Exhibit 10.37
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AMENDED AND RESTATED CREDIT AGREEMENT
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PREFERRED HOME MORTGAGE COMPANY
as Borrower
GUARANTY BANK
as Lender
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December 19, 2003
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TABLE OF CONTENTS
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ARTICLE I GENERAL TERMS..............................................................................1
Section 1.1 Certain Definitions...............................................................1
Section 1.2 Exhibits and Schedules...........................................................18
Section 1.3 Calculations and Determinations..................................................18
ARTICLE II AMOUNT AND TERMS OF LOANS.................................................................18
Section 2.1 Commitment and Loans.............................................................19
Section 2.2 Promissory Note; Interest on the Note............................................19
Section 2.3 Notice and Manner of Obtaining Loans.............................................19
Section 2.4 Fees.............................................................................19
Section 2.5 Mandatory Repayments.............................................................20
Section 2.6 Continuations and Conversions of Existing Loans..................................20
Section 2.7 Payments to Lender...............................................................21
Section 2.8 Increased Cost and Reduced Return................................................22
Section 2.9 Limitation on Types of Loans.....................................................23
Section 2.10 Illegality.......................................................................23
Section 2.11 Treatment of Affected Loans......................................................24
Section 2.12 Compensation.....................................................................24
Section 2.13 Taxes............................................................................24
ARTICLE III CONDITIONS PRECEDENT......................................................................25
Section 3.1 Initial Loan.....................................................................25
Section 3.2 All Loans........................................................................27
ARTICLE IV BORROWER REPRESENTATIONS AND WARRANTIES...................................................27
Section 4.1 Organization and Good Standing...................................................27
Section 4.2 Authorization and Power..........................................................28
Section 4.3 No Conflicts or Consents.........................................................28
Section 4.4 Enforceable Obligations..........................................................28
Section 4.5 Priority of Liens................................................................28
Section 4.6 No Liens.........................................................................28
Section 4.7 Financial Condition of Borrower..................................................28
Section 4.8 Full Disclosure..................................................................29
Section 4.9 No Default.......................................................................29
Section 4.10 No Litigation....................................................................29
Section 4.11 Taxes............................................................................29
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TABLE OF CONTENTS
(Cont'd)
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Section 4.12 Principal Office, etc............................................................29
Section 4.13 Compliance with ERISA............................................................29
Section 4.14 Subsidiaries.....................................................................29
Section 4.15 Indebtedness.....................................................................30
Section 4.16 Permits, Patents, Trademarks, etc................................................30
Section 4.17 Status Under Certain Federal Statutes............................................30
Section 4.18 Securities Act...................................................................30
Section 4.19 No Approvals Required............................................................30
Section 4.20 Survival of Representations......................................................31
Section 4.21 Individual Mortgage Loans........................................................31
Section 4.22 Environmental Matters............................................................32
Section 4.23 Regulation U.....................................................................32
ARTICLE V AFFIRMATIVE COVENANTS.....................................................................32
Section 5.1 Financial Statements and Reports.................................................33
Section 5.2 Taxes and Other Liens............................................................34
Section 5.3 Maintenance......................................................................35
Section 5.4 Further Assurances...............................................................35
Section 5.5 Reimbursement of Expenses........................................................35
Section 5.6 Insurance........................................................................36
Section 5.7 Accounts and Records; Servicing Records..........................................36
Section 5.8 Right of Inspection..............................................................36
Section 5.9 Notice of Certain Events.........................................................36
Section 5.10 Performance of Certain Obligations and Information Regarding Investors...........37
Section 5.11 Use of Proceeds; Margin Stock....................................................37
Section 5.12 Notice of Default................................................................37
Section 5.13 Compliance with Loan Documents...................................................37
Section 5.14 Operations and Properties........................................................37
Section 5.15 Environmental Matters............................................................37
ARTICLE VI NEGATIVE COVENANTS........................................................................38
Section 6.1 No Merger; Limitation on Issuance of Securities..................................38
Section 6.2 Limitation on Indebtedness.......................................................38
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TABLE OF CONTENTS
(Cont'd)
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Section 6.3 Fiscal Year, Method of Accounting................................................39
Section 6.4 Business.........................................................................39
Section 6.5 Liquidations, Consolidations and Dispositions of Substantial Assets..............39
Section 6.6 Loans, Advances, and Investments.................................................39
Section 6.7 Use of Proceeds..................................................................40
Section 6.8 Actions with Respect to Mortgage Collateral......................................40
Section 6.9 Transactions with Affiliates.....................................................40
Section 6.10 Liens............................................................................40
Section 6.11 ERISA............................................................................41
Section 6.12 Change of Principal Office.......................................................41
Section 6.13 Tangible Net Worth...............................................................41
Section 6.14 Adjusted Tangible Net Worth......................................................41
Section 6.15 Total Debt to Adjusted Tangible Net Worth Ratio..................................41
Section 6.16 Profitability....................................................................41
Section 6.17 Current Ratio....................................................................41
ARTICLE VII EVENTS OF DEFAULT.........................................................................41
Section 7.1 Nature of Event..................................................................41
Section 7.2 Default Remedies.................................................................44
ARTICLE VIII INDEMNIFICATION...........................................................................44
Section 8.1 Indemnification..................................................................44
Section 8.2 Limitation of Liability..........................................................45
ARTICLE IX [RESERVED]................................................................................45
ARTICLE X MISCELLANEOUS.............................................................................45
Section 10.1 Notices..........................................................................45
Section 10.2 Amendments, Etc..................................................................46
Section 10.3 CHOICE OF LAW; VENUE.............................................................46
Section 10.4 Invalidity.......................................................................46
Section 10.5 Survival of Agreements...........................................................46
Section 10.6 Renewal, Extension or Rearrangement..............................................47
Section 10.7 Waivers..........................................................................47
Section 10.8 Cumulative Rights................................................................47
TABLE OF CONTENTS
(Cont'd)
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Section 10.9 Limitation on Interest...........................................................47
Section 10.10 Bank Accounts; Offset............................................................48
Section 10.11 Assignments, Participations......................................................48
Section 10.12 Exhibits.........................................................................48
Section 10.13 Titles of Articles, Sections and Subsections.....................................49
Section 10.14 Counterparts.....................................................................49
Section 10.15 Termination; Limited Survival....................................................49
Section 10.16 Confidential Information.........................................................49
Section 10.17 Time is of the Essence...........................................................50
Section 10.18 WAIVER OF JURY TRIAL.............................................................50
Section 10.19 CONSEQUENTIAL DAMAGES............................................................50
Section 10.20 Amendment and Restatement........................................................50
Section 10.21 ENTIRE AGREEMENT.................................................................50
EXHIBITS
Exhibit A -- Form of Note
Exhibit B -- Form of Borrowing Request
Exhibit C -- Investors
Exhibit D -- Subsidiaries
Exhibit E -- Certificate Accompanying Financial Statement
Exhibit F -- Form of Security Agreement
Exhibit G -- Form of Opinion of Borrower's Counsel
Exhibit H -- Borrowing Base Certificate
Exhibit I -- Continuation/Conversion Notice
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AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT is made and entered into as
of December 19, 2003, between PREFERRED HOME MORTGAGE COMPANY, a Florida
corporation ("BORROWER"), and GUARANTY BANK ("LENDER").
WITNESSETH:
WHEREAS, Borrower, Technical Mortgage, L.P., a Texas limited
partnership ("TECHNICAL MORTGAGE") and Lender entered into that certain Credit
Agreement dated August 1, 2002 which amended and restated in its entirety the
Credit Agreement dated July 5, 2001 between Borrower and Lender (as amended
through the date hereof, the "ORIGINAL CREDIT AGREEMENT"), for the purposes and
consideration therein expressed, pursuant to which Lender became obligated to
make loans to Borrower and Technical Mortgage as therein provided;
WHEREAS, effective February 28, 2003, TM Investments, L.L.C., General
Partner of Technical Mortgage, and NMH Investments, Inc. were merged into
Borrower, and effective March 11, 2003 Technical Mortgage was dissolved, leaving
Borrower as the sole remaining Borrower; and
WHEREAS, Borrower has requested (i) an increase in the maximum
aggregate amount of the Commitment to $50,000,000, and (ii) certain other
changes to the covenants and other terms relating to the Loans;
WHEREAS, Lender is willing to amend and restate the Original Credit
Agreement in its entirety to make available to Borrower such increased
Commitment upon the terms and subject to the conditions set forth herein;
WHEREAS, it is the intent of the parties hereto (i) that this Agreement
does not constitute a novation of rights, obligations and liabilities of the
respective parties (including the Obligations) existing under the Original
Credit Agreement or evidence payment of all or any of such obligations and
liabilities and such rights, obligations and liabilities shall continue and
remain outstanding and (ii) that this Agreement amend and restate in its
entirety the Original Credit Agreement;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements contained herein, the parties hereto hereby agree as follows:
ARTICLE I
GENERAL TERMS
Section 1.1. CERTAIN DEFINITIONS. As USED in this Agreement, the
following terms have the following meanings:
"ADJUSTED FIXED EURODOLLAR RATE" means, for any Fixed Eurodollar Loan
for any Interest Period therefor, the rate per annum equal to the sum of (a) the
Applicable Fixed Eurodollar Rate Margin plus (b) the Fixed Eurodollar Rate,
provided that the Adjusted Fixed Eurodollar Rate shall
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never exceed the Maximum Rate. The Adjusted Fixed Eurodollar Rate for any Fixed
Eurodollar Loan shall change whenever the Reserve Requirement changes.
"ADJUSTED FLOATING EURODOLLAR RATE" means, for any day, the rate per
annum equal to the sum of the Floating Eurodollar Rate for such day plus the
Applicable Floating Eurodollar Rate Margin, provided that the Adjusted Floating
Eurodollar Rate shall never exceed the Maximum Rate.
"ADJUSTED TANGIBLE NET WORTH OF ANY PERSON" means, as of any date, the
Tangible Net Worth of such Person MINUS intercompany loans to its Affiliates.
"AFFILIATE" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person.
"AGENCY ELIGIBLE MORTGAGE LOAN" means a Mortgage Loan which conforms to
current GNMA, FNMA, FHLMC, FHA or VA guidelines in regards to credit quality.
"AGREEMENT" means this Amended and Restated Credit Agreement, as the
same may from time to time be amended, supplemented or restated.
"AGREEMENT TO PLEDGE" means each agreement by Borrower set forth in a
Borrowing Request for Wet Mortgage Loans, to deliver Required Mortgage Documents
to Lender.
"APPLICABLE FLOATING EURODOLLAR RATE MARGIN" means, on each day, one
and three-eighths percent (1.375%) per annum.
"APPLICABLE FIXED EURODOLLAR RATE MARGIN" means, on each day, one and
three-eighths percent (1.375%) per annum.
"APPLICABLE LENDING OFFICE" means the address of Lender set forth
herein.
"BORROWER" shall have the meaning assigned to such term in the preamble
hereof.
"BORROWING" means a borrowing of a new Loan of a single Type pursuant
to SECTION 2.3 or a Continuation or Conversion of existing Loans into a single
Type (and, in the case of Fixed Eurodollar Loans, with the same Interest Period)
pursuant to SECTION 2.6.
"BORROWING BASE" means at any date all Eligible Mortgage Loans which
have been delivered to and held by Lender or otherwise identified as Mortgage
Collateral.
"BORROWING BASE CERTIFICATE" means a certificate describing the
Eligible Mortgage Loans to be included in the Borrowing Base in a form
acceptable to Lender.
"BORROWING REQUEST" means a request, in the form of EXHIBIT B, for a
Loan pursuant to ARTICLE II.
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"BUSINESS DAY" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Dallas, Texas. Any
Business Day in any way relating to the Fixed Eurodollar Rate must also be a day
on which, in the judgment of Lender, significant transactions in dollars are
carried out in the interbank Eurocurrency market.
"CASH EQUIVALENTS" means (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof which mature within ninety (90) days from the date of
acquisition, and (ii) time deposits and certificates of deposit, which mature
within ninety (90) days from the date of acquisition, of Lender or any other
domestic commercial bank having capital and surplus in excess of $200,000,000,
which has, or the holding company of which has, a commercial paper rating of at
least A-1 or the equivalent thereof by Standard & Poors Corporation or P-1 or
the equivalent thereof by ▇▇▇▇▇'▇ Investors Service, Inc.
"CHANGE OF CONTROL" means the occurrence of any of the following
events: (a) Parent ceases to own, directly or indirectly, all of the voting
power of the voting stock of Borrower, (b) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ceases to serve as
President of Borrower and is not replaced by a Person reasonably acceptable to
Lender within 180 days after such cessation, (c) if any "person" or "group" (as
such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended, or any successor provisions to either of the preceding),
including any group acting for the purpose of acquiring, holding, voting or
disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Securities Exchange Act, other than any one or more of the Permitted Holders,
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act, except that a person will be deemed to have "beneficial ownership"
of all shares that any such person has the right to acquire, whether such right
is exercisable immediately or only after the passage of time), directly or
indirectly, of 40% or more of the total voting power of the voting stock of the
Parent; (for purposes of this CLAUSE (C), such person or group shall be deemed
to beneficially own any voting stock of a corporation held by any other
corporation (the "PARENT CORPORATION") so long as such person or group
beneficially owns, directly or indirectly, in the aggregate a majority of the
total voting power of the voting stock of such parent corporation); or (d)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the board of directors of Parent (together with any new
directors whose election or appointment by such board of directors or whose
nomination for election by the shareholders of Parent was approved by a vote of
not less than two-thirds of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the board of directors of Parent then in office.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" has the meaning given to it in the Security Agreement.
"COLLATERAL VALUE OF THE BORROWING BASE" means on any day the sum of
the Unit Collateral Values of all Eligible Mortgage Loans included in the
Borrowing Base on such day as reasonably determined by Lender based on
information then available to Lender; provided that the Collateral Value of the
Borrowing Base shall never exceed the Commitment.
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"COMMITMENT" means on any day, the obligation of the Lender to make
Loans to Borrower pursuant to SECTION 2.1 hereof in an aggregate outstanding
amount not to exceed at any time $50,000,000.
"CONSOLIDATED" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"CONSTRUCTION/PERM LOAN" means a Mortgage Loan which has been
underwritten in accordance with the guidelines of an Investor and which would be
an Agency Eligible Mortgage Loan except that the mortgage loan is a construction
loan for a home to be built by Parent or its Subsidiaries. For any
Construction/Perm Loan, funding hereunder will be limited to the initial advance
only.
"CONSTRUCTION/PERM SUBLIMIT" means five percent (5%) of the Commitment.
"CONTINUATION" shall refer to the continuation pursuant to SECTION 2.6
hereof of a Fixed Eurodollar Loan as a Fixed Eurodollar Loan from one Interest
Period to the next Interest Period.
"CONTINUATION/CONVERSION NOTICE" means a written or telephonic request,
or a written confirmation, made by Borrower which meets the requirements of
SECTION 2.6.
"CONVERSION" shall refer to a conversion pursuant to SECTION 2.6 or
ARTICLE II of one Type of Loan into another Type of Loan.
"DATE OF ORIGINATION" means, for any Mortgage Loan, the date such
Mortgage Loan is funded.
"DEBTOR LAWS" means all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization or
similar Laws from time to time in effect affecting the rights of creditors
generally and general principles of equity.
"DEFAULT" means any of the events specified in SECTION 7.1 hereof,
whether or not any requirement for notice or lapse or time or any other
condition has been satisfied.
