 4.2(c) and (d).
-----------------------
200
Article V
---------
BORROWER REPRESENTATIONS AND WARRANTIES
---------------------------------------
The Borrower represents and warrants as follows:
Section 5.1 Authorization and Power. The Borrower has the
-----------------------
corporate power and requisite authority to execute, deliver and perform this
Agreement, the Note and the other Loan Documents to which it is a party; the
Borrower is duly authorized to and has taken all corporate action necessary to
authorize it to, execute, deliver and perform this Agreement, the Note and the
other Loan Documents to which it is a party and is and will continue to be duly
authorized to perform this Agreement, the Note and such other Loan Documents.
Section 5.2 No Conflicts or Consents. Neither the execution and
------------------------
delivery by the Borrower of this Agreement, the Note or the other Loan Documents
to which it is a party, nor the consummation of any of the transactions herein
or therein contemplated, nor compliance with the terms and provisions hereof or
with the terms and provisions thereof, will (a) materially contravene or
conflict with any Requirement of Law to which the Borrower is subject, or any
indenture, mortgage, deed of trust, or other agreement or instrument to which
the Borrower is a party or by which the Borrower may be bound, or to which the
Property of the Borrower may be subject, or (b) result in the creation or
imposition of any Lien, other than the Liens granted to Bank One pursuant to
this Agreement, on the Property of the Borrower.
Section 5.3 Enforceable Obligations. This Agreement, the Note and
-----------------------
the other Loan Documents to which the Borrower is a party are the legal, valid
and binding obligations of the Borrower, enforceable in accordance with their
respective terms, except as limited by Debtor Laws.
Section 5.4 Priority of Liens. Upon delivery of the Borrowing
-----------------
Request on which each such item is identified, Bank One shall have a valid,
enforceable, perfected, first priority Lien and security interest in (i) each
Pledged Mortgage Loan, (ii) each Pledged Agency Commitment, and (iii) each
Pledged Take-Out Commitment.
Section 5.5 No Liens. The Borrower has good and indefeasible
--------
title to the Collateral. All of the Collateral is free and clear of all Liens
and other adverse claims of any nature, other than Permitted Liens.
Section 5.6 Full Disclosure. There is no material fact that the
---------------
Borrower has not disclosed to Bank One which could have a Material Adverse
Effect. Neither the financial statements referred to in Section 5.7 of the Loan
-----------
Agreement, nor any Borrowing Request, officer's certificate or statement
delivered by the Borrower to Bank One (including, without limitation, any such
item delivered to Bank One in its capacity as the Agent or a Lender under the
Loan Agreement), contains any untrue statement of material fact.
Section 5.7 Securities Acts and Securities Credit Transaction
-------------------------------------------------
Regulations. The Borrower has not issued any unregistered securities in
- -----------
violation of the registration requirements of the Securities Act of 1933, as
amended, or of any other Requirement of Law, and is not violating any rule,
regulation, or requirement under the Securities Act of 1933, as amended, or the
Securities and Exchange Act of 1934, as amended. The Borrower is not required to
qualify an indenture under the Trust Indenture Act of 1939, as amended, in
connection with its execution and delivery of the Note. The Borrower is not a
party, whether as a customer or a creditor, to any transaction that is subject
to the Securities Credit Transaction Regulations.
Section 5.8 No Approvals Required. Other than consents and
---------------------
approvals previously obtained and actions previously taken, neither the
execution and delivery of this Agreement, the Note and the other Loan Documents
to which the Borrower is a party, nor the consummation of any of the
transactions contemplated hereby or thereby requires the consent or approval of,
the giving of notice to, or the registration, recording or filing by the
Borrower of any document with, or the taking of any other action in respect of,
any Governmental Authority which has jurisdiction over the Borrower or any of
its Property.
Section 5.9 Loan Agreement Representations and Warranties. Each
---------------------------------------------
of the representations and warranties of the Borrower set forth in Article V of
the Loan Agreement is true and correct in all material respects.
201
Section 5.10 Survival of Representations. All representations and
---------------------------
warranties by the Borrower herein shall survive delivery of the Note and the
making of the Advances, and any investigation at any time made by or on behalf
of Bank One shall not diminish the right of Bank One to rely thereon.
Article VI
----------
AFFIRMATIVE COVENANTS
---------------------
The Borrower shall at all times comply with the covenants contained in this
Article VI, from the date hereof and for so long as any Obligation is
- ----------
outstanding.
