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 May 31, 1996
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 of (IRS Employer
incorporation or organization) Identification No.)
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 No
-------- --------
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 July 9, 1996
Common Stock $.05 par value 102,526,176
<TABLE>
<CAPTION>
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
May 31, February 29,
1996 1996
---------------- -----------------
(Dollar amounts in thousands,
except per share data)
ASSETS
<S> <C> <C>
Cash $ 7,876 $ 16,444
Receivables for mortgage loans shipped 2,412,931 2,299,979
Mortgage loans held for sale 2,403,955 2,440,108
Other receivables 1,047,288 912,613
Property, equipment and leasehold improvements, at cost - net of
accumulated depreciation and amortization 147,468 140,963
Capitalized servicing fees receivable 693,207 631,784
Mortgage servicing rights 1,941,844 1,691,881
Other assets 586,638 523,881
---------------- -----------------
Total assets $9,241,207 $8,657,653
================ =================
Borrower and investor custodial accounts (segregated in special
accounts - excluded from corporate assets) $2,374,385 $2,548,549
================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $6,517,119 $6,097,518
Drafts payable issued in connection with mortgage loan closings 223,469 238,020
Accounts payable and accrued liabilities 588,219 505,148
Deferred income taxes 535,972 497,212
---------------- -----------------
Total liabilities 7,864,779 7,337,898
Commitments and contingencies
- -
Shareholders' equity
Preferred stock - authorized, 1,500,000 shares of $.05 par value;
issued and outstanding, none
- -
Common stock - authorized, 240,000,000 shares of $.05 par value; issued and
outstanding, 102,425,856 shares at May 31, 1996
and 102,242,329 shares at February 29, 1996 5,121 5,112
Additional paid-in capital 824,406 820,183
Retained earnings 546,901 494,460
---------------- -----------------
Total shareholders' equity 1,376,428 1,319,755
---------------- -----------------
Total liabilities and shareholders' equity $9,241,207 $8,657,653
================ =================
Borrower and investor custodial accounts $2,374,385 $2,548,549
================ =================
The accompanying notes are an integral part of these
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
Three Months
Ended May 31,
1996 1995
---------------- -----------------
(Dollar amounts in thousands,
except per share data)
Revenues
<S> <C> <C>
Loan origination fees $ 55,949 $ 41,521
Gain on sale of loans 47,080 12,731
---------------- -----------------
Loan production revenue 103,029 54,252
Interest earned 100,712 73,592
Interest charges (77,066) (61,973)
---------------- -----------------
Net interest income 23,646 11,619
Loan servicing income 167,410 129,382
Add (less) amortization and impairment/recovery
of servicing assets 48,285 (145,743)
Servicing hedge (expense) benefit (100,426) 116,975
---------------- -----------------
Net loan administration income 115,269 100,614
Commissions, fees and other income 21,338 12,478
---------------- -----------------
Total revenues 263,282 178,963
---------------- -----------------
Expenses
Salaries and related expenses 68,998 50,639
Occupancy and other office expenses 29,898 26,545
Guarantee fees 37,501 26,022
Marketing expenses 8,824 5,951
Other operating expenses 18,677 9,512
---------------- -----------------
Total expenses 163,898 118,669
---------------- -----------------
Earnings before income taxes 99,384 60,294
Provision for income taxes 38,760 24,118
---------------- -----------------
NET EARNINGS $ 60,624 $ 36,176
================ =================
Earnings per share
Primary $0.58 $0.39
Fully diluted $0.58 $0.39
The accompanying notes are an integral part of these
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months
Ended May 31,
1996 1995
---------------- -----------------
(Dollar amounts in thousands)
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 60,624 $ 36,176
Adjustments to reconcile net earnings to net cash
used by operating activities:
Amortization and impairment/recovery of mortgage
servicing rights (55,621) 111,489
Amortization and impairment of capitalized servicing fees
receivable 7,336 34,254
Depreciation and other amortization 9,036 6,917
Deferred income taxes 38,760 24,118
Servicing hedge unrealized expense (benefit) 87,477 (106,821)
Origination and purchase of loans held for sale (11,002,082) (6,771,558)
Principal repayments and sale of loans 10,925,283 5,957,054
---------------- -----------------
Increase in mortgage loans shipped and held for sale (76,799) (814,504)
Increase in other receivables and other assets (287,312) (102,000)
Increase in accounts payable and accrued liabilities 83,071 71,474
---------------- -----------------
Net cash used by operating activities (133,428) (738,897)
---------------- -----------------
Cash flows from investing activities:
Additions to mortgage servicing rights (194,342) (157,467)
Additions to capitalized servicing fees receivable (68,759) (56,262)
(Purchase) sale of property, equipment and leasehold
improvements - net (13,138) 812
---------------- -----------------
Net cash used by investing activities (276,239) (212,917)
---------------- -----------------
Cash flows from financing activities:
Net increase in warehouse debt and other
short-term borrowings 478,239 972,945
Issuance of long-term debt - 25,000
Repayment of long-term debt (73,189) (45,241)
Issuance of common stock 4,232 1,692
Cash dividends paid (8,183) (7,315)
---------------- -----------------
Net cash provided by financing activities 401,099 947,081
---------------- -----------------
Net decrease in cash (8,568) (4,733)
Cash at beginning of period 16,444 17,624
================ =================
Cash at end of period $ 7,876 $ 12,891
================ =================
Supplemental cash flow information:
Cash used to pay interest $ 64,050 $ 57,445
Cash used to pay income taxes $ 6 -
The accompanying notes are an integral part of these
statements.
</TABLE>
<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 month period ended May 31, 1996 are
not necessarily indicative of the results that may be expected for the fiscal
year ending February 28, 1997. 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 29, 1996 of Countrywide
Credit Industries, Inc. (the "Company").
Certain amounts reflected in the consolidated financial statements for the three
month period ended May 31, 1995 have been reclassified to conform to the
presentation for the three month period ended May 31, 1996.
<TABLE>
<CAPTION>
NOTE B - NOTES PAYABLE
Notes payable consisted of the following.
------------------------------------------------------------------ ---- --------------- --- -------------- --
(Dollar amounts in thousands) May 31, February 29,
1996 1996
------------------------------------------------------------------ ---- --------------- --- -------------- --
<S> <C> <C>
Commercial paper $3,010,054 $2,847,442
Medium-term notes, Series A, B, C and D 1,751,800 1,824,800
Repurchase agreements 1,279,786 808,353
Subordinated notes 200,000 200,000
Unsecured notes payable, maturing in July 1996 275,000 235,000
Pre-sale funding facilities - 181,255
Note payable 479 668
=============== ==============
$6,517,119 $6,097,518
=============== ==============
------------------------------------------------------------------ ---- --------------- --- -------------- --
</TABLE>
Revolving Credit Facility and Commercial Paper
As of May 31, 1996, Countrywide Home Loans, Inc. ("CHL"), the Company's
mortgage banking subsidiary, had an unsecured credit agreement (revolving credit
facility) with forty-eight commercial banks (fifty commercial banks as of June
14, 1996) permitting CHL to borrow an aggregate maximum amount of $3.5 billion,
less commercial paper backed by the agreement. The amount available under the
facility is subject to a borrowing base, which consists of mortgage loans held
for sale, receivables for mortgage loans shipped and mortgage servicing rights.
The facility contains various financial covenants and restrictions, certain of
which limit the amount of dividends that can be paid by the Company or CHL. The
interest rate 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. This interest rate varies, depending on CHL's credit ratings. No
amount was outstanding on the revolving credit facility at May 31, 1996. The
weighted average borrowing rate on commercial paper borrowings for the three
months ended May 31, 1996 was 5.35%. The weighted average borrowing rate on
commercial paper outstanding as of May 31, 1996 was 5.36%. 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 facility expires on May 14, 2000.
<TABLE>
<CAPTION>
Medium-Term Notes
As of May 31, 1996, outstanding medium-term notes issued by CHL 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
------------------------------------------- ----------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Series A $ - $ 344,800 $ 344,800 6.10% 8.79% Jul 1996 Mar 2002
Series B 11,000 396,000 407,000 5.11% 6.98% Aug 1997 Aug 2005
Series C 303,000 197,000 500,000 5.50% 8.43% Dec 1997 Mar 2004
Series D 115,000 385,000 500,000 5.69% 6.88% Aug 1998 Sep 2005
-------------------------------------------
Total $429,000 $1,322,800 $1,751,800
===========================================
---------------------------------------------------------------------------------------------------------------
</TABLE>
As of May 31, 1996, all of the outstanding fixed-rate notes had been
effectively converted by interest rate swap agreements to floating-rate notes.
The weighted average borrowing rate on medium-term note borrowings for the three
months ended May 31, 1996, including the effect of the interest rate swap
agreements, was 6.07%.
On May 15, 1996, the Company filed a $1.0 billion shelf registration with
the Securities and Exchange Commission ("SEC") covering Series E Medium-Term
Notes. The Company intends to use the proceeds from the sale of the medium-term
notes for general corporate purposes, which may include retirement of
indebtedness of the Company and investment in servicing rights through the
current production of loans and the bulk acquisition of contracts to service
loans.
