<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 8-K
Current Report
Pursuant To Section 13 Or 15(d) Of The
Securities Exchange Act Of 1934
February 23, 1999
Date of Report (Date of earliest event reported)
NOVASTAR FINANCIAL, INC.
------------------------
(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
Maryland 001-13533 74-2830661
-------- ----------- -------------
(State or Other Jurisdiction (Commission File Number) (I.R.S. Employer Identification No.)
(of Incorporation)
</TABLE>
1901 West 47th Place
Suite 105
Westwood, Kansas 66205
----------------------
(Address of Principal Executive Offices)
(913) 362-1090
--------------
(Registrant's Telephone Number,
Including Area Code)
Not Applicable
--------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Events
------------
NovaStar Financial, Inc. announced that the Company has entered into
several agreements that significantly expand its relationship with
its primary lender, First Union National Bank. First Union will be
providing financing through the following facilities, each maturing
in February 2000: $75 million revolving warehouse line of credit,
$300 million whole loan repurchase facility and $20 million residual
repurchase facilities. The Company will issue First Union 350,000
warrants to purchase NovaStar common stock at $6.9375 per share, the
closing price on February 11, 1999, in exchange for 186,667 existing
warrants exercisable at $15 per share. Copies of the financing
agreements are included as Exhibits 10.7a, 10.21 and 10.22 and a
copy of the warrant agreement is included as Exhibit 10.23. A copy
of the press release dated February 16, 1999 is included as Exhibit
99.1.
Item 7(c). Exhibits
--------
10.07a Amendment No. 6 dated as of February 12, 1999 to Mortgage
Loan Warehousing Agreement dated as of February 20, 1997
between First Union National Bank and Registrant.
10.21 Addendum to Master Repurchase Agreement dated as of
February 12, 1999 among NovaStar Financial, Inc., NovaStar
Capital, Inc. and NovaStar Mortgage, Inc., as sellers, and
First Union National Bank, as buyer.
10.22 Form of Addendum to Master Repurchase Agreement dated as
of February 12, 1999 between Registrant's affiliated
entity, as seller, and First Union Bank, as buyer, with
respect to the residual interest on certain asset-backed
bonds.
10.23 Warrant Agreement dated as of February 12, 1999 between
the Registrant and First Union National Bank.
99.1 Press Release dated February 16, 1999.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date: February 23, 1999
NOVASTAR FINANCIAL, INC.
By:/s/ Mark J. Kohlrus
-------------------
Mark J. Kohlrus
Senior Vice President, Treasurer
and Chief Financial Officer
3
<PAGE>
EXHIBIT INDEX
Exhibit No. Document
- ----------- --------
10.07a Amendment No. 6 dated as of February 12, 1999 to Mortgage Loan
Warehousing Agreement dated as of February 20, 1997 between First
Union National Bank and Registrant.
10.21 Addendum to Master Repurchase Agreement dated as of February 12,
1999 among NovaStar Financial, Inc., NovaStar Capital, Inc. and
NovaStar Mortgage, Inc., as sellers, and First Union National
Bank, as buyer.
10.22 Form of Addendum to Master Repurchase Agreement dated as of
February 12, 1999 between Registrant's affiliated entity, as
seller, and First Union National Bank, as buyer, with respect to
the residual interest on certain asset-backed bonds.
10.23 Warrant Agreement dated as of February 12, 1999 between the
Registrant and First Union National Bank.
99.1 Press Release dated February 16, 1999.
4
<PAGE>
EXHIBIT 10.07a
SIXTH AMENDMENT TO MORTGAGE LOAN
WAREHOUSING AGREEMENT
THIS SIXTH AMENDMENT TO MORTGAGE LOAN WAREHOUSING AGREEMENT (the
"Amendment") is made as of the 12th day of February, 1999, by and between
NOVASTAR MORTGAGE, INC., a Virginia corporation ("NovaStar Mortgage"), NOVASTAR
FINANCIAL, INC., a Maryland corporation ("NovaStar Financial"), NOVASTAR
CAPITAL, INC., a Delaware corporation ("NovaStar Capital") and FIRST UNION
NATIONAL BANK (formerly known as First Union National Bank of North Carolina), a
national banking association (the "Lender").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, NovaStar Mortgage and NovaStar Financial and the Lender are
parties to a Mortgage Loan Warehousing Agreement dated as of November 24, 1997,
as amended by a First Amendment to Mortgage Loan Warehousing Agreement dated as
of February 19, 1998, by a Second Amendment to Mortgage Loan Warehousing
Agreement dated as of April 30, 1998, by a Third Amendment to Mortgage Loan
Warehousing Agreement dated as of September 3, 1998, by a Fourth Amendment to
and Waiver of Mortgage Loan Warehousing Agreement dated as of October 15, 1998
and by a Fifth Amendment to Mortgage Loan Warehousing Agreement dated as of
November 30, 1998 (as so amended, the "Credit Agreement"; all capitalized terms
used herein and not otherwise defined having the respective meanings provided to
such terms in the Credit Agreement, as amended hereby); and
WHEREAS, the parties hereto desire that NovaStar Capital be admitted as a
borrower under the Credit Agreement and the other Credit Documents and wish to
amend the Credit Agreement and the other Credit Documents to provide for the
inclusion of NovaStar Capital as a party thereto and a borrower thereunder and
to provide for certain other modifications thereto, as more particularly set
forth herein; and
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Lender is willing to continue to make available to NovaStar Mortgage,
NovaStar Financial and NovaStar Capital the credit facilities provided for in
the Credit Agreement; and
WHEREAS, a specific condition to the willingness of the Lender to
continue to make available to NovaStar Mortgage, NovaStar Financial and NovaStar
Capital the credit facilities provided for in the Credit Agreement is the re-
affirmation by the Guarantor of the Guaranty; and
WHEREAS, the Guarantor will derive a material benefit from the
continued availability to NovaStar Mortgage, NovaStar Financial and NovaStar
Capital of the credit facilities provided for in the Credit Agreement, and
therefore the Guarantor is willing to reaffirm the Guaranty;
1
<PAGE>
NOW, THEREFORE, in consideration of the premises and agreements
contained herein and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree as follows:
1. Effect and Effective Date. By its execution hereof, NovaStar
-------------------------
Capital hereby assumes on a joint and several basis with NovaStar Mortgage and
NovaStar Financial all of the obligations of the Companies under the Credit
Agreement and the other Credit Documents and agrees to be bound by the Credit
Agreement and the other Credit Documents. The effective date of all of the
amendments to the Credit Agreement and the other Credit Documents described
herein shall be as of the date hereof unless otherwise expressly provided
herein.
2. Conditions Precedent.
--------------------
(a) As a condition precedent to the effectiveness of this
Amendment, NovaStar Capital shall deliver to the Lender the following:
(i) certified copies of resolutions of the Board of Directors of
NovaStar Capital approving the execution and delivery of this Amendment and the
Credit Documents to which NovaStar Capital is a party and the performance of the
obligations hereunder and under the Credit Documents by NovaStar Capital and the
consummation of the transactions contemplated hereby and thereby;
(ii) a certificate of the Secretary or an Assistant Secretary of
NovaStar Capital certifying the names and true signatures of the officers of
NovaStar Capital authorized to execute and deliver this Amendment and the Credit
Documents to which NovaStar Capital is a party;
(iii) a copy of the Certificate of Incorporation of NovaStar
Capital, certified by the Secretary or a Assistant Secretary of NovaStar Capital
as of the date of this Amendment as being accurate and complete;
(iv) a copy of the Bylaws of NovaStar Capital, certified by the
Secretary or an Assistant Secretary of NovaStar Capital as of the date of this
Amendment as being accurate and complete;
(v) (A) a certificate of the Secretary of State of Delaware,
certifying as of a recent date that NovaStar Capital is in good standing, and
(B) a certificate of the Secretary of State of Kansas, certifying as of a recent
date that NovaStar Capital is authorized to transact business as a foreign
corporation;
(vi) UCC-1 Financing Statement(s) in form and substance acceptable
to the Lender, listing NovaStar Capital as debtor and the Lender as secured
party thereunder; and
(vii) an opinion of counsel for NovaStar Capital acceptable to the
Lender and substantially in accordance with the one delivered on behalf of
NovaStar
2
<PAGE>
Mortgage and NovaStar Financial as of the effective date of the Credit Agreement
and containing the additional opinion that NFI Holding owns one hundred percent
(100%) of the issued and outstanding shares of NovaStar Capital.
(b) As a condition precedent to the effectiveness of this
Amendment, the Companies (as that term is amended by this Amendment) shall
deliver to the Lender the following:
(i) a copy of this Amendment executed by each of the Companies (as
that term is amended by this Amendment) and the Guarantor (whether such parties
shall have signed the same or different counterparts);
(ii) a replacement Note, such Note being made by the Companies (as
that term is amended by this Amendment) payable to the order of the Lender;
(iii) a copy of the Second Amendment to Security Agreement in form
and substance acceptable to the Lender, as executed by each of the Companies (as
that term is amended by this Amendment) (whether such parties shall have signed
the same or different counterparts);
(iv) a reaffirmation of the Guaranty (the "Reaffirmation") executed
by the Guarantor in favor of the Lender;
(v) resolutions of each of NovaStar Mortgage, NovaStar Financial
and the Guarantor authorizing the execution of this Amendment, the replacement
Note and the Second Amendment to Security Agreement, and the Reaffirmation,
respectively;
(vi) a certificate of even date herewith signed by the President,
any Vice President or the Treasurer of each of NovaStar Mortgage, NovaStar
Financial and the Guarantor certifying that (A) the articles, bylaws and
resolutions of each of NovaStar Mortgage, NovaStar Financial and the Guarantor
previously delivered to the Lender remain in full force and effect except as
provided therein, (B) each of NovaStar Mortgage, NovaStar Financial and the
Guarantor remains in good standing, (C) all representations and warranties of
each of NovaStar Mortgage, NovaStar Financial and the Guarantor previously made
to Lender remain true, complete and accurate, and (D) no Event of Default or
Potential Default has occurred and is continuing; and
(vii) payment to the Lender by the Companies (as that term is amended
by this Amendment) of a one-time non-refundable facility fee in the amount of
$93,750.
3. Companies. All references in the Credit Agreement and the Credit
---------
Documents to the "Companies" shall be deemed to include, in addition to NovaStar
Mortgage and NovaStar Financial, NovaStar Capital, and reference in the Credit
Agreement or in any of the other Credit
3
<PAGE>
Documents to a "Company" shall be to any of NovaStar Mortgage, NovaStar
Financial and NovaStar Capital. All references in the Credit Agreement and the
Credit Documents to "either Company" shall be deemed to mean "any Company."
4. Representations, Warranties and Covenants. All references to any
-----------------------------------------
representations, warranties or covenants contained in the Credit Agreement or
the other Credit Documents relating to, made by or binding upon the Companies,
shall be deemed as of and after the date hereof to be made in relation to, to be
made by, or to be binding upon, each of the Companies (as that term is amended
by this Amendment).
5. Amendments to the Credit Agreement.
----------------------------------
(a) Paragraph 2(l)(3) of the Credit Agreement is deleted in its
entirety and the following paragraph is substituted in lieu thereof:
"(3) An aged loan fee, such fee to be payable monthly in arrears on
the applicable dates specified in Paragraph 2(d) hereof, each such
installment to be in an amount equal to the product of (i) the average
daily aggregate principal balance of all Mortgage Loans included in the
Borrowing Base during said month of the type described in subsection (iii)
of the proviso to subsection (p) of the definition of "Eligible Mortgage
Loan," multiplied by (ii) 0.25%, divided by (iii) 12."
----------- -------
(b) Paragraph 2(l)(5) of the Credit Agreement is deleted in its
entirety and the following paragraph is substituted in lieu thereof:
"(5) A delinquent loan fee, such fee to be computed on a per annum
basis payable in monthly installments, in arrears, on those dates set forth
for payment of interest in Paragraph 2(d) hereof, each such installment to
be in an amount equal to the product of: (i) the average daily aggregate
principal amount of Loans outstanding during the preceding month;
multiplied by (ii) the quotient of (A) the average daily aggregate Unit
-------------
Collateral Values for all Eligible Delinquent Mortgage Loans included in
the Borrowing Base during the preceding month; divided by (B) the average
-----------
daily aggregate Unit Collateral Values of all Eligible Mortgage Loans
included in the Borrowing Base during the preceding month; multiplied by
-------------
(iii) 0.25%; divided by (iv) 12."
----------
(c) A new clause (C) is hereby added to subsection (1) of Paragraph
5(c) of the Credit Agreement as follows:
", and (C) with respect to NovaStar Capital, the State of Delaware"
(d) Paragraph 5(n)of the Credit Agreement is hereby deleted in its
entirety and the following paragraph is hereby substituted in lieu thereof:
"5(n) Ownership and Subsidiaries. As of the date hereof, (i) ninety-
--------------------------
nine percent (99%) of the economic interests in the Guarantor are owned by
NovaStar Financial, and (ii) one hundred percent (100%) of the outstanding
stock of each of
4
<PAGE>
NovaStar Mortgage and NovaStar Capital is owned by the Guarantor. NovaStar
Mortgage has no Subsidiaries other than NovaStar Mortgage Funding
Corporation II and NovaStar REMIC Financing Corporation. NovaStar Capital
has no Subsidiaries. The Guarantor has no Subsidiaries other than NovaStar
Mortgage, NovaStar Capital and The Hiresource, Inc. NovaStar Financial has
no Subsidiaries other than Guarantor, NovaStar Assets Corporation, NovaStar
Certificates Financing Corporation, NovaStar Mortgage Funding Corporation
and NovaStar Capital Access Corporation."
(e) Paragraph 6(b)(5) of the Credit Agreement is hereby deleted in its
entirety and the following paragraph is substituted in lieu thereof:
"(5) With respect to each Eligible Delinquent Mortgage Loan included
in the Borrowing Base, (i) on or before the date said Eligible Delinquent
Mortgage Loan is included in the Borrowing Base under the delinquent loan
sublimit, a report including, but not limited to, the original appraised
value and location of the Property which is the subject of such Eligible
Delinquent Mortgage Loan, and the original principal balance, current
outstanding balance and status of such Eligible Delinquent Mortgage Loan;
(ii) monthly delinquency and progress reports for such Eligible Delinquent
Mortgage Loan in form and content acceptable to the Lender; (iii) in the
event such Eligible Delinquent Mortgage Loan becomes more than seventy-five
(75) days past due, a certificate of mortgage insurance (or a demonstration
of coverage in form satisfactory to Lender) covering such Eligible
Delinquent Mortgage Loan and satisfactory to Lender in its sole discretion;
and (iv) in the event such Eligible Delinquent Mortgage Loan becomes more
than ninety (90) days past due, a "drive-by" appraisal of, or broker's
price opinion with respect to, the Property which is the subject of such
Eligible Delinquent Mortgage Loan (provided, that the Companies shall have
--------
ten (10) Business Days after the date on which such Eligible Delinquent
Mortgage Loan becomes more than ninety (90) days past due in which to
deliver any such broker's price opinion)".
(f) Paragraph 7(e)of the Credit Agreement is hereby deleted in its
entirety and the following paragraph is hereby substituted in lieu thereof:
"7(e) Transfer of Stock. Permit the acquisition, purchase,
------------------
redemption, retirement, transfer or issuance of any shares of the capital
stock of either of NovaStar Mortgage or NovaStar Capital now or hereafter
outstanding which would result in the Guarantor owning less than one
hundred percent (100%) of its outstanding capital stock, or (ii) permit the
acquisition, purchase, redemption, retirement, transfer or issuance of any
shares of the capital stock of the Guarantor now or hereafter outstanding
which would result in NovaStar Financial owning less than ninety-nine
percent (99%) of the economic interest in the Guarantor."
(g) Paragraph 7(i) of the Credit Agreement is hereby deleted in its
entirety and the following paragraph is hereby substituted in lieu thereof:
5
<PAGE>
"7(i) Minimum Adjusted Tangible Net Worth. Permit Adjusted Tangible
-----------------------------------
Net Worth as of the last day of any fiscal quarter to be less than the sum
of (i) $75,000,000, plus (ii) eighty percent (80%) of all contributions to
-----
equity capital of NovaStar Financial, its consolidated Subsidiaries or its
unconsolidated Affiliates (which contributions are made by Persons other
than NovaStar Financial, its consolidated Subsidiaries or its
unconsolidated Affiliates) after February 12, 1999."
=
(h) The definition of the term "Adjusted Tangible Net Worth" contained
in Section 10 of the Credit Agreement is hereby amended by deleting the last
sentence thereof in its entirety and substituting the following sentence in lieu
thereof:
"Provided that in all cases such amount shall be determined by combining
--------
the relevant figures for NovaStar Financial and for Guarantor and its
consolidated Subsidiaries and its Affiliates, as accounted for under the
equity method, in the form shown on the example Covenant Compliance
Certificate attached as Exhibit H hereto."
---------
(i) The definition of the term "Buy-Down Rate" contained in Section 10
of the Credit Agreement is hereby amended by deleting the percentage "one and
one-quarter percent (1.25%)" contained therein and by substituting the
percentage "one and three-quarters percent (1.75%)" in lieu thereof.
(j) Subparagraph (d) of the definition of the term "Eligible Mortgage
Loan" contained in Section 10 of the Credit Agreement is hereby deleted in its
entirety and the following subparagraph is substituted in lieu thereof:
"(d) No payment under said Mortgage Loan is more than thirty
(30) days past due the payment due date set forth in the underlying
promissory note and deed of trust (or mortgage); provided, however, that a
-------- -------
Mortgage Loan which is more than thirty (30) days delinquent may be an
Eligible Mortgage Loan so long as (i) said Mortgage Loan is a delinquent
----------
Mortgage Loan which is either the subject of an ongoing attempt by the
applicable Company to work out said Mortgage Loan or the subject of an
ongoing foreclosure proceeding which has not yet resulted in the sale of
the underlying Property; (ii) said Mortgage Loan has not been specifically
rejected on a Mortgage Loan-by-Mortgage Loan basis, by the Lender in its
sole discretion, for inclusion in the Borrowing Base; (iii) the Companies
have delivered to the Lender such reports with respect to said Mortgage
Loan as are required under Paragraph 6(b)(5) above; (iv) if said Mortgage
Loan is more than thirty (30) days delinquent, the Unit Collateral Value of
said Mortgage Loan, when added to the aggregate Unit Collateral Values of
all Eligible Mortgage Loans included in the Borrowing Base by virtue of
this proviso to subparagraph (d) of the definition of "Eligible Mortgage
Loan" which are more than thirty (30) days delinquent does not exceed
$10,000,000; and (v) said Mortgage Loan is not more than one hundred eighty
(180) days delinquent (Eligible Mortgage Loans of the type referred to in
the proviso to this subsection (d) shall be referred to herein as "Eligible
Delinquent Mortgage Loans")."
6
<PAGE>
(k) Subparagraph (p) of the definition of the term "Eligible Mortgage
Loan" contained in Section 10 of the Credit Agreement is hereby deleted in its
entirety and the following subparagraph is substituted in lieu thereof:
"(p) Said Mortgage Loan has not been included in the Borrowing
Base for more than one hundred eighty (180) days; provided, however that a
-------- -------
Mortgage Loan which is included in the Borrowing Base for more than one
hundred eighty (180) days may be an Eligible Mortgage Loan so long as (i)
[INTENTIONALLY OMITTED], or (ii) (A) said Eligible Mortgage Loan is an
Eligible Home Equity Line of Credit Mortgage Loan, and (B) said Mortgage
Loan is not included in the Borrowing Base for more than three hundred
sixty-four (364) days, or (iii) (A) said Mortgage Loan is not an Eligible
Home Equity Line of Credit Mortgage Loan, (B) said Mortgage Loan is not
included in the Borrowing Base for more than three hundred sixty (360)
days, and (C) the Unit Collateral Value of said Mortgage Loan, when added
---
to the Unit Collateral Values of all other Mortgage Loans which are not
Eligible Home Equity Line of Credit Mortgage Loans and which are included
in the Borrowing Base for more than one hundred eighty (180) days, does not
exceed five percent (5%) of the Credit Limit (Eligible Mortgage Loans
referred to in subsection (iii) of the proviso to this subparagraph (p)
shall be referred to herein as "Eligible Aged Mortgage Loans")."
(l) The definition of the term "Maturity Date" contained in Section 10
of the Credit Agreement is deleted in its entirety and the following paragraph
is substituted in lieu thereof:
"`Maturity Date' shall mean the earlier of: (a) February 11, 2000, as
-------------
such date may be extended from time to time in writing by the Lender, in
its sole discretion, and (b) the date the Lender terminates its obligation
to make further Loans pursuant to the provisions hereof."
(m) The following definition of the term "NovaStar Capital" is hereby
added to Paragraph 10 of the Credit Agreement:
"`NovaStar Capital' shall mean NovaStar Capital, Inc., a Delaware
----------------
corporation."
(n) The definition of the term "Unit Collateral Value" contained in
Section 10 of the Credit Agreement is deleted in its entirety and the following
paragraph is substituted in lieu thereof:
"`Unit Collateral Value' shall mean, with respect to each Eligible
----------------------
Mortgage Loan contained in the Borrowing Base:
(a) If said Mortgage Loan is an Eligible Aged Mortgage Loan, the
lesser of: (i) ninety percent (90%) of the lesser of (A) the unpaid
principal balance thereof at the time the Mortgage Loan is included in the
Borrowing Base, and (B) the original note amount thereof; and (ii) eighty-
eight percent (88%) of the Fair Market Value thereof.
7
<PAGE>
(b) If said Mortgage Loan is an Eligible Delinquent Mortgage Loan
which is less than or equal to 75 days past due, eighty-five percent (85%)
of the current amount outstanding under the Mortgage Loan.
(c) If said Mortgage Loan is an Eligible Delinquent Mortgage Loan
which is more than 75, but less than or equal to 180, days past due, sixty
percent (60%) of the current amount outstanding under the Mortgage Loan.
(d) If said Mortgage Loan is an Eligible Home Equity Line of
Credit Mortgage Loan, the lesser of: (i) ninety percent (90%) of the
current amount outstanding under the Mortgage Loan; and (ii) eighty-eight
percent (88%) of the Fair Market Value thereof.
(e) If said Mortgage Loan is an Eligible Super Jumbo Mortgage
Loan, the lesser of: (i) ninety-five percent (95%) of the lesser of (A) the
unpaid principal balance thereof at the time the Mortgage Loan is included
in the Borrowing Base, and (B) the original note amount thereof; and (ii)
ninety-three percent (93%) of the Fair Market Value thereof.
(f) If said Mortgage Loan is an Eligible Alt-A Mortgage Loan, the
lesser of: (i) ninety-eight percent (98%) of the lesser of (A) the unpaid
principal balance thereof at the time the Mortgage Loan is included in the
Borrowing Base, and (B) the original note amount thereof; and (ii) the Fair
Market Value thereof.
(g) For all other Mortgage Loans, the lesser of: (i) ninety-eight
percent (98%) of the lesser of (A) the unpaid principal balance thereof at
the time the Mortgage Loan is included in the Borrowing Base, and (B) the
original note amount thereof; and (ii) ninety-seven percent (97%) of the
Fair Market Value thereof."
(o) Schedule I to the Credit Agreement is deleted in its entirety and
----------
the form of Schedule I attached as Annex A hereto is substituted in lieu
----------
thereof.
(p) Schedule II to the Credit Agreement is deleted in its entirety and
-----------
the form of Schedule II attached as Annex B hereto is substituted in lieu
-----------
thereof.
(q) Exhibit E to the Credit Agreement is deleted in its entirety and
---------
the form of Exhibit E attached as Annex C hereto is substituted in lieu thereof.
---------
(r) Exhibit G to the Credit Agreement is deleted in its entirety and
---------
the form of Exhibit G attached as Annex D hereto is substituted in lieu thereof.
---------
6. The Credit Agreement and the other Credit Documents are hereby amended
to the extent necessary to conform to the parties' intention as evidenced by the
express amendments set forth above.
8
<PAGE>
7. Except as expressly amended hereby or as may be necessary to conform
to the intentions of the parties hereto, all other terms and provisions of the
Credit Agreement and the other Credit Documents are hereby ratified and affirmed
and remain in full force and effect.
8. This Amendment is limited, and except as set forth herein, shall not
constitute the modification, acceptance or waiver of any provision of the Credit
Agreement, or any other document or instrument entered into in connection
therewith.
9. This Amendment may be executed in any number of counterparts by the
different parties hereto on separate counterparts, each of which counterparts
when executed and delivered shall be an original, but all of which together
shall constitute one in the same instrument. A complete set of counterparts
shall be lodged with each of the Companies and the Lender.
10. This Amendment and the rights and obligations of the parties hereunder
shall be construed in accordance with and governed by the laws of the State of
North Carolina.
11. From and after the date hereof, all references in the Credit Agreement
and any other document or instrument entered into in connection therewith, to
the Credit Agreement shall be named to be references to the Credit Agreement as
amended hereby.
12. The Guarantor joins in the execution and delivery of this Amendment to
acknowledge and consent to the terms hereof and hereby reaffirms its obligations
under the Guaranty.
13. THE LENDER, THE GUARANTOR AND THE COMPANIES EACH HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW,
THE RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AMENDMENT OR
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN)
OR ACTIONS OF ANY PARTY RELATING HERETO. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE LENDER TO ENTER INTO THIS AGREEMENT.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first above written.
NOVASTAR MORTGAGE, INC.,
a Virginia corporation
By:
----------------------------------
Name:
-----------------------------
Title: Treasurer
----------------------------
NOVASTAR FINANCIAL, INC.,
a Maryland corporation
By:
----------------------------------
Name:
-----------------------------
Title: Treasurer
----------------------------
NOVASTAR CAPITAL, INC.,
a Delaware corporation
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
FIRST UNION NATIONAL BANK
(formerly known as First Union National Bank
of North Carolina), a national banking
association
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
GUARANTOR:
NFI HOLDING CORPORATION,
a Delaware corporation
By:
----------------------------------
Name:
-----------------------------
Title:
----------------------------
10
<PAGE>
ANNEX A
SCHEDULE I
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF NOVEMBER 24, 1997
BY AND AMONG NOVASTAR MORTGAGE, INC.,
NOVASTAR FINANCIAL, INC.,
NOVASTAR CAPITAL, INC. AND
FIRST UNION NATIONAL BANK
Schedule of Addresses
---------------------
COMPANIES:
NovaStar Mortgage, Inc.
1900 West 47th Place, Suite 205
Westwood, Kansas 66205
Attention: Mark Kohlrus
NovaStar Financial, Inc.
1901 West 47th Place, Suite 105
Westwood, Kansas 66205
Attention: Mark Kohlrus
NovaStar Capital, Inc.
1901 West 47th Place, Suite 105
Westwood, Kansas 66205
Attention: Mark Kohlrus
BANK:
First Union National Bank
One First Union Center, TW-09
301 South College Street, 9th Floor
Charlotte, North Carolina 28288-0610
Attention: Mark A. Mendenhall
GUARANTOR:
NFI Holding Corporation
1901 West 47th Place, Suite 105
Westwood, Kansas 66205
Attention: Mark Kohlrus
11
<PAGE>
ANNEX B
SCHEDULE II
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF NOVEMBER 24, 1997
BY AND AMONG NOVASTAR MORTGAGE, INC.,
NOVASTAR FINANCIAL, INC.,
NOVASTAR CAPITAL, INC. AND
FIRST UNION NATIONAL BANK
Approved Investors
------------------
Agencies
- --------
FHLMC
FNMA
Investment Banks
- ----------------
Bear Stearns
CIBC-Oppenheimer
Dain Rauscher
DeutscheBank
DLJ
First Tennessee
Goldman Sachs
Greenwich Capital
Lehman Brothers
Merrill Lynch
Morgan Keegan
Morgan Stanley
Nomura
PaineWebber
Prudential
Salomon Brothers
Conduit/Finance Companies
- -------------------------
Advanta
American General
Amresco
CIT
12
<PAGE>
Commercial Credit
Conti
Countrywide
GE
Greentree
Household
Impac
IndyMac
RFC
TransAmerica
Federal/State Regulated Financial Institutions
- ----------------------------------------------
Federal- or state-regulated banks, thrifts, credit unions and insurance
companies which meet all three (3) of the following criteria: (i) at least
$500,000,000 in assets; (ii) a capital ratio of not less than five percent (5%);
and (iii) a CAMEL rating of 1 or 2; provided, that in the event any of the above
--------
three (3) criteria are not met, the Companies may submit such bank, thrift,
credit union or insurance company to the Lender for approval as an Approved
Investor, which approval may be granted or denied by the Lender in its sole
discretion, acting in good faith.
13
<PAGE>
ANNEX C
EXHIBIT E
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF NOVEMBER 24, 1997
BY AND AMONG NOVASTAR MORTGAGE, INC.,
NOVASTAR FINANCIAL, INC.,
NOVASTAR CAPITAL, INC. AND
FIRST UNION NATIONAL BANK
Litigation Schedule
-------------------
With respect to NovaStar Financial, Inc.:
NovaStar Financial, Inc. and the Senior Credit Officer of NovaStar
Mortgage, Inc. were served a complaint on January 2, 1997 alleging several
points. Plaintiff is a competitor of NovaStar Financial, Inc. and the former
employer of NovaStar Mortgage, Inc.'s Senior Credit Officer. Plaintiff seeks
preliminary and permanent injunctions to restrain NovaStar Financial, Inc. from
certain matters. NovaStar Financial, Inc. strongly disagrees with all
allegations and believes they are without merit. NovaStar Financial, Inc. has
engaged legal counsel to assist in the response to and timely dismissal of these
charges
With respect to NovaStar Mortgage, Inc.:
None.
With respect to NovaStar Capital, Inc.:
None.
14
<PAGE>
ANNEX D
EXHIBIT G
TO
MORTGAGE LOAN WAREHOUSING AGREEMENT
DATED AS OF NOVEMBER 24, 1997
BY AND AMONG NOVASTAR MORTGAGE, INC.,
NOVASTAR FINANCIAL, INC.,
NOVASTAR CAPITAL, INC. AND
FIRST UNION NATIONAL BANK
Form of Borrowing Base Schedule
-------------------------------
This Borrowing Base Schedule is furnished pursuant to the Mortgage Loan
Warehousing Agreement dated as of November 24, 1997, as amended from time to
time, among the Companies and the Lender (the "Agreement"). Unless otherwise
defined herein, the terms used in this Borrowing Base Schedule have the meanings
ascribed thereto in the Agreement.