Section 6.1 Financial Statements and Reports. The Borrower shall
--------------------------------
furnish to Bank One (a) a copy of all information furnished by the Borrower
under Section 6.1 of the Loan Agreement and (b) such other information
-----------
concerning the business, Properties or financial condition of the Borrower, any
Affiliate or any Investor as Bank One may request. For so long as the Loan
Agreement has not terminated, timely delivery by the Borrower to Bank One in its
capacity as a Lender or the Agent under the Loan Agreement of any item required
to be delivered under Section 6.1 of the Loan Agreement shall constitute
-----------
compliance with clause (a) of the preceding sentence. Thereafter delivery by the
Borrower to Bank One of the requisite information shall be considered timely if
it is within the period contemplated by the Loan Agreement.
Section 6.2 Further Assurances. The Borrower shall, within three
------------------
(3) Business Days after the request of Bank One, cure any defects in the
execution and delivery of the Note, this Agreement or any other Loan Document
and the Borrower shall, at its expense, promptly execute and deliver to Bank One
upon request all such other and further documents, agreements and instruments in
compliance with or accomplishment of the covenants and agreements of the
Borrower in this Agreement and in the other Loan Documents or to further
evidence and more fully describe the collateral intended as security for the
Obligations, or to correct any omissions in this Agreement or the other Loan
Documents, or more fully to state the security for the Obligations set out
herein or in any of the other Loan Documents, or to perfect, protect or preserve
any Liens created (or intended to be created) pursuant to any of the other Loan
Documents, or to make any recordings, to file any notices, or obtain any
consents.
Section 6.3 Reimbursement of Expenses. The Borrower shall, within
-------------------------
ten (10) Business Days of notice of the amount thereof (which notice shall
include appropriate evidence of the amount of such reimbursable item) pay (i)
all reasonable legal fees incurred by Bank One in connection with the
preparation, negotiation or execution of this Agreement, the Note and the other
Loan Documents and any amendments, consents or waivers executed in connection
therewith, (ii) all fees, charges or taxes for the recording or filing of the
Security Instruments, (iii) all shipping, postage and transfer costs incurred by
Bank One in connection with the administration of this Agreement, the Note and
the other Loan Documents, including courier expenses incurred in connection with
the Collateral, and (iv) all amounts expended, advanced or incurred by Bank One
to satisfy any obligation of the Borrower under this Agreement or any of the
other Loan Documents or to collect the Note, or to enforce the rights of Bank
One 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 Bank One in connection with any
such matters, together with interest at the post-maturity rate specified in
Section 2.8 on each item specified in clauses (i) through (iv) from thirty (30)
- -----------
days after the date of written demand or request for reimbursement until the
date of reimbursement.
Section 6.4 Appraisals. The Borrower shall obtain and maintain a
----------
copy of an Appraisal with respect to the underlying property covered by the
Mortgage which relates to each Pledged Mortgage Loan, shall require that all
Appraisals delivered to it in connection with the Pledged Mortgage Loans
(whether originated by the Borrower or purchased by it) comply in all respects
with the Appraisal Laws and Regulations, shall implement and maintain
administrative and operating procedures which permit the Borrower and Bank One
to verify such compliance, and shall permit and shall use all reasonable efforts
to cause each Person from whom it purchases Mortgage Loans to permit any
officer, employee or agent of Bank One to visit and inspect the Properties of
the Borrower and such Person relevant to such compliance, to inspect the records
of the Borrower and such Person relevant to such compliance, to take copies and
extracts therefrom, and to discuss the Appraisals relevant to the
202
Pledged Mortgage Loans with the responsible officers, employees and agents
(including any third party appraisers) of the Borrower and such Person, all at
such reasonable times (which may include unannounced "spot" checks) and as often
as Bank One may desire.
Section 6.5 Right of Inspection. The Borrower shall permit any
-------------------
officer, employee or agent of Bank One to visit and inspect any of the
Properties of the Borrower, examine the Borrower's Servicing Records and books
of record and accounts, take copies and extracts therefrom, and discuss the
affairs, finances and accounts of the Borrower with the Borrower's officers,
accountants and auditors, all at such reasonable times upon reasonable notice
and as often as Bank One may desire.