Repurchase Agreements
As of May 31, 1996, the Company had entered into short-term financing
arrangements to sell mortgage-backed securities ("MBS") under agreements to
repurchase. The weighted average borrowing rate for the three months ended May
31, 1996 was 5.36%. The weighted average borrowing rate on repurchase agreements
outstanding as of May 31, 1996 was 5.37%. The repurchase agreements were
collateralized by MBS. All MBS underlying repurchase agreements are held in
safekeeping by broker-dealers, and all agreements are to repurchase the same or
substantially identical MBS.
Subordinated Notes
The 8.25% subordinated notes are due July 15, 2002. Interest is payable
semi-annually on each January 15 and July 15. The subordinated notes are not
redeemable prior to maturity and are not subject to any sinking fund
requirements.
Pre-Sale Funding Facilities
As of May 31, 1996, CHL had uncommitted revolving credit facilities with two
government-sponsored entities and an affiliate of an investment banking firm.
The credit facilities are secured by conforming mortgage loans which are in the
process of being pooled into MBS. Interest rates are based on LIBOR, federal
funds and/or the prevailing rates for MBS repurchase agreements. The weighted
average borrowing rate for all three facilities for the three months ended May
31, 1996 was 5.57%.
<PAGE>
NOTE C - SUBSEQUENT EVENTS
On June 20, 1996, the Company filed a registration statement with the SEC
covering 9,500,000 shares of Common Stock to be issued pursuant to the Company's
Dividend Reinvestment and Stock Purchase Plan. The plan provides holders of
record and beneficial owners of the Company's Common Stock with a method of
investing cash dividends in additional shares of stock and making optional cash
purchases of additional shares. The Company will use the net proceeds from such
issuance of Common Stock for general corporate purposes.
On June 11, 1996, the Company declared a cash dividend of $0.08 per common
share payable July 15, 1996 to shareholders of record on July 1, 1996.
<TABLE>
<CAPTION>
NOTE D - SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY
The following tables present summarized financial information for
Countrywide Home Loans, Inc.
-- ----------------------------------------- ---- --------------------------------------------------- -------
(Dollar amounts in thousands) May 31, February 29,
1996 1996
-- ---------------------------------------------- -------- -------------- ---------- -------------- ---------
Balance Sheets:
<S> <C> <C>
Mortgage loans shipped and held for sale $4,816,886 $4,740,087
Other assets 3,867,955 3,441,678
============== ==============
Total assets $8,684,841 $8,181,765
============== ==============
Short- and long-term debt $6,734,586 $6,335,538
Other liabilities 639,872 588,446
Equity 1,310,383 1,257,781
============== ==============
Total liabilities and equity $8,684,841 $8,181,765
============== ==============
-- ---------------------------------------------- -------- -------------- ---------- -------------- ---------
</TABLE>
<TABLE>
<CAPTION>
--- ----------------------------------------- --- -------------------------------------------------- --------
(Dollar amounts in thousands) Three Months Ended May 31,
--------------- ---------- ---------------
1996 1995
--- --------------------------------------------- ------- --------------- ---------- --------------- --------
Statements of Earnings:
<S> <C> <C>
Revenues $238,486 $168,515
Expenses 152,255 110,277
Provision for income taxes 33,630 23,295
=============== ===============
Net earnings $ 52,601 $ 34,943
=============== ===============
--- --------------------------------------------- ------- --------------- ---------- --------------- --------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NOTE E - SERVICING HEDGE
The following summarizes the notional amounts of servicing hedge derivative
contracts.
- -------------------------------- ----------- ------------ --------------- --------- ------------ ---------- ------------
(Dollar amounts in millions) Long Call
Options on
Interest Long Call Interest Rate Principal Interest
Rate Floors Options Futures Swap - Only Rate
on MBS Caps Swaps Cap Swaptions
- -------------------------------- ----------- ------------ --------------- --------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, February 29, 1996 $15,750 $1,500 $3,550 $1,000 $268 $ - $ -
Additions 4,000 - 800 - - 500 1,000
Dispositions/Expirations - (1,000) (2,150) - - - -
=========== ============ =============== ========= ============ ========== ------------
Balance, May 31, 1996 $19,750 $ 500 $2,200 $1,000 $268 $500 $1,000
=========== ============ =============== ========= ============ ========== ------------
- -------------------------------- ----------- ------------ --------------- --------- ------------ ---------- ------------
</TABLE>
During the quarter ended May 31, 1996, the Company entered into an interest
rate cap agreement ("Cap") and purchased options on interest rate swaps
("Swaptions") as additional components of its Servicing Hedge. The Cap entitles
the Company to receive the amounts, if any, by which the selected market
interest rate exceeds the stated strike price. The Cap outstanding will expire
on April 26, 2001. Under the Swaption agreements, the Company has the option to
enter into a receive-fixed, pay-floating interest rate swap at a future date or
to settle the transaction for cash. The Swaptions outstanding expire from March
11, 1999 to April 15, 2007.
NOTE F - VALUATION ALLOWANCE FOR CAPITALIZED MORTGAGE SERVICING RIGHTS
The following summarizes the aggregate activity in the valuation allowances
for capitalized mortgage servicing rights.
- --------------------------------------------------- --------------------------
(Dollar amounts in thousands) Aggregate Balances
--------------------------
Balances, February 29, 1996 ($61,634)
Recovery 24,668
--------------------------
Balances, May 31, 1996 ($36,966)
--------------------------
- --------------------------------------------------- --------------------------
NOTE G - RATIO OF EARNINGS TO FIXED CHARGES
The ratios of earnings to fixed charges for the three months ended May 31,
1996 and 1995 were 2.26 and 1.95, respectively. For purposes of calculating the
ratio of earnings to fixed charges, earnings consist of income before income
taxes, plus fixed charges. Fixed charges include interest expense on debt and
the portion of rental expenses which is considered to be representative of the
interest factor (one-third of operating leases).
NOTE H - LEGAL PROCEEDINGS
On June 22, 1995, a lawsuit was filed by Jeff and Kathy Briggs, as a
purported class action, against CHL and a mortgage broker in the Northern
Division of the United States District Court for the Middle District of Alabama.
The suit claims, among other things, that in connection with residential
mortgage loan closings, CHL made certain payments to mortgage brokers in
violation of the Real Estate Settlement Procedures Act and induced mortgage
brokers to breach their alleged fiduciary duties to their customers. The
plaintiffs seek unspecified compensatory and punitive damages plus, as to
certain claims, treble damages. CHL's management believes that its compensation
programs to mortgage brokers comply with applicable laws and with long-standing
industry practice, and that it has meritorious defenses to the action. CHL
intends to defend vigorously against the action and believes that the ultimate
resolution of such claims will not have a material adverse effect on the
Company's results of operations or financial position.
The Company and certain subsidiaries are defendants in various lawsuits
involving matters generally incidental to their business. Although it is
difficult to predict the ultimate outcome of these cases, management believes,
based on discussions with counsel, that any ultimate liability will not
materially affect the consolidated financial position or results of operations
of the Company and its subsidiaries.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a new
"safe harbor" for certain forward-looking statements. This Quarterly Report on
Form 10-Q contains forward-looking statements which reflect the Company's
current views with respect to future events and financial performance. These
forward-looking statements are subject to certain risks and uncertainties,
including those identified below, which could cause actual results to differ
materially from historical results or those anticipated. The words "believe,"
"expect," "anticipate," "intend," "estimate" and other expressions which
indicate future events and trends identify forward-looking statements. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. The following factors could cause
actual results to differ materially from historical results or those
anticipated: (1) the level of demand for mortgage credit, which is affected by
such external factors as the level of interest rates, the strength of the
various segments of the economy and demographics of the Company's lending
markets; (2) the direction of interest rates; (3) the relationship between
mortgage interest rates and the cost of funds; (4) federal and state regulation
of the Company's mortgage banking operations and (5) competition within the
mortgage banking industry.
RESULTS OF OPERATIONS
Quarter Ended May 31, 1996 Compared to Quarter Ended May 31, 1995
Revenues for the quarter ended May 31, 1996 increased 47% to $263.3
million from $179.0 million for the quarter ended May 31, 1995. Net earnings
increased 68% to $60.6 million for the quarter ended May 31, 1996 from $36.2
million for the quarter ended May 31, 1995. The increase in revenues and net
earnings for the quarter ended May 31, 1996 compared to the quarter ended May
31, 1995 was attributable to an increase in the size of the Company's servicing
portfolio, higher loan production volume and improved pricing margins. These
positive factors during the quarter ended May 31, 1996 were partially offset by
amortization of its Servicing Assets that was greater than in the quarter ended
May 31, 1995, due primarily to a larger servicing portfolio.