"DEFAULT RATE" means, at the time in question, with respect to any
Fixed Eurodollar Loan, four percent (4%) per annum plus the Adjusted Fixed
Eurodollar Rate then in effect, and (ii) with respect to any Floating Eurodollar
Loan and any other Obligation, four percent (4%) per annum plus the Adjusted
Floating Eurodollar Rate then in effect; provided that in no event shall the
Default Rate ever exceed the Maximum Rate.
"DIVIDENDS" in respect of any corporation means: (a) cash distributions
or any other distributions on, or in respect of, any class of equity security of
such corporation, except for distributions made solely in shares of securities
of the same class; and (b) any and all funds, cash or other payments made in
respect of the redemption, repurchase or acquisition of such securities.
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"DRAWDOWN TERMINATION DATE" means the earlier of the date which is 364
days after the date hereof, being December 17, 2004, or the day on which the
Note first becomes due and payable in full.
"ELIGIBLE MORTGAGE LOAN" means a Mortgage Loan with respect to which
each of the following statements is accurate and complete (and the Borrower by
including such Mortgage Loan in any computation of the Collateral Value of the
Borrowing Base shall be deemed to so represent to Lender at and as of the date
of such computation):
(a) Such Mortgage Loan is a binding and valid obligation of
the Obligor thereon, in full force and effect and enforceable in
accordance with its terms, except as enforceability may be limited by
Debtor Laws;
(b) The Mortgage Note evidencing such Mortgage Loan is genuine
in all respects as appearing on its face and as represented in the
books and records of Borrower, and all information set forth therein is
true and correct;
(c) Such Mortgage Loan is free of any default (other than as
permitted by subparagraph (d) below) of any party thereto (including
Borrower), counterclaims, offsets and defenses, including the defense
of usury, and from any rescission, cancellation or avoidance, and all
right thereof, whether by operation of law or otherwise;
(d) No payment under such Mortgage Loan is more than thirty
(30) days past due the payment due date set forth in the underlying
Mortgage Note and Mortgage;
(e) The Mortgage Note evidencing such Mortgage Loan contains
the entire agreement of the parties thereto with respect to the subject
matter thereof, has not been modified or amended in any respect not
expressed in writing therein and is free of concessions or
understandings with the Obligor thereon of any kind not expressed in
writing therein;
(f) Such Mortgage Loan is in all respects in accordance with
all Requirements of Law applicable thereto, including, without
limitation, the federal Consumer Credit Protection Act and the
regulations promulgated thereunder and all applicable usury Laws and
restrictions, and all notices, disclosures and other statements or
information required by Law or regulation to be given, and any other
act required by Law or regulation to be performed, in connection with
such Mortgage Loan have been given and performed as required;
(g) All advance payments and other deposits on such Mortgage
Loan have been paid in cash, and no part of said sums has been loaned,
directly or indirectly, by Borrower to the Obligor, and, other than as
disclosed to Lender in writing, there have been no prepayments;
(h) At all times such Mortgage Loan will be free and clear of
all Liens, except in favor of Lender;
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(i) The Property covered by such Mortgage Loan is insured
against loss or damage by fire and all other hazards normally included
within standard extended coverage in accordance with the provisions of
such Mortgage Loan with Borrower named as a loss payee thereon;
(j) Such Mortgage Loan is secured by a first Mortgage, or in
the case of any Second Lien Loan, a second Mortgage, on Property
consisting of a completed one-to-eight unit single family residence
which is not used for commercial purposes, and which is not a
construction loan, unless such Mortgage Loan is a Construction/Perm
Loan; PROVIDED THAT (i) if such Mortgage Loan is a Second Lien Loan,
the Unit Collateral Value of such Mortgage Loan when added to the Unit
Collateral Value of other Second Lien Loans does not exceed the Second
Lien Loan Sublimit and (ii) if such Mortgage Loan is a
Construction/Perm Loan, the Unit Collateral Value of such Mortgage Loan
when added to the Unit Collateral Value of other Construction/Perm
Loans does not exceed the Construction/Perm Sublimit;
(k) The Date of Origination of such Mortgage Loan is not more
than thirty (30) days prior to the date such Mortgage Loan was first
included in the Borrowing Base;
(l) Such Mortgage Loan has not been included in the Borrowing
Base for more than one hundred and twenty (120) days;
(m) If such Mortgage Loan is included in the Borrowing Base
and has been withdrawn from the possession of the Lender on terms and
subject to conditions set forth in the Security Agreement:
(i) If such Mortgage Loan was withdrawn by Borrower
for purposes of correcting clerical or other non-substantive
documentation problems, the promissory note and other
documents relating to such Mortgage Loan are returned to the
Lender within ten (10) Business Days from the date of
withdrawal; and the Unit Collateral Value of such Mortgage
Loan when added to the Unit Collateral Value of other Mortgage
Loans which have been similarly released to Borrower and have
not been returned does not exceed ten percent (10%) of the
Commitment;
(ii) If such Mortgage Loan was shipped by the Lender
directly to a permanent investor for purchase or to a
custodian for the formation of a pool, (x) such investor or
custodian is in full compliance with the terms of the bailee
letter under which such Mortgage Loan was shipped, and (y) the
full purchase price for such Mortgage Loan has been received
by the Lender (or such Mortgage Loan has been returned to the
Lender) within forty-five (45) calendar days from the date of
shipment by the Lender;
(n) Such Mortgage Loan is subject to a Take-Out Commitment
which is in full force and effect unless such Mortgage Loan is a
Investment Loan, provided that the Unit Collateral Value of such
Investment Loan when added to the Unit Collateral Value of all other
Investment Loans does not exceed the Investment Sublimit;
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(o) Such Mortgage Loan conforms to GNMA, FNMA, FHLMC, FHA or
VA guidelines in regards to credit quality, or
(i) If such Mortgage Loan is a Jumbo Loan, the Unit
Collateral Value of such Mortgage Loan when added to the Unit
Collateral Value of all other Jumbo Loans does not exceed the
Jumbo Sublimit;
(ii) If such Mortgage Loan is a Super Jumbo Loan, the
Unit Collateral Value of such Mortgage Loan when added to the
Unit Collateral Value of all other Super Jumbo Loans does not
exceed the Super Jumbo Sublimit;
(iii) If such Mortgage Loans is a Second Lien Loan,
the Unit Collateral Value of such Mortgage Loan when added to
the Unit Collateral Value of all other Second Lien Loans does
not exceed the Second Lien Loan Sublimit;
(iv) If such Mortgage Loans is a Non-Conforming Loan,
the Unit Collateral Value of such Mortgage Loan when added to
the Unit Collateral Value of all other Non-Conforming Loans
does not exceed the Non-Conforming Sublimit;
(v) If such Mortgage Loans is a Construction/Perm
Loan, the Unit Collateral Value of such Mortgage Loan when
added to the Unit Collateral Value of all other
Construction/Perm Loans does not exceed the Construction/Perm
Sublimit; and
(p) The Required Mortgage Documents have been delivered to
Lender prior to the inclusion of such Mortgage Loan in any computation
of the Borrowing Base or, if such items have not been delivered to
Lender on or prior to the date such Mortgage Loan is first included in
any computation of the Borrowing Base, (a) Borrower has pledged and
agreed to deliver all Required Mortgage Documents pursuant to a
Borrowing Request delivered to Lender prior to such inclusion, and (b)
the Collateral Value of such Mortgage Loan when added to the Collateral
Value of all other Mortgage Loans for which Lender has not received the
Required Mortgage Documents does not exceed the Wet Warehousing
Sublimit, PROVIDED THAT, all Required Mortgage Documents with respect
to such Mortgage Loan shall be delivered to Lender within SEVEN (7)
BUSINESS DAYS AFTER THE DATE of the Agreement to Pledge with respect
thereto;
"ENVIRONMENTAL LAWS" means any and all Laws relating to (a) the
protection of the environment, (b) emissions, discharges or releases of
pollutants, contaminants, chemicals or hazardous or toxic substances or wastes
into the environment including ambient air, surface water, ground water or land,
or (c) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with the regulations from time to time
promulgated with respect thereto.
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"ERISA AFFILIATE" means all members of the group of corporations and
trades or businesses (whether or not incorporated) which, together with
Borrower, are treated as a single employer under Section 414 of the Code.
"ERISA PLAN" means any pension benefit plan subject to Title IV of
ERISA or Section 412 of the Code maintained or contributed to by Borrower or any
ERISA Affiliate with respect to which Borrower has a fixed or contingent
liability.
"EVENT OF DEFAULT" means any of the events specified in SECTION 7.1
hereof, provided that any requirement in connection with such event for the
giving of notice or the lapse of time, or the happening of any further
condition, event or act has been satisfied.
"FHA" means the Federal Housing Administration or any successor
thereto.
"FHLMC" means the Federal Home Loan Mortgage Corporation, or any
successor thereto.
"FINANCING LEASE" means (i) any lease of Property if the then present
value of the minimum rental commitment thereunder should, in accordance with
GAAP, be capitalized on a balance sheet of the lessee, and (ii) any other lease
obligations which are capitalized on a balance sheet of the lessee.
"FISCAL QUARTER" means each period of three calendar months ending
March 31, June 30, September 30 and December 31 of each year.
"FISCAL YEAR" means each period of twelve calendar months ending
December 31 of each year.
"FIXED EURODOLLAR LOAN" means a Loan that bears interest at the
Adjusted Fixed Eurodollar Rate.
"FIXED EURODOLLAR RATE" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) appearing on the Bloomberg
Eurorate (or, if not available, any other nationally recognized trading screen
reporting on-line trading with Eurorates) at 10:00 a.m. (Central Standard time)
as the Eurorates for deposits in dollars on that day for the period equal to or
next greater than the Interest Period. In the event such rate ceases to be
published, Fixed Eurodollar Rate shall mean a comparable rate of interest
reasonably selected by Lender.
"FLOATING EURODOLLAR RATE" means, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on the
Bloomberg Eurorate (or, if not available, any other nationally recognized
trading screen reporting on-line trading with Eurorates) at 10:00 a.m. (Central
Standard time) as the Eurorates for deposits in dollars on that day for a period
of one month. In the event such rate ceases to be published, Floating Eurodollar
Rate shall mean a comparable rate of interest reasonably selected by Lender.
"FLOATING EURODOLLAR LOAN" means a Loan which does not bear interest at
the Adjusted Fixed Eurodollar Rate.
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"FNMA" means the Federal National Mortgage Association, or any
successor thereto.
"FUNDING ACCOUNT" means the non-interest bearing demand checking
account established by Borrower with Lender to be used for (a) the initial
deposit of proceeds of Loans; and (b) the funding or purchase of a Mortgage Note
by Borrower; provided that the Funding Account shall be pledged to Lender and
shall be a controlled disbursement account, and Borrower shall not be entitled
to withdraw funds from the Funding Account.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of Borrower
and its consolidated subsidiaries, are applied for all periods after the date
hereof in a manner consistent with the manner in which such principles and
practices were applied to the financial statements described in SECTION 4.7. If
any change in any accounting principle or practice is required by the Financial
Accounting Standards Board (or any such successor) in order for such principle
or practice to continue as a generally accepted accounting principle or
practice, all reports and financial statements required hereunder with respect
to Borrower or Parent may be prepared in accordance with such change, but all
calculations and determinations to be made hereunder may be made in accordance
with such change only after notice of such change is given to Lender and Lender
agrees to such change insofar as it affects the accounting of Borrower or
Parent.
"GOVERNMENTAL AUTHORITY" means any nation or government, any agency,
department, state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GOVERNMENTAL REQUIREMENT" means any law, statute, code, ordinance,
order, rule, regulation, judgment, decree, injunction, franchise, permit,
certificate, license, authorization or other direction or requirement
(including, without limitation, any of the foregoing which relate to
environmental standards or controls, energy regulations and occupational, safety
and health standards or controls) of any arbitrator, court or other Governmental
Authority, which exercises jurisdiction over any Related Person or any of its
Property.
"GUARANTY OBLIGATION" of any Person means any contract, agreement or
understanding of such Person pursuant to which such Person guarantees, or in
effect guarantees, any Indebtedness, lease, dividends or other obligations (the
"PRIMARY OBLIGATIONS") of any other Person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, contingently or absolutely, in whole or
in part, including without limitation agreements:
(a) to purchase such Primary Obligation or any property
constituting direct or indirect security therefor;
(b) to advance or supply funds (A) for the purchase or payment
of any such Primary Obligation, or (B) to maintain working capital or
other balance sheet conditions of the Primary Obligor or otherwise to
maintain the net worth or solvency of the Primary Obligor;
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(c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such Primary Obligation of the
ability of the Primary Obligor to make payment of such Primary
Obligation; or
(d) otherwise to assure or hold harmless the owner of any such
Primary Obligation against loss in respect thereof;
PROVIDED, THAT "GUARANTY OBLIGATION" shall not include endorsements that are
made in the ordinary course of business of negotiable instruments or documents
for deposit or collection. The amount of any Guaranty Obligation shall be deemed
to be the maximum amount for which the guarantor may be liable pursuant to the
agreement that governs such Guaranty Obligation, unless such maximum amount is
not stated or determinable, in which case the amount of such obligation shall be
the maximum reasonably anticipated liability thereon, as determined by such
guarantor in good faith.
"INDEBTEDNESS" of any Person at a particular date means the sum
(without duplication) at such date of (a) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services or
which is evidenced by a note, bond, debenture, or similar instrument, (b) all
obligations of such Person under any Financing Lease, (c) all obligations of
such Person in respect of letters of credit, acceptances, or similar obligations
issued or created for the account of such Person, (d) all Guaranty Obligations
of such Person, (e) all liabilities secured by any Lien on any property owned by
such Person, whether or not such Person has assumed or otherwise become liable
for the payment thereof, and (f) any liability of such Person in respect of
unfunded vested benefits under an ERISA Plan and (g) all liabilities of such
Person in respect of indemnities or repurchase obligations made in connection
with the sale of Mortgage Loans.
"INTEREST PERIOD" means, with respect to each particular Fixed
Eurodollar Loan, a period of l, 2, or 3 months, as specified in the Borrowing
Request applicable thereto, beginning on and including the date specified in
such Borrowing Request (which must be a Business Day), and ending on but not
including the same day of the month as the day on which it began (e.g., a period
beginning on the third day of one month shall end on but not include the third
day of another month), provided that each Interest Period which would otherwise
end on a day which is not a Business Day shall end on the next succeeding
Business Day (unless such next succeeding Business Day is the first Business Day
of a calendar month, in which case such Interest Period shall end on the
immediately preceding Business Day). No Interest Period may be elected which
would extend past the date on which the associated Note is due and payable in
full.
"INVESTMENT LOAN" means a Mortgage Loan which has been underwritten in
accordance with the guidelines of an Investor and which would be an Agency
Eligible Mortgage Loan except that the Mortgage Loan is not covered by a
Take-Out Commitment, but is held by Borrower for investment.
"INVESTMENT SUBLIMIT" means five percent (5%) of the Commitment.
"INVESTOR" means any Person listed on EXHIBIT C, as such exhibit may be
updated or supplemented from time to time; PROVIDED, HOWEVER, that Lender shall
deliver a list of all Persons approved as Investors by Lender upon each
amendment of such exhibit by Lender, and a Investor
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shall be removed from such list upon the written direction of Lender exercised
in its reasonable discretion.
"JUMBO LOAN" means a Mortgage Loan which has been underwritten in
accordance with the guidelines of an Investor and which would be an Agency
Eligible Mortgage Loan except that the original unpaid principal amount of the
underlying Mortgage Note is greater than the current FNMA/FHLMC loan size limit
but does not exceed $650,000.
"JUMBO SUBLIMIT" means thirty percent (30%) of the Commitment.
"LAW" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof. Any reference to a Law includes any amendment or
modification to such Law, and all regulations, rulings, and other Laws
promulgated under such Law.