Section 6.6 Notice of Certain Events. The Borrower shall promptly
------------------------
notify Bank One upon (i) the occurrence of any circumstance set forth in Section
-------
6.10 of the Loan Agreement; (ii) the commencement of, or any determination in,
- ----
any legal, judicial or regulatory proceedings which, if adversely determined,
could have a Material Adverse Effect; (iii) the occurrence of any dispute
between the Borrower and any Governmental Authority or any other Person which,
if adversely determined, could have a Material Adverse Effect; or (iv) the
occurrence of any event or condition which, if adversely determined, would have
a Material Adverse Effect. For so long as the Loan Agreement has not terminated,
timely delivery by the Borrower to Bank One under the Loan Agreement of notice
of any occurrence of any circumstance set forth in Section 6.10 of the Loan
------------
Agreement shall constitute compliance with clause (i) of the preceding sentence.
Thereafter delivery by the Borrower to Bank One of the requisite information
shall be considered timely if it is within the period contemplated by the Loan
Agreement.
Section 6.7 Performance of Certain Obligations. The Borrower
----------------------------------
shall perform and observe in all material respects each of the provisions of
each Pledged Agency Commitment and each Pledged Take-Out Commitment on its part
to be performed or observed and will cause all things to be done which are
necessary to have each item of Collateral Allocated to a Pledged Agency
Commitment or a Pledged Take-Out Commitment comply with the requirements
thereof.
Section 6.8 Use of Proceeds; Margin Stock. The proceeds of the
-----------------------------
Advances shall be used by the Borrower solely for the purpose of paying
Indebtedness outstanding under the Loan Agreement and for general corporate
purposes of the Borrower. None of such proceeds shall be used for the purpose of
purchasing or carrying any "margin stock" as defined in Regulation U of the
Board of Governors of the Federal Reserve System, or for the purpose of reducing
or retiring any Indebtedness which was originally incurred to purchase or carry
margin stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of such Regulation U. Neither the Borrower
nor any Person acting on behalf of the Borrower shall (i) take any action in
violation of Regulation U or Regulation X of the Board of Governors of the
Federal Reserve System, (ii) violate Section 7 of the Securities Exchange Act of
1934, as amended, or any rule or regulation thereunder, or (iii) engage in any
transaction which is subject to the Securities Credit Transaction Regulations.
Section 6.9 Notice of Default. The Borrower shall furnish to Bank
-----------------
One immediately upon becoming aware of the existence of any Default or Event of
Default, a written notice specifying the nature and period of existence thereof
and the action which the Borrower is taking or proposes to take with respect
thereto.
Section 6.10 Compliance with Loan Documents. The Borrower shall
------------------------------
promptly comply with any and all covenants and provisions of this Agreement, the
Note and the other Loan Documents.
Section 6.11 Compliance with Loan Agreement. Whether or not the
------------------------------
Loan Agreement has terminated, the Borrower shall comply in all material
respects with each of the covenants set forth in Articles VI and VII of the Loan
Agreement.
Article VII
203
NEGATIVE COVENANTS
------------------
The Borrower shall at all times comply with the covenants contained in this
Article VII, from the date hereof and for so long as any Obligation is
- -----------
outstanding.
Section 7.1 Use of Proceeds. The Borrower shall not permit the
---------------
proceeds of the Advances to be used for any purpose other than those permitted
by Section 6.8. The Borrower shall not, directly or indirectly, use any of the
-----------
proceeds of the Advances for the purpose of engaging in any transaction which is
subject to the Securities Credit Transaction Regulations.
Section 7.2 Actions with Respect to Collateral. The Borrower
----------------------------------
shall not:
(a) Compromise, extend, release, or adjust payments on any Mortgage
Loan included in the Collateral, accept a conveyance of mortgaged property
in full or partial satisfaction of any such Mortgage Loan, or release any
Mortgage securing any such Mortgage Loan;
(b) agree to the amendment or termination of any Pledged Take-Out
Commitment or to the substitution of any Take-Out Commitment for a Pledged
Take-Out Commitment without the consent of Bank One;
(c) transfer, sell, assign, or deliver any Collateral pledged to Bank
One to any Person other than Bank One, except in accordance with Article
-------
III; or
---
(d) grant, create, incur, assume, permit or suffer to exist any Lien
upon any Collateral except for (i) Permitted Liens and (ii) such non-
consensual Liens as may be deemed to arise as a matter of law pursuant to
any Pledged Agency Commitment or any Pledged Take-Out Commitment.
