<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended November 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________________ to
__________________________
Commission File Number: 1-8422
COUNTRYWIDE CREDIT INDUSTRIES,
INC.
(Exact name of registrant as
specified in its charter)
DELAWARE 13-2641992
(State or other jurisdiction (IRS Employer
of Identification No.)
incorporation or organization)
155 N. Lake Avenue, Pasadena,
California 91101
(Address of principal executive
offices) (Zip Code)
(818) 304-8400
(Registrant's telephone number,
including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X N
o
Indicate the number of shares outstanding of each of the issuer's classes
of common
stock, as of the latest practicable date.
Class Outstanding at December 30,
1994
Common Stock $.05 par value 91,319,585
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
November 30, February 28,
1994 1994
(Dollar amounts in thousands)
ASSETS
Cash $ 3,806 $ 4,034
Receivables for mortgage loans shipped 1,646,614 1,970,431
Mortgage loans held for sale 2,254,722 1,743,830
Other receivables 410,560 349,770
Property, equipment and leasehold
improvements, at cost - net of
accumulated depreciation 153,960 145,625
Capitalized servicing fees receivable 402,308 289,541
Purchased servicing rights 1,211,458 836,475
Other assets 235,731 245,815
Total assets $6,319,159 $5,585,521
Borrower and investor custodial accounts
(segregated in special accounts
- excluded from corporate assets) $1,070,058 $1,366,643
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $4,799,679 $3,859,227
Drafts payable issued in connection with
mortgage loan closings 129,775 449,814
Accounts payable and accrued liabilities 106,708 87,818
Deferred income taxes 354,523 308,525
Total liabilities 5,390,685 4,705,384
Commitments and contingencies - -
Shareholders' equity
Preferred stock - authorized, 1,316,000
shares of $.05 par value;
issued and outstanding, none - -
Common stock - authorized, 240,000,000
shares of $.05 par value;
issued and outstanding, 91,318,470
shares at November 30, 1994
and 91,063,751 shares at February 28,1994 4,566 4,553
Additional paid-in capital 607,247 606,031
Retained earnings 316,661 269,553
Total shareholders' equity 928,474 880,137
Total liabilities and shareholders'
equity $6,319,159 $5,585,521
Borrower and investor custodial accounts $1,070,058 $1,366,643
The accompanying notes are an integral
part of these statements.
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months Nine Months
Ended November 30, Ended November 30,
1994 1993 1994 1993
(Dollar amounts in thousands, except per share data)
Revenues
Loan origination fees $45,289 $106,346 $168,066 $281,968
Gain (loss) on sale of
loans, net of
commitment fees (25,551) 21,823 (30,306) 65,657
Loan production revenue 19,738 128,169 137,760 347,625
Interest earned 82,108 108,652 245,758 267,530
Interest charges (65,897) (79,603) (183,919) (198,765)
Net interest income 16,211 29,049 61,839 68,765
Loan servicing income 110,898 82,332 310,076 221,476
Less amortization of
servicing assets (23,329) (66,000) (71,397) (203,435)
Add (less) servicing hedge
benefit (expense) (162) 10,000 (39,422) 80,900
Less write-off of
servicing hedge 0 0 (25,600) 0
Net loan administration
income 87,407 26,332 173,657 98,941
Gain on sale of servicing 0 0 56,880 0
Commissions, fees and
other income 10,370 12,896 31,814 36,052
Total revenues 133,726 196,446 461,950 551,383
Expenses
Salaries and related expenses 44,926 61,962 154,048 165,112
Occupancy and other office
expenses 25,273 27,392 76,889 73,304
Guarantee fees 21,940 15,184 61,718 40,801
Marketing expenses 5,704 7,734 17,856 18,259
Branch and administrative
office consolidation costs 0 0 8,000 0
Other operating expenses 8,952 12,572 28,444 33,378
Total expenses 106,795 124,844 346,955 330,854
Earnings before income taxes 26,931 71,602 114,995 220,529
Provision for income taxes 10,773 28,641 45,998 88,212
NET EARNINGS $16,158 $42,961 $68,997 $132,317
Earnings per share
Primary $0.18 $0.46 $0.75 $1.46
Fully diluted $0.18 $0.46 $0.75 $1.43
The accompanying notes are an integral part of these statements.
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COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months
Ended November 30,
1994 1993
(Dollar amounts in thousands)
Cash flows from operating activities:
Net earnings $68,997 $132,317
Adjustments to reconcile net earnings
to net cash
used by operating activities:
Amortization of purchased servicing
rights 69,080 113,434
Amortization of capitalized servicing
fees receivable 2,317 90,001
Depreciation and other amortization 19,277 10,592
Deferred income taxes 45,998 88,212
Gain on bulk sale of servicing rights (56,880) -
Origination and purchase of loans held
for sale (22,081,979) (39,331,272)
Principal repayments and sale of loans 21,894,904 37,444,242
Increase in mortgage loans shipped
and held for sale (187,075) (1,887,030)
Increase in other receivables and
other assets (17,773) (44,682)
Increase in accounts payable and
accrued liabilities 18,890 52,220
Net cash used by operating activities (37,169) (1,444,936)
Cash flows from investing activities:
Additions to purchased servicing rights (444,063) (393,975)
Additions to capitalized servicing fees
receivable (145,149) (105,687)
Book value of excess servicing sold 30,065 -
Proceeds from bulk sale of servicing rights 20,547 -
Purchase of property, equipment and
leasehold improvements - net (24,212) (47,268)
Net cash used by investing activities (562,812) (546,930)
Cash flows from financing activities:
Net increase in warehouse debt and
other short-term borrowings 439,840 1,574,517
Issuance of long-term debt 271,205 501,188
Repayment of long-term debt (90,632) (75,737)
Issuance of common stock 1,229 3,367
Cash dividends paid (21,889) (18,445)
Net cash provided by financing
actvities 599,753 1,984,890
Net decrease in cash (228) (6,976)
Cash at beginning of period 4,034 12,573
Cash at end of period $3,806 $5,597
Supplemental cash flow information:
Cash used to pay interest $196,088 $185,406
Cash refunded from income taxes ($ 894) ($ 1,745)
Noncash financing activities -
conversion of preferred stock - $ 25,800
The accompanying notes are an integral
part of these statements.
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the three- and nine-month periods ended
November 30, 1994 are not necessarily indicative of the results that may be
expected for the fiscal year ending February 28, 1995. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the annual report on Form 10-K for the fiscal year ended February 28, 1994
of Countrywide Credit Industries, Inc. (the "Company").
On March 21, 1994, the Company's Board of Directors declared a 3-for-2
stock split payable May 3, 1994 to shareholders of record on April 11, 1994.
All references in the accompanying consolidated financial statements to the
number of common shares and share amounts have been restated to reflect the
stock split.
NOTE B - NOTES PAYABLE
Notes payable consisted of the following.
(Dollar amounts in thousands)
November 30, February 28,
1994 1994
Commercia paper $2,204,826 $2,194,543
Revolving credit facility
Revolving credit facility 100,000 -
Medium-term notes, Series A, B and
C, net of discounts 1,268,050 1,088,550
Reverse-repurchase agreements 92,349 312,129
Pre-sale funding facilities 932,586 63,210
Subordinated notes 200,000 200,000
Other notes payable (2.40%-2.90%) 1,868 795
$4,799,679 $3,859,227
Revolving Credit Facility and Commercial Paper
As of November 30, 1994, Countrywide Funding Corporation ("CFC"), the
Company's mortgage banking subsidiary, had an unsecured credit agreement
(revolving credit facility) with forty-two commercial banks permitting CFC to
borrow an aggregate maximum amount of $2.5 billion, including commercial
paper. The facility contains various financial covenants and restrictions,
certain of which limit the amount of dividends that can be paid by the Company
or CFC. Interest on direct borrowings is based on a variety of sources,
including the prime rate and the London Interbank Offered Rates ("LIBOR") for
U.S. dollar deposits. The weighted average borrowing rate on direct
borrowings and commercial paper borrowings for the nine months ended November
30, 1994, including the effect of the interest rate swap agreements discussed
below, was 4.34%. Under certain circumstances, including the failure to
maintain specified minimum credit ratings, borrowings under the revolving
credit facility and commercial paper may become secured by mortgage loans held
for sale, receivables for mortgage loans shipped and mortgage servicing
rights. The revolving credit facility expires on September 19, 1997.
<PAGE>
Medium-Term Notes
As of November 30, 1994, outstanding medium-term notes issued by the
parent and CFC under various shelf registrations filed with the Securities and
Exchange Commission were as follows.
(Dollar amounts in thousands)
Outstanding Balance Interest Rate Maturity Date
Floating-Rate Fixed-Rate Total From To From To
Parent
Series A $ - $ 12,750 $12,750 10.60% 10.60% Dec 1994 Aug 1995
CFC
Series A 5,000 424,800 429,800 6.10% 8.79% Mar 1995 Mar 2002
Series B 11,000 469,000 480,000 5.11% 6.98% Mar 1996 Aug 2005
Series C 150,000 195,500 345,500 5.89% 8.43% Apr 1996 Mar 2004
Subtotal $166,000 $1,089,300 $1,255,300
Total $166,000 $1,102,050 $1,268,050
As of November 30, 1994, all of the outstanding fixed-rate notes of CFC had
been effectively converted by interest rate swap agreements to floating-rate
notes. The weighted average borrowing rate on CFC's medium-term note
borrowings for the nine months ended November 30, 1994, including the effect
of the interest rate swap agreements, was 5.20%. As of November 30, 1994,
$154.5 million was available for future issuances under the Series C shelf
registration.
Reverse-Repurchase Agreements
As of November 30, 1994, CFC had entered into short-term financing
arrangements to sell mortgage-backed securities and whole loans under
agreements to repurchase. The weighted average borrowing rate for the nine
months ended November 30, 1994 was 4.30%. The reverse-repurchase agreements
were collateralized by either mortgage-backed securities or whole loans. All
mortgage-backed securities and whole loans underlying reverse-repurchase
agreements are held in safekeeping by broker-dealers, and all agreements are
to repurchase the same or substantially identical mortgage-backed securities
or whole loans.
Pre-Sale Funding Facilities
As of November 30, 1994, CFC had an uncommitted revolving credit facility
("Pre-sale Funding Facility") with an affiliate of an investment banking firm.
The credit facility is secured by conforming mortgage loans which are in the
process of being pooled into mortgage-backed securities. Interest rates are
based on LIBOR. The weighted average borrowing rate for the nine months ended
November 30, 1994 was 5.01%. The balance outstanding under this facility at
November 30, 1994 was $281.2 million.
As of November 30, 1994, CFC had an uncommitted revolving credit facility
("Early Funding Agreement") with the Federal Home Loan Mortgage Corporation
("FHLMC"). The credit facility is secured by conforming mortgage loans which
are in the process of being pooled into FHLMC participation certificates.
Interest rates under the agreement are based on the prevailing rates for
mortgage-backed securities reverse-repurchase agreements. The weighted
average borrowing rate for the nine months ended November 30, 1994 was 3.78%.
The balance outstanding under this facility at November 30, 1994 was $24.8
million.
<PAGE>
As of November 30, 1994, CFC had a $1 billion revolving credit facility ("As
Soon as Pooled Agreement") with the Federal National Mortgage Association
("FNMA"). The credit facility is secured by conforming mortgage loans which
are in the process of being pooled into FNMA mortgage-backed securities.
Interest rates are based on LIBOR and/or federal funds. The weighted average
borrowing rate for the nine months ended November 30, 1994 was 4.48%. Of the
total credit facility, $500 million is committed through July 20, 1995. This
commitment is subject to CFC's compliance with certain financial and
operational covenants. The balance of the credit facility is cancelable by
either party upon the maturity of all, if any, then existing obligations. The
balance outstanding under this facility at November 30, 1994 was $626.6
million.
Subordinated Notes
In October 1992, CFC issued $200 million of 8.25% subordinated notes (the
"Subordinated Notes") due July 15, 2002. Interest on the Subordinated Notes
is payable semi-annually on each January 15 and July 15, beginning January 15,
1993. The Subordinated Notes are not redeemable prior to maturity and are not
subject to any sinking fund.
Other
As of November 30, 1994, CFC had interest rate swap agreements with certain
financial institutions having notional principal amounts totaling $2.54
billion. The effect of these agreements is to enable CFC to convert a portion
of its fixed-rate cost borrowings to LIBOR-based floating-rate cost borrowings
(notional amount $1.09 billion), to convert a portion of its commercial paper
and medium-term note borrowings from one floating-rate index to another
(notional amount $0.20 billion) and to further manage the Company's exposure
to interest rate risk (notional amount $1.25 billion). Payments are due
periodically through the termination date of each agreement. The agreements
expire between December 1994 and August 2005.
NOTE C - SUBSEQUENT EVENTS
On December 13, 1994, the Company declared a cash dividend of $0.08 per
common share payable January 23, 1995 to shareholders of record on December
27, 1994.
<PAGE>
NOTE D - SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY
The following tables present summarized financial information for Countrywide
Funding Corporation.
(Dollar amounts in thousands)
November 30, February 28,
1994 1994
Balance Sheets:
Mortgage loans shipped
and held for sale $3,901,336 $3,714,261
Other assets 2,354,292 1,809,403
Total assets $6,255,628 $5,523,664
Short- and long-term debt $4,916,704 $4,296,291
Other liabilities 422,158 374,559
Equity 916,766 852,814
Total liabilities and equity $6,255,628 $5,523,664
(Dollar amounts in thousands)
Nine Months Ended November 30,
1994 1993
Statements of Earnings:
Revenues $433,812 $521,747
Expenses 327,226 313,277
Provision for income taxes 42,634 83,388
Net earnings $ 63,952 $125,082
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Quarter Ended November 30, 1994 Compared to Quarter Ended November 30, 1993
Revenues for the quarter ended November 30, 1994 decreased 32% to $133.7
million from $196.4 million for the quarter ended November 30, 1993. Net
earnings decreased 62% to $16.2 million for the quarter ended November 30,
1994 from $43.0 million for the quarter ended November 30, 1993. The decrease
in revenues was due to decreased loan production resulting primarily from
increased mortgage interest rates in the quarter ended November 30, 1994. In
addition, intense price competition during the quarter ended November 30, 1994
resulted in the Company's recording a loss on sale of loans. The Company had
a gain on sale of loans in the quarter ended November 30, 1993. These factors
were offset somewhat by the favorable impact of a larger and more slowly
prepaying loan servicing portfolio. The decrease in net earnings was
primarily the result of the decrease in revenues and higher guarantee fees
caused by the larger servicing portfolio.
The total volume of loans produced decreased 54% to $6.5 billion for the
quarter ended November 30, 1994 from $14.2 billion for the quarter ended
November 30, 1993. Refinancings totaled $1.3 billion, or 20% of total
fundings for the quarter ended November 30, 1994, as compared to $10.9 billion
or 77% of total fundings for the quarter ended November 30, 1993. Adjustable-
rate mortgage loan production totaled $2.9 billion, or 45% of total fundings
for the quarter ended November 30, 1994, as compared to $2.4 billion or 17% of
total fundings for the quarter ended November 30, 1993. Production in the
Company's Consumer Markets Division (formerly the Company's Retail and
Consumer Divisions) amounted to $1.3 billion for the quarter ended November
30, 1994 compared to $3.6 billion combined production for the Retail and
Consumer Divisions for the quarter ended November 30, 1993. Production in the
Company's Wholesale Division decreased to $2.1 billion (which included
approximately $0.6 billion of originated loans and $1.5 billion of purchased
loans) for the quarter ended November 30, 1994 compared to $5.5 billion (which
included approximately $2.0 billion of originated loans and $3.5 billion of
purchased loans) for the quarter ended November 30, 1993. The Company's
Correspondent Division purchased $3.1 billion in mortgage loans for the
quarter ended November 30, 1994 compared to $5.1 billion for the quarter ended
November 30, 1993. The factors which affect the relative volume of production
among the Company's three divisions include loan pricing decisions and the
relative competitiveness of such pricing, the level of real estate and
mortgage lending activity in each Division's markets, and the success of each
Division's sales and marketing efforts.
At November 30, 1994 and 1993, the Company's pipeline of loans in process
was $4.4 billion and $9.5 billion, respectively. Historically, approximately
41% to 75% of the pipeline of loans in process has funded. In addition, at
November 30, 1994 and 1993, the Company had committed to make loans in the
amount of $2.7 billion and $0.8 billion, respectively, subject to property
identification and borrower qualification ("Lock n' Shop Pipeline"). For the
quarters ended November 30, 1994 and 1993, the Company received 82,355 and
138,442 new loan applications, respectively, at an average daily rate of $149
million and $308 million, respectively. The following actions were taken
during the quarter ended November 30, 1994 on the total applications received
during that quarter: 43,123 loans (52% of total applications received) were
funded and 8,702 applications (11% of total applications received) were either
rejected by the Company or withdrawn by the applicant. The following actions
were taken during the quarter ended November 30, 1993 on the total
applications received during that quarter: 61,364 loans (44% of total
applications received) were funded and 15,002 applications (11% of total
applications received) were either rejected by the Company or withdrawn by the
applicant. The factors that affect the percentage of applications received
and funded during a given time period include changes in interest rates, the
purpose of the loan, the average length of loan commitments issued, the
creditworthiness of applicants, the production divisions' loan processing
efficiency and loan pricing decisions.
<PAGE>
Loan origination fees decreased and a loss was recorded on the sale of
loans due to lower loan production that resulted primarily from an increase in
the level of mortgage interest rates. Reduced margins due to increased
competition caused by lower demand for mortgage loans in the quarter ended
November 30, 1994 than in the quarter ended November 30, 1993 also contributed
to the loss on sale of loans. In general, loan origination fees and gain
(loss) on sale of loans are affected by numerous factors including loan
pricing decisions, the volume of loans produced and the volatility and general
direction of interest rates.
Net interest income (interest earned net of interest charges) decreased
to $16.2 million for the quarter ended November 30, 1994 from $29.0 million
for the quarter ended November 30, 1993. Net interest income is principally a
function of: (i) net interest income earned from the Company's mortgage loan
warehouse ($5.1 million and $32.1 million for the quarters ended November 30,
1994 and 1993, respectively); (ii) interest expense related to the Company's
investment in servicing rights ($4.6 million and $22.9 million for the
quarters ended November 30, 1994 and 1993, respectively); and (iii) interest
income earned from the escrow balances associated with the Company's servicing
portfolio ($15.7 million and $19.8 million for the quarters ended November 30,
1994 and 1993, respectively). The Company earns interest on, and incurs
interest expense to carry, mortgage loans held in its warehouse. The
decrease in net interest income from the mortgage loan warehouse was
attributable to a decrease in the net earnings rate and to a decrease in the
average mortgage loan warehouse due to the decline in production. The
decrease in interest expense related to the investment in servicing rights
resulted primarily from a decrease in the payments of interest to certain
investors pursuant to customary servicing arrangements with regard to paid-off
loans in excess of the interest earned on these loans through their respective
payoff dates ("Interest Costs Incurred on Payoffs"). Such decrease was caused
by a decline in prepayments resulting from increased interest rates. The
decrease in net interest income earned from the escrow balances was related to
a decline in the escrow balances caused by a decline in prepayments from the
quarter ended November 30, 1993 to the quarter ended November 30, 1994.
During the quarter ended November 30, 1994, loan administration income
was positively affected by the continued growth and decreased prepayment rate
of the loan servicing portfolio. At November 30, 1994, the Company serviced
$105.4 billion of loans (including $0.7 billion of loans subserviced for
others) compared to $77.9 billion (including $0.4 billion of loans subserviced
for others) at November 30, 1993, a 35% increase. The growth in the Company's
servicing portfolio during the quarter ended November 30, 1994 was primarily
the result of loan production volume and the acquisition of bulk servicing
rights, partially offset by prepayments. The weighted average interest rate
of the mortgage loans in the Company's servicing portfolio at November 30,
1994 was 7.4% compared to 7.3% at November 30, 1993. It is the Company's
strategy to build and retain its servicing portfolio because of the returns
the Company can earn from such investment and because the Company believes
that servicing income is countercyclical to loan origination income. In
periods of rising interest rates (as occurred in the quarter ended November
30, 1994), prepayments tend to decline and income from the servicing portfolio
generally rises.
During the quarter ended November 30, 1994, the annualized prepayment
rate of the Company's servicing portfolio was 7%, as compared to 45% for the
quarter ended November 30, 1993. In general, the prepayment rate is affected
by the relative level of mortgage interest rates, activity in the home
purchase market and the relative level of home prices in a particular market.
The decrease in the prepayment rate was primarily attributable to decreased
refinance activity caused by increased mortgage interest rates in the quarter
ended November 30, 1994 from the quarter ended November 30, 1993. The primary
means used by the Company to reduce the sensitivity of its earnings to changes
in interest rates is through a strong production capability and a growing
servicing portfolio. To further mitigate the effect on earnings of higher
amortization (which is deducted from loan servicing income) resulting from
increased prepayment activity, the Company purchases financial instruments
that increase in value when interest rates decline (the "Servicing Hedge").
<PAGE>
During the quarter ended November 30, 1994, the Company implemented a new
hedge strategy, which the Company believes will be more cost effective in the
higher interest rate environment being experienced than the prior strategy of
using call options on U.S. Treasury futures and mortgage-backed securities.