The total volume of loans produced increased 62% to $11.0 billion for
the quarter ended May 31, 1996 from $6.8 billion for the quarter ended May 31,
1995. Refinancings totaled $4.6 billion, or 42% of total fundings, for the
quarter ended May 31, 1996, as compared to $1.2 billion, or 17% of total
fundings, for the quarter ended May 31, 1995. Fixed-rate loan production totaled
$9.0 billion, or 82% of total fundings, for the quarter ended May 31, 1996, as
compared to $4.5 billion, or 67% of total fundings, for the quarter ended May
31, 1995. Production in the Company's Consumer Markets Division increased to
$2.3 billion for the quarter ended May 31, 1996 from $1.3 billion for the
quarter ended May 31, 1995. Production in the Company's Wholesale Division
increased to $2.1 billion for the quarter ended May 31, 1996 from $1.8 billion
for the quarter ended May 31, 1995. The Company's Correspondent Division
purchased $6.6 billion in mortgage loans for the quarter ended May 31, 1996
compared to $3.7 billion for the quarter ended May 31, 1995. The factors which
affect the relative volume of production among the Company's three divisions
include 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.
Included in the Company's total volume of loans produced are $106 million of
home equity loans funded in the quarter ended May 31, 1996 and $47 million
funded in the quarter ended May 31, 1995. Sub-prime credit quality ("B&C") loan
activity, which is also included in the Company's total production volume, was
$188 million for the quarter ended May 31, 1996. No B&C loans were funded during
the quarter ended May 31, 1995.
At May 31, 1996 and 1995, the Company's pipeline of loans in process
was $5.2 billion and $4.3 billion, respectively. In addition, at May 31, 1996,
the Company had committed to make loans in the amount of $1.9 billion, subject
to property identification and borrower qualification ("Lock n' Shop(R)
Pipeline"). At May 31, 1995, the Lock n' Shop(R) Pipeline was $1.6 billion.
Historically, approximately 43% to 77% of the pipeline of loans in process has
funded. For the quarters ended May 31, 1996 and 1995, the Company received
143,779 and 101,205 new loan applications, respectively, at an average daily
rate of $231 million and $160 million, respectively. The following actions were
taken during the quarter ended May 31, 1996 on the total applications received
during that quarter: 78,507 loans (55% of total applications received) were
funded and 20,700 applications (14% of total applications received) were either
rejected by the Company or withdrawn by the applicant. The following actions
were taken during the quarter ended May 31, 1995 on the total applications
received during that quarter: 51,018 loans (50% of total applications received)
were funded and 14,626 applications (14% 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 the movement and direction of interest rates, the average length
of loan commitments issued, the creditworthiness of applicants, the production
divisions' loan processing efficiency and loan pricing decisions.
Loan origination fees increased during the quarter ended May 31, 1996
as compared to the quarter ended May 31, 1995 due to higher loan production that
resulted primarily from lower mortgage interest rates during the quarter ended
May 31, 1996 than during the quarter ended May 31, 1995. The percentage increase
in loan origination fees was lower than the percentage increase in total
production. This is primarily because production by the Correspondent Division,
which, due to lower cost structures, charges lower origination fees per dollar
loaned, comprised a greater percentage of total production in the quarter ended
May 31, 1996 than in the quarter ended May 31, 1995. Gain on sale of loans
improved during the quarter ended May 31, 1996 as compared to the quarter ended
May 31, 1995 primarily due to increased loan production and improved pricing
margins. In general, loan origination fees and gain (loss) on sale of loans are
affected by numerous factors including loan pricing decisions, interest rate
volatility, the general direction of interest rates and the volume and mix of
loans produced.
Net interest income (interest earned net of interest charges) increased
to $23.6 million for the quarter ended May 31, 1996 from $11.6 million for the
quarter ended May 31, 1995. Consolidated net interest income is principally a
function of: (i) net interest income earned from the Company's mortgage loan
warehouse ($16.0 million and $2.3 million for the quarters ended May 31, 1996
and 1995, respectively); (ii) interest expense related to the Company's
investment in servicing rights ($23.9 million and $8.8 million for the quarters
ended May 31, 1996 and 1995, respectively) and (iii) interest income earned from
the custodial balances associated with the Company's servicing portfolio ($31.5
million and $18.1 million for the quarters ended May 31, 1996 and 1995,
respectively). The Company earns interest on, and incurs interest expense to
carry, mortgage loans held in its warehouse. The increase in net interest income
from the mortgage loan warehouse was attributable to an increase in the average
amount of the mortgage loan warehouse due to higher production, partially offset
by a lower net earnings rate in the quarter ended May 31, 1996 than in the
quarter ended May 31, 1995. The increase in interest expense on the investment
in servicing rights resulted primarily from a larger servicing portfolio and an
increase 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"). The increase in net interest income earned from the
custodial balances was related to an increase in the average custodial balances,
offset somewhat by a decline in the earnings rate from the quarter ended May 31,
1995 to the quarter ended May 31, 1996.
During the quarter ended May 31, 1996, loan administration income was
positively affected by the continued growth of the loan servicing portfolio. At
May 31, 1996, the Company serviced $143.4 billion of loans (including $2.4
billion of loans subserviced for others), compared to $120.9 billion (including
$1.1 billion of loans subserviced for others) at May 31, 1995, a 22% increase.
The growth in the Company's servicing portfolio during the quarter ended May 31,
1996 was the result of loan production volume and the acquisition of bulk
servicing rights, partially offset by prepayments, partial prepayments, and
scheduled amortization of mortgage loans. The weighted average interest rate of
the mortgage loans in the Company's servicing portfolio at May 31, 1996 was
7.8%, compared to 7.7% at May 31, 1995. Generally, 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 production income.
During the quarter ended May 31, 1996, the prepayment rate of the Company's
servicing portfolio was 14%, as compared to 6% for the quarter ended May 31,
1995. 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 increase in the prepayment rate
from the quarter ended May 31, 1995 to the quarter ended May 31, 1996 is
primarily attributable to increased refinance activity caused by lower interest
rates during the quarter ended May 31, 1996 than during the quarter ended May
31, 1995. 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. In addition, to mitigate the effect on
earnings of higher amortization and impairment (which are deducted from loan
servicing income) that may result from increased current and projected future
prepayment activity, the Company acquires financial instruments, including
derivative contracts, that increase in value when interest rates decline (the
"Servicing Hedge"). These financial instruments include call options on interest
rate futures and MBS, interest rate floors, interest rate swaps (with the
Company's maximum payment capped) ("Swap Caps"), principal-only ("P/O") swaps,
options on interest rate swaps ("Swaptions"), and certain tranches of
collateralized mortgage obligations ("CMOs").
In the interest rate Swap Caps contracts, the Company receives and pays
interest on a specified notional amount. The rate received is fixed; the rate
paid is adjustable, is indexed to the London Interbank Offered Rates for U.S.
dollar deposits ("LIBOR") and has a specified maximum or "cap."
The P/O swaps are derivative contracts, the value of which is
determined by changes in the value of the referenced P/O security. The payments
received by the Company under the P/O swaps relate to the cash flows of the
referenced P/O security. The payments made by the Company are based upon a
notional amount tied to the remaining balance of the referenced P/O security
multiplied by a floating rate indexed to LIBOR.
In the Swaption agreements, the Company has the option to enter into a
receive-fixed, pay-floating interest rate swap at a future date or to settle the
transaction for cash.
The CMOs, which consist primarily of P/O securities, have been
purchased at deep discounts to their par values. As interest rates increase,
prepayments on the collateral underlying the CMOs should decrease. These changes
should result in an increase in the average lives of the P/O securities and a
decrease in the present values of their cash flows. Conversely, as interest
rates decrease, prepayment on the collateral underlying the CMOs should increase
and should result in a decline in the average lives of the P/O securities and a
corresponding increase in the present values of their cash flows.
The Servicing Hedge instruments utilized by the Company are designed to
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 instruments declines. With respect
to the options, cap, swaptions, floors and CMOs, the Company is not exposed to
loss beyond its initial outlay to acquire the hedge instruments. With respect to
the Swap Caps contracts entered into by the Company as of May 31, 1996, the
Company estimates that its maximum exposure to loss over the contractual term is
$36 million. The Company's exposure to loss in the P/O swaps is related to
changes in the market value of the referenced P/O security over the life of the
contract. In the quarter ended May 31, 1996, the Company recognized a net loss
of $100.4 million from its Servicing Hedge. The net loss included unrealized
losses of $87.5 million and realized losses of $12.9 million from the sale of
various financial instruments that comprise the Servicing Hedge. In the quarter
ended May 31, 1995, the Company recognized a net gain of $117.0 million from its
Servicing Hedge. The net gain included unrealized gains of $106.9 million and
realized gains of $10.1 million from the sale of various financial instruments
that comprise the Servicing Hedge.
The Company recorded amortization and a net recovery of its Servicing
Assets in the quarter ended May 31, 1996 totaling $48.3 million (consisting of
normal amortization amounting to $52.5 million and a net recovery of $100.8
million), compared to $145.7 million of amortization and impairment of its
Servicing Assets in the quarter ended May 31, 1995 (consisting of normal
amortization amounting to $29.1 million and impairment of $116.7 million). The
factors affecting the amount of amortization and impairment or recovery of the
Servicing Assets 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.