Section 7.3 Loan Agreement Covenants. Whether or not the Loan
------------------------
Agreement has terminated, the Borrower shall not fail timely to observe or
perform any covenant of the Borrower under Articles VI and VII of the Loan
Agreement.
Article VIII
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EVENTS OF DEFAULT
-----------------
Section 8.1 Nature of Event. An Event of Default shall exist if
---------------
any one or more of the following occurs:
(a) The Borrower fails to make any payment of principal of or
interest on the Note, or payment of any fee, expense or other amount due
hereunder, under the Note or under any other Loan Document, on or before
the date such payment is due;
(b) the Borrower fails to observe or perform (i) any term, covenant
or agreement set forth in Sections 2.4, 3.4, 6.9, 7.1 or 7.2 or (ii) any
----------------------------------
other term, covenant or agreement in this Agreement on its part to be
performed or observed if the failure to perform or observe such other term,
covenant or agreement shall remain unremedied for twenty (20) days after
written notice thereof shall have been given to the Borrower by Bank One;
(c) the Borrower fails to observe or perform any of the covenants or
agreements contained in any other Loan Document, and (unless such default
otherwise constitutes a Default pursuant to other provisions of this
Section 8.1) such default continues unremedied beyond the expiration of any
-----------
applicable grace period which may be expressly allowed under such other
Loan Document;
(d) any material statement, warranty or representation by or on
behalf of the Borrower contained in this Agreement, the Note or any other
Loan Document or any Borrowing Request, officer's certificate or other
writing
204
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;
or
(e) (whether or not the Loan Agreement has terminated) any Loan
Agreement Event of Default occurs.
Section 8.2 Default Remedies. Upon the occurrence of an Event of
----------------
Default and provided that such Event of Default has not previously been cured by
the Borrower, Bank One may declare the entire principal of and all interest
accrued on the Note to be, and the Note, together with all other Obligations,
shall thereupon become, forthwith due and payable, without any presentment,
demand, protest, notice of protest and nonpayment, notice of acceleration or of
intent to accelerate or other notice of any kind, all of which hereby are
expressly waived. Notwithstanding the foregoing and whether or not the Loan
Agreement has terminated, if a Loan Agreement Event of Default specified in
Section 8.1(f), (g), (h) or (p) of the Loan Agreement occurs, the Note and all
- -------------------------------
other Obligations shall become automatically and immediately due and payable,
both as to principal and interest, without any action by Bank One and without
presentment, demand, protest, notice of protest and nonpayment, notice of
acceleration or of intent to accelerate, or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the Note to
the contrary notwithstanding.
Article IX
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CONCERNING BANK ONE
-------------------
Section 9.1 Indemnification.
---------------
(a) The Borrower will indemnify and hold harmless Bank One, Bank
One's directors, officers, employees and each Person, if any, who is deemed to
control Bank One (any and all of whom are referred to as the "Indemnified
-----------
Party") from and against any and all losses, claims, damages and liabilities,
- -----
joint or several (including all losses, claims, damages and liabilities
resulting from the negligence, but not the gross negligence of such Indemnified
Party, and including all legal fees or other expenses reasonably incurred by any
Indemnified Party in connection with the preparation for or defense of any
pending or threatened claim, action or proceeding, whether or not resulting in
any liability), to which such Indemnified Party may become subject (whether or
not such Indemnified Party is a party thereto) under any applicable Federal,
state or local law or otherwise caused by or arising out of, or allegedly caused
by or arising out of, this Agreement or any transaction contemplated hereby,
including, without limitation, any liability or penalty arising out of any fact
or circumstance which causes the representations and warranties set forth in
Section 3.5 to be false or incorrect, excepting only losses, claims, damages or
- -----------
liabilities resulting from the gross negligence or willful misconduct or fraud
of such Indemnified Party.
(b) Promptly after receipt by an Indemnified Party of notice of any
claim, action or proceeding with respect to which an Indemnified Party is
entitled to indemnity hereunder, such Indemnified Party will notify the Borrower
of such claim or the commencement of such action or proceeding, provided that
--------
the failure of an Indemnified Party to give notice as provided herein shall not
relieve the Borrower of its obligations under this Section 9.1 with respect to
-----------
such Indemnified Party, except to the extent that the Borrower is actually
prejudiced by such failure. The Borrower will assume the defense of such claim,
action or proceeding and will employ counsel reasonably satisfactory to the
Indemnified Party and will pay the reasonable fees and expenses of such counsel.