"LENDER" means Guaranty Bank and its successors and assigns.
"LIEN" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (whether statutory or otherwise), or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any Financing Lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"LOAN" has the meaning given it in SECTION 2.1(A).
"LOAN BALANCE" means for any day, the principal balance of the Loans
outstanding on such day.
"LOAN DOCUMENT" means any, and "LOAN DOCUMENTS" shall mean all, of this
Agreement, the Note, the Security Instruments, the MERS Agreement, the Keep-Well
Agreement and any and all other agreements or instruments now or hereafter
executed and delivered by Borrower or any other Person in connection with, or as
security for the payment or performance of any or all of the Obligations, as any
of such may be renewed, amended or supplemented from time to time.
"LOAN TO VALUE PERCENTAGE" means, as to any Mortgage Loan, the
percentage determined by dividing the total amount owing and outstanding on all
loans secured by the property by the Market Value of the property.
"MARKET VALUE" on any day shall be determined by Lender, in its
reasonable discretion, based upon (a) information then available to Lender
regarding quotes to dealers for the purchase of mortgage notes similar to the
Mortgage Note that have been delivered to Lender pursuant to this Agreement or
(b) sales prices actually received by Borrower for mortgage notes sold by
Borrower during the immediately preceding thirty (30) day period similar to the
Mortgage Note that have been delivered to Lender pursuant to this Agreement.
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"MATERIAL ADVERSE EFFECT" means any material adverse effect on (a) the
validity or enforceability of this Agreement, the Note or any other Loan
Document, (b) the business, operations, total Property or financial condition of
any Related Person, (c) the collateral under any Security Instrument, or (d) the
ability of any Related Person to fulfill its obligations under this Agreement,
the Note, or any other Loan Document to which it is a party.
"MAXIMUM RATE" means, with respect to each Lender, the maximum
nonusurious rate of interest that such Lender is permitted under applicable Law
to contract for, take, charge, or receive with respect to its Loans.
"MERS" means Mortgage Electronic Registration, Inc., a Delaware
corporation, or any successor thereto.
"MERS AGREEMENT" means those agreements by and among Borrower, Lender,
MERS and MERSCORP, Inc., as amended, modified, supplemented, extended, restated
or replaced from time to time.
"MERS(R) SYSTEM" means the system of recording transfers of mortgages
electronically maintained by MERS.
"MIN" means, with respect to each Mortgage Loan, the Mortgage
Identification Number for such Mortgage Loan registered with MERS on the MERS(R)
System.
"MOM LOAN" means, with respect to any Mortgage Loan, MERS acting as the
mortgagee of such Mortgage Loan, solely as nominee for the originator or
Borrower, as the case may be, of such Mortgage Loan and its successors and
assignees.
"MORTGAGE" means a mortgage or deed of trust, on standard forms in form
and substance satisfactory to Lender, securing a Mortgage Note and granting a
perfected, first or second priority lien on residential real property consisting
of land and a one-to-eight unit single family dwelling thereon which is
completed and ready for occupancy.
"MORTGAGE ASSIGNMENT" means an instrument duly executed and in
recordable form assigning a Mortgage, in blank and like all intervening
instruments that have been executed with respect to such Mortgage and which is
in form acceptable to Lender and satisfies all Requirements of Law.
"MORTGAGE COLLATERAL" means all Mortgage Notes (a) which are made
payable to the order of Borrower or have been endorsed (without restriction or
limitation) payable to the order of Borrower, (b) in which Lender has been
granted and continues to hold a perfected first priority security interest, (c)
which are in form and substance acceptable to Lender in its reasonable
discretion, (d) which are secured by Mortgages, and (e) which conform in all
respects with all the requirements for purchase of such Mortgage Note under the
Take-Out Commitments and are valid and enforceable in accordance with their
respective terms.
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"MORTGAGE LOAN" means a one-to-eight unit single family mortgage loan
which is evidenced by a Mortgage Note and secured by a Mortgage, together with
the rights and obligations of a holder thereof and payments thereon and proceeds
therefrom.
"MORTGAGE NOTE" means the note or other evidence of indebtedness
evidencing the indebtedness of an Obligor under a Mortgage Loan.
"NET WORTH" of any Person means, as of any date, the remainder of all
Consolidated assets of such Person MINUS such Person's Consolidated liabilities,
each as determined by GAAP.
"NON-CONFORMING LOAN" means a Mortgage Loan which grants a perfected,
first priority lien on residential real property which (i) is not insured by the
FHA or guaranteed by the VA and does not fully conform to FNMA and FHLMC
underwriting, but is within the maximum loan amount for FNMA and FHLMC mortgage
loans; (ii) is underwritten in accordance with Investor-approved guidelines,
(iii) is covered by a Take-Out Commitment from a pre-approved Investor, and (iv)
does not have a Loan to Value Percentage of greater than one hundred percent
(100%). Any Non-Conforming Loan must be covered by private mortgage insurance if
the Loan to Value Percentage exceeds eighty percent (80%).
"NON-CONFORMING SUBLIMIT" means twenty percent (20%) of the Commitment.
"NOTE" means any promissory note delivered by Borrower to Lender
pursuant to SECTION 2.2 in the form attached hereto as EXHIBIT A and all
renewals, modifications and extensions thereof.
"OBLIGATIONS" means all present and future Indebtedness, obligations,
and liabilities of Borrower to Lender, and all renewals 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 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.
"OBLIGOR" means the Person or Persons obligated to pay the Indebtedness
which is the subject of a Mortgage Loan.
"OPERATING ACCOUNT" means the non-interest bearing demand checking
accounts (whether one or more) established by Borrower with Lender to be used
for Borrower's operations.
"PARENT" means Technical Olympic USA, Inc., a Delaware corporation and
beneficial owner of all of the outstanding capital stock of Borrower.
"PARENT CREDIT AGREEMENT" means that certain Amended and Restated
Credit Agreement dated as of April 4, 2003 among Technical Olympic USA, Inc. as
Borrower, the Lenders and Issuers party thereto, Citicorp North America, Inc. as
Administrative Agent, Fleet National Bank as Documentation Agent, and ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ Inc. as Sole Arranger and Sole Book Manager, as amended.
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"PARENT DEBT AGREEMENTS" means each of the following: (i) the Parent
Credit Agreement, all related guaranties and pledge agreements and other
instruments from time to time delivered in connection therewith; (ii) that
certain Senior Indenture dated as of June 25, 2002 among the Parent, as issuer,
the subsidiary guarantors party thereto and ▇▇▇▇▇ Fargo Bank Minnesota, National
Association, as trustee, pursuant to which the Parent's 9% Senior Notes due 2010
are issued; (iii) that certain senior Subordinated Indenture dated as of June
25, 2002 among the Parent, as issuer, the subsidiary guarantors party thereto
and ▇▇▇▇▇ Fargo Bank Minnesota, National Association, as trustee, pursuant to
which the Parent's 10 3/8% Senior Subordinated Notes due 2012 are issued; and
(iv) that certain Indenture dated as of January 29, 2003 among the Parent, as
issuer, the subsidiary guarantors party thereto and ▇▇▇▇▇ Fargo Bank Minnesota,
National Association, as trustee, pursuant to which the Parent's 9% Senior Notes
due 2010 are issued, in each case of clauses (i) through (iv), as the same may
be amended, modified, supplemented, waived, replaced, refinanced from time to
time.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Governmental Authority succeeding to any of its functions.
"PERMITTED HOLDERS" means Technical Olympic, S.A., a Greek corporation.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, limited liability company, trust,
unincorporated organization, Governmental Authority, or any other form of
entity.
"PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.
"PURCHASE FACILITY" means the Mortgage Loan Purchase and Sale Agreement
of even date herewith between Borrower and Lender.
"REGULATION D" means Regulation D issued by the Board of Governors of
the Federal Reserve System as in effect from time to time.
"REGULATION U" means Regulation U issued by the Board of Governors of
the Federal Reserve System as in effect from time to time.
"REGULATION X" means Regulation X issued by the Board of Governors of
the Federal Reserve System as in effect from time to time.
"RELATED PERSONS" means Borrower and each of Borrower's Subsidiaries.
"REPORTABLE EVENT" means (1) a reportable event described in Sections
4043(c)(5) or (6) of ERISA or the regulations promulgated thereunder, or (2) any
other reportable event described in Section 4043(c) of ERISA or the regulations
promulgated thereunder other than a reportable event not subject to the
provision for 30-day notice to the PBGC pursuant to a waiver by the PBGC under
Section 4043(a) of ERISA.
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"REQUIRED MORTGAGE DOCUMENTS" means as to any Mortgage Loan, the items
described on SCHEDULE A to the Security Agreement.
"REQUIREMENT OF LAW" as to any Person means the charter and by-laws or
other organizational or governing documents of such Person, and any law,
statute, code, ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other determination,
direction or requirement (including, without limitation, any of the foregoing
which relate to environmental standards or controls, energy regulations and
occupational, safety and health standards or controls) of any arbitrator, court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its Property or to which such Person or any of its Property is
subject.
"RESERVE REQUIREMENT" means at any time, the maximum rate at which
reserves (including any marginal, special, supplemental, or emergency reserves)
are required to be maintained under regulations issued from time to time by the
Board of Governors of the Federal Reserve System (or any successor) by member
banks of the Federal Reserve System against "Eurocurrency liabilities" (as such
term is used in Regulation D). Without limiting the effect of the foregoing, the
Reserve Requirement shall reflect any other reserves required to be maintained
by such member banks with respect to any category of liabilities which includes
deposits by reference to which the Adjusted Fixed Eurodollar Rate is to be
determined, or any category of extensions of credit or other assets which
include Fixed Eurodollar Loans.
"SECOND LIEN LOAN" means an otherwise Agency Eligible Mortgage Loan,
except that such Mortgage Loan is secured by a second priority lien on Property
consisting of a completed one-to-eight unit single family residence, including a
condominium, planned unit development, townhouse or co-op.
"SECOND LIEN LOAN SUBLIMIT" means ten percent (10%) of the Commitment.
"SECURITY AGREEMENT" means the Amended and Restated Security Agreement
between Borrower and Lender in the form attached hereto as EXHIBIT F, as the
same may from time to time be further supplemented, amended or restated.
"SECURITY INSTRUMENT" means (a) the Security Agreement and (b) such
other executed documents as are or may be necessary to grant to Lender a
perfected first prior and continuing security interest in and to all Mortgage
Collateral, and any and all other agreements or instruments now or hereafter
executed and delivered by Borrower in connection with, or as security for the
payment or performance of, all or any of the Obligations, including Borrower's
obligations under the Note and this Agreement, as such agreements may be
amended, modified or supplemented from time to time.
"SERVICING AGREEMENTS" means all agreements between the Related Persons
and Persons other than a Related Person pursuant to which Borrower undertakes to
service Mortgage Loans.
"SERVICING RECORDS" means all contracts and other documents, books,
records and other information (including without limitation, computer programs,
tapes, discs, punch cards, data
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processing software and related property and rights) maintained with respect to
the Servicing Rights.
"SERVICING RIGHTS" means all of right, title and interest of any
Related Person in and under the Servicing Agreements, including, without
limitation, the rights of Borrower to income and reimbursement thereunder.
"SETTLEMENT ACCOUNT" means (i) the non-interest bearing demand deposit
account established by Borrower with Lender to be used for the deposit of
proceeds from the sale of Mortgage Collateral; and (ii) the payment of the
Obligations; PROVIDED THAT (a) the Settlement Account shall be pledged to Lender
for the benefit of Lender, (b) Borrower shall not be entitled to withdraw funds
from the Settlement Account, (c) as long as no Event of Default has occurred and
is continuing, to the extent that the deposit of proceeds from the sale of
Mortgage Loans exceeds the Unit Collateral Value of such Mortgage Loans and any
payments then due and owing under this Agreement or the Note, Lender shall
transfer such excess amount to the Operating Account, and (d) if at any time the
aggregate amount of funds in the Settlement Account is insufficient to pay any
and all payments due and owing under this Agreement or the Note (such amount
being referred to as the "DEFICIENCY"), Lender shall transfer an amount equal to
the Deficiency from the Operating Account to the Settlement Account.
"SUBMISSION LIST" means a list in the form of SCHEDULE I to the form of
Borrowing Request.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent (50%) or more by such
Person.
"SUPER JUMBO LOAN" means a Jumbo Loan except that the original unpaid
principal amount of the underlying Mortgage Note is greater than $650,000 but
does not exceed $1,000,000, which Loan has been pre-approved by Lender. .
"SUPER JUMBO SUBLIMIT" means five percent (5%) of the Commitment.
"TAKE-OUT COMMITMENT" means with respect to any Eligible Mortgage Loan,
a written master commitment of an Investor to purchase a pool of Mortgage Loans
under which such Eligible Mortgage Loans will be delivered to such Investor on
terms satisfactory to Lender, in its reasonable discretion.
"TANGIBLE NET WORTH OF ANY PERSON" means, as of any date, the Net Worth
of such Person MINUS all Consolidated assets of such Person which would be
classified as intangible assets under GAAP, including but not limited to
goodwill (whether representing the excess cost over book value of assets
acquired or otherwise), patents, trademarks, trade names, copyrights,
franchises, deferred charges, and capitalized servicing rights.
"TERMINATION EVENT" means (a) the occurrence with respect to any ERISA
Plan of a Reportable Event, (2) the withdrawal of the Borrower or any ERISA
Affiliate from an ERISA Plan
-16-
during a plan year in which it was a "substantial employer," as defined in
Section 400l(a)(2) of ERISA, (c) the distribution to affected parties of a
notice of intent to terminate any ERISA Plan or the treatment of any ERISA Plan
amendment as a termination under Section 4041 of ERISA, (d) the institution of
proceedings to terminate any ERISA Plan by the PBGC under Section 4042 of ERISA,
or (5) any other event or condition which might constitute grounds under Section
4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any ERISA Plan.
"TOTAL DEBT" of any Person means, as of any date, all amounts which
would be included as Consolidated liabilities on a balance sheet of such Person
and its properly Consolidated subsidiaries as of such date prepared in
accordance with GAAP.
"TYPE" means with respect to any Loan, the characterization of such
Loan as either a Floating Eurodollar Loan or a Fixed Eurodollar Loan.
"UCC" means the Texas Uniform Commercial Code, as the same may
hereafter be amended.
"UNIT COLLATERAL VALUE" means on any day, as applicable, (a) with
respect to each Investment Loan included in the Borrowing Base, ninety percent
(90%) of the least of (i), (ii), (iii) and (iv) below, and (b) with respect to
every other Eligible Mortgage Loan included in the Borrowing Base, ninety-eight
percent (98%) of the least of (i), (ii), (iii) and (iv) below:
(i) the outstanding principal balance of the Mortgage Note
constituting such Mortgage Loan;
(ii) the actual out-of-pocket cost to Borrower of such
Mortgage Loan minus the amount of principal paid under such Mortgage
Loan and delivered to Lender for application to the prepayment of the
Loans;
(iii) the amount at which an Investor has committed to
purchase the Mortgage Loan pursuant to a Take-Out Commitment not to
exceed 100% of the original principal balance of the Mortgage Note; or
(iv) the Market Value of the Mortgage Note constituting such
Mortgage Loan.
"VA" means the Veterans Administration and any successor thereto.
"WET LOANS" means Eligible Mortgage Loans which are included in the
Borrowing Base, but for which the Required Mortgage Documents have not been
delivered to Lender.
"WET WAREHOUSING SUBLIMIT" means thirty-five percent (35%) of the
Commitment; PROVIDED THAT Wet Warehousing Sublimit means fifty percent (50%)
during the first three (3) days and the last three (3) days of each month.