The new hedge position consists of interest rate floors with terms ranging
from 3 to 5 years under which the Company receives a cash payment based upon a
notional principal, or contract, amount for any period during the term in
which interest rates fall below a certain level.
For the quarter ended November 30, 1994, total amortization amounted to
$23.3 million, representing an annualized rate of 7% of average capitalized
servicing fees receivable and purchased servicing rights ("Servicing Assets").
During the quarter ended November 30, 1994, the Company did not realize any
Servicing Hedge gains; in addition, amortization of interest rate floor
premiums related to the Servicing Hedge amounted to $0.2 million. For the
quarter ended November 30, 1993, total amortization was $66.0 million,
representing an annualized rate of 29% of the average Servicing Assets.
During the quarter ended November 30, 1993, the Company realized $10.0 million
in net Servicing Hedge gains. The factors affecting the rate of amortization
recorded in an accounting period include the level of prepayments during the
period, the change in prepayment expectations and the amount of Servicing
Hedge gains or losses. The decline in the rate of amortization from the
quarter ended November 30, 1993 to the quarter ended November 30, 1994
resulted primarily from a decline in the current and projected future
prepayment rates caused by an increase in mortgage interest rates.
The following summarizes the notional principal amounts of servicing
hedge transactions.
Interest
Rate
(Dollar amounts in millions) Floors
Balance, August 31, 1994 $ 0
Additions 1,750
Balance, November 30, 1994 $1,750
The servicing hedge instruments utilized by the Company partially protect
the value of the investment in servicing rights from the effects of increased
prepayment activity that generally results from declining interest rates. To
the extent that interest rates increase, the value of the servicing rights
increases while the value of the hedge instrument declines. With respect to
interest rate floors and long call options, the Company is not exposed to loss
beyond its initial outlay to acquire them. At November 30, 1994, the interest
rate floors, which expire through November 1999, had an unamortized cost of
approximately $7.1 million and a replacement value of $7.0 million.
During the quarter ended November 30, 1994, the Company acquired bulk
servicing rights for loans with principal balances aggregating $4.5 billion at
a price of $80.9 million or 1.79% of the aggregate outstanding principal
balances of the servicing portfolios acquired. During the quarter ended
November 30, 1993, the Company acquired bulk servicing rights for loans with
principal balances aggregating $78 million at a price of $1.2 million or 1.59%
of the aggregate outstanding principal balances of the servicing portfolios
acquired.
<PAGE>
Salaries and related expenses are summarized below for the quarters ended
November 30, 1994 and 1993.
(Dollar amounts in
thousands) Quarter Ended November 30, 1994
Production Loan Other
Activities Adminis- Activities Total
tration
Base Salaries $24,442 $6,025 $1,858 $32,325
Incentive Bonus 6,725 128 627 7,480
Payroll Taxes and
Benefits 3,992 929 200 5,121
Total Salaries and
Related Expenses $35,159 $7,082 $2,685 $44,926
Average Number of
Employees 2,343 853 260 3,456
(Dollar amounts in
thousands) Quarter Ended November 30, 1993
Production Loan Other
Activities Adminis- Activities Total
tration
Base Salaries $33,540 $4,945 $1,135 $39,620
Incentive Bonus 16,632 71 733 17,436
Payroll Taxes and
Benefits 3,883 888 135 4,906
Total Salaries and
Related Expenses $54,055 $ 5,904 $2,003 $61,962
Average Number of
Employees 3,633 701 155 4,489
Salaries expense decreased during the quarter ended November 30, 1994
primarily due to the decreased number of employees resulting from decreased
loan production. Incentive bonuses earned during the quarter ended November
30, 1994 decreased primarily due to decreased loan production.
Occupancy and other office expenses for the quarter ended November 30,
1994 decreased 8% to $25.3 million from $27.4 million for the quarter ended
November 30, 1993. This decrease was attributable to the reduction in the
number of Consumer Markets and Wholesale Divisions branch offices. As of
November 30, 1994, there were 274 Consumer Markets Division branch offices
(including 44 satellite offices) and 62 Wholesale Division branch offices
(including six regional support centers). As of November 30, 1993, there were
283 Consumer Markets Division branch offices (including 117 satellite offices
and 10 regional service centers) and 89 Wholesale Division branch offices
(including 12 satellite offices and 12 regional support centers).
Guarantee fees (fees paid to guarantee timely and full payment of
principal and interest on mortgage-backed securities and whole loans sold to
permanent investors and to transfer the credit risk of the loans in the
servicing portfolio) for the quarter ended November 30, 1994 increased 44% to
$21.9 million from $15.2 million for the quarter ended November 30, 1993. This
increase resulted primarily from an increase in the servicing portfolio.
<PAGE>
Marketing expenses for the quarter ended November 30, 1994 decreased 26%
to $5.7 million from $7.7 million for the quarter ended November 30, 1993.
The decrease in marketing expenses reflects the Company's strategy to
centralize and streamline its marketing functions.
Other operating expenses for the quarter ended November 30, 1994
decreased from the quarter ended November 30, 1993 by $3.6 million, or 29%.
This decrease was due primarily to decreased loan production.
Profitability of Loan Production and Servicing Activities
During the quarter ended November 30, 1994, the Company's pre-tax loss
from its loan production activities (which include loan originations and
purchases, warehousing and sales) was $41.2 million. For the quarter ended
November 30, 1993, the Company's comparable pre-tax income was $69.7 million.
The decrease of $110.9 million is primarily attributable to lower loan
production and increased competition caused by lower demand for mortgage
loans. During the quarter ended November 30, 1994, the Company's pre-tax
income from its loan servicing activities (which include administering the
loans in the servicing portfolio, selling homeowners and other insurance and
acting as tax payment agent) was $64.4 million as compared to $1.2 million
during the quarter ended November 30, 1993. The increase is primarily due to
an increase in the servicing portfolio and an increase in mortgage interest
rates resulting in a decline in prepayments.
<PAGE>
RESULTS OF OPERATIONS
Nine Months Ended November 30, 1994 Compared to Nine Months Ended November 30,
1993
Revenues for the nine months ended November 30, 1994 decreased 16% to
$462.0 million from $551.4 million for the nine months ended November 30,
1993. Net earnings decreased 48% to $69.0 million for the nine months ended
November 30, 1994 from $132.3 million for the nine months ended November 30,
1993. The decrease in revenues was due to decreased loan production resulting
primarily from increased mortgage interest rates in the nine months ended
November 30, 1994 and the write-off of the remaining unamortized costs of the
Company's prior Servicing Hedge. In addition, price competition during the
nine months ended November 30, 1994 resulted in the Company's recording a loss
on sale of loans. The Company had a gain on sale of loans in the nine months
ended November 30, 1993. In the nine months ended November 30, 1994, the
Company did not realize any Servicing Hedge gains; in addition, amortization
of option and interest rate floor premiums related to the Servicing Hedge
amounted to $39.4 million. During the nine months ended November 30, 1993,
the Company realized $80.9 million in net Servicing Hedge gains. These
negative effects were somewhat offset by the favorable impact of a larger and
more slowly prepaying loan servicing portfolio and of a gain recognized on the
sale of servicing. The decrease in net earnings was primarily the result of
the decrease in revenues, higher guarantee fees caused by the larger servicing
portfolio and a nonrecurring charge due to the Company's downsizing and office
consolidation process.
The total volume of loans produced decreased 44% to $22.1 billion for the
nine months ended November 30, 1994 from $39.3 billion for the nine months
ended November 30, 1993. Refinancings totaled $7.4 billion, or 34% of total
fundings for the nine months ended November 30, 1994, as compared to $29.6
billion or 75% of total fundings for the nine months ended November 30, 1993.
Adjustable-rate mortgage loan production totaled $7.1 billion, or 32% of total
fundings for the nine months ended November 30, 1994, as compared to $8.0
billion or 20% of total fundings for the nine months ended November 30, 1993.
Production in the Company's Consumer Markets Division was $6.0 billion for the
nine months ended November 30, 1994 compared to combined production of $8.3
billion for the Retail and Consumer Divisions for the nine months ended
November 30, 1993. Production in the Company's Wholesale Division decreased
to $7.1 billion (which included approximately $2.8 billion of originated loans
and $4.3 billion of purchased loans) for the nine months ended November 30,
1994 compared to $16.5 billion (which included approximately $9.0 billion of
originated loans and $7.5 billion of purchased loans) for the nine months
ended November 30, 1993. The Company's Correspondent Division purchased $9.0
billion in mortgage loans for the nine months ended November 30, 1994 compared
to $14.5 billion for the nine months ended November 30, 1993.
For the nine months ended November 30, 1994 and 1993, the Company
received 243,151 and 397,380 new loan applications, respectively, at an
average daily rate of $145 million and $293 million, respectively. The
following actions were taken during the nine months ended November 30, 1994 on
the total applications received during that nine months: 161,136 loans (66%
of total applications received) were funded and 47,028 applications (19% of
total applications received) were either rejected by the Company or withdrawn
by the applicant. The following actions were taken during the nine months
ended November 30, 1993 on the total applications received during that nine
months: 256,461 loans (65% of total applications received) were funded and
70,317 applications (18% of total applications received) were either rejected
by the Company or withdrawn by the applicant.
<PAGE>
Loan origination fees decreased and a loss was recorded on the sale of
loans due to lower loan production that resulted from an increase in the level
of mortgage interest rates. Reduced margins due to increased competition
caused by lower demand for mortgage loans in the nine months ended November
30, 1994 than in the nine months ended November 30, 1993 also contributed to
the loss on sale of loans.
Net interest income decreased to $61.8 million for the nine months ended
November 30, 1994 from $68.8 million for the nine months ended November 30,
1993. Net interest income is principally a function of: (i) net interest
income earned from the Company's mortgage loan warehouse ($32.3 million and
$79.3 million for the nine months ended November 30, 1994 and 1993,
respectively); (ii) interest expense related to the Company's investment in
servicing rights ($13.4 million and $52.1 million for the nine months ended
November 30, 1994 and 1993, respectively); and (iii) interest income earned
from the escrow balances associated with the Company's servicing portfolio
($42.9 million and $41.6 million for the nine months ended November 30, 1994
and 1993, respectively). The decrease in net interest income from the
mortgage loan warehouse was attributable to a decrease from the nine months
ended November 30, 1993 to the nine months ended November 30, 1994 in the
average mortgage loan warehouse due to the decline in production and to a
decrease in the net earnings rate. The decrease in interest expense related
to the investment in servicing rights resulted primarily from decreased
Interest Costs Incurred on Payoffs. The increase in net interest income earned
from the escrow balances was related to an increase in the earnings rate from
the nine months ended November 30, 1993 to the nine months ended November 30,
1994.
Loan administration income was positively affected by the continued
growth of the loan servicing portfolio. The growth in the Company's servicing
portfolio during the nine months ended November 30, 1994 was the result of
loan production volume and the acquisition of bulk servicing rights, partially
offset by prepayments and a sale of servicing rights for loans with principal
balances of $5.9 billion.
During the nine months ended November 30, 1994, the annualized prepayment
rate of the Company's servicing portfolio was 11%, as compared to 37% for the
nine months ended November 30, 1993. The decrease in the prepayment rate was
primarily attributable to decreased refinance activity caused by increased
mortgage interest rates in the nine months ended November 30, 1994 from the
nine months ended November 30, 1993.
For the nine months ended November 30, 1994, total amortization amounted
to $71.4 million, representing an annualized rate of 7% of average Servicing
Assets. During the nine months ended November 30, 1994, the Company did not
realize any Servicing Hedge gains; in addition, amortization of option and
interest rate floor premiums related to the Servicing Hedge amounted to $39.4
million. Also during the nine months ended November 30, 1994, the Company
decided to replace its prior Servicing Hedge with a new hedge resulting in a
write-down of the remaining unamortized costs of the prior hedge of $25.6
million. For the nine months ended November 30, 1993, total amortization was
$203.4 million, representing an annualized rate of 38% of the average
Servicing Assets. During the nine months ended November 30, 1993, the Company
realized $80.9 million in net Servicing Hedge gains. The decline in the rate
of amortization from the nine months ended November 30, 1993 to the nine
months ended November 30, 1994 resulted primarily from a decline in the
current and projected future prepayment rates caused by an increase in
mortgage interest rates.
During the nine months ended November 30, 1994, the Company acquired bulk
servicing rights for loans with principal balances aggregating $13.1 billion
at a price of $192.7 million or 1.47% of the aggregate outstanding principal
balances of the servicing portfolios acquired. During the nine months ended
November 30, 1993, the Company acquired bulk servicing rights for loans with
principal balances aggregating $3.4 billion at a price of $45.8 million or
1.35% of the aggregate outstanding principal balances of the servicing
portfolios acquired.
<PAGE>
During the nine months ended November 30, 1994, the Company sold
servicing rights for loans with principal balances of $5.9 billion and
recognized a gain of $56.9 million. No servicing rights were sold during the
nine months ended November 30, 1993.
Salaries and related expenses are summarized below for the nine months
ended November 30, 1994 and 1993.
(Dollar amounts in
thousands) Nine Months Ended November 30, 1994
Production Loan Other
Activities Adminis- Activities Total
tration
Base Salaries $84,700 $17,444 $4,780 $106,924
Incentive Bonus 25,353 336 3,393 29,082
Payroll Taxes and
Benefits 14,579 2,842 621 18,042
Total Salaries and
Related Expenses $124,632 $20,622 $8,794 $154,048
Average Number of
Employees 2,722 830 233 3,785
(Dollar amounts in
thousands) Nine Months Ended November 30, 1993
Production Loan Other
Activities Adminis- Activities Total
tration
Base Salaries $86,930 $13,695 $3,605 $104,230
Incentive Bonus 42,815 212 2,082 45,109
Payroll Taxes and
Benefits 12,834 2,464 475 15,773
Total Salaries and
Related Expenses $142,579 $16,371 $6,162 $165,112
Average Number of
Employees 3,161 652 137 3,950
The amount of expense attributable to salaries and related expenses decreased
during the nine months ended November 30, 1994 primarily due to the decreased
number of employees resulting from decreased loan production, offset somewhat
by a larger servicing portfolio.
Occupancy and other office expenses for the nine months ended November
30, 1994 increased 5% to $76.9 million from $73.3 million for the nine months
ended November 30, 1993. This increase was attributable primarily to the
opening of 74 Consumer Markets Division full-size branch offices during the
period from November 30, 1993 to November 30, 1994.
<PAGE>
Guarantee fees for the nine months ended November 30, 1994 increased 51%
to $61.7 million from $40.8 million for the nine months ended November 30,
1993. This increase resulted primarily from an increase in the servicing
portfolio.
Marketing expenses for the nine months ended November 30, 1994 decreased
2% to $17.9 million from $18.3 million for the nine months ended November 30,
1993. The decrease in marketing expenses reflects the Company's strategy to
centralize and streamline its marketing functions.
In the nine months ended November 30, 1994, the Company incurred an $8.0
million expense relating to the consolidation and relocation of branch and
administrative offices that occurred as a result of the reduction in staff
caused by declining production. No such expense was incurred in the nine
months ended November 30, 1993.
Other operating expenses for the nine months ended November 30, 1994
decreased from the nine months ended November 30, 1993 by $4.9 million, or
15%. This decrease was due primarily to decreased loan production.
Profitability of Loan Production and Servicing Activities
During the nine months ended November 30, 1994, the Company's pre-tax
loss from its loan production activities was $58.6 million. For the nine
months ended November 30, 1993, the Company's comparable pre-tax income was
$188.9 million. The decrease of $247.5 million is primarily attributable to
lower loan production and increased competition caused by lower demand for
mortgage loans. During the nine months ended November 30, 1994, the Company's
pre-tax income from its loan servicing activities was $164.4 million as
compared to $30.1 million during the nine months ended November 30, 1993. The
increase is primarily due to an increase in the servicing portfolio, a decline
in Interest Costs Incurred on Payoffs and a sale of servicing during the nine
months ended November 30, 1994 which resulted in a gain of $56.9 million,
partially offset by a write-off of the remaining costs of the Servicing Hedge
in the amount of $25.6 million.
INFLATION
Inflation affects the Company in the areas of loan production and
servicing. Interest rates normally increase during periods of high inflation
and decrease during periods of low inflation. Historically, as interest rates
decline, loan production, particularly from loan refinancings, increases.
However, during such periods, prepayment rates tend to accelerate (principally
on the portion of the servicing portfolio having a note rate higher than the
then-current interest rates), thereby decreasing the average life of the
Company's servicing portfolio and adversely impacting its servicing-related
earnings primarily due to increased amortization of the Servicing Assets, a
decreased rate of interest earned from the escrow balances, and increased
Interest Costs Incurred on Payoffs. Conversely, as interest rates increase,
loan production, particularly from loan refinancings, decreases, although in
an environment of gradual interest rate increases, purchase activity may
actually be stimulated by a more vibrant economy or anticipation of increasing
real estate values. In a higher interest rate environment, servicing-related
earnings are enhanced because prepayment rates tend to slow down, thereby
extending the average life of the Company's servicing portfolio and reducing
amortization of the Servicing Assets and Interest Costs Incurred on Payoffs,
and because the rate of interest earned from the escrow balances tends to
increase. This is particularly noteworthy as the Company's servicing
portfolio grows.
<PAGE>
SEASONALITY
The mortgage banking industry is generally subject to seasonal trends.
These trends reflect the general national pattern of sales and resales of
homes, although refinancings tend to be less seasonal and more closely related
to changes in interest rates. Sales and resales of homes typically peak
during the spring and summer seasons and decline to lower levels from mid-
November through February. Therefore, when new loan applications are driven
by home purchase activity instead of refinances, the Company's fourth fiscal
quarter (ending February 28(29)) has historically yielded the lowest levels of
production activity for the fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal financing needs are the financing of loan funding
activities and the investment in servicing rights. To meet these needs, the
Company currently relies on direct borrowings from and commercial paper
supported by the revolving credit facility, medium-term notes, mortgage-backed
securities and whole loan reverse-repurchase agreements, pre-sale funding
facilities, subordinated notes and cash flow from operations. In addition, in
the past the Company has relied on servicing-secured bank facilities,
privately-placed financings and public offerings of preferred and common
stock.
Certain of the Company's and CFC's debt obligations contain various
provisions that may affect the ability of the Company and CFC to pay dividends
and remain in compliance with such obligations. These provisions include
requirements concerning current ratio, net worth and other financial
covenants. These provisions have not had, and are not expected to have, an
adverse impact on the ability of the Company and CFC to pay dividends.
On September 23, 1994, CFC entered into a new three-year revolving credit
agreement with a group of forty commercial banks, replacing the existing
mortgage warehouse credit facility. The revolving credit agreement permits
CFC to borrow an aggregate maximum amount of $2.5 billion, including
commercial paper. The revolving credit agreement expires on September 19,
1997.
The Company continues to investigate and pursue alternative and
supplementary methods to finance its growing operations through the public and
private capital markets. These may include such methods as mortgage loan sale
transactions designed to expand the Company's financial capacity and reduce
its cost of capital and the securitization of servicing income cash flows.
At times, the Company must meet margin requirements to cover changes in
the market value of its commitments to sell mortgage-backed securities. To
the extent that aggregate commitment prices are less than the current market
prices, the Company must deposit cash or certain government securities or
obtain letters of credit. The Company's credit facility provides a means of
obtaining such letters of credit to meet these margin requirements.
In the course of the Company's mortgage banking operations, the Company
sells to investors the mortgage loans it originates and purchases but
generally retains the right to service the loans, thereby increasing the
Company's investment in loan servicing rights. The Company views the sale of
loans on a servicing-retained basis in part as an investment vehicle.
<PAGE>
Cash Flows
Operating Activities During the nine months ended November 30, 1994, the
Company's operating activities used cash on a short-term basis to fund the
increase of its warehouse of mortgage loans by approximately $0.2 billion.
These activities were funded primarily by cash flow from financing activities,
as discussed below. The Company's operating activities also generated $150
million of positive cash flow, which was principally allocated to the long-
term investment in servicing as discussed below under Investing Activities.
Investing Activities Net cash used by investing activities was $563
million for the nine months ended November 30, 1994 and $547 million for the
nine months ended November 30, 1993. The additions to purchased servicing
rights and capitalized servicing fees receivable increased by approximately
$90 million from the nine months ended November 30, 1993 to the nine months
ended November 30, 1994. This additional cash outlay was offset by cash
provided by a sale of servicing during the nine months ended November 30,
1994, and a lower cash outlay for purchases of property, equipment and
leasehold improvements in the nine months ended November 30, 1994 than the
nine months ended November 30, 1993.
Financing Activities Net cash provided by financing activities decreased
to $0.6 billion for the nine months ended November 30, 1994 from $2.0 billion
for the nine months ended November 30 1993. The decrease was primarily the
result of reduced short- and long-term borrowings by the Company during the
nine months ended November 30, 1994 from the nine months ended November 30,
1993.