Notwithstanding the preceding sentence, the Indemnified Party will be entitled,
at the expense of the Borrower, to employ counsel separate from counsel for the
Borrower and for any other party in such action if the Indemnified Party
reasonably determines that a conflict of interest or other reasonable basis
exists which makes representation by counsel chosen by the Borrower not
advisable, provided that the Borrower shall not be obligated to pay for the fees
--------
and expenses of more than one counsel for all Indemnified Parties in respect of
a particular controversy. In the event an Indemnified Party appears as a witness
in any action or proceeding brought against the Borrower or any of its
Subsidiaries (or any of its officers, directors or employees) in which an
Indemnified Party is not named as a defendant, the Borrower agrees to reimburse
such Indemnified Party for all reasonable expenses incurred by it (including
reasonable fees and expenses of counsel) in connection with its appearing as a
witness.
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Section 9.2 Limitation of Liability. Neither Bank One nor the
-----------------------
directors, officers, agents or employees of Bank One shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement, except for such actions taken or omitted to be taken as
constitute gross negligence or wilful misconduct on the part of Bank One or its
directors, officers, agents or employees.
Article X
---------
MISCELLANEOUS
-------------
Section 10.1 Notices. Any notice or request required or permitted
-------
to be given under or in connection with this Agreement, the Note or the other
Loan Documents (except as may otherwise be expressly required therein) shall be
in writing and shall be mailed by first class or express mail or overnight
messenger, postage prepaid, or sent by telex, telegram, telecopy or other
similar form of rapid transmission, confirmed by mailing (by first class or
express mail, postage prepaid) written confirmation at substantially the same
time as such rapid transmission, or personally delivered to an officer of the
receiving party. All such communications shall be mailed, sent or delivered to
the parties hereto at their respective addresses as follows:
Borrower: NVR Mortgage Finance, Inc.
7601 Lewinsville Road; Suite 302
McLean, Virginia 22102
Attention: Mr. William J. Inman
Telecopy: (703) 761-2030
Bank One: Bank One, Texas, National Association
1717 Main Street, Third Floor
Dallas, Texas 75201
Attention: Ms. Pamela E. Skinner
Telecopy: (214) 290-2275
or at such other addresses or to such individual's or department's attention as
any party may have furnished the other parties in writing. Any communication so
addressed and mailed shall be deemed to be given when so mailed, sent or
delivered, except that communications given pursuant to Sections 2.4 and 6.9,
--------------------
Borrowing Requests and communications related thereto shall not be effective
until actually received by Bank One or the Borrower, as the case may be, any
communication mailed by first class mail shall be deemed to have been given on
the third day following the day it is mailed, any communication sent by rapid
transmission shall be deemed to be given when receipt of such transmission is
confirmed, and any communication delivered in person shall be deemed to be given
when receipted for by, or actually received by, an officer of the Borrower or
Bank One, as the case may be.
Section 10.2 Amendments, Etc. No amendment or waiver of any
---------------
provision of this Agreement, the Note, or any other Loan Document, nor consent
to any departure by the Borrower or by Bank One therefrom, shall in any event be
effective unless the same shall be in writing and signed by the party against
whom enforcement of such amendment, waiver or consent is sought, and any waiver
or consent given shall be effective only in the specific instance and for the
specific purpose for which it is given.
Section 10.3 Invalidity. In the event that any one or more of the
----------
provisions contained in the Note, this Agreement or any other Loan Document
shall, for any reason, be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of such document.
Section 10.4 Survival of Agreements. All covenants and agreements
----------------------
herein and in any other Loan Document not fully performed before the date hereof
or the date thereof, and all representations and warranties herein or therein,
shall survive until payment in full of the Obligations.
206
Section 10.5 Renewal, Extension or Rearrangement. All provisions
-----------------------------------
of this Agreement and of the other Loan Documents shall apply with equal force
and effect to each and all promissory notes hereafter executed which in whole or
in part represent a renewal, extension for any period, increase or rearrangement
of any part of the Obligations originally represented by the Note or of any part
of such other Obligations.
Section 10.6 Waivers. No course of dealing on the part of Bank
-------
One, or any of its officers, employees, consultants or agents, nor any failure
or delay by Bank One with respect to exercising any right, power or privilege of
Bank One under the Note, this Agreement or any other Loan Document shall operate
as a waiver thereof, except as otherwise provided in Section 10.2.