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OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall 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 SECTION 1.1 shall mean
the plural thereof when the plural form of such term 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
SECTION 1.1 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, subsection, schedule and
exhibit references herein are references to sections, subsections, schedules and
exhibits to this Agreement unless otherwise specified. The word "or" is not
exclusive, and the word "including" (in its various forms) means "including
without limitation."
(d) Unless the context otherwise requires or unless otherwise provided
herein the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments and restatements of such agreement,
instrument or document, provided that nothing contained in this section shall be
construed to authorize any such renewal, extension, modification, amendment or
restatement.
(e) 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.
Section 1.2 EXHIBITS AND SCHEDULES. All Exhibits and Schedules attached
to this Agreement are a part hereof for all purposes.
Section 1.3 CALCULATIONS AND DETERMINATIONS. All calculations under the
Loan Documents of interest and of fees shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of three
hundred sixty (360) days. Each determination by Lender of amounts to be paid
under SECTIONS 2.2 THROUGH 2.13 or any other matters which are to be determined
hereunder by Lender (such as any Fixed Eurodollar Rate, Floating Eurodollar
Rate, Adjusted Fixed Eurodollar Rate, Adjusted Floating Eurodollar Rate,
Business Day, Interest Period or Reserve Requirement) shall, in the absence of
manifest error, be conclusive and binding. Unless otherwise expressly provided
herein or unless Lender otherwise consents all financial statements and reports
furnished to Lender hereunder shall be prepared and all financial computations
and determinations pursuant hereto shall be made in accordance with GAAP. Lender
shall deliver to Borrower an interest billing statement for each month on or
before the fifth (5th) day of the next succeeding month, which interest billing
statement shall set forth the interest accrued on the Loans for such month;
provided that any failure or delay in delivering such interest billing or any
inaccuracy therein shall not affect the Obligations.
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ARTICLE II
AMOUNT AND TERMS OF LOANS
Section 2.1 COMMITMENT AND LOANS. Subject to the terms and conditions
contained in this Agreement, Lender agrees to make loans ("LOANS") to Borrower
on a revolving credit basis from time to time on any Business Day from the date
of this Agreement through the Drawdown Termination Date. The aggregate amount of
all Loans requested in any Borrowing Notice (i) which are Floating Eurodollar
Loans must be greater than or equal to the lesser of $25,000 or the unadvanced
portion of the Borrowing Base, and (ii) which are Fixed Eurodollar Loans must be
greater than or equal to the lesser of $1,000,000 or the unadvanced portion of
the Borrowing Base. Borrower may have no more than four (4) Fixed Eurodollar
Loans outstanding at any time. After giving effect to the transactions
contemplated by the Borrowing Request pursuant to which a Loan is requested, and
at all other times, the aggregate amount of all Loans outstanding shall not
exceed the Collateral Value of the Borrowing Base.
Section 2.2 PROMISSORY NOTE; INTEREST ON THE NOTE. The obligation of
Borrower to repay the Loans made by Lender, together with interest accruing in
connection therewith, shall be evidenced by a Note payable to the order of
Lender. Interest on the Note shall be due and payable monthly in arrears as
provided herein and therein. The entire Loan Balance and all accrued and unpaid
interest thereon shall be finally due and payable on the Drawdown Termination
Date.
Section 2.3 NOTICE AND MANNER OF OBTAINING LOANS. Borrower must give
written notice, or telephonic notice promptly confirmed in writing, of each
request for Loans. Each such written request or confirmation must be made in
writing in the form and substance of the "Borrowing Request" attached hereto as
EXHIBIT B, duly completed. Each such Borrowing Request must:
(a) specify (i) the aggregate amount of any such Borrowing of
new Floating Eurodollar Loans and the date on which such Floating
Eurodollar Loans are to be advanced, or (ii) the aggregate amount of
any such Borrowing of new Fixed Eurodollar Loans, the date on which
such Fixed Eurodollar Loans are to be advanced (which shall be the
first day of the Interest Period which is to apply thereto), and the
length of the applicable Interest Period; and
(b) be received by Lender not later than 1:00 p.m., Dallas,
Texas, time, on (i) the day on which any such Floating Eurodollar Loans
are to be made, or (ii) the third Business Day preceding the day on
which any such Fixed Eurodollar Loans are to be made.
Each such telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by Borrower as to the matters which are required to
be set out in such written confirmation. If all conditions precedent to such
Loan have been met Lender will on the date requested promptly remit to Borrower
the amount of such Loan in immediately available dollars, by crediting the
Funding Account with immediately available funds as the amount of such Loan.
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Section 2.4 FEES.
(a) In consideration of Lender's commitment to make the Loans,
Borrower will pay to Lender a non-refundable commitment fee determined
on a daily basis by applying a rate of fifteen basis points (0.15%) per
annum to the Commitment on each day during the term of the Loans. This
commitment fee shall be due and payable in advance for each Fiscal
Quarter on the first day of such Fiscal Quarter.
(b) Borrower shall pay to Lender a collateral handling fee in
the amount of $15 for each Mortgage Loan file delivered to Lender after
the execution date of this Agreement, up to and including the 2,800th
file so delivered, and thereafter Borrower shall pay to Lender a
collateral handling fee in the amount of $10 for each Mortgage Loan
file delivered.
Section 2.5 MANDATORY REPAYMENTS. If at any time (a) the Loan Balance
exceeds the Collateral Value of the Borrowing Base, or (b) the Jumbo Sublimit,
the Super Jumbo Sublimit, the Second Lien Loan Sublimit, the Non-Conforming
Sublimit, the Construction/Perm Sublimit, the Investment Sublimit or the Wet
Warehousing Sublimit is exceeded, Borrower shall repay the amount of such excess
within two (2) Business Day after written notice thereof is given by Lender to
Borrower.
Section 2.6 CONTINUATIONS AND CONVERSIONS OF EXISTING LOANS. Borrower
may make the following elections with respect to Loans already outstanding: (i)
to convert Floating Eurodollar Loans to Fixed Eurodollar Loans, (ii) to convert
Fixed Eurodollar Loans to Floating Eurodollar Loans on the last day of the
Interest Period applicable thereto, and (iii) to continue Fixed Eurodollar Loans
beyond the expiration of such Interest Period by designating a new Interest
Period to take effect at the time of such expiration. In making such elections,
Borrower may combine existing Loans made pursuant to separate Borrowings into
one new Borrowing or divide existing Loans made pursuant to one Borrowing into
separate new Borrowings, provided that Borrower may have no more than four (4)
Borrowings of Fixed Eurodollar Loans outstanding at any time. To make any such
election, Borrower must give to Lender written notice (or telephonic notice
promptly confirmed in writing) of any such Conversion or Continuation of
existing Loans, with a separate notice given for each new Borrowing. Each such
notice constitutes a "CONTINUATION/CONVERSION NOTICE" hereunder and must:
(a) specify the existing Loans which are to be Continued or
Converted;
(b) specify (i) the aggregate amount of any Borrowing of
Floating Eurodollar Loans into which such existing Loans are to be
continued or converted and the date on which such Continuation or
Conversion is to occur, or (ii) the aggregate amount of any Borrowing
of Fixed Eurodollar Loans into which such existing Loans are to be
continued or converted, the date on which such Continuation or
Conversion is to occur (which shall be the first day of the Interest
Period which is to apply to such Fixed Eurodollar Loans), and the
length of the applicable Interest Period; and
(c) be received by Lender not later than 11:00 a.m., Central
Standard time, on (a) the day on which any such Continuation or
Conversion to Floating Eurodollar Loans is
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to occur, or (b) the third Business Day preceding the day on which any
such Continuation or Conversion to Fixed Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as EXHIBIT I, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Each
Continuation/Conversion Notice shall be irrevocable and binding on Borrower.
During the continuance of any Default, Borrower may not make any election to
convert existing Loans into Fixed Eurodollar Loans or continue existing Loans as
Fixed Eurodollar Loans. If (due to the existence of a Default or for any other
reason) Borrower fails to timely and properly give any Continuation/Conversion
Notice with respect to a Borrowing of existing Fixed Eurodollar Loans at least
three days prior to the end of the Interest Period applicable thereto, such
Fixed Eurodollar Loans shall automatically be converted into Floating Eurodollar
Loans at the end of such Interest Period. No new funds shall be repaid by
Borrower or advanced by Lender in connection with any Continuation or Conversion
of existing Loans pursuant to this section, and no such Continuation or
Conversion shall be deemed to be a new advance of funds for any purpose; such
Continuations and Conversions merely constitute a change in the interest rate
applicable to already outstanding Loans.
Section 2.7 PAYMENTS TO LENDER. All payments of interest on the Note,
all payments of principal, including any principal payment made with proceeds of
Mortgage Collateral, and fees hereunder shall be made directly to Lender in
federal or other immediately available funds before 10:00 a.m. (Central Standard
time) on the respective dates when due via wire transfer to the Settlement
Account. Borrower shall send notice to Lender before 10:00 a.m. (Central
Standard time) on the day any payment of principal or interest is received by
Lender which sets forth the Loans against which such payment is to be applied.
Any payment (or any payment received without a notice regarding application of
such payment) received by Lender after such time will be deemed to have been
made on the next following Business Day. Should any such payment become due and
payable on a day other than a Business Day, the maturity of such payment shall
be extended to the next succeeding Business Day, and, in the case of a payment
of principal or past due interest, interest shall accrue and be payable thereon
for the period of such extension as provided in the Loan Document under which
such payment is due. Each payment under a Loan Document shall be payable at the
place provided therein and, if no specific place of payment is provided, shall
be payable at the place of payment of the Note. When Lender collects or receives
money on account of the Obligations, Lender shall apply all such money so
distributed, as follows:
(a) first, for the payment of all Obligations which are then
due, and if such money is insufficient to pay all such Obligations, (i)
first to any reimbursements due Lender under SECTION 5.5, (ii) second,
to the payment of the Loans then due, and (iii) then to the partial
payment of all other Obligations then due in proportion to the amounts
thereof, or as Lender shall otherwise agree;
(b) then for the prepayment of amounts owing under the Loan
Documents if so specified by Borrower;
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(c) then for the prepayment of principal on the Note, together
with accrued and unpaid interest on the principal so prepaid; and
(d) last, for the payment or prepayment of any other
Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest.
Section 2.8 INCREASED COST AND REDUCED RETURN.
(a) If, after the date hereof, there shall occur any change in
any applicable Law, rule, or regulation, or any change in the
interpretation or administration thereof by any Governmental Authority,
central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by Lender (or its Applicable
Lending Office) with any request or directive issued after the date
hereof (whether or not having the force of Law) of any such
Governmental Authority, central bank, or comparable agency:
(i) shall subject Lender (or its Applicable Lending
Office) to any tax, duty, or other charge with respect to any
Fixed Eurodollar Loans, any Note, or its obligation to make
Fixed Eurodollar Loans, or change the basis of taxation of any
amounts payable to Lender (or its Applicable Lending Office)
under this Agreement or any Note in respect of any Fixed
Eurodollar Loans (other than taxes imposed on the overall net
income of Lender by the jurisdiction in which Lender has its
principal office or such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement
(other than the Reserve Requirement utilized in the
determination of the Adjusted Fixed Eurodollar Rate) relating
to any extensions of credit or other assets of, or any
deposits with or other liabilities or commitments of, Lender
(or its Applicable Lending Office), including the commitment
of Lender hereunder; or
(iii) shall impose on Lender (or its Applicable
Lending Office) or the London interbank market any other
condition affecting this Agreement or any Notes or any of such
extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to Lender (or its
Applicable Lending Office) of making, converting into, continuing, or
maintaining any Fixed Eurodollar Loans or to reduce any sum received or
receivable by Lender (or its Applicable Lending Office) under this Agreement or
its Notes with respect to any Fixed Eurodollar Loans, then Borrower shall pay to
Lender within fifteen (15) days after demand by Lender, such amount or amounts
as will compensate Lender for such increased cost or reduction. If Lender
requests compensation by Borrower under this SECTION 2.8(A), Borrower may, by
notice to Lender, suspend the obligation of Lender to make or continue Loans of
the Type with respect to which such compensation is requested, or to convert
Loans of any other Type into Loans of such Type, until the event or
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condition giving rise to such request ceases to be in effect (in which case the
provisions of SECTION 2.11 shall be applicable); PROVIDED that such suspension
shall not affect the right of Lender to receive the compensation so requested.
(b) If, after the date hereof, Lender shall have determined
that the adoption of any applicable Law, rule, or regulation regarding
capital adequacy or any change therein or in the interpretation or
administration thereof by any Governmental Authority, central bank, or
comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy
(whether or not having the force of Law) of any such Governmental
Authority, central bank, or comparable agency, has or would have the
effect of reducing the rate of return on the capital of Lender or any
corporation controlling Lender, due to the obligations of Lender
hereunder, to a level below that which Lender or such corporation could
have achieved but for such adoption, change, request, or directive
(taking into consideration its policies with respect to capital
adequacy), then, within fifteen (15) days after demand by Lender,
Borrower shall pay to Lender such additional amount or amounts as will
compensate Lender for such reduction, but only to the extent that
Lender has not been compensated therefor by any increase in the
Adjusted Fixed Eurodollar Rate.
(c) Lender shall promptly notify Borrower of any event of
which it has knowledge, occurring after the date hereof, which will
entitle Lender to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation
will avoid the need for, or reduce the amount of, such compensation and
will not, in the judgment of Lender, be otherwise disadvantageous to
it. In the event that Lender claims compensation under this Section,
Lender shall furnish to Borrower a statement setting forth the
additional amount or amounts to be paid to it hereunder which shall be
conclusive in the absence of manifest error. In determining such
amount, Lender shall act in good faith and may use any reasonable
averaging and attribution methods.
Section 2.9 LIMITATION ON TYPES OF LOANS. If on or prior to the first
day of any Interest Period for any Fixed Eurodollar Loan:
(a) Lender determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Fixed Eurodollar Rate, as the case may be, for such Interest Period; or
(b) Lender determines (which determination shall be
conclusive) that the Adjusted Fixed Eurodollar Rate will not adequately
and fairly reflect the cost to Lender of funding Fixed Eurodollar Loans
for such Interest Period;
then Lender shall give Borrower prompt notice thereof specifying the relevant
amounts or periods, and so long as such condition remains in effect, Lender
shall be under no obligation to make additional Loans, continue Fixed Eurodollar
Loans or convert Floating Eurodollar Loans into Fixed Eurodollar Loans, and
Borrower shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Fixed Eurodollar Loans, either prepay such Loans or convert such
Loans into Floating Eurodollar Loans in accordance with the terms of this
Agreement.
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Section 2.10 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for Lender or its Applicable
Lending Office to make, maintain, or fund Fixed Eurodollar Loans hereunder, then
Lender shall promptly notify Borrower thereof and Lender's obligation to make or
continue Fixed Eurodollar Loans and to convert Floating Eurodollar Loans into
Fixed Eurodollar Loans shall be suspended until such time as Lender may again
make, maintain, and fund Fixed Eurodollar Loans.
Section 2.11 TREATMENT OF AFFECTED LOANS. If the obligation of Lender
to make a particular Type of Loan or to continue, or to convert Loans of any
other Type into, Loans of a particular Type shall be suspended pursuant to
SECTIONS 2.8, 2.9 OR 2.10 hereof (Loans of such Type being herein called
"AFFECTED LOANS" and such Type being herein called the "AFFECTED TYPE"),
Lender's Affected Loans shall be automatically converted into Floating
Eurodollar Loans on the last day(s) of the then current Interest Period(s) for
Affected Loans (or, in the case of a Conversion required by SECTION 2.6 hereof;
on such earlier date as Lender may specify to Borrower) and, unless and until
Lender gives notice as provided below that the circumstances specified in
SECTIONS 2.8, 2.9 OR 2.10 hereof that gave rise to such Conversion no longer
exist:
(a) to the extent that Lender's Affected Loans have been so
converted, all payments and prepayments of principal that would
otherwise be applied to Lender's Affected Loans shall be applied
instead to its Floating Eurodollar Loans; and
(b) all Loans that would otherwise be made or continued by
Lender as Loans of the Affected Type shall be made or continued instead
as Floating Eurodollar Loans, and all Loans of Lender that would
otherwise be converted into Loans of the Affected Type shall be
converted instead into (or shall remain as) Floating Eurodollar Loans.