PROSPECTIVE TRENDS
Applications and Pipeline of Loans in Process
During the quarter ended November 30, 1994, the Company received new loan
applications at an average daily rate of $149 million, and at November 30,
1994, the Company's pipeline of loans in process was $4.4 billion. This
compares to a daily application rate during the quarter ended November 30,
1993 of $308 million and a pipeline of loans in process at November 30, 1993
of $9.5 billion. The decline in the pipeline of loans in process from
November 30, 1993 to November 30, 1994 was primarily due to an increase in
mortgage interest rates. The size of the pipeline is generally an indication
of the level of future fundings, as historically 41% to 75% of the pipeline of
loans in process has funded. In addition, the Company's Lock n' Shop Pipeline
at November 30, 1994 was $2.7 billion and at November 30, 1993 was $0.8
billion. Future application levels and loan fundings are dependent on
numerous factors, including the level of competition, the direction of
interest rates, seasonal factors and general economic conditions. For the
month ended December 31, 1994, the average daily amount of applications
received was $119 million, and at December 31, 1994, the pipeline of loans in
process was $3.5 billion and the Lock n' Shop Pipeline was $1.9 billion.
<PAGE>
Market Factors
Since late 1993, mortgage interest rates have increased. An environment
of rising interest rates has resulted in lower production (particularly from
refinancings) and greater price competition, which has adversely impacted
earnings from loan origination activities and may do so in the future. The
Company has taken steps to maintain its productivity and efficiency,
particularly in the loan production area, by reducing staff and embarking on a
program to reduce production-related and overhead costs. However, there was a
time lag between the reduction in income caused by declining production and
the reduction in expenses. The Company's production staff declined 41% from
approximately 2,700 at February 28, 1994 to approximately 1,600 at November
30, 1994. The Company has reduced its total staffing levels from
approximately 4,800 at February 28, 1994 to approximately 3,400 at November
30, 1994. However, with rising interest rates, earnings from the Company's
loan servicing portfolio are enhanced as amortization of the Servicing Assets
and Interest Costs Incurred on Payoffs decrease from levels experienced during
periods of declining interest rates, and the rate of interest earned from the
escrow balances associated with the Company's servicing portfolio increases.
The Company has further increased the size of its servicing portfolio, thereby
increasing its servicing revenue base, by acquiring servicing contracts
through bulk purchases. During the nine months ended November 30, 1994, the
Company purchased servicing contracts for loans with principal balances of
approximately $13.1 billion.
The Company's primary competitors are commercial banks and savings and
loans and mortgage banking subsidiaries of diversified companies, as well as
other mortgage bankers. Particularly in California, savings and loans and
other portfolio lenders are competing with the Company by offering
aggressively priced adjustable-rate mortgage products which with the rise in
interest rates have grown in popularity. Generally, the Company has noted
significant price competition among mortgage lenders, which has resulted in
downward pressure on loan production revenue.
Some regions in which the Company operates have been experiencing slower
economic growth, and real estate financing activity in these regions has been
negatively impacted. As a result, home lending activity for single- (one-to-
four) family residences in these regions may also have experienced slower
growth. There can be no assurance that the Company's operations and results
will not be negatively impacted by such adverse economic conditions. The
Company's California mortgage loan production (measured by principal balance)
constituted 32% of its total production during the quarter ended November 30,
1994, down from 43% for the quarter ended November 30, 1993. The decline in
the percentage of California production was due to the Company's continued
effort to expand its production capacity outside of California and the
aggressively priced adjustable-rate mortgage products offered by the Company's
competitors in the state. Since California's mortgage loan production
constitutes a significant portion of the Company's production during the
quarter, there can be no assurance that the Company's operations will not be
adversely affected to the extent California experiences a period of slower or
negative economic growth resulting in decreased residential real estate
lending activity or market factors further impact the Company's competitive
position in the state.
As of November 30, 1994, approximately 45% of the principal balance of
mortgage loans in the Company's servicing portfolio were secured by properties
located in California. Because the Company services substantially all
conventional loans on a non-recourse basis, foreclosure losses are generally
the responsibility of the investor or insurer and not the Company.
Accordingly, any increase in foreclosure activity should not result in
significant foreclosure losses to the Company. However, the Company's
expenses may be increased somewhat as a result of the additional staff efforts
required to foreclose on a loan. Similarly, government loans serviced by the
Company (21% of the Company's servicing portfolio at November 30, 1994) are
insured or partially guaranteed against loss by the Federal Housing
Administration or the Veterans Administration. As such, the limited
unreimbursed costs incurred by the Company on government foreclosed loans are
not material to the Company's consolidated financial statements.
<PAGE>
Servicing Hedge
As previously discussed, the Company realized no gains and recorded
amortization of Servicing Hedge instruments amounting to $0.2 million during
the quarter ended November 30, 1994. At November 30, 1994, the unamortized
cost of the interest rate floor contracts comprising the Servicing Hedge was
approximately $7.1 million. There is no assurance the Company's Servicing
Hedge will generate gains in the future.
Implementation of New Accounting Standards
Statement of Financial Accounting Standards No. 114, Accounting by
Creditors for Impairment of a Loan, was issued in May 1993. Implementation of
this standard, which is required for the Company's fiscal year beginning March
1, 1995, is not expected to have a material effect on the Company's financial
statements.
In June 1994, the Financial Accounting Standards Board ("FASB") issued a
Proposed Statement of Financial Accounting Standards, Accounting for Mortgage
Servicing Rights and Excess Servicing Receivables and for Securitization of
Mortgage Loans. This proposed statement would, among other provisions,
require the recognition of originated mortgage servicing rights ("OMSRs"), as
well as purchased mortgage servicing rights ("PMSRs"), as assets. Presently,
the cost of OMSRs is included with the cost of the related loans and written
off against income when the loans are sold, but the cost of PMSRs is recorded
as an asset. Under the proposed statement, all capitalized mortgage servicing
rights would be evaluated for impairment on a discounted, disaggregated basis.
Under current accounting requirements, the impairment evaluation may be made
on either a discounted or an undiscounted basis. The Company uses a
disaggregated, undiscounted method. A final statement is expected in the
second quarter of calendar year 1995. The effect on the Company's financial
position and results of operations will be evaluated when the FASB finalizes
its decisions.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Revolving Credit Agreement dated as of September 23, 1994 by and among
Countrywide Funding Corporation, The First National Bank of Chicago,
Bankers Trust Company and the Lenders Party Thereto.
11.1 Statement Regarding Computation of Per Share Earnings.
(b) Reports on Form 8-K. No reports on Form 8-K have been filed during this
reporting period.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
COUNTRYWIDE CREDIT INDUSTRIES, INC.
(Registrant)
DATE: January 16, /s/ Stanford L.
1995 Kurland
Senior Managing
Director and
Chief Operating
Officer
Chief Financial
Officer
DATE: January 16, /s/ Carlos M. Garcia
1995
Chief Accounting
Officer
Page 4
Exhibit 11.1
COUNTRYWIDE CREDIT INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months Nine Months
Ended November 30, Ended November 30,
1994 1993 1994 1993
(Dollar amounts in thousands, except per share data)
Primary
Net earnings $16,158 $42,961 $68,997 $132,317
Preferred stock dividend
requirement - - - 732
Net earnings applicable to
common stock $16,158 $42,961 $68,997 $131,585
Average shares outstanding
91,296 90,876 91,208 88,056
Net effect of dilutive
stock options --
based on the treasury
stock method
using average market
price 799 1,772 888 1,807
Total average shares 92,095 92,648 92,096 89,863
Per share amount $0.18 $0.46 $0.75 $1.46
Fully diluted
Net earnings applicable to
common stock $16,158 $42,961 $68,997 $132,317
Average shares outstanding
91,296 90,876 91,208 88,056
Assumed conversion of
convertible preferred
shares
- - - 2,627
Net effect of dilutive
stock options --
based on the treasury
stock method using
the closing market price,
if higher than
average market price 799 1,772 888 1,807
Total average shares 92,095 92,648 92,096 92,490
Per share amount $0.18 $0.46 $0.75 $1.43
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-28-1995
<PERIOD-END> NOV-30-1994
<CASH> 3,806
<SECURITIES> 0
<RECEIVABLES> 410,560
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 206,675
<DEPRECIATION> 52,715
<TOTAL-ASSETS> 6,319,159
<CURRENT-LIABILITIES> 0
<BONDS> 1,469,918
<COMMON> 4,566
0
0
<OTHER-SE> 914,783
<TOTAL-LIABILITY-AND-EQUITY> 6,319,159
<SALES> 0
<TOTAL-REVENUES> 461,950<F1>
<CGS> 0
<TOTAL-COSTS> 346,955
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 114,995
<INCOME-TAX> 45,998
<INCOME-CONTINUING> 68,997
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68,997
<EPS-PRIMARY> .75
<EPS-DILUTED> .75
<FN>
<F1>Includes 183,919 of interest expense related to mortgage loan activities.
</FN>
</TABLE>
TABLE OF CONTENTS
Page
RECITALS...................................................... 1
AGREEMENT..................................................... 1
1. Credit Facilities ....................................... 1
1(a) Primary Loan Facility ........................... 1
1(b) Negotiated Loan Facility ........................ 2
1(c) Swing Loan Facility ............................. 2
1(d) Letter of Credit Facility ....................... 3
1(e) GNMA Pool Advance Facility ...................... 4
2. Requests for Credit Events and Issuance of CPNs; Funding 4
2(a) Requests for Credit Events ...................... 4
2(b) Direct and Discount Primary Loans ............... 5
2(c) Funding of Loans and GNMA Pool Advance Loans .... 6
2(d) Sale and Assignment of Discount Loans by Balance Banks
........................................... 7
3. Payment of Principal and L/C Drawings; Prepayments ......8
3(a) Required Principal Payments ..................... 8
3(b) Prepayments ..................................... 8
4. Calculation and Payment of Interest; Related Provisions.. 9
4(a) Interest on Direct Loans ........................ 9
4(b) Interest on Discount Loans ...................... 10
4(c) Interest on Negotiated Loans .................... 10
4(d) Interest on Swing Loans ......................... 10
4(e) Interest on GNMA Pool Advance Loans ............. 10
4(f) Interest on L/C Drawings ........................ 10
4(g) Payment of Interest ............................. 10
4(h) Inability to Determine Rate ..................... 11
4(i) Funding Indemnification. ........................ 11
4(j) Illegality; Impracticality ...................... 12
4(k) Requirements of Law; Increased Costs ............ 12
4(l) Taxes ........................................... 13
4(m) Treatment of Qualifying Balances; Indemnity ..... 15
5. Miscellaneous Lending Provisions ........................ 15
5(a) Use of Proceeds ................................. 15
5(b) Assumption of Funding/Purchase .................. 15
5(c) Notes ........................................... 16
5(d) Interest and Fee Billing and Payment ............ 16
5(e) Nature and Place of Payments .................... 17
5(f) Post-Default Interest ........................... 17
5(g) Computations .................................... 17
5(h) Disbursement of Payments Received ............... 18
5(i) Fees ............................................ 18
5(j) Wire Transfers of Funds ......................... 19
5(k) Reduction in Aggregate Credit Limit ............. 19
5(l) Capital Requirements ............................ 19
6. Security Agreement; Guaranty; Subordination; Additional Documents
............................................... 19
6(a) Security Agreement .............................. 19
6(b) Guaranty and Subordination Agreement ............ 20
6(c) Further Documents ............................... 20
7. Conditions Precedent .................................... 20
7(a) First Credit Event .............................. 20
7(b) All Credit Events ............................... 22
8. Representations and Warranties of the Company ........... 23
8(a) Financial Condition ............................. 24
8(b) Corporate Existence; Compliance with Law ........24
8(c) Corporate Power; Authorization; Enforceable Obligations
..................................... 24
8(d) No Legal Bar .................................... 24
8(e) No Material Litigation .......................... 24
8(f) Taxes ........................................... 25
8(g) Investment Company Act .......................... 25
8(h) Subsidiaries .................................... 25
8(i) Federal Reserve Board Regulations ............... 25
8(j) ERISA ........................................... 25
8(k) Assets .......................................... 25
9. Affirmative Covenants ................................... 26
9(a) Financial Statements ............................ 26
9(b) Certificates; Reports; Other Information ........ 27
9(c) Payment of Indebtedness ......................... 28
9(d) Maintenance of Existence and Properties ......... 28
9(e) Inspection of Property; Books and Records; Discussions
..................................... 28
9(f) Notices ......................................... 29
9(g) Expenses ........................................ 29
9(h) Credit Documents ................................ 30
9(i) Insurance ....................................... 30
9(j) CPN Program ..................................... 30
9(k) Hedging Program ................................. 30
10. Negative Covenants ...................................... 30
10(a) Liens ........................................... 30
10(b) Indebtedness .................................... 31
10(c) Consolidation and Merger ........................ 31
10(d) Acquisitions .................................... 31
10(e) Payment of Dividends ............................ 31
10(f) Purchase or Retirement of Stock ................. 32
10(g) Investments; Advances; Receivables .............. 32
10(h) Sale of Assets .................................. 32
10(i) Current Ratio ................................... 32
10(j) Minimum Net Worth ............................... 32
10(k) Maximum Total Debt .............................. 33
11. Events of Default ....................................... 33
12. Agency Provisions ....................................... 37
12(a) Appointment ..................................... 37
12(b) Delegation of Duties ............................ 37
12(c) Exculpatory Provisions .......................... 37
12(d) Reliance by Agent ............................... 38
12(e) Notice of Default; Agreement to Advance ......... 38
12(f) Non-Reliance on Agent and Other Lenders ......... 39
12(g) Indemnification ................................. 39
12(h) Agent in Its Individual Capacity ................ 40
12(i) Successor Agents ................................ 40
12(j) Sharing of Set-Offs ............................. 41
13. Miscellaneous Provisions ................................ 41
13(a) No Assignment ................................... 41
13(b) Amendment ....................................... 41
13(c) Cumulative Rights; No Waiver .................... 42
13(d) Entire Agreement; Severability .................. 42
13(e) Survival ........................................ 42
13(f) Notices ......................................... 43
13(g) Governing Law ................................... 43
13(h) Counterparts .................................... 43
14. Additional Lenders; Assignments and Participations; Increases in
Availability ............................... 43
14(a) Addition of New Lender .......................... 43
14(b) Assignments Among Existing Lenders .............. 45
14(c) Minimum Loan Commitment ......................... 46
14(d) Sub-Participations by Lenders ................... 46
14(e) Federal Reserve Bank ............................ 47
14(f) Increases in Availability ....................... 47
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (the "Agreement") is made and dated as
of the 23rd day of September, 1994, by and among the lenders signatory hereto
(collectively, the "Lenders"), THE FIRST NATIONAL BANK OF CHICAGO, a national
banking association ("FNBC"), as credit agent for the Lenders (in such capacity,
the "Credit Agent"), FNBC and BANKERS TRUST COMPANY, a New York State banking
corporation ("BT"), as co-arrangers of the credit facility evidenced hereby (in
such capacity, the "Co-Arrangers"), BT as syndication agent of the credit
facility evidenced hereby (in such capacity, the "Syndication Agent"), and
COUNTRYWIDE FUNDING CORPORATION, a New York corporation (the "Company").
RECITALS
A. Pursuant to that certain Mortgage Loan Warehousing Agreement:
Facility A, and that certain Mortgage Loan Warehousing Agreement: Facility B,
each dated as of November 15, 1993, among certain of the Lenders, the Collateral
Agent, the Credit Agent, the Company and others (as amended and extended from
time to time to date, the "Existing Agreements"), certain of the Lenders agreed
to extend credit to the Company on the terms and subject to the conditions set
forth more particularly therein.
B. The current parties to the Existing Agreements desire to terminate
the Existing Agreements and replace the credit facilities evidenced thereby with
this Agreement.
NOW, THEREFORE, in consideration of the above Recitals and for other
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Credit Facilities.
1(a) Primary Loan Facility. On the terms and subject to the
conditions set forth herein, the Lenders severally agree that they shall, from
time to time to but not including the Maturity Date (as such term and
capitalized terms not otherwise defined herein are defined in the Glossary
attached hereto as Annex I), directly, or indirectly by purchase from a Balance
Bank, advance their Primary Loan Percentage Share of loans (the "Primary Loans"
or a "Primary Loan") to the Company in amounts such that:
(1) The aggregate amount of Primary Loans outstanding does
not exceed at any date the lesser of:
(i) The Primary Loan Credit Limit; and
(ii) The lesser of: a. the Aggregate Credit Limit, and
b. the Collateral Value of the Borrowing Base minus, in each case, the
sum of: (A) Negotiated Loans and Swing Loans outstanding, (B) the
amount available for drawing under Outstanding Letters of Credit,
(C) unrepaid L/C Drawings, (D) the GNMA Pool Advance Commitment,
(E) Verified Outstanding CPNs, and (F) outstanding Funding Checks; and
(2) The aggregate dollar amount of each Lender's Primary
Loan Percentage Share of Primary Loans outstanding does not exceed such
Lender's Maximum Primary Loan Commitment.
In calculating the availability of Primary Loans on any date, Loans outstanding
and Verified Outstanding CPNs shall not include any of such items which will be
repaid with Loans to be advanced on such date.
1(b) Negotiated Loan Facility. On the terms and subject to the
conditions set forth herein, any Lender may from time to time to but not
including the Maturity Date in its sole and absolute discretion offer to make
loans ("Negotiated Loans" or a "Negotiated Loan") to the Company in such
amounts, at such interest rates and for such terms (not to extend beyond the
Maturity Date) as such Lender and the Company may agree; provided, however, that
in no event will any Lender advance any Negotiated Loan to the Company nor will
the Company accept the proceeds of any Negotiated Loan if upon the funding
thereof the aggregate amount of Negotiated Loans outstanding would exceed the
lesser of: (1) the Aggregate Credit Limit, and (2) the Collateral Value of the
Borrowing Base minus, in each case, the sum of: (i) Primary Loans and Swing
Loans outstanding, (ii) the amount available for drawing under Outstanding
Letters of Credit, (iii) unrepaid L/C Drawings, (iv) the GNMA Pool Advance
Commitment, (v) Verified Outstanding CPNs, and (vi) outstanding Funding Checks.
In calculating the availability of Negotiated Loans on any date, Loans
outstanding and Verified Outstanding CPNs shall not include any of such items
which will be repaid with Loans to be advanced on such date. The agreement of a
Lender to make a Negotiated Loan hereunder shall not to any extent reduce such
Lender's obligation to fund Primary Loans to the extent of such Lender's Maximum
Primary Loan Commitment, it being expressly acknowledged and agreed that the
agreement to make Negotiated Loans is optional on the part of such Lender and in
addition to its Maximum Primary Loan Commitment.
1(c) Swing Loan Facility. On the terms and subject to the
conditions set forth herein, each of the Swing Line Lenders agrees that it
shall, from time to time to but not including the Maturity Date, advance its
Swing Line Percentage Share of loans (the "Swing Loans" or a "Swing Loan") to
the Company in amounts such that the aggregate amount of Swing Loans outstanding
does not exceed at any date the least of:
(1) The Aggregate Swing Line Commitment;
(2) The Primary Loan Credit Limit minus the sum of
Primary Loans outstanding; and
(3) The lesser of: (i) the Aggregate Credit Limit, and
(ii) the Collateral Value of the Borrowing Base minus, in each case,
the sum of: a. Primary Loans and Negotiated Loans outstanding, b. the
amount available for drawing under Outstanding Letters of Credit,
c. unrepaid L/C Drawings, d. the GNMA Pool Advance Commitment,
e. Verified Outstanding CPNs, and f. outstanding Funding Checks.
In calculating the availability of Swing Loans on any date, Loans outstanding
and Verified Outstanding CPNs shall not include any of such items which will be
repaid with Loans to be advanced on such date. At the request of any Swing Line
Lender, made through the Credit Agent at any time and from time to time,
including, without limitation, following the occurrence of an Event of Default,
each Lender (including each of the Swing Line Lenders) absolutely and
unconditionally agrees to refund Swing Loans held by the Swing Line Lenders by
advancing its Primary Loan Percentage Share thereof to the Credit Agent for
disbursement to the Swing Line Lenders pro rata, in accordance with their
respective Swing Line Percentage Shares. Such fundings shall be made no later
than 12:00 noon (Los Angeles time) on the date request therefor is made if such
request is made on or before 11:00 a.m. (Los Angeles time) on such date, and no
later than 12:00 noon (Los Angeles time) on the next succeeding Business Day if
request therefor is made after 11:00 a.m. (Los Angeles time). Advances made by
the Lenders hereunder for the purpose of refunding Swing Loans shall constitute
Primary Loans (and be advanced as Alternate Base Rate Loans) for all purposes of
the Credit Documents. In the event, for whatever reason, the Lenders are not
able to advance their respective Primary Loan Percentage Shares of Primary Loans
for the purpose of refunding Swing Loans as required hereunder, then each of the
Lenders (including each of the Swing Line Lenders) absolutely and
unconditionally agrees to purchase and take from the Swing Line Lenders on
demand an undivided participation interest in Swing Loans outstanding in an
amount equal to their respective Primary Loan Percentage Shares of such Swing
Loans.