A. Aggregate Unit Collateral Values of
Eligible Mortgage Loans in Borrowing
Base as of previous Borrowing Base
Schedule delivered by the Companies $____________
B. Aggregate Unit Collateral Values of
Eligible Mortgage Loans submitted for
inclusion in Borrowing Base since
previous Borrowing Base Schedule
delivered by the Companies $____________
C. Sum of (A plus B) $____________
D. Aggregate Unit Collateral Values of
Eligible Mortgage Loans previously
released by the Lender for which
the full purchase price has been
received by the Lender since previous
Borrowing Base Schedule delivered by the
Companies $____________
E. Aggregate Unit Collateral Values of
Eligible Mortgage Loans more than
thirty (30) days delinquent for which
Lender has not received any of those reports
required under Paragraph 6(b)(5) of the Agree-
ment in a timely manner $____________
15
<PAGE>
F. Amount by which Aggregate Unit Collateral
Values of Eligible Mortgage Loans more
than thirty (30) days delinquent exceeds
$10,000,000 $____________
G. Aggregate Unit Collateral Values of
Eligible Mortgage Loans delinquent for more than
one hundred eighty (180) days $____________
H. Amount by which Aggregate Unit Collateral
Values of Eligible Mortgage Loans
withdrawn from the possession of the
Lender under a trust receipt and not
returned to the Lender exceeds
one percent (1%) of Credit Limit $____________
I. Aggregate Unit Collateral Values of Eligible
Mortgage Loans withdrawn from the possession
of the Lender under a trust receipt more than
10 Business Days prior to the date of this
schedule and not returned to the Lender $____________
J. Aggregate Unit Collateral Values of
Eligible Mortgage Loans withdrawn from
the possession of the Lender and shipped
to an investor for purchase or to a
custodian for pool formation more than
45 days prior to the date of this schedule
and not returned to the Lender or for which
the full purchase price has not been
received by the Lender $____________
K. Aggregate Unit Collateral Values of
Eligible Home Equity Line of Credit Mortgage
Loans submitted for inclusion in the Borrowing
Base more than 364 days prior to the date of
this schedule $____________
L. Amount by which Aggregate Unit Collateral
Values of Eligible Mortgage Loans (other than
Eligible Home Equity Line of Credit Mortgage
Loans) submitted for inclusion in the Borrowing
Base more than 180 days prior to the date of
this Schedule exceeds five percent (5%) of the
Credit Limit $____________
16
<PAGE>
M. Aggregate Unit Collateral Values of
Eligible Mortgage Loans (other than
Eligible Home Equity Line of Credit Mortgage
Loans) submitted for inclusion in the Borrowing
Base more than 360 days prior to the date of
this Schedule $____________
N. Aggregate Unit Collateral Values of
Eligible Mortgage Loans the Required
Documents for which have not been
delivered to the Lender within ten (10)
Business Days after the submission of
such Eligible Mortgage Loans for inclusion
in the Borrowing Base $____________
O. Amount by which Aggregate Unit Collateral
Values of Eligible Mortgage Loans for
which the Required Documents are not
delivered upon, but within ten (10)
Business Days following, the submission
of such Eligible Mortgage Loans for
inclusion in the Borrowing Base exceeds
(i) fifty percent (50%) of the Credit
Limit during the last 5 or first 5
Business Days of each month or (ii) thirty
percent (30%) of the Credit Limit during
any other time $____________
P. Aggregate Unit Collateral Values of Eligible
Mortgage Loans (other than those acquired as part of
a Bulk Acquisition) with respect to which
the underlying promissory note is dated more than
365 days prior to the date as of which this
Certificate is prepared $____________
Q. Amount by which Aggregate Unit Collateral
Values of Eligible Mortgage Loans which are
home equity line of credit loans exceeds fifteen
percent (15%) of the Credit Limit $____________
R. Amount by which Aggregate Unit Collateral
Values of Eligible Mortgage Loans with an original
principal amount in excess of $650,000 exceeds
twenty percent (20%) of the Credit Limit $____________
17
<PAGE>
S. Amount by which Aggregate Unit Collateral
Values of Eligible Alt-A Mortgage Loans exceeds
twenty percent (20%) of the Credit Limit $____________
T. Sum of (D plus E plus F plus G plus H
plus I plus J plus K plus L plus M plus N plus O
plus P plus Q plus R plus S) $____________
U. Adjusted Collateral Value of the
Borrowing Base (C minus T) $____________
V. Aggregate principal amount of Loans
Outstanding $____________
W. Borrowing Base availability (U minus V;
must equal or exceed zero) $____________
The undersigned hereby certifies that, as of the date hereof:
(1) I am the duly elected ____________________ of _____________________________
(2) The above schedule accurately states the Collateral Value of the Borrowing
Base and the aggregate principal amount of Loans outstanding;
(3) All Mortgage Loans included in the Borrowing Base as Eligible Mortgage
Loans comply in all respects with the requirements of the definition of
"Eligible Mortgage Loan"; and
(4) I have no knowledge of the existence of any condition or event which
constitutes an Event of Default under the Agreement.
18
<PAGE>
Certified on behalf of the undersigned this _____ day of _________, 19___.
NOVASTAR MORTGAGE, INC.
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
NOVASTAR FINANCIAL, INC.
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
NOVASTAR CAPITAL, INC.
By:
--------------------------------------------
Name:
------------------------------------------
Title:
-----------------------------------------
19
<PAGE>
EXHIBIT 10.21
ADDENDUM TO
MASTER REPURCHASE AGREEMENT
This Addendum Agreement, dated as of February 12, 1999 is made by and among
NovaStar Financial, Inc. ("NFI"), NovaStar Capital, Inc.("NCI") and NovaStar
Mortgage, Inc. ("NSM"), each acting as seller (NFI, NCI and NSM, each
individually and, jointly and severally, "Seller") and First Union National Bank
acting as buyer ("Buyer"). Capitalized terms used herein but not otherwise
defined shall have the meanings ascribed thereto in the Master Repurchase
Agreement (as defined below).
RECITALS:
WHEREAS, Buyer and Seller have entered into a Master Repurchase Agreement
dated as of February 12, 1999 (the "Master Repurchase Agreement"); and
WHEREAS, Buyer and Seller desire to supplement and amend the Master
Repurchase Agreement to enter into Transactions involving Assets (as defined
below).
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) The first sentence of Section 1 of the Master Repurchase Agreement
shall be amended in its entirety to read as follows:
"From time to time in Buyer's sole and absolute discretion
exercised in Good Faith, the parties hereto may enter into
transactions in which one party ("Seller") agrees to transfer to the
other ("Buyer") Assets deemed to be Eligible Mortgage Loans by the
Buyer against the transfer of funds by Buyer, with a simultaneous
agreement by Buyer to transfer to Seller such Assets at a date certain
or on demand, against the transfer of funds by Seller."
(b) Section 1 is hereby further amended by adding the following at the
end thereof:
"Without limiting any rights of Buyer under this Master
Repurchase Agreement, Buyer shall not be obligated to enter into more
than one (1) Transaction per week and no Transaction shall be for a
Purchase Price of less than $5,000,000."
(c) Every reference in the Master Repurchase Agreement to "Securities"
shall be replaced by "Assets".
2. Subparagraph 2(a) of the Master Repurchase Agreement is amended
by adding the following after the word "any" and before the word "bankruptcy" in
the second line thereof:
1
<PAGE>
"conservatorship or receivership (within the meaning of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989),".
3. Subparagraphs 2(j) and 2(p) of the Master Repurchase Agreement are
amended to read as follows:
(j) "Market Value" with respect to any Assets as of any date, shall mean
the price at which the Purchased Assets could readily be sold as determined
by Buyer in its sole and absolute discretion, provided, however, in the
--------
absence of a generally recognized source for prices or bid or offer
quotations for any Assets, Buyer may establish the source therefor in its
sole and absolute discretion. Without limiting the foregoing, Seller
acknowledges that the Market Value of all or any portion of a Purchased
Asset may be reduced to zero if (i) there exists a breach of a
representation, warranty or covenant made by Seller in this Master
Repurchase Agreement with respect to such Purchased Asset or (ii) such
Purchased Asset is a Non-Performing Mortgage Loan. "Non-Performing Mortgage
Loan" shall mean (i) any Mortgage Loan (x) as to which any portion of a
monthly payment is greater than seventy-five (75) days past due or (y) as
to which the related property securing such Mortgage Loan is in foreclosure
or (ii) any Mortgage Loans which are 30-75 days delinquent to the extent
the aggregate principal balance of such Mortgage Loans exceeds five percent
(5%) of the unpaid principal balance of all Purchased Assets constituting
Mortgage Loans.
(p) "Purchased Assets" the Assets transferred by Seller to Buyer in a
Transaction hereunder, and any Assets substituted therefor in accordance
with Paragraph 9 hereof. The terms "Purchased Assets" with respect to any
Transaction at any time also shall include Additional Assets delivered
pursuant to Paragraph 4(b) hereof.
4. The following definitions are hereby added to Section 2 of the Master
Repurchase Agreement:
"Acceptable Originating Counterparty" shall mean Seller or any Originating
Counterparty, listed on Exhibit C hereto.
---------
"Additional Required Documents" shall mean the following documents with
respect to any Asset:
(i) original disclosure statements complying with Regulation Z ("Truth in
Lending") of the Board of Governors of the Federal Reserve System and
all agreements relating thereto, if applicable;
(ii) original Equal Credit Opportunity Act notice and additional
disclosure statements or agreements relating thereto, if applicable;
(iii) a certification as to whether or not the property securing the Asset
falls into a flood zone as identified by a HUD identified flood map
and, if applicable, a survey of such property;
2
<PAGE>
(iv) an attorney's opinion of title and abstract of title or an original
or certified copy of a mortgagee's title insurance policy insuring
the lien of the Asset against the applicable property;
(v) written statement signed by the attorney, title company or closing
agent responsible for supervising the closing of the Asset that such
Person closed the Asset in accordance with any closing instructions
received by such Person;
(vi) a property and casualty insurance policy on the property securing the
Asset covering fire, hazard and extended coverage, and if applicable,
flood and earthquake insurance, all in amounts not less than the
principal amount of the promissory note relating to the Asset (or the
maximum amount issuable for flood insurance) which insurance has been
endorsed to provide for payment thereof to the Seller, as mortgagee,
together with written notice to the mortgagor of the fact, if true,
that mortgagor's property lies within a flood zone;
(vii) original or copy of executed application by the obligor on such Asset
for such Asset;
(viii) original or copy of credit bureau report on the obligor on such
Asset;
(ix) original HUD-1 settlement statement duly executed by the obligor on
such Asset;
(x) original complete appraisal obtained with respect to the applicable
property obtained in connection with the Asset;
(xi) the original of any guaranty executed in connection with the Asset
(if any);
(xii) the originals of all assumption, modification, consolidation or
extension agreements, with evidence of recording thereon or copies
certified by the Seller, its agent or the title company on behalf of
the Seller to have been sent for recording;
(xiii) the originals of all intervening assignments of mortgage with
evidence of recording thereon or copies certified by the Seller to be
true and correct and to have been sent for recording;
(xiv) the original of any security agreement, chattel mortgage or
equivalent document executed in connection with the Asset (if any);
(xv) the original power of attorney, if any, or a copy thereof certified
by an authorized officer of the Seller, for any document described
below; and
(xvi) such other documents as the Buyer may reasonably request from time to
time, including but not limited to verification of employment of the
obligor on such Asset, verification of deposit by such obligor (if
applicable), and any inspection reports performed with respect to
such obligor or the property covered by such Asset.
3
<PAGE>
"Applicable Additional Percentage" means (a) one and one-quarter
percent (1.25%) so long as no Event of Default has occurred and is then
continuing and (b) five and one-half percent (5.5%) at any time following the
occurrence and during the continuance of an Event of Default.
"Assets" means Mortgage Loans, home equity loans, or other assets, in
each case agreed to from time to time by Buyer and Seller and delivered to Buyer
hereunder from time to time, or a participating or pro rata interest therein.
"Change of Control" means the occurrence of any event (whether in one
or more transactions) which results in a transfer of power, direct or indirect
(x) to vote 50% or more of the securities having ordinary voting power for the
election of the directions of Seller or Guarantor or (y) to direct or cause the
direction of the management and policies of Seller or Guarantor by contract or
otherwise.
"Current Margin" shall mean, with respect to any date, the difference
between (i) the aggregate Market Value of all Purchased Assets held by Buyer on
such date and (ii) the aggregate Purchase Price paid by Buyer for all Purchased
Assets held by Buyer on such date.
"Custodian" shall mean, as applicable, the designated custodian under
each Custody Agreement.
"Custody Agreement" means collectively, each of the Custody Agreements
more particularly described on Exhibit C hereto.
---------
"Delivery Confirmation" shall have the meaning given to such term in
Paragraph 7 of the Master Repurchase Agreement.
"Eligible Mortgage Loans" shall mean Mortgage Loans with respect to
which each of the representations and warranties set out in Exhibit A hereto is
---------
accurate and complete as of the date of the related Confirmation and on each day
thereafter (and the Seller by including any such Mortgage Loan in any such
transaction shall be deemed to so represent and warrant to Buyer at and as of
the date of such Transaction).
"Good Faith" as used in this Master Repurchase Agreement shall mean
honesty in fact in the conduct or transaction concerned.
"Guarantor" shall mean NFI Holding Corporation, a Delaware
corporation.
"Maximum Purchase Amount" shall mean $300,000,000.
"Mortgage Loan" shall mean a residential real estate secured loan or
home equity real estate secured loan, including, without limitation: (i) a
promissory note, any reformation thereof and related deed of trust (or mortgage)
and security agreement; (ii) all guaranties and insurance policies, including,
without limitation, all mortgage and title insurance policies and all fire and
extended coverage insurance policies and rights of the Seller to return premiums
or payments with respect thereto; and (iii) all right, title and interest of the
Seller in the property covered by such deed of trust (or mortgage).
4
<PAGE>
"Originating Counterparty" shall mean, as applicable, Seller or any
third party which sold or pledged Assets to Seller pursuant to an Underlying
Agreement.
"Related Documents" means the Master Repurchase Agreement, the Custody
Agreements and the Servicing Agreements.
"Related Facilities" means (i) the other Master Repurchase Agreement
dated as of February 12, 1999 among NFI, NSM and First Union Corporation and the
Addendum thereto, (ii) any other Master Repurchase Agreement by and among NFI,
NCI, NSM and/or any affiliate of either NFI, NCI or NSM and Buyer or any
affiliate of Buyer and the Addendum thereto, (iii) any Mortgage Loan Warehousing
Agreement by and among NFI, NCI, NSM and/or any affiliate of either NFI, NCI or
NSM and Buyer or any affiliate of Buyer and (iv) any other document, agreement
or instrument pursuant to which NFI, NCI, NSM and/or an affiliate of either NFI,
NCI or NSM incurs any obligations or liabilities to Buyer or any affiliate of
Buyer.
"Required Documents" shall mean the following documents with respect to
any Asset:
(i) the original executed and fully completed promissory note
relating to the Asset which promissory note shall be duly endorsed in
blank without recourse by an authorized officer of (a) the Seller if
such promissory note had been previously endorsed to Seller or (b) the
payee of such promissory note;
(ii) the original executed and fully completed mortgage or deed of
trust relating to the Asset in proper form for recordation in the
appropriate jurisdiction and duly recorded in the appropriate
jurisdiction; provided, however, that a certified copy of the executed
-------- -------
mortgage or deed of trust relating to the Asset may be delivered to the
Buyer in lieu of the original recorded deed of trust of mortgage until
such time as the original recorded mortgage or deed of trust is
received from the recording jurisdiction and submitted to the Buyer;
and
(iii) an original executed and fully completed and recordable but
unrecorded assignment of the mortgage or deed of trust relating to the
Asset in proper form for recordation in the appropriate jurisdiction
(unless the Buyer determines that under applicable state law the
assignment should be recorded in order to adequately protect its
interest, in which case the assignment shall be recorded by the Seller
and a certified true copy thereof shall be provided to the Buyer),
together with the original or a duly certified copy of the fully
completed and proper assignment or assignments of the mortgage or deed
of trust from the original holder through any subsequent transferees to
the Seller in proper form for recordation in the appropriate
jurisdiction, duly recorded if local requirements in the jurisdiction
in which the property is located required the recordation of such
assignment or assignments.
"Required Margin" shall mean, with respect to any Transaction, a fixed
percentage of the Market Value of Purchased Assets as specified in the
Confirmation for such Transaction.
"Servicer" shall mean, as applicable, Seller or the designated servicer
under each Servicing Agreement.
5
<PAGE>
"Servicing Agreements" means those certain servicing agreements or
servicing arrangements listed on Exhibit D hereto as in existence on date hereof
---------
which have been approved by Buyer and provide for servicing of the Purchased
Assets.
"Term" shall mean three hundred and sixty-four (364) days from the date of
execution of this Master Repurchase Agreement.
"Underlying Agreements" shall mean those agreements as are more
specifically described on Exhibit E hereto.
---------
"Underwriting Standards" shall mean the underwriting policies of Seller as
are more specifically described on Exhibit F hereto.
---------
5. Subparagraph 3(b) of the Master Repurchase Agreement is amended by
adding at the end of the first sentence of Paragraph 3(b):
"In the case of Transactions involving Assets that are Eligible
Mortgage Loans, (a) except as otherwise expressly provided in this Master
Repurchase Agreement, the Eligible Mortgage Loans shall be serviced in
accordance with the Servicing Agreements, (b) pursuant to the terms of the
Custody Agreement, the Required Documents evidencing the Eligible Mortgage
Loans shall have been delivered to and held by the applicable Custodian as
of the business day immediately preceding the applicable Purchase Date,
which shall, among other things, issue Trust Receipts, as defined in the
Custody Agreement (the "Trust Receipts") to Buyer or its designee, (c) the
Repurchase Date for each Transaction shall be the earlier of (i) thirty
(30) days following the applicable Purchase Date or, if such date is not a
business day, the next succeeding business day, (ii) the date set forth in
the applicable Confirmation and (iii) the date determined by application of
Paragraph 11 of the Master Repurchase Agreement and (d) the Pricing Rate
for each Transaction shall be a per annum rate equal to the sum of (i) the
London interbank offered rate for one month deposits of U.S. dollars as
determined by reference to the Bloomberg Service page 3720, as of 11:00
a.m., London time, by Buyer on the Purchase Date, plus, (ii) the Applicable
----
Additional Percentage."
6. Subparagraph 3(c) of the Master Repurchase Agreement is amended by
adding the following at the end of the first sentence of Paragraph 3(c):
"In the case of Transactions involving Assets that are Eligible
Mortgage Loans, such demand by Seller shall be for a repurchase of all
Purchased Assets subject to the related Transaction and shall be made no
later than 2:00 p.m. New York City time on the business day immediately
preceding the day on which such termination will be effective, which
termination shall also be on a business day. Upon receipt of the
Repurchase Price in immediately available funds, Buyer shall deliver the
Trust Receipt(s) for such Transaction to Custodian for further disposition
in accordance with the terms of the applicable Custody Agreement."
7. Subparagraph 4 of the Master Repurchase Agreement is amended in its
entirety to read as follows:
6
<PAGE>
(a) Daily until the expiration of the Term (or less frequently if the
Buyer, in its sole and absolute discretion, so elects), Buyer will determine (i)
the aggregate Market Value of all Purchased Assets held by Buyer and (ii) the
Current Margin as of such date. Without limiting the foregoing, Seller shall
deliver to Buyer, at any time and from time to time, information with respect to
the Purchased Assets to assist Buyer in ascertaining the Market Value of such
Purchased Assets.
(b) If, on any date, the Current Margin is less than the Required
Margin for such date by an amount in excess of $250,000 (a "Margin Deficit"),
Buyer may, in its sole and absolute discretion, by notice to Seller (a "Margin
Call"), require Seller to transfer cash or additional Assets reasonably
acceptable to Buyer ("Additional Assets") so that the Current Margin for such
date then equals or exceeds the Required Margin for such date.
(c) Seller shall transfer the Additional Assets no later than the
close of business on the second business day immediately following the date on
which a Margin Call is given. Any cash transferred to Buyer pursuant hereto
shall be held by Buyer until the Repurchase Date and shall be applied against
the Repurchase Price on the Repurchase Date.
(d) Buyer's election, in its sole and absolute discretion, not to make
a Margin Call at any time there is a Margin Deficit shall not in any way limit
or impair its right to make a Margin Call at any time a Margin Deficit exists.
8. Paragraph 5 of the Master Repurchase Agreement is amended by adding
the following at the end of the last sentence thereof:
Notwithstanding the foregoing and except as provided in paragraph 11
of this Master Repurchase Agreement, Seller shall hold if it is the Servicer, or
if Seller is not the Servicer, shall cause each Servicer to hold for the benefit
of, and in trust for, Buyer all income, including without limitation all
scheduled and unscheduled principal and interest payments or any other income
(including without limitation, tax escrow payments), received by or on behalf of
Seller with respect to such Purchased Assets (collectively, "Purchased Asset
Income"); provided, however, so long as no Event of Default shall have occurred
-------- -------
and be continuing, Seller shall be permitted to use the Purchased Asset Income
received by Seller in the ordinary course of its business. Immediately upon the
occurrence and during the continuation of an Event of Default, Seller shall
deposit, or cause the Servicer to deposit, such Purchased Asset Income in a
deposit account (the title of which shall indicate that the funds therein are
being held in trust for Buyer) (the "Collection Account") with a financial
institution acceptable to Buyer and subject to a collection account agreement or
alternative written agreement which, in each case, is in form and substance
satisfactory to Buyer (the "Collection Account Agreement"). All such Purchased
Asset Income shall be held in trust for Buyer, shall constitute the property of
Buyer and shall not be commingled with other property of Seller, any affiliate
of Seller or the applicable Servicer except as expressly permitted above. All
funds on deposit in the Collection Account shall immediately be remitted to
Buyer. Buyer may, in its sole and absolute discretion, apply all Purchased
Asset Income received by Buyer to the repurchase obligations and/or other
monetary obligations owing by Seller to Buyer under this Master Repurchase
Agreement, or under any
7
<PAGE>
other document, instrument, agreement or otherwise, including, without
limitation, under the Related Facilities, in such order as Buyer determines in
the exercise of its sole and absolute discretion.
Seller shall service, or supervise the servicing of, the Mortgage
Loans, for the benefit of Buyer. Neither Seller nor any Servicer shall transfer
its rights to service any of the Purchased Assets without the prior written
consent of Buyer. On or before 2:00 p.m. (New York time) one (1) business day
prior to any Transaction, or any Repurchase Date during the Term, Seller will
(if Seller is the Servicer) provide Buyer with, or Seller will (if Seller is not
the Servicer) cause the Servicer to provide Buyer with, a credit tape with
respect to all Mortgage Loans subject to any Transaction hereunder, including,
without limitation, information concerning all delinquencies and Seller will
forward to Buyer, upon receipt from the Servicers, reports substantially
identical in form to FNMA's form 2010 remittance report with respect to all
Mortgage Loans subject to any Transaction hereunder."
9. Paragraph 6 of the Master Repurchase Agreement is amended by deleting
the words "all of the Purchased Assets with respect to the Transactions
hereunder and" in the fourth line thereof and inserting the following therefor:
"all of the Seller's Assets, Seller's right (including the power to convey
title thereto), title and interest in and to".
10. Paragraph 6 of the Master Repurchase Agreement is amended by adding
the following after the words "title and interest in and to" in the fourth line
thereof:
"the contractual right to receive payments, including the right to
payments of principal and interest and the right to enforce such payments,
arising from or under any of the Purchased Assets, the contractual right to
service each Purchased Asset and/or Additional Assets, any servicing
agreements with respect to each Purchased Asset and/or Additional Assets,
and all documents and instruments relating to each Purchased Asset and/or
Additional Assets,".
11. Paragraph 6 of the Master Repurchase Agreement is amended by adding
the following after the word "other" and before the word "proceeds" in the fifth
line thereof:
"income, payments, products and".
12. Paragraph 6 of the Master Repurchase Agreement is amended by adding
the following after the word "thereof" and before the period in the fifth line
thereof:
"including the rights under the Servicing Agreements and the
Underlying Agreements (the "Collateral " ) " .
13. Paragraph 6 of the Master Repurchase Agreement is amended by adding
the following at the end of the last sentence of Paragraph 6:
8
<PAGE>
"In such event, the parties hereto intend to create for the benefit of
Buyer, as secured party, a legally valid and enforceable first priority
perfected security interest in the Collateral, and Seller hereby grants
Buyer a first priority security interest in the Collateral. On or prior to
the initial Purchase Date and/or at the request of Buyer at any time,
Seller shall immediately cause to be filed in the appropriate filing
offices of the jurisdiction in which Seller maintains its place of
business, or its chief executive office if Seller has more than one place
of business, in accordance with applicable law, Uniform Commercial Code
financing statements naming Seller as debtor, Buyer as secured party, and
the Collateral as collateral and in form and substance reasonably
acceptable to Buyer."
14. Paragraph 7 of the Master Repurchase Agreement is amended by adding
the following at the end of the last sentence of Paragraph 7:
"In the case of Transactions involving Assets that are Mortgage Loans,
the transfer of such Mortgage Loans for the purposes of this Paragraph 7
shall include the delivery to the applicable Custodian of the Required
Documents as provided for in the Custody Agreement and the Additional
Required Documents to the Servicer as provided for in the Servicing
Agreements and/or Custody Agreement (the "Mortgage File") and the issuance
by the Custodian to the Buyer or Buyer's designee on the Purchase Date of a
Trust Receipt and a confirmation of delivery of the foregoing Required
Documents and Additional Required Documents ("Delivery Confirmation")."
15. Paragraph 8 of the Master Repurchase Agreement is amended by deleting
the last sentence of Paragraph 8 and substituting the following:
"Title to all Purchased Assets (except for Assets that are Mortgage
Loans) shall pass to Buyer. In the case of Purchased Assets that are Mortgage
Loans, upon transfer of the Mortgage Loans to Buyer as set forth in Paragraph
3(a) of this Master Repurchase Agreement and until termination of any related
Transactions as set forth in Paragraphs 3(c) or 11 of this Master Repurchase
Agreement, ownership of each Mortgage Loan, including each document in the
related Mortgage File, is vested in Buyer. Upon transfer of the Mortgage Loans
to Buyer as set forth in Paragraph 3(a) of this Master Repurchase Agreement and
until termination of any Transactions as set forth in Paragraphs 3(c) or 11 of
this Master Repurchase Agreement and prior to the recordation of the assignments
of mortgage by the Custodian as provided for in the Custody Agreement, record
title in the name of Seller to each Mortgage shall be retained by Seller in
trust, for the benefit of Buyer, for the sole purpose of facilitating the
servicing and the supervision of the servicing of the Mortgage Loans. Nothing in
this Master Repurchase Agreement shall preclude Buyer from engaging in
repurchase transactions with the Purchased Assets or otherwise pledging or
hypothecating the Purchased Assets without the prior consent of Seller, but no
such transaction or provision hereof or provision of the Custody Agreement shall
relieve Buyer of its obligations to transfer Purchased Assets (and, with respect
to the Mortgage Loans, the same Mortgage Loans and not substitutes therefor) to
Seller pursuant and subject to Paragraphs 3, 4 or 11 hereof. Upon termination of
any Transactions as set forth in Paragraph 3(c) of this Master Repurchase
Agreement, Buyer agrees to execute promptly endorsements of the mortgage notes,
assignments of the mortgages and UCC-3 assignments, releases or
9
<PAGE>
terminations related to such Transactions, to the extent that such documents are
prepared by Seller for Buyer's execution, are delivered to Buyer by Seller and
are necessary and appropriate, as reasonably determined by Seller, to reconvey,
without recourse, to Seller and perfect title of like tenor to that conveyed to
Buyer to the related Mortgage Loans. Buyer shall provide reasonable cooperation
in assisting and directing the Custodian to facilitate such preparation (without
material expense to Buyer)".
16. Subparagraph 9(b) of the Master Repurchase Agreement is amended by
adding the following after the word "substituted" and before the period in the
fifth line thereof:
"; provided, further, that, in the case of Transactions involving
Purchased Assets that are Mortgage Loans, the retention by Seller of
custody of any document relating to any Mortgage Loan shall be held by
Seller in trust for Buyer for purposes of servicing or supervising the
servicing of such Mortgage Loan and shall not be deemed to constitute
Seller's retention of custody of the Purchased Assets for purposes of this
subparagraph".
17. Paragraph 9 of the Master Repurchase Agreement is further amended by
adding at the end of the Paragraph the following subparagraphs (c) and (d):
(c) In the case of any Transaction for which the Repurchase Date is
other than the business day immediately following the Purchase Date and
with respect to which Seller does not have any existing right to substitute
substantially the same Assets for the Purchased Assets, Seller shall have
the right, subject to the proviso to this sentence, upon notice to Buyer,
which notice shall be given at or prior to 4:00 p.m. (New York time) on the
preceding business day, to substitute substantially the same Assets for any
Purchased Assets; provided, however, that Buyer, in its sole and absolute
discretion, may elect, by the close of business on the business day next
following the business day on which notice is received, not to accept such
substitution. In the event such substitution is accepted by Buyer, such
substitution shall be made by Seller's transfer to Buyer of additional
Mortgage Loans (including the transfer of the related Mortgage Files to the
Custodian and the issuance to the Buyer of the related Trust Receipt and
Delivery Confirmation) and Buyer's transfer to Seller of such Assets and
the related Trust Receipt and Delivery Confirmation, if any, and after
substitution, the substituted additional Mortgage Loans shall be deemed to
be Purchased Assets. In the event Buyer elects not to accept such
substitution, Buyer shall offer the Seller the right to terminate the
Transaction. If the Seller elects to terminate such Transaction (which
election shall be made in writing within five (5) business days of Buyer's
offer to Seller of the right to terminate the transaction), the date of
termination will be determined in accordance with Paragraph 3(c).