During the quarter ended May 31, 1996, the Company acquired bulk
servicing rights for loans with principal balances aggregating $1.1 billion at a
price of $21.6 million or 1.93% of the aggregate outstanding principal balances
of the servicing portfolios acquired. During the quarter ended May 31, 1995, the
Company acquired bulk servicing rights for loans with principal balances
aggregating $3.0 billion at a price of $37.3 million or 1.26% of the aggregate
outstanding principal balances of the servicing portfolios acquired.
<TABLE>
<CAPTION>
Salaries and related expenses are summarized below for the quarters
ended May 31, 1996 and 1995.
-- --------------------------- -- -- --------- ------------------------------------------------- -- --- --- -----
(Dollar amounts in Quarter Ended May 31, 1996
thousands)
-- --------- ------------------------------------------------- -- --- --- -----
-- --------------------------- --
Production Loan Corporate Other
Activities Administration Administration Activities Total
-- --------------------------- -- ------------ -- ------------- - ------------- -- ------------- -- -------------
<S> <C> <C> <C> <C> <C>
Base Salaries $20,832 $9,634 $12,127 $3,039 $45,632
Incentive Bonus 10,709 151 3,408 1,189 15,457
Payroll Taxes and Benefits 3,879 1,869 1,727 434 7,909
------------ ------------- ------------- ------------- -------------
Total Salaries and Related
Expenses $35,420 $11,654 $17,262 $4,662 $68,998
============ ============= ============= ============= -------------
Average Number of 2,104 1,461 1,004 252 4,821
Employees
-- --------------------------- -- ------------ -- ------------- - ------------- -- ------------- -- -------------
</TABLE>
<TABLE>
<CAPTION>
-- --------------------------- -- --- -------- ------------------------------------------------- ---- --- -- ----
(Dollar amounts in Quarter Ended May 31, 1995
thousands)
--- -------- ------------------------------------------------- ---- --- -- ----
-- --------------------------- --
Production Loan Corporate Other
Activities Administration Administration Activities Total
-- --------------------------- -- ------------ - -------------- - ------------- -- ------------- -- -------------
<S> <C> <C> <C> <C> <C>
Base Salaries $15,252 $6,709 $10,227 $2,064 $34,252
Incentive Bonus 5,571 136 2,429 1,754 9,890
Payroll Taxes and Benefits 2,558 1,210 2,432 297 6,497
------------ -------------- ------------- ------------- -------------
Total Salaries and Related
Expenses $23,381 $8,055 $15,088 $4,115 $50,639
============ ============== ============= ============= -------------
Average Number of 1,550 966 812 143 3,471
Employees
-- --------------------------- -- ------------ - -------------- - ------------- -- ------------- -- -------------
</TABLE>
The amount of salaries increased during the quarter ended May 31, 1996
from the quarter ended May 31, 1995 primarily due to an increased number of
employees resulting from higher loan production, a larger servicing portfolio
and growth in the Company's non-mortgage banking subsidiaries. Incentive bonuses
earned during the quarter ended May 31, 1996 increased primarily due to
increased loan production and increased loan production personnel.
Occupancy and other office expenses for the quarter ended May 31, 1996
increased to $29.9 million from $26.5 million for the quarter ended May 31,
1995, reflecting the Company's goal of expanding its retail branch network. In
addition, higher loan production, a larger servicing portfolio and growth in the
Company's non-mortgage banking subsidiaries also contributed to the increase.
Guarantee fees represent fees paid to guarantee timely and full payment
of principal and interest on MBS and whole loans sold to permanent investors and
to transfer the credit risk of the loans in the servicing portfolio. For the
quarter ended May 31, 1996, guarantee fees increased 44% to $37.5 million from
$26.0 million for the quarter ended May 31, 1995. The factors which affect the
amount of guarantee fees in a period include the size of the servicing
portfolio, the mix of permanent investors and the terms negotiated at the time
of loan sales.
Marketing expenses for the quarter ended May 31, 1996 increased 48% to
$8.8 million from $6.0 million for the quarter ended May 31, 1995, reflecting
the Company's continued implementation of a marketing plan to increase brand
awareness of the Company in the residential mortgage market.
Other operating expenses for the quarter ended May 31, 1996 increased
from the quarter ended May 31, 1995 by $9.2 million, or 96%. This increase was
due primarily higher loan production, a larger servicing portfolio and increased
data processing costs reflecting the Company's commitment to higher efficiency
through the use of technology.
Profitability of Loan Production and Servicing Activities
In the quarter ended May 31, 1996, the Company's pre-tax income from
its loan production activities (which include loan origination and purchases,
warehousing and sales) was $30.9 million. In the quarter ended May 31, 1995, the
Company's comparable pre-tax loss was $1.5 million. The increase of $32.4
million was primarily attributable to higher loan production and improved
pricing margins, partially offset by a change in the internal method of
allocating overhead between the Company's production and servicing activities.
In the quarter ended May 31, 1996, 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 $62.7 million as compared to $60.0 million in the quarter ended May
31, 1995. The increase of $2.7 million was principally due to an increase in the
size of the servicing portfolio and the change in the internal method of
allocating overhead.
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
increase, loan production, particularly from loan refinancings, decreases,
although in an environment of gradual interest rate increases, purchase activity
may actually be stimulated by an improving economy or the anticipation of
increasing real estate values. In such periods of reduced loan production,
production margins may decline due to increased competition resulting from
overcapacity in the market. 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 both amortization and impairment of the Servicing Assets and Interest
Costs Incurred on Payoffs, and because the rate of interest earned from the
custodial balances tends to increase. Conversely, 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 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 and impairment of the Servicing Assets, a decreased rate of
interest earned from the custodial balances and increased Interest Costs
Incurred on Payoffs.
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. In addition, delinquency rates typically rise in the winter months,
which results in higher servicing costs. However, late charge income has
historically been sufficient to offset such incremental expenses.
<PAGE>
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 utilizes commercial paper supported by CHL's revolving
credit facility, medium-term notes, MBS repurchase agreements, subordinated
notes, unsecured notes, pre-sale funding facilities and cash flow from
operations. In addition, in the past the Company has utilized whole loan
repurchase agreements, servicing-secured bank facilities, direct borrowings from
CHL's revolving credit facility, privately-placed financings and public
offerings of preferred stock.
Certain of the debt obligations of the Company and CHL contain various
provisions that may affect the ability of the Company and CHL to pay dividends
and remain in compliance with such obligations. These provisions include
requirements concerning net worth, current ratio 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 CHL to pay dividends.
On May 15, 1996, the Company filed a $1.0 billion shelf registration
with the Securities and Exchange Commission ("SEC") covering Series E
Medium-Term Notes. The Company intends to use the proceeds from the sale of the
medium-term notes for general corporate purposes, which may include retirement
of indebtedness of the Company and investment in servicing rights through the
current production of loans and the bulk acquisition of contracts to service
loans.
On June 20, 1996, the Company filed a registration statement with the SEC
covering 9,500,000 shares of Common Stock to be issued pursuant to the Company's
Dividend Reinvestment and Stock Purchase Plan. The plan provides holders of
record and beneficial owners of the Company's Common Stock with a method of
investing cash dividends in additional shares of stock and making optional cash
purchases of additional shares. The Company will use the net proceeds from such
issuance of Common Stock for general corporate purposes.
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.
In connection with its derivative contracts, the Company may be
required to deposit cash or certain government securities or obtain letters of
credit to meet margin requirements. The Company considers such potential margin
requirements in its overall liquidity management.
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. Significant
unanticipated prepayments in the Company's servicing portfolio could have a
material adverse effect on the Company's future operating results and liquidity.
Cash Flows
Operating Activities In the quarter ended May 31, 1996, the Company's
operating activities used cash of approximately $133 million. This cash was
provided primarily by short-term borrowings.
Investing Activities The primary investing activity for which cash was
used during the quarter ended May 31, 1996 was the long-term investment in
servicing. Net cash used by investing activities increased to $276 million for
the quarter ended May 31, 1996 from $213 million for the quarter ended May 31,
1995.
Financing Activities Net cash provided by financing activities amounted
to $401 million for the quarter ended May 31, 1996 and $947 million for the
quarter ended May 31, 1995. The decrease in net cash provided was primarily the
result of lower net short-term borrowings by the Company in the quarter ended
May 31, 1996 than in the quarter ended May 31, 1995.