Section 2.12 COMPENSATION. Upon the request of Lender, Borrower shall
pay to Lender such amount or amounts as shall be sufficient (in the reasonable
opinion of Lender) to compensate it for any loss, cost, or expense (including
loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Fixed
Eurodollar Loan for any reason (including, without limitation, the
acceleration of the Loans pursuant to SECTION 7.2) on a date other than
the last day of the Interest Period for such Loan; or
(b) any failure by Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in ARTICLE
IV hereof to be satisfied) to borrow, convert, continue, or prepay a
Fixed Eurodollar Loan on the date for such borrowing, Conversion,
Continuation, or prepayment specified in the relevant notice of
borrowing, prepayment, Continuation, or Conversion under this
Agreement.
Section 2.13 TAXES.
(a) Any and all payments by Borrower to or for the account of
Lender hereunder or under any other Loan Document shall be made free
and clear of and without deduction for any and all present or future
taxes, duties, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, EXCLUDING, taxes imposed on
Lender's income, and franchise taxes imposed on it, by the jurisdiction
under the Laws
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of which Lender (or its Applicable Lending Office) is organized or any
political subdivision thereof (all such non-excluded taxes, duties,
levies, imposts, deductions, charges, withholdings, and liabilities
being hereinafter referred to as "TAX"). If Borrower shall be required
by Law to deduct any Taxes from or in respect of any sum payable under
this Agreement or any other Loan Document to Lender, (a) the sum
payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this section) Lender receives an amount equal to the sum
it would have received had no such deductions been made, (b) Borrower
shall make such deductions, and (c) Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable Law.
(b) In addition, Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property
taxes or charges or similar levies which arise from any payment made
under this Agreement or any other Loan Document or from the execution
or delivery of, or otherwise with respect to, this Agreement or any
other Loan Document (hereinafter referred to as "OTHER TAXES").
(c) Borrower agrees to indemnify Lender for the full amount of
Taxes and Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable
under this section) paid by Lender and any liability (including
penalties, interest, and expenses) arising therefrom or with respect
thereto.
(d) If Borrower is required to pay additional amounts to or
for the account of Lender pursuant to this Section, then Lender will
agree to use reasonable efforts to change the jurisdiction of its
Applicable Lending Office so as to eliminate or reduce any such
additional payment which may thereafter accrue if such change, in the
judgment of Lender, is not otherwise disadvantageous to Lender, and in
the event Lender is reimbursed for an amount paid by Borrower pursuant
to this SECTION 2.13, it shall promptly return such amount to Borrower.
(e) Within thirty (30) days after the date of any payment of
Taxes, Borrower shall furnish to Lender the original or a certified
copy of a receipt evidencing such payment.
(f) Without prejudice to the survival of any other agreement
of Borrower hereunder, the agreements and obligations of Borrower
contained in this section shall survive the termination of this
Agreement and the payment in full of the Notes.
ARTICLE III
CONDITIONS PRECEDENT
The obligation of Lender to make Loans hereunder is subject to
fulfillment of the conditions precedent stated in this ARTICLE III.
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Section 3.1 INITIAL LOAN. The obligation of Lender to fund any Loan
hereunder shall be subject to, in addition to the conditions precedent specified
in SECTION 3.2, the following terms and conditions:
(a) Borrower shall have delivered to Lender the following
(each of the following documents being duly executed and delivered and
in form and substance satisfactory to Lender, and, with the exception
of the Note, each in a sufficient number of originals that Lender and
its counsel may have an executed original of each document):
(i) an executed counterpart of this Agreement and of
all instruments, certificates and opinions referred to in this
ARTICLE III not theretofore delivered (except the Borrowing
Request which is to be delivered at the time provided in
SUBSECTION 3.2(A) hereof);
(ii) the Note;
(iii) the Security Agreement dated of even date
herewith;
(iv) a certificate of the Secretary or Assistant
Secretary of Borrower setting forth (i) resolutions of its
board of directors authorizing the execution, delivery, and
performance of the Loan Documents to which it is a party and
identifying the officers authorized to sign such instruments,
(ii) specimen signatures of the officers so authorized, and
(iii) articles of incorporation of Borrower certified by the
appropriate Secretary of State as of a recent date, and (iv)
bylaws of Borrower, certified as being accurate and complete;
(v) a certificate of the existence and good standing
for Borrower in its state of incorporation dated no earlier
than fifteen days prior to the date hereof; and
(vi) an opinion of counsel for Borrower in the form
of EXHIBIT G;
(vii) a Borrowing Request and a Borrowing Base
Certificate dated as of the date of the first Loan, certified
by the chief financial officer or treasurer of Borrower;
(viii) the Keep-Well Agreement of Parent;
(ix) documents similar to those described as items
(iv) and (v) above with respect to Parent;
(x) a duly executed original of the MERS Agreement;
and
(xi) such other documents as Lender may reasonably
request at any time at or prior to the date of the initial
Loan hereunder.
(b) No Person other than Lender shall be listed in the field
designated "interim funder" on the MERS(R) System.
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(c) No Person other than Lender holds any mortgage, pledge,
lien, security interest or other charge or encumbrance in, against or
to any of the Mortgage Loans.
(d) Borrower shall have paid all fees and reimbursements to be
paid to Lender pursuant to any Loan Document, or otherwise due Lender
and including reasonable fees and disbursements of Lender's attorneys.
Section 3.2 ALL LOANS. The obligation of Lender to fund any Loan
pursuant to this Agreement is subject to the following further conditions
precedent:
(a) Borrowing Request accompanied by a Borrowing Base
Certificate dated as of the date of such Loan, certified by the chief
financial officer or controller of Borrower, and the Required Mortgage
Documents for all Eligible Mortgage Loans other than Wet Loans;
(b) all other Property in which Borrower has granted a Lien to
Lender shall have been physically delivered to the possession of
Lender;
(c) the representations and warranties of each Related Person
contained in this Agreement or any Security Instrument (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 date of such
Loan;
(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 date of such Loan;
(e) the Funding Account, the Settlement Account and the
Operating Account shall be established and in existence;
(f) the making of such Loan shall not be prohibited by any
Governmental Requirement; and
(g) the delivery to Lender of such other documents and
opinions of counsel, including such documents as may be necessary or
desirable to perfect or maintain the priority of any Lien granted or
intended to be granted hereunder or otherwise and including favorable
written opinions of counsel with respect thereto, as Lender may
reasonably request.
Delivery to Lender of a Borrowing Request shall be deemed to constitute a
representation and warranty by Borrower on the date thereof and on the date on
which the Loan is made, if any, set forth therein as to the facts specified in
SUBSECTIONS (C) and (D) of this Section.
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ARTICLE IV
BORROWER REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
Section 4.1 ORGANIZATION AND GOOD STANDING. Each Related Person (a) is
a corporation duly incorporated and existing in good standing under the Laws of
the jurisdiction of its incorporation, (b) is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which its failure to be
so qualified could have a Material Adverse Effect, (c) has the corporate power
and authority to own its properties and assets and to transact the business in
which it is engaged and is or will be qualified in those states wherein it
proposes to transact business in the future and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, have a Material Adverse Effect.
Section 4.2 AUTHORIZATION AND POWER. Each Related Person has the
corporate power and requisite authority to execute, deliver and perform the Loan
Documents to which it is a party; each Related Person is duly authorized to and
has taken all corporate action necessary to authorize it to, execute, deliver
and perform the Loan Documents to which it is a party and is and will continue
to be duly authorized to perform such Loan Documents.
Section 4.3 NO CONFLICTS OR CONSENTS. Neither the execution and
delivery by any Related Person of the 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 any Related Person is subject, or any indenture, mortgage, deed of
trust, or other agreement or instrument to which any Related Person is a party
or by which any Related Person may be bound, or to which the Property of any
Related Person may be subject, or (b) result in the creation or imposition of
any Lien, other than the Lien of the Security Agreement, on the Property of any
Related Person. All actions, approvals, consents, waivers, exemptions,
variances, franchises, orders, permits, authorizations, rights and licenses
required to be taken, given or obtained, as the case may be, from any
Governmental Authority that are necessary in connection with the transactions
contemplated by the Loan Documents have been obtained.
Section 4.4 ENFORCEABLE OBLIGATIONS. This Agreement, the Note, and the
other Loan Documents to which any Related Person is a party are the legal, valid
and binding obligations of such Related Person, enforceable in accordance with
their respective terms, except as limited by Debtor Laws.
Section 4.5 PRIORITY OF LIENS. Upon delivery to Lender of each
Borrowing Request, Lender shall have valid, enforceable, perfected, first
priority Liens and security interests in each Mortgage Note identified therein.
Section 4.6 NO LIENS. Borrower has good and indefeasible title to the
Mortgage Collateral free and clear of all Liens and other adverse claims of any
nature, except for ad valorem taxes and assessments not yet due and payable and
Liens in the Mortgage Collateral in favor of Lender.
Section 4.7 FINANCIAL CONDITION OF BORROWER. Borrower has delivered to
Lender copies of its annual audited balance sheet as of December 31, 2002, and
the related statements of income, stockholders' equity and cash flows for the
period ended such date; such financial statements fairly
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present the financial condition of Borrower as of such date and the results of
operations of Borrower for the period ended on such date and have been prepared
in accordance with GAAP; as of the date thereof, there were no obligations,
liabilities or Indebtedness (including material contingent and indirect
liabilities and obligations or unusual forward or long-term commitments) of
Borrower which are not reflected in such financial statements and no change
which constitutes a Material Adverse Effect has occurred in the financial
condition or business of Borrower since December 31, 2002. Borrower has also
delivered to Lender its unaudited quarterly balance sheet for the period ending
October 31, 2003 and management reports for October 31, 2003; such reports
fairly and accurately present Borrower's commitment position, pipeline position,
servicing and production as of the end of such months and for the fiscal year to
date for the periods ending on such dates, subject to normal year-end
adjustments.
Section 4.8 FULL DISCLOSURE. There is no material fact that Borrower
has not disclosed to Lender which could adversely affect the properties,
business, prospects or condition (financial or otherwise) of the Related
Persons, or could adversely affect the Mortgage Collateral or the Servicing
Rights. To the knowledge of Borrower, none of (i) the financial statements
referred to in SECTION 4.7 hereof, (ii) any Borrowing Request or officer's
certificate, or (iii) any statement delivered by any Related Person to Lender in
connection with this Agreement, contains any untrue statement of material fact.
Section 4.9 NO DEFAULT. No Related Person is in default under any loan
agreement, mortgage, security agreement or other material agreement or
obligation to which it is a party or by which any of its Property is bound, and
no Related Person has knowledge of any event or occurrence which with the
passage of time or with notice and/or the expiration of any grace or cure period
would constitute a default hereunder or thereunder.
Section 4.10 NO LITIGATION. There are no material actions, suits or
legal, equitable, arbitration or administrative proceedings pending, or to the
knowledge of Borrower threatened, against any Related Person the adverse
determination of which could constitute a Material Adverse Effect.
Section 4.11 TAXES. All tax returns required to be filed by each
Related Person in any jurisdiction have been filed and all taxes, assessments,
fees and other governmental charges upon each Related Person or upon any of its
properties, income or franchises have been paid prior to the time that such
taxes could give rise to a Lien thereon, unless protested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been established on the books of such Related Person. No Related
Person has any knowledge of any proposed tax assessment against any Related
Person.
Section 4.12 PRINCIPAL OFFICE, ETC. The principal office, chief
executive office and principal place of business of each Related Person is at
the address set forth in SECTION 10.1.
Section 4.13 COMPLIANCE WITH ERISA. No Related Person currently
maintains, contributes to, is required to contribute to or has any liability,
whether absolute or contingent, with respect to an ERISA Plan. With respect to
all other employee benefit plans maintained or contributed to by each Related
Person, each Related Person is in material compliance with ERISA.
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Section 4.14 SUBSIDIARIES. No Related Person presently has any
Subsidiary or owns any stock in any other corporation or association except
those listed in EXHIBIT D. As of the date hereof, each Related Person owns,
directly or indirectly, the equity interest in each of its Subsidiaries which is
indicated in such exhibit.
Section 4.15 INDEBTEDNESS. No Related Person has any indebtedness
outstanding other than the Indebtedness permitted by SECTION 6.2.
Section 4.16 PERMITS, PATENTS, TRADEMARKS, ETC.
(a) Each Related Person has all permits and licenses necessary
for the operation of its business.
(b) Each Related Person owns or possesses (or is licensed or
otherwise has the necessary right to use) all patents, trademarks,
service marks, trade names and copyrights, technology, know-how and
processes, and all rights with respect to the foregoing, which are
necessary for the operation of its business, without any known material
conflict with the rights of others. The consummation of the
transactions contemplated hereby will not alter or impair in any
material respect any of such rights of each Related Person.
Section 4.17 STATUS UNDER CERTAIN FEDERAL STATUTES. No Related Person
is (a) a "holding company" or a "subsidiary company" of a "holding company" or
an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding
company," as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, (b) a "public utility," as such term is defined in the Federal
Power Act, as amended, (c) an "investment company," or a company "controlled" by
an "investment company," within the meaning of the Investment Company Act of
1949, as amended or (d) a "rail carrier," or a "person controlled by or
affiliated with a rail carrier," within the meaning of Title 49, U.S.C., and no
Related Person is a "carrier" to which 49 U.S.C. ss. 11301(b)(1) is applicable.
Section 4.18 SECURITIES ACT. No Related Person has 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. No
Related Person is required to qualify an indenture under the Trust Indenture Act
of 1939, as amended, in connection with its execution and delivery of the Note.
Section 4.19 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 any
Related Person 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 any Related Person of
any document with, or the taking of any other action in respect of, any
Governmental Authority which has jurisdiction over each Related Person or any of
its Property, except for (a) the filing of the Uniform Commercial Code financing
statements and other similar filings to perfect the interest of Lender in the
Collateral, and (b) such other consents, approvals, notices, registrations,
filings or action as
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may be required in the ordinary course of business of the Related Persons in
connection with the performance of the obligations of the Related Persons
hereunder.
Section 4.20 SURVIVAL OF REPRESENTATIONS. All representations and
warranties by Borrower herein shall survive delivery of the Note and the funding
of the Loans, and any investigation at any time made by or on behalf of Lender
shall not diminish the right of Lender to rely thereon.