(d) In the event Seller exercises its right to substitute or terminate
pursuant to subparagraph (c), Seller shall be obligated to pay to Buyer, by
the close of the business day of such substitution or termination, as the
case may be, an amount equal to (A) Buyer's actual cost (including all
fees, expenses and commissions) of (i) entering into replacement
transactions; and (ii) entering into or terminating hedge transactions, (B)
to the extent Buyer determines not to enter into replacement transactions,
the loss incurred by Buyer directly arising or resulting from such
substitution or termination and (C) in the
10
<PAGE>
case of the termination of any Transaction, the related Repurchase Price
for such Purchased Assets. The foregoing amounts shall be determined and
calculated solely by Buyer."
18. Paragraph 10 of the Master Repurchase Agreement is amended by adding
the following clauses at the end of the first sentence of Paragraph 10 after the
word "affected" and before the period:
", and (vi) Seller and Buyer have entered into a Transaction described
in each Confirmation contemporaneously with the sale of the Purchased
Assets by Seller to Buyer and the transfer of the Purchase Price by Buyer
to Seller, or, in the event that any Transaction is deemed to constitute a
loan, contemporaneously with the grant of the security interest in the
Collateral by Seller to Buyer pursuant to Paragraph 6 hereof and the
transfer of the consideration therefor, consisting of the extension of the
Purchase Price, which represents the loan proceeds, by Buyer to Seller".
19. The first paragraph of Paragraph 11 is amended by deleting the
word "or" immediately preceding clause (vii) and by adding at the end of such
clause, immediately preceding the parenthesis, the following:
"(viii) Subject to Paragraph 6, the Master Repurchase Agreement shall
for any reason cease to create a valid, first priority security
interest in any of the Purchased Assets purported to be covered
thereby;
(ix) Any (a) termination by Seller of any Servicer or subservicer of
the Mortgage Loans without the prior written consent of Buyer
other than as expressly permitted in any Collateral Assignment of
any Servicing Agreement between Buyer and Seller or (b) amendment
of any Servicing Agreement without the prior written consent of
Buyer, (c) transfer by Seller of any of its servicing obligations
with respect to any Purchased Assets or (d) failure by Seller (if
it is the Servicer) or any Servicer to service the Mortgage Loans
(i) in accordance with the standards set forth in the Servicing
Agreement or (ii) industry standards for similar loans owned by
third parties;
(x) Any other default by Seller of its obligations hereunder which is
not cured within two (2) days following Seller's receipt of
written notice from Buyer specifying such default;
(xi) An event of default has occurred with respect to indebtedness of
Seller or Guarantor in excess of $100,000 in the aggregate which
has not been cured within any applicable grace period;
(xii) Any Change of Control shall occur;
11
<PAGE>
(xiii) In Buyer's sole judgment exercised in Good Faith, any material
adverse change shall have occurred in the business, operations,
properties, prospects or financial condition of Seller or
Guarantor;
(xiv) Any event of default has occurred under any Servicing
Agreement, any Custody Agreement or any Related Facility; or
(xv) termination or breach of any guaranty by Guarantor or similar
agreement executed and delivered to Buyer in connection with the
obligations of Seller under this Master Repurchase Agreement, or
if any Guarantor attempts to terminate, challenges the validity
of, or its liability under, any such guaranty or similar
agreement."
20. Subparagraph 11(d)(i) of the Master Repurchase Agreement is amended by
adding the following after the word "hereunder" and before the semi-colon:
"and in either case upon the receipt and crediting by Buyer, in a
manner deemed final and complete by Buyer in its sole and absolute
discretion, of the aggregate unpaid Repurchase Prices and any other amounts
owing by the defaulting party, including, without limitation, (w) any
unpaid fees, expenses (including, without limitation, expenses of
terminating any Servicer so that Mortgage Loans could be sold on a
servicing-released basis, if applicable), (x) or other amounts owing to the
Custodian under the Custody Agreement, (y) amounts due and owing by Seller
or any affiliate of either NFI, NCI or NSM to Buyer or any affiliate of
Buyer under the Related Facilities and (z) other amounts which are
otherwise due and owing by Seller or any affiliate of either NFI, NCI or
NSM to Buyer or any affiliate of Buyer including, without limitation, under
any guaranty issued by Seller or any affiliate of Seller to Buyer or any
affiliate of Buyer, Buyer shall transfer the portion of the Purchased
Assets and all income, payments, products and proceeds thereof held by
Buyer following such receipt and crediting to either (i) Seller, if in
Buyer's reasonable judgment Seller is legally entitled thereto, (ii) such
other party or person which in Buyer's reasonable judgment is legally
entitled thereto, or (iii) if Buyer determines in its reasonable judgment
that it cannot identify the person or party entitled thereto, a court of
competent jurisdiction. Seller acknowledges that (A) to secure Seller's or
any of either NFI's, NCI's or NSM's affiliate's obligations under the
Related Facilities it has executed and delivered to Buyer or any affiliate
of Buyer an assignment of any equities, rights and money Seller may be
entitled to or may have under this Master Repurchase Agreement and (B)
pursuant thereto Buyer or any affiliate of Buyer may apply any amounts to
which Seller may be entitled to under this Master Repurchase Agreement
against Seller's or any affiliate of Seller's obligations under any of the
Related Facilities"
21. Paragraph 11 of the Master Repurchase Agreement is amended by adding
new subparagraphs (j) and (k) following Subparagraph (i) as follows:
"(j) As to Transactions in which the defaulting party is acting as
Seller, Buyer may, in its sole and absolute discretion, (i) terminate any
Servicing Agreements without any liability to Seller or the applicable Servicer
(including, without limitation, without liability for
12
<PAGE>
the payment of fees or other sums due and owing to Seller in its capacity as
Servicer) and (ii) transfer servicing responsibility for any Mortgage Loans to
any third party servicer Buyer selects.
(k) The parties hereto recognize that Seller's obligations to Buyer
under this Master Repurchase Agreement are special, unique and of extraordinary
character. If an Event of Default occurs hereunder, Seller agrees that Buyer may
enforce this Master Repurchase Agreement by a proceeding for specific
performance or other equitable remedy including, without limitation, a
proceeding in which replevin or injunction is sought by Buyer. Seller hereby
waives to the fullest extent permitted by law any and all rights it may have by
statute, constitution or otherwise, to (a) assert the defense of adequacy of a
remedy at law that might be asserted as a bar to any such proceeding, (b) the
fixing, imposition or posting of a bond or other security by Buyer as a
condition to obtaining any equitable relief sought by Buyer, which relief Seller
further agrees may be obtained ex parte without prior notice to Seller provided
a hearing is subsequently provided Seller within a reasonable time after any ex
parte relief may be granted Buyer. Seller further agrees that the rights and
remedies hereunder are cumulative, and are not exclusive of any rights, powers,
privileges, or remedies, now or hereafter existing, at law, or in equity or
otherwise."
22. Paragraph 13 of the Master Repurchase Agreement is amended by deleting
the text thereof and replacing it with the following:
"Any notice or communication in respect of this Master Repurchase
Agreement will be sufficiently given to a party if in writing and delivered
in person, sent by certified or registered mail, return receipt requested,
or by overnight courier or given by facsimile transfer at the following
address or facsimile number:
If to Buyer: First Union National Bank
One First Union Center TW-9
301 South College Street
Charlotte, North Carolina 28288-0610
Attention: Mark Mendenhall
Facsimile No.: (704) 383-8121
with copies to: Hahn & Hessen LLP
350 Fifth Avenue, Suite 3700
New York, New York 10118-0075
Attention: Linda C. Berman, Esq.
Facsimile No.: (212) 594-7167
If to any Seller: NovaStar Financial, Inc.
1901 West 47th Place, Suite 105
Westwood, Kansas 66205
Attention: Mark Kohlrus
Facsimile No. (913) 514-3515
A notice or communication will be effective:
13
<PAGE>
(i) if delivered by hand or sent by overnight courier, on the day
and time it is delivered;
(ii) If sent by facsimile transfer on a machine that provides for
automatic confirmation of receipt, on the day and time such
confirmation is received; or
(iii) if sent by certified or registered mail, return receipt
requested, three days after dispatch.
Either party may by written notice to the other change the address or
facsimile number at which notices or communications are to be given to
it."
23. The first sentence of Paragraph 15(a) of the Master Repurchase
Agreement is amended by inserting the following after the words "null and void"
on the third line thereof: ", provided however, that Buyer may sell, transfer
-------- -------
and assign its rights under this Master Repurchase Agreement or under any
Transaction to any affiliate of Buyer, without the prior consent of Seller.
Notwithstanding the foregoing, the Mortgage Files shall at all times remain with
the Custodian."
24. Buyer is hereby appointed the attorney-in-fact of Seller for the sole
and limited purpose of executing or endorsing any instruments that Buyer may
deem necessary to accomplish the sale, transfer and assignment of the Purchased
Assets and/or Collateral to Buyer, including, without limitation, completing or
correcting any endorsement of a mortgage note or assignment of a mortgage, which
appointment as attorney-in-fact is irrevocable and coupled with an interest. In
this connection, Buyer shall have the right and power to receive, endorse and
collect all checks made payable to the order of Seller representing any payment
on account of the principal of or interest on any Purchased Asset or Collateral
and to give full discharge for the same.
25. Seller shall promptly pay as and when payment is due all, and Buyer
shall not be liable for any expenses, fees and charges incurred by Buyer or
Seller arising out of or related in any way to this Master Repurchase Agreement
(including the reasonable fees and disbursements of counsel to Buyer in
negotiation of the Master Repurchase Agreement) and the enforcement of this
Master Repurchase Agreement, the Custody Agreement or any of the Servicing
Agreements , including, without limitation, legal expenses of counsel to Buyer,
the fees and expenses of the Custodian, recording and filing fees and any costs
associated with reconveyance of the Purchased Assets ("Costs") and, in the event
that any Costs are incurred by Buyer, Seller shall reimburse Buyer on demand of
Buyer accompanied by a statement describing in reasonable detail the
circumstances and the nature of the Cost by wire transfer of immediately
available federal funds no later than one (1) business day following such
demand.
26. (a) Each party represents and warrants, and shall on and as of the
Purchase Date of any Transaction and on and as of each date thereafter through
the related Repurchase Date be deemed to represent and warrant, as follows:
14
<PAGE>
(i) The execution, delivery and performance of this Master
Repurchase Agreement and the performance of each
Transaction do not and will not result in or require the
creation of any lien, security interest or other charge or
encumbrance (other than pursuant hereto) upon or with
respect to any of its properties; and
(ii) This Master Repurchase Agreement is, and each Transaction
when entered into under this Master Repurchase Agreement
will be, a legal, valid and binding obligation of it
enforceable against it in accordance with the terms of
this Master Repurchase Agreement; and
(iii) Seller's principal place of business is located in
Westwood, Kansas.
(b) Seller hereby (i) assigns to Buyer such representations and
warranties with respect to the Assets as are made by the Originating
Counterparty to Seller pursuant to any Underlying Agreement, (ii) makes each
such representation and warranty relating to the Purchased Assets as are set
forth in each Underlying Agreement as if such representations and warranties
were set forth herein on and as of the Purchase Date of any Transaction and, on
and as of each date thereafter through the related Repurchase Date shall be
deemed to have made such representations and warranties and (iii) makes, on and
as of the Purchase Date of any Transaction and on and as of each date thereafter
through the related Repurchase Date shall be deemed to have made, the
representations and warranties to Buyer set forth in Exhibit A hereto. The
---------
representations and warranties set forth herein shall survive transfer of the
Purchased Assets to the Buyer and shall continue until the related Transaction
has terminated.
(c) Seller hereby further represents and warrants that, as of the
Purchase Date of each Transaction:
(i) No Event of Default, event of default or default has
occurred or is continuing under this Master Repurchase
Agreement, any Servicing Agreement, any Underlying
Agreement or any Related Facility.
(ii) None of the Purchased Assets are delinquent more than
seventy-five (75) days.
(iii) If Seller is servicing any Purchased Assets, it is doing
so in accordance with the standards set forth in the
Servicing Agreement.
(iv) Seller has no actual knowledge of any pending or threatened
litigation or any basis therefor against Seller or
Guarantor before any court, governmental agency or
authority or arbitration panel, which, if determined
adversely to Seller or Guarantor, would have a materially
adverse effect on Seller's or Guarantor's ability to
15
<PAGE>
perform its obligations under the Related Documents or
guaranty issued by Guarantor to Buyer.
(v) Since the date of the most recent balance sheet of Seller
or Guarantor and/or the most recent financial statement of
Seller or Guarantor delivered to Buyer hereunder, there has
been no material adverse change in its financial condition
or results of operations.
(vi) The information set forth in the schedule to each
Confirmation is true and correct in all material respects.
(vii) Each Purchased Asset is an Eligible Mortgage Loan.
(d) Upon discovery by the Seller of a breach of any of the
representations, warranties or covenants set forth herein or in Exhibit A,
---------
Seller shall give prompt written notice thereof to the Buyer.
(e) Seller hereby indemnifies and holds Buyer harmless for any loss,
liability, expense (including attorney fees) or damage suffered or incurred by
Buyer arising from or in any way related to a breach by Seller of any
representation or warranty of Seller in this Master Repurchase Agreement.
(f) Seller shall take all action, as Buyer may reasonably request to
ensure that Buyer will have a first priority security interest in the Purchased
Assets, including among other things, filing such UCC financing statements
regarding the Purchased Assets as Buyer may reasonably request.
27. On and as of the date of this Master Repurchase Agreement and each
Purchase Date and until this Master Repurchase Agreement is no longer in force
with respect to any Transaction, Seller covenants that:
(a) it will not take any action which would directly or indirectly
cause the Buyer's interest in or the value of the Purchased Assets to be
adversely affected thereby; and
(b) it will not pledge, assign, convey, grant, bargain, sell, set
over, deliver or otherwise transfer any interest in the Purchased Assets to any
person not a party to this Master Repurchase Agreement nor will Seller create,
incur or permit to exist any lien, encumbrance or security interest in or on the
Purchased Assets other than that created hereunder without the prior express
written consent of Buyer.
(c) Pursuant to the terms of the applicable Custody Agreements and
Servicing Agreements, the Seller, Custodian and/or any Servicer engaged by
Seller with respect to the Purchased Assets shall hold all Required Documents
and Additional Required Documents for the Assets that are Purchased Assets in
trust for the benefit of the Buyer and Seller shall have no beneficial, legal or
equitable interest in the Required Documents and/or the Additional Required
Documents provided, however, nothing contained herein shall limit or impair any
contractual
16
<PAGE>
rights Seller may have under this Master Repurchase Agreement. The
Seller, Custodian and/or any Servicer shall follow all instructions of Buyer
with respect to the servicing of the Purchased Assets and upon Buyer's request
will make available and/or turn over and deliver to Buyer all Required Documents
and Additional Required Documents in good and usable order wherever Buyer shall
request such documents be produced and/or delivered.
(d) The Seller shall promptly furnish to the Buyer:
(i) Within 90 days after the last day of each fiscal year of NFI
balance sheets, statements of income and cash flows for NFI
for such year on a consolidated basis as of the end of such
year presented fairly in all material respects in accordance
with GAAP and accompanied by an unqualified report of a firm
of independent certified public accountants of nationally
recognized standing and including therewith a copy of any
management letter from such certified public accountant; and
(ii) Within 45 days after the last day of each fiscal quarter,
(A) unaudited balance sheets and statements of income and
cash flows (with respect to NFI only) for NFI and the
Guarantor for such quarter and (B) a certificate of an
officer of NFI, whose position is vice president or higher,
stating that such financial statements are presented fairly
in all material respects and in accordance with GAAP,
subject to year-end audit adjustments, and further
certifying that neither NFI nor any affiliate thereof is in
default under the terms and conditions of this Master
Repurchase Agreement or under any agreement evidencing or
securing any indebtedness of such entity.
(e) The Seller and Guarantor shall maintain its corporate existence
and obtain and maintain all rights, privileges, licenses, approvals, franchises,
properties and assets necessary or desirable in the normal conduct of its
business, including but not limited to all approvals with respect to the SEC or
the Securities Commissions of the States of Kansas, Maryland, Virginia and
Delaware, and comply with all contractual obligations and requirements of law
(including, without limitation, any requirements of law under or in connection
with ERISA, the Federal Consumer Credit Protection Act, the Federal Real Estate
Settlement Procedures Act, the Federal Equal Credit Opportunity Act, the Federal
Truth-in-Lending Act, and any regulations promulgated thereunder), except where
the failure to so comply is not likely to have a material adverse effect on the
business, operations, assets or financial or other condition of the Seller or on
the Purchased Assets.
(f) The Seller shall promptly furnish such additional financial and
other information including, without limitation, financial statements of Seller
and Guarantor and information regarding the Purchased Assets as the Buyer may
from time to time reasonably request.
17
<PAGE>
(g) The books of record and account kept by Seller shall be
maintained in accordance with GAAP.
(h) The Seller shall promptly give written notice to the Buyer
of:
(i) the occurrence of a default or event of default or state of
facts which with the giving of notice or passage of time,
or both, would constitute (x) an Event of Default under
this Master Repurchase Agreement or (y) an event of default
or default any Underlying Agreement, Servicing Agreement,
Related Facility or Custody Agreement, known to Seller and
the proposed method cure thereof;
(ii) any litigation or proceeding affecting the Seller or
Guarantor or the Purchased Assets known to Seller which
could have a material adverse effect on the Purchased
Assets, or the business, operations, property or financial
or other condition of the Seller or Guarantor;
(iii) a material adverse change known to the Seller in the
business, operations, property or financial or other
condition of the Seller or Guarantor;
(iv) any breach of a representation or warranty set out in
Exhibit A hereto; or
(v) any default or event of default by Seller or Guarantor
under the terms of any agreement evidencing or securing any
indebtedness of Seller or Guarantor in excess of $100,000
in the aggregate which has not been cured within any
applicable grace period.
(i) The Seller shall comply fully with the terms of each Servicing
Agreement and Custody Agreement.
(j) The Seller shall pay or otherwise satisfy at or before maturity
or before it comes delinquent or accelerated, as the case may be, all its
indebtedness (including taxes), except indebtedness being contested in good
faith by appropriate proceedings and for which provision is made to the
satisfaction of the Buyer for the payment thereof in the event the Seller is
found to be obligated to pay such indebtedness and which indebtedness is
thereupon promptly paid by the Seller.
(k) The Seller shall permit representatives of the Buyer to (A)
visit and inspect any of its properties and examine and make abstracts from any
of its books and records (including, without limitation, books and records
relating to the Purchased Assets) at any reasonable time and as often as may
reasonably be desired by the Buyer (but, prior to the occurrence of an Event of
Default, only upon not less than three (3) business days prior notice) and
Seller shall pay all out of pocket costs and expenses incurred by Buyer in the
performance of such inspection, and (B) upon prior notice to NFI, discuss the
business, operations, properties
18
<PAGE>
and financial and other condition of the Seller with officers and employees of
the Seller, and with its independent certified public accountants; provided,
--------
however, that the results of any such visit, inspection, examination, discussion
- -------
or audit, to the extent such results are proprietary and non-public, shall be
maintained by the Buyer in confidentiality except as required by law or
regulation or by any governmental agency or regulatory body having authority
over the Buyer, or to the extent such information may be communicated to the
legal counsel or auditors of the Buyer.
(l) The Seller shall originate and acquire Mortgage Loans only in
accordance with the Seller's Underwriting Standards including, any exceptions or
deviations, expressly set forth on Exhibit F hereto, from the usual and
----------
customary underwriting standards.
(m) The Seller shall not alter its current Underwriting Standards in
any material manner from those annexed hereto as Exhibit F unless it has given
---------
five (5) business days' prior written notice of the proposed alteration to
Buyer.
(n) The Seller shall comply with each and every covenant set forth on
Exhibit B hereto.
- ---------
(o) The Seller shall pay Buyer a quarterly repo fee calculated on the
Maximum Purchase Amount at a rate of seven and one-half basis points (0.075%)
per annum, such repo fee to be paid quarterly in advance commencing on the date
of execution hereof and on each three (3) month anniversary of the date hereof.
This repo fee shall be (i) calculated for the three (3) months succeeding the
scheduled date of its payment and (ii) be deemed earned in full upon each such
scheduled date of payment and not be subject to rebate or proration for any
reason.
28. (a) The aggregate Purchase Price for Purchased Assets purchased by
Buyer in any Transaction hereunder shall not be less than $5,000,000 nor shall
it exceed the lesser of (x) 98% of the unpaid principal balance of such
Purchased Assets on the Purchase Date or (y) 97% of the Market Value of the
Purchased Assets.
(b) The aggregate Purchase Price for all Purchased Assets owned by
Buyer on any date shall at no time exceed the Maximum Purchase Amount.
(c) This Master Repurchase Agreement shall continue in effect until
the expiration of the Term.
29. All capitalized terms used herein and not otherwise defined herein
shall have the meanings given to them in the Underlying Agreements.
30. The parties irrevocably agree to submit to the personal jurisdiction
of the United States District Court for the Southern District of New York and
that the exclusive venue for all actions and proceedings, except a proceeding
for enforcement of a judgment, shall be in the United States District Court for
the Southern District of New York, the parties irrevocably waiving any objection
thereto. If, for any reason, federal jurisdiction is not available, the parties
19
<PAGE>
irrevocably agree to submit to the personal jurisdiction of the Supreme Court of
the State of New York and that the exclusive venue of all actions and
proceedings, except a proceeding for the enforcement of a judgment, shall be in
the Supreme Court of the State of New York, New York County, the parties
irrevocably waiving any objection thereto. Notwithstanding the foregoing two
sentences, at Buyer's option exercisable at any time not later than thirty (30)
days after an action or proceeding has been commenced hereunder, the parties
agree that the matter may be submitted to binding arbitration in accordance with
the commercial rules of the American Arbitration Association then in effect in
the State of New York, and judgment upon any award rendered by the arbitrator
may be entered in any court having jurisdiction thereof within the City, County
and State of New York; provided, however, that the arbitrator shall not amend,
-------- -------
supplement, or reform in any regard this Master Repurchase Agreement or the
terms of any Confirmation, the rights or obligations of any party hereunder or
thereunder, or the enforceability of any of the terms hereof or thereof. Any
arbitration shall be conducted in the City, County, and State of New York before
a single arbitrator who shall be reasonably familiar with repurchase
transactions and the secondary mortgage market.
EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS MASTER REPURCHASE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
31. UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE FOR PUNITIVE
DAMAGES IN ANY WAY RELATED TO THIS MASTER REPURCHASE AGREEMENT AND EXCEPT AS
PROVIDED IN PARAGRAPH 11(g) HEREIN, UNDER NO CIRCUMSTANCES WILL EITHER PARTY, BE
LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL LOSS OR DAMAGES
SUFFERED OR INCURRED BY THE OTHER, OR ANY OTHER PARTY, IN EACH CASE ARISING
UNDER THIS MASTER REPURCHASE AGREEMENT, REGARDLESS OF WHETHER SUCH DAMAGES COULD
HAVE BEEN FORESEEN OR PREVENTED.
32. Prior to entering into each Transaction under this Master Repurchase
Agreement, each of the following conditions shall occur:
(a) all of the Required Documents with respect to Mortgage Loans that
are to be Purchased Loans shall have been delivered to Buyer (or its designee)
at least one (1) business day prior to the applicable Purchase Date for such
Transaction.
(b) a Custody Agreement in a form satisfactory to Buyer, shall have
been executed and delivered by the parties thereto;
(c) Seller and Guarantor shall have disclosed information satisfactory
to Buyer with respect to the scheduled maturities and termination provisions of
all outstanding credit facilities and debt of Seller;
(d) a favorable opinion of counsel with respect to the corporate and
perfection matters set forth in Exhibit G hereto, in form and substance
---------
acceptable to Buyer, with reliance thereon permitted as to any person or entity
that purchases in accordance with and subject to the
20
<PAGE>
terms of this Master Repurchase Agreement, the Assets from Buyer in a repurchase
transaction shall have been delivered to Buyer;
(e) UCC-1 Financing Statements in form suitable for filing in the
office of the Secretary of State of the State of Kansas and such other
jurisdictions in which Seller may maintain a principal place of business.
(f) Seller shall have delivered to Buyer (i) a collateral assignment
in form and substance satisfactory to Buyer of Seller's rights under each of the
Servicing Agreements to which Seller is a party with respect to the Mortgage
Loans that are the subject of such Transaction or (ii) if requested by Buyer, an
amendment to any such Servicing Agreement in form and substance satisfactory to
Buyer.
(g) Seller acknowledges that the obligations of Buyer hereunder or
otherwise are not the subject of any guaranty by, or recourse to, any direct or
indirect parent or other affiliate of Buyer.
(h) Buyer shall have received all appropriate Trust Receipts and
Confirmations.
(i) Buyer shall have received executed warrants from Seller in form
and substance satisfactory to Buyer.
(j) Buyer shall have received an executed guaranty from Guarantor in
form and substance satisfactory to Buyer and such guaranty shall be in full
force and effect.
(k) Buyer shall have received executed assignments of equities with
respect to any equity or right to receive money Seller has under the Master
Repurchase Agreement or any of the Related Facilities to secure Seller's
obligations under this Master Repurchase Agreement and each Related Facility,
each of which shall be in form and substance satisfactory to Buyer.
(l) Buyer shall have received an executed Collection Account
Agreement.
33. This Master Repurchase Agreement amends, restates and replaces in its
entirety the Master Repurchase Agreement (the "Existing Repurchase Agreement")
dated as of August 21, 1998 by and between NovaStar Financial, Inc., as Seller
and First Union National Bank, as Buyer, as the same has been amended, restated,
modified and/or supplemented from time to time. All Transactions in existence
on the date hereof under the Existing Repurchase Agreement shall, without
interruption or deemed repurchase and sale, constitute Transactions under the
Master Repurchase Agreement.
34. The obligations of each Seller set forth in this Master Repurchase
Agreement shall be joint and several, and each of NFI, NCI and NSM agrees that
it will perform and will be liable for the failure of the other Seller to
perform its obligations under this Master Repurchase Agreement.
21
<PAGE>
35. This Addendum is executed and shall be construed as an agreement
supplemental to the Master Repurchase Agreement and, as provided in the Master
Repurchase Agreement, this Addendum forms a part thereof.
36. All of the covenants, stipulations, promises and agreements in this
Addendum shall bind the successors and assigns of the parties hereto, whether
expressed or not.
37. The Master Repurchase Agreement and this Addendum may be executed in
any number of counterparts, each of which shall be an original but such
counterparts shall together constitute but one and the same instrument. Any
signature delivered by a party via facsimile transfer shall be deemed to be an
original signature thereto.
38. This Addendum shall supersede any existing annex to or modification of
the Master Repurchase Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
22
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Addendum Agreement as of the date first written above.
NOVASTAR FINANCIAL, INC., as a Seller FIRST UNION NATIONAL BANK, as a Buyer
By:__________________________________ By:___________________________________
Name:________________________________ Name:_________________________________
Title:_______________________________ Title:________________________________
NOVASTAR MORTGAGE, INC., as a Seller
By:__________________________________
Name:________________________________
Title:_______________________________
NOVASTAR CAPITAL, INC., as a Seller
By:__________________________________
Name:________________________________
Title:_______________________________
CONSENTED AND AGREED TO:
NOVASTAR MORTGAGE, INC., as a Servicer
By:___________________________________
Name:_________________________________
Title:________________________________
23
<PAGE>
NFI HOLDING CORPORATION, as Guarantor
By:_____________________________________
Name:___________________________________
Title:__________________________________
24
<PAGE>
Exhibit A
REPRESENTATIONS AND WARRANTIES
RELATING TO ELIGIBLE MORTGAGE LOANS
(a) The 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 the same may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (ii) general principles of equity.
(b) The Mortgage Loan is genuine in all respects as appearing on its face
and as represented in the books and records of the Seller and all information
set forth therein is true and correct.
(c) The Mortgage Loan is free of any default of any party thereto
(including the Seller), other than as expressly permitted pursuant to
subparagraph (d) below, counterclaims, offsets and defenses and from any
rescission, cancellation or avoidance, whether by operation of law or otherwise.
(d) No payment under any Mortgage Loan is unpaid more than seventy-five
(75) days past the payment due date set forth in the underlying promissory note
and deed of trust (or mortgage); provided, in no event shall Mortgage Loans
having any payment which is unpaid more than thirty (30) days past the payment
due date set forth in the underlying promissory note and deed of trust (or
mortgage) constitute more than five percent (5%) unpaid principal balance of all
Purchased Assets then owned by Buyer pursuant to the terms of this Agreement.
(e) The Mortgage Loan contains the entire agreement of the parties thereto
with respect to the subject matter thereof, has not been modified or amended in
any respect and is free of concessions or understanding with the obligor thereon
of any kind not expressed in writing therein.
(f) The Mortgage Loan complies in all respects with the federal Truth-in-
Lending Act and all regulations promulgated thereunder, and complies in all
material respects and was originated in accordance with all other applicable
laws and regulations governing the same, including, without limitation, the
federal Consumer Credit Protection Act, the federal Real Estate Settlement
Procedures Act, the federal Equal Credit Opportunity 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 the Mortgage Loan have been given and performed as
required.
(g) All proceeds of the Mortgage Loan have been fully disbursed and there
is no obligation on the part of the mortgagee to make future advances
thereunder. Any and all requirements as to completion of any on-site or off-
site improvements and as to disbursements of
25
<PAGE>
any escrow funds therefor have been complied with or are not yet required to be
complied with but will be complied with as and when required. All costs, fees
and expenses incurred in making or closing or recording such Mortgage Loans were
paid.
(h) At all times the Mortgage Loans will be free and clear of all liens.
(i) The property covered by the 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 the Mortgage Loan with the Seller
and its successors and assigns named as a loss payee thereon.
(j) The property covered by the Mortgage Loan is free and clear of all
liens except:
(i) the lien in favor of the Seller;
(ii) the lien of current real property taxes and assessments not yet
due and payable;
(iii) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record, as of the date of
recording, as are acceptable to mortgage lending institutions generally and
specifically referred to in a lender's title insurance policy delivered to
the originator of the Mortgage Loan and which (A) are referred to or
otherwise considered in the appraisal made for the originator of the
Mortgage Loan or (B) do not materially adversely affect the appraised value
of the property as set forth in such appraisal;
(iv) other matters to which like properties are commonly subject and
which do not materially interfere with the benefits of the security
intended to be provided by the Mortgage Loan or the use, enjoyment, value
or marketability of the related property,
(v) liens subordinate in priority to the lien in favor of the Seller;
and
(vi) in the case of second priority Mortgage Loans, one lien superior
in priority to the lien in favor of the Seller.