1(d) Letter of Credit Facility. On the terms and subject to the
conditions set forth herein, each L/C Issuing Lender severally agrees that it
will issue, from time to time from the date hereof to and including the fourth
Business Day immediately preceding the Maturity Date, letters of credit (a
"Letter of Credit" and, collectively and severally, the "Letters of Credit") for
the account of the Company in favor of the Mortgage Backed Securities Clearing
Corporation (the "MBSCC") for the purpose of allowing the Company to meet its
margin requirements with the MBSCC; provided, however, that the aggregate dollar
amount available for drawing under all Outstanding Letters of Credit:
(1) Issued by such L/C Issuing Lender shall not exceed
such L/C Issuing Lender's L/C Commitment less unrepaid L/C Drawings owing
to such L/C Issuing Lender at such date; and
(2) Issued by all L/C Issuing Lenders shall not exceed the
lesser of: (i) the Aggregate Credit Limit, and (ii) the Collateral Value
of the Borrowing Base minus, in each case, the sum of: a. Loans
outstanding, b. unrepaid L/C Drawings, c. the GNMA Pool Advance
Commitment, d. Verified Outstanding CPNs, and e. outstanding Funding
Checks.
In calculating the availability of Letters of Credit on any date, Loans
outstanding and Verified Outstanding CPNs shall not include any of such items
which will be repaid with Loans to be advanced on such date. The amount and
expiration date of each Letter of Credit shall be as agreed to by each L/C
Issuing Lender and the Company; provided, however, that in no event may any
Letter of Credit issued hereunder have an expiration date later than the third
Business Day immediately preceding the Maturity Date or automatically renew or
be renewed to a date beyond such date. Each Letter of Credit issued by a L/C
Issuing Lender shall be in form customarily issued by such L/C Issuing Lender.
Each L/C Issuing Lender shall promptly notify the Credit Agent of the issuance
of a Letter of Credit, any increase in the amount available for drawing
thereunder, any extension of the expiration date thereof, and any L/C
Drawing, and shall at and as of the end of each calendar quarter, and at such
other times as the Credit Agent may reasonably request, notify the Credit
Agent in writing of the aggregate amount available for drawing under
Outstanding Letters of Credit and unrepaid L/C Drawings at such date.
1(e) GNMA Pool Advance Facility. On the terms and subject to the
conditions set forth in the GNMA Pool Advance Agreement, the GNMA Pool Advance
Lender agrees that it shall, from time to time to but not including the Maturity
Date, make loans (the "GNMA Pool Advance Loans" or a "GNMA Pool Advance Loan")
to the Company in an aggregate amount not to exceed the GNMA Pool Advance
Commitment.
2. Requests for Credit Events and Issuance of CPNs; Funding.
2(a) Requests for Credit Events.
(1) Subject to Paragraph 4(a) below, on any Business Day
that the Company desires to borrow Loans or GNMA Pool Advance Loans or
request the issuance of a Letter of Credit hereunder, it shall deliver a
Loan Request, Interest Rate Election and Payoff Notice to the Credit Agent
no later than: (i) in the case of Primary Loans, GNMA Pool Advance Loans and
Letters of Credit, 10:00 a.m. (Los Angeles time); (ii) in the case of
Negotiated Loans, 12:00 noon (Los Angeles time); (iii) in the case of Early
Swing Loans, 12:00 noon (Los Angeles time); and (iv) in the case of Late
Swing Loans, 2:00 p.m. (Los Angeles time) on such date. Said Loan Request,
Interest Rate Election and Payoff Notice shall, as applicable, identify the
Lender which has agreed to fund any Negotiated Loan and the L/C Issuing
Lender which is to issue any Letter of Credit. Except for a request for a
Negotiated Loan or a Swing Loan made after 10:00 a.m. (Los Angeles time) on
a given date, only one consolidated Loan Request, Interest Rate Election and
Payoff Notice requesting Loans and/or GNMA Pool Advance Loans and/or Letters
of Credit shall be submitted to the Credit Agent on any date. Any request
for Primary Loans shall be in such amount that the aggregate dollar amount
of Primary Loans which the Lenders are required to actually newly fund with
respect thereto (after, during any Secured Period, giving effect to the
provisions of Paragraph 8(a) of the Security Agreement) is not less than
$10,000,000.00, and any request for Swing Loans shall be in an amount not
less than $5,000,000.00. On each Business Day on which a Loan Request,
Interest Rate Election and Payoff Notice is delivered to the Credit Agent,
the Credit Agent shall notify the applicable Lenders (which notification may
be telephonic and, if telephonic, shall be promptly confirmed in writing) no
later than 11:00 a.m. (Los Angeles time) (or in the case of a Negotiated
Loan, 1:00 p.m. (Los Angeles time) or in the case of an Early Swing Loan,
12:30 p.m. (Los Angeles time) or in the case of a Late Swing Loan, 2:30 p.m.
(Los Angeles time)) of the aggregate amount of Credit Events which will
occur on such date.
(2) During any Secured Period, the Company may request the
Credit Agent to facilitate the approval for the issuance of CPNs on any
Business Day by delivering to the Credit Agent no later than 8:30 a.m. (Los
Angeles time) on such day a duly completed CPN Issuance Request.
2(b) Direct and Discount Primary Loans. The Company may request
that Primary Loans be made, at the election of the Company as set forth on the
related Loan Request, Interest Rate Election and Payoff Notice:
(1) By the Balance Banks in the form of Discount Loans;
provided, however, that any request for Discount Loans may be made only in
the Loan Request, Interest Rate Election and Payoff Notice provided for the
initial Credit Events and, thereafter, the Loan Request, Interest Rate
Election and Payoff Notice delivered on the last day of the Discount Loan
Interest Period with respect to the then outstanding Discount Loans or, if
no Discount Loans are then outstanding, on the fifth and twentieth days of
each calendar month (or if any such day is not a Business Day, the next
succeeding Business Day) (the permitted dates for funding of Discount Loans
being referred to herein as "Discount Loan Funding Dates"); and, provided,
further, that as a condition precedent to the Company's right to request any
Balance Bank to fund a Discount Loan, the Company shall have delivered to
the Credit Agent a Pre-Funding Notice thereof no later than 10:00 a.m. (Los
Angeles time) three Eurodollar Business Days prior thereto (the Credit Agent
hereby agreeing to promptly transmit by facsimile transmission said Pre-
Funding Notice to the applicable Balance Bank and each of the Lenders);
and/or
(2) By the Lenders in the form of Direct Loans on any
Business Day.
2(c) Funding of Loans and GNMA Pool Advance Loans. Loans and GNMA
Pool Advance Loans requested pursuant to any Loan Request, Interest Rate
Election and Payoff Notice shall be funded (subject, during any Secured Period,
to the provisions of Paragraph 8(a) of the Security Agreement), as follows:
(1)(i) Each Balance Bank shall make Discount Loans net of
the applicable Balance Bank Discount, each Lender shall make its Primary
Loan Percentage Share of Direct Loans and the GNMA Pool Advance Lender shall
make GNMA Pool Advance Loans available by wiring the amount thereof in
immediately available same day (including Federal) funds, to the Credit
Agent to the Pre-Disbursement Account no later than 12:30 p.m. (Los Angeles
time) on the proposed funding date, such amounts to be held during any
Secured Period pending disbursement as provided in subparagraph (2) below;
(ii) each Lender agreeing to make a Negotiated Loan shall make the same
available by wiring the amount thereof in immediately available same day
(including Federal) funds, to the Credit Agent to the Pre-Disbursement
Account no later than 2:30 p.m. (Los Angeles time) on the proposed funding
date; (iii) each Swing Line Lender shall make its Swing Line Percentage
Share of each Early Swing Loan available by wiring the amount thereof in
immediately available same day (including Federal) funds to such accounts as
the Company may direct no later than 2:00 p.m. (Los Angeles time); and
(iv) each Swing Line Lender shall make its Swing Line Percentage Share of
each Late Swing Loan available by wiring the amount thereof in immediately
available same day (including Federal) funds to such accounts as the Company
may direct no later than 3:00 p.m. (Los Angeles time) on the proposed
funding date.
(2) During any Secured Period, on or before 10:45 a.m. (Los
Angeles time) on each proposed funding date the Credit Agent shall request
the Collateral Agent to make a Determination of Collateral Value pursuant to
Paragraph 7 of the Security Agreement. Upon reviewing the Determination of
Collateral Value provided by the Collateral Agent to the Credit Agent
thereunder, the Credit Agent shall determine whether the Collateral Value of
the Secured Borrowing Base is sufficient to support the requested Credit
Events (or a portion thereof) (a "Determination of Availability"). Upon a
positive Determination of Availability, the Credit Agent shall so notify the
Company and shall, subject to the additional conditions set forth in
Paragraph 7(b) below, disburse amounts held in the Pre-Disbursement Account
to the Funding Account and/or the Commercial Paper Account, as applicable,
no later than 12:45 p.m. (Los Angeles time) on the proposed funding date.
Amounts held in the Pre-Disbursement Account which cannot be disbursed to
the Company as a result of a negative Determination of Availability or non-
satisfaction of the additional conditions set forth in Paragraph 7(b) below
shall constitute cash collateral for the Obligations, shall be transferred
to the Settlement Account prior to the opening of business of the Credit
Agent on the Business Day following the date deposited in the Pre-
Disbursement Account and disbursed to the Company only upon a favorable
Determination of Availability and subject to the additional conditions set
forth in Paragraph 7(b) below. Such amounts shall constitute "Loans" to the
Company for all purposes of the Credit Documents and shall be payable, with
interest, to the same extent as if such amounts had been fully disbursed.
2(d) Sale and Assignment of Discount Loans by Balance Banks.
Simultaneously with the making of a Discount Loan by a Balance Bank on a
Discount Loan Funding Date, such Balance Bank agrees to sell and assign, and
does hereby sell and assign, to each Lender (including such Balance Bank in its
capacity as a Lender), and each Lender irrevocably agrees to purchase and
acquire, its Primary Loan Percentage Share of such Discount Loan for a purchase
price equal to such Lender's Primary Loan Percentage Share of the principal
amount of such Discount Loan less the Lender Discount applicable thereto. Such
purchase price will be paid to the Credit Agent for the account of the
applicable Balance Banks in immediately available same day (including Federal)
funds at the Contact Office of the Credit Agent no later than 12:15 p.m. (Los
Angeles time) on the Discount Loan Funding Date. The Company hereby
acknowledges and consents to the assignment of Discount Loans by the Balance
Banks to the Lenders hereunder. The Company, the Credit Agent and the
Collateral Agent shall deem and treat each Lender as the creditor in respect of
its Primary Loan Percentage Share of each Discount Loan to the same extent as if
such Discount Loan were a Direct Loan as to which such Lender had advanced its
Primary Loan Percentage Share.
2(e) Funding. Each Lender shall be entitled to fund all or any
portion of its Primary Loan Percentage Share of Primary Loans, its Negotiated
Loans, its Swing Line Percentage Share of Swing Loans and its GNMA Pool Advance
Loans, as applicable, in any manner it may determine in its sole discretion,
including, without limitation, in the Grand Cayman inter-bank market, the
eurocurrency inter-bank market and within the United States, but all
calculations and transactions hereunder shall be conducted as though all Lenders
actually fund the purchase of amounts funded on Discount Loans and Eurodollar
Loans by them hereunder through the purchase of offshore dollar deposits in such
amounts with maturities corresponding to the applicable Interest Periods.
3. Payment of Principal and L/C Drawings; Prepayments.
3(a) Required Principal Payments. Subject to the provisions of
Paragraph 3(b) below, the Company shall pay to the Credit Agent for the account
of the applicable Lender or Lenders, including the GNMA Pool Advance Lender and
the L/C Issuing Lenders:
(1) The unpaid principal balance of each Discount Loan,
Eurodollar Loan and Negotiated Loan on the last day of the applicable
Interest Period;
(2) The unpaid principal balance of each Alternate Base Rate
Loan and each Swing Loan on the Maturity Date;
(3) The unpaid principal balance of each GNMA Pool Advance
Loan on or before the earlier of: (i) the thirtieth day following the date
advanced and (ii) the Maturity Date; and
(4) The full amount of each L/C Drawing on the date thereof.
3(b) Prepayments.
(1) The Company may voluntarily prepay Direct Loans,
Negotiated Loans, Swing Loans and GNMA Pool Advance Loans in whole or in
part and may voluntarily prepay Discount Loans in whole at any time;
provided, however, that in the case of prepayment of a Discount Loan, the
Company shall pay the net funded amount of such Discount Loan actually
advanced by the Balance Bank with respect thereto plus that portion of the
Balance Bank Discount for such Discount Loan for the period from the date of
funding to but not including the date of prepayment; and, provided further,
that any prepayment of a Direct Loan, Negotiated Loan, Swing Loan or GNMA
Pool Advance Loan shall be accompanied by accrued but unpaid interest on the
portion being prepaid.
(2) During any Secured Period, Loans and GNMA Pool Advance
Loans are subject to mandatory prepayment pursuant to Paragraph 6 of the
Security Agreement and, in addition, by application of proceeds of the sale
or other disposition of Collateral as provided in the Security Agreement.
(3) The Company shall pay in connection with any prepayment
hereunder any amount payable on account thereof pursuant to Paragraph 4(i)
below concurrently with such prepayment.
4. Calculation and Payment of Interest; Related Provisions.
4(a) Interest on Direct Loans.
(1) The Company shall pay interest to each Lender on such
Lender's Primary Loan Percentage Share of Direct Loans outstanding
calculated, at the election of the Company made from time to time as
permitted herein and set forth on a duly executed Loan Request, Interest
Rate Election and Payoff Notice, at either: (i) the Alternate Base Rate,
and/or (ii) the Applicable Eurodollar Rate. Each Lender's Primary Loan
Percentage Share of Direct Loans bearing interest at the Alternate Base Rate
shall be referred to herein as "Alternate Base Rate Loans"; and each
Lender's Primary Loan Percentage Share of Direct Loans bearing interest at
the Applicable Eurodollar Rate shall be referred to herein as "Eurodollar
Loans".
(2) The Company may elect from time to time to convert
Direct Loans from Eurodollar Loans to Alternate Base Rate Loans or to have
Direct Loans funded as Alternate Base Rate Loans by giving the Credit Agent
irrevocable notice of such election as set forth on a duly executed Loan
Request, Interest Rate Election and Payoff Notice delivered on the proposed
conversion or funding date; provided, however, that any conversion of
Eurodollar Loans may only be made on the last day of the applicable Interest
Period. The Company may elect from time to time to convert Direct Loans
from Alternate Base Rate Loans to Eurodollar Loans or to have Direct Loans
funded as Eurodollar Loans by giving the Credit Agent at least three
Eurodollar Business Days' prior irrevocable notice of such election by
delivery of a duly executed Loan Request, Interest Rate Election and Payoff
Notice. Upon receipt of any such notice, the Credit Agent shall promptly
notify each of the Lenders affected thereby thereof. No Direct Loan shall
be funded as or converted into a Eurodollar Loan if an Event of Default or
Potential Default has occurred and is continuing on the day occurring two
Business Days prior to the date of the funding or conversion requested by
the Company.
(3) Any Eurodollar Loan may be continued as such upon the
expiration of the Interest Period applicable thereto by giving the Credit
Agent (which shall notify the Lenders) at least three Eurodollar Business
Days' prior irrevocable notice of such election as set forth on a duly
executed Loan Request, Interest Rate Election and Payoff Notice; provided,
however, that no Eurodollar Loan may be continued as such when any Event of
Default or Potential Default has occurred and is continuing, but shall be
automatically converted to an Alternate Base Rate Loan on the last day of
the then current Interest Period applicable thereto. The Credit Agent shall
notify the Lenders and the Company promptly that such automatic conversion
will occur. If the Company shall fail to give notice as provided above, the
Company shall be deemed to have elected to convert the affected Eurodollar
Loan to an Alternate Base Rate Loan on the last day of the Interest Period
applicable thereto.
(4) The Credit Agent shall give prompt written notice (or
notice by telephone immediately confirmed in writing) to the Company and the
Lenders of the applicable interest rate determined by the Credit Agent.
(5) Under no circumstances shall the Lenders be required to
make or maintain Eurodollar Loans under this Agreement with more than an
aggregate number of eight (8) different Interest Periods.
4(b) Interest on Discount Loans. Since Discount Loans will be
funded by the Balance Banks net of the applicable Balance Bank Discount, no
additional interest shall be payable thereon prior to the maturity date thereof.
4(c) Interest on Negotiated Loans. The Company shall pay interest
to any Lender making a Negotiated Loan from the date advanced to but not
including the date of payment calculated at the Negotiated Loan Interest Rate
applicable thereto.
4(d) Interest on Swing Loans. The Company shall pay interest to
each Swing Line Lender on such Swing Line Lender's Swing Line Percentage Share
of Swing Loans outstanding from the date advanced to but not including the date
of payment thereof at:
(1) In the case of each Early Swing Loan, the Early Swing
Loan Rate; and
(2) In the case of each Late Swing Loan, the Overnight
Transaction Loan Rate.
4(e) Interest on GNMA Pool Advance Loans. The Company shall pay
interest on GNMA Pool Advance Loans from the date advanced to but not including
the date of payment calculated at such rates and at such times as may be
established in writing from time to time by the Company and the GNMA Pool
Advance Lender.
4(f) Interest on L/C Drawings. L/C Drawings shall bear interest
calculated at a per annum rate equal to the Alternate Bate Rate plus one percent
(1%) from the date such L/C Drawing occurs to but not including the date paid in
full.
4(g) Payment of Interest. The Company shall pay interest:
(1) On Alternate Base Rate Loans, Swing Loans and GNMA Pool
Advance Loans monthly, in arrears, on the fifth day of each month for the
period from and including the first day of the immediately preceding month
to and including the last day of such month;
(2) On Eurodollar Loans and Negotiated Loans on the last day
of the applicable Interest Period relating thereto; and
(3) On unrepaid L/C Drawings, on demand;
in each case as provided more specifically in Paragraph 5(d) below.
4(h) Inability to Determine Rate. In the event that the Credit
Agent shall have determined (which determination shall be conclusive and binding
upon the Company) that by reason of circumstances affecting the interbank
eurodollar market adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate for any given Interest Period, the Credit Agent shall
forthwith give notice (which may be telephonic and promptly confirmed in writing
or by facsimile transmission) of such determination to each Lender and to the
Company at least two Eurodollar Business Days prior to, as the case may be, the
proposed funding date of a Discount Loan, the conversion date of an Alternate
Base Rate Loan to a Eurodollar Loan or the proposed funding or continuation date
of a Direct Loan as a Eurodollar Loan. If such notice is given: (1) any
Primary Loan that was to have been funded as a Discount Loan shall be funded as
an Alternate Base Rate Loan, (2) any Direct Loan that was to have been converted
to or funded as a Eurodollar Loan shall, subject to the provisions hereof, be
continued or funded as an Alternate Base Rate Loan, and (3) any outstanding
Eurodollar Loan shall be converted, on the last day of the then current Interest
Period with respect thereto, to an Alternate Base Rate Loan. Until such notice
has been withdrawn by the Credit Agent, the Company shall not have the right to
have a Primary Loan funded as a Discount Loan or to convert a Direct Loan to or
fund or continue a Direct Loan as a Eurodollar Loan.
4(i) Funding Indemnification. In addition to all other payment
obligations hereunder, in the event: (1) any Primary Loan funded as a Discount
Loan or which is outstanding as a Eurodollar Loan is prepaid prior to the last
day of the applicable Interest Period, whether following a mandatory prepayment,
application of proceeds from the sale of Collateral or otherwise, including,
without limitation, pursuant to Paragraphs 14(a), 14(b) and 14(c) below, or
(2) the Company shall fail to make a conversion into or a borrowing as a
Eurodollar Loan after the Company has given notice thereof as provided in
Paragraph 4(a)(2) above, or (3) the Company shall fail to continue any Direct
Loan which it has elected to have continued as a Eurodollar Loan, or (4) the
Company shall fail to borrow any Primary Loan as a Discount Loan after giving a
Pre-Funding Notice with respect thereto or fail to prepay any Discount Loan
after having given notice of its intention so to do, or (5) the Company shall
fail to make any payment of principal or interest on any Loan when due, then the
Company shall immediately pay to each of the Lenders, through the Credit Agent,
an additional amount compensating such Lender for all losses, costs and expenses
incurred by such Lender in connection therewith, including, without limitation,
such as may arise out of re-employment of funds obtained by such Lender or from
fees payable to terminate the deposits from which such funds were obtained, such
losses, costs and expenses and the method of calculation thereof being set forth
in reasonable detail in a statement delivered to the Company by such Lender,
such statement to be conclusive in the absence of manifest error. Under no
circumstances shall any Lender have any obligation to remit monies to the
Company upon prepayment of any Discount Loan or any Eurodollar Loan, even under
circumstances which do not result in the necessity for the payment by the
Company of any amount hereunder. The provisions hereof shall survive
termination of this Agreement and payment of the outstanding Loans and GNMA Pool
Advance Loans and all other Obligations.