Section 4.21 INDIVIDUAL MORTGAGE LOANS. Borrower hereby represents with
respect to each Mortgage Note and Mortgage Loan that is part of the Collateral:
(a) Borrower has good and marketable title to each Mortgage
Note and Mortgage, was the sole owner thereof and had full right to
pledge the Mortgage Loan to Lender free and clear of any other Lien;
(b) To the knowledge of Borrower, there is no default, breach,
violation or event of acceleration existing under any Mortgage or the
related Mortgage Note and there is no event which, with the passage of
time or with notice and/or the expiration of any grace or cure period,
would constitute a default, breach, violation or event of acceleration
and no such default, breach, violation or event of acceleration has
been waived;
(c) To the knowledge of Borrower, the physical condition of
the Property subject to the Mortgage has not deteriorated since the
Date of Origination of the related secured Mortgage Loan (normal wear
and tear excepted) and there is no proceeding pending for the total or
partial condemnation of any Mortgaged Property;
(d) Each Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the related Property
subject to the Mortgage of the benefits of the security provided
thereby, including, (i) in the case of a Mortgage designated as a deed
of trust, by trustee's sale, and (ii) otherwise, by judicial
foreclosure;
(e) Each Mortgage Loan is a first lien or second lien
one-to-eight-family loan, and has been underwritten by the originator
thereof in accordance with such originator's then current underwriting
guidelines; provided that (i) the Unit Collateral Value of all Jumbo
Loans does not exceed the Jumbo Sublimit; (ii) the Unit Collateral
Value of all Super Jumbo Loans does not exceed the Super Jumbo
Sublimit; (iii) the Unit Collateral Value of all Second Lien Loans does
not exceed the Second Lien Loan Sublimit; (iv) the Unit Collateral
Value of all Non-Conforming Loans does not exceed the Non-Conforming
Sublimit; (v) the Unit Collateral Value of all Construction/Perm Loans
does not exceed the Construction/Perm Sublimit; (vi) the Unit
Collateral Value of all Investment Loans does not exceed the Investment
Sublimit; and (vii) the Unit Collateral Value of all Wet Loans does not
exceed the Wet Warehousing Sublimit;
(f) Each Mortgage Note is payable in monthly installments of
principal and interest, with interest payable in arrears, and requires
a monthly payment which is sufficient to amortize the original
principal balance over the original term and to pay
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interest at the related interest rate (unless such Mortgage Note
provides for interest-only payments) for a certain period; and no
Mortgage Note provides for any extension of the original term;
(g) No Mortgage Loan is a loan in respect of either the
purchase of a manufactured home or mobile home or the purchase of the
land on which a manufactured home or mobile home will be placed;
(h) The origination practices used by the originator of the
Mortgage Loans and the collection practices used by the Borrower with
respect to each Mortgage Loan have been in all material respects legal,
proper, prudent and customary in the loan origination and servicing
business;
(i) Each Mortgage Loan was originated in compliance with all
applicable Laws and no fraud or misrepresentation was committed by any
Person in connection therewith; and
(j) Each Mortgage Loan matures within thirty (30) years after
the Date of Origination thereof.
Section 4.22 ENVIRONMENTAL MATTERS. In the ordinary course of each
Related Person's business, the officers and managers of each Related Person
consider the effect of Environmental Laws on the business of such Related
Person, in the course of which they identify and evaluate potential risks and
liabilities accruing to such Related Person due to Environmental Laws. On the
basis of this consideration, each Related Person has reasonably concluded that
neither violation of nor compliance with Environmental Laws can reasonably be
expected to have a Material Adverse Effect on the business or financial
condition of such Related Person or on the ability of Borrower to perform the
Obligations. No Related Person has received any notice to the effect that its
operations are not in material compliance with any of the requirements of
applicable Environmental Laws or are the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment, which
non-compliance or remedial action could reasonably be expected to have a
Material Adverse Effect on the business or financial condition of the Related
Persons, taken as a whole, or on the ability of Borrower to perform the
Obligations.
Section 4.23 REGULATION U. Borrower has not, directly or indirectly,
used any of the proceeds of the Loans for the purpose, whether immediate,
incidental or ultimate, of buying any "margin stock" or of maintaining, reducing
or retiring any Indebtedness originally incurred to purchase a stock that is
currently any "margin stock," or for any other purpose which might constitute
this transaction a "purpose credit," in each case within the meaning of
Regulation U, or otherwise taken or permitted to be taken any action which would
involve a violation of Regulation U or of Regulation T (12 C.F.R. 220, as
amended) or Regulation X (12 C.F.R. 224, as amended) or any other regulation of
such board.
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ARTICLE V
AFFIRMATIVE COVENANTS
Each Related Person shall at all times comply with the covenants
contained in this Article V, from the date hereof and for so long as any part of
the Obligations or the Commitment is outstanding unless Lender has agreed
otherwise.
Section 5.1 FINANCIAL STATEMENTS AND REPORTS.
(a) Borrower shall furnish to Lender the following, all in
form and detail reasonably satisfactory to Lender.
(i) Promptly after becoming available, and in any
event within ninety (90) days after the close of each Fiscal
Year, Borrower's audited Consolidated balance sheet as of the
end of such Fiscal Year, and the related Consolidated
statements of income, stockholders' equity and cash flows of
Borrower for such Fiscal Year, setting forth in each case in
comparative form the corresponding figures for the preceding
Fiscal Year, such financial statements shall be unqualified
and shall be accompanied by the related report of independent
certified public accountants acceptable to Lender which report
shall be to the effect that such statements have been prepared
in accordance with GAAP applied on a basis consistent with
prior periods except for such changes in such principles with
which the independent public accountants shall have concurred;
(ii) Promptly after becoming available, and in any
event within ninety (90) days after the close of each Fiscal
Year, Parent's audited Consolidated and consolidating balance
sheet as of the end of such Fiscal Year, and the related
audited Consolidated and consolidating statements of income,
stockholders' equity and cash flows of Parent for such Fiscal
Year, setting forth in each case in comparative form the
corresponding figures for the preceding Fiscal Year, such
financial statements shall be unqualified and shall be
accompanied by the related report of independent certified
public accountants acceptable to Lender which report shall be
to the effect that such statements have been prepared in
accordance with GAAP applied on a basis consistent with prior
periods except for such changes in such principles with which
the independent public accountants shall have concurred;
(iii) Promptly after becoming available, and in any
event within ninety (90) days after the close of each Fiscal
Year, a copy of the plan and forecast (including a projected
summary balance sheet and income statement) of Borrower,
Parent, and Parent and its Consolidated Subsidiaries, and also
on a combined basis, all in form acceptable to Lender;
(iv) Promptly after becoming available, and in any
event within forty-five (45) days after the end of each
calendar quarter, a Consolidated balance sheet of Parent as of
the end of such quarter and the related Consolidated
statements of income, stockholders' equity and cash flows of
Parent for such quarter and the period from the first day of
the then current Fiscal Year through the end of such quarter,
certified by the chief financial officer or other executive
officer of Parent to
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have been prepared in accordance with GAAP applied on a basis
consistent with prior periods;
(v) Promptly and in any event within forty-five (45)
days after the end of each calendar quarter, a production
information report of Borrower in form acceptable to Lender
detailing geographic mix of all retail and correspondent
production for such quarter and the period from the first day
of the then current Fiscal Year through the end of such
quarter;
(vi) Promptly and in any event within thirty (30)
days after the end of each calendar month in each Fiscal Year
of Borrower (except the last calendar month in each Fiscal
Year of Borrower), and within ninety (90) days after the
completion of Parent's Fiscal Year, a completed Officer's
Certificate in the form of EXHIBIT E hereto, executed by the
president or chief financial officer of Borrower;
(vii) With each Borrowing Notice and in any event
within thirty (30) days after the end of each calendar month,
a Borrowing Base Certificate;
(viii) Promptly after becoming available, and in any
event within thirty (30) days after the end of each calendar
month, a Consolidated balance sheet of Borrower as of the end
of such month and the related Consolidated statements of
income, stockholders' equity and cash flows of Borrower for
such month and the period from the first day of the then
current Fiscal Year through the end of such month, certified
by the chief financial officer or other executive officer of
Borrower to have been prepared in accordance with GAAP applied
on a basis consistent with prior periods;
(ix) Promptly and in any event within thirty (30)
days after the end of each calendar month, a secondary
marketing report for such month in form reasonably
satisfactory to Lender including, without limitation, detail
on Borrower's pipeline position (amount and rate of price
committed loans in pipeline, future contracts, hedged
positions, repurchase agreements, and profit and loss),
commitment position (detailing investor, type, original
principal amount, rate, price/yield, and expiration date),
repurchase requests by investors and production statistics;
(x) Promptly upon receipt thereof, a copy of each
other report submitted to Borrower by independent accountants
in connection with any annual, interim or special audit of the
books of Borrower; and
(xi) such other information concerning the business,
properties or financial condition of any Related Person as
Lender may reasonably request.
Section 5.2 TAXES AND OTHER LIENS. Each Related Person shall pay and
discharge promptly all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or upon any of its Property as well as all
claims of any kind (including claims for labor, materials, supplies and rent)
which, if unpaid, might become a Lien upon any or all of its Property;
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provided, however, each Related Person shall not be required to pay any such
tax, assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate proceedings
diligently conducted by or on behalf of such Related Person and if such Related
Person shall have set up reserves therefor adequate under GAAP.
Section 5.3 MAINTENANCE. Each Related Person shall (a) maintain its
corporate existence, rights and franchises, (b) observe and comply in all
material respects with all Governmental Requirements and (c) maintain its
Properties (and any Properties leased by or consigned to it or held under title
retention or conditional sales contracts) in good and workable condition at all
times and make all repairs, replacements, additions, betterments and
improvements to its Properties as are needed and proper so that the business
carried on in connection therewith may be conducted properly and efficiently at
all times. Borrower shall maintain good standing as an approved seller and
servicer for FNMA and FHLMC and as an approved lender with FHA, VA and HUD.
Section 5.4 FURTHER ASSURANCES. Borrower shall, within three (3)
Business Days after the request of Lender, cure any defects in the execution and
delivery of the Note, this Agreement or any other Loan Document and each Related
Person shall, at its expense, promptly execute and deliver to Lender upon
request all such other and further documents, agreements and instruments in
compliance with or accomplishment of the covenants and agreements of each
Related Person in this Agreement and in the other Loan Documents or to further
evidence and more fully describe the collateral intended as security for the
Note, 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 make any recordings, to file any notices, or
obtain any consents.
Section 5.5 REIMBURSEMENT OF EXPENSES. Borrower shall pay (a) all
reasonable legal fees incurred by Lender in connection with the preparation,
negotiation, syndication, execution and delivery of this Agreement, the Note and
the other Loan Documents and any amendments, consents or waivers executed in
connection therewith, up to a maximum amount of $10,000.00, (b) all fees,
charges or taxes for the recording or filing of the Security Instruments, (c)
all reasonable out-of-pocket expenses of Lender in connection with the
administration of this Agreement, the Note and the other Loan Documents,
including courier expenses incurred in connection with the Mortgage Collateral,
(d) all amounts expended, advanced or incurred by Lender to satisfy any
obligation of Borrower under this Agreement or any of the other Loan Documents
or to collect the Note, or to protect, preserve, exercise or enforce the rights
of Lender under this Agreement or any of the other Loan Documents or to collect
the Note, or to protect, preserve, exercise or enforce the rights of Lender or
any Lender under this Agreement or any of the other Loan Documents, (e) all
reasonable out-of-pocket costs and expenses (including fees and disbursements of
attorneys and other experts employed or retained by such Person) incurred in
connection with, arising out of, or in any way related to (i) consulting during
a Default with respect to (A) the protection, preservation, exercise or
enforcement of any of its rights in, under or related to the Collateral or the
Loan Documents or (B) the performance of any of its obligations under or related
to the Loan Documents, or (ii) protecting, preserving, exercising or enforcing
during a Default any of its rights in, under or related to the Collateral or the
Loan Documents, each of (a) through (e) shall include all underwriting expenses,
collateral liquidation costs, court costs, attorneys' fees (including,
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without limitation, for trial, appeal or other proceedings), fees of auditors
and accountants, and investigation expenses reasonably incurred by Lender in
connection with any such matters, together with interest at the post-maturity
rate specified in the Note on each item specified in clause (a) through (e) from
thirty (30) days after the date of written demand or request for reimbursement
until the date of reimbursement.
Section 5.6 INSURANCE. Borrower shall maintain with financially sound
and reputable insurers, insurance with respect to its Properties and business
against such liabilities, casualties, risks and contingencies and in such types
and amounts as is customary in the case of Persons engaged in the same or
similar businesses and similarly situated, including, without limitation, a
fidelity bond or bonds with financially sound and reputable insurers with such
coverage and in such amounts as is customary in the case of Persons engaged in
the same or similar businesses and similarly situated. The improvements on the
land covered by each Mortgage shall be kept continuously insured at all times by
responsible insurance companies against fire and extended coverage hazards under
policies, binders, letters, or certificates of insurance, with a standard
mortgagee clause in favor of Borrower and its assigns. Each such policy must be
in an amount equal to the lesser of the maximum insurable value of the
improvements or the original principal amount of the Mortgage Note, without
reduction by reason of any co-insurance, reduced rate contribution, or similar
clause of the policies or binders. Upon request of Lender, Borrower shall
furnish or cause to be furnished to Lender from time to time a summary of the
insurance coverage of Borrower in form and substance satisfactory to Lender and
if requested shall furnish Lender copies of the applicable policies.
Section 5.7 ACCOUNTS AND RECORDS; SERVICING RECORDS. Each Related
Person shall keep books of record and account in which full, true and correct
entries will be made of all dealings or transactions in relation to its business
and activities, in accordance with GAAP. Each Related Person shall maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate all records pertaining to the performance of
such Related Person's obligations under the Servicing Agreements in the event of
the destruction of the originals of such records) and keep and maintain all
documents, books, records, computer tapes and other information reasonably
necessary or advisable for the performance by each Related Person of its
obligations under the Servicing Agreements.
Section 5.8 RIGHT OF INSPECTION. Each Related Person shall permit
authorized representatives of Lender to discuss the business, operations, assets
and financial condition of such Related Person with their officers and
employees, to examine their Servicing Records and books of records and account
and make copies or extracts thereof and to visit and inspect any of the
Properties of each Related Person, all at such reasonable times and as often as
Lender may request. Each Related Person will provide its accountants with a copy
of this Agreement promptly after the execution hereof and will instruct its
accountants to answer candidly any and all questions that the officers of Lender
or any authorized representatives of Lender may address to them in reference to
the financial condition or affairs of any Related Person as those conditions or
affairs relate to this Agreement. Each Related Person may have its
representatives in attendance at any meetings between the officers or other
representatives of Lender and such Related Person's accountants held in
accordance with this authorization.
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Section 5.9 NOTICE OF CERTAIN EVENTS. Borrower shall promptly notify
Lender upon (a) the receipt of any notice from, or the taking of any other
action by, the holder of any promissory note, debenture or other evidence of
Indebtedness of any Related Person with respect to a claimed default, together
with a detailed statement by a responsible officer of Borrower specifying the
notice given or other action taken by such holder and the nature of the claimed
default and what action Borrower is taking or proposes to take with respect
thereto; (b) the commencement of, or any determination in, any legal, judicial
or regulatory proceedings between any Related Person and any Governmental
Authority or any other Person which, if adversely determined, could have a
Material Adverse Effect; (c) any change in senior management of Borrower; (d)
any material adverse change in the business, operations, prospects or financial
condition of any Related Person, including, without limitation, the insolvency
of any Related Person, (e) any event or condition which, if adversely
determined, could have a Material Adverse Effect or (f) the occurrence of any
Termination Event.
Section 5.10 PERFORMANCE OF CERTAIN OBLIGATIONS AND INFORMATION
REGARDING INVESTORS. Borrower shall perform and observe in all material respects
each of the provisions of each Take-Out Commitment and each of the Servicing
Agreements on its part to be performed or observed and will cause all things to
be done which are necessary to have each item of Mortgage Collateral covered by
a Take-Out Commitment comply with the requirements of such Take-Out Commitment.
Upon request by Lender, Borrower will deliver to Lender financial information
concerning any Person Lender is reviewing to determine whether to approve such
Person as an Investor; all such financial information must be delivered to
Lender prior to any request by Borrower for Mortgage Collateral to be delivered
to such Person.