(k) The property shall be improved, and such improvements shall consist of
a completed one-to four-unit single family residence, including, but not limited
to, a condominium, planned unit development, townhouse, manufactured housing
which is permanently affixed to the underlying real estate, but excluding in any
event a co-op or mobile home.
(l) The Mortgage Loan is not subject to any servicing arrangement other
than the Servicing Agreements nor are any servicing rights relating to the
Mortgage Loan subject to any lien, claim, interest or negative pledge in favor
of any Person other than as permitted hereunder.
26
<PAGE>
(m) The Additional Required Documents for each Mortgage Loan include an
appraisal of the property signed prior to the approval of the application for
such Mortgage Loan by a qualified appraiser, duly appointed by the originator of
the Mortgage Loan who has no interest, direct or indirect, in the mortgage
property or in any loan made on the security thereof, other than as an employee
of the originator and whose compensation is not affected by the approval or
disapproval of the Mortgage Loan. The appraisal and appraiser both satisfy the
requirements of Title XI of the Federal Institutions Reform, Recovery, and
Enforcement Act of 1989 and the relegation's promulgated thereunder, all as in
effect on the date the Mortgage Loan was originated.
(n) The Mortgage Loan is secured by a first or second priority mortgage or
deed of trust on the property covered thereby; provided that no more than ten
percent (10%) of the Mortgage Loans purchased by the Buyer in Transactions may
consist of Mortgage Loans secured by second priority mortgages or deeds of
trust.
(o) The Mortgage Loan is not a revolving credit facility.
(p) No real property taxes or insurance payments due and payable with
respect to the property (or escrow installments therefor) covered by the
Mortgage Loan are past due the payment due date thereof.
(q) (i) No more than two hundred and seventy (270) days have elapsed since
the Mortgage Loan was first purchased by the Buyer pursuant to this Master
Repurchase Agreement provided, at any date no more than five percent (5%) of all
Purchased Assets owned by Buyer pursuant to this Master Repurchase Agreement
shall have been first purchased by Buyer pursuant to this Master Repurchase
Agreement more than one hundred eighty (180) days prior to such date and (ii) no
Mortgage Loan shall have been originated more than one hundred and twenty (120)
days prior to the date Buyer first purchased such Mortgage Loan pursuant to this
Master Repurchase Agreement, provided, at any date no more than ten percent
(10%) of all Purchased Assets owned by Buyer pursuant to this Master Repurchase
Agreement shall have been originated more than sixty (60) days prior to the date
Buyer first purchased such Mortgage Loan pursuant to this Master Repurchase
Agreement.
(r) The Mortgage Loan has a loan-to-value ratio of not more than one
hundred percent (100%) based on the value assigned to the property securing the
Mortgage Loan in the appraisal referred to in (m) above; and provided further
that no Mortgage Loan secured by a second priority lien shall, when combined
with all mortgage loans secured by liens on the related property, have a
combined loan-to-value ratio of more than one hundred percent (100%).
(s) The Mortgage Loan was originated by Seller in accordance with the
Underwriting Standards of Seller or, if such Mortgage Loan was acquired by
Seller, it was acquired from an Acceptable Originating Counterparty in
accordance with the Underwriting Standards pursuant to and in accordance with
the terms and conditions of an Underlying Agreement and is serviced by
27
<PAGE>
Seller or another Servicer in accordance with the Servicing Agreement, each
of which is in all respects acceptable to Buyer.
(t) The Purchased Assets originated by an Acceptable Originating
Counterparty shall not exceed the amount set forth in Exhibit C hereto.
---------
28
<PAGE>
Exhibit B
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
1. Seller represents, warrants and covenants, as of the date hereof and as
of each day during the term of the Agreement, as follows:
(a) Due Organization and Qualification. Seller is a corporation duly
----------------------------------
organized, validly existing and in good standing under the laws of the state of
its incorporation Seller is duly qualified to do business, is in good standing
and has obtained all necessary licenses, permits, charters, registrations and
approvals (together, "approvals") necessary for the conduct of its business as
---------
currently conducted and the performance of its obligations under the Related
Documents, in each jurisdiction in which the failure to be so qualified or to
obtain such approvals would render any Mortgage Loan unenforceable in any
respect or would otherwise have a material adverse effect upon any Transaction.
(b) Power and Authority. Seller has all necessary power and authority
-------------------
to conduct its business as currently conducted, to execute, deliver and perform
its obligations under the Related Documents and to consummate the Transactions.
(c) Due Authorization. The execution, delivery and performance of the
-----------------
Related Documents by Seller have been duly authorized by all necessary corporate
action and do not require any additional approvals or consents or other action
by or any notice to or filing with any person.
(d) Noncontravention. None of the execution and delivery of all
----------------
documents by Seller, the consummation of the transactions contemplated thereby
or the satisfaction of the terms and conditions of the Related Documents:
(i) conflicts with or results in any breach or violation of any
provision of the articles or certificate of incorporation or by-laws
of Seller or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect having
applicability to Seller, or any of its properties, including
regulations issued by an administrative agency or other governmental
authority having supervisory powers over Seller;
(ii) constitutes a material default by Seller under or a material
breach of any provision of any loan agreement, mortgage, indenture or
other material agreement or instrument to which Seller or any of its
affiliates is a party or by which it or any of its properties is or
may be bound or affected which would have a material and adverse
effect on Seller's ability to perform its obligations under the
Related Documents; or
29
<PAGE>
(iii) results in or requires the creation of any lien upon or in
respect of any of the assets of Seller except as otherwise expressly
contemplated by the Related Documents.
(e) Legal Proceedings. There is no action, proceeding or
-----------------
investigation by or before any court, governmental or administrative agency or
arbitrator against or affecting all or any of the Purchased Assets, Seller or
any of its affiliates, or any properties or rights of Seller or any of its
affiliates, pending or threatened, which, in any case, if decided adversely,
would have a material adverse effect with respect to the Seller's ability to
perform its obligations under the Related Documents.
(f) Valid and Binding Obligations. Each of the Related Documents to
-----------------------------
which Seller is a party when executed and delivered by Seller will constitute
the legal, valid and binding obligations of Seller, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles.
(g) No Consents. No consent, license, approval or authorization from,
-----------
or registration, filing or declaration with, any regulatory body, administrative
agency, or other governmental instrumentality, nor any consent, approval, waiver
or notification of any creditor, lessor or other nongovernmental person, is
required in connection with the execution, delivery and performance by Seller of
this Master Repurchase Agreement or of any other Related Documents, except such
as have been obtained and are in full force and effect and those as to which the
failure to so obtain does not have a material adverse effect on Seller.
(h) Notice of Material Events. Seller shall promptly inform (unless,
-------------------------
in the case of clause (i) only, prohibited by applicable law) Buyer in writing
of the occurrence of and of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation (A)
against Seller pertaining to the Purchased Assets in general, (B) with
respect to a material portion of the Purchased Assets or (C) in which
a request has been made for certification as a class action (or
equivalent relief) that would involve a material portion of the
Purchased Assets; or
(ii) any change in the location of Seller's principal office or any
change in the location of Seller's books and records; or
(iii) the occurrence of any Event of Default.
30
<PAGE>
Exhibit C
ACCEPTABLE ORIGINATING COUNTERPARTIES
Name Concentration Amount
- ----- --------------------
Seller
31
<PAGE>
Exhibit D
SERVICING AGREEMENTS
1. The Flow Loan Subservicing Agreement dated as of June 30, 1997 by and among
NFI, NSM, NCI and Buyer as the same has been amended by the First Amendment
dated as of August 21, 1998 and the Second Amendment dated as of the date
hereof.
32
<PAGE>
Exhibit E
UNDERLYING AGREEMENTS
None.
33
<PAGE>
Exhibit F
UNDERWRITING STANDARDS
[SEE ATTACHED]
34
<PAGE>
Exhibit G
OPINION
[SEE ATTACHED]
35
<PAGE>
EXHIBIT 10.22
ADDENDUM TO
MASTER REPURCHASE AGREEMENT
This Addendum Agreement, dated as of February 12, 1999 is made by and
between NovaStar REMIC Financing Corporation, acting as seller ("Seller") and
First Union Corporation acting as buyer ("Buyer"). Capitalized terms used
herein but not otherwise defined shall have the meanings ascribed thereto in the
Master Repurchase Agreement (as defined below).
RECITALS:
WHEREAS, Buyer and Seller have entered into a Master Repurchase Agreement
dated as of February 12, 1999 (the "Master Repurchase Agreement"); and
WHEREAS, Buyer and Seller desire to supplement and amend the Master
Repurchase Agreement to enter into Transactions involving Assets (as defined
below).
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) The first sentence of Section 1 of the Master Repurchase Agreement
shall be amended in its entirety to read as follows:
"From time to time in Buyer's sole and absolute discretion
exercised in Good Faith, the parties hereto may enter into
transactions in which one party ("Seller") agrees to transfer to the
other ("Buyer") Assets deemed to be Eligible Asset-Backed Securities
by the Buyer against the transfer of funds by Buyer, with a
simultaneous agreement by Buyer to transfer to Seller such Assets at a
date certain or on demand, against the transfer of funds by Seller."
(b) Section 1 is hereby further amended by adding the following at the
end thereof:
"Without limiting any rights of Buyer under this Master
Repurchase Agreement, Buyer shall not be obligated to enter into more
than one (1) Transaction per month and no Transaction shall be for a
Purchase Price of less than $1,000,000 or an integral multiple of
$500,000 thereafter".
(c) Every reference in the Master Repurchase Agreement to "Securities"
shall be replaced by "Assets" other than any terms specifically defined in this
Addendum include "Securities" within such term or definition.
2. Subparagraph 2(a) of the Master Repurchase Agreement is amended by
adding the following after the word "any" and before the word "bankruptcy" in
the second line thereof:
1
<PAGE>
"conservatorship or receivership (within the meaning of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989),".
3. Subparagraphs 2(j) and 2 (p) of the Master Repurchase Agreement are
amended to read as follows:
(i) "Market Value" with respect to any Assets as of any date, shall
mean the price at which the Purchased Assets could readily be sold as
determined by Buyer in its sole and absolute discretion provided, however,
--------
in the absence of a generally recognized source for prices or bid or offer
quotations for any Assets, Buyer may establish the source therefor in its
sole and absolute discretion. Without limiting the foregoing, Seller
acknowledges that the Market Value of all or any portion of a Purchased
Asset may be reduced to zero if there exists a breach of a representation,
warranty or covenant made by Seller in this Master Repurchase Agreement
with respect to such Purchased Asset.
(p) "Purchased Assets" the Assets transferred by Seller to Buyer in a
Transaction hereunder and any Assets substituted therefor in accordance
with Paragraph 9 hereof. The term "Purchased Assets" with respect to any
Transaction at any time also shall include Additional Assets delivered
pursuant to Paragraph 4(b) hereof.
4. The following definitions are hereby added to Section 2 of the Master
Repurchase Agreement:
"Applicable Additional Percentage" means (a) five percent (5.0%) so long as
no Event of Default has occurred and is then continuing and (b) nine percent
(9.0%) any time following the occurrence and during the continuance of an Event
of Default.
"Asset-Backed Security" shall mean either (i) a certificate issued under a
Trust Agreement representing 100% ownership of a Delaware business trust that
has issued bonds secured by a pool of Mortgage Assets originated in accordance
with the Underwriting Standards of the applicable affiliate of Seller or (ii) a
subordinated bond issued by a Delaware business trust that has issued bonds
under an Indenture secured by a pool of Mortgage Assets originated in accordance
with the Underwriting Standards of the applicable affiliate of Seller.
"Assets" means Eligible Asset-Backed Securities and other assets, in each
case agreed to from time to time by Buyer and Seller and delivered to Buyer
hereunder from time to time, or a participating or pro rata interest therein.
"Change of Control" means the occurrence of any event (whether in one or
more transactions) which results in a transfer of power, direct or indirect (x)
to vote 50% or more of the securities having ordinary voting power for the
election of the directions of Seller or any Guarantor (other than NFI) or (y) to
direct or cause the direction of the management and policies of Seller or any
Guarantor (other than NFI) by contract or otherwise.
"Current Margin" shall mean, with respect to any date, the difference
between (i) the aggregate Market Value of all Purchased Assets held by Buyer on
such date and (ii) the aggregate Purchase Price paid by Buyer for all Purchased
Assets held by Buyer on such date.
2
<PAGE>
"Eligible Asset-Backed Security" shall mean each Asset-Backed Security
deemed to be eligible by Buyer in its sole and absolute discretion with respect
to which each of the representations and warranties set forth on Exhibit C
---------
hereto is accurate and complete as of the date of the related Confirmation (and
Seller by including any such Asset-Backed Security in any such Transaction shall
be deemed to make such representations and warranties to Buyer at and as of the
date of such Transaction).
"First Union" shall mean Buyer or any of its non-bank affiliates or
subsidiaries.
"Good Faith" as used in this Master Repurchase Agreement shall mean honesty
in fact in the conduct or transaction concerned.
"Guarantor" shall mean individually and collectively, NFI Holding
Corporation, a Delaware corporation, NovaStar Mortgage, Inc., a Virginia
corporation and NFI.
"Indentures" shall mean (a) each indenture listed on Exhibit G hereto as in
---------
existence on the date hereof and (b) any Indenture pursuant to which an Asset-
Backed Security has been issued.
"Maximum Purchase Amount" at any date shall mean $20,000,000 less the
aggregate amount of Repurchase Prices owed to Buyer under and pursuant to the
NCFC Repurchase Agreement at such date.
"Mortgage Assets" shall mean home equity loans or mortgage loans originated
by an affiliate of Seller.
"NCFC" shall mean NovaStar Certificates Financing Corporation, a Delaware
corporation.
"NCFC Repurchase Agreement" means the Master Repurchase Agreement dated as
of the date hereof between NCFC and Buyer.
"NCI" shall mean NovaStar Capital, Inc., a Delaware corporation.
"NFI" shall mean NovaStar Financial, Inc., a Maryland corporation.
"NMI" shall mean NovaStar Mortgage, Inc., a Virginia corporation.
"Related Documents" means the Master Repurchase Agreement, the Servicing
Agreements and the Collection Account Agreement.
"Related Facilities" means (i) the Master Repurchase Agreement dated as of
the date hereof among NFI, NMI, NCI and First Union or First Union National Bank
("FUNB") and the Addendum thereto, (ii) the NCFC Repurchase Agreement, (iii) any
other Master Repurchase Agreement by and among Seller, NMI, NCFC and/or any
affiliate of either Seller or NMI and First Union or FUNB and the Addendum
thereto, (iv) any Mortgage Loan Warehousing Agreement by and among Seller, NMI
and/or any affiliate of either Seller or NMI and First
3
<PAGE>
Union or FUNB and (v) any other document, agreement or instrument pursuant to
which Seller, NMI, NCFC and/or any affiliate of either Seller or NMI is
obligated to Buyer.
"Required Documents" shall mean the following documents with respect to any
Eligible Asset-Backed Security:
(i) an executed assignment of such Eligible Asset-Backed Security, in
form and substance satisfactory to Buyer in its sole and absolute
discretion, from the Seller to Buyer, and
(ii) executed documents, certificates, notices, consents, opinions and
other transfer documentation as is required to register the Eligible Asset-
Backed Security in the name of Buyer under the applicable Trust Agreement
or Indenture.
"Required Margin" shall mean, with respect to any Transaction, a fixed
percentage of the Market Value of Purchased Assets as specified in the
Confirmation for such Transaction but shall in no event be less than 50%.
"Servicer" shall mean the designated servicer under each Servicing
Agreement.
"Servicing Agreements" means those certain servicing agreements or
servicing arrangements (a) listed on Exhibit E hereto as in existence on the
---------
date hereof which have been approved by Buyer and (b) any Servicing Agreements
pursuant to which any Mortgage Assets are serviced.
"Term" shall mean three hundred and sixty-four (364) days from the date of
execution of this Master Repurchase Agreement.
"Trust Agreements" shall mean each of the Trust Agreements (a) listed on
Exhibit H hereto as in existence on the date hereof and (b) pursuant to which an
- ---------
Asset-Backed Security has been issued.
"Trustee" shall mean, as applicable, the entity designated as such pursuant
to each Trust Agreement.
"Underwriting Standards" shall mean the underwriting policies of affiliates
of the Seller that were applied to the Mortgage Assets included in any
securitization by an affiliate of the Seller, as set forth in the Prospectus
Supplement for such securitization.
5. Subparagraph 3(b) of the Master Repurchase Agreement is amended by
adding at the end of the first sentence of Paragraph 3(b):
"In the case of Transactions involving Assets that are Eligible Asset-
Backed Securities, the Required Documents and the Eligible Asset-Backed
Securities shall have been delivered to and held by Buyer, (b) the Repurchase
Date for each Transaction shall be the earlier of (i) thirty (30) days following
the applicable Purchase Date or, if such date is not a business day, the next
succeeding business day, (ii) the date set forth in the applicable Confirmation
and
4
<PAGE>
(iii) the date determined by application of Paragraph 11 of the Master
Repurchase Agreement and (c) the Pricing Rate for each Transaction shall be a
per annum rate equal to the sum of (i) the London interbank offered rate for one
month deposits of U.S. dollars as determined by reference to the Bloomberg
Telerate Service page 3720, as of 11:00 a.m., London time, by Buyer on the
Purchase Date, plus, (ii) the Applicable Additional Percentage."
----
6. Subparagraph 3(c) of the Master Repurchase Agreement is amended by
adding the following at the end of the first sentence of Paragraph 3(c):
"In the case of Transactions involving Assets that are Eligible Asset-
Backed Securities, such demand by Seller shall be for a repurchase of all
Purchased Assets subject to the related Transaction and shall be made no
later than 2:00 p.m. New York City time on the business day immediately
preceding the day on which such termination will be effective, which
termination shall also be on a business day. Upon receipt of the
Repurchase Price in immediately available funds, Buyer shall promptly
deliver the Purchased Assets for such Transaction to Seller for further
disposition."
7. Subparagraph 4 of the Master Repurchase Agreement is amended in its
entirety to read as follows:
(a) Daily until the expiration of the Term (or less frequently if the
Buyer, in its sole and absolute discretion, so elects), Buyer will determine (i)
the aggregate Market Value of all Purchased Assets held by Buyer and (ii) the
Current Margin as of such date. Without limiting the foregoing, Seller shall
promptly deliver to Buyer, at any time and from time to time, information with
respect to the Purchased Assets to assist Buyer in ascertaining the Market Value
of such Purchased Assets including, without limitation, any information with
respect to the Purchased Assets which has been expressly requested by Buyer.
(b) If, on any date, the Current Margin is less than the Required
Margin for such date by an amount in excess of $150,000 (a "Margin Deficit"),
Buyer may, in its sole and absolute discretion, by notice to Seller (a "Margin
Call"), require Seller to transfer cash or additional Assets reasonably
acceptable to Buyer ("Additional Assets") so that the Current Margin for such
date then equals or exceeds the Required Margin for such date Seller shall
provide Buyer, no later than the close of business on the date of any Margin
Call, a detailed description, in form and substance satisfactory to Buyer, of
the Additional Assets Seller will use to satisfy such Margin Call.
(c) Seller shall transfer the Additional Assets no later than the
close of business on the third business day immediately following the date on
which a Margin Call is given. Any cash transferred to Buyer pursuant hereto
shall be held by Buyer until the Repurchase Date and shall be applied against
the Repurchase Price on the Repurchase Date.
(d) Buyer's election, in its sole and absolute discretion, not to make
a Margin Call at any time there is a Margin Deficit shall not in any way limit
or impair its right to make a Margin Call at any time a Margin Deficit exists.
5
<PAGE>
(e) If, on any date, one or more Margin Calls are outstanding, the
Buyer shall be under no obligation to enter into any new Transactions.
8. Paragraph 5 of the Master Repurchase Agreement is amended by added the
following at the end of the last sentence thereof:
"Notwithstanding the foregoing and except as provided in Paragraph 11
of this Master Repurchase Agreement, Seller shall hold, for the benefit of, and
in trust for, Buyer all Income received by or on behalf of Seller with respect
to any Purchased Assets or any Eligible Asset-Backed Securities on and after the
applicable Purchase Date; provided, however, so long as no Event of Default
-------- -------
shall have occurred and be continuing, Seller shall be permitted to use the
Income received by Seller in the ordinary course of its business. Immediately
upon the occurrence and during the continuation of an Event of Default, Seller
shall deposit such Income in a deposit account (the title of which shall
indicate that the funds therein are being held in trust for Buyer) (the
"Collection Account") with a financial institution acceptable to Buyer and
subject to a collection account agreement or alternative written agreement
which, in each case, is in form and substance satisfactory to Buyer ("Collection
Account Agreement"). All such Income shall be held in trust for Buyer, shall
constitute property of the Buyer, and shall not be commingled with other
property of Seller or any affiliate of Seller except as expressly permitted
above. All funds on deposit in the Collection Account shall be immediately
remitted to Buyer. Buyer may, in its sole and absolute discretion, apply all
Income received by Buyer to the repurchase obligations and/or other monetary
obligations owing by Seller to Buyer under this Master Repurchase Agreement, or
under any other document, instrument, agreement between Seller and Buyer in such
order as Buyer determines in the exercise of its sole and absolute discretion.
To the extent, if any, that Seller's consent is required, Seller shall
not consent to any transfer of any servicing rights under any Servicing
Agreement or otherwise with respect to any Mortgage Assets, without the prior
written consent of Buyer.
On or before 2:00 p.m. (New York time) ten (10) business days prior to
any Transaction, Seller will provide Buyer with (a) notice of such Transaction
and (b) all information deemed necessary by Buyer, in its sole and absolute
discretion, to ascertain the Market Value of the Asset to be purchased by Buyer
pursuant to such Transaction. In addition, on or before 2:00 p.m. (New York
time) one (1) business day prior to any Transaction, Seller will provide written
notice to Buyer that such Transaction will close the following business day."
9. Paragraph 6 of the Master Repurchase Agreement is amended by deleting
the words "all of the Purchased Securities with respect to the Transactions
hereunder" in the fourth line thereof and inserting the following therefor:
"all of the Seller's Assets, Seller's right (including the power to convey
title thereto), title and interest in and to".
10. Paragraph 6 of the Master Repurchase Agreement is amended by adding
the following after the words "title and interest in and to" in the fourth line
thereof:
6
<PAGE>
"the contractual right to receive payments, including the right to
payments of principal and interest and the right to enforce such payments,
arising from or under any of the Purchased Assets, the contractual right to
service or arrange for the servicing of each Mortgage Asset to the extent,
if any, Seller has such rights, any servicing agreements with respect to
each Mortgage Asset and all documents and instruments relating to each
Purchased Asset and/or Additional Assets,".
11. Paragraph 6 of the Master Repurchase Agreement is amended by adding
the following after the word "other" and before the word "proceeds" in the fifth
line thereof:
"income, payments, products and".
12. Paragraph 6 of the Master Repurchase Agreement is amended by adding
the following after the word "thereof" and before the period in the fifth line
thereof:
"including the rights, if any, of Seller under any Servicing
Agreements to the extent such rights under the Servicing Agreements are
assignable by Seller (the "Collateral")." .
13. Paragraph 6 of the Master Repurchase Agreement is amended by adding
the following at the end of the last sentence of Paragraph 6:
"In such event, the parties hereto intend to create for the benefit of
Buyer, as secured party, a legally valid and enforceable first priority
perfected security interest in the Collateral, and Seller hereby grants
Buyer a first priority security interest in the Collateral. On or prior to
the initial Purchase Date and/or at the request of Buyer at any time,
Seller shall immediately cause to be filed in the appropriate filing
offices of the jurisdiction in which Seller maintains its place of
business, or its chief executive office if Seller has more than one place
of business, in accordance with applicable law, Uniform Commercial Code
financing statements naming Seller as debtor, Buyer as secured party, and
the Collateral as collateral and in form and substance reasonably
acceptable to Buyer."
14. Paragraph 7 of the Master Repurchase Agreement is amended by adding
the following at the end of the last sentence of Paragraph 7:
"In the case of Transactions involving Eligible Asset-Backed
Securities, the transfer of such Eligible Asset-Backed Securities for the
purposes of this Paragraph 7 shall include the delivery to the Buyer or its
designee of the Eligible Asset-Backed Security and the Required Documents."
15. Paragraph 8 of the Master Repurchase Agreement is amended by deleting
the last sentence of Paragraph 8 and substituting the following:
"Title to all Purchased Assets shall pass to Buyer. Nothing in this
Master Repurchase Agreement shall preclude Buyer from engaging in repurchase
transactions with the Purchased Assets or otherwise pledging or hypothecating
the Purchased Assets without the prior
7
<PAGE>
consent of Seller, but no such transaction or provision hereof shall relieve
Buyer of its obligations to transfer Purchased Assets to Seller pursuant and
subject to Paragraphs 3, 4 or 11 hereof. Upon termination of any Transactions as
set forth in Paragraph 3(c) of this Master Repurchase Agreement, Buyer agrees to
execute promptly all Required Documents, endorsements, assignments of the Assets
and UCC-3 assignments, releases or terminations related to such Transactions, to
the extent that such documents are prepared by Seller for Buyer's execution, are
delivered to Buyer by Seller and are necessary and appropriate, as reasonably
determined by Seller, to reconvey, without recourse, to Seller and perfect title
of like tenor to that conveyed to Buyer to the related Assets. Buyer shall
provide reasonable cooperation in assisting and directing the Seller to
facilitate such preparation (without material expense to Buyer)".
16. Subparagraph 9(b) of the Master Repurchase Agreement is amended by
adding the following after the word "substituted" and before the period in the
fifth line thereof:
"; provided, further, that, the retention by Seller of custody of any
document relating to any Asset shall be held by Seller in trust for Buyer
and shall not be deemed to constitute Seller's retention of custody of the
Purchased Assets for purposes of this subparagraph".
17. Paragraph 9 of the Master Repurchase Agreement is further amended by
adding at the end of the Paragraph the following subparagraphs (c) and (d):
(c) In the case of any Transaction for which the Repurchase Date is
other than the business day immediately following the Purchase Date and
with respect to which Seller does not have any existing right to substitute
substantially the same Assets for the Purchased Assets, Seller shall have
the right, subject to the proviso to this sentence, upon notice to Buyer,
which notice shall be given at or prior to 2:00 p.m. (New York time) at
least ten (10) business days prior to the date of such substitution, to
substitute substantially the same Assets for any Purchased Assets;
provided, however, that Buyer, in its sole and absolute discretion, may
elect, by the close of business on the business day next following the
business day on which notice is received, not to accept such substitution.
In the event such substitution is accepted by Buyer, such substitution
shall be made by Seller's transfer to Buyer of additional Assets (including
the applicable Required Documents and the issuance to the Buyer of the
Confirmation) and Buyer's transfer to Seller of such Assets, and after
substitution, the substituted additional Assets shall be deemed to be
Purchased Assets. In the event Buyer elects not to accept such
substitution, Buyer shall offer the Seller the right to terminate the
Transaction. If the Seller elects to terminate such Transaction (which
election shall be made in writing within five (5) business days of Buyer's
offer to Seller of the right to terminate the transaction), the date of
termination will be determined in accordance with Paragraph 3(c).
(d) In the event Seller exercises its right to substitute or terminate
pursuant to subparagraph (c), Seller shall be obligated to pay to Buyer, by
the close of the business day of such substitution or termination, as the
case may be, an amount equal to (A) Buyer's actual cost (including all
fees, expenses and commissions) of (i) entering into replacement
transactions; and (ii) entering into or terminating hedge transactions, (B)
to
8
<PAGE>
the extent Buyer determines not to enter into replacement transactions,
the loss incurred by Buyer directly arising or resulting from such
substitution or termination and (C) in the case of the termination of any
Transaction, the related Repurchase Price for such Purchased Assets. The
foregoing amounts shall be determined and calculated in Good Faith solely
by Buyer."
18. Paragraph 10 of the Master Repurchase Agreement is amended by adding
the following clauses at the end of the first sentence of Paragraph 10 after the
word "affected" and before the period:
", and (vi) Seller and Buyer have entered into a Transaction described
in each Confirmation contemporaneously with the sale of the Purchased
Assets by Seller to Buyer and the transfer of the Purchase Price by Buyer
to Seller, or, in the event that any Transaction is deemed to constitute a
loan, contemporaneously with the grant of the security interest in the
Collateral by Seller to Buyer pursuant to Paragraph 6 hereof and the
transfer of the consideration therefor, consisting of the extension of the
Purchase Price, which represents the loan proceeds, by Buyer to Seller".