4(j) Illegality; Impracticality. Notwithstanding any other
provisions herein, if any law, regulation, treaty or directive or any change
therein or in the interpretation or application thereof shall or may in the
opinion of any Lender make it unlawful or impractical for such Lender to make or
maintain Eurodollar Loans or purchase its Primary Loan Percentage Share of
Discount Loans: (1) the commitment of such Lender hereunder to purchase its
Primary Loan Percentage Share of Discount Loans or to make Eurodollar Loans, as
applicable, shall forthwith be cancelled and (2) such Lender's Primary Loan
Percentage Share of Primary Loans outstanding as Discount Loans or as Eurodollar
Loans, if any, shall be converted automatically to Alternate Base Rate Loans at
the end of their respective Interest Periods or within such earlier period as
required by law. In the event the commitment of any Lender to purchase its
Primary Loan Percentage Share of Discount Loans shall be terminated hereunder,
the agreement of the Balance Banks to fund Discount Loans shall be reduced in a
like amount. In the event of a conversion of any Loan prior to the end of its
applicable Interest Period the Company hereby agrees promptly to pay each
Lender, upon its written demand, the amounts required pursuant to Paragraph 4(i)
above, it being agreed and understood that such conversion shall constitute a
prepayment for all purposes hereof. The provisions hereof shall survive the
termination of this Agreement and payment of the outstanding Loans and GNMA Pool
Advance Loans and all other Obligations.
4(k) Requirements of Law; Increased Costs. In the event that a
change subsequent to the date hereof in any applicable law, regulation, treaty
or directive or in the governmental or judicial interpretation or application
thereof, or compliance by any Lender with any request or directive (whether or
not having the force of law) issued subsequent to the date hereof by any central
bank or other governmental authority, agency or instrumentality:
(1) Does or shall subject any Lender to any tax of any kind
whatsoever with respect to this Agreement or any Loans or GNMA Pool Advance
Loans purchased or made or Letters of Credit issued hereunder, or changes
the basis of taxation of payments to such Lender of principal, fees,
interest or any other amount payable hereunder (except for changes in the
rate of tax on the overall net income of such Lender);
(2) Does or shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any other acquisition
of funds by, any office of such Lender which are not otherwise included in
the determination of the Balance Bank Discount, the Lender Discount, the
Alternate Base Rate or the Applicable Eurodollar Rate or the rate applicable
to a Negotiated Loan, a GNMA Pool Advance Loan or a L/C Drawing; or
(3) Does or shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender of
purchasing, making, agreeing to make, renewing or maintaining any Loan or any
GNMA Pool Advance Loan or Letter of Credit or to reduce any amount receivable in
respect thereof then, in any such case, the Company shall promptly pay to such
Lender, upon its written demand, any additional amounts necessary to compensate
such Lender for such additional cost or reduced amounts receivable as determined
by such Lender with respect to this Agreement or such credit extensions. If a
Lender becomes entitled to claim any additional amounts pursuant to this
Paragraph 4(k), it shall promptly notify the Company of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
payable pursuant to the foregoing sentence submitted by a Lender to the Company
shall be conclusive in the absence of manifest error. The obligations of the
Company under this Paragraph 4(k) shall survive the termination of this
Agreement and the payment of all other Obligations.
4(l) Taxes.
(1) All payments made by the Company, the Credit Agent and
the Lenders on account of the Obligations shall be made free and clear of,
and without deduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding, in the case
of the Lenders, net income taxes and franchise taxes (imposed in lieu of net
income taxes), imposed on the Lenders, as the case may be, as a result of a
present or former connection between the jurisdiction of the government or
taxing authority imposing such tax, or any political subdivision or taxing
authority thereof or therein, and such Lender (other than a connection
arising solely from such Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, the Credit Documents)
(all such non-excluded taxes, levies, imposts, duties, charges, fees,
deductions and withholdings being hereinafter called "Taxes"). If any Taxes
are required to be withheld from any amounts payable to any Lender under
the Credit Documents, the amounts so payable by the Company to the Credit
Agent for the benefit of such Lender shall be increased to the extent
necessary to yield to such Lender (after payment of all Taxes) interest or
any such other amounts payable thereunder at the rates or in the amounts
specified in the Credit Documents. Whenever any Taxes are payable by the
Company or on behalf of the Company, as promptly as possible thereafter the
Company shall send to the Credit Agent for its own account or for the
account of such Lender, as the case may be, a certified copy of an original
official receipt received by the Company showing payment thereof. If the
Company fails to pay any Taxes when due to the appropriate taxing authority
or fails to remit to the Credit Agent the required receipts or other
required documentary evidence, the Company shall indemnify the Credit Agent
and such Lender for any incremental taxes, interest or penalties that may
become payable by the Credit Agent and the Lenders as a result of any such
failure. The agreements in this subsection shall survive the termination of
this Agreement and the payment of all other Obligations. Each Lender by
executing this Agreement represents and warrants to the Company and the
Credit Agent that at the date of this Agreement no Taxes are imposed upon
such Lender which would result in increased liability of the Company to such
Lender pursuant to this Paragraph 4(l)(1).
(2) Each Lender that is not incorporated under the laws of
the United States of America or a state thereof agrees that it will deliver
to the Company and the Credit Agent (1) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 or successor applicable
form, as the case may be, and (2) an Internal Revenue Service Form W-8 or
W-9 or successor applicable form. Each such Lender also agrees to deliver
to the Company and the Credit Agent two further copies of the said Form 1001
or 4224 and Form W-8 or W-9, or successor applicable forms or other manner
of certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form previously delivered by it to the
Company, and such extensions or renewals thereof as may reasonably be
requested by the Company or the Credit Agent, unless in any such case an
event (including, without limitation, any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which
would prevent such Lender from duly completing and delivering any such form
with respect to it and such Lender so advises the Company and the Credit
Agent. Such Lender shall certify (i) in the case of a Form 1001 or 4224,
that it is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and
(ii) in the case of a Form W-8 or W-9, that it is entitled to an exemption
from United States backup withholding tax.
4(m) Treatment of Qualifying Balances; Indemnity. Each Balance
Bank and the Company will consult from time to time with a view toward allowing
the Company to maintain its deposit balances at such Balance Bank in types of
deposit accounts bearing the lowest reserve requirements practicable consistent
with the flexibility required by the Company to make frequent withdrawals and
deposits. In the event that it shall be determined at any time that (1) any
Balance Bank has incorrectly characterized deposit accounts maintained by the
Company with such Balance Bank for purposes of determining required reserves,
(2) any Balance Bank has maintained inadequate reserves in respect of such
deposit accounts, (3) the cost of reserves used in the calculation of the amount
of Qualifying Balances at any time was the cost of the inadequate reserves so
maintained or (4) any Balance Bank is required to maintain retroactive reserves,
or to pay other costs, penalties or charges, as a result thereof, then, in any
such event, the Company shall pay to such Balance Bank on demand the additional
amounts necessary to compensate such Balance Bank for the cost of maintaining
such retroactive reserves and for any other costs, penalties or charges related
thereto, including any amounts arising from a recalculation of the "Balance
Deficiency Fee" referred to in the Balance Bank Agreements. A certificate as to
any additional amounts payable pursuant to this subsection submitted by a
Balance Bank, through the Credit Agent, to the Company shall be conclusive in
the absence of manifest error. The agreements in this subsection shall survive
termination of this Agreement and payment of all other Obligations.
5. Miscellaneous Lending Provisions.
5(a) Use of Proceeds. The proceeds of Loans shall be utilized by
the Company solely for the purpose of originating and/or acquiring Mortgage
Loans, to repay L/C Drawings and other Indebtedness of the Company (including
Indebtedness of the Company to the Parent permitted to be repaid by the Company
to the Parent pursuant to the terms of the Credit Documents and including CPNs)
and for other general corporate purposes. The proceeds of the GNMA Pool Advance
Loans shall be used solely for the purpose of fulfilling the Company's
obligations to GNMA as described in the GNMA Pool Advance Agreement.
5(b) Assumption of Funding/Purchase. The Credit Agent may (but
shall not be obligated to) assume that each Lender has made its Primary Loan
Percentage Share of Primary Loans and any other Loans and GNMA Pool Advance
Loans to be advanced by it available on the funding date therefor and may, in
reliance upon such assumption, make available to the Company on such date a
corresponding amount. If and to the extent any Lender shall not have so made
such amounts available, such Lender and the Company jointly and severally agree
to repay to the Credit Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to the Company until the date such amount is repaid to the Credit
Agent, at, in the case of the Company, the interest rate applicable at the time
to the subject Loan or GNMA Pool Advance Loan and, in the case of the Lenders,
the Federal Funds Effective Rate. If such Lender shall repay to the Credit
Agent such corresponding amount, such amount so repaid shall constitute such
Lender's Primary Loan Percentage Share of such Primary Loan or other Loans or
GNMA Pool Advances Loans for all purposes of the Credit Documents. Nothing
contained herein shall affect the liability of any Lender for its failure to
make its Primary Loan Percentage Share of Primary Loans or other Loans or GNMA
Pool Advance Loans available to the Company as required pursuant to this
Agreement and the other Credit Documents.
5(c) Notes. The obligation of the Company to repay Direct Loans
shall be evidenced by notes payable to each Lender, each in the form of that
attached hereto as Exhibit A-1 (the "Direct Loan Notes"); the obligation of the
Company to repay Discount Loans shall be evidenced by notes payable to each
Lender in the form of that attached hereto as Exhibit A-2 (the "Discount Loan
Notes"); the obligation of the Company to repay Negotiated Loans shall be
evidenced by notes payable to each Lender in the form of that attached hereto as
Exhibit A-3 (the "Negotiated Loan Notes"); the obligation of the Company to
repay Swing Loans shall be evidenced by a promissory note payable to each Swing
Line Lender in the form of that attached hereto as Exhibit A-4 (the "Swing Loan
Notes"); and the obligation of the Company to repay GNMA Pool Advance Loans
shall be evidenced by a promissory note payable to the GNMA Pool Advance Lender
in the form of that attached hereto as Exhibit A-5 (the "GNMA Pool Advance
Note").
5(d) Interest and Fee Billing and Payment. The Credit Agent
shall: (1) on or before the first Business Day of each month notify the Company
(which notification may be telephonic) of the estimated amount of interest
payable with respect to Alternate Base Rate Loans, Swing Loans and GNMA Pool
Advance Loans as of the fifth day of the current month for the period from and
including the first day of the immediately preceding month to and including the
last day of such month, with the actual amount confirmed by notification by the
Credit Agent to the Company (which notification may be telephonic and which, if
telephonic, shall be promptly confirmed in writing) given no later than
9:00 a.m. (Los Angeles time) on the due date of payment thereof; (2) on the last
day of the Interest Period for each Eurodollar Loan and Negotiated Loan notify
the Company (which notification may be telephonic and which, if telephonic,
shall be promptly confirmed in writing) of the amount of interest payable on
such date on account thereof (such notification in the case of a Negotiated Loan
to be based, without independent verification by the Credit Agent, upon
information provided by the Lender which advanced such Negotiated Loan); (3) on
or before the first Business Day of the first month of each calendar quarter
notify the Company (which notification may be telephonic) of the amount of
facility fees payable pursuant to Paragraph 2 of the Fee Letter on the fifth day
of such month for the period from and including the first day of the first month
of the immediately preceding calendar quarter to and including the last day of
such calendar quarter, with the actual amount confirmed by notification by the
Credit Agent to the Company (which notification may be telephonic and which, if
telephonic, shall be promptly confirmed in writing) given no later than
9:00 a.m. (Los Angeles time) on the due date of payment thereof; and (4) from
time to time upon the request of any Lender deliver to the Company a funding
indemnification billing for amounts payable to such Lender pursuant to
Paragraph 4(i) above or a billing for amounts payable to such Lender pursuant to
Paragraphs 4(k), 4(l) and 4(m) above and Paragraph 5(l) below. The Company
shall pay the full amount of interest and fees of which it has been notified
pursuant to subparagraphs (1) and (3) above on the fifth day of each month,
shall pay the full amount of interest of which it has been notified pursuant to
subparagraph (2) above on the date such notification is given and shall pay the
full amount of each billing delivered to it pursuant to subparagraph (4) above
within five Business Days thereafter.
5(e) Nature and Place of Payments. Except as otherwise expressly
provided in the Credit Documents, all payments made on account of the
Obligations shall be made to the Credit Agent at the Contact Office for
distribution to the Lenders, as the Company shall direct pursuant to a Loan
Request, Interest Rate Election and Payoff Notice (but, in any event during any
Secured Period, consistent with Paragraph 8 of the Security Agreement), without
set-off or counterclaim in lawful money of the United States of America in
immediately available same day funds, and must be received by the Credit Agent
accompanied by a Loan Request, Interest Rate Election and Payoff Notice at the
Contact Office by 11:30 a.m. (Los Angeles time) on the day of payment, it being
expressly agreed and understood that if a payment is received after 11:30 a.m.
(Los Angeles time) by the Credit Agent or the Credit Agent does not receive a
Loan Request, Interest Rate Election and Payoff Notice therefor, such payment
will be considered to have been made on the next succeeding Business Day or such
later date as the Credit Agent receives the Loan Request, Interest Rate Election
and Payoff Notice therefor and interest thereon shall be payable by the Company
at the then applicable rate during such extension. If any payment required to
be made by the Company hereunder becomes due and payable on a day other than a
Business Day, the due date thereof shall be extended to the next succeeding
Business Day and interest thereon shall be payable at the then applicable rate
during such extension. The Credit Agent is hereby authorized to debit accounts
of the Company maintained with FNBC for amounts payable by the Company under
this Agreement through the Credit Agent and the Credit Agent will promptly
notify the Company of any such debit.
5(f) Post-Default Interest. Following the occurrence of an Event
of Default and until such Event of Default is cured or waived as provided
herein, Obligations shall bear interest at a per annum rate equal to the
Alternate Base Rate plus three percent (3%).
5(g) Computations. All computations of interest and fees payable
hereunder and under the Fee Letter and computations of each Balance Bank
Discount and Lender Discount shall be based upon a year of 360 days for the
actual number of days elapsed. The determination by the Credit Agent of a
Balance Bank Discount, a Lender Discount or interest rate hereunder shall be
conclusive and binding on the Company and the Lenders absent manifest error.
5(h) Disbursement of Payments Received. All amounts received by
the Credit Agent on account of the Obligations shall be disbursed by the Credit
Agent to the Lenders by wire transfer prior to the cut-off deadline of the
Federal Reserve Wire System on the date of receipt if received by the Credit
Agent before 11:30 a.m. (Los Angeles time) and accompanied by a Loan Request,
Interest Rate Election and Payoff Notice (or disbursed on the day of receipt
although received later than 11:30 a.m. (Los Angeles time) with the agreement of
the Credit Agent, the Collateral Agent and any Lender) or if received later or
if the Credit Agent has not received a Loan Request, Interest Rate Election and
Payoff Notice therefor, on the next succeeding Business Day or such later date
as the Credit Agent receives the Loan Request, Interest Rate Election and Payoff
Notice relating thereto, without interest payable by the Credit Agent. During
any Unsecured Period, amounts received by the Credit Agent on account of the
Obligations shall be disbursed in accordance with the written direction of the
Company, subject only to the requirement that amounts disbursed to the Lenders
on account of Primary Loans be disbursed pro rata in accordance with the
Lender's respective Primary Loan Percentage Shares and that amounts disbursed to
the Swing Line Lenders be disbursed pro rata in accordance with the Swing Line
Lender's respective Swing Line Percentage Shares. During any Secured Period,
amounts received by the Credit Agent on account of the Obligations shall be
disbursed as set forth in Paragraph 8 of the Security Agreement.
5(i) Fees. The Company shall pay:
(1) To the Credit Agent and, during any Secured Period, the
Collateral Agent, such fees as may from time to time be agreed upon in
writing by such Persons and the Company;
(2) To each of the Lenders, the facility fees described in
the Fee Letter;
(3) To each of the Balance Banks, the additional fees
described in the Balance Bank Agreements;
(4) To each L/C Issuing Lender, with respect to each Letter
of Credit such issuance fees and modification fees as may be established in
writing from time to time by the Company and such L/C Issuing Lender; and
(5) To the GNMA Pool Advance Lender, fees on account of the
GNMA Pool Advance Commitment in such amounts and at such times as may be
established in writing from time to time by the Company and the GNMA Pool
Advance Lender.
5(j) Wire Transfers of Funds. Notwithstanding anything to the
contrary contained herein and in the other Credit Documents, funds which the
Credit Agent and the Lenders are transmitting by wire transfer shall be deemed
to have been sent and received upon release by the transmitting party of such
funds into the Federal Reserve Wire System.
5(k) Reduction in Aggregate Credit Limit. Upon not less than
thirty (30) days' prior written notice to the Credit Agent, which shall promptly
transmit such notice to each of the Lenders, the Company may permanently reduce
the Aggregate Credit Limit in full or in minimum increments of $5,000,000.00 in
part; provided, however, that upon the effective date of any such reduction, the
aggregate amount of Loans outstanding, the amount available for drawing under
Outstanding Letters of Credit, unrepaid L/C Drawings, the GNMA Pool Advance
Commitment, Verified Outstanding CPNs and outstanding Funding Checks shall not
exceed the Aggregate Credit Limit as so reduced.
5(l) Capital Requirements. The Company shall pay from time to
time upon demand such amounts as any Lender may determine to be necessary to
compensate such Lender for all reasonable costs which such Lender determines are
attributable to its making, agreeing to make, purchasing or maintaining its
Primary Loan Percentage Share of any Primary Loan or other Loan or GNMA Pool
Advance Loan under this Agreement or its obligation to make or purchase its
Primary Loan Percentage Share of any Primary Loans or to make any other Loan or
GNMA Pool Advance Loan, including, without limitation, reserve requirements
attributed to the unused portion of the Aggregate Credit Limit, in respect of
any amount of capital required to be maintained by such Lender pursuant to any
law or regulation of any jurisdiction or any interpretation, directive or
request affecting banks, savings and loan institutions and/or financial
institutions generally notwithstanding the creditworthiness of any particular
bank, savings and loan institution or other financial institution (whether or
not having the force of law) of any court or governmental or monetary authority,
whether in effect on the date of this Agreement or thereafter. The obligations
of the Company under this Paragraph 5(l) shall survive the termination of this
Agreement and the payment of all Loans and all other Obligations.
6. Security Agreement; Guaranty; Subordination; Additional Documents.
6(a) Security Agreement. To reflect the agreement of the Company
to provide collateral security for the Obligations during all Secured Periods,
the Company shall execute and deliver to the Collateral Agent the Security
Agreement pursuant to which the Company shall, effective only upon the
commencement of a Secured Period, pledge, assign and grant to the Collateral
Agent for the pro rata, pari passu benefit of the Secured Parties, and to each
of such Persons, a first priority security interest in and lien upon the
Collateral, subject to the release and reinstatement provisions set forth in
Paragraph 28 of the Security Agreement. In addition, the Company shall execute
and deliver to the Collateral Agent such UCC-1 financing statements as the
Collateral Agent may request. The Collateral Agent shall file such UCC-1
financing statements only upon the occurrence of a Negative Security Event and
shall file releases thereof upon the occurrence of a Positive Security Event.
6(b) Guaranty and Subordination Agreement. As additional support
for the Obligations, the Company shall execute and deliver and shall cause to be
executed and delivered to the Credit Agent on behalf of the Lenders: (1) the
Guaranty and (2) the Subordination Agreement.
6(c) Further Documents. The Company agrees to execute and deliver
and to cause to be executed and delivered to the Credit Agent or such Persons as
the Credit Agent may direct from time to time such confirmatory or supplementary
security agreements, financing statements, notices to third parties and other
documents, instruments and agreements as the Credit Agent on behalf of the
Lenders may reasonably request, which are in any of the Lenders' judgment
necessary or desirable to obtain for the Collateral Agent on behalf of the
Credit Agent, the Lenders, and the holders from time to time of Outstanding CPNs
the benefit of the Credit Documents and the Collateral.
7. Conditions Precedent.
7(a) First Credit Event. As conditions precedent to the Effective
Date and the first Credit Event hereunder:
(1) There shall have been delivered to the Credit Agent, in
form and substance and in quantities reasonably satisfactory to the Lenders
and their counsel, each of the following:
(i) A duly executed copy of this Agreement;
(ii) Duly executed copies of the Discount Loan
Notes, the Direct Loan Notes, the Negotiated Loan Notes, the Swing Loan
Notes and the GNMA Pool Advance Note;
(iii) Duly executed copies of the Security
Agreement accompanied by such UCC-1 financing statements related
thereto as the Collateral Agent may request, the Guaranty, the
Subordination Agreement and the Fee Letter;
(iv) Such credit applications, financial
statements, pro forma financial statements, authorizations and
information concerning the Company and its business, operations and
condition (financial and otherwise) as the Credit Agent or any Lender
may reasonably request;
(v) Certified copies of resolutions of the Boards
of Directors of the Company and the Parent approving the execution and
delivery of all documents required to be delivered by the Company and
the Parent hereunder;
(vi) Certificates of the Secretary or an Assistant
Secretary of each of the Company and the Parent certifying the names,
incumbency and true signatures of the officers of the Company and the
Parent authorized to sign the documents required to be executed and
delivered by the Company and the Parent hereunder;
(vii) An opinion of counsel for the Company and
the Parent (which counsel may be in-house counsel) in form and
substance satisfactory to the Lenders and covering such matters as the
Lenders may reasonably request;
(viii) A certificate of an executive officer of
each of the Company and the Parent in the form of that attached hereto
as Exhibit B dated as of the date of this Agreement;
(ix) A duly completed Unsecured Period Borrowing
Base Certificate dated as of July 31, 1994 and a Covenant Compliance
Certificate, dated as of the Interim Date, for each of the Company and
the Parent demonstrating in detail satisfactory to the Lenders the
Company's compliance with the covenants set forth in Paragraphs 10(g),
10(i), 10(j), and 10(k) below, and the Parent's compliance with the
financial covenants set forth in Paragraphs 11(d) and 11(e) of the
Guaranty; and
(x) A duly executed copy of the Balance Bank
Agreement with each Balance Bank.