Section 5.11 USE OF PROCEEDS; MARGIN STOCK. The proceeds of all Loans
shall be used by Borrower solely for the origination and purchase of Eligible
Mortgage Loans pending sale to an Investor. None of such proceeds shall be used
for the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U, or for the purpose of reducing or retiring any Indebtedness which
was originally incurred to purchase or carry margin stock or for any other
purpose which might constitute this transaction a "purpose credit" within the
meaning of such Regulation U. Neither Borrower nor any Person acting on behalf
of Borrower shall take any action in violation of Regulation U or Regulation X
or shall violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereafter be in effect.
Section 5.12 NOTICE OF DEFAULT. Borrower shall furnish to Lender
immediately upon becoming aware of the existence of any Default or Event of
Default, a written notice specifying the nature and period of existence thereof
and the action which Borrower is taking or proposes to take with respect
thereto.
Section 5.13 COMPLIANCE WITH LOAN DOCUMENTS. Each Related Person shall
promptly comply with any and all covenants and provisions of this Agreement the
Note and the other Loan Documents to be complied with by such Related Person.
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Section 5.14 OPERATIONS AND PROPERTIES. Each Related Person shall
comply with all Laws, rules, regulations and guidelines applicable to it. Each
Related Person shall act prudently and in accordance with customary industry
standards in managing and operating its Property.
Section 5.15 ENVIRONMENTAL MATTERS.
(a) Each Related Person will comply in all material respects
with all Environmental Laws now or hereafter applicable to such Related
Person and shall obtain, at or prior to the time required by applicable
Environmental Laws, all environmental, health and safety permits,
licenses and other authorizations necessary for its operations and will
maintain such authorizations in full force and effect.
(b) Borrower will promptly furnish to Lender all written
notices of violation, orders, claims, citations, complaints, penalty
assessments, suits or other proceedings received by Borrower, or of
which it has notice, pending or threatened against Borrower, by any
Governmental Authority with respect to any alleged violation of or
non-compliance with any Environmental Laws or any permits, licenses or
authorizations in connection with its ownership or use of its
properties or the operation of its business.
ARTICLE VI
NEGATIVE COVENANTS
Each Related Person shall at all times comply with the covenants
contained in this ARTICLE VI, from the date hereof and for so long as any part
of the Obligations or the Commitment is outstanding unless Lender has agreed
otherwise in writing:
Section 6.1 NO MERGER; LIMITATION ON ISSUANCE OF SECURITIES. Neither
Parent nor any Related Person shall merge or consolidate with or into any Person
except that (i) Parent may merge with an Affiliate; provided that such Affiliate
confirms to Lender that upon the consummation of such merger it shall be liable
for all obligations of Parent arising under the Keep-Well Agreement by
documentation reasonably satisfactory to Lender in form and substance, (ii) any
Related Person may merge with a Borrower so long as such Borrower is the
survivor, and (iii) except as otherwise provided in the immediately preceding
clause (ii), any Related Person may merge with any other Related Person. No
Related Person shall acquire by purchase, or otherwise, all or substantially all
of the assets or capital stock of any Person except Borrower may acquire all or
substantially all of the assets of any Person or all of the capital stock or
other equity interests of any Person so long as (i) no Default or Event of
Default has occurred and is continuing at the time of such acquisition, and (ii)
no Default or Event of Default occurs as a result of such acquisition. No
Subsidiary of Borrower will issue any additional shares of its capital stock or
other securities or any options, warrants or other rights to acquire such
additional shares or other securities except to Borrower and only to the extent
not otherwise forbidden under the terms hereof. No Subsidiary of Borrower which
is a partnership will allow any diminution of Borrower's interest (direct or
indirect) therein.
Section 6.2 LIMITATION ON INDEBTEDNESS. No Related Person shall incur,
create, contract, assume, have outstanding, guarantee or otherwise be or become,
directly or indirectly, liable in respect of any Indebtedness or Guaranty
Obligations except:
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(a) the Obligations;
(b) trade debt, equipment leases, equipment loans and liens
for taxes and assessments not yet due and payable owed in the ordinary
course of business;
(c) Guaranty Obligations of Borrower and the other Related
Persons arising under the Parent Debt Agreements; and
(d) Inter-Company loans to Affiliates of Borrower.
Section 6.3 FISCAL YEAR, METHOD OF ACCOUNTING. Neither Parent nor any
Related Person shall change its Fiscal Year or make any material change in its
method of accounting. If any such change is required by Law, the reports and
financial statement of Borrower and its Consolidated subsidiaries required
hereunder may be prepared in accordance with such change but, if such changes
are material, all calculations and determinations to be made hereunder may be
made in accordance with such change only after notice of such change is given to
Lender and Lender agrees to such change insofar as it affects the accounting of
Borrower or of Borrower and its Consolidated subsidiaries.
Section 6.4 BUSINESS. No Related Person shall, directly or indirectly,
engage in any business which differs materially from that currently engaged in
by Borrower.
Section 6.5 LIQUIDATIONS, CONSOLIDATIONS AND DISPOSITIONS OF
SUBSTANTIAL ASSETS. No Related Person shall dissolve or liquidate or sell,
transfer, lease or otherwise dispose of any material portion of their property
or assets or business; PROVIDED, HOWEVER, nothing in this SECTION 6.5 shall be
construed to prohibit any Related Person from selling rights to service mortgage
loans and pools of mortgage loans or Mortgage Note in the ordinary course of
their business.
Section 6.6 LOANS, ADVANCES, AND INVESTMENTS. No Related Person shall
make any loan (other than Mortgage Loans), advance, or capital contribution to,
or investment in (including any investment in any Subsidiary, joint venture or
partnership), or purchase or otherwise acquire any of the capital stock,
securities, or evidences of indebtedness of, any Person (collectively,
"INVESTMENT"), or otherwise acquire any interest in, or control of, another
Person, except for the following:
(a) Cash Equivalents;
(b) Any acquisition of securities or evidences of indebtedness
of others when acquired by a Related Person in settlement of accounts
receivable or other debts arising in the ordinary course of its
business, so long as the aggregate amount of any such securities or
evidences of indebtedness is not material to the business or condition
(financial or otherwise) of such Related Person;
(c) Mortgage Notes acquired by Borrower in the ordinary course
of Borrower's business;
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(d) Investments in Subsidiaries which have a Guaranty
Obligation with respect to the Obligations; and.
(e) loans to Parent, or any Affiliate of Borrower.
Section 6.7 USE OF PROCEEDS. Borrower shall not permit the proceeds of
the Loans to be used for any purpose other than those permitted by SECTION 5.11
hereof. Borrower shall not, directly or indirectly, use any of the proceeds of
the Loans for the purpose, whether immediate, incidental or ultimate, of buying
any "margin stock" or of maintaining, reducing or retiring any Indebtedness
originally incurred to purchase a stock that is currently any "margin stock," or
for ANY other purpose which might constitute this transaction a "purpose
credit," in each case within the meaning of Regulation U, or otherwise take or
permit to be taken any action which would involve a violation of Regulation U or
of Regulation T (12 C.F.R. 220, as amended) or Regulation X (12 C.F.R. 224, as
amended) or any other regulation of such board.
Section 6.8 ACTIONS WITH RESPECT TO MORTGAGE COLLATERAL. Borrower shall
not:
(a) Compromise, extend, release, or adjust payments on any
Mortgage Collateral, accept a conveyance of mortgaged property in full
or partial satisfaction of any Mortgage Collateral, or release any
Mortgage securing or underlying any Mortgage Collateral;
(b) Agree to the amendment or termination of any Take-Out
Commitment in which Lender has a security interest or to substitution
of a Take-Out Commitment for a Take-Out Commitment in which Lender has
a security interest hereunder, if such amendment, termination or
substitution may reasonably be expected (as determined by Lender in its
sole discretion) to have a Material Adverse Effect;
(c) Transfer, sell, assign, or deliver any Mortgage Collateral
pledged to Lender to any Person other than Lender, except pursuant to a
Take-Out Commitment; or
(d) Grant, create, incur, permit or suffer to exist any Lien
upon any Mortgage Collateral except for Liens granted to Lender to
secure the Note and Obligations and such nonconsensual Liens as may be
deemed to arise as a matter of law pursuant to any Take-Out Commitment.
Section 6.9 TRANSACTIONS WITH AFFILIATES. Borrower shall not enter into
any transactions including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transactions are otherwise permitted under this Agreement, are in the
ordinary course of Borrower's business and are upon fair and reasonable terms no
less favorable to Borrower than it would obtain in a comparable arm's length
transaction with a Person not an Affiliate.
Section 6.10 LIENS. No Related Person shall grant, create, incur,
assume, permit or suffer to exist any Lien, upon any of its Property, including
without limitation any and all of Borrower's Mortgage Note, and Servicing Rights
and the proceeds from any thereof, other than (a) Liens which secure payment of
the Obligations, (b) first Liens on Property subject to Second Lien
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Mortgages, so long as the aggregate amount of the Mortgage Notes secured thereby
does not exceed the Second Mortgage Sublimit, (c) Liens on Property (other than
Collateral) to secure the "obligations" (as defined in the Parent Credit
Agreement) arising under the Parent Credit Agreement, (d) Liens to secure
Indebtedness permitted under Section 6.2(b) which arises in connection with the
purchase or lease of such assets, (e) statutory liens for taxes, assessments or
other governmental charges or levies which are not yet delinquent or which are
being contested in good faith by appropriate action and for which adequate
reserves have been maintained in accordance with GAAP on Property other than
Collateral, and (e) landlords', operators', carriers', warehousemen's,
repairmen's, mechanics', materialmen's, or other like Liens which do not secure
Indebtedness, in each case only to the extent arising in the ordinary course of
business and only to the extent securing obligations which are not delinquent or
which are being contested in good faith by appropriate proceedings and for which
adequate reserves have been maintained in accordance with GAAP on Property other
than Collateral.
Section 6.11 ERISA. No Related Person shall adopt or agree to maintain
or contribute to any ERISA Plan. Borrower shall promptly notify Lender in
writing in the event an ERISA Affiliate adopts an ERISA Plan.
Section 6.12 CHANGE OF PRINCIPAL OFFICE. No Related Person shall move
its principal office, executive office or principal place of business from the
address set forth in SECTION 10.1 without giving written notice to Lender within
ten (10) Business Days after the date of such move.
Section 6.13 TANGIBLE NET WORTH. As of the end of each calendar month,
the Tangible Net Worth of Borrower shall not be less than $5,000,000.
Section 6.14 ADJUSTED TANGIBLE NET WORTH. As of the end of each
calendar month, the Adjusted Tangible Net Worth of Borrower shall not be less
than $4,000,000.
Section 6.15 TOTAL DEBT TO ADJUSTED TANGIBLE NET WORTH RATIO. The ratio
of the Total Debt of Borrower to the Adjusted Tangible Net Worth of Borrower
shall never be more than 10.0 to 1.0.
Section 6.16 PROFITABILITY. As of the end of each Fiscal Quarter,
Borrower's Consolidated net income for such Fiscal Quarter shall be a positive
number equal to or greater than $1.
Section 6.17 CURRENT RATIO. The ratio of the Consolidated current
assets of Borrower to the Consolidated current liabilities of Borrower, as
determined in accordance with GAAP, shall never be less than 1.0 to 1.0.
ARTICLE VII
EVENTS OF DEFAULT
Section 7.1 NATURE OF EVENT. An Event of Default shall exist if any one
or more of the following occurs:
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(a) Any Related Person or Parent 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) Default is made in the due observance or performance by
any Related Person of any covenant set forth in ARTICLE V of this
Agreement (other than SECTION 5.9) and such Default continues for a
period of thirty (30) days after Lender gives Borrower notice thereof;
(c) Default is made in the due observance or performance by
any Related Person of any of the covenants or agreements contained in
this Agreement other than those described in subsections (a) or (b)
immediately above;
(d) Any Related Person or Parent defaults in the due
observance or performance or any of the covenants or agreements
contained in any Loan Document to which it is a party (other than this
Agreement), and (unless such default otherwise constitutes a Default
pursuant to other provisions of this SECTION 7.1) such default
continues unremedied beyond the expiration of any applicable grace
period which may be expressly allowed under such other Loan Document;
(e) Any material statement, warranty or representation by or
on behalf of any Related Person or Parent contained in this Agreement,
the Note or any other Loan Document to which it is a party, or in any
Borrowing Request, officer's certificate or other writing furnished in
connection with this Agreement, proves to have been incorrect or
misleading in any material respect as of the date made or deemed made;
(f) Any Related Person or Parent:
(i) suffers the entry against it of a judgment,
decree or order for relief by a court of competent
jurisdiction in an involuntary proceeding commenced under any
applicable bankruptcy, insolvency or other similar law of any
jurisdiction now or hereafter in effect, including the federal
Bankruptcy Code, as from time to time amended, or has any such
proceeding commenced against it which remains undismissed for
a period of ninety (90) days; or
(ii) commences a voluntary case under any applicable
bankruptcy, insolvency or similar law now or hereafter in
effect, including the federal Bankruptcy Code, as from time to
time amended; or applies for or consents to the entry of an
order for relief in an involuntary case under any such law; or
makes a general assignment for the benefit of creditors; or
fails generally to pay (or admits in writing its inability to
pay) its debts as such debts become due; or takes corporate or
other action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession
by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of all or a substantial part
of its assets or of any part of the Mortgage Collateral in a
proceeding brought against or initiated by it, and such
appointment or taking
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possession is neither made ineffective nor discharged within
ninety (90) days after the making thereof, or such appointment
or taking possession is at any time consented to, requested
by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment
for the payment of money in excess of $1,000,000 (not covered
by insurance satisfactory to Lender in its discretion), unless
the same is discharged within thirty (30) days after the date
of entry thereof or an appeal or appropriate proceeding for
review thereof is taken within such period and a stay of
execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any
similar process to be issued by any court against all or any
substantial part of its assets or any part of the Mortgage
Collateral;
(g) Any Related Person fails to make when due or within any
applicable grace period any payment on any Indebtedness (other than the
Obligations) with an unpaid principal balance of over $1,000,000; or
any event or condition occurs under any provision contained in any
agreement under which such obligation is governed, evidenced or secured
(or any other material breach or default under such obligation or
agreement occurs) if the effect thereof is to cause or permit the
holder or trustee of such obligation to cause such obligation to become
due prior to its stated maturity; or any such obligation becomes due
(other than by regularly scheduled payments) prior to its stated
maturity; or any of the foregoing occurs with respect to any one or
more items of Indebtedness of any Related Person with unpaid principal
balances exceeding, in the aggregate, $1,000,000;
(h) Any event or condition occurs under any provision
contained in the Parent Debt Agreements (or any other material breach
or default under the Parent Debt Agreements occurs) if the effect
thereof is to cause or permit the holder or trustee of such obligation
to cause such obligation to become due prior to its stated maturity;
(i) Any default or event of default occurs under any other
agreement governing Indebtedness of the Borrower or any of its
Subsidiaries, which indebtedness is in excess of $50,000, whether or
not such default or event of default results in acceleration of said
Indebtedness;
(j) This Agreement, the Note or any other Loan Document shall
for any reason cease to be in full force and effect, or be declared
null and void or unenforceable in whole or in part as. the result of
any action initiated by any Person other than Lender; or the validity
or enforceability of any such document shall be challenged or denied by
any Person other than Lender other than by reason of illegality;
(k) Either (i) any "accumulated funding deficiency" (as
defined in Section 412(a) of the Code in excess of $75,000 exists with
respect to any ERISA Plan, whether or not waived by the Secretary of
the Treasury or his delegate, or (ii) any Termination Event occurs with
respect to any ERISA Plan and the then current value of such ERISA
Plan's benefits guaranteed under Title IV of ERISA exceeds the then
current value of such ERISA Plan's assets available for the payment of
such benefits by more than
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$10,000 (or in the case of a Termination Event involving the withdrawal
of a substantial employer, the withdrawing employer's proportionate
share of such excess exceeds such amount) or (iii) any Related Person
or any ERISA Affiliate withdraws from a multiemployer plan resulting in
liability under Title IV of ERISA of an amount in excess of$ 10,000 in
the case of any Related Person or $100,000 in the case of any other
ERISA Affiliate;
(l) Any interest created by any Security Instrument shall
cease to be enforceable and of the same priority purported to be
created thereby,
(m) A Change of Control occurs; or
(n) Any Related Person or Parent is dissolved or otherwise
ceases to exist except as permitted by SECTION 6.1.