19. The first paragraph of Paragraph 11 is amended by deleting the word
"or" immediately preceding clause (vii) and by adding at the end of such clause,
immediately preceding the parenthesis, the following:
"(viii) Subject to Paragraph 6, the Master Repurchase Agreement shall
for any reason cease to create a valid, first priority
security interest in any of the Purchased Assets purported to
be covered thereby;
(ix) Any (a) termination by Seller of any Servicer or subservicer
of the Mortgage Assets without the prior written consent of
Buyer to the extent Seller's consent is required for such
termination or (b) amendment of any Servicing Agreement
without the prior written consent of Buyer to the extent
Seller's consent is required for such occurrences, (c)
failure by Seller (if it is the Servicer) or any Servicer to
service the Mortgage Assets in accordance with (i) industry
standards for similar loans with third parties or (ii) the
standards set forth in the Servicing Agreement;
(x) Any other default by Seller of its obligations hereunder
which is not cured within two (2) days following Seller's
receipt of written notice from Buyer specifying such default;
(xi) An event of default has occurred with respect to indebtedness
of Seller or any Guarantor in excess of $100,000 in the
aggregate which has not been cured within any applicable
grace period;
(xii) Any Change of Control shall occur;
9
<PAGE>
(xiii) In Buyer's sole judgment exercised in Good Faith, any
material adverse change shall have occurred in the business,
operations, properties, prospects or financial condition of
Seller or any Guarantor;
(xiv) Any event of default has occurred under any Servicing
Agreement, any Indenture, any Trust Agreement, the guaranty
or any Related Facility; or
(xv) any termination or breach of any guaranty by any Guarantor or
similar agreement executed and delivered to Buyer in
connection with the obligations of Seller under this Master
Repurchase Agreement, or if any Guarantor attempts to
terminate, challenges the validity of, or its liability
under, any such guaranty or similar agreement
20. Subparagraph 11(d)(i) of the Master Repurchase Agreement is amended in
its entirety to provide as follows by:
"as to Transactions in which the defaulting party is acting as Seller,
so long as the applicable Event of Default occurred three (3) business days
prior to the date of any such sale, Buyer may, (A) immediately sell in a
recognized market (or otherwise in a commercially reasonable manner) at
such price or prices as the nondefaulting party may reasonably deem
satisfactory, any or all Purchased Assets or any Eligible Asset-Backed
Security subject to such Transactions and apply the proceeds thereof to the
aggregate unpaid Repurchase Prices and any other amounts owing by the
defaulting party hereunder or (B) in its sole discretion elect, in lieu of
selling all or a portion of such Purchased Assets or Eligible Asset-Backed
Security, as the case may be, to give the defaulting party credit for such
Purchased Assets or Eligible Asset-Backed Security, as the case may be, in
an amount equal to the price therefor on such date, obtained from a
generally recognized source or the most recent closing bid quotation from
such a source, against the aggregate unpaid Repurchase Prices and any other
amounts owing by the defaulting party hereunder and in either case upon the
receipt and crediting by Buyer, in a manner deemed final and complete by
Buyer in its sole and absolute discretion, of the aggregate unpaid
Repurchase Prices and any other amounts owing by the defaulting party,
including, without limitation, (x) any unpaid fees and expenses, (y)
amounts due and owing by Seller to Buyer and (z) other amounts which are
otherwise due and owing by Seller to Buyer, Buyer shall transfer the
portion of the Purchased Assets and all income, payments, products and
proceeds thereof held by Buyer following such receipt and crediting to
Seller.
21. Paragraph 11 of the Master Repurchase Agreement is amended by adding
new subparagraphs (j) and (k) following Subparagraph (i) as follows:
"(j) As to Transactions in which the defaulting party is acting as
Seller, Buyer may, in its sole and absolute discretion, to the extent, if any,
Seller has the right to do so, (i) terminate any Servicing Agreements without
any liability to Seller (including, without limitation, without liability for
the payment of fees or other sums due and owing to Seller in its capacity as
Servicer) and, to the extent permitted under any Servicing Agreement, terminate
any Servicing Agreements without any liability to the applicable Servicer
(including, without limitation,
10
<PAGE>
without liability for the payment of fees or other sums due to owing to such
Servicer) and (ii) transfer servicing responsibility for any Mortgage Assets to
any third party servicer Buyer selects.
(k) The parties hereto recognize that Seller's obligations to Buyer
under this Master Repurchase Agreement are special, unique and of extraordinary
character. If an Event of Default occurs hereunder, Seller agrees that Buyer
may enforce this Master Repurchase Agreement by a proceeding for specific
performance or other equitable remedy including, without limitation, a
proceeding in which replevin or injunction is sought by Buyer. Seller hereby
waives to the fullest extent permitted by law any and all rights it may have by
statute, constitution or otherwise, to (a) assert the defense of adequacy of a
remedy at law that might be asserted as a bar to any such proceeding, (b) the
fixing, imposition or posting of a bond or other security by Buyer as a
condition to obtaining any equitable relief sought by Buyer. Seller further
agrees that the rights and remedies hereunder are cumulative, and are not
exclusive of any rights, powers, privileges, or remedies, now or hereafter
existing, at law, or in equity or otherwise."
22. Paragraph 13 of the Master Repurchase Agreement is amended by deleting
the text thereof and replacing it with the following:
"Any notice or communication in respect of this Master Repurchase
Agreement will be sufficiently given to a party if in writing and delivered
in person, sent by certified or registered mail, return receipt requested,
or by overnight courier or given by facsimile transfer at the following
address or facsimile number:
If to Buyer: First Union Corporation
One First Union Center TW-9
301 South College Street
Charlotte, North Carolina 28288-0610
Attention: Mark Mendenhall
Facsimile No.: (704) 383-8121
with copies to: Hahn & Hessen LLP
350 Fifth Avenue, Suite 3700
New York, New York 10118-0075
Attention: Linda C. Berman, Esq.
Facsimile No.: (212) 594-7167
If to Seller: NovaStar REMIC Financing Corporation.
1901 West 47th Place, Suite 105
Westwood, Kansas 66205
Attention: Mark Kohlrus
Facsimile No. (913) 514-3515
A notice or communication will be effective:
(iv) if delivered by hand or sent by overnight courier, on the day and
time it is delivered;
11
<PAGE>
(v) If sent by facsimile transfer on a machine that provides for
automatic confirmation of receipt, on the day and time such
confirmation is received; or
(vi) if sent by certified or registered mail, return receipt
requested, three days after dispatch.
Either party may by written notice to the other change the address or
facsimile number at which notices or communications are to be given to
it."
23. The first sentence of Paragraph 15(a) of the Master Repurchase
Agreement is amended by inserting the following after the words "null and void"
on the third line thereof: ", provided however, that Buyer may sell, transfer
-------- -------
and assign its rights under this Master Repurchase Agreement or under any
Transaction to any affiliate of Buyer, without the prior consent of Seller.
24. Buyer is hereby appointed the attorney-in-fact of Seller for the sole
and limited purpose of executing or endorsing any instruments that Buyer may
deem necessary to accomplish the sale, transfer and assignment of the Purchased
Assets and/or Collateral to Buyer, including, without limitation, completing or
correcting any endorsement or assignment, which appointment as attorney-in-fact
is irrevocable and coupled with an interest. In this connection, Buyer shall
have the right and power to receive, endorse and collect all checks made payable
to the order of Seller representing any payment on account of the principal of
or interest on any Purchased Asset or Collateral and to give full discharge for
the same.
25. Seller shall promptly pay as and when payment is due all, and Buyer
shall not be liable for any expenses, fees and charges incurred by Buyer or
Seller arising out of or related in any way to this Master Repurchase Agreement
(including the reasonable fees and disbursements of counsel to Buyer in
negotiation of the Master Repurchase Agreement) and the enforcement of this
Master Repurchase Agreement, or any of the Servicing Agreements , including,
without limitation, legal expenses of counsel to Buyer, the fees and expenses of
any custodian, recording and filing fees and any costs associated with
reconveyance of the Purchased Assets ("Costs") and, in the event that any Costs
are incurred by Buyer, Seller shall reimburse Buyer on demand of Buyer
accompanied by a statement describing in reasonable detail the circumstances and
the nature of the Cost by wire transfer of immediately available federal funds
no later than one (1) business day following such demand.
26. (a) Each party represents and warrants, and shall on and as of the
Purchase Date of any Transaction and on and as of each date thereafter through
the related Repurchase Date be deemed to represent and warrant, as follows:
(i) The execution, delivery and performance of this Master
Repurchase Agreement and the performance of each Transaction
do not and will not result in or require the creation of any
lien, security interest or other charge or encumbrance
(other than pursuant hereto) upon or with respect to any of
its properties; and
12
<PAGE>
(ii) This Master Repurchase Agreement is, and each Transaction
when entered into under this Master Repurchase Agreement will
be, a legal, valid and binding obligation of it enforceable
against it in accordance with the terms of this Master
Repurchase Agreement; and
(iii) Seller's principal place of business and chief executive
office is located in Westwood, Kansas.
(b) Seller hereby makes, on and as of the Purchase Date of any Transaction
and on and as of each date thereafter through the related Repurchase Date shall
be deemed to have made, the representations and warranties to Buyer set forth in
Exhibit C hereto. The representations and warranties set forth herein shall
- ---------
survive transfer of the Purchased Assets to the Buyer and shall continue until
the related Transaction has terminated.
(c) Seller hereby further represents and warrants that, as of the Purchase
Date of each Transaction:
(i) No Event of Default, event of default or default has
occurred or is continuing under this Master Repurchase
Agreement, any Servicing Agreement, any Trust Agreement or
any Related Facility.
(ii) Seller has no actual knowledge of any pending or threatened
litigation or any basis therefor against Seller or any
Guarantor before any court, governmental agency or authority
or arbitration panel, which, if determined adversely to
Seller or such Guarantor, would have a materially adverse
effect on Seller's or such Guarantor's ability to perform
its obligations under the Related Documents or the guaranty
issued by such Guarantor to Buyer.
(iii) If Seller is servicing any Purchased Assets, it is doing
so in accordance with the industry standards.
(iv) Since the date of the most recent balance sheet of Seller or
any Guarantor and/or the most recent financial statement of
Seller or any Guarantor delivered to Buyer hereunder, there
has been no material adverse change in its financial
condition or results of operations.
(v) The information set forth in the schedule to each
Confirmation is true and correct in all material respects.
(vi) Each Purchased Asset is an Eligible Asset-Backed Security.
13
<PAGE>
(d) Upon discovery by the Seller of a breach of any of the
representations, warranties or covenants set forth herein or in Exhibit C
---------
hereto, Seller shall give prompt written notice thereof to the Buyer.
(e) Seller hereby indemnifies and holds Buyer harmless for any loss,
liability, expense (including attorney fees) or damage suffered or incurred by
Buyer arising from or in any way related to a breach by Seller of any
representation or warranty of Seller in this Master Repurchase Agreement.
(f) Seller shall take all action, as Buyer may reasonably request to
ensure that Buyer will have a first priority security interest in the Purchased
Assets, including among other things, delivering the Purchased Assets to Buyer
registered or, with properly endorsed instruments of transfer to be registered,
in Buyer's name or in the name of Buyer's nominee and filing such UCC financing
statements regarding the Purchased Assets as Buyer may reasonably request.
Notwithstanding the foregoing, the parties hereto agree and confirm that the
Transactions are intended to constitute a sale and purchase of assets, rather
than a loan
27. On and as of the date of this Master Repurchase Agreement and each
Purchase Date and until this Master Repurchase Agreement is no longer in force
with respect to any Transaction, Seller covenants that:
(a) it will not take any action which would directly or indirectly
cause the Buyer's interest in or the value of the Purchased Assets to be
adversely affected thereby; and
(b) it will not pledge, assign, convey, grant, bargain, sell, set
over, deliver or otherwise transfer any interest in the Purchased Assets to any
person not a party to this Master Repurchase Agreement nor will Seller create,
incur or permit to exist any lien, encumbrance or security interest in or on the
Purchased Assets other than that created hereunder without the prior express
written consent of Buyer.
(c) it shall have no beneficial, legal or equitable interest in the
Purchased Assets provided, however, nothing contained herein shall limit or
impair any contractual rights Seller may have under this Master Repurchase
Agreement. To the extent, if any, Seller has the right to control the servicing
of the Mortgage Assets under any Servicing Agreement or otherwise, Seller shall
and shall direct the applicable Servicer to follow all instructions of Buyer
with respect to the servicing of the Mortgage Assets and upon Buyer's request
Seller will make available and/or turn over and deliver to Buyer all Required
Documents in good and usable order wherever Buyer shall request such documents
be produced and/or delivered.
(d) Seller shall promptly furnish to the Buyer:
(i) Within 90 days after the last day of each fiscal year, a
balance sheet and statements of income and cash flows for
NFI for such year on a consolidated basis as of the end of
such year presented fairly in all material respects in
accordance with GAAP and accompanied by an unqualified
report of a firm of independent
14
<PAGE>
certified public accountants of nationally recognized
standing and including therewith a copy of any management
letter from such certified public accountant; and
(ii) Within 45 days after the last day of each fiscal quarter,
(A) an unaudited balance sheet and statements of income and
cash flows for NFI for such quarter and (B) a certificate of
an officer of NFI, whose position is vice president or
higher, stating that such financial statements are presented
fairly in all material respects and in accordance with GAAP,
subject to year-end audit adjustments, and further
certifying that neither Seller nor any affiliate thereof is
in default under the terms and conditions of this Master
Repurchase Agreement or under any agreement evidencing or
securing any indebtedness of such entity.
(e) Each of Seller and each Guarantor shall maintain its corporate
existence and obtain and maintain all rights, privileges, licenses, approvals,
franchises, properties and assets necessary or desirable in the normal conduct
of its business, including but not limited to all approvals with respect to the
SEC or the Securities Commissions of the States of Kansas, Virginia and
Delaware, and comply with all contractual obligations and requirements of law
(including, without limitation, any requirements of law under or in connection
with ERISA, the Federal Consumer Credit Protection Act, the Federal Real Estate
Settlement Procedures Act, the Federal Equal Credit Opportunity Act, the Federal
Truth-in-Lending Act, and any regulations promulgated thereunder), except where
the failure to so comply is not likely to have a material adverse effect on the
business, operations, assets or financial or other condition of the Seller or on
the Purchased Assets.
(f) The Seller shall promptly furnish such additional financial and
other information including, without limitation, financial statements of Seller
and information regarding the Purchased Assets as the Buyer may from time to
time reasonably request.
(g) The books of record and account kept by Seller shall be maintained
in accordance with GAAP.
(h) The Seller shall promptly give written notice to the Buyer of:
(i) the occurrence of a default or event of default or state of
facts which with the giving of notice or passage of time, or
both, would constitute (x) an Event of Default under this
Master Repurchase Agreement or (y) an event of default or
default any Indenture, any Trust Agreement, any Servicing
Agreement or Related Facility, known to Seller and the
proposed method cure thereof;
(ii) any litigation or proceeding affecting the Seller or any
Guarantor or the Purchased Assets known to Seller or such
Guarantor which could have a material adverse effect on the
Purchased Assets, or
15
<PAGE>
the business, operations, property or financial or other
condition of the Seller or such Guarantor;
(iii) a material adverse change known to the Seller or any
Guarantor in the business, operations, property or financial
or other condition of the Seller or such Guarantor;
(iv) any breach of a representation or warranty set out in
Exhibit C hereto; or
---------
(v) any default or event of default by Seller or any Guarantor
under the terms of any agreement evidencing or securing any
indebtedness of Seller or such Guarantor in excess of
$100,000 in the aggregate which has not been cured within
any applicable grace period.
(i) To the extent, if any, Seller has any obligation under any
Servicing Agreement, the Seller shall comply fully with the terms of each
Servicing Agreement.
(j) The Seller shall pay or otherwise satisfy at or before maturity
or before it comes delinquent or accelerated, as the case may be, all its
indebtedness (including taxes), except indebtedness being contested in good
faith by appropriate proceedings and for which provision is made to the
satisfaction of the Buyer for the payment thereof in the event the Seller is
found to be obligated to pay such indebtedness and which indebtedness is
thereupon promptly paid by the Seller.
(k) The Seller shall permit representatives of the Buyer to (A) visit
and inspect any of its properties and examine and make abstracts from any of its
books and records (including, without limitation, books and records relating to
the Purchased Assets) at any reasonable time and as often as may reasonably be
desired by the Buyer (but, prior to the occurrence of an Event of Default, only
upon not less than three (3) business days prior notice) and Seller shall pay
all out of pocket costs and expenses incurred by Buyer in the performance of
such inspection, and (B) upon prior notice to Seller, discuss the business,
operations, properties and financial and other condition of the Seller or any
Guarantor with officers and employees of the Seller and such Guarantor and (iv)
with their independent certified public accountants; provided, however, that the
-------- -------
results of any such visit, inspection, examination, discussion or audit, to the
extent such results are proprietary and non-public, shall be maintained by the
Buyer in confidentiality except as required by law or regulation or by any
governmental agency or regulatory body having authority over the Buyer, or to
the extent such information may be communicated to the legal counsel or auditors
of the Buyer.
(l) Mortgage Assets shall be originated and acquired by Seller only in
accordance with the Underwriting Standards including, any exceptions or
deviations from the usual and customary underwriting standards to the extent
such exceptions or deviations are made in the ordinary course of the applicable
Seller's affiliate's business.
16
<PAGE>
(m) The Seller shall comply with each and every covenant set forth on
Exhibit B hereto.
- ---------
(n) The Seller shall pay Buyer a quarterly repo fee calculated on the
Maximum Purchase Amount at a rate of one percent (1%) per annum, such repo fee
to be paid in advance commencing on the date of execution hereof and on each
three (3) month anniversary of the date hereof. This repo fee shall be (i)
calculated for the three (3) months succeeding the scheduled date of its payment
and (ii) be deemed earned in full upon each such scheduled date of payment and
not be subject to rebate or proration for any reason.
(o) the Seller shall furnish or cause to be furnished to the Buyer
once each month copies of, in electronic readable format all reports received
with respect to any Purchased Asset
28. (a) The Purchase Price for Purchased Assets purchased by Buyer in
any Transaction hereunder shall be 50% of the Market Value of the Purchased
Assets on the Purchase Date unless a lesser amount shall be agreed to by Buyer
and Seller.
(b) The aggregate Purchase Price for all Purchased Assets owned by
Buyer on any date shall at no time exceed the Maximum Purchase Amount.
(c) This Master Repurchase Agreement shall continue in effect until
the expiration of the Term.
29. The parties irrevocably agree to submit to the personal jurisdiction of
the United States District Court for the Southern District of New York and that
the exclusive venue for all actions and proceedings, except a proceeding for
enforcement of a judgment, shall be in the United States District Court for the
Southern District of New York, the parties irrevocably waiving any objection
thereto. If, for any reason, federal jurisdiction is not available, the parties
irrevocably agree to submit to the personal jurisdiction of the Supreme Court of
the State of New York and that the exclusive venue of all actions and
proceedings, except a proceeding for the enforcement of a judgment, shall be in
the Supreme Court of the State of New York, New York County, the parties
irrevocably waiving any objection thereto. Notwithstanding the foregoing two
sentences, at Buyer's option exercisable at any time not later than thirty (30)
days after an action or proceeding has been commenced hereunder, the parties
agree that the matter may be submitted to binding arbitration in accordance with
the commercial rules of the American Arbitration Association then in effect in
the State of New York, and judgment upon any award rendered by the arbitrator
may be entered in any court having jurisdiction thereof within the City, County
and State of New York; provided, however, that the arbitrator shall not amend,
-------- -------
supplement, or reform in any regard this Master Repurchase Agreement or the
terms of any Confirmation, the rights or obligations of any party hereunder or
thereunder, or the enforceability of any of the terms hereof or thereof. Any
arbitration shall be conducted in the City, County, and State of New York before
a single arbitrator who shall be reasonably familiar with repurchase
transactions and the secondary mortgage market.
17
<PAGE>
EACH PARTY HERETO IRREVOCABLY WAIVES ANY RIGHT THAT IT MAY HAVE TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS MASTER REPURCHASE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
30. UNDER NO CIRCUMSTANCES WILL EITHER PARTY BE LIABLE FOR PUNITIVE DAMAGES
IN ANY WAY RELATED TO THIS MASTER REPURCHASE AGREEMENT AND EXCEPT AS PROVIDED IN
PARAGRAPH 11(g) HEREIN, UNDER NO CIRCUMSTANCES WILL EITHER PARTY, BE LIABLE FOR
ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL LOSS OR DAMAGES SUFFERED OR
INCURRED BY THE OTHER, OR ANY OTHER PARTY, IN EACH CASE ARISING UNDER THIS
MASTER REPURCHASE AGREEMENT, REGARDLESS OF WHETHER SUCH DAMAGES COULD HAVE BEEN
FORESEEN OR PREVENTED.
31. Prior to entering into each Transaction under this Master Repurchase
Agreement, each of the following conditions shall occur:
(a) the Assets shall have been delivered to Buyer (or its designee);
(b) Seller and each Guarantor shall have disclosed information
satisfactory to Buyer with respect to the scheduled maturities and termination
provisions of all outstanding credit facilities and debt of Seller;
(c) a favorable opinion of counsel with respect to the corporate and
perfection matters, in form and substance acceptable to Buyer, with reliance
thereon permitted as to any person or entity that purchases in accordance with
and subject to the terms of this Master Repurchase Agreement, the Assets from
Buyer in a repurchase transaction shall have been delivered to Buyer;
(d) UCC-1 Financing Statements in form suitable for filing in the
offices of the Secretary of State of the State of Kansas and Delaware and such
other jurisdictions in which Seller may maintain a principal place of business
against Seller shall have been delivered to Buyer.
(e) Seller shall have delivered to Buyer a collateral assignment in
form and substance satisfactory to Buyer of Seller's rights, if any, under each
of the Servicing Agreements to which Seller is a party with respect to the
Mortgage Assets securing any Asset-Backed Security.
(f) Seller acknowledges that the obligations of Buyer hereunder or
otherwise are not the subject of any guaranty by, or recourse to, any direct or
indirect parent or other affiliate of Buyer.
(g) Buyer shall have received all appropriate Confirmations.
(h) Buyer shall have received each Eligible Asset-Backed Security and
the Required Documents.
18
<PAGE>
(i) Buyer shall have received executed warrants from NFI in form and
substance satisfactory to Buyer.
(j) Buyer shall have received (i) an executed guaranty from each
Guarantor and (ii) a security agreement from each Guarantor (other than NFI
Holding Corporation) in form and substance satisfactory to Buyer and such
guaranty shall be in full force and effect.
(k) Buyer shall have received executed assignments of equities with
respect to any equity or right to receive money under the master repurchase
agreement dated as of the date hereof among, NFI, NMI, NCI and First Union
National Bank to secure Seller's obligations under this Master Repurchase
Agreement and each Related Facility, each of which shall be in form and
substance satisfactory to Buyer.
32. To induce Buyer to enter into this Master Repurchase Agreement and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Seller agrees that:
(a) During the 364 days immediately following the date of this Master
Repurchase Agreement, the Seller and all of its affiliates or subsidiaries shall
give First Union the exclusive right to act as (i) sole placement agent or sole
underwriter (as the case may be), in connection with any and all public or
private offerings of structured home equity securities which the Seller or such
affiliates or subsidiaries may attempt, and/or (ii) syndication agent or
administrative agent with respect to any credit facility the Seller or such
affiliates or subsidiaries may enter into.
(b) During the 364 days immediately following the date of this Master
Repurchase Agreement the Seller shall and cause its affiliates or subsidiaries
to solicit a proposal from First Union to act as advisor to the Seller or any
such affiliates or subsidiaries in connection with any merger or acquisition
transaction involving the Seller or any such affiliates or subsidiaries.
(c) During the 364 days immediately following the date of this Master
Repurchase Agreement, the Seller shall and cause its affiliates or subsidiaries
to (i) solicit a proposal from First Union to act as lead underwriter or sole
placement agent on any and all public or private offerings of any securities
offered by the Seller and such affiliates and subsidiaries (other than
structured home equity securities), and (ii) if First Union is not appointed
lead underwriter or placement agent, as the case may be, the Seller shall and
cause its affiliates and subsidiaries to use its best efforts to have First
Union appointed co-underwriter or co-placement agent for such transaction.
Any offer by Seller or one of its affiliates and subsidiaries to First
Union to act in any capacity described above with respect to any transaction
shall be on terms (including fees and expenses) and conditions that are usual
and customary for investment or commercial banks acting in transactions of a
similar type.
19
<PAGE>
33. This Addendum is executed and shall be construed as an agreement
supplemental to the Master Repurchase Agreement and, as provided in the Master
Repurchase Agreement, this Addendum forms a part thereof.
34. All of the covenants, stipulations, promises and agreements in this
Addendum shall bind the successors and assigns of the parties hereto, whether
expressed or not.
35. The Master Repurchase Agreement and this Addendum may be executed in
any number of counterparts, each of which shall be an original but such
counterparts shall together constitute but one and the same instrument. Any
signature delivered by a party via facsimile transfer shall be deemed to be an
original signature thereto.
36. This Addendum shall supersede any existing annex to or modification of
the Master Repurchase Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Addendum Agreement as of the date first written above.
<TABLE>
<S> <C>
NOVASTAR REMIC FINANCING FIRST UNION CORPORATION, as a Buyer
CORPORATION,
as a Seller
By:________________________________________ By:_________________________________________
Name:______________________________________ Name:_______________________________________
Title:_____________________________________ Title:______________________________________
</TABLE>
CONSENTED AND AGREED TO:
NFI HOLDING CORPORATION, as
Guarantor
By:________________________________________
Name:______________________________________
Title:_____________________________________
NOVASTAR MORTGAGE, INC., as
Guarantor
By:________________________________________
Name:______________________________________
Title:_____________________________________
NOVASTAR FINANCIAL, INC., as
Guarantor
By:________________________________________
Name:______________________________________
Title:_____________________________________
21
<PAGE>
EXHIBIT A
INTENTIONALLY OMITTED
22
<PAGE>
Exhibit B
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
1. Seller represents, warrants and covenants, as of the date hereof and as
of each day during the term of the Agreement, as follows:
(a) Due Organization and Qualification. Seller is a corporation duly
----------------------------------
organized, validly existing and in good standing under the laws of the state of
its incorporation Seller is duly qualified to do business, is in good standing
and has obtained all necessary licenses, permits, charters, registrations and
approvals (together, "approvals") necessary for the conduct of its business as
---------
currently conducted and the performance of its obligations under the Related
Documents, in each jurisdiction in which the failure to be so qualified or to
obtain such approvals would have a material adverse effect upon Seller, any
Purchased Asset or any Transaction.
(b) Power and Authority. Seller has all necessary power and authority
-------------------
to conduct its business as currently conducted, to execute, deliver and perform
its obligations under the Related Documents and to consummate the Transactions.
(c) Due Authorization. The execution, delivery and performance of
-----------------
this Master Repurchase Agreement by Seller have been duly authorized by all
necessary corporate action and do not require any additional approvals or
consents or other action by or any notice to or filing with any person.
(d) Noncontravention. None of the execution and delivery of all
----------------
documents by Seller, the consummation of the transactions contemplated thereby
or the satisfaction of the terms and conditions of the Related Documents:
(i) conflicts with or results in any breach or violation of any
provision of the articles or certificate of incorporation or by-laws
of Seller or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect having
applicability to Seller, or any of its properties, including
regulations issued by an administrative agency or other governmental
authority having supervisory powers over Seller;
(ii) constitutes a material default by Seller under or a
material breach of any provision of any loan agreement, mortgage,
indenture or other material agreement or instrument to which Seller or
any of its affiliates is a party or by which it or any of its
properties is or may be bound or affected which would have a material
and adverse effect on Seller's ability to perform its obligations
under the Related Documents; or
23
<PAGE>
(iii) results in or requires the creation of any lien upon or in
respect of any of the assets of Seller except as otherwise expressly
contemplated by the Related Documents.
(e) Legal Proceedings. There is no action, proceeding or
-----------------
investigation by or before any court, governmental or administrative agency or
arbitrator against or affecting all or any of the Purchased Assets, Seller or
any of its affiliates, or any properties or rights of Seller or any of its
affiliates, pending or threatened, which, in any case, if decided adversely,
would have a material adverse effect with respect to the Seller's ability to
perform its obligations under the Related Documents.
(f) Valid and Binding Obligations. Each of the Related Documents to
-----------------------------
which Seller is a party when executed and delivered by Seller will constitute
the legal, valid and binding obligations of Seller, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and general equitable principles.
(g) No Consents. No consent, license, approval or authorization from,
-----------
or registration, filing or declaration with, any regulatory body, administrative
agency, or other governmental instrumentality, nor any consent, approval, waiver
or notification of any creditor, lessor or other nongovernmental person, is
required in connection with the execution, delivery and performance by Seller of
this Master Repurchase Agreement or of any other Related Documents, except such
as have been obtained and are in full force and effect and those as to which the
failure to so obtain does not have a material adverse effect on Seller.
(h) Notice of Material Events. Seller shall promptly inform (unless,
-------------------------
in the case of clause (i) only, prohibited by applicable law) Buyer in writing
of the occurrence of and of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial
investigation (A) against Seller pertaining to the Purchased
Assets in general, (B) with respect to a material portion of
the Purchased Assets or (C) in which a request has been made
for certification as a class action (or equivalent relief)
that would involve a material portion of the Purchased
Assets; or
(ii) any change in the location of Seller's principal office or
any change in the location of Seller's books and records; or
(iii) the occurrence of any Event of Default.
(i) Special Purpose Vehicle. Certificateholder (i) engages in no
-----------------------
business activity other than the ownership of the Purchased Assets and the entry
of Seller into this Master Repurchase Agreement, (ii) has no liabilities or
creditors other than liabilities to Buyer under this Master Repurchase Agreement
and (iii) is properly capitalized given the business conducted by it.
24
<PAGE>
EXHIBIT C
REPRESENTATIONS AND WARRANTIES
RELATING TO ELIGIBLE ASSET-BACKED SECURITIES
(a) The applicable Eligible Asset-Backed Security is a binding and valid
obligation of the obligor thereon, in full force and effect and enforceable in
accordance with its terms except as the same may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity.
(b) The Eligible Asset-Backed Security is genuine in all respects as
appearing on its face and as represented in the books and records of the Seller
and all information set forth therein is true and correct.
(c) The Eligible Asset-Backed Security is free of any default of any party
thereto counterclaims, offsets and defenses and from any rescission,
cancellation or avoidance, whether by operation of law or otherwise.
(d) The Eligible Asset-Backed Security complies in all respects with and
was issued in accordance with all applicable laws and regulations governing the
same, 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 Asset have been given and
performed as required.
(e) At all times the Eligible Asset-Backed Security will be free and clear
of all liens.
25
<PAGE>
EXHIBIT D
INTENTIONALLY OMITTED
26
<PAGE>
EXHIBIT E
SERVICING AGREEMENTS
Servicing Agreement dated as of September 1, 1997, among NovaStar Mortgage,
Inc., NovaStar Home Equity Loan Trust Series 1997-1 and First Union National
Bank, as amended.
Servicing Agreement dated as of November 1, 1997, among NovaStar Mortgage, Inc.,
NovaStar Home Equity Loan Trust Series 1997-2 and First Union National Bank, as
amended.
Servicing Agreement dated as of April 1, 1998 by and among NovaStar Mortgage,
Inc., First Union National Bank and NovaStar Mortgage Funding Trust, Series
1998-1, as amended.