(2) All acts and conditions (including, without limitation,
the obtaining of all necessary regulatory approvals and the making of all
required filings, recordings and registrations) required to be done and
performed and to have happened precedent to the execution, delivery and
performance of the Credit Documents and to constitute the same legal, valid
and binding obligations, enforceable in accordance with their respective
terms, shall have been done and performed and shall have happened in due and
strict compliance with all applicable laws.
(3) All documentation, including, without limitation,
documentation for corporate and legal proceedings in connection with the
transactions contemplated by the Credit Documents, shall be satisfactory in
form and substance to the Lenders and their counsel.
(4) The Company shall have delivered to each of the
Collateral Agent and the Credit Agent, respectively, a letter acceptable to
each such Person, respectively, regarding the payment by the Company to each
such Person of fees, and the Company shall have paid all fees required under
each such letter to have been paid prior to the first Credit Event
hereunder.
(5) All amounts outstanding under the Existing Agreements
shall have been (or shall upon the happening of the first Credit Event
hereunder be) paid in full and all "Letters of Credit" (as defined in the
Existing Agreements) shall have been cancelled or replaced with a Letter of
Credit issued hereunder and the Existing Agreements and any obligations of
the Lenders to make advances or issue Letters of Credit thereunder
terminated; provided, however, that it is expressly agreed and understood
that "Letters of Credit" issued under the Existing Agreements by Lenders
which have agreed to be L/C Issuing Lenders hereunder may be continued as
such and shall be deemed in all respects to be Letters of Credit entitled to
all benefits of, and subject to all restrictions of, the Credit Documents.
(6) No material adverse change in the business, operations,
assets or financial or other condition of the Company or the Company and its
consolidated Subsidiaries taken as a whole shall have occurred since the
Statement Date and the Company by presenting the initial Loan Request,
Interest Rate Election and Payoff Notice shall be deemed to have so
represented and warranted hereunder.
7(b) All Credit Events. As conditions precedent to each Credit
Event hereunder, at and as of the date of, and after giving effect to, such
Credit Event:
(1) The representations and warranties of the Company and
the Parent contained in the Credit Documents shall be accurate and complete
in all respects as of such date;
(2) There shall not have occurred a Potential Default or an
Event of Default (other than an Event of Default under Paragraph 11(a) below
which has not been waived by one hundred percent (100%) of the Lenders or a
Potential Default or an Event of Default under Paragraph 11(g) or under
Paragraph 11(e) resulting from a breach or potential breach of Paragraph
10(j) which has not been waived by the Majority Lenders) and the Majority
Lenders' written election to cease funding Loans hereunder;
(3) There shall not have occurred an Event of Default under
Paragraph 11(a) below which has not been waived by one hundred percent
(100%) of the Lenders or a Potential Default or an Event of Default under
Paragraph 11(g) or under Paragraph 11(e) resulting from a breach or
potential breach of Paragraph 10(j) which has not been waived by the
Majority Lenders;
(4) Following such Credit Event, the aggregate principal
amount of Loans outstanding shall not exceed the applicable limitations of
Paragraphs 1(a), 1(b), 1(c), 1(d) and 1(e) above;
(5) The Company shall have delivered to the Credit Agent a
duly executed Loan Request, Interest Rate Election and Payoff Notice
requesting such Credit Event;
(6) If the Credit Event is the making of a Discount Loan:
(i) the Company shall have delivered a timely Pre-Funding Notice with
respect thereto; and (ii) the Balance Bank funding said Discount Loan shall
have received from each Lender the amount payable by such Lender on account
thereof pursuant to Paragraph 2(d) above, it being expressly agreed and
understood that in the event any Lender has not delivered to such Balance
Bank the amount payable by such Lender, the Discount Loan disbursed to the
Company shall be reduced by the amount not received;
(7) If the Credit Event is the making of a Loan the proceeds
of which will be utilized to repay CPNs, at the date the CPN or CPNs to be
repaid thereby were issued, the Depositary Agreement was in full force and
effect; and
(8) If the date such Credit Event is requested occurs during
any Secured Period and the Company has delivered a Release Request to the
Collateral Agent pursuant to Paragraph 10(a) of the Security Agreement, the
Majority Lenders have not notified the Credit Agent in writing that they
have elected to terminate the agreement of the Lenders to continue funding
Loans (if such election and notification is permitted pursuant to said
Paragraph 10(a)).
By delivering a Loan Request, Interest Rate Election and Payoff Notice to the
Credit Agent, the Company shall be deemed to have represented and warranted the
accuracy and completeness of the statements set forth in subparagraphs (b)(1)
through (b)(7) above and all information set forth in such Loan Request,
Interest Rate Election and Payoff Notice. Each of the Lenders expressly
acknowledges and agrees that during any Unsecured Period neither the Credit
Agent nor the Collateral Agent shall have any obligation to make a
"Determination of Availability" or "Determination of Collateral Value" with
respect to the Collateral Value of the Unsecured Borrowing Base and that the
Credit Agent in transmitting to the Lenders a Loan Request, Interest Rate
Election and Payoff Notice during any Unsecured Period and the Lenders in
participating in the Credit Events requested thereunder are relying, without
independent verification, on the representation and warranty of the Company set
forth in subparagraph (b)(4) above with respect to the Collateral Value of the
Unsecured Borrowing Base.
8. Representations and Warranties of the Company. As an inducement
to the Credit Agent and each Lender to enter into this Agreement, the Company
represents and warrants to the Credit Agent and each Lender (and during any
Secured Period to the Collateral Agent) that:
8(a) Financial Condition. The financial statements, respectively
dated the Statement Date and the Interim Date, copies of which have heretofore
been furnished to each Lender, are complete and correct and present fairly in
accordance with GAAP the consolidated and consolidating financial condition of
the Company and its consolidated Subsidiaries at such dates and the consolidated
and consolidating results of their operations and changes in financial position
for the fiscal periods then ended.
8(b) Corporate Existence; Compliance with Law. Each of the
Company and its Subsidiaries: (1) is duly organized, validly existing and in
good standing as a corporation under the laws of the state of its incorporation,
and is in good standing as a foreign corporation in each jurisdiction where its
ownership of property or conduct of business requires such qualification and
where failure to be in good standing could have a material adverse effect on the
Company, any of its Subsidiaries, or their respective property and/or business
or on the ability of the Company or the Parent to pay or perform the Credit
Documents (or during any Secured Period on the Collateral); (2) has the
corporate power and authority and the legal right to own and operate its
property and to conduct business in the manner in which it does and proposes so
to do; and (3) is in compliance with all Requirements of Law and Contractual
Obligations except to the extent that failure to comply could not have a
material adverse effect on the Company, any of its Subsidiaries, or their
respective property and/or business or on the ability of the Company or the
Parent to pay or perform the Credit Documents (or during any Secured Period on
the Collateral).
8(c) Corporate Power; Authorization; Enforceable Obligations.
Each of the Company and the Parent has the corporate power and authority and the
legal right to execute, deliver and perform the Credit Documents to which it is
a party and has taken all necessary corporate action to authorize the execution,
delivery and performance of the Credit Documents. The Credit Documents have
been duly executed and delivered on behalf of each of the Company and the Parent
and constitute legal, valid and binding obligations of such party enforceable
against such party in accordance with their respective terms.
8(d) No Legal Bar. The execution, delivery and performance of the
Credit Documents, the borrowing thereunder and the use of the proceeds thereof,
will not violate any Requirement of Law or any Contractual Obligation of the
Company or the Parent to the extent that failure to comply therewith could have
a material adverse effect on the Company or its property and/or business or on
the ability of the Company or the Parent to pay or perform the Credit Documents
(or during any Secured Period, on the Collateral).
8(e) No Material Litigation. Except as disclosed on Exhibit C
attached hereto, no litigation, investigation or proceeding of or before any
court, arbitrator or Governmental Authority is pending or, to the knowledge of
the Company, threatened by or against the Company or any of its Subsidiaries or
against any of such parties' properties or revenues involving amounts, in the
case of any such individual litigation, investigation or proceeding, in excess
of $10,000,000.00 or which, regardless of the amount in controversy, is likely
to be adversely determined and which, if adversely determined, could have a
material adverse effect on the business, operations, property or financial or
other condition of the Company or any of its Subsidiaries.
8(f) Taxes. The Company and each of its Subsidiaries have filed
or caused to be filed all tax returns that are required to be filed and have
paid all taxes (other than incidental local business and other municipal taxes
which are not material to the operation of the Company and its Subsidiaries)
shown to be due and payable on said returns or on any assessments made against
them or any of their property other than taxes which are being contested in good
faith by appropriate proceedings and as to which the Company or the applicable
Subsidiary has established adequate reserves in conformity with GAAP.
8(g) Investment Company Act. The Company is not an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
8(h) Subsidiaries. Exhibit D attached hereto sets forth an
accurate and complete list of all presently existing Subsidiaries of the
Company, their respective jurisdictions of incorporation and the percentage of
their capital stock owned by the Company or other Subsidiaries. All of the
issued and outstanding shares of capital stock of the Subsidiaries have been
duly authorized and issued and are fully paid and non-assessable.
8(i) Federal Reserve Board Regulations. Neither the Company nor
any of its Subsidiaries is engaged or will engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
such terms under Regulation U. No part of the proceeds of any Loan made
hereunder will be used for "purchasing" or "carrying" "margin stock" as so
defined or for any purpose which violates, or which would be inconsistent with,
the provisions of the Regulations of the Board of Governors of the Federal
Reserve System.
8(j) ERISA. The Company and each of its Subsidiaries are in
compliance in all material respects with the requirements of ERISA and no
Reportable Event has occurred under any Plan maintained by the Parent, the
Company or any of its or their Subsidiaries which is likely to result in the
termination of such Plan for purposes of Title IV of ERISA.
8(k) Assets. The Company and each of its Subsidiaries has good
and marketable title to all property and assets reflected in the financial
statements referred to in Paragraph 8(a) above, except property and assets sold
or otherwise disposed of in the ordinary course of business subsequent to that
date. Neither the Company nor any of its Subsidiaries has outstanding Liens on
any of its properties or assets nor are there any security agreements to which
the Company or any of its Subsidiaries is a party, or title retention
agreements, whether in the form of leases or otherwise, of any personal property
except as reflected in said financial statements referred to in Paragraph 8(a)
above or as permitted under Paragraph 10(a) below.
9. Affirmative Covenants. The Company hereby covenants and agrees
with the Credit Agent and each Lender that, as long as any Obligations remain
unpaid or any Lender has any obligation to make or purchase its Primary Loan
Percentage Share of Primary Loans or to make Swing Loans or GNMA Pool Advance
Loans or to issue Letters of Credit, the Company shall:
9(a) Financial Statements. Furnish or cause to be furnished
directly to the Credit Agent and each Lender:
(1) Within ninety (90) days after the last day of each
fiscal year of the Parent, consolidated statements of income and statements
of changes in cash flow of the Parent and its Subsidiaries for such year and
a balance sheet as of the end of such year (including therein as
supplemental information, consolidating statements of income and statements
of changes in cash flow and balance sheets as of the end of such year) in
each case presented fairly in accordance with GAAP and, in the case of the
Company, the requirements of HUD Handbook IG 4000.3 REV and accompanied, in
all cases, by an unqualified report of a firm of independent certified
public accountants acceptable to the Majority Lenders;
(2) Within forty-five (45) days after the last day of:
(i) during each Unsecured Period, each fiscal quarter, and (ii) during each
Secured Period, each calendar month, consolidated and consolidating
statements of income and statements of changes in cash flow of the Parent
and its Subsidiaries for such fiscal quarter or calendar month, as
applicable, and balance sheets of the Parent and its Subsidiaries as of the
last day of such fiscal quarter or calendar month, as applicable, presented
fairly in accordance with GAAP, in each case certified in writing as to
fairness of presentation by the chief financial officer or treasurer of the
Company and the Parent;
(3) Within forty-five (45) days following each Applicable
Financial Test Date, a Covenant Compliance Certificate from the chief
financial officer or treasurer of each of the Company and the Parent,
certifying that there does not exist an Event of Default or Potential
Default and, in addition, demonstrating in detail satisfactory to the
Majority Lenders the Company's compliance with the financial covenants set
forth in Paragraphs 10(g), 10(i), 10(j), and 10(k) below as of and at such
Applicable Financial Test Date, and the Parent's compliance with the
financial covenants set forth in Paragraphs 11(d) and 11(e) of the Guaranty,
as of and at such Applicable Financial Test Date;
(4) As soon as is available any written report pertaining to
material items in respect of the internal control matters of the Parent or
the Company submitted to any of such Persons by their respective independent
accountants in connection with each annual or interim special audit of the
financial condition of such Persons made by such independent public
accountants; and
(5) Copies of all proxy statements, financial statements,
and reports which the Parent sends to its stockholders, and copies of all
regular, periodic and special reports, and all registration statements under
the Securities Act of 1933, as amended (the "Act"), which the Parent or the
Company files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or with any
national securities exchange; provided, however, that there shall not be
required to be delivered hereunder to the Credit Agent such copies for any
Lender of prospectuses relating to future series of offerings under
registration statements filed under Rule 415 of the Act or other items which
such Lender has indicated in writing to the Parent or the Company from time
to time need not be delivered to such Lender.
9(b) Certificates; Reports; Other Information. Furnish or cause
to be furnished directly to the Credit Agent and each Lender:
(1) No later than: (i) during any Unsecured Period, the
thirtieth day of each calendar month, an Unsecured Period Borrowing Base
Certificate as of the last day of the immediately preceding calendar month,
and (ii) during any Secured Period, 6:00 p.m. (Los Angeles time) on the
second Business Day of the first and third full week of each calendar month
(and at such other times as the Majority Lenders, through the Credit Agent,
may reasonably request), a Secured Period Borrowing Base Certificate as of
the close of business on the last day of the immediately preceding week;
(2) Within forty-five (45) days following each Applicable
Financial Test Date, prepared as of such Applicable Financial Test Date and
certified by an appropriate officer of the Company, a report covering the
servicing portfolio of the Company covering such matters as the Majority
Lenders, through the Credit Agent, may reasonably request (but which shall
in any event list the aggregate principal amount of mortgage notes serviced
and the number and types of loans evidenced by such notes, and show all
loans in the servicing portfolio more than thirty (30) days past due the due
dates set forth in such notes);
(3) Promptly, such additional financial and other
information, including, without limitation, financial statements of the
Company, the Parent, any Affiliate of the Company or the Parent, or, during
any Secured Period, any Approved Investor (other than FNMA or FHLMC) and
information regarding the Collateral as any Lender, through the Credit
Agent, may from time to time reasonably request, including, without
limitation, such information as is necessary for any Lender to participate
out any of its interests in Loans, GNMA Pool Advance Loans and Letters of
Credit hereunder or to enable another financial institution to become a
signatory hereto;
(4) Promptly upon receipt thereof by the Company, copies of
all audit reports prepared by or on behalf of FNMA, FHLMC and GNMA; and
(5) During any Secured Period, within forty five (45) days
following the written request therefor by the Majority Lenders (which
request may be given no more frequently than once during each calendar
quarter), a market valuation of the Pledged Eligible Mortgage Servicing
Assets prepared by an independent appraiser acceptable to the Majority
Lenders.
9(c) Payment of Indebtedness. Pay, discharge or otherwise satisfy
at or before maturity or before it becomes delinquent, defaulted or accelerated,
as the case may be, all its Indebtedness, except: (1) Indebtedness (other than
Indebtedness with respect to CPNs) being contested in good faith and for which
provision is made to the satisfaction of the Majority Lenders for the payment
thereof in the event the Company is found to be obligated to pay such
Indebtedness and which Indebtedness is thereupon promptly paid by the Company,
and (2) additional Indebtedness (other than Indebtedness with respect to CPNs)
in the aggregate not to exceed $100,000.00.
9(d) Maintenance of Existence and Properties. Maintain all
rights, privileges, licenses, approvals, franchises, properties and assets
necessary in the normal conduct of its business, and comply with all Contractual
Obligations and Requirements of Law. The Company will at all times be a FNMA,
FHLMC and GNMA-approved Seller/ Servicer and a wholly-owned Subsidiary of the
Parent.
9(e) Inspection of Property; Books and Records; Discussions. Keep
proper books of record and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities, and permit
representatives of each Lender (at no cost or expense to the Company unless
there shall have occurred and be continuing an Event of Default) to visit and
inspect any of its properties and examine and make abstracts from any of its
books and records at any reasonable time and as often as may reasonably be
desired by any of the Lenders, and to discuss the business, operations,
properties and financial and other condition of the Company and any of its
Subsidiaries with officers and employees of such parties, and with their
independent certified public accountants.
9(f) Notices. Promptly give written notice to the Credit Agent
(who shall promptly notify each of the Lenders and the Collateral Agent thereof)
of:
(1) The occurrence of any Potential Default or Event of
Default or a Negative Security Event;
(2) Any litigation or proceeding affecting the Company, any
of its Subsidiaries or the Collateral involving amounts, in the case of any
such individual litigation, investigation or proceeding, in excess of
$5,000,000.00 or which, regardless of the amount in controversy, is likely
to be adversely determined and which, if adversely determined, could have a
material adverse effect on the Collateral or the business, operations,
property, or financial or other condition of the Company or the ability of
the Company to pay and perform the Obligations;
(3) Receipt by the Company or the Parent of notice from any
rating agency concerning a potential change in any credit rating previously
accorded the Company or the Parent by such rating agency;
(4) A material adverse change in the business, operations,
property or financial or other condition of the Parent, the Company or any
of their Subsidiaries; and
(5) The Company's entering into any agreement to sell or
pledge servicing rights (other than in connection with the acquisition
financing therefor) which in the aggregate from and after the date hereof
would exceed $2,500,000,000.00 in aggregate principal amount of the subject
mortgage loans.
9(g) Expenses. Pay all reasonable out-of-pocket expenses
(including fees and disbursements of counsel) of the Credit Agent, the
Collateral Agent and the Co-Arrangers incident to the preparation, negotiation,
administration and amendment of the Credit Documents and, following the
occurrence of an Event of Default, of the Credit Agent, the Collateral Agent and
each of the Lenders incident to the protection of the rights of the Lenders, the
Credit Agent and the Collateral Agent under the Credit Documents, and incident
to the enforcement of payment of the Obligations, whether by judicial
proceedings or otherwise, including, without limitation, in connection with
bankruptcy, insolvency, liquidation, reorganization, moratorium or other similar
proceedings involving the Parent or the Company or a "workout" of the
Obligations. The obligations of the Company under this Paragraph 9(g) shall be
effective and enforceable whether or not any Loan is advanced by any Lender
hereunder and shall survive payment of all other Obligations.
9(h) Credit Documents. Comply with and observe all terms and
conditions of the Credit Documents.
9(i) Insurance. Obtain and maintain insurance with responsible
companies in such amounts and against such risks as are usually carried by
corporations engaged in similar businesses similarly situated, including,
without limitation, errors and omissions coverage and fidelity coverage in form
and substance acceptable under FNMA or FHLMC guidelines, and furnish the Lenders
on request full information as to all such insurance.
9(j) CPN Program. Obtain the written approval of the Majority
Lenders to any modification of the documentation relating to the issuance of
CPNs of the Company as in effect on the date of this Agreement.
9(k) Hedging Program. Maintain at all times a Hedging Program
consistent with the Hedging Program in effect at and as of the Effective Date.
10. Negative Covenants. The Company hereby agrees that, as long as
any Obligations remain unpaid or any Lender has any obligation to make or
purchase its Primary Loan Percentage Share of Primary Loans or to make Swing
Loans or GNMA Pool Advance Loans or to issue Letters of Credit, the Company
shall not, directly or indirectly:
10(a) Liens. Create, incur, assume or suffer to exist, any Lien
upon any assets of the Company included in the Unsecured Borrowing Base or,
during any Secured Period, upon the Collateral (except pursuant to or as
permitted under the Security Agreement) or create, incur, assume or suffer to
exist any Lien upon any of its other property and assets (including servicing
rights) other than:
(1) Liens or charges for current taxes, assessments or other
governmental charges which are not delinquent or which remain payable
without penalty, or the validity of which are contested in good faith by
appropriate proceedings upon stay of execution of the enforcement thereof,
provided the Company shall have set aside on its books and shall maintain
adequate reserves for the payment of same in conformity with GAAP;
(2) Liens, deposits or pledges made to secure statutory
obligations, surety or appeal bonds, or bonds for the release of attachments
or for stay of execution, or to secure the performance of bids, tenders,
contracts (other than for the payment of borrowed money), leases or for
purposes of like general nature in the ordinary course of the Company's
business;
(3) Liens on Mortgage Loans and Mortgage-Backed Securities
which are the subject of repurchase agreements;
(4) Liens on real property (including fixtures and
improvements thereon) securing Indebtedness in an amount not to exceed
$50,000,000.00 in the aggregate at any time outstanding; and
(5) During any Secured Period, Liens on any property or
assets (including servicing rights) not included in the calculation of the
Collateral Value of the Secured Borrowing Base; provided, however, that the
aggregate dollar amount of Indebtedness secured by such Liens at any one
time outstanding shall not exceed the dollar amount of unsecured
Indebtedness (other than Indebtedness owed to the Lenders under this
Agreement) on the balance sheet of the Company as of the date that the
applicable Negative Security Event occurred.