PROSPECTIVE TRENDS
Applications and Pipeline of Loans in Process
During the quarter ended May 31, 1996, the Company received new loan
applications at an average daily rate of $231 million and at May 31, 1996, the
Company's pipeline of loans in process was $5.2 billion. This compares to a
daily application rate during the quarter ended May 31, 1995 of $160 million and
a pipeline of loans in process at May 31, 1995 of $4.3 billion The size of the
pipeline is generally an indication of the level of future fundings, as
historically 43% to 77% of the pipeline of loans in process has funded. In
addition, the Company's Lock n' Shop(R) Pipeline at May 31, 1996 was $1.9
billion and at May 31, 1995 was $1.6 billion. For the month ended June 30, 1996,
the average daily amount of applications received was $190 million, and at June
30, 1996, the pipeline of loans in process was $4.7 billion and the Lock n'
Shop(R) pipeline was $1.9 billion. Interest rates generally continued to
increase during June 1996. This resulted in a decline in the average level of
applications received during June 1996 from the average rate of applications
received during the quarter ended May 31, 1996, and a decline in the pipeline
from May 31, 1996 to June 30, 1996. Future application levels and loan fundings
are dependent on numerous factors, including the level of demand for mortgage
credit, the extent of price competition in the market, the direction of interest
rates, seasonal factors and general economic conditions.
Market Factors
During the quarter ended May 31, 1996, interest rates generally
increased. Loan production generally declines in periods of rising interest
rates. However, loan production increased during the quarter ended May 31, 1996
from the prior quarter ended February 29, 1996. This is because of the lag
between when a loan application is submitted and the mortgage loan is funded.
The loans funded during the quarter generally represent applications that had
been submitted in a lower interest rate environment, and in some cases, in
anticipation of higher interest rates. Further, purchase loans comprised 58
percent of fundings for the quarter ended May 31, 1996 and, as discussed in
"Seasonality," sales and resale of homes typically peak in the spring and summer
months, which correspond to the Company's first and second fiscal quarters.
The environment of rising interest rates that prevailed and accelerated
during the quarter ended May 31, 1996 resulted in a decline in the prepayment
rate in the servicing portfolio, a recovery of previously recorded impairment of
the Servicing Assets and a Servicing Hedge expense.
The Company's primary competitors are commercial banks, savings and
loans and mortgage banking subsidiaries of diversified companies, as well as
other mortgage bankers. Certain commercial banks have expanded their mortgage
banking operations through acquisition of formerly independent mortgage banking
companies, the integration of which has not been completed, or through internal
growth. These transactions and activities have not had a material impact on the
Company or on the degree of competitive pricing in the market.
Some regions in which the Company operates, particularly some regions
of California, 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. The Company's California
mortgage loan production (measured by principal balance) constituted 27% of its
total production during the quarter ended May 31, 1996, down slightly from 29%
for the quarter ended May 31, 1995. The Company is continuing its efforts to
expand its production capacity outside of California. Since California's
mortgage loan production constituted a significant portion of the Company's
production during the year, there can be no assurance that the Company's
operations will not continue to be adversely affected to the extent California
continues to experience slow 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.
The delinquency rate in the Company-owned servicing portfolio increased
to 2.70% at May 31, 1996 from 2.38% at May 31, 1995. The Company believes that
this increase was primarily the result of portfolio mix changes and aging. The
proportion of government and high loan-to-value conventional loans, which tend
to experience higher delinquency rates than low loan-to-value conventional
loans, has increased from 41% of the portfolio at May 31, 1995 to 45% at May 31,
1996. In addition, the weighted average age of the portfolio is 26 months at May
31, 1996, up from 22 months at May 31, 1995. Delinquency rates tend to increase
as loans age, reaching a peak at three to five years of age. However, because
the loans in the portfolio are generally serviced on a non-recourse basis, the
Company's exposure to credit loss resulting from increased delinquency rates is
substantially limited. Further, related late charge income has historically been
sufficient to offset incremental servicing expenses resulting from an increased
delinquency rate.
The percentage of loans in the Company's owned servicing portfolio that
are in foreclosure increased to 0.50% at May 31, 1996 from 0.29% at May 31,
1995. 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 (25% of the Company's servicing
portfolio at May 31, 1996) are insured or partially guaranteed against loss by
the Federal Housing Administration or the Veterans Administration. In the
Company's view, the limited unreimbursed costs that may be incurred by the
Company on government foreclosed loans are not material to the Company's
consolidated financial statements.
Servicing Hedge
As previously discussed, the Company's Servicing Hedge is designed to
protect the value of its investment in servicing rights from the effects of
increased prepayment activity that generally results from declining interest
rates. In periods of increasing interest rates, such as the quarter ended May
31, 1996, the value of the Servicing Hedge generally declines and the value of
the servicing rights generally increases. There can be no assurance that, in
periods of increasing interest rates, the increase in value of the Servicing
Assets will offset the amount of Servicing Hedge expense; or in periods of
declining interest rates, that the Company's Servicing Hedge will generate gains
or if gains are generated, that they will fully offset impairment of the
Servicing Assets.
Implementation of New Accounting Standards
In June 1996, the Financial Accounting Standard Board ("FASB") issued
statement No. 125, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities ("SFAS No. 125"). Among other provisions,
this Statement uses a "financial components" approach that focuses on control to
determine the proper accounting for financial asset transfers, addresses the
accounting for servicing rights on financial assets in addition to mortgage
loans and extends the disaggregated lower of cost or market approach for
measuring servicing rights (including excess servicing) on all financial assets.
The financial asset transfers provisions of SFAS No. 125 are not expected to
have a material impact on the Company's financial position or results of
operations. The impact of the new Statement's servicing rights provisions will
not be known until the implementation date because such impact is dependent on
the fair value of the Company's capitalized servicing fees receivable (excess
servicing) on December 31, 1996.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
\pnf4
10.1 Revolving Credit Agreement dated as of May 20, 1996 by and among
Countrywide Home Loans, Inc., Bankers Trust Company, The First National Bank of
Chicago, The Bank of New York, Chase Securities, Inc., The Chase Manhattan Bank,
N.A. and the Lenders Party Thereto.
11.1 Statement Regarding Computation of Per Share Earnings.
12.1 Computation of the Ratio of Earnings to Fixed Charges.
27 Financial Data Schedules (included only with the electronic filing with
the SEC).
(b) Reports on Form 8-K. None
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: July 15, 1996 /s/ Stanford L. Kurland
-----------------------------
Senior Managing Director and
Chief Operating Officer
DATE: July 15, 1996 /s/ Carlos M. Garcia
-----------------------------
Managing Director; Chief Financial
Officer and Chief Accounting Officer
(Principal Financial Officer and
Principal Accounting Officer)
EXHIBIT INDEX
Exhibit Number Document Description
10.1 Revolving Credit Agreement dated as of May 20, 1996 by and among
Countrywide Home Loans, Inc., Bankers Trust Company, The First National Bank of
Chicago, The Bank of New York, Chase Securities, Inc., The Chase Manhattan Bank,
N.A. and the Lenders Party Thereto.
11.1 Statement Regarding Computation of Per Share Earnings.
12.1 Computation of the Ratio of Earnings to Fixed Charges.
27 Financial Data Schedules (included only with the electronic filing with
the SEC).
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (the "Agreement") is made and
dated as of the 20th day of May, 1996, by and among the lenders signatory hereto
(collectively, the "Lenders"); BANKERS TRUST COMPANY, a New York State banking
corporation ("BT"), as credit agent for the Lenders (in such capacity, the
"Credit Agent"); BT and THE FIRST NATIONAL BANK OF CHICAGO, a national banking
association ("FNBC"), as co-administrative agents of the credit facility
evidenced hereby; THE BANK OF NEW YORK, a New York State banking corporation
("BNY"), as documentation agent (in such capacity, the "Documentation Agent");
BT, FNBC, BNY, and CHASE SECURITIES, INC., as co-arrangers of the credit
facility evidenced hereby (in such capacity, the "Co-Arrangers"); THE CHASE
MANHATTAN BANK, N.A., as syndication agent of the credit facility evidenced
hereby (in such capacity, the "Syndication Agent"); and COUNTRYWIDE HOME LOANS,
INC., a New York corporation (the "Company").
RECITALS"1"RECITALS
A. Pursuant to that certain Revolving Credit Agreement dated
as of September 23, 1994 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 Agreement"), certain of the Lenders have 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 Agreement desire to terminate the
Existing Agreement 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"AGREEMENT
1. Credit Facilities"2" 1. Credit Facilities.
1(a) Primary Loan Facility"3" 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 minus the sum of Swing Loans
outstanding; 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 plus such Lender's Primary Loan Percentage
Share of Swing 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"3" 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"3" 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"3" 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 least of: (i) the
Aggregate Credit Limit, (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, and (iii) $150,000,000.00.
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"3" 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"
2. Requests for Credit events and Issuance of CPNs; Funding.
2(a) Requests for Credit Events"3"
2(a) Requests for Credit Events.
(1) Subject to the advance notice required with respect to Eurodollar
Loans pursuant 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 Swing Loans, 1:00 p.m. (Los Angeles time); and (iv)
in the case of Swing Loans to be funded on a best efforts basis by the Swing
Line Lenders, later than 1:00 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 a Swing Loan, 1:30 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"3"
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"3" 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) During any Unsecured Period: (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 its GNMA Pool Advance Loans available by wiring the amount thereof in
immediately available same day (including Federal) funds, to the Funding Account
no later than 12:30 p.m. (Los Angeles time) on the proposed funding date; (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 Funding Account no later than 2:30 p.m. (Los Angeles time) on the
proposed funding date; and (iii) each Swing Line Lender shall make its Swing
Line Percentage Share of each Swing Loan available by wiring the amount thereof
in immediately available same day (including Federal) funds to the Funding
Account no later than 2:00 p.m. (Los Angeles time) on the proposed funding date.