Servicing Agreement dated as of August 1, 1998 by and among NovaStar Mortgage,
Inc., First Union National Bank and NovaStar Mortgage Funding Trust, Series
1998-2, as amended.
Servicing Agreement dated as of January 1, 1999 by and among NovaStar Mortgage,
Inc., Fairbanks Capital Corp., First Union National Bank, The Chase Manhattan
Bank and NovaStar Mortgage Funding Trust, Series 1999-1.
27
<PAGE>
EXHIBIT F
INTENTIONALLY OMITTED
28
<PAGE>
EXHIBIT G
INDENTURES
Indenture dated as of September 1, 1997, between NovaStar Home Equity Loan
Trust, Series 1997-1 and First Union National Bank.
Indenture dated as of November 1, 1997, between NovaStar Home Equity Loan Trust,
Series 1997-2 and First Union National Bank.
Indenture dated as of April 1, 1998 by and among NovaStar Mortgage Funding
Trust, Series 1998-1 and First Union National Bank.
Indenture dated as of August 1, 1998 by and among NovaStar Mortgage Trust,
Series 1998-2 and First Union National Bank.
Indenture, dated as of January 1, 1999, by and among NovaStar Mortgage Funding
Trust, Series 1999-1, First Union National Bank, and The Chase Manhattan Bank.
29
<PAGE>
EXHIBIT H
TRUST AGREEMENTS
Amended and Restated Trust Agreement dated as of September 1, 1997 between
NovaStar Assets Corp. and Wilmington Trust Company concerning the NovaStar Home
Equity Loan Asset-Backed Certificates Series 1997-1.
Amended and Restated Trust Agreement dated as of November 1, 1997 between
Merrill Lynch Mortgage Investors, Inc. and Wilmington Trust Company concerning
the NovaStar Home Equity Loan Asset-Backed Certificates Series 1997-2.
Amended and Restated Trust Agreement dated as of April 1, 1998 by and among
NovaStar Mortgage Funding Corporation and Wilmington Trust Company concerning
the NovaStar Mortgage Funding Trust, Series 1998-1, Home Equity Loan Asset-
Backed Bonds.
Amended and Restated Trust Agreement dated as of August 19, 1998 by and among
NovaStar Mortgage Funding Corporation and Wilmington Trust Company concerning
the NovaStar Mortgage Funding Trust, Series 1998-2, Home Equity Loan Asset-
Backed Bonds.
Amended and Restated Trust Agreement dated January 1, 1999 by and among NovaStar
Mortgage Funding Corporation II, Residential Asset Funding Corporation and
Wilmington Trust Company concerning the NovaStar Mortgage Funding Trust, Series
1999-1, Home Equity Loan Asset-Backed Bonds.
30
<PAGE>
EXHIBIT 10.23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
BETWEEN
NOVASTAR FINANCIAL, INC.
and
FIRST UNION CORPORATION
DATED AS OF FEBRUARY 12, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1. Definitions........................................................................................ 1
-----------
Section 2. Representations, Warranties and Covenants.......................................................... 5
-----------------------------------------
Section 3. Warrant Certificates............................................................................... 8
--------------------
Section 4. Issuance and Delivery of Warrant Certificates...................................................... 9
Section 5. Registration....................................................................................... 9
------------
Section 6. Transfer; Registration of Transfers and Exchanges.................................................. 9
Section 7. Duration and Exercise of Warrants.................................................................. 10
---------------------------------
Section 8. Payment of Expenses and Taxes...................................................................... 10
-----------------------------
Section 9. Mutilated or Missing Warrant Certificates.......................................................... 11
-----------------------------------------
Section 10. Reservation and Issuance of Warrant Shares......................................................... 11
------------------------------------------
Section 11. No Registration under the Act; Legend.............................................................. 11
-------------------------------------
Section 12. Registration Rights................................................................................ 13
-------------------
Section 13. Fair Market Value.................................................................................. 25
-----------------
Section 14. Adjustment of Exercise Price and Number of Shares of Common Stock
Purchasable or Number of Warrants 25
Section 15. Fractional Warrants and Fractional Warrant Shares.................................................. 29
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 16. Financial Information.............................................................................. 29
---------------------
Section 17. No Rights or Liabilities as Shareholder............................................................ 29
---------------------------------------
Section 18. Decisions of Holders............................................................................... 29
--------------------
Section 19. Notices to Holders................................................................................. 30
------------------
Section 20. Amendments and Waivers............................................................................. 30
----------------------
Section 21. Survival........................................................................................... 31
--------
Section 22. Indemnification.................................................................................... 31
---------------
Section 23. Expenses........................................................................................... 31
--------
Section 24. Notices............................................................................................ 31
-------
Section 25. Binding Effect..................................................................................... 31
--------------
Section 26. Termination........................................................................................ 31
-----------
Section 27. Severability....................................................................................... 32
------------
Section 28. Counterparts....................................................................................... 32
------------
Section 29. Governing Law; Remedies............................................................................ 32
-----------------------
Section 30. No Impairment...................................................................................... 32
-------------
</TABLE>
ii
<PAGE>
EXHIBIT A - Company's Articles of Incorporation and By-laws
EXHIBIT B - Warrant Certificate
EXHIBIT C - Purchase Form
EXHIBIT D - Assignment Form
EXHIBIT E - Options and Convertible Securities
iii
<PAGE>
WARRANT AGREEMENT
-----------------
WARRANT AGREEMENT dated as of February 12, 1999, between NOVASTAR
FINANCIAL, INC. (together with its permitted successors and assigns, the
"Company"), a Maryland corporation with its principal office at 1901 W. 47th
Place, Westwood, Kansas 66205 and FIRST UNION CORPORATION, a Delaware
corporation ("First Union") with its principal office at One First Union Center,
301 South College Street, Charlotte, North Carolina, 28288.
W I T N E S S E T H:
WHEREAS, the Company and First Union Corporation, a subsidiary of First
Union, are parties to the Master Repurchase Agreement dated as of the date
hereof (as the same may be amended, supplemented or otherwise modified from time
to time and together with all documents and agreements executed and delivered in
connection therewith, collectively, the "Repo Documents"); and
WHEREAS, as a condition to the obligation of First Union Corporation
to enter into the Repo Documents, First Union Corporation has required, inter
-----
alia, that the Company shall have executed and delivered this Warrant Agreement;
- -----
NOW, THEREFORE, in consideration of the premises and the agreements
hereinafter set forth, the parties hereto agree as follows:
Section 1. Definitions. For purposes hereof, the terms set forth below
-----------
in this Section 1 shall have this respective meanings hereinafter assigned to
them in this Warrant Agreement:
"Act" shall mean the Securities Act of 1933, as amended, or any
---
similar successor federal statute.
"Affiliate" of any Person shall mean any other Person directly or
---------
indirectly controlling, controlled by or under direct or indirect common control
with such Person. A Person shall be deemed to control another Person if such
first Person possesses directly or indirectly the power to direct, or cause the
direction of, the management and policies of the second Person, whether through
the ownership of voting securities, by contract or otherwise.
"Appraiser" shall mean an investment bank or other qualified
---------
independent appraiser of national standing.
"Blue Sky Laws" shall mean any and all applicable state securities
-------------
laws.
"Board of Directors" shall have the same meaning as in the Company's
------------------
Charter, and shall also include any governing body with similar functions of any
successor entity of the Company as it may then be constituted.
"Business Day" shall mean any day that is not a Saturday or Sunday or
-----------
a day on which
1
<PAGE>
banks are required or permitted to be closed in the State of North Carolina.
"Closing Date" shall mean the date this Warrant Agreement is originally
------------
executed.
"Commission" shall mean the Securities and Exchange Commission or any
----------
entity succeeding to its functions relating to the registration of securities
and securities markets under the federal securities laws.
"Common Stock" shall mean (except where the context otherwise indicates)
------------
the shares of Common Stock of the Company as constituted on the Closing Date,
and any equity interests (whether in the form of common stock or otherwise) into
which such shares may thereafter be changed, by reclassification or otherwise,
and shall also include (i) equity interests (whether in the form of common stock
or otherwise) of the Company of any other class (regardless of how denominated)
which is also not preferred as to dividends or distributions of assets over any
other class of equity of the Company and which is not subject to redemption and
(ii) equity interests (whether in the form of common stock or otherwise) of any
successor or acquiring Person received by or distributed to the holders of
shares of Common Stock of Company in the circumstances contemplated by Section
14(f).
"Common Stock Certificate" shall mean a certificate evidencing one or more
------------------------
shares of Common Stock.
"Company's Charter" shall mean the Company's Articles of Incorporation and
-----------------
By-laws, true, accurate and correct copies of which are attached hereto as
Exhibit A.
"Convertible Securities" shall mean any evidences of indebtedness, shares
----------------------
of stock or other securities directly or indirectly convertible into or
exchangeable (with or without payment of additional consideration) for shares of
Common Stock.
"Current Price" with respect to any security on any day shall mean the
-------------
closing sale price, regular way, on such day or, in case no such sale takes
place on such day, the average of the reported closing bid and asked prices,
regular way, in each case on the Nasdaq National Market or if such security is
not quoted on the Nasdaq National Market, on the principal national securities
exchange or quotation system on which such security is quoted or listed or
admitted to trading or, if not quoted or listed or admitted to trading on any
national securities exchange or quotation system, the average of the closing bid
and asked prices of such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or, if the security is not publicly
traded, the Fair Market Value of such security determined in accordance with
Section 13.
"Date of Exercise" shall mean, with respect to any Warrant, the first date
----------------
on which the Company shall have received (i) the Warrant Certificate evidencing
such Warrant, together with a purchase form (in the form attached hereto as
Exhibit C) duly filled in and signed, and (ii) payment of the Exercise Price.
- ---------
"Delay Period" is defined in Section 12.
------------
2
<PAGE>
"Demanding Parties" is defined in Section 12.
-----------------
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
------------
or any similar successor federal statute.
"Exercise Price" shall mean the exercise price of a Warrant, which shall
--------------
initially be $_________ per Warrant Share, subject to adjustment as provided in
Section 2(b)(vii) and Section 14.
"Expiration Date" shall mean, with respect to any Warrant, the calendar
---------------
date corresponding to the date three years from the Closing Date.
"First Union" is defined in the introductory paragraph.
-----------
"Five Percent Purchasers" shall have the meaning set forth in the
-----------------------
Registration Rights Agreement entered into as of December 9, 1996 by and between
the Company and Stifel, Nicolaus & Company, Incorporated, as in effect on the
Closing Date.
"GAAP" shall mean generally accepted accounting principles as in effect in
----
the United States of America from time to time.
"GMAC" is defined in Section 2.
----
"GMAC Warrants" is defined in Section 2.
-------------
"Holder" shall mean the registered holder, from time to time, of any
------
Subject Security.
"Holder Representative" is defined in Section 17.
---------------------
"NASD" shall mean the National Association of Securities Dealers, Inc.
----
"NASDAQ/NMS" shall mean the Nasdaq National Market.
----------
"1996 Warrants" shall mean the warrants to purchase shares of Common Stock
-------------
issued pursuant to the Warrant Agreement dated as of December 9, 1996.
"Options" shall mean rights, options or warrants (other than the Warrants)
-------
to subscribe for, purchase or otherwise acquire either shares of Common Stock or
Convertible Securities.
"Other Registrable Securities" shall mean securities as to which the
----------------------------
holders of 1996 Warrants have registration rights as of the Closing Date and as
to which other Persons are granted registration rights.
"Other Securities" shall mean any securities (other than shares of Common
----------------
Stock) of the Company or any other Person which the Holders at any time shall be
entitled to receive, or shall have received, upon the exercise of the Warrants,
in lieu of or in addition to the Warrant Shares, or which at any time shall be
issuable or shall have been issued to holders of the Warrant Shares
3
<PAGE>
in exchange for, in addition to or in replacement of, the Warrant Shares.
"Person" shall mean an individual, an association, a partnership, a
------
corporation, a limited liability company, a trust, an unincorporated
organization, a government or any other entity or organization.
"Piggyback Registration" is defined in Section 12(a).
----------------------
"Preferred Stock" shall mean shares of capital stock which are preferred as
---------------
to dividends or distributions of assets over any other class of equity
securities of the Company.
"Prospectus" shall mean the prospectus included in any Registration
----------
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
Registration Statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Public Offering" shall mean an offering and/or sale to the public of
---------------
shares of Common Stock, which offering and sale are registered under the Act.
"Register" shall mean the register for the registration and registration of
--------
transfer of the Warrants, which shall be maintained by the Company at its
principal office, or such other place as the Company may specify in writing to
the Persons named therein as Holders of the Warrants.
"Registrable Securities" is defined in Section 12(a).
----------------------
"Registration Statement" shall mean any registration statement of the
----------------------
Company that covers any of the Registrable Securities pursuant to the provisions
of this Warrant Agreement, including the Prospectus, amendments and supplements
to such Registration Statement, including post-effective amendments, all
exhibits and all material incorporated by reference or deemed to be incorporated
by reference in such Registration Statement.
"Repo Documents" is defined in the first Whereas clause.
--------------
"Representative" is defined in Section 13.
--------------
"Shelf Registration Statement" shall have the meaning provided in Section
----------------------------
12 (c) hereof.
"Supplemental Shelf Registration Statement" shall have the meaning provided
-----------------------------------------
in Section 12 (c) hereof.
4
<PAGE>
"Subject Securities" shall mean, without duplication if the context
------------------
requires, the Warrants issued hereunder and the Warrant Shares and Other
Securities issued upon exercise of such Warrants.
"Trading Day" shall mean (x) if the applicable security is quoted on the
-----------
Nasdaq National Market, a day on which a trade may be made on the Nasdaq
National Market, (y) if the applicable security is listed or admitted for
trading on a national securities exchange, a day on which such national
securities exchange is open for business or (z) if the applicable security is
not otherwise listed, admitted for trading or quoted, any day other than a
Saturday or Sunday or a day on which banking institutions in the State of New
York are authorized or obligated by law or executive order to close.
"Warrant" shall mean a Warrant issued to First Union pursuant hereto and
-------
all Warrants issued upon transfer, division or combination of, or in
substitution for, any thereof.
"Warrant Certificate" shall mean a certificate substantially in the form of
-------------------
Exhibit B evidencing one or more Warrants.
"Warrant Shares" shall mean the shares of Common Stock issuable, from time
--------------
to time, upon exercise of the Warrants.
Section 2. Representations, Warranties and Covenants . (a) The Company
-----------------------------------------
represents and warrants to the Holder that:
(i) The Company has the power to execute and deliver this Warrant
Agreement and has the power to issue the Warrant Shares and to perform its
obligations under this Warrant Agreement and the Warrant Certificates.
(ii) The execution, delivery and performance by the Company of this
Warrant Agreement and the issuance of Warrant Shares upon the exercise of
the Warrants have been duly authorized by all necessary action, and do not
(A) violate any provision of applicable law or regulation or of the
Company's Charter or of any order, writ, injunction or decree of any court
or governmental authority applicable to the Company, or (B) result in a
breach of, or constitute a default under, or require any consent under, any
contractual obligation to which the Company is a party or by which the
Company is bound or affected. The Company has taken sufficient corporate
action to reserve a sufficient number of shares of authorized but unissued
Common Stock in connection with the prospective issuance of the Warrant
Shares.
(iii) This Warrant Agreement has been duly executed and delivered
by the Company and constitutes a legal, valid, binding and enforceable
obligation of the Company, except as limited by bankruptcy, insolvency or
other similar laws now or hereafter in effect affecting the enforcement of
creditors' rights and by the application of equitable principles. The
Warrants and the Warrant Certificates constitute legal, valid, binding and
enforceable obligations of the Company, except as limited by bankruptcy,
insolvency or other similar laws now or hereafter in effect affecting the
enforcement of creditors' rights and by the application of equitable
principles, and the Warrant Shares,
5
<PAGE>
when issued upon exercise of the Warrants, will be duly authorized, validly
issued, fully paid and nonassessable and be free from all taxes, liens and
charges with respect to the issuance thereof (other than any liens or
charges resulting from the Holder's actions).
(iv) The Company's authorized shares of Common Stock are as
described in the Company's Charter. A total of 8,130,069 shares of Common
Stock were issued and outstanding on February __, 1999.
(v) Except as set forth on Exhibit E, there are no Options,
subscriptions or similar rights to acquire from the Company, or agreements
or other obligations by the Company, absolute or contingent, to issue, sell
or register shares of Common Stock, whether by Public Offering or on
conversion or exchange of Convertible Securities or otherwise.
(vi) No holder of shares of Common Stock of the Company has any
preemptive rights to subscribe for or to purchase any Warrants or Warrant
Shares under the Company's Charter, any agreement to which the Company is a
party or otherwise bound or the corporation law of the Company's
jurisdiction of organization.
(vii) Assuming the accuracy of First Union's representations as
set forth in Section 2(c), no consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other
governmental body is required to be obtained by the Company in connection
with the execution of this Warrant Agreement and the transactions
contemplated hereby, including the valid issuance of the Subject
Securities.
(viii) Assuming the accuracy of First Union's representations as
set forth in Section 2(c), it is not necessary in connection with the
offer, issuance or sale to First Union of the Subject Securities to
register the Subject Securities under the Act or any Blue Sky Law. The
Company will not take or authorize any action which may cause the issuance
or sale of the Subject Securities to be subject to any such registration,
except as contemplated by Section 12.
(ix) No legal proceeding or investigation is pending or to the
best knowledge of the Company threatened before any court, arbitrator or
administrative or governmental authority, bureau or agency to restrain or
prohibit the Company from performing this Warrant Agreement or the
transactions contemplated hereby.
(x) No representation or warranty made by the Company in this
Warrant Agreement, or in any schedule, written statement or certificate
furnished to the Holder in connection with the transactions contemplated by
this Warrant Agreement, contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements contained
herein and therein not false or misleading.
(b) The Company hereby covenants for so long as this Warrant Agreement
remains in effect that:
(i) The Company will not (and will cause any Affiliate not to)
take any
6
<PAGE>
action, including, without limitation, amending the Company's Charter,
reorganizing, consolidating, merging, dissolving, transferring assets or
issuing or selling securities or take any other voluntary action, to avoid,
or seek to avoid, observing or performing any of the terms, or complying
with the essential intent and principles, of this Warrant Agreement or the
Subject Securities, and will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may
be necessary or appropriate to protect the rights of the Holders against
dilution or impairment to the extent contemplated by the terms hereof. In
furtherance and not in limitation of the foregoing, the Company shall not
(1) enter into any agreement with respect to its securities that is
inconsistent with the rights granted to Holders of Subject Securities in
this Warrant Agreement or otherwise conflicts with the provisions hereof or
(2) increase the par value of any Warrant Shares or other Securities above
the Exercise Price then in effect. Before taking any action that would
cause an adjustment pursuant to Section 14, the Company will take all
corporate action that, in the opinion of its counsel (which may be counsel
employed by the Company), may be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares at
the then applicable Exercise Price.
(ii) The Company will take all actions necessary or appropriate
to be taken by it to validly and legally issue fully paid and nonassessable
shares of Common Stock upon exercise of the Warrants and will use best
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to
enable the Company to perform its obligations under this Warrant Agreement.
In respect of the issuance of the Warrants to the Holders, the exercise
thereof by the Holders and the resulting issuance of Subject Securities,
the Company shall not set off, recoup, claim, abate, withhold or defer any
property or amount for any reason whatsoever.
(iii) At all times during the term of this Warrant Agreement, the
Company shall retain a nationally recognized accounting firm as its
auditor.
(iv) (A) The Company will file with the Commission such
information as the Commission may require under Section 13 or 15(d) of the
Exchange Act, as applicable, and shall use its best efforts to take all
action as may be required as a condition to the availability of Rule 144 or
Rule 144A under the Act (or any successor or similar exemptive rules
hereafter in effect) and (B) the Company shall (1) furnish to any Holder of
Subject Securities upon request a written statement executed by the Company
as to the steps it has taken to comply with the current public information
requirements of Rule 144 or Rule 144A or such successor rules and (2) make
available to Holders of Subject Securities such reports, documents and
information as such Holders reasonably request to enable such Holders to
make sales of Subject Securities pursuant to such rules. If the Company
ceases to be subject to Section 13 or 15(d) of the Exchange Act, the
Company shall make available to the Holder of Subject Securities in
connection with any sale thereof, the information required by Rule
144A(d)(4) under the Act in order to permit resales of Subject Securities
pursuant to Rule 144A.
(v) If the Company becomes eligible to use Form S-3 under the Act
or a
7
<PAGE>
comparable successor form, the Company shall use its best efforts to
continue to qualify at all times for registration of its shares of Common
Stock on Form S-3 or such successor form.
(vi) In the event that any of the terms of the warrant agreement
or the warrants to be issued by the Company to GMAC/Residential Funding
Corporation or any of its Affiliates (collectively, "GMAC"), other than (1)
the initial exercise price, (2) the term of the warrant agreement, (3) the
grant of tag-along rights to GMAC, and (4) the number of warrants to be
issued, are more favorable to GMAC than the terms hereof are to the
Holders, then a majority in interest of the Holders may prepare, and the
Company agrees to sign, an amendment to this Warrant Agreement making such
changes as shall be necessary in order to make the terms of this Warrant
Agreement at least as favorable as those set forth in the Warrant Agreement
or warrants to be issued to GMAC ("GMAC Warrants").
(vii) In the event that the Company reduces the exercise price of
the 1996 Warrants to an amount below the Exercise Price of the Warrants,
the Exercise Price of the Warrants shall be reduced concurrently to such
lower price.
(c) First Union hereby represents and warrants to and agrees with the
Company that:
(i) First Union is acquiring and will acquire the Subject
Securities for its own account for investment and not with a view to any
distribution thereof that might cause a violation of the Act or any rules
or regulations thereunder; provided, however that subject to Section 6
hereof, the disposition of the Subject Securities shall be at all times
within the sole discretion of the Holders.
(ii) First Union has had an opportunity to ask questions of the
principal officers and representatives of the Company and to obtain any
additional information necessary to permit an evaluation of the benefits
and risks associated with the investment made hereby.
(iii) First Union has had sufficient experience in business,
financial and investment matters to evaluate the merits and risks involved
in the investment made hereby and is able to bear the economic risk of such
investment for an indefinite period of time.
(d) In addition to any reduction in the Exercise Price required by
Sections 2(b)(vii) and 14, the Company and First Union hereby agree that
the Company shall have the right to reduce the Exercise Price at any time,
in its sole discretion, for such limited periods as it may from time to
time determine, upon no less than 10 days and no more than 60 days prior
written notice to Holders, provided that no such reduction may be effected
without the approval of a majority of Company's Board of Directors.
Section 3. Warrant Certificates. The Warrant Certificates shall be in
--------------------
registered form only and shall be substantially in the form of Exhibit B hereto,
---------
with such changes therein as may be required from time to time to reflect any
adjustments made pursuant to Section 14 hereof.
8
<PAGE>
The Warrant Certificates may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Warrant Agreement, or as
may be required to comply with any law, or with any rule or regulation made
pursuant thereto, or with any rule or regulation of any stock exchange on which
the Common Stock or the Warrants may be listed, or any inter-dealer quotation
system upon which the Common Stock or the Warrants may be quoted. Warrant
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, President or any Executive or Senior Vice President, and attested by its
Secretary or an Assistant Secretary. The signature of any of such officers may
be manual or facsimile. Warrant Certificates bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that any of such individuals
shall have ceased to hold such offices prior to the delivery of such Warrant
Certificates or did not hold such offices on the date of this Warrant Agreement.
Section 4. Issuance and Delivery of Warrant Certificates. The Company
---------------------------------------------
hereby agrees to issue and deliver on the Closing Date to First Union 350,000
Warrants registered in the name of First Union, and shall deliver to First Union
two (2) separate Warrant Certificates in the amount of 230,000 Warrants and
120,000 Warrants, evidencing such Warrants. First Union hereby agrees to
deliver on the Closing Date to the Company for cancellation certificates
representing 186,667 1996 Warrants.
Section 5. Registration. The Warrants shall be registered in the name(s)
------------
of the recordholder(s) thereof from time to time. The Company may deem and treat
the registered Holder(s) of the Warrants as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing on the Warrant
Certificates made by anyone) for the purpose of any exercise thereof or any
distribution to the Holder(s) thereof, and for all other purposes.
Section 6. Transfer; Registration of Transfers and Exchanges.
-------------------------------------------------
(a) Subject to compliance with U.S. securities laws, the Warrants and all
rights thereunder are fully transferable in whole or in part and from time to
time to any Person. The Company shall register the transfer of any outstanding
Warrants made in accordance with the terms hereof and applicable law upon the
Register, upon surrender of the Warrant Certificate(s) to the Company's
principal office, accompanied by a written instrument of transfer substantially
in the form attached as Exhibit D, duly executed by the registered Holder(s)
thereof or by the duly appointed legal representative thereof. Upon any such
registration of transfer, new Warrant Certificate(s) evidencing such transferred
Warrants shall be issued to the transferee(s) and the surrendered Warrant
Certificate(s) shall be cancelled.
(b) Warrant Certificates may be exchanged at the option of the Holder
thereof, when surrendered to the Company at its principal office, for other
Warrant Certificates of like tenor
9
<PAGE>
and representing in the aggregate a like number of Warrants. Warrant
Certificates surrendered for exchange shall be cancelled.
Section 7. Duration and Exercise of Warrants.
---------------------------------
(a) The Warrants shall be exercisable by the Holder thereof on any Business
Day on or after the Closing Date and prior to the close of business on the
Expiration Date.
(b) Subject to the provisions of this Warrant Agreement, the Holder of each
Warrant shall have the right to purchase from the Company (and the Company shall
issue and sell to such Holder of a Warrant) one fully paid and nonassessable
share of Common Stock per Warrant held upon (i) surrender of the Warrant
Certificate evidencing such Warrant, with a purchase form substantially in the
form attached as Exhibit C duly filled in and signed, to the Company at its
principal office or at such other address as the Company may specify in writing
to the then registered Holders, and (ii) payment of the Exercise Price. Payment
of the Warrant Price shall be made at the option of the Holder by (i) cash or
certified or official bank check, (ii) by surrendering additional Warrants or
shares of Common Stock for cancellation to the extent the Company may lawfully
accept shares of Common Stock, with the value of such shares of Common Stock for
such purpose to equal the average Current Market Price of the Common Stock
during the 10 Trading Days immediately preceding the date of surrender and the
value of the Warrants to equal the difference between the aggregate value of the
Warrant Shares issuable on the exercise of such Warrants, calculated as set
forth in this clause 7(b)(ii), and the Exercise Price, or (iii) any combination
thereof, duly endorsed by or accompanied by appropriate instruments of transfer
duly executed by Holder or by Holder's attorney duly authorized in writing.
(c) Upon such surrender of the Warrant Certificate evidencing any Warrants
and payment of the Exercise Price, the Company shall, as promptly as
practicable, and in any event within five Business Days thereafter, issue and
cause to be delivered to, or upon the written order of, the Holder of such
Warrants and in such name or names as such Holder may designate, a certificate
for the Warrant Shares issued upon such exercise of such Warrants. Any Person(s)
so designated to be named therein shall be deemed to have become the Holder of
record of the Warrant Shares as of the Date of Exercise of such Warrants. The
stock certificate or certificates so delivered shall be, to the extent possible,
in such denomination or denominations as such Holder shall request.
(d) The Warrants evidenced by a Warrant Certificate are exercisable, from
time to time, either in whole or in part for any number of Warrant Shares as are
evidenced by the Warrant Certificate. If fewer than all of the Warrants
evidenced by a Warrant Certificate are exercised at any time, a new Warrant
Certificate or Certificates shall be issued as promptly as practicable (and in
any event within five Business Days), at the Company's expense, for the
remaining number of Warrants evidenced by such Warrant Certificate. All Warrant
Certificates surrendered upon exercise of Warrants shall be cancelled.
Section 8. Payment of Expenses and Taxes. The Company shall pay all
-----------------------------
expenses in connection with, and all taxes and other governmental charges that
may be imposed with respect to, the issue or delivery of Warrant Shares, unless
such tax or charge is imposed by law upon the
10
<PAGE>
Holder, in which case such taxes or charges shall be paid by the Holder. The
Company shall not be required, however, to pay any tax or other charge imposed
in connection with any transfer involved in the issue of any certificate for
Warrant Shares in any name other than that of the Holder.
Section 9. Mutilated or Missing Warrant Certificates . Upon receipt by the
-----------------------------------------
Company from any Holder of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of a Warrant Certificate and indemnity
reasonably satisfactory to it (it being understood that the written agreement of
First Union, without posting of a bond, shall be sufficient indemnity), and in
case of mutilation upon surrender and cancellation of the mutilated Warrant
Certificate, the Company will execute and deliver in lieu thereof a new Warrant
Certificate of like tenor to such Holder; provided, in the case of mutilation,
--------
no indemnity shall be required if the mutilated Warrant Certificate in
identifiable form is surrendered to Company for cancellation.
Section 10. Reservation and Issuance of Warrant Shares . The Company will
------------------------------------------
at all times authorize, reserve and have available, free from preemptive rights,
solely for the purpose of enabling it to satisfy any obligation to issue and
deliver Warrant Shares upon the exercise of the Warrants, the number of shares
of Common Stock that is equal to the total number of Warrant Shares issuable
upon the exercise of the Warrants, as such number shall vary from time to time
in accordance with Section 14, and, if necessary, will amend its Certificate of
Incorporation to provide sufficient reserves of shares of Common Stock issuable
upon exercise of the Warrants. The transfer agent for the Common Stock and
every subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the Warrants shall be irrevocably authorized and
directed at all times to reserve the maximum number of authorized shares as
shall be required for such purpose. The Company shall keep a copy of this
Warrant Agreement on file with the transfer agent for the Common Stock and with
every subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the Warrants.
Section 11. No Registration under the Act; Legend . None of the Subject
-------------------------------------
Securities has been registered under the Act. In agreeing to issue the Warrants,
the Company has relied upon the exemption from registration provided by Section
4(2) of the Act on the ground that Warrants are to be issued in transactions by
an issuer not involving any Public Offering.