Section 7.2 DEFAULT REMEDIES. Upon the occurrence of an Event of
Default, Lender may declare the Commitment to be terminated and/or declare the
entire principal and all interest accrued on the Note to be, and the Note,
together with all 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, if an Event of Default specified in SUBSECTIONS 7.1(F)(I), (II) OR
(III) above occurs with respect to Borrower, the Commitment shall automatically
and immediately terminate and the Note and all other Obligations shall become
automatically and immediately due and payable, both as to principal and
interest, without any action by Lender and without presentment, demand, protest,
notice of protest and nonpayment, notice of acceleration or of intent to
accelerate, or any other notice of any kind, all of which are hereby expressly
waived, anything contained herein, in the Note to the contrary notwithstanding.
ARTICLE VIII
INDEMNIFICATION
Section 8.1 INDEMNIFICATION. Borrower agrees to indemnify Lender and
each director, officer, agent, attorney, employee, representative and Affiliate
of Lender (each an "INDEMNIFIED PARTY"), upon demand, from and against any and
all liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (including reasonable fees of
attorneys, accountants, experts and advisors) of any kind or nature whatsoever
(in this SECTION 8.1 collectively called "LIABILITIES AND COSTS") which to any
extent (in whole or in part) may be imposed on, incurred by, or asserted against
any Indemnified Party growing out of, resulting from or in any other way
associated with any of the Mortgage Collateral, the Loan Documents, and the
transactions and events (including the enforcement or defense thereof) at any
time associated therewith or contemplated therein (including any violation or
noncompliance with any Environmental Laws by any Related Person).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH
LIABILITIES AND COSTS ARE IN ANY WAY OR TO ANY
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EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY OF STRICT
LIABILITY, OR ARE CAUSED IN WHOLE OR PART, BY ANY NEGLIGENT ACT OR
OMISSION OF ANY KIND BY SUCH INDEMNIFIED PARTY,
provided only that such indemnified party shall be not entitled under this
section to receive indemnification for that portion, if any, of any liabilities
and costs which is proximately caused by its own individual gross negligence or
willful misconduct. All amounts payable by Borrower shall be immediately due
upon Lender's request for the payment thereof.
Section 8.2 LIMITATION OF LIABILITY. None of Lender, its directors,
officers, agents, attorneys, employees, representatives or affiliates shall be
liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement. THE FOREGOING EXCULPATION SHALL APPLY TO ANY
NEGLIGENT ACT OR OMISSION OF ANY KIND BY ANY SUCH PERSON, PROVIDED THAT SUCH
PERSON SHALL BE LIABLE FOR ITS OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT.
ARTICLE IX
[RESERVED]
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, 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: Preferred Home Mortgage Company
▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
TEL: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
Technical Olympic USA, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, General Counsel
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
TEL: (▇▇▇) ▇▇▇-▇▇▇▇
Lender: Guaranty Bank
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
TEL: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other addresses or to such individual's or department's attention as
any party may have furnished the other party in writing. Any communication so
addressed and mailed shall be deemed to be given when so mailed, except that
Borrowing Requests, and communications related thereto shall not be effective
until actually received by Lender or Borrower, as the case may be; and any
notice so sent by rapid transmission shall be deemed to be given when receipt of
such transmission is acknowledged, and any communication so delivered in person
shall be deemed to be given when receipted for by, or actually received by, an
authorized officer of Borrower or Lender, as the case may be.
Section 10.2 AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement, the Security Instruments, the Note, or any other Loan
Document, nor consent to any departure by any Related Person from the terms
thereof, shall in any event be effective unless the same shall be in writing and
signed by (i) if such party is Borrower, by Borrower and (ii) if such party is
Lender, by Lender.
Section 10.3 CHOICE OF LAW; VENUE. THIS AGREEMENT SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF TEXAS. CHAPTER 346 OF THE TEXAS FINANCE CODE (WHICH
REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND REVOLVING TRIPARTY ACCOUNTS) SHALL
NOT APPLY TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. ANY LEGAL ACTION OR
PROCEEDING ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT SHALL BE BROUGHT
AND MAINTAINED IN THE APPLICABLE STATE OR FEDERAL COURT IN DALLAS COUNTY, TEXAS.
THIS AGREEMENT IS PERFORMABLE IN DALLAS COUNTY, TEXAS AND THE PARTIES HERETO
WAIVE ANY RIGHT THEY MAY HAVE TO BE SUED ELSEWHERE. THE PARTIES HERETO CONSENT
TO PERSONAL JURISDICTION IN DALLAS COUNTY, TEXAS.
Section 10.4 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
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or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of such document.
Section 10.5 SURVIVAL OF AGREEMENTS. All covenants and agreements
herein and in any other Loan Document not fully performed before the date hereof
or the date thereof, and all representations and warranties herein or therein,
shall survive until payment in full of the Obligations and termination of the
Commitment.
Section 10.6 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 10.7 WAIVERS. No course of dealing on the part of Lender, or
any of its officers, employees, consultants or agents, nor any failure or delay
by Lender with respect to exercising any right, power or privilege of Lender
under the Note, this Agreement or any other Loan Document shall operate as a
waiver thereof, except as otherwise provided in SECTION 10.2 hereof.
Section 10.8 CUMULATIVE RIGHTS. The rights and remedies of Lender 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 10.9 LIMITATION ON INTEREST. Lender, each Related Person and
any other parties to the Loan Documents intend to contract in strict compliance
with applicable usury Law from time to time in effect. In furtherance thereof
such Persons stipulate and agree that none of the terms and provisions contained
in the Loan Documents shall ever be construed to create a contract to pay, for
the use, forbearance or detention of money, interest in excess of the maximum
amount of interest permitted to be charged by applicable Law from time to time
in effect. Neither each Related Person nor any present or future guarantors,
endorsers, or other Persons hereafter becoming liable for payment of any
Obligation shall ever be liable for unearned interest thereon or shall ever be
required to pay interest thereon in excess of the maximum amount that may be
lawfully charged under applicable Law from time to time in effect, and the
provisions of this section shall control over all other provisions of the Loan
Documents which may be in conflict or apparent conflict herewith. Lender
expressly disavows any intention to charge or collect excessive unearned
interest or finance charges in the event the maturity of any Obligation is
accelerated. If (a) the maturity of any Obligation is accelerated for any
reason, (b) any Obligation is prepaid and as a result any amounts held to
constitute interest are determined to be in excess of the legal maximum, or (c)
Lender or any other holder of any or all of the Obligations shall otherwise
collect moneys which are determined to constitute interest which would otherwise
increase the interest on any or all of the Obligations to an amount in excess of
that permitted to be charged by applicable Law then in effect, then all such
sums determined to constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then outstanding principal of
the related Obligations or, at Lender's or such holder's option, promptly
returned to each Related Person or the other payor thereof upon such
determination. In determining whether or not the interest paid or payable, under
any specific circumstance, exceeds the maximum amount permitted under
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applicable Law, Lender and each Related Persons (and any other payors thereof)
shall to the greatest extent permitted under applicable Law, (i) characterize
any non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of the instruments evidencing the Obligations in accordance
with the amounts outstanding from time to time thereunder and the maximum legal
rate of interest from time to time in effect under applicable Law in order to
lawfully charge the maximum amount of interest permitted under applicable Law.
In the event applicable Law provides for an interest ceiling under Chapter 303
of the Texas Finance Code, that ceiling shall be the weekly ceiling under said
Chapter 303.
Section 10.10 BANK ACCOUNTS; OFFSET. To secure the repayment of the
Obligations each Related Person hereby grants to Lender and to each financial
institution which hereafter acquires a participation or other interest in the
Loans or Note (in this section called a "Participant") a security interest, a
lien, and a right of offset, each of which shall be in addition to all other
interests, liens, and rights of Lender or any Participant at common law, under
the Loan Documents, or otherwise, and each of which shall be upon and against
(a) any and all moneys, securities or other property (and the proceeds
therefrom) of any Related Person now or hereafter held or received by or in
transit to Lender, any Lender or Participant from or for the account any Related
Person, whether for safekeeping, custody pledge, transmission, collection or
otherwise, (b) any and all deposits (general or special, time or demand,
provisional or final) of any Related Person with Lender or any Participant, and
(c) any other credits and claims of any Related Person at any time existing
against Lender, any Lender or Participant, including claims under certificates
of deposit. Upon the occurrence of any Default, each of Lender and Participants
is hereby authorized to foreclose upon, offset, appropriate, and apply, at any
time and from time to time, without notice to Borrower, any and all items
hereinabove referred to against the Obligations then due and payable.
Section 10.11 ASSIGNMENTS, PARTICIPATIONS.
(a) ASSIGNMENTS. Lender shall have the right to sell, assign
or transfer all or any part of Note, Loans and rights and the
associated rights and obligations under all Loan Documents to one or
more financial institutions, with minimum assets of $5,000,000,000, and
the assignee, transferee or recipient shall have, to the extent of such
sale, assignment, or transfer, the same rights, benefits and
obligations of Lender. Within five (5) Business Days after any such
assignment, the assignee shall notify Borrower of the outstanding
principal balance of the Note payable to assignee and Borrower shall
execute and deliver to assignee a new Note evidencing such assignee's
assigned Loans and, if the assignor Lender has retained a portion of
its Loans, replacement Note in the principal amount of the Loans
retained by the assignor Lender (such Note to be in exchange for, but
not in payment of, the Note held by such Lender).
(b) PARTICIPATIONS. Lender shall have the right to grant
participations in all or any part of the Note, Loans and the associated
rights and obligations under all Loan Documents to one or more
financial institutions with minimum assets of $5,000,000,000.
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(c) DISTRIBUTION OF INFORMATION. Subject to SECTION 10.16, it
is understood and agreed that Lender may provide to assignees and
participants and prospective assignees and participants financial
information and reports and data concerning Borrower's properties and
operations which was provided to Lender pursuant to this Agreement.
Section 10.12 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 10.13 TITLES OF ARTICLES, SECTIONS AND SUBSECTIONS. All titles
or headings to articles, sections, subsections 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.
Section 10.14 COUNTERPARTS. This Agreement may be executed in
counterparts, and it shall not be necessary that the signatures of both 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 10.15 TERMINATION; LIMITED SURVIVAL. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
notice delivered to Lender to terminate this Agreement. Upon receipt by Lender
of such a notice, if no Obligations are then owing, this Agreement and all other
Loan Documents shall thereupon be terminated and the parties thereto released
from all prospective obligations thereunder. Notwithstanding the foregoing or
anything herein to the contrary, any waivers or admissions made by any Person in
any Loan Documents, any Obligations, and any obligations which any Person may
have to indemnify or compensate Lender shall survive any termination of this
Agreement or any other Loan Document. At the request and expense of Borrower,
Lender shall prepare and execute all necessary instruments to reflect and effect
such termination of the Loan Documents.
Section 10.16 CONFIDENTIAL INFORMATION. Lender shall use any
confidential non-public information concerning the Borrower, the Parent, and
their Subsidiaries that is furnished to Lender by or on behalf of the Borrower,
the Parent and their Subsidiaries in connection with the Loan Documents
(collectively, "CONFIDENTIAL INFORMATION") solely for the purpose of evaluating
and providing products and services to them and administering and enforcing the
Loan Documents, and shall hold the Confidential Information in confidence.
Notwithstanding the foregoing, Lender may disclose Confidential Information (a)
to its Affiliates or any of its or its Affiliates' directors, officers,
employees, advisors, or representatives (collectively, the "REPRESENTATIVES")
whom it determines need to know such information for the purposes set forth in
this Section; (b) to any bank or financial institution or other entity to which
such Lender has assigned or desires to assign an interest or participation in
the Loan Documents or the Obligations, PROVIDED that any such foregoing
recipient of such Confidential Information agrees to keep such Confidential
Information confidential as specified herein; (c) to any Governmental Authority
having or claiming to have authority to regulate or oversee any aspect of
Lender's business or that of its Representatives in
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connection with the exercise of such authority or claimed authority; (d) to the
extent necessary or appropriate to effect or preserve Lender's or any of its
Affiliates' security (if any) for any Obligation or to enforce any right or
remedy or in connection with any claims asserted by or against Lender or any of
its Representatives; and (e) pursuant to any subpoena or any similar legal
process. For purposes hereof, the term "Confidential Information" shall not
include information that (x) is in Lender's possession prior to its being
provided by or on behalf of the Borrower, the Parent or their Subsidiaries,
PROVIDED that such information is not known by Lender to be subject to another
confidentiality agreement with, or other legal or contractual obligation of
confidentiality to, the Borrower, Parent or their Subsidiaries, (y) is or
becomes publicly available (other than through a breach hereof by Lender), or
(z) becomes available to Lender on a nonconfidential basis, provided that the
source of such information was not known by Lender to be bound by a
confidentiality agreement or other legal or contractual obligation of
confidentiality with respect to such information.
Section 10.17 TIME IS OF THE ESSENCE. Time is of the essence with
respect to the performance of the obligations contained in this Agreement.
Section 10.18 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES,
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, ITS RESPECTIVE RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF
ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. EACH OF THE PARTIES
HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT
TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE
THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT OR ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY
TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
AGREEMENT AND ANY OTHER LOAN DOCUMENTS.
Section 10.19 CONSEQUENTIAL DAMAGES. NEITHER BORROWER NOR LENDER SHALL
HAVE ANY LIABILITY WITH RESPECT TO, AND EACH SUCH PERSON HEREBY WAIVES, RELEASES
AND AGREES NOT TO ▇▇▇ EACH OTHER SUCH PERSON FOR, ANY SPECIAL, INDIRECT OR
CONSEQUENTIAL DAMAGES SUFFERED BY SUCH OTHER PERSON IN CONNECTION WITH ANY CLAIM
RELATED TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREIN.
Section 10.20 AMENDMENT AND RESTATEMENT. This Agreement is executed in
renewal,
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modification and amendment (but not in extinguishment) of that certain Credit
Agreement dated as of August 1, 2002 by and between Borrower, Technical
Mortgage, L.P. and Lender (as previously amended and restated from time to time,
the "ORIGINAL CREDIT AGREEMENT") in its entirety, effective as of the date first
written above, and all of the terms and provisions hereof shall supersede the
terms and provisions of the Original Credit Agreement. Borrower hereby agrees
that (i) the Indebtedness outstanding under the Original Credit Agreement and
all accrued and unpaid interest thereon and (ii) all accrued and unpaid fees
under the Original Credit Agreement shall be deemed to be Indebtedness of
Borrower outstanding under and governed by this Agreement.
Section 10.21 ENTIRE AGREEMENT. THE NOTE, THIS AGREEMENT, AND THE OTHER
LOAN DOCUMENTS 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.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the date first above written.
BORROWER: PREFERRED HOME MORTGAGE COMPANY
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Secretary
LENDER: GUARANTY BANK
By: /s/ ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇
Senior Vice President
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