10(b) Indebtedness. Create, incur, assume or suffer to exist, or
otherwise become or be liable in respect of any Indebtedness if upon such
creation, incurrence or assumption there would exist an Event of Default or the
Company would fail to be in compliance with the requirements of
Paragraphs 10(i), 10(j) or 10(k) below (assuming such compliance were tested at
such date immediately following such creation, incurrence or assumption).
10(c) Consolidation and Merger. Liquidate or dissolve or enter
into any consolidation, merger, partnership, joint venture, syndicate or other
combination, except that the Company may be consolidated with or merged with any
corporation provided that (1) in any such merger or consolidation the Company
shall be the surviving or resulting corporation and (2) at the time of and
immediately after the effectiveness of such merger or consolidation there shall
not have occurred and be continuing an Event of Default or Potential Default.
10(d) Acquisitions. Purchase or acquire or incur liability for
the purchase or acquisition of any or all of the assets or business of any
Person other than in the normal course of a mortgage banking-related business
(it being expressly agreed and understood that the acquisition of servicing is a
normal course of business activity); provided, however, that the Company may
acquire all or a portion of the stock or assets of another mortgage company or
companies so long as no Event of Default or Potential Default shall exist
immediately following the consummation of such acquisition, and, provided,
further, that the Company shall be in compliance with the financial covenants
set forth in Paragraphs 10(i), 10(j) and 10(k) below, assuming for purposes of
this Paragraph 10(d) that the "Applicable Financial Test Date" referenced in
such covenants is the day immediately following the consummation of such
acquisition.
10(e) Payment of Dividends. Declare or pay any dividends upon any
shares of the Company's stock now or hereafter outstanding, except dividends
payable in the capital stock of the Company, or make any distribution of assets
to its stockholders as such, whether in cash, property or securities, if at the
date of payment or distribution (either before or after giving effect thereto)
there should exist an Event of Default or Potential Default.
10(f) Purchase or Retirement of Stock. Acquire, purchase, redeem
or retire any shares of its capital stock now or hereafter outstanding for
value.
10(g) Investments; Advances; Receivables. Make or commit to make
any advance, loan or extension of credit ("Advances") to, or hold any receivable
("Receivable") of, or make or commit to make any capital contribution to, or
purchase any stock, bonds, notes, debentures or other securities ("Investments")
of, or make any other investment in, any Person, except: (1) Advances
constituting Mortgage Loans made in the ordinary course of the Company's
business and (2) Investments in, Advances to, and Receivables of, any Affiliate
(and Servicing Pass-Through Ventures which are not otherwise Affiliates) not to
exceed the lesser of: (i) ten percent (10%) of the net worth of the Company
determined in accordance with GAAP, and (ii) $100,000,000.00 in the aggregate.
10(h) Sale of Assets. Sell, lease, assign, transfer or otherwise
dispose of any of its assets (other than obsolete or worn out property), whether
now owned or hereafter acquired, other than in the ordinary course of business
as presently conducted and at fair market value (it being expressly agreed and
understood that the sale or other disposition of Mortgage Loans with or without
servicing released and the sale or other disposition of servicing rights are in
the ordinary course of business); provided, however, that in no event shall the
Company enter into any sale and leaseback transaction involving any of its
assets without the prior written consent of the Majority Lenders; and, provided
further, that the Company may sell, lease, assign, transfer or otherwise dispose
of any of its assets to a Subsidiary of the Company (which, for the purpose of
this proviso shall include any limited partnership the general and limited
partners of which are Subsidiaries of the Company) so long as: (1) all classes
of stock of, or partnership interests in, such Subsidiary are owned, directly or
indirectly, by the Company, (2) such Subsidiary incurs no obligations for third
party indebtedness except such obligations to employees and vendors as are
necessary or desirable in the normal conduct of the business of servicing 1-4
unit single family mortgage loans and in managing an office building owned by
such Subsidiary, and (3) any such unpaid obligations as are described in
subsection (2) above (other than payroll and benefits obligations to employees)
shall not exceed at any time $50,000,000.00 in the aggregate.
10(i) Current Ratio. Permit its ratio of Current Assets to
Current Liabilities to be less than 1.05:1.0 on and as of any Applicable
Financial Test Date.
10(j) Minimum Net Worth. Permit its net worth determined in
accordance with GAAP:
(1) On and as of each Applicable Financial Test Date during
the period commencing on the Effective Date to and including February 28,
1995, to be less than $725,000,000.00; and
(2) On and as of each Applicable Financial Test Date
thereafter to be less than the greater of $725,000,000.00 and eighty percent
(80%) of its net worth determined in accordance with GAAP as of February 28,
1995, February 28, 1996 and, February 28, 1997.
10(k) Maximum Total Debt. Permit Total Debt on and as of each
Applicable Financial Test Date to exceed the sum of: (1) one hundred percent
(100%) of Cash, plus (2) one hundred percent (100%) of the amount of Mortgages
Held For Sale and Receivables for Mortgage Loans Shipped (including Mortgage
Loans and Mortgage-Backed Securities subject to a Lien under a repurchase
agreement but excluding all other Mortgage Loans and Mortgage-Backed Securities
which are excluded from "Eligible Mortgage Assets" pursuant to
subparagraphs (a), (b) and (c) of the definition of such term), plus (3) ninety
percent (90%) of Pool Loan Purchases and Mortgage Claims Receivable to the
extent such assets represent VA and FHA Mortgage Loans repurchased by the
Company from pools supporting GNMA Mortgage-Backed Securities, plus (4) eighty
percent (80%) of Mortgages Held for Sale and Receivables for Mortgage Loans
Shipped otherwise excluded from subparagraph (2) above, plus (5) one
percent (1%) of the outstanding principal balance of 1-4 family Mortgage Loans
the servicing rights to which are owned by the Company.
11. Events of Default. Upon the occurrence of any of the following
events (an "Event of Default"):
11(a) The Company shall fail to make any payment on account of
that portion of the Obligations consisting of principal or interest on Loans or
GNMA Pool Advance Loans or L/C Drawings on the date when due; or
11(b) Any representation or warranty made or deemed made by the
Company or the Parent in any Credit Document or in connection with any Credit
Document shall be materially inaccurate or incomplete in any respect on or as of
the date made or deemed made; or
11(c) The Company shall default in the observance or performance
of any covenant or agreement contained in Paragraph 10 above (other than those
contained in Paragraphs 10(i), 10(j), and 10(k) above) or, during any Secured
Period, in the Security Agreement; or
11(d) The Parent shall fail to observe or comply with any term or
provision contained in the Guaranty (other than those contained in
Paragraph 11(d) thereof); or
11(e) The Company or the Parent shall fail to observe or perform
any other term or provision contained in the Credit Documents and such failure
shall continue for thirty (30) days; or
11(f) The Company, any of its Subsidiaries or the Parent shall
default in any payment of any Indebtedness (other than the Obligations or as
permitted under Paragraph 9(c) above) in an aggregate amount of more than
$10,000,000.00 or any other event shall occur and, as a result, the holder or
holders thereof, or any trustee or agent for such holders, either: (1) cause
such Indebtedness to become due and payable prior to its stated maturity, or
(2) elect not to cause such Indebtedness to become so due and payable, but such
event continues for a period of thirty (30) days and is not cured or waived; or
11(g) (1) The Parent, the Company or any of its Subsidiaries shall
commence any case, proceeding or other action (i) under any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (ii) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or the
Parent, the Company or any of its Subsidiaries shall make a general assignment
for the benefit of its creditors; or (2) there shall be commenced against the
Parent, the Company or any of its Subsidiaries any case, proceeding or other
action of a nature referred to in clause (1) above which (i) results in the
entry of an order for relief or any such adjudication or appointment, or
(ii) remains undismissed, undischarged or unbonded for a period of sixty (60)
days; or (3) there shall be commenced against the Parent, the Company or any of
its Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within sixty (60) days from the entry thereof; or (4) the
Parent, the Company or any of its Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (1), (2) or (3) above; or (5) the Parent,
the Company or any of its Subsidiaries shall generally not, or shall be unable
to, or shall admit in writing its inability to, pay its debts as they become
due; or
11(h) (1) Any Person shall engage in any "prohibited transaction"
(as defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (2) any "accumulated funding deficiency" (as defined in Section 302 of
ERISA), whether or nor waived, shall exist with respect to any Plan, (3) a
Reportable Event shall occur with respect to, or proceedings shall commence to
have a trustee appointed, or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable Event or institution of
proceedings is, in the reasonable opinion of the Credit Agent, likely to result
in the termination of such Plan for purposes of Title IV of ERISA, and, in the
case of a Reportable Event, the continuance of such Reportable Event unremedied
for ten days after notice of such Reportable Event pursuant to Section 4043(a),
(c) or (d) of ERISA is given or the continuance of such proceedings for ten days
after commencement thereof, as the case may be, (4) any Single Employer Plan
shall terminate for purposes of Title IV of ERISA, (5) any withdrawal liability
to a Multiemployer Plan shall be incurred by the Company or the Parent or any
Commonly Controlled Entity, or (6) any other event or condition shall occur or
exist; and in each case in clauses (1) through (6) above, such event or
condition, together with all other such events or conditions, if any, could
subject the Parent, the Company or any of its Subsidiaries to any tax, penalty
or other liabilities in the aggregate material in relation to the business,
operations, property or financial or other condition of the Parent, the Company
or any of its Subsidiaries; or
11(i) One or more judgments or decrees in amounts aggregating
$1,000,000.00 or more not fully covered by insurance (exclusive of self-
insurance (not to exceed $5,000,000.00) and deductibles) during any consecutive
twelve (12) month period shall be entered against the Company or any of its
Subsidiaries and all such judgments or decrees shall not have been vacated,
discharged or satisfied, or stayed or bonded pending appeal, within sixty (60)
days from the entry thereof unless counsel to the Company reasonably acceptable
to the Majority Lenders has delivered to the Lenders within such sixty (60) day
period an opinion that the Company has the legal right to have such judgment or
decree vacated without the expenditure of funds (other than for costs of
proceedings) and the Company is diligently proceeding to accomplish such
vacation; or
11(j) The Parent shall notify the Credit Agent or any Lender of
its intention to rescind or revoke the Guaranty or the Subordination Agreement,
in whole or in part, with respect to future transactions or otherwise; or
11(k) The Parent shall cease to own one hundred percent (100%) of
the outstanding capital stock of the Company; or
11(l) The Credit Agent (or during any Secured Period the
Collateral Agent) receives notice from the Paying Agent that the Company has
failed to cover an overdraft in the Commercial Paper Account on or before the
close of business of the Paying Agent in New York on the Business Day
immediately following the date on which such overdraft was created;
THEN:
(i) Automatically upon the occurrence of an Event of
Default under Paragraph 11(g) above,
(ii) At the option of any Lender upon the occurrence of an
Event of Default under Paragraph 11(a) above unless such Event of Default
is expressly waived in writing by one hundred percent (100%) of the
Lenders, and
(iii) In all other cases, at the option of the Majority
Lenders,
each Lender's obligation to make or purchase Loans, the obligation of the GNMA
Pool Advance Lender to make GNMA Pool Advance Loans and the obligation of the
L/C Issuing Lenders to issue Letters of Credit shall terminate, the principal
balance of outstanding Loans and GNMA Pool Advance Loans and interest accrued
but unpaid thereon and all other Obligations shall become immediately due and
payable and the aggregate contingent liability of the Company to reimburse each
L/C Issuing Lender for L/C Drawings under Outstanding Letters of Credit shall be
deemed immediately due and payable, without demand upon or notice or presentment
to the Company, all of which are hereby waived. Immediately upon the occurrence
of an Event of Default and termination of the obligation of the Lenders to make
or purchase Loans, of the GNMA Pool Advance Lender to make GNMA Pool Advance
Loans and of the L/C Issuing Lenders to issue Letters of Credit, the Credit
Agent shall notify the Paying Agent thereof and is hereby irrevocably authorized
to instruct the Paying Agent to cease issuing CPNs on behalf of the Company.
Following the occurrence and during the continuance of an Event of Default
during any Secured Period, the Company agrees that the Company and the Credit
Agent shall, at the request of the Majority Lenders, implement certain
procedures with respect to the Company's funding of Wet Funded Loans, all at the
Company's sole expense. Such procedures may include, but are not limited to:
a. reducing the advance rate against Wet Funded Loans for purposes of
determining the Collateral Value of the Borrowing Base for Wet Funded Loans,
b. requiring that if (1) Wet Funded Loans are funded with wire transfers, such
wire transfers originate from accounts located at a lending office of a Lender,
(2) Wet Funded Loans are funded with drafts, such drafts be drawn on accounts
located at a lending office of a Lender, and (3) Wet Funded Loans are funded
from accounts which are not located at a lending office of a Lender, the
financial institution which holds such account enters into an agreement with the
Company and the Credit Agent which shall provide that the Credit Agent shall
have exclusive dominion and control over the funds in such account, c. requiring
the closing agents for such Wet Funded Loans to enter into escrow or other
agreements regarding the monies used to fund such Wet Funded Loans, and
d. requiring the Company to provide the Credit Agent and the Lenders with such
information regarding the funding of Wet Funded Loans as the Majority Lenders
may reasonably request. The Company, at its expense, shall from time to time
execute and deliver to the Credit Agent all such assignments, certificates,
supplemental documents, and financing statements, and shall do all other acts or
things, as the Credit Agent may reasonably request in order to more fully
implement such procedures.
12. Agency Provisions.
12(a) Appointment. Each Lender hereby irrevocably designates and
appoints each Agent as the agent of such Lender under the Credit Documents and
each Lender hereby irrevocably authorizes each Agent, as the agent for such
Lender, to take such action on its behalf under the provisions of the Credit
Documents and to exercise such powers and perform such duties as are expressly
delegated to such Agent by the terms of the Credit Documents, together with such
other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in the Credit Documents, no Agent shall have
any duties or responsibilities, except those expressly set forth herein or
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into the Credit Documents or otherwise exist against any Agent.
12(b) Delegation of Duties. Each of the Collateral Agent and the
Credit Agent may execute any of its duties under the Credit Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. Neither the Collateral Agent
nor the Credit Agent shall be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.
12(c) Exculpatory Provisions. No Agent nor any of their
respective officers, directors, employees, agents, counsel, attorneys-in-fact or
Affiliates shall be (1) liable to any Lender, any other Agent, the holder of any
CPN or the Company for any action taken or omitted to be taken by it or such
Person under or in connection with the Credit Documents (except for its or such
Person's own gross negligence or willful misconduct), or (2) responsible in any
manner to any of the Lenders, the other Agent, the holder of any CPN or the
Company for: (i) any recitals, statements, representations or warranties made by
the Company or any officer thereof contained in the Credit Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by such Agent under or in connection with, the Credit Documents
(except such as are prepared by such Agent and, then, only to the extent such
Agent is responsible for verification of the accuracy and completeness of the
information contained therein or the facts upon which such information is based
as expressly provided herein) or for the value, validity, effectiveness,
genuineness, enforceability, collectability or sufficiency of the Credit
Documents or for any failure of the Company to perform its obligations
thereunder or (ii) any action taken or omitted to be taken by the Collateral
Agent with respect to the Collateral in accordance with written instructions
given as permitted hereunder or (iii) assuring compliance of the Credit
Documents and/or the transactions contemplated by the Credit Documents with any
law or regulation binding upon such Person, it being expressly acknowledged,
agreed and understood that each such Person has obtained independent advice
satisfactory to it in all such regards. No Agent shall be under any obligation
to any Lender to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, the Credit Documents
(other than agreements required to be complied with by such Agent thereunder and
subject to the standards of care set forth herein with respect thereto) or to
inspect the properties, books or records of the Company. Each Agent shall be
entitled to refrain from exercising any discretionary powers or actions under
this Agreement or any other Credit Document until it shall have received the
prior written consent of one hundred percent (100%) of the Lenders to such
action.
12(d) Reliance by Agent. Each Agent shall be entitled to rely,
and shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certification, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Company),
independent accountants and other experts selected by such Agent. The Credit
Agent may deem and treat the payee of any Direct Loan Note, Discount Loan Note,
Negotiated Loan Note, Swing Loan Note or GNMA Pool Advance Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation or
transfer thereof shall have been filed with the Credit Agent. Each Agent shall
be fully justified in failing or refusing to take any action under the Credit
Documents unless it shall first receive such advice or concurrence of the
Majority Lenders (or all Lenders, as required under the Credit Documents) or it
shall first be indemnified to its satisfaction by the Lenders against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any action (other than liability and/or expense arising out
of such Agent's gross negligence or willful misconduct). Each Agent shall in
all cases be fully protected in acting, or in refraining from acting, under the
Credit Documents in accordance with a request of the Majority Lenders (or all
Lenders, if applicable) absent gross negligence and willful misconduct on the
part of such Agent in the method in which it acts or refrains from acting in
accordance therewith, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders.
12(e) Notice of Default; Agreement to Advance. No Agent shall be
deemed to have knowledge or notice of the occurrence of any Event of Default or
Potential Default unless such Agent has received notice from a Lender or the
Company referring to the Credit Documents, describing such Event of Default or
Potential Default and stating that such notice is a "notice of default". In the
event that any Agent receives such a notice, such Agent shall give notice
thereof to the Lenders and the other Agent. The Collateral Agent shall take
such action with respect to such Event of Default or Potential Default occurring
during a Secured Period as shall be reasonably directed by the Majority Lenders
(or all Lenders, as required under the Credit Documents), through the Credit
Agent (subject to the provisions of Paragraph 18 of the Security Agreement);
provided, however, that unless and until the Collateral Agent shall have
received such directions, the Collateral Agent may (but shall not be obligated
to) take such action or refrain from taking such action (in each case consistent
with the provisions of the Credit Documents), with respect to such Event of
Default or Potential Default as it shall deem advisable in the best interest of
the Lenders.
12(f) Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that no Agent nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by such Agent hereafter
taken, including any review of the affairs of the Company, shall be deemed to
constitute any representation or warranty by such Agent to any Lender. Each
Lender represents to each Agent that it has, independently and without reliance
upon such Agent or any other Lender or their respective counsel, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Company and made its
own decision to extend credit hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon any
Agent or any other Lender or their respective counsel, and based on such
documents, information and legal advice (including, without limitation, advice
of regulatory counsel to it) as it shall deem appropriate at the time, continue
to make its own credit analysis, appraisals and decisions in entering into the
Credit Documents and taking or not taking action thereunder, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Company. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by an Agent hereunder, such Agent shall not have any
duty or responsibility to provide any Lender with any legal advice or credit or
other information concerning the business, operations, property, financial and
other condition or creditworthiness of the Company which may come into the
possession of such Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
12(g) Indemnification. The Company agrees to indemnify, defend
and hold harmless each Agent in its capacity as such from and against any and
all claims, obligations, penalties, actions, suits, judgments, costs,
disbursements, losses, liabilities and/or damages (including, without
limitation, attorneys' fees) of any kind whatsoever which may at any time be
imposed on, assessed against or incurred by such Agent in any way (1) relating
to or arising out of the Credit Documents or any documents contemplated by or
referred to therein or the transactions contemplated thereby or any action taken
or omitted to be taken by such Agent in connection with the foregoing; provided,
the Company shall not be liable for any portion of any such claims, obligations,
etc., arising out of or resulting from the gross negligence or willful
misconduct of such Agent or (2) resulting from any action taken or omitted to be
taken by such Agent in accordance with written instructions given as provided in
the Credit Documents or (3) relating to any one or more of the matters covered
by Paragraph 12(c) above. The Lenders agree to indemnify and hold harmless each
Agent in its capacity as such ratably in accordance with their Aggregate
Percentage Shares to the extent required by the Company hereunder if any Agent
is not reimbursed by the Company hereunder and without limiting the obligation
of the Company to do so. The indemnification obligations of the Company and
Lenders under this Paragraph 12(g) shall survive termination of this Agreement
and payment in full of the Obligations.
12(h) Agent in Its Individual Capacity. Any Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Company as though such Agent were not an Agent
hereunder. With respect to such loans made or renewed by them and any note
issued to them hereunder, each Agent shall have the same rights and powers under
the Credit Documents as any Lender thereunder and may exercise the same as
though it were not an Agent, and the terms "Lender" and "Lenders" shall include
Agents in their individual capacities.