A copy of this Warrant Agreement shall be filed with the Secretary of the
Company and kept at its principal office. The Warrant Certificates shall
contain a legend substantially in the following form:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE PURSUANT TO THE TERMS HEREOF HAVE THE BENEFIT AND ARE SUBJECT TO THE
TERMS AND CONDITIONS SPECIFIED IN THE WARRANT AGREEMENT, DATED AS OF FEBRUARY
12, 1999, BETWEEN THE COMPANY AND THE INITIAL HOLDER OF THE WARRANTS THEREIN
NAMED, AS FROM TIME TO TIME AMENDED, A COMPLETE AND CORRECT COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED TO THE HOLDER OF THIS WARRANT UPON WRITTEN REQUEST AND WITHOUT CHARGE.
11
<PAGE>
THE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE OR OTHER SECURITIES LAW AND MAY NOT BE TRANSFERRED
EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL THAT SUCH TRANSFER IS
NOT IN VIOLATION OF THE REGISTRATION REQUIREMENTS OF THE ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
OWNERSHIP AND TRANSFER FOR THE PURPOSE OF MAINTAINING THE COMPANY'S STATUS AS A
REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, INCLUDING A RESTRICTION ON OWNERSHIP OF EQUITY STOCK IN EXCESS OF 9.8%
(SUBJECT TO CERTAIN EXCEPTIONS) OF THE OUTSTANDING EQUITY STOCK OF THE COMPANY,
ALL AS SET FORTH IN THE COMPANY'S ARTICLES OF INCORPORATION, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE
COMPANY.
IN ADDITION, THE COMPANY WILL FURNISH TO ANY STOCKHOLDER ON REQUEST AND
WITHOUT CHARGE A FULL STATEMENT OR SUMMARY OF THE DESIGNATIONS AND PREFERENCES,
CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO
DIVIDENDS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF
EACH CLASS WHICH THE COMPANY IS AUTHORIZED TO ISSUE AND THE DIFFERENCES IN THE
RELATIVE RIGHTS AND PREFERENCES BETWEEN SUCH SHARES OF EACH SERIES, IF ANY, TO
THE EXTENT THEY HAVE BEEN SET, AND OF THE AUTHORITY OF THE BOARD OF DIRECTORS TO
SET THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. SUCH REQUEST MAY
BE MADE TO THE SECRETARY OF THE COMPANY.
The Common Stock Certificates shall contain a legend substantially in the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE OR OTHER
SECURITIES LAW AND MAY NOT BE TRANSFERRED EXCEPT (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR (ii) UPON FIRST FURNISHING TO THE
COMPANY AN OPINION OF COUNSEL THAT SUCH TRANSFER IS NOT IN VIOLATION OF THE
REGISTRATION REQUIREMENTS OF THE ACT.
12
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS
ON OWNERSHIP AND TRANSFER FOR THE PURPOSE OF MAINTAINING THE COMPANY'S STATUS AS
A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, INCLUDING A RESTRICTION ON OWNERSHIP OF EQUITY STOCK IN EXCESS OF 9.8%
(SUBJECT TO CERTAIN EXCEPTIONS) OF THE OUTSTANDING EQUITY STOCK OF THE COMPANY,
ALL AS SET FORTH IN THE COMPANY'S ARTICLES OF INCORPORATION, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE
COMPANY.
IN ADDITION, THE COMPANY WILL FURNISH TO ANY STOCKHOLDER ON REQUEST AND
WITHOUT CHARGE A FULL STATEMENT OR SUMMARY OF THE DESIGNATIONS AND PREFERENCES,
CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO
DIVIDENDS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF
EACH CLASS WHICH THE COMPANY IS AUTHORIZED TO ISSUE AND THE DIFFERENCES IN THE
RELATIVE RIGHTS AND PREFERENCES BETWEEN SUCH SHARES OF EACH SERIES, IF ANY, TO
THE EXTENT THEY HAVE BEEN SET, AND OF THE AUTHORITY OF THE BOARD OF DIRECTORS TO
SET THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. SUCH REQUEST MAY
BE MADE TO THE SECRETARY OF THE COMPANY.
Any opinion of counsel obtained in connection with a transfer or delegending of
the Subject Securities will be at the expense of the relevant Holder. At such
time as a legend stated above is no longer applicable for any reason, including
without limitation the operation of Section 12 or Rule 144(k), the Company will,
upon receipt of an opinion of counsel to the relevant Holder to such effect,
issue new Warrant Certificates or Common Stock Certificates which do not contain
such legend.
Section 12. Registration Rights.
-------------------
(a) Piggyback Registration
----------------------
(i) If (and on each occasion that) the Company proposes to register
any of its securities under the Act in connection with a Public Offering or
effect an underwritten Public Offering under an effective shelf
registration statement, either for the Company's own account and/or for the
account of any of its securityholders, other than any such registration
described in the next to last sentence of clause (ii) below (each such
registration being herein called a Piggyback Registration), then the
Company will give written notice to all Holders who then hold Registrable
Securities (as hereinafter defined) of the Company's intention to effect
such Piggyback Registration not later than the earlier to occur of (A) 30
days prior to the anticipated initial filing date of such Piggyback
Registration if such registration is on Form S-3 and (B) 45 days prior to
such date if the registration is on any other form.
13
<PAGE>
(ii) Subject to the provisions contained in Section 12(b) and in the
next to last sentence of this clause (ii), in connection with any
registration subject to the provisions of this Section 12, if within 20
days after the date of the Company notice pursuant to clause (i) above
Holders of Registrable Securities request the inclusion of some or all of
the Registrable Securities owned by them in such registration (in the form
of shares of Common Stock to be obtained upon exercise of the Warrants then
held by them), the Company will use best efforts to effect the registration
under the Act of all Registrable Securities which such Holders request to
be registered. Holders of Registrable Securities shall be permitted to
withdraw all or any part of the Registrable Securities of such Holders from
any Piggyback Registration at any time prior to the final filing (which has
been made by and in the discretion of the Company) of such Piggyback
Registration, and the Company shall have the right to postpone or withdraw
any registration without obligation to any Holder (other than for payment
of any reasonable expense incurred by the Holders). Notwithstanding
anything herein to the contrary, the Company will not be obligated or
required to include any Registrable Securities in any registration effected
on Form S-4; on Form S-8 solely to implement an employee benefit plan
(including any option plan) or a transaction of the type to which Rule 145
of the Commission or any successor provision is applicable; or in
connection with a dividend reinvestment or direct stock purchase plan for
the benefit of the Company's stockholders. The term "Registrable
-----------
Securities" shall mean the Warrants, any shares of Common Stock or Other
----------
Securities issuable or issued upon exercise of the Warrants, any shares of
Common Stock or Other Securities of the Company issued as a dividend or
other distribution with respect to, or in exchange or in replacement of
such shares of Common Stock.
(b) Allocation on Piggyback Registrations. In connection with an
-------------------------------------
underwritten Public Offering, if the managing underwriter or underwriters in
connection with a Piggyback Registration shall advise the Company in writing
that, in the reasonable opinion of such managing underwriter or underwriters,
the inclusion of all Registrable Securities for which registration is requested
pursuant to Section 12(a) hereof would materially and adversely affect the
success of such offering, then subject to the rights, if any, of the Five
Percent Purchasers, registration for the Registrable Securities shall be cut
back such that (i) no Holder of Registrable Securities shall be entitled to
participate in such underwritten Public Offering unless all shares of Common
Stock proposed to be sold by the Company for its own account or for the account
of the parties for which the underwritten Public Offering was commenced as a
result of the exercise of demand registration rights ("Demanding Parties") have
been included in such underwritten Public Offering, and (ii) after the Company
or the Demanding Party has included its own shares of Common Stock, the Holders,
the holders of 1996 Warrants and the holders of GMAC Warrants (if not a
Demanding Party) and any other owners of Other Registrable Securities shall be
entitled to include their Registrable Securities and Other Registrable
Securities in an amount up to the amount that such managing underwriter or
underwriters advise may be included therein (as allocated among the Holders, the
holders of 1996 Warrants, the holders of GMAC Warrants and such other owners of
Registrable Securities pro rata on the basis of the number of securities
requested to be included therein by each such Holder or holder).
14
<PAGE>
(c) Demand Registration.
-------------------
(i) The Company shall cause to be filed with the Commission as promptly
as practicable, but in no event more than three (3) months following the
Closing Date, a shelf Registration Statement pursuant to Rule 415 under the
Securities Act (the "Shelf Registration Statement") on Form S-11 (or other
appropriate form, such as Form S-3 after having established eligibility
therefor) to cover sales of the Registrable Securities. In connection with
the Shelf Registration Statement, the Company shall also register the offer
and sale of the Warrant Shares issuable upon exercise of the Warrants as a
primary registration. The Company shall use its best efforts to cause such
Shelf Registration Statement to be declared effective by the Commission as
soon as practicable thereafter. The Company shall use its best efforts to
keep such Shelf Registration Statement continuously effective until the
earlier to occur of three (3) years following the Closing Date or such time
as, in the written opinion of counsel to the Company, such registration is
not required for the unrestricted resale under Rule 144 (k) of Registrable
Securities entitled to registration rights under this Agreement. If Holders
of a majority of the Registrable Securities to be registered for resale in
the Shelf Registration Statement so elect, an offering of Registrable
Securities pursuant to the Shelf Registration Statement may be effected in
the form of an underwritten offering. Upon the receipt of a notice of
election by a majority of the Registrable Securities to effect an
underwritten offering, the Company will notify in writing all Holders whose
names are not included in such notice and such non-electing Holders may,
within five (5) business days of receipt of such notice, elect to be
included with, and treated as, an electing Holder. If the managing
underwriter or underwriters advises the Company and the Holders of such
Registrable Securities that in its opinion the amount of Registrable
Securities proposed to be sold in such offering exceeds the amount of
Registrable Securities which can be sold in such offering, there shall be
included in such underwritten offering the amount of such Registrable
Securities which in the opinion of such underwriter(s) can be sold, and
such amount or number of shares of such Registrable Securities shall be
allocated pro rata among the Holders electing to participate in such
underwritten offering.
(ii) In addition to their rights under Sections 12(a), (b) and (c)(i)
hereof following the expiration of the Shelf Registration Statement,
Holders collectively holding at least 25% of the then outstanding
Registrable Securities shall have the right to request and have effected
registrations of Registrable Securities for a Public Offering of
Registrable Securities unless, in the written opinion of counsel to the
Company, which opinion is reasonably acceptable to such Holders, such
registration is not necessary for such Holders to sell their Registrable
Securities in the manner contemplated in compliance with applicable
securities laws. Such requests shall be in writing and shall state the
number of Registrable Securities to be disposed of and the intended method
of disposition of such Registrable Securities by such Holders. The Company
shall give notice to all of the Holders of Registrable Securities of the
receipt of a request for registration pursuant to this Section 12(c)(ii)
and shall provide a reasonable opportunity for such Persons to participate
in such a registration provided they elect to do so in writing to the
Company within 15 days after the date of the Company's notice. Subject to
the foregoing, the Company will use its best efforts to effect promptly the
registration of all Registrable Securities to the extent requested by the
Holder or Holders thereof, and to
15
<PAGE>
keep such registration effective for 36 months or until all such Holder's
Registrable Securities registered thereunder are sold, whichever is
shorter. If so requested by any Holder in connection with a registration
under this Section 12(c)(ii), and if the Company is then eligible to use
Form S-11 or Form S-3, the Company shall take such steps as are required to
register such Holder's Registrable Securities for sale on a delayed or
continuous basis (the "Supplemental Shelf Registration") under Rule 415 of
the Act or any successor provision (if applicable).
(iii) The Company further agrees to use its best efforts to prevent
the happening of any event that would cause a Registration Statement to
contain a material misstatement or omission or to be not effective and
usable for resale of the Registrable Securities during the period that such
Registration Statement is required to be effective and usable. Upon the
occurrence of any event that would cause a Registration Statement (1) to
contain a material misstatement or omission, or (2) to be not effective and
usable for resale of Registrable Securities during the period that such
Registration Statement is required to be effective and usable, the Company
shall as promptly as reasonably practicable file an amendment to the
Registration Statement, in the case of clause (1) immediately above,
correcting any such misstatement or omission, and in the case of either
clause (1) or (2) immediately above, use its best efforts to cause such
amendment to be declared effective and such Registration Statement to
become usable as soon as reasonably practicable thereafter. If requested
by the majority in interest of the Holders selling Registrable Securities
pursuant to an underwritten offering as provided in this Section 12(c), the
Company's management shall cooperate in roadshow presentations to assist
such Holders in selling their Registrable Securities and shall otherwise
work in good faith with any managing underwriter(s) in connection with
taking all actions necessary to successfully consummate the Public
Offering. If any demand registration pursuant to this Section 12(c)
involves an underwritten public offering, the underwriter(s) to be used in
connection with such registration shall be selected by a majority in
interest of the Holders of Registrable Securities to be sold in such
registration , subject to the approval of the Company (which shall not be
unreasonably withheld).
(iv) Notwithstanding Sections 12(c)(i) and (ii) above, if the
Company files a Registration Statement (other than on Form S-4 or Form S-8
or any successor form or in connection with a dividend reinvestment plan or
direct stock purchase plan) with respect to an underwritten Public Offering
of Common Stock or proposes to effect an underwritten Public Offering for
its own account or the account of a Demanding Party pursuant to an
effective shelf registration statement and the managing underwriter or
underwriters advise the Company in writing that an underwritten offering of
Registrable Shares would materially and adversely affect the success of
such proposed underwritten Public Offering, then the Company shall provide
timely written notice of such advice from the underwriter(s) to the Holders
(a "Holdback Notice") and the Company shall not be required (1) to cause a
Registration Statement for an underwritten Public Offering that is demanded
pursuant to Section 12 (c)(ii) after the date on which the Holdback Notice
is given to the Holders to become effective or (2) to effect an
underwritten Public Offering under a Shelf Registration Statement that is
elected pursuant to Section 12(c)(i) after the date on which such Holdback
Notice is given, in either case until the earlier of (A) the abandonment of
the previously proposed underwritten offering or (B) 90 days after the
16
<PAGE>
effective date of the registration statement for such previously proposed
Public Offering or, in the case of a previously proposed Public Offering
pursuant to an effective shelf registration statement, 75 days after the
first day on which sales to the public commence pursuant to such offering,
in either case unless a shorter period is agreed to by such managing
underwriter or underwriters (the "Delay Period"); provided that the Company
shall use its best efforts (taking into account the possibility of other
pending demands for registration made by other securityholders) to effect
an underwritten Public Offering under a Shelf Registration Statement
elected under Section 12(c)(i) or to achieve the effectiveness of the
Registration Statement demanded pursuant to Section 12 (c) (ii), as the
case may be, promptly following such Delay Period and that the Company
shall treat any demand or election by the Holders with at least the same
priority as any pending demands for registration made by other
securityholders. The foregoing provisions shall not apply to a previously
proposed underwritten Public Offering for the account of a Demanding Party
unless such Demanding Party has agreed to restrictions on such Demanding
Party's ability to sell securities of the Company after the Holders demand
or elect, as the case may be, an underwritten Public Offering (which
restrictions shall be at least as favorable to the Holders as those
provided to other Demanding Parties under this Section 12(c)(iv)). This
Section 12(b)(iv) shall not apply to any Holder of Registrable Securities
if such Holder is prevented by applicable statute or regulation from
entering into any such agreement; provided, however, that any such Holder
shall undertake upon written request not to effect any underwritten
offering during the Delay Period unless it has provided forty-five (45)
days' prior written notice of such offering to the managing underwriter or
underwriters.
(v) The Company agrees that without the written consent of the
managing underwriter or underwriters in an underwritten offering of
Registrable Securities pursuant to Sections 12(a) and 12(c) hereof, it will
not effect any public sale or distribution of its equity securities (except
(i) pursuant to registrations on Form S-4 or Form S-8 or any successor form
or pursuant to any dividend reinvestment or direct stock purchase plan of
the Company, (ii) in connection with an exchange offer, or (iii) in
connection with the acquisition of assets by the Company or its
subsidiaries) from the date the Company receives a notice of election to
effect an underwritten offering under Section 12(c) (i) or a demand for
registration under Section 12(c) (ii) until the earlier of (A) the
abandonment of such underwritten offering or (B) 90 days after the
effective date of the registration statement for such previously proposed
Public Offering or, in the case of a previously proposed Public Offering
pursuant to an effective Shelf Registration Statement, 75 days after the
first day on which sales to the public commence pursuant to such offering,
in either case unless a shorter time period is agreed upon by the managing
underwriter or underwriters.
(d) Other Provisions Relating to Registration Rights. In connection with
------------------------------------------------
the Company's registration obligations pursuant to this Section 12, the Company
shall as expeditiously as possible:
(i) Prepare and file with the Commission, as soon as practicable, a
Registration Statement or Registration Statements on such form as shall be
available for the sale of the Registrable Securities by the Holders thereof in
accordance with the
17
<PAGE>
intended method or methods of distribution thereof, and use its best
efforts to cause such Registration Statement to become effective and to
remain effective as provided herein; provided, however, that before filing
a Registration Statement or Prospectus or any amendments or supplements
thereto (including documents that would be incorporated or deemed to be
incorporated therein by reference), the Company shall notify the Holders of
the Registrable Securities covered by such Registration Statement, their
counsel and the managing underwriters, if any, of its intention to file
such documents, and upon written request shall furnish to such parties so
requesting copies of all such documents proposed to be filed, which
documents will be subject to the review of such Holders, their counsel and
such underwriters, if any; provided, further, that the Company shall not be
required to deliver to such Holders a copy of any such document that has
not been materially changed from a copy of such document that was
previously delivered to such Holders.
(ii) Prepare and file with the Commission such amendments and post-
effective amendments to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective during the period
provided in this Warrant Agreement with respect to the disposition of all
securities covered by such Registration Statement, and cause the related
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) under the Act.
(iii) Notify the selling Holders of the Registrable Securities, their
counsel and the managing underwriters, if any, promptly, and (if requested
in writing by any such Person), confirm such notice in writing: (1) when a
Registration Statement or any amendment thereto has been filed, and, with
respect to a Registration Statement or any post-effective amendment, when
the same has become effective, (2) of any request by the Commission or any
other Federal or state governmental authority for amendments or supplements
to a Registration Statement or related Prospectus or for additional
information, (3) of the issuance by the Commission of any stop order
suspending the effectiveness of a Registration Statement or the initiation
of any proceedings for that purpose, (4) if at any time the representations
and warranties of the Company contained in any agreement (including any
underwriting agreement) contemplated by Section 12(d)(xiv) below cease to
be true and correct, (5) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any proceeding for such
purpose, and (6) of the happening of any event that makes any statement
made in such Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in
any material respect or that requires the making of any changes to such
Registration Statement, Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, not misleading, and
that in the case of the Prospectus, it will not contain any untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
18
<PAGE>
(iv) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement, or the lifting of
any suspension of the qualification (or exemption from qualification) of
any of the Registrable Securities for sale in any jurisdiction.
(v) If requested by the managing underwriters, if any, or the
Holders of a majority in interest of the Registrable Securities being sold
in connection with an underwritten offering, promptly include in a
Prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, and such Holders may reasonably request in
order to permit the intended method of distribution of such securities and
make all required filings of such Prospectus supplement or such post-
effective amendment as soon as practicable after the Company has received
such request.
(vi) Furnish to each selling Holder of Registrable Securities, their
counsel and each managing underwriter, if any, without charge, at least one
conformed copy of the Registration Statement and each post-effective
amendment thereto, including financial statements (including schedules, all
documents incorporated or deemed to be incorporated therein by reference,
and all exhibits).
(vii) Deliver to each selling Holder, their counsel, and the
Underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request in connection
with the distribution of the Registrable Securities; and the Company hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Securities and the
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any such amendment or
supplement thereto.
(viii) Use its best efforts to register or qualify, or obtain an
exemption therefrom (or cooperate with the selling Holders of Registrable
Securities, the underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification)) of such Registrable Securities for offer
and sale under the securities or "Blue Sky" laws of such jurisdictions
within the United States as any seller (or underwriter) reasonably requests
in writing and to keep each such registration or qualification (or
exemption therefrom) effective during the period such Registration
Statement is required to be kept effective; provided, however, that the
Company will not be required to (1) qualify generally to do business in any
jurisdiction where it is not then so qualified, or (2) take any action that
would subject it to general service of process or to taxation in any
jurisdiction where it is not then so subject other than as to matters and
transactions related to such Registration Statement.
(ix) Cooperate with the selling Holders of Registrable Securities
and the managing underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be
sold, which certificates shall be in a form eligible for deposit with The
Depository Trust Company; and enable such Registrable Securities to be in
such denominations and registered in such names as the
19
<PAGE>
managing underwriters, if any, or Holders may request in writing at least
two (2) business days prior to any sale of Registrable Securities.
(x) Use its best efforts to cause the Registrable Securities
covered by such Registration Statement to be registered with or approved by
such other governmental agencies or authorities within the United States as
may be necessary to enable the seller or sellers thereof or the
underwriters, if any, to consummate the disposition of such Registrable
Securities.
(xi) Upon the occurrence of any event contemplated by Section
12(d)(iii)(6) above, prepare a supplement or post-effective amendment to
the Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Securities being sold thereunder, such
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
(xii) Prior to the effective date of the Registration Statement
relating to the Registrable Securities, provide a CUSIP number for the
Registrable Securities.
(xiii) Use its best efforts to cause the Common Stock covered by such
Registration Statement to be listed on the New York Stock Exchange (or on
such other exchange or trading system on which the Common Stock is then
listed or authorized to be quoted), and to cause all Registrable Securities
other than Common Stock that are covered by such Registration Statement to
be authorized to be quoted on the NASDAQ/NMS or listed on a national
securities exchange to the extent eligible therefor under the rules of the
NASDAQ/NMS or such national securities exchange.
(xiv) Enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary in underwritten
offerings) and take all such other actions reasonably requested by the
Holders of a majority in interest of the Registrable Securities being sold
in connection therewith (including those reasonably requested by the
managing underwriters, if any) in order to expedite or facilitate the
disposition of such Registrable Securities, and in such connection, whether
or not an underwriting agreement is entered into and whether or not the
registration is an underwritten offering, (1) make such representations and
warranties to the Holders of such Registrable Securities and the
underwriters, if any, with respect to the business of the Company and its
subsidiaries, and the Registration Statement, Prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in
each case, in form, substance and scope as are customarily made by issuers
to underwriters in underwritten offerings, and, if true, confirm the same
if and when requested in writing to do so, (2) obtain opinions of counsel
to the Company and updates thereof (which counsel and opinions, in form,
scope and substance, shall be reasonably satisfactory to the managing
underwriters, if any, and counsel to the Holders of Registrable Securities
being sold), addressed to each selling Holder and each of the underwriters,
if any, covering the matters customarily covered in opinions requested in
underwritten offerings and such other matters as may be reasonably
20
<PAGE>
requested in writing by such counsel and underwriters, (3) obtain "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed to each selling Holder (unless such accountants shall
be prohibited from so addressing such letters by applicable standards of
the accounting profession) and each of the underwriters, if any, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings, (4) if an underwriting agreement is entered into,
the same shall contain indemnification provisions and procedures
substantially to the effect set forth in Section 12(f) hereof with respect
to all parties to be indemnified pursuant to Section 12(f) and (5) deliver
such additional documents and certificates as may be reasonably requested
by the Holders of a majority of the Registrable Securities being sold,
their counsel and the managing underwriters, if any, to evidence the
continued validity of the representations and warranties made pursuant to
Section 12(d)(xiv)(1) above and to evidence compliance with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Company. The above shall be done at each closing under
such underwriting or similar agreement, or as and to the extent required
thereunder.
(xv) Make available for inspection by a representative of the
Holders of Registrable Securities being sold, each underwriter
participating in any such disposition of Registrable Securities, if any,
and any attorney or accountant retained by such selling Holder or
underwriter, at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of the Company and its subsidiaries, and cause the officers,
directors and employees of the Company and its subsidiaries to supply all
information reasonably requested by any such representative, underwriter,
attorney or accountant in connection with such Registration Statement;
provided, however, that any information that is designated by the Company
in writing as confidential at the time of delivery of such information
shall be kept confidential by such Persons unless (1) disclosure of such
information is required by court or administrative order, (2) disclosure of
such information, in the opinion of counsel to such Person, is required by
law, or (3) such information becomes generally available to the public
other than as a result of a disclosure or failure to safeguard by such
Person. Without limiting the foregoing, no such information shall be used
by such Person as the basis for any market transactions in securities of
the Company or its subsidiaries in violation of law.
(xvi) Comply with all applicable rules and regulations of the
Commission and make generally available to its security Holders earning
statements satisfying the provisions of Section 11(a) of the Act and Rule
158 thereunder, or any similar rule promulgated under the Act, no later
than forty-five (45) days after the end of any twelve (12) month period (or
ninety (90) days after the end of any twelve (12) month period if such
period is a fiscal year) (A) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firm commitment
or best efforts underwritten offering, and (B) if not sold to underwriters
in such an offering, commencing on the first day of the first fiscal
quarter of the Company after the effective
21
<PAGE>
date of a Registration Statement, which statements shall cover such twelve
(12) month periods.
(xvii) Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of any Registration Statement at the
earliest possible moment.
(xviii) Cooperate and assist in any filings required to be made with
the NASD and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter" that is
required to be retained in accordance with the rules and regulations of the
NASD).
(e) Registration Expenses. All fees and expenses incident to the
---------------------
Company's performance of or compliance with this Section 12 will be borne by the
Company, regardless of whether a Registration Statement filed pursuant to this
Section 12 becomes effective and whether or not any securities are sold pursuant
to such Registration Statement, including without limitation:
(i) all registration and filing fees and expenses associated
therewith including, without limitation, fees and expenses with respect to
filings required to be made with the Commission and the NASD;
(ii) fees and expenses of compliance with federal securities or state
Blue Sky laws (including fees and disbursements of counsel for the
Underwriters or selling Holders in connection with Blue Sky qualifications
of the Registrable Securities pursuant to Section 12(d)(viii) hereof);
(iii) expenses of printing (including, without limitation, expenses
of printing or engraving certificates for the Registrable Securities in a
form eligible for deposit with The Depositary Trust Company and of printing
Prospectuses), messenger and delivery services and telephone;
(iv) reasonable fees and disbursements of counsel for the Company and
of not more than one counsel for the Holders of Registrable Securities
(chosen by a majority of the Holders of the Registrable Securities to be
included in the Registration Statement);
(v) fees and disbursements of all independent certified public
accountants of the Company (including the expenses of any special audit and
"cold comfort" letters required by or incident to such performance);
(vi) fees and expenses associated with any NASD filing required to be
made in connection with a Registration Statement, including, if applicable,
the fees and expenses of any "qualified independent underwriter" (and its
counsel) that is required to be retained in accordance with the rules and
regulations of the NASD; and
(vii) fees and expenses of listing the Registrable Securities on any
securities exchange or quotation system in accordance with Section
12(d)(xii) hereof.
22
<PAGE>
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, rating
agency fees and the fees and expenses of any Person, including special experts,
retained by the Company. The Holders of Registrable Securities shall bear the
expense of any broker's commission or Underwriters' discount or commission.
(f) Indemnification; Contribution.
-----------------------------
(i) Subject to applicable law, the Company will indemnify and hold
harmless each Holder of Registrable Securities (and each underwriter for
such Holder (if any and if retained by the Holder)) being registered, and
each person who controls any of them within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, to the full extent lawful, from
and against any and all losses, claims, damages, judgments, expenses and
liabilities, joint or several (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in any settlement
of, any action, suit or proceeding or any claim asserted), to which they,
or any of them, may become subject under the Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages, judgments, expenses or liabilities
arise out of or are based on (A) any untrue statement or alleged untrue
statement of a material fact contained in such Registration Statement
(including any related preliminary or definitive Prospectus, or any
amendment or supplement to such Registration Statement or Prospectus), (B)
any omission or alleged omission to state in such document a material fact
required to be stated in it or necessary to make the statements in it not
misleading, or (C) any violation by the Company of the Act, the Exchange
Act, any Blue Sky Laws or any rule or regulation thereunder in connection
with such registration; provided, however, that the Company will not be
liable to the extent that such loss, claim, damage, judgment, expense or
liability arises from and is based on a material untrue statement or
omission or alleged material untrue statement or omission made in reliance
on and in conformity with information furnished in writing to the Company
by such Holder, underwriter or controlling person expressly for use in such
Registration Statement. Each Holder of Registrable Securities will
indemnify and hold harmless the Company, each other Holder of Registrable
Securities and each person who controls any of them within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, from and against
any and all losses, claims, damages, judgments, expenses and liabilities,
joint or several, to which they, or any of them, may become subject under
the Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise insofar as such losses, claims,
damages, judgments, expenses and liabilities arise solely by reason of a
material untrue statement or omission made in reliance on and in conformity
with information furnished in writing to the Company by such Holder for use
in such Registration Statement. The obligations of any Holder under this
clause (i) shall be limited to the net proceeds to such Holder of the
Registrable Securities sold pursuant to the Registration Statement to which
the loss, claim, damage, judgment, expense or liability relates.