(2) During any Secured Period, (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 (3) 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; and (iii) each Swing Line Lender
shall make its Swing Line Percentage Share of each 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) on the proposed funding date.
(3) 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), or in
the case of Negotiated Loans, 2:45 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"3" 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"3" 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 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"2"
3. Payment of Principal and L/C Drawings; Prepayments.
3(a) Required Principal Payments"3"
3(a) Required Principal Payments.
(1) During any Unsecured Period, subject to the provisions of
Paragraph 3(b) below, the Company shall pay (i) to the Credit Agent for the
account of the applicable Lender or Lenders, the unpaid principal balance of
each Discount Loan and Eurodollar Loan on the last day of the applicable
Interest Period, and the unpaid principal balance of each Alternate Base Rate
Loan and each Swing Loan on the Maturity Date; and (ii) to the Lender or Lenders
making Negotiated Loans, the GNMA Pool Advance Lender and the L/C Issuing
Lenders directly, as applicable, the unpaid principal balance of each Negotiated
Loan on the last day of the applicable Interest Period, and the unpaid principal
balance of each GNMA Pool Advance Loan on or before the earlier of: (a) the
thirtieth day following the date advanced and (b) the Maturity Date, and the
full amount of each L/C Drawing on the date thereof. The Company shall give
notice to the Credit Agent of any payment under subparagraph (ii) above on the
date such payment is made.
(2) During any Secured Period, 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, (i) the unpaid principal balance of each Discount Loan,
Eurodollar Loan and Negotiated Loan on the last day of the applicable Interest
Period, (ii) the unpaid principal balance of each Alternate Base Rate Loan and
each Swing Loan on the Maturity Date, (iii) the unpaid principal balance of each
GNMA Pool Advance Loan on or before the earlier of (a) the thirtieth day
following the date advanced and (b) the Maturity Date, and (iv) the full amount
of each L/C Drawing on the date thereof.
3(b) Prepayments"3"
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"2"
4. Calculation and Payment of Interest; Related Provisions.
4(a) Interest on Direct Loans"3"
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"3" 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"3" 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"3" 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 the Overnight Transaction Loan Rate.
4(e) Interest on GNMA Pool Advance Loans"3" 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"3" 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"3"
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"3" 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."3" 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"3" 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"3" 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 or issuing 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"3"
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"3" 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 applicable
Balance Bank Agreement. A certificate as to any additional amounts payable
pursuant to this subsection submitted by a Balance Bank directly to the Company
during any Unsecured Period, and through the Credit Agent during any Secured
Period, 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"2"
5. Miscellaneous Lending Provisions.
5(a) Use of Proceeds"3" 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/Purchase67"3" 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"3" 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"3"
5(d) Interest and Fee Billing and Payment.
(1) During any Unsecured Period the Credit Agent shall: (i) 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 and Swing 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; (ii) on the last day of the Interest Period for
each Eurodollar 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; (iii) 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 (iv) 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 (i) and (iii) above on the fifth day of each month, shall pay
the full amount of interest of which it has been notified pursuant to
subparagraph (ii) above on the date such notification is given and shall pay the
full amount of each billing delivered to it pursuant to subparagraph (iv) above
within five Business Days thereafter. Interest payable with respect to GNMA Pool
Advance Loans during any Unsecured Period shall be billed to the Company
directly by the GNMA Pool Advance Lender in accordance with the timeframes set
forth in subparagraph (i) above, and the Company shall pay the full amount of
interest due on GNMA Pool Advance Loans directly to such Lender on the fifth day
of each month. Interest payable with respect to Negotiated Loans during any
Unsecured Period shall be billed to the Company directly by each Lender which
advanced such Negotiated Loans on the last day of the Interest Period for such
Negotiated Loan, and the Company shall pay the full amount of interest due on
such Negotiated Loans directly to each such Lender on such date.
(2) During any Secured Period, the Credit Agent shall: (i) 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; (ii) 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); (iii) 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 (iv) 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 (i)
and (iii) above on the fifth day of each month, shall pay the full amount of
interest of which it has been notified pursuant to subparagraph (ii) above on
the date such notification is given and shall pay the full amount of each
billing delivered to it pursuant to subparagraph (iv) above within five Business
Days thereafter.
5(e) Nature and Place of Payments"3" 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 the Credit Agent 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"3" 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"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"3" 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 Lenders' respective Primary Loan
Percentage Shares and that amounts disbursed to the Swing Line Lenders be
disbursed pro rata in accordance with the Swing Line Lenders' 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"3"
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"3" 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"3" 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 and the
Collateral Agent, the Company may permanently reduce the Aggregate Credit Limit
in full or in increments of $5,000,000.00; provided, however, that any such
reduction shall be in a minimum amount of $25,000,000.00; and provided, further,
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"3" 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. Security Agreement; Guaranty; Subordination; Additional Documents"2".
6(a) Security Agreement"3" 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"3"
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"3" 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 Documentation Agent, the Syndication 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"2"
7. Conditions Precedent.
7(a) First Credit Event"3"
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 (a) the Discount Loan Notes, the Direct Loan
Notes, and the Swing Loan Notes, and (b) the Negotiated Loan Notes and GNMA Pool
Advance Note to the extent required by the Lenders providing Negotiated Loans
and the GNMA Pool Advance Lender;
(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 March 31, 1996 and a Covenant Compliance Certificate, dated as of February
29, 1996, 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 if any such Balance Bank Agreements are in place as of the date of this
Agreement.
(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, the
Documentation Agent, the Syndication 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 Agreement 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 Agreement) shall
have been cancelled or replaced with a Letter of Credit issued hereunder and the
Existing Agreement 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
Agreement 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"3"
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) below or under Paragraph
11(e) below resulting from a breach or potential breach of Paragraph 10(j) below
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)
below or under Paragraph 11(e) below resulting from a breach or potential breach
of Paragraph 10(j) below 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) During any Secured Period, 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"2" 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, the Documentation Agent, the Syndication Agent and each Lender (and
during any Secured Period to the Collateral Agent) that:
8(a) Financial Condition"3" 8(a) Financial Condition. The financial statements,
respectively dated the Statement Date and February 29, 1996, 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"3" 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 "3" 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"3" 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"3" 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"3" 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"3"
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"3" 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"3" 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"3" 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"3" 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"2"
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"3"
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"3"
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"3" 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"3" 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; "3" 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 those of its properties and examine and make
abstracts from those of its books and records as are reasonably necessary to
enable such Lender to conduct appropriate credit and collateral due diligence in
connection with customary credit approval practices for credit facilities of
this type, 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"3" 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"3" 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"3"
9(h) Credit Documents. Comply with and observe all terms and
conditions of the Credit Documents.
9(i) Insurance"3" 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"3" 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"3"
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"2"
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"3" 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, margin call requirements 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"3" 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"3" 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"3" 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"3" 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"3" 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; Receivables67"3" 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"3" 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"3" 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"3" 10(j) Minimum Net Worth. Permit its net worth
determined in accordance with GAAP on and as of each Applicable Financial Test
Date to be less than the greater of $1,000,000,000.00 and eighty percent (80%)
of its net worth determined in accordance with GAAP as of the most recent
February 28 (or February 29 in a leap year) preceding the date such net worth is
calculated.
10(k) Maximum Total Debt"3"
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) Ninety percent (90%) of Margins, plus
(3) Ninety-seven percent (97%) of the amount of each of Mortgage Loans 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
(4) 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
(5) Fifty percent (50%) of Deferred Commitment Fees, plus
(6) Fifty percent (50%) of Property and Equipment, plus
(7) Seventy-five percent (75%) of each of Capitalized Servicing Fees
Receivable and Purchased Servicing Rights, plus
(8) Fifty percent (50%) of Other Assets.
11. Events of Default"2"
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"2" 12. Agency Provisions.
12(a) Appointment"3" 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"3" 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"3" 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, any 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"3" 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"3" 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
Agents. 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"3" 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"3" 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. To the extent indemnification payments made by the
Lenders pursuant to this Paragraph 12(g) are subsequently recovered by each
Agent from, or for the account of, the Company, such Agent will promptly refund
such previously paid indemnity payments to the Lenders. 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"3" 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"3" 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," "Documentation Agent," "Syndication
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"3" 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"2"
13. Miscellaneous Provisions.
13(a) No Assignment"3" 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"3" 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. The Credit Agent shall provide notice
and a copy of all amendments to the Credit Documents to all parties to the
Credit Documents, including, without limitation, the Collateral Agent.
13(c) Cumulative Rights; No Waiver"3" 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"3" 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"3" 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"3" 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"3" 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"3" 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
Availability14. Additional Lenders; Assignments and Participations; Increases in
Availability; "2".