12(i) Successor Agents. Any Agent may resign as such under the
Credit Documents upon ninety (90) days' prior written notice to the Lenders and
the Company and the Credit Agent shall resign in the event its Aggregate Maximum
Commitment shall be less than $25,000,000.00. In addition, in the event any
Agent fails to perform its obligations under the Credit Documents in any
material manner and fails to correct its performance within thirty (30) days of
written notice of such failure of performance given by not less than the
Majority Lenders, then such Agent may be removed upon thirty (30) days notice
given by not less than the Majority Lenders. If an Agent shall resign or be so
removed, then, on or before the effective date of such resignation or removal,
the Majority Lenders shall appoint a successor agent reasonably acceptable to
the Company or, if the Majority Lenders are unable to agree on the appointment
of a successor agent, such Agent shall appoint a successor agent for the
Lenders, which successor agent shall be reasonably acceptable to the Company,
whereupon such successor agent shall succeed to the rights, powers and duties of
such Agent, and the term "Collateral Agent" or "Credit Agent", as applicable,
shall mean such successor agent effective upon its appointment, and the former
Agent's rights, powers and duties shall be terminated without any other or
further act or deed on the part of such former Agent or any of the parties to
this Agreement or any of the other Credit Documents or successors thereto.
After any Agent's resignation or removal hereunder, the provisions of this
Paragraph 12 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Agent under the Credit Documents.
12(j) Sharing of Set-Offs. If following the occurrence and during
the continuance of an Event of Default any Lender (a "benefitted Lender") shall
at any time receive any payment of all or part of the Obligations held by it or
receive any collateral in respect thereof (whether voluntarily or involuntarily,
by set-off or otherwise) in a greater proportion than any such payment to and
collateral received by any other Lender, if any, in respect of such other
Lender's portion of the Obligations, or interest thereon, such benefitted Lender
shall purchase for cash from the other Lenders such portion of each such other
Lender's Obligations, or shall provide such other Lenders with the benefits of
such collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefitted Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery but without interest. The
Company agrees that each Lender so purchasing a portion of another Lender's
Obligations may exercise all rights of payment (including, without limitation,
rights of set-off) with respect to such portion as fully as if such Lender were
the direct holder of such portion.
13. Miscellaneous Provisions.
13(a) No Assignment. The Company may not assign its rights or
obligations under the Credit Documents without the prior written consent of one
hundred percent (100%) of the Lenders. Subject to the foregoing, all provisions
contained in this Agreement or any document or agreement referred to herein or
relating hereto shall inure to the benefit of each Lender, its successors and
assigns, and shall be binding upon the Company, its successors and assigns.
13(b) Amendment. The Credit Documents may not be amended or terms
or provisions hereof waived unless such amendment or waiver is in writing and
signed by the Majority Lenders and the Company; provided, however, that without
the prior written consent of one hundred percent (100%) of the Lenders, no
amendment or waiver shall:
(1) Waive or amend any term or provision of Paragraphs 4(i),
4(j) or 4(k) above, or this Paragraph 13(b);
(2) Reduce the principal of, or interest on, the Obligations
or any amount of fees payable under this Agreement, or extend the required
payment date of principal or interest on the Obligations or any fees;
(3) Modify the Primary Loan Credit Limit or any Lender's
Primary Loan Percentage Share thereof; provided, however, that the Company
and any Lender, acting alone, may agree to an increase, temporary or
permanent, in such Lender's Maximum Primary Loan Commitment and Aggregate
Maximum Commitment with an effect on the Aggregate Credit Limit as a result
of such increase (and if such increase was a temporary increase, eventual
decrease);
(4) Modify the definition of "Majority Lenders," "Negative
Security Event" or "Positive Security Event";
(5) Extend the Maturity Date;
(6) Include any Person other than the Lenders signatory
hereto as a "Lender" hereunder except as expressly permitted under
Paragraph 14(a) below;
(7) During any Secured Period, release any Collateral except
as expressly provided in the Credit Documents;
(8) Cancel or terminate the Guaranty; or
(9) Modify any provision in the Credit Documents which
expressly requires consent of one hundred percent (100%) of the Lenders.
No amendment or waiver shall, unless agreed to in writing by the affected Agent,
modify the rights or duties of such Agent.
13(c) Cumulative Rights; No Waiver. The rights, powers and
remedies of the Lenders hereunder are cumulative and in addition to all rights,
powers and remedies provided under any and all agreements between the Company
and the Lenders relating hereto, at law, in equity or otherwise. Any delay or
failure by the Lenders to exercise any right, power or remedy shall not
constitute a waiver thereof by the Lenders, and no single or partial exercise by
the Lenders of any right, power or remedy shall preclude any other or further
exercise thereof or any exercise of any other rights, powers or remedies.
13(d) Entire Agreement; Severability. This Agreement and the
documents and agreements referred to herein embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings relating to the subject matter hereof and thereof. All waivers
by the Company provided for in the Credit Documents have been specifically
negotiated by the parties with full cognizance and understanding of their
rights. If any of the provisions of the Credit Documents shall be held invalid
or unenforceable, the Credit Documents shall be construed as if not containing
such provisions, and the rights and obligations of the parties hereto shall be
construed and enforced accordingly.
13(e) Survival. All representations, warranties, covenants and
agreements herein contained on the part of the Company shall survive the
termination of this Agreement and shall be effective until the Obligations are
paid and performed in full or longer as expressly provided herein.
13(f) Notices. All notices given by any party to any of the
others shall be in writing (which may be by facsimile transmission), delivered
personally, by commercial courier service or by depositing the same in the
United States mail, registered, with postage prepaid, addressed to such party at
the address set forth on Annex II attached hereto. Any party may change the
address to which notices are to be sent by notice of such change to the other
party or parties given as provided herein.
13(g) Governing Law. This Agreement shall be deemed to be a
contract made under the laws of the State of California, and for all purposes
shall be construed in accordance with the laws of said State, without regard to
principles of conflicts of law.
13(h) Counterparts. This Agreement may be executed in
counterparts each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
agreement.
14. Additional Lenders; Assignments and Participations; Increases in
Availability.
14(a) Addition of New Lender.
(1) Subject to the limitation on the Aggregate Credit Limit
and the Primary Loan Credit Limit, the Company or any Lender may at any time
propose that one or more financial institutions (each, an "Applicant
Financial Institution") become an additional Lender hereunder. At such
time, the Company or such Lender, as applicable, shall notify the other
parties hereto, including the Credit Agent, of the identity of such
Applicant Financial Institution and such Applicant Financial Institution's
proposed Aggregate Maximum Commitment, Primary Loan Percentage Share,
Maximum Primary Loan Commitment and, if applicable, Swing Line Percentage
Share, L/C Commitment and/or GNMA Pool Advance Commitment. The addition of
any Applicant Financial Institution shall be subject to:
(i) If such Applicant Financial Institution is
proposed for inclusion as a Lender hereunder by a Lender, the prior
written consent of the Company and the Credit Agent, and if such
Applicant Financial Institution is proposed for inclusion as a Lender
hereunder by the Company, the prior written consent of the Credit
Agent, none of which consents shall be unreasonably withheld and which,
if given, shall be given in writing to the other parties hereto no
later than the tenth day following receipt by the Company of a written
request for the inclusion of such Applicant Financial Institution as a
Lender hereunder;
(ii) If such Applicant Financial Institution will
become the GNMA Pool Advance Lender and/or a L/C Issuing Lender, such
Applicant Financial Institution shall execute a replacement GNMA Pool
Advance Agreement and cooperate with the current GNMA Pool Advance
Lender and any other L/C Issuing Lenders to effect such intent; and
(iii) Delivery of each of the items and the
occurrence of each of the events described in subparagraph (2) below.
(2) Assuming delivery of the consent of the Company and/or
Credit Agent as required pursuant to subparagraph (1)(i) above, the Credit
Agent, the Collateral Agent, the Company and, if such Applicant Financial
Institution will be acquiring a portion of an existing Lender's Aggregate
Maximum Commitment and Maximum Primary Loan Commitment by way of assignment
from such existing Lender, such existing Lender, shall mutually agree on the
Adjustment Date on which such Applicant Financial Institution shall become a
party hereto and a Lender hereunder. On such Adjustment Date:
(i) The Company shall deliver to the Credit Agent,
the Collateral Agent and each of the Lenders a Commitment Schedule to
be effective as of such Adjustment Date, reflecting the Aggregate
Credit Limit and the Lenders' respective Aggregate Maximum Commitments,
Primary Loan Percentage Shares, Maximum Primary Loan Commitments and,
if applicable, L/C Commitments and GNMA Pool Advance Commitment.
(ii) No later than 12:30 p.m. (Los Angeles time) on
such Adjustment Date, such Applicant Financial Institution shall pay to
the Credit Agent an amount equal to such Applicant Financial
Institution's Primary Loan Percentage Share of Primary Loans
outstanding. The Credit Agent shall thereupon remit to the Lenders
their Primary Loan Percentage Shares of such funds. Following such
Adjustment Date, fees and interest accrued on the Obligations to but
not including such Adjustment Date shall be payable to the Lenders in
accordance with their respective Primary Loan Percentage Shares prior
to such Adjustment Date before giving effect to the readjustment
thereof pursuant to the Commitment Schedule provided by the Company on
such Adjustment Date.
(iii) If such Applicant Financial Institution
is acquiring a portion of an existing Lender's Aggregate Maximum
Commitment and Maximum Primary Loan Commitment by way of assignment
from such existing Lender, the Credit Agent, the Company, the assigning
Lender and the Applicant Financial Institution shall execute and
deliver an Assignment Agreement, or if such Applicant Financial
Institution is becoming a Lender hereunder as a result of an increase
in the Aggregate Credit Limit, the Credit Agent, the Company and the
Applicant Financial Institution shall execute and deliver an Additional
Lender Agreement, either of which Assignment Agreement or Additional
Lender Agreement shall constitute an amendment to this Agreement to the
extent necessary to reflect the inclusion of the Applicant Financial
Institution as a Lender hereunder.
(iv) The Company shall execute and deliver to such
Applicant Financial Institution a Direct Loan Note, a Discount Loan
Note, a Negotiated Loan Note and, if applicable, a GNMA Pool Advance
Note.
(v) The Applicant Financial Institution shall pay
to the Credit Agent a registration fee of $2,500.00.
Subject to the requirements described above, the Applicant Financial
Institution shall become a party hereto and a Lender hereunder and shall be
entitled to all rights, benefits and privileges accorded a Lender under the
Credit Documents and shall be subject to all obligations of a Lender under
the Credit Documents.
14(b) Assignments Among Existing Lenders. Any Lender may at any
time agree to assign a portion of such Lender's Aggregate Maximum Commitment and
Maximum Primary Loan Commitment to a Transferee Lender. In such event the
Lender and the Transferee Lender shall so notify the Credit Agent, the
Collateral Agent and the Company of the Adjustment Date on which such assignment
is to be effective. On such Adjustment Date:
(1) The Company shall deliver to the Credit Agent, the
Collateral Agent and each of the Lenders a Commitment Schedule to be
effective as of such Adjustment Date, reflecting the Aggregate Credit
Limit and the Lenders' respective Aggregate Maximum Commitments, Primary
Loan Percentage Shares, and, if applicable, L/C Commitments and GNMA Pool
Advance Commitment.
(2) The Credit Agent, the Company, the assigning Lender
and the Transferee Lender shall execute and deliver an Assignment
Agreement, which shall constitute an amendment to this Agreement to the
extent necessary to reflect such transfer.
(3) No later than 12:30 p.m. (Los Angeles time) on such
Adjustment Date, the Transferee Lender shall pay to the Credit Agent an
amount equal to such Transferee Lender's Primary Loan Percentage Share of
Primary Loans and Loans outstanding in excess of such Transferee Lender's
previous Primary Loan Percentage Share thereof. The Credit Agent shall
thereupon remit to the transferring Lender the amount thereof.
(4) If the Transferee Lender will become the GNMA Pool
Advance Lender and/or a L/C Issuing Lender, such Transferee Lender shall
execute a replacement GNMA Pool Advance Agreement and cooperate with the
current GNMA Pool Advance Lender and any other L/C Issuing Lender to
effect such intent.
14(c) Minimum Loan Commitment. Notwithstanding anything to the
contrary contained herein, the inclusion of any Applicant Financial Institution
as a Lender hereunder pursuant to Paragraph 14(a) above and the assignment by a
Lender of a portion of such Lender's Aggregate Maximum Commitment and Maximum
Primary Loan Commitment to a Transferee Lender pursuant to Paragraph 14(b) above
shall be subject to the following restrictions:
(1) If an Applicant Financial Institution is acquiring
a portion of an existing Lender's Aggregate Maximum Commitment by way of an
assignment from such existing Lender, then: (i) such assignment of Aggregate
Maximum Commitment must be in the minimum amount of $5,000,000.00 (or if in
a higher amount, in integral multiples of $5,000,000.00 in excess thereof),
and (ii) following the consummation of the contemplated assignment and after
giving effect to any other assignments occurring on the related Adjustment
Date, such existing Lender must continue to hold an Aggregate Maximum
Commitment of not less than $25,000,000.00 and such Applicable Financial
Institution must hold an Aggregate Maximum Commitment of not less than
$25,000,000.00;
(2) If an existing Lender is assigning a portion of its
Aggregate Maximum Commitment to a Transferee Lender, such assignment of
Aggregate Maximum Commitment is in the minimum amount of $5,000,000.00 (or
if in a higher amount, in integral multiples of $5,000,000.00 in excess
thereof) and such existing Lender shall continue to hold an Aggregate
Maximum Commitment of not less than $25,000,000.00 following the
consummation of the contemplated assignment.
14(d) Sub-Participations by Lenders. Any Lender may at any time
sell participating interests in any of the Obligations held by such Lender and
its commitments hereunder; provided, however, that:
(1) No participation contemplated by this Paragraph 14(d)
shall relieve such Lender from its obligations hereunder or under any
other Credit Document;
(2) Such Lender shall remain solely responsible for the
performance of such obligations;
(3) The Company, the Credit Agent, the Collateral Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under the
Credit Documents;
(4) The participation agreement between such Lender and
the Person purchasing such participation interest (a "Participant") shall
provide that: (i) the participation interest of the Participant is an
undivided interest in such Lender's Aggregate Maximum Commitment, and
(ii) the sole voting rights of the Participant are with respect to those
items on which such Lender is entitled to vote pursuant to
Paragraphs 13(b)(2), 13(b)(5), 13(b)(7) and 13(b)(8) above; and
(5) Such Lender shall not enter into participation
agreements with more than two Participants for each $25,000,000.00 of
Aggregate Maximum Commitment held by such Lender.
The Company acknowledges and agrees that each Participant shall be considered a
Lender for purposes of Paragraphs 4(i), 4(k) and 4(l) and 5(l) above; provided,
however, that in no event shall any Participant be entitled to receive any
payment or compensation in excess of that to which such Participant's selling
Lender would be entitled with respect to the participation interest held by such
Participant if such Lender had not sold any participation interest to such
Participant.
14(e) Federal Reserve Bank. Notwithstanding the provisions of
Paragraphs 14(a) and 14(b) above, any Lender may at any time pledge or assign
all or any portion of such Lender's rights under this Agreement and the other
Credit Documents to a Federal Reserve Bank.
14(f) Increases in Availability. From time to time the Company
and any Lender (an "Increasing Lender") may agree, with the prior written
consent of the Credit Agent, to permanently or temporarily increase such
Lender's Aggregate Maximum Commitment and Primary Loan Percentage Share, the
dollar amount of any such increase to be, subject to the Aggregate Credit Limit
limitation, in the minimum dollar amount of $5,000,000.00 and integral multiples
of $5,000,000.00 in excess thereof. The Company and the Increasing Lender shall
agree on the Adjustment Date for said increase and, if the increase is a
temporary rather than permanent increase, the date on which said increase shall
terminate (the "Temporary Increase Termination Date"). The Company shall
deliver to the Credit Agent, the Collateral Agent and each of the Lenders a
Commitment Schedule to be effective as of such Adjustment Date. On the
Temporary Increase Termination Date the aggregate amount of such Increasing
Lender's Primary Loan Percentage Share of outstanding Primary Loans in excess of
its Maximum Primary Loan Commitment after giving effect to the termination of
the subject increase shall, if but only if at such Temporary Increase
Termination Date there does not exist an Event of Default, be payable in full.
If at the Temporary Increase Termination Date there exists an Event of Default,
the temporary increase of the Increasing Lender shall continue in effect and,
unless otherwise agreed by one hundred percent (100%) of the Lenders, shall be
treated thereafter as a permanent increase in said Increasing Lender's Aggregate
Maximum Commitment.
14(g) Provision of Information; Confidentiality. The Company
hereby acknowledges and agrees that in connection with the proposed assignment
or subparticipation by a Lender of its interest in the Obligations, such Lender
may disclose to prospective assignees and Participants any and all information
provided to such Lender hereunder; provided, however, that such information
shall be furnished to such prospective assignees and Participants on a
confidential basis.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
COUNTRYWIDE FUNDING CORPORATION,
a New York corporation
By _____________________________
Name ___________________________
Title __________________________
THE FIRST NATIONAL BANK OF CHICAGO,
a national banking association,
as Co-Arranger and Credit Agent
By __________________________________
Name ________________________________
Title _______________________________
BANKERS TRUST COMPANY, a New York State
banking corporation, as Co-Arranger and
Syndication Agent
By __________________________________
Name ________________________________
Title _______________________________
ABN AMRO BANK N.V.,
LOS ANGELES INTERNATIONAL BRANCH,
as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
BANK BRUSSELS LAMBERT, NEW YORK BRANCH, as a
Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
BANK OF HAWAII, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
BANK OF MONTREAL, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE BANK OF NEW YORK, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
BANKERS TRUST COMPANY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
BANQUE NATIONALE DE PARIS,
LOS ANGELES AGENCY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
BANQUE PARIBAS, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
CANADIAN IMPERIAL BANK OF COMMERCE, as a
Lender
By __________________________________
Name ________________________________
Title _______________________________
THE CHASE MANHATTAN BANK, N.A., as a Lender
By __________________________________
Name ________________________________
Title _______________________________
CITICORP USA, INC., as a Lender
By __________________________________
Name ________________________________
Title _______________________________
COMMERZBANK AKTIENGESELLSCHAFT
GRAND CAYMAN BRANCH, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
CREDIT LYONNAIS SAN FRANCISCO BRANCH AND/OR
CAYMAN ISLANDS BRANCH, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
CREDIT SUISSE, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE DAI-ICHI KANGYO BANK, LIMITED, SAN
FRANCISCO AGENCY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN
ISLANDS BRANCHES, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
DG BANK, DEUTSCHE GENOSSENSCHAFTSBANK, as a
Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
FIRST INTERSTATE BANK OF CALIFORNIA,
as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
THE FIRST NATIONAL BANK OF BOSTON,
as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE FIRST NATIONAL BANK OF CHICAGO, as a
Lender
By __________________________________
Name ________________________________
Title _______________________________
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE FUJI BANK, LIMITED, LOS ANGELES AGENCY, as
a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE INDUSTRIAL BANK OF JAPAN, LIMITED, LOS
ANGELES AGENCY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
KREDIETBANK N.V., as a Lender
By __________________________________
Name ________________________________
Title _______________________________
LLOYDS BANK PLC, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS
ANGELES AGENCY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
NATIONAL WESTMINSTER BANK USA,
as a Lender
By __________________________________
Name ________________________________
Title _______________________________
NATIONSBANK OF TEXAS, N.A., as a Lender
By __________________________________
Name ________________________________
Title _______________________________
PNC BANK KENTUCKY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE SAKURA BANK, LTD., LOS ANGELES AGENCY, as
a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
THE SANWA BANK LIMITED, LOS ANGELES BRANCH, as
a Lender
By __________________________________
Name ________________________________
Title _______________________________
SHAWMUT BANK, N.A., as a Lender
By __________________________________
Name ________________________________
Title _______________________________
SOCIETE GENERALE, NEW YORK BRANCH, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE SUMITOMO BANK, LIMITED, LOS ANGELES
BRANCH, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE TOYO TRUST & BANKING CO., LTD., LOS
ANGELES AGENCY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
UNION BANK OF SWITZERLAND, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
By __________________________________
Name ________________________________
Title _______________________________
UNITED STATES NATIONAL BANK OF OREGON, as a
Lender,
By __________________________________
Name ________________________________
Title _______________________________
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK
BRANCH/CAYMAN ISLANDS BRANCH,
as a Lender
By __________________________________
Name ________________________________
Title _______________________________
THE YASUDA TRUST & BANKING COMPANY, LIMITED,
LOS ANGELES AGENCY, as a Lender
By __________________________________
Name ________________________________
Title _______________________________
ACKNOWLEDGED and AGREED as of the date
first written above:
COUNTRYWIDE CREDIT INDUSTRIES, INC., a
Delaware corporation
By _______________________________
Name _____________________________
Title ____________________________
SCHEDULE OF EXHIBITS
EXHIBIT DOCUMENT
A-1 Form of Direct Loan Notes
A-2 Form of Discount Loan Notes
A-3 Form of Negotiated Loan Notes
A-4 Form of Swing Loan Notes
A-5 Form of GNMA Pool Advance Note
B Form of Officer's Certificate
C Litigation Schedule
D Schedule of Existing Subsidiaries
Annex I: Glossary
Annex II: Schedule of Notice Addresses
REVOLVING CREDIT AGREEMENT
By and Among
COUNTRYWIDE FUNDING CORPORATION
and
THE FIRST NATIONAL BANK OF CHICAGO
as Co-Arranger and Credit Agent
BANKERS TRUST COMPANY
as Co-Arranger and Syndication Agent
and
THE LENDERS PARTY THERETO
Los Angeles, California
September 23, 1994