(ii) If the indemnification provided for in clause (i) above for any
reason is held by a court of competent jurisdiction to be unavailable to an
indemnified party in
23
<PAGE>
respect of any losses, claims, damages, judgments, expenses or liabilities
referred to therein, then each indemnifying party under such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute to
the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, judgments, expenses or liabilities in such
proportion as is appropriate to reflect the relative fault, if any, of the
Company and the other selling Holders in connection with the statements or
omissions which resulted in such losses, claims, damages, expenses or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company and the selling Holders shall be determined
by reference to, among other things, whether the untrue statement or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the selling Holders and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. The Company, the Holders, and the underwriters agree that it
would not be just and equitable if contribution pursuant to this clause
(ii) were determined by pro rata or per capita allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding sentence. The
obligations of any Holder under this clause (ii) are several, not joint,
and shall be limited to an amount equal to the net proceeds to such Holder
of Registrable Securities sold pursuant to the Registration Statement to
which the loss, claim, damage, judgment expense or liability relates. No
person found guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
(iii) If any action or proceeding (including any governmental or
regulatory investigation or proceeding) shall be brought or asserted
against any indemnified party with respect to which indemnity may be sought
against the indemnifying party pursuant to this Section 12(f), such
indemnified party shall promptly notify the indemnified party in writing
and the indemnifying party shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to
such indemnified party and the indemnifying party shall be responsible for
the payment of all fees and expenses; provided, however, that the omission
so to notify the indemnifying party shall not relieve the indemnifying
party from any liability that it may have to any indemnified party (except
to the extent that the indemnifying party is materially prejudiced or
otherwise forfeits substantive rights or defenses by reason of such
failure). An indemnified party shall have the right to employ separate
counsel in any such action or proceeding and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (1) the indemnifying party agrees in
writing to pay such fees and expenses, (2) the indemnifying party has
failed promptly to assume the defense and employ counsel satisfactory to
the indemnified party or (3) the named parties to any such action or
proceeding (including any impleaded parties) include both the indemnified
party and the indemnifying party and such indemnified party shall have been
advised in writing by its counsel that representation of it and the
indemnifying party by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such
representation has been proposed) due to actual or potential differing
interests between them (in which case the indemnifying party shall not have
the right to assume the defense of such action on behalf of such
indemnified party). It is
24
<PAGE>
understood that the indemnifying party shall not, in connection with any
one such action or separate but substantially similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time
for such indemnified parties which firm shall be designated in writing by
the Holders of a majority in interest of the Registrable Securities on
behalf of the Holders of all of the Registrable Securities, and that all
such fees and expenses shall be reimbursed as they are incurred. The
indemnifying party shall not be liable for any settlement of any such
action effected without the written consent of the indemnifying party
(which shall not be unreasonably withheld), but if settled with the written
consent of the indemnifying party, or if there is a final judgment with
respect thereto, the indemnifying party agrees to indemnify and hold
harmless each indemnified party from and against any loss or liability by
reason of such settlement or judgment. The indemnifying party shall not,
without the prior written consent of each indemnified party affected
thereby, effect any settlement of any pending or threatened proceeding in
which such indemnified party has sought indemnity hereunder, unless such
settlement includes an unconditional release of such indemnified party from
all liability arising out of such action, claim, litigation or proceeding.
(g) Survival.
--------
The provisions of this Section 12 shall survive the termination or
expiration of this Warrant Agreement.
Section 13. Fair Market Value. In order to determine Fair Market Value
-----------------
for purposes of this Warrant Agreement, the Company and a representative (the
"Representative") designated by the Holders shall attempt to agree upon such
Fair Market Value. If the Company and the Representative are unable to agree
upon the Fair Market Value within 20 days after notification of the event
requiring such a determination, the Company and the Representative shall agree
on an Appraiser to be appointed by the Company to determine the Fair Market
Value. In the event that the parties cannot agree upon an Appraiser in the
foregoing period, then the determination of Fair Market Value shall be conducted
by two Appraisers, one of whom shall be selected by the Company, and one of whom
shall be selected by the Representative. If either of such two determinations of
Fair Market Value is within ten percent (10%) of the other determination of Fair
Market Value, then the Fair Market Value shall be the average of such two
determinations. The Company shall pay the expenses of each such Appraiser. If
neither of such two determinations of Fair Market Value is within ten percent
(10%) of the other determination of Fair Market Value, a third Appraiser shall
be selected by the other two Appraisers. The third Appraiser shall make its own
independent final determination of Fair Market Value. The Company shall pay the
expenses of such third Appraiser. All appraisal reports shall be in writing,
shall be signed by the Appraisers and shall be delivered to the Company and the
Holders. The Fair Market Value determined pursuant to this Section 13 shall be
final and binding upon the Company and the Holders.
Section 14. Adjustment of Exercise Price and Number of Shares of Common
-----------------------------------------------------------
Stock Purchasable or Number of Warrants. In addition to any reduction in the
- ---------------------------------------
Exercise Price required pursuant to Section 2(b)(vii) above, prior to the
Expiration Date, the Exercise Price, the number
25
<PAGE>
of shares of Common Stock purchasable upon the exercise of each Warrant and the
number of Warrants outstanding are subject to adjustment from time to time upon
the occurrence of any of the events enumerated in this Section 14.
(a) In case the Company shall at any time after the date of this Warrant
Agreement (i) make a distribution to holders of shares of Common Stock of
additional shares of Common Stock or of Other Securities, (ii) subdivide the
outstanding shares of Common Stock, (iii) combine the outstanding shares of
Common Stock into a smaller number of shares of Common Stock, or (iv) issue any
Other Securities by reclassification of the shares of Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing entity), then (1) the number and kind of shares of
Common Stock and/or Other Securities issuable, at the time of the record date
for such dividend or of the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the Holder(s) after
such time shall be entitled to receive upon exercise of its Warrants the
aggregate number and kind of shares of Common Stock and/or Other Securities
which, if its Warrants had been exercised immediately prior to such time, it
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification and (2) the Exercise
Price shall be proportionately adjusted. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) (i) In case the Company shall issue any Common Stock or any class or
series of capital stock that is not Preferred Stock at a price per share
less than the greater of (i) $___ and (ii) the Fair Market Value per share
of such security (such greater amount being hereinafter referred to as the
"Base Rate"), then the Exercise Price in effect at the opening of business
on the day next following such issuance shall be adjusted to equal the
price determined by multiplying (A) the Exercise Price in effect
immediately prior to the opening of business on the day next following such
issuance by (B) a fraction, the numerator of which shall be the sum of (x)
the number of shares of all classes and series of capital stock (other than
Preferred Stock) outstanding on the close of business on the day next
preceding the day of such issuance and (y) the number of shares that could
be purchased at the Base Rate from the aggregate proceeds to the Company
from the issuance of such new shares of capital stock, and the denominator
of which shall be the sum of (xx) the number of shares of all classes and
series of capital stock (other than Preferred Stock) outstanding on the
close of business on the day next preceding the day of such issuance and
(yy) the number of additional shares of capital stock being issued. For
purposes of this Section, "Fair Market Value" shall mean, as to any class
or series of capital stock that is not publicly traded, the fair value of
the shares of such class or series as determined in accordance with Section
13 hereof and, as to publicly-traded securities, shall mean the average of
the daily Current Market Prices of a share of such capital stock during the
ten (10) Trading Days immediately preceding the effective day of the
Exercise Price adjustment pursuant to this subsection. Upon each
adjustment of the Exercise Price, the number of Warrant Shares that a
Holder of a Warrant shall be entitled to receive upon exercise shall be
adjusted by multiplying the number of Warrant Shares
26
<PAGE>
issuable upon exercise immediately prior to such adjustment by a fraction,
the numerator of which is $______________ and the denominator of which is
the Exercise Price after such adjustment.
(ii) If at any time Company shall issue or sell any Options or any
Convertible Securities, whether or not the rights to exercise, exchange or
convert thereunder are immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise of such Options or upon
conversion or exchange of such Convertible Securities shall be less than
the Base Rate in effect immediately prior to the time of such issue or
sale, then the number of shares for which a Warrant is exercisable and the
Exercise Price shall be adjusted as provided in Section 12(b)(i) above on
the basis that the maximum number of additional shares of Common Stock
issuable pursuant to all such Options or necessary to effect the conversion
or exchange of all such Convertible Securities shall be deemed to have been
issued and outstanding and Company shall be deemed to have received all of
the consideration payable therefor, if any, as of the date of the issuance
of such Options and Convertible Securities. No further adjustments of the
Exercise Price shall be made upon the actual issue of such Common Stock or
of such Convertible Securities upon exercise of such Options or upon the
actual issue of such Common Stock upon such conversion or exchange of such
Convertible Securities or upon the expiration or termination of such
Options or Convertible Securities. If the number of shares for which any
Option is exercisable or the rate at which any Convertible Securities are
convertible into or exchangeable for shares of Common Stock shall increase,
the number of shares of Common Stock purchasable upon the exercise of the
Warrants in effect at the time of such event shall promptly be readjusted
to the number of shares of Common Stock which would have been so
purchasable at such time had such Options or Convertible Securities
initially been exercisable or convertible into such changed number of
shares of Common Stock and the Exercise Price shall be adjusted
accordingly. The provisions of this Section 14(b)(ii) shall not apply to
the issuance by the Company of GMAC Warrants to purchase 1,624,650 shares
of Common Stock. The provisions of this Section 14(b) also shall not apply
to any issuance of shares of Common Stock upon exercise of any Warrants or
issuances covered by subsections (a), (c) or (f) of this Section 14.
(c) In case the Company shall fix a record date for making a distribution
to any holders of the shares of Common Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of shares of stock other than Common Stock, other
securities, evidences of its indebtedness or assets or property of whatever
nature (excluding cash dividends consistent with past practice), (i) the number
of shares of Common Stock for which a Warrant is exercisable shall be adjusted
to equal the product of the number of shares of Common Stock for which a Warrant
is exercisable immediately prior to such adjustment multiplied by a fraction (A)
the numerator of which shall be the Fair Market Value per share of Common Stock
immediately prior to such record date and (B) the denominator of which shall be
such Fair Market Value per share of Common Stock minus the amount allocable to
one share of Common Stock of any such cash so distributable and of the Fair
Market Value of any and all such shares of stock, other securities, evidences of
indebtedness, or assets or property so distributable, and (ii) the Exercise
Price to be in effect after such record date shall be determined by multiplying
the Exercise Price in effect immediately prior to such record date by a
27
<PAGE>
fraction, of which the numerator shall be the current Fair Market Value per
share of Common Stock immediately prior to such record date minus the amount
allocable to one share of Common Stock of any such cash so distributable and of
the Fair Market Value of any and all such shares of stock, other securities,
evidences of indebtedness, or assets or property so distributable, and of which
the denominator shall be such current Fair Market Value per share of Common
Stock immediately prior to such record date. Such adjustment shall be made
successively whenever such a record date is fixed; and, if such distribution is
not so made, the Exercise Price shall again be adjusted to be the Exercise Price
which would then be in effect if such record date had not been fixed.
(d) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such price;
provided that any adjustments which by reason of this subsection (d) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 14 shall be made to
the nearest hundredth of a cent or to the nearest share of Common Stock, as the
case may be.
(e) If at any time, as a result of an adjustment made pursuant to
subsection (a) of this Section 14, a Holder shall become entitled to receive any
Other Securities, thereafter the number of such Other Securities so receivable
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions contained in this Section 14.
(f) In the case of any capital reorganization of the Company, or of any
reclassification of the shares of Common Stock, or in case of the consolidation
of the Company with or the merger of the Company with or into any other
corporation (where the Company is not the Surviving Corporation) or of the sale
of the properties and assets of the Company as, or substantially as, an entirety
to any other company, each Warrant shall after such capital reorganization,
reclassification of shares of Common Stock, consolidation, merger or sale be
exercisable, upon the terms and conditions specified in this Warrant Agreement,
for the number of shares of stock and the cash or other securities or property
of any nature whatsoever that is receivable upon or as a result of the
reorganization, reclassification, consolidation, merger or sale by a holder of
the number of shares of Common Stock (or Other Securities) for which a Warrant
is exercisable immediately prior to such event; and in any such case, if
necessary, the provisions set forth in this Section 14 with respect to the
rights thereafter of the Holders shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any shares of stock or other
securities or assets thereafter deliverable on the exercise of the Warrants. The
subdivision or combination of the shares of Common Stock at any time outstanding
into a greater or lesser number of units or any other event covered by
subsection (a) of this Section 14 shall not be deemed to be a reclassification
of the shares of Common Stock for the purposes of this subsection (f). The
Company shall not effect any such consolidation, merger or sale, unless prior to
or simultaneously with the consummation thereof, the successor corporation
resulting from such consolidation or merger or the corporation purchasing such
assets or the appropriate corporation or entity shall assume, by written
instrument, the obligation to deliver to each Holder the shares of stock, cash,
other securities or assets to which, in accordance with the foregoing
provisions, each Holder may be entitled to and all other obligations of the
Company under this Warrant Agreement.
28
<PAGE>
(g) In case of any adjustment or readjustment in the Warrants, Warrant
Shares or Exercise Price in accordance with this Section 14, the Company at its
expense will promptly compute such adjustment or readjustment in accordance with
the terms of this Warrant Agreement and cause independent public accountants of
recognized national standing selected by the Company to verify such computation;
and the Company will prepare a report, certified by the principal financial
officer of the Company, setting forth such adjustment or readjustment and
showing, in detail, the facts upon which such adjustment or readjustment is
based, and all calculations relating to any adjustments made in accordance with
this Section 14. The Company will forthwith mail a copy of each such report to
each Holder, and will, upon the written request at any time of any Holder,
furnish to such Holder a report setting forth such information as may be
requested by such Holder, including any calculations with respect thereto in
order that such Holder may verify such calculations.
Section 15. Fractional Warrants and Fractional Warrant Shares.
-------------------------------------------------
The Company shall not be required to issue a fractional share
of Common Stock upon exercise of any Warrant. As to any
fraction of a share which the Holder of one or more Warrants,
the rights under which are exercised in the same transaction,
would otherwise be entitled to purchase upon such exercise, the
Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Current
Market Price per share of Common Stock on the date of exercise.
Section 16. Financial Information.
---------------------
(a) The Company will furnish to the Holders the reports and information
that is required to be delivered to the Company's stockholders.
(b) Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder shall be made, and
all financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Company's independent public accountants) with the most
recent audited consolidated financial statements of the Company.
Section 17. No Rights or Liabilities as Shareholder. Nothing contained in
---------------------------------------
this Warrant Agreement shall be construed as conferring upon the Holder any
rights as a shareholder of the Company or as imposing any liabilities on the
Holder as a shareholder of the Company, whether such liabilities are asserted by
the Company or by creditors or shareholders of the Company or otherwise.
Section 18. Decisions of Holders. All decisions to be made and actions to
--------------------
be taken by the Holders as a group pursuant to this Warrant Agreement will be
made or taken by a majority in interest of the Holders (each Warrant counting as
the number of Warrant Shares obtainable upon the exercise of the Warrant at such
time).
Section 19. Notices to Holders. In case:
------------------
(a) the Company shall authorize the issuance to any holders of shares of
Common
29
<PAGE>
Stock of Options to purchase shares of Common Stock of the Company or any other
similar subscription rights; or
(b) the Company shall authorize a dividend or the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or assets
(including distributions payable in shares of Common Stock and cash dividends or
distributions, other than cash dividends consistent with past practice); or
(c) of any consolidation or merger to which the Company is a party and for
which approval of any shareholders of the Company is required, or of the
conveyance or transfer of all or substantially all of the properties and assets
of the Company, or of a capital reorganization or reclassification or change of
the shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(e) the Company proposes to take any other action which would require an
adjustment of the number of Warrant Shares issuable upon exercise of the
Warrants or an adjustment of the Exercise Price pursuant to Section 14;
then the Company shall cause notice to be given to each Holder of shares of
Common Stock at its address appearing on the Register, at least 30 calendar days
prior to the applicable record or effective date specified. Such notice shall
state (i) the date as of which the holders of record of shares of Common Stock
to be entitled to receive any such dividend, rights, warrants or distribution
are to be determined, or (ii) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation, winding up or other action is
expected to become effective, and, if applicable, the date as of which it is
expected that holders of record of shares of Common Stock shall be entitled to
exchange their shares of Common Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up.
Section 20. Amendments and Waivers. Any provision of this Warrant
----------------------
Agreement or the Warrant Certificates may be amended or waived if, but only if,
such amendment or waiver is in writing and is signed by the Company and two
thirds of the Holders; provided that the Warrant Agreement and the Warrant
--------
Certificate may not be modified or amended to reduce the number of shares of
Common Stock for which a Warrant is exercisable or to increase the price at
which such shares may be purchased upon exercise of a Warrant without the prior
written consent of the Holder thereof. Notwithstanding the foregoing, a waiver
or consent to departure from the provisions hereof that relates exclusively to
the rights of Holders of Registrable Securities whose securities are being sold
pursuant to a Registration Statement and that does not directly or indirectly
affect the rights of other Holders of Registrable Securities shall be valid only
with the written consent of Holders of at least 66-2/3% of the Registrable
Securities being sold.
Section 21. Survival. The provisions of this Warrant Agreement shall
--------
survive the exercise of any Warrant in whole or part and, in event of such
exercise, the term "Holder" shall refer to the holder of any Warrant Shares
issued upon exercise hereunder; provided, however, that in the case of any sale
of Subject Securities pursuant to a Public Offering or Rule 144 under
30
<PAGE>
the Act, the Subject Securities which are so transferred will no longer have the
benefits of this Warrant Agreement.
Section 22. Indemnification. Company agrees to indemnify and hold
---------------
harmless the Holders from and against any liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, attorneys' fees,
expenses and disbursements of any kind which may be imposed upon, incurred by or
asserted against the Holders in any manner relating to or arising out of any
litigation to which a Holder is made a party in its capacity as a stockholder or
warrantholder of Company; provided, however, that the Company will not be liable
-------- -------
hereunder to the extent that any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, attorneys' fees, expenses
or disbursements are found in a final non-appealable judgment by a court to have
resulted from a Holder's fraud or willful misconduct in its capacity as a
stockholder or warrantholder of the Company.
Section 23. Expenses. Except as provided herein, the Company shall pay all
--------
reasonable legal and other professional fees (and related disbursements) of
First Union in connection with this Warrant Agreement and the transactions
contemplated hereby.
Section 24. Notices. Any notice or demand authorized by this Warrant
-------
Agreement to be given shall be in writing and shall be delivered in person, sent
by telecopy, mailed (registered or certified, return receipt requested), postage
prepaid, or sent by overnight delivery service addressed to the Company or the
Holders at their respective addresses specified above or in the Register or, as
to any such party, at such other address as may be designated by it in a notice
to the other parties hereto. All notices shall be deemed to be properly given or
made upon the earlier to occur of (i) actual delivery, (ii) 5 days after being
deposited in the mail addressed as aforesaid, or (iii) 1 Business Day after
being sent by facsimile (with answer back confirmed) or overnight delivery
service. For the purposes of notices sent by facsimile, the parties' facsimile
numbers are: the Company (913) 514-3515, and First Union (704) 383-8121.
Section 25. Binding Effect. This Warrant Agreement shall be binding upon
--------------
and inure to the sole and exclusive benefit of the Company, and its permitted
successors and each registered Holder from time to time of the Subject
Securities and each of its respective permitted successors.
Section 26. Termination. Except as provided herein, this Warrant
-----------
Agreement shall terminate and be of no further force and effect at the close of
business on the Expiration Date unless, prior to such Expiration Date, there
shall no longer be any Holders in which event this Warrant Agreement shall
terminate as of such date except with respect to the provisions hereof which are
intended to survive.
Section 27. Severability. In the event that any provision of this Warrant
------------
Agreement is held to be invalid, prohibited or unenforceable in any jurisdiction
for any reason, unless such provision is narrowed by judicial construction, this
Warrant Agreement shall, as to such jurisdiction, be construed as if such
invalid, prohibited or unenforceable provision had been more narrowly drawn so
as not to be invalid, prohibited or unenforceable. Notwithstanding the
foregoing, if any provision of this Warrant Agreement is held to be invalid,
prohibited or unenforceable in any jurisdiction, such provision, as to such
jurisdiction, shall be ineffective to
31
<PAGE>
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Warrant Agreement and without affecting the validity or enforceability of
such provision or the other provisions of this Warrant Agreement in any other
jurisdiction.
Section 28. Counterparts. This Warrant Agreement may be executed by one or
------------
more of the parties hereto on any number of
separate counterparts and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
Section 29. Governing Law; Remedies.
-----------------------
(a) This Warrant Agreement and each Warrant Certificate shall be construed
in accordance with and governed by the laws of the State of New York (without
giving effect to its conflicts of law principles).
(b) Each holder of a Subject Security, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant Agreement.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of this Warrant
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
Section 30. No Impairment. If any event occurs as to which the provisions
-------------
of this Warrant Agreement or the Subject Securities are strictly applicable and
the application thereof would not fairly protect the rights of the Holders in
accordance with the essential intent and principles of such provisions, then the
Company shall make such adjustments in the application of such provisions, in
accordance with such essential intent and principles, as shall be reasonably
necessary to protect such rights as aforesaid.
32
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement to
be duly executed and delivered by their proper and duly authorized officers, as
of the date and year first above written.
NOVASTAR FINANCIAL, INC.
By _____________________
Name:
Title:
FIRST UNION CORPORATION
By ______________________
Name:
Title:
33
<PAGE>
EXHIBIT B
---------
Warrant Certificate
No._____________ _______ Warrants
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
ON FEBRUARY __, 2002
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES OF COMMON STOCK
ISSUABLE PURSUANT TO THE TERMS HEREOF HAVE THE BENEFIT AND ARE SUBJECT TO THE
TERMS AND CONDITIONS SPECIFIED IN THE WARRANT AGREEMENT, DATED AS OF FEBRUARY
12, 1999, BETWEEN THE COMPANY AND THE INITIAL HOLDER OF THE WARRANTS THEREIN
NAMED, AS FROM TIME TO TIME AMENDED, A COMPLETE AND CORRECT COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED TO THE HOLDER OF THIS WARRANT UPON WRITTEN REQUEST AND WITHOUT CHARGE.
THE WARRANTS AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THE
WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY STATE OR OTHER SECURITIES LAW AND MAY NOT BE TRANSFERRED
EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (ii)
UPON FIRST FURNISHING TO THE COMPANY AN OPINION OF COUNSEL THAT SUCH TRANSFER IS
NOT IN VIOLATION OF THE REGISTRATION REQUIREMENTS OF THE ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
OWNERSHIP AND TRANSFER FOR THE PURPOSE OF MAINTAINING THE COMPANY'S STATUS AS A
REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED, INCLUDING A RESTRICTION ON OWNERSHIP OF EQUITY STOCK IN EXCESS OF 9.8%
(SUBJECT TO CERTAIN EXCEPTIONS) OF THE OUTSTANDING EQUITY STOCK OF THE COMPANY,
ALL AS SET FORTH IN THE COMPANY'S ARTICLES OF INCORPORATION, AS THE SAME MAY BE
AMENDED FROM TIME TO TIME, A COPY OF WHICH WILL BE SENT WITHOUT CHARGE TO EACH
STOCKHOLDER WHO SO REQUESTS. SUCH REQUEST MAY BE MADE TO THE SECRETARY OF THE
COMPANY.
IN ADDITION, THE COMPANY WILL FURNISH TO ANY STOCKHOLDER ON REQUEST AND WITHOUT
CHARGE A FULL STATEMENT OR SUMMARY OF THE DESIGNATIONS AND PREFERENCES,
CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO
DIVIDENDS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF
EACH CLASS
34
<PAGE>
WHICH THE COMPANY IS AUTHORIZED TO ISSUE AND THE DIFFERENCES IN THE RELATIVE
RIGHTS AND PREFERENCES BETWEEN SUCH SHARES OF EACH SERIES, IF ANY, TO THE EXTENT
THEY HAVE BEEN SET, AND OF THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET THE
RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. SUCH REQUEST MAY BE MADE
TO THE SECRETARY OF THE COMPANY.
THIS CERTIFIES THAT for value received the registered holder hereof or
registered assign (the "Holder"), is the owner of the number of Warrants set
forth above, each of which entitles the owner thereof to purchase at any time on
or before 5:00 P.M., New York City time, on February __, 2002, one fully paid
and nonassessable share of Common Stock of NOVASTAR FINANCIAL, INC., a Delaware
corporation (the "Company"), at the purchase price of $6.9375 per share of
Common Stock (the "Exercise Price"). As provided in the Warrant Agreement
referred to below, the Exercise Price and the number or kind of shares of Common
Stock which may be purchased upon the exercise of the Warrants evidenced by this
Warrant Certificate are, upon the happening of certain events, subject to
modification and adjustment.
This Warrant Certificate is subject to and entitled to the benefits of
all of the terms, provisions and conditions of that certain agreement dated as
of February 12, 1999 (the "Warrant Agreement") by and between the Company and
FIRST UNION CORPORATION, which Warrant Agreement is hereby incorporated herein
by reference and made a part hereof and to which Warrant Agreement reference is
hereby made for a full description of the rights, limitations of rights,
obligations, duties and immunities hereunder of the Company and the Holders of
the Warrant Certificates. Copies of the Warrant Agreement are on file at the
principal office of the Company.
The Holder hereof may be treated by the Company and all other persons
dealing with this Warrant Certificate as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby, or
to the transfer hereof on the books of the Company, any notice to the contrary
notwithstanding, and until such transfer on such books, the Company may treat
the Holder hereof as the owner for all purposes.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the Holder to purchase a like aggregate number of
shares of Common Stock as the Warrants evidenced by the Warrant Certificate or
Warrant Certificates surrendered. If this Warrant Certificate shall be
exercised in part, the Holder shall be entitled to receive upon surrender
hereof, another Warrant Certificate or Warrant Certificates for the number of
whole Warrants not exercised.
No fractional share of Common Stock will be issued upon the exercise
of any Warrant or Warrants evidenced hereby, as provided in the Warrant
Agreement.
35
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant Certificate.
NOVASTAR FINANCIAL, INC.
By:_____________________
Name:
Title:
Attest:
____________________________
Name:
Secretary
36
<PAGE>
EXHIBIT C
---------
PURCHASE FORM
(To be signed only upon exercise of Warrant)
To: NOVASTAR FINANCIAL, INC.:
The undersigned, the holder of the within Warrant Certificate, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
Certificate for, and to purchase thereunder, * Shares of Common Stock of
NOVASTAR FINANCIAL, INC., and herewith makes payment of $ therefor, and
requests that the certificates for such shares of Common Stock be issued in the
name of, and delivered to, , whose address is
Dated:
___________________________________________________
(Signature must conform in all respects to name of
holder as specified on the face of the Warrant
certificate)
_________________ (Address)
- ----------
* Insert here the number of shares of Common Stock called for on the face of
the Warrant Certificate (or, in the case of a partial exercise, the portion
thereof as to which Warrants are being exercised), in either case without
making any adjustment for additional shares of Common Stock or other
securities or property or cash which, pursuant to the adjustment provisions
of the Warrant Agreement, may be deliverable upon exercise.
37
<PAGE>
EXHIBIT D
---------
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of the Warrants
represented by this Warrant Certificate, hereby sells, assigns and transfers
unto the Assignee named below all of the rights of the undersigned with respect
to the number of Warrants set forth below:
Name and Address of Assignee No. of Warrants
- ---------------------------- ---------------
and does hereby irrevocably constitute and appoint _______ ________________
attorney-in-fact to register such transfer on the books of NOVASTAR FINANCIAL,
INC. maintained for the purpose, with full power of substitution in the
premises.
Dated:__________________ Print Name:___________________
Signature:____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the within Warrant Certificate in every particular,
without alteration or any change whatsoever.
38
<PAGE>
EXHIBIT E
---------
OPTIONS AND CONVERTIBLE SECURITIES
39
<PAGE>
EXHIBIT 99.1
Company contact: Investor information requests:
Mark J. Kohlrus Anna LeCluyse
Chief Financial Officer 913.514.3505
913.514.3534 Fax 913.514.3515
NOVASTAR FINANCIAL, INC. ANNOUNCES
- -----------------------------------
EXPANDED RELATIONSHIP WITH FIRST UNION
--------------------------------------
(WESTWOOD, KANSAS - February 16, 1999) - NovaStar Financial, Inc. (NYSE: NFI)
announced today that it has entered into certain agreements that significantly
expand its relationship with its primary lender, First Union National Bank and
its affiliates (collectively, "First Union").
As a result of the new arrangement, First Union will be providing a
significantly increased level of financing to the Company and its affiliates
through the following facilities: $75 million revolving warehouse line of
credit, $300 million whole loan repurchase facility, and $20 million of residual
financing. All of the facilities are committed for one year, maturing February
2000. In connection with the new arrangements, the Company will issue to First
Union 350,000 warrants to purchase NovaStar common stock at $6.9375 per share,
the closing price on February 11, 1999, in exchange for 186,667 existing
warrants to purchase NovaStar common stock at a price of $15 per share, which
will be retired.
"First Union has been tremendously supportive during the turbulent events of the
last five months. They have served as our primary warehouse lender from
inception and we are extremely pleased to announce that we have taken a major
step in solidifying our long-term liquidity position by expanding our
relationship with them," said Scott Hartman, Chairman and CEO. "We continue to
pursue additional arrangements that would supplement the facilities provided by
First Union and bring additional liquidity and capital to NovaStar."
Hartman commented further, "We expect to use proceeds from the First Union
residual facility to repay borrowings under the GMAC/RFC facility on or before
its maturity date of February 28, 1999. GMAC/RFC provided us with much needed
liquidity during a very difficult time and we appreciate their support. We
continue to negotiate with GMAC/RFC to develop a long-term lending relationship.
However, we do not envision that such a relationship would involve the issuance
of 811,919 additional warrants at $4.5625 per share, as previously contemplated.
Such a long-term lending arrangement with GMAC/RFC could include some level of
additional warrants at current market prices."
The Company had previously announced it had entered into a short-term secured
financing agreement with GMAC/RFC for $15 million to address liquidity needs.
That facility was initially scheduled to mature on January 13, 1999, and was
extended to February 28, 1999, as the Company and GMAC/RFC continued
negotiations towards a long-term strategic alliance. In
1
<PAGE>
connection with that financing arrangement, the Company agreed to issue GMAC/RFC
warrants for the purchase of 812,731 shares of common stock at an exercise price
of $4.5625, the closing price on October 12, 1998.
NovaStar Financial, Inc. is a real estate investment trust (REIT) that invests
in the single-family residential subprime mortgage loans originated by its
affiliate, NovaStar Mortgage, Inc. Mortgage loans in portfolio are financed on
a long-term basis by issuing collateralized mortgage obligations accounted for
as debt instruments. NovaStar Financial, Inc. is located in Westwood, Kansas, a
part of the Kansas City metropolitan area. NovaStar Mortgage's operates its
wholesale lending operation in Orange County, California, and its servicing
operation in Westwood, Kansas.
Certain matters discussed in this news release may constitute forward-looking
statements within the meaning of the federal securities laws that inherently
include certain risks and uncertainties. Actual results and the timing of
certain events could differ materially from those projected in or contemplated
by the forward-looking statements due to a number of factors, including general
economic conditions, fluctuations in interest rates, the availability of
subprime residential mortgage loans, the availability and access to financing
and liquidity resources, and other risk factors outlined in the Company's 1997
annual report on Form 10-K.
2