14(a) Addition of New Lender"3"
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 under this Agreement and/or a L/C Issuing Lender under this
Agreement, 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. If such Applicant Financial Institution is becoming a
Lender hereunder as a result of an increase in the Aggregate Credit Limit, the
Credit Agent shall thereupon remit to the Lenders their Primary Loan Percentage
Shares of such funds. If such Applicant Financial Institution is acquiring a
portion of an existing Lender's outstanding Primary Loans, the Credit Agent
shall thereupon remit such funds to the assigning Lender. 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"3" 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"3" 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 Applicant 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.
There shall be no minimum hold requirement in the event that an existing Lender
is assigning one hundred percent (100%) of its Aggregate Maximum Commitment.
14(d) Sub-Participations by Lenders"3" 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;
(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), 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"3" 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"3" 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"3" 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.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first above written.
COUNTRYWIDE HOME LOANS, INC.,
a New York corporation
By
Name
Title
BANKERS TRUST COMPANY,
a New York State banking corporation,
as Co-Arranger and Credit Agent
By
Name
Title
THE BANK OF NEW YORK, a New York
State banking corporation, as
Co-Arranger and Documentation Agent
By
Name
Title
CHASE SECURITIES, INC., as Co-Arranger
By
Name
Title
THE FIRST NATIONAL BANK OF CHICAGO,
a national banking association,
as Co-Arranger
By
Name
Title
THE CHASE MANHATTAN BANK, N.A.,
as Syndication Agent
By
Name
Title
ABN AMRO BANK N.V., LOS ANGELES
INTERNATIONAL BRANCH, as a Lender
By
Name
Title
ASAHI BANK LTD., as a Lender
By
Name
Title
BANCA CRT S.p.A., as a Lender
By
Name
Title
By
Name
Title
BANCA MONTE DEI PASCHI DI SIENA\
S.p.A., as a Lender
By
Name
Title
By
Name
Title
BANCO CENTRAL HISPANO, as a Lender
By
Name
Title
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION,
as a Lender
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
BANK OF TOKYO -
MITSUBISHI TRUST COMPANY,
as a Lender
By
Name
Title
BANKERS TRUST COMPANY, as a Lender
By
Name
Title
BANQUE NATIONALE DE PARIS, as a Lender
By
Name
Title
By
Name
Title
BANQUE PARIBAS, as a Lender
By
Name
Title
By
Name
Title
BARCLAYS BANK PLC, as a Lender
By
Name
Title
CAISSE NATIONALE DE CREDIT
AGRICOLE, as a Lender
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
THE CHIBA BANK, LTD, as a Lender
By
Name
Title
COMMERZBANK AKTIENGESELLSCHAFT,
LOS ANGELES BRANCH, as a Lender
By
Name
Title
By ______________________________
Name ____________________________
Title ___________________________
CREDIT LYONNAIS, SAN FRANCISCO BRANCH,
as a Lender
By
Name
Title
THE DAI-ICHI KANGYO BANK, LIMITED,
SAN FRANCISCO AGENCY, as a Lender
By
Name
Title
DEN DANSKE BANK, 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
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
FLEET NATIONAL BANK, 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
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as a Lender
By
Name
Title
KREDIETBANK, as a Lender
By
Name
Title
By _____________________________
Name ___________________________
Title __________________________
THE LONG-TERM CREDIT BANK OF JAPAN
, LIMITED, LOS ANGELES AGENCY, as
a Lender
By
Name
Title
THE MITSUBISHI TRUST AND BANKING
CORPORATION, LOS ANGELES AGENCY,
as a Lender
By
Name
Title
MITSUI TRUST & BANKING, as a Lender
By
Name
Title
NATIONSBANK OF TEXAS, N.A.,
as a Lender
By
Name
Title
NORDDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH AND
/OR CAYMAN
ISLANDS BRANCH, as a Lender
By
Name
Title
By
Name
Title
ROYAL BANK OF CANADA, as a Lender
By
Name
Title
THE SAKURA BANK, LIMITED,
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
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 SUMITOMO TRUST & BANKING CO.,
LTD., LOS ANGELES AGENCY, as a
Lender
By
Name
Title
THE TOKAI BANK LTD., LOS ANGELES
AGENCY, as a Lender
By
Name
Title
THE TOYO TRUST & BANKING CO., LTD.
, LOS ANGELES AGENCY, as a Lender
By
Name
Title
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By
Name
Title
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH, as a Lender
By
Name
Title
By
Name
Title
U. S. 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 ____________________________________________
<PAGE>
SCHEDULE OF EXHIBITS TO CREDIT AGREEMENT
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
<PAGE>
la-57306
REVOLVING CREDIT AGREEMENT
By and Among
COUNTRYWIDE HOME LOANS, INC.
and
BANKERS TRUST COMPANY ("BT")
as Credit Agent and Co-Administrative Agent
THE FIRST NATIONAL BANK OF CHICAGO ("FNBC")
as Co-Administrative Agent
THE BANK OF NEW YORK ("BNY")
as Documentation Agent
THE CHASE MANHATTAN BANK, N.A.
as Syndication Agent
BT, FNBC, BNY, and CHASE SECURITIES, INC.
as Co-Arrangers
and
THE LENDERS PARTY THERETO
May 20, 1996
<PAGE>
TABLE OF CONTENTS
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....................................3
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
2(e) Funding................................................7
3. Payment of Principal and L/C Drawings; Prepayments.........7
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............14
5. Miscellaneous Lending Provisions...........................14
5(a) Use of Proceeds........................................15
5(b) Assumption of Funding/Purchase.........................15
5(c) Notes..................................................15
5(d) Interest and Fee Billing and Payment...................15
5(e) Nature and Place of Payments...........................17
5(f) Post-Default Interest..................................17
5(g) Computations...........................................18
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.....................................20
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..............24
8(a) Financial Condition....................................24
8(b) Corporate Existence; Compliance with Law...............24
8(c) Corporate Power; Authorization; Enforceable............24
8(d) No Legal Bar...........................................24
8(e) No Material Litigation.................................25
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.................................................26
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;.............28
9(f) Notices................................................29
9(g) Expenses...............................................29
9(h) Credit Documents.......................................29
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.......................31
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....................................32
11. Events of Default.........................................33
12. Agency Provisions.........................................36
12(a) Appointment...........................................36
12(b) Delegation of Duties..................................37
12(c) Exculpatory Provisions................................37
12(d) Reliance by Agent.....................................37
12(e) Notice of Default; Agreement to Advance...............38
12(f) Non-Reliance on Agent and Other Lenders...............38
12(g) Indemnification.......................................39
12(h) Agent in Its Individual Capacity......................39
12(i) Successor Agents......................................39
12(j) Sharing of Set-Offs...................................40
13. Miscellaneous Provisions..................................40
13(a) No Assignment.........................................40
13(b) Amendment.............................................40
13(c) Cumulative Rights; No Waiver..........................41
13(d) Entire Agreement; Severability........................42
13(e) Survival..............................................42
13(f) Notices...............................................42
13(g) Governing Law.........................................42
13(h) Counterparts.........................................42
14. Additional Lenders; Assignments and Participations; Increases
in Availability;............................42
14(a) Addition of New Lender...............................42
14(b) Assignments Among Existing Lenders...................44
14(c) Minimum Loan Commitment...............................45
14(d) Sub-Participations by Lenders.........................45
14(e) Federal Reserve Bank..................................46
14(f) Increases in Availability.............................46
14(g) Provision of Information; Confidentiality.............47
ANNEX I: GLOSSARY
For purposes of the Credit Documents (as defined herein), the
terms set forth below shall have the following meanings:
"Additional Lender Agreement" shall mean an agreement in the
form of that attached hereto as Exhibit A.
"Additional Required Documents" shall mean with respect to any
Mortgage Loan those items listed on Exhibit B attached hereto.
"Adjustment Date" shall mean that date as of which an
Applicant Financial Institution becomes a "Lender" or an existing Lender takes
all of or a portion of another existing Lender's Aggregate Maximum Commitment
under the Credit Documents, or otherwise increases its Aggregate Maximum
Commitment, as provided therein.
"Affiliate" shall mean any Person directly or indirectly
controlling, controlled by or under direct or indirect common control with, any
other Person and, in any event in the case of the Company, shall include CWM
Mortgage Holdings, Inc. "Control" as used herein means the power to direct the
management and policies of a Person.
"Agents" shall mean, jointly and severally, the Collateral
Agent, the Credit Agent, the Syndication Agent and the Documentation Agent.
"Aggregate Credit Exposure" shall mean on any date the sum of
(a) 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
each case calculated after giving effect to all Credit Events and the issuance
of CPNs to occur on such date.
"Aggregate Credit Limit" shall mean at any date the sum (not
to exceed $5,000,000,000.00) of the Primary Loan Credit Limit, the aggregate L/C
Commitments and the GNMA Pool Advance Commitment at such date, with the
"Aggregate Credit Limit" at the Effective Date set forth on the initial
Commitment Schedule attached hereto as Schedule I.