------------
Section 10.7 Cumulative Rights. The rights and remedies of Bank
-----------------
One under the Note, this Agreement, and any other Loan Document shall be
cumulative, and the exercise or partial exercise of any such right or remedy
shall not preclude the exercise of any other right or remedy.
Section 10.8 Construction. THIS AGREEMENT, THE NOTE AND EACH
------------
OTHER LOAN DOCUMENT IS A CONTRACT MADE UNDER AND SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED STATES OF AMERICA AND THE
STATE OF TEXAS, AS SUCH LAWS ARE NOW IN EFFECT, EXCEPT AS OTHERWISE SPECIFIED
HEREIN OR THEREIN, AND, WITH RESPECT TO USURY LAWS, IF ANY, APPLICABLE TO BANK
ONE AND TO THE EXTENT ALLOWED THEREBY, AS SUCH LAWS MAY HEREAFTER BE IN EFFECT
WHICH ALLOW A HIGHER MAXIMUM NONUSURIOUS INTEREST RATE THAN SUCH LAWS NOW ALLOW.
TEX. REV. CIV. STAT. ANN. ART. 5069, CH. 15 (WHICH REGULATES CERTAIN REVOLVING
LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT
OR THE NOTE.
Section 10.9 Interest. Any provisions herein, in the Note, or in
--------
any other Loan Document, or any other document executed or delivered in
connection herewith, or in any other agreement or commitment, whether written or
oral, expressed or implied, to the contrary notwithstanding, Bank One shall not
in any event be entitled to receive or collect, nor shall or may amounts
received hereunder be credited, so that Bank One shall be paid, as interest, a
sum greater than the maximum amount permitted by applicable law to be charged to
the Person primarily obligated to pay the Note at the time in question. If any
construction of this Agreement, the Note or any other Loan Document, or any and
all other papers, agreements or commitments indicate a different right given to
Bank One to ask for, demand or receive any larger sum as interest, such is a
mistake in calculation or wording which this clause shall override and control,
it being the intention of the parties that this Agreement, the Note, and all
other Loan Documents or other documents executed or delivered in connection
herewith shall in all things comply with applicable law and proper adjustments
shall automatically be made accordingly. In the event that Bank One shall ever
receive, collect or apply as interest, any sum in excess of the maximum
nonusurious rate permitted by applicable law (the "Maximum Rate"), if any, such
------------
excess amount shall be applied to the reduction of the unpaid principal balance
of the Note, and if the same be paid in full, any remaining excess shall be paid
to the Borrower. In determining whether or not the interest paid or payable,
under any specific contingency, exceeds the Maximum Rate, if any, the Borrower
and Bank One shall, to the maximum extent permitted under applicable law: (a)
characterize any nonprincipal payment as an expense or fee rather than as
interest, (b) exclude voluntary prepayments and the effects thereof, and (c)
"spread" the total amount of interest throughout the entire term of the Note;
provided that if the Note is paid and performed in full prior to the end of the
full contemplated term hereof, and if the interest received for the actual
period of existence thereof exceeds the Maximum Rate, if any, the Person holding
the Note shall refund to the Borrower the amount of such excess.
To the extent that TEX. REV. CIV. STAT. ANN. art 5069-1.04, as amended (the
"Act" is relevant to the holder of the Note for purposes of determining the
---
Maximum Rate, each such holder elects to determine such applicable legal rate
under the Act pursuant to the "indicated rate ceiling", from time to time in
effect, as referred to and defined in article 1.04(a)(1) of the Act; subject,
however, to the limitations on such applicable ceiling referred to and defined
in article 1.04(b)(2) of the Act, and further subject to any right such holder
may have subsequently, under applicable law, to change the method of determining
the Maximum Rate.
Section 10.10 Right of Offset. The Borrower hereby grants to Bank
---------------
One and to any assignee or participant of Bank One a right of offset, to secure
the repayment of the Obligations, upon any and all monies, securities or other
property of the Borrower, and the proceeds therefrom now or hereafter held or
received by or in transit to such Person, from or for the account of the
Borrower, whether for safekeeping, custody, pledge, transmission, collection or
otherwise, and also upon any and
207
all deposits (general or special, time or demand, provisional or final) and
credits of the Borrower, and any and all claims of the Borrower against such
Person at any time existing. Upon the occurrence of any Event of Default, such
Person is hereby authorized at any time and from time to time, without notice to
the Borrower, to offset, appropriate, and apply any and all items hereinabove
referred to against the Obligations. Notwithstanding anything in this Section
-------
10.10 or elsewhere in this Agreement to the contrary, neither Bank One nor any
- -----
assignee or participant of Bank One shall have any right to offset, appropriate
or apply any accounts of the Borrower which consist of escrowed funds (except
and to the extent of any beneficial interest of the Borrower in such escrowed
funds) on deposit in accounts which accounts have been identified on the books
and records of the Person with whom such accounts are maintained as containing
escrowed funds.
Section 10.11 Successors and Assigns; Confidentiality. All
---------------------------------------
covenants and agreements by or on behalf of the Borrower in the Note, this
Agreement, or any other Loan Document shall bind the Borrower's successors and
assigns and shall inure to the benefit of Bank One and its successors and
assigns. The Borrower shall not, however, have the right to assign its rights
under this Agreement or any interest herein, without the prior written consent
of Bank One. Bank One may, in connection with any assignment or participation or
proposed assignment or participation by Bank One, disclose to the actual or
proposed assignee or participant any information relating to the Borrower
furnished to Bank One by or on behalf of the Borrower; provided, that prior to
--------
any such disclosure, the actual or proposed assignee or participant shall agree
to preserve the confidentiality of any information relating to the Borrower that
has been identified in writing by the Borrower to be confidential.
Section 10.12 Bank One Representations and Warranties. Bank One
---------------------------------------
represents and warrants that it:
(a) Is a banking association duly organized and validly existing
under the laws of the United States of America;
(b) has the power and authority to own its properties and assets
and to transact the business in which it is engaged;
(c) has the power and requisite authority to execute, deliver
and perform this Agreement and the other Loan Documents to which it is a
party, and is duly authorized to, and has taken all action necessary to
authorize it to, execute, deliver and perform this Agreement and the other
Loan Documents to which it is a party and will continue to be authorized to
so perform; and
(d) will continuously maintain all components of this Agreement
and the other Loan Documents as an official record of Bank One.
Section 10.13 Consent to Jurisdiction. The Borrower hereby agrees
-----------------------
that any action or proceeding under this Agreement or any other Loan Document
may be commenced against it in any court of competent jurisdiction within the
State of Texas, by service of process upon the Borrower by first-class
registered or certified mail, return receipt requested, addressed to the
Borrower at its address last known to Bank One. The Borrower agrees that any
such suit, action, or proceeding arising out of or relating to this Agreement or
any other Loan Document may be instituted in the courts of the State of Texas,
or in the United States District court for the Northern District of Texas, at
the option of Bank One; and the Borrower hereby waives any objection to the
venue of any such suit, action, or proceeding. Nothing herein shall affect the
right of Bank One to accomplish service of process in any other manner permitted
by law or to commence legal proceedings or otherwise proceed against the
Borrower in any other jurisdiction or court.
Section 10.14 Exhibits. The exhibits attached to this Agreement
--------
are incorporated herein and shall be considered a part of this Agreement for the
purposes stated herein, except that in the event of any conflict between any of
the provisions of such exhibits and the provisions of this Agreement, the
provisions of this Agreement shall prevail.
Section 10.15 Titles of Articles and Sections. All titles or
-------------------------------
headings to articles, sections, or other divisions of this Agreement or the
exhibits hereto are only for the convenience of the parties and shall not be
construed to have any effect or meaning with respect to the other content of
such articles, sections, subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.
208
Section 10.16 Counterparts. This Agreement may be executed in two
------------
counterparts, and it shall not be necessary that the signatures of each of the
parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all counterparts together shall constitute one
and the same instrument.
Section 10.17 ENTIRE AGREEMENT. THE NOTE, THIS AGREEMENT, AND THE
----------------
OTHER LOAN DOCUMENTS EXECUTED AND DELIVERED AS OF EVEN DATE HEREWITH REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND THERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
209
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
BORROWER: NVR MORTGAGE FINANCE, INC.
- --------
By: /s/ William J. Inman
----------------------
Name:William J. Inman
Title:President
BANK ONE: BANK ONE, TEXAS, NATIONAL
- --------
ASSOCIATION
By: /s/ Pamela E. Skinner
---------------------
Pamela E. Skinner
Vice President
Attachments:
Exhibit A Form of Note
Exhibit B Form of Borrowing Request
Exhibit C Form of Release of Lien
Exhibit D Form of Request for Release of Security Interest
210