"Aggregate Maximum Commitment" shall mean for any Lender at
any date such Lender's Maximum Primary Loan Commitment plus, if applicable, for
the GNMA Pool Advance Lender the GNMA Pool Advance Commitment and for each L/C
Issuing Lender its L/C Commitment.
"Aggregate Percentage Share" shall mean for any Lender at any
date that percentage which the dollar amount of such Lender's Aggregate Maximum
Commitment bears to the Aggregate Credit Limit or, if such Lender shall have no
Aggregate Maximum Commitment, that percentage which: (a) the aggregate dollar
amount of outstanding Loans held (or participated in pursuant to Paragraph 1(a)
of the Agreement) by such Lender plus, if applicable, the aggregate dollar
amount of outstanding GNMA Pool Advance Loans held by such Lender plus, if
applicable, the contingent liability of such Lender under Outstanding Letters of
Credit plus, if applicable, the aggregate dollar amount of unrepaid L/C Drawings
relating to Letters of Credit issued by such Lender, bears to (b) the aggregate
dollar amount of outstanding Loans, plus the aggregate dollar amount of
outstanding GNMA Pool Advance Loans, plus the aggregate dollar amount of
Outstanding Letters of Credit, plus the aggregate dollar amount of unrepaid L/C
Drawings.
"Aggregate Swing Line Commitment" shall mean at any date the
sum of the Swing Line Commitments of the Swing Line Lenders at such date.
"Agreement" shall mean that certain Revolving Credit Agreement
dated as of May 20, 1996 by and among the Credit Agent, the Co-Administrative
Agents, the Co-Arrangers, the Documentation Agent, the Syndication Agent, the
Lenders and the Company, as the same may be amended, extended or replaced from
time to time.
"Alternate Base Rate" shall mean on any date the greater of:
(a) the Federal Funds Effective Rate plus one half of one percent (0.50%),
and (b) the Corporate Base Rate.
"Alternate Base Rate Loans" shall mean Direct Loans during
such time as they are being made and/or maintained at a rate of interest based
upon the Alternate Base Rate.
"Applicable Eurodollar Rate" shall mean with respect to any
Eurodollar Interest Period or Discount Loan Interest Period, the rate per annum
(rounded upward, if necessary, to the next higher one one hundredth of one
percent (.01%)) calculated in accordance with the following formula:
Applicable Eurodollar Rate = ER + PS
1-RR
where
ER = Eurodollar Rate
RR = Reserve Requirement
PS = Pricing Spread
"Applicable Fed Funds Rate" shall mean on any date a rate per
annum equal to the Federal Funds Funding Rate plus the Pricing Spread.
"Applicable Financial Test Date" shall mean for each of the
Company and the Parent: (a) during any Unsecured Period, the last day of each
fiscal quarter of such Person, and (b) during any Secured Period, the last day
of each calendar month.
"Applicable Valuation Factor" shall mean at any date during
any Secured Period the weighted average purchase price, expressed as a
percentage, of all Eligible Mortgage Loans and Eligible Mortgage-Backed
Securities included in the computation of the Collateral Value of the Secured
Borrowing Base at such date based upon:
(a) With respect to FHA-insured and VA-guaranteed Eligible Mortgage Loans
bearing interest at a fixed rate per annum, the Telerate purchase price (stated
as a percentage of principal amount) for one month mandatory forward delivery
commitments of GNMA I Mortgage-Backed Securities having an interest rate equal
to the average interest rate on all such Mortgage Loans less one-half of one
percent (0.50%); provided, however, that in the absence of a quoted purchase
price for GNMA I Mortgage-Backed Securities having such an interest rate,
reference shall be made to the nearest lower rate GNMA Mortgage-Backed
Securities for which a purchase price is quoted;
(b) With respect to Eligible Mortgage Loans bearing interest at a fixed
rate per annum which conform to all FNMA or FHLMC underwriting and other
requirements, the Telerate purchase price (stated as a percentage of principal
amount) for one month mandatory forward delivery commitments of similar
conforming Mortgage Loans having an interest rate equal to the average interest
rate on all such Mortgage Loans less one half of one percent (0.50%); provided,
however, that in the absence of a quoted purchase price for Mortgage Loans
having such an interest rate, reference shall be made to Mortgage Loans having
the nearest lower rate for which a purchase price is quoted;
(c) With respect to Eligible Mortgage Loans bearing interest at a fixed
rate per annum which conform to all FNMA or FHLMC underwriting and other
requirements except as to acceptable original principal balance, the Telerate
purchase price (stated as a percentage of principal amount) for one month
mandatory forward delivery commitments of similar Mortgage Loans having an
interest rate equal to the average interest rate on all such Mortgage Loans less
one percent (1%); provided, however, that in the absence of a quoted purchase
price for such Mortgage Loans having such an interest rate, reference shall be
made to Mortgage Loans having the nearest lower rate for which a purchase price
is quoted;
(d) With respect to Eligible Mortgage Loans bearing interest at a fixed
rate per annum and secured by multi-family improvements, the actual purchase
prices under the related, pre-approved Take-Out Commitments;
(e) With respect to Eligible Mortgage Loans which do not bear interest at a
fixed rate per annum and which conform to all underwriting and other
requirements of FNMA or FHLMC, or are otherwise deliverable to FNMA, (1) one
hundred (100), minus (2) the sum of: (i) double the amount by which (y) the
Telerate yield requirement quoted on Page 7163 of Telerate (Fannie Mae ARM
Yields/Net Margins for Par -- 1-yr. 6%/2% Caps) for two month mandatory forward
delivery commitments of Mortgage Loans, exceeds (z) the note rate for such
Mortgage Loans, less (ii) .375%;
(f) With respect to Eligible Mortgage Loans which do not bear interest at a
fixed rate per annum and which conform to all underwriting and other
requirements of FNMA or FHLMC, or are otherwise deliverable to FNMA, except as
to acceptable original principal balance, and the note rate for such Eligible
Mortgage Loan is indexed off the one-year Treasury rate:
(1) The 30-day mandatory delivery price for 1-year treasury adjustable rate
mortgages quoted on Page 23082 of Telerate (RFC - OTC ARMS), plus
(2) The product of: a. the initial note rate, less the sum of: (y) the "net
rate", plus (z) .50%, and b. the applicable "discount formula", plus
(3) The product of: a. 2.25% less the appropriate "net margin," and b. the
applicable "discount formula";
(g) With respect to Eligible Mortgage Loans which do not bear interest at a
fixed rate per annum and which conform to all underwriting and other
requirements of FNMA or FHLMC, or are otherwise deliverable to FNMA, except as
to acceptable original principal balance, but the note rate of such Eligible
Mortgage Loan is not indexed off the one-year Treasury rate, ninety percent
(90%);
(h) With respect to each Eligible Non-Agency Mortgage Loan (1) which is
subject to a Take-Out Commitment, the actual purchase price under such Take-Out
Commitment, and (2) which is not subject to a Take-Out Commitment, one hundred
percent (100%);
(i) With respect to each Eligible HELOC (1) which is subject to a Take-Out
Commitment, the actual purchase price under such Take-Out Commitment, and (2)
which is not subject to a Take-Out Commitment, one hundred percent (100%);
(j) With respect to each Eligible Mortgage Loan which is subject to a
second priority deed of trust (or mortgage) (other than an Eligible HELOC), one
hundred percent (100%); and
(k) With respect to each Eligible Mortgage-Backed Security, the purchase
price for one month mandatory forward delivery commitments of such
Mortgage-Backed Security determined with reference to the Telerate or, if no
price is so quoted on the Telerate, the average purchase price quoted by two
nationally recognized dealers in Mortgage-Backed Securities for one month
forward mandatory delivery thereof.
Notwithstanding the provisions of subparagraphs (f) and (g) above, until such
time as the Collateral Agent has notified the Lenders that it has developed a
system for accurately differentiating between Eligible Mortgage Loans the "Fair
Market Value" for which would otherwise be determined under such subparagraphs,
the respective Fair Market Values of all such Eligible Mortgage Loans shall be
determined pursuant to subparagraph (g) above. In any case in which no price is
quoted on the Telerate, the purchase price shall be deemed to be that quoted for
similar Mortgage Loans and Mortgage-Backed Securities by any nationally
recognized reporting service for similar information acceptable to the
Collateral Agent and the Credit Agent.
"Applicant Financial Institution" shall mean a financial
institution proposed for inclusion as a "Lender" under the Credit Documents by
the Company or by an existing Lender thereunder.
"Approved HELOC Investor" shall mean any Person pre-approved
in writing (which pre-approval may be limited in dollar amount, by type and
otherwise) by the Majority Lenders and which approval has not been revoked by
the Majority Lenders in their sole discretion, any such revocation notice to be
given no later than ten (10) days prior to its intended effective date (and no
such revocation to affect the continuing eligible status of any Eligible HELOC
shipped to the Approved HELOC Investor which is the subject of such revocation
notice prior to the effective date of such revocation).
"Approved Investor" shall mean, during any Secured Period: (a)
FNMA, FHLMC or any other Person, including, without limitation, Affiliates of
the Company, pre-approved in writing (which pre-approval may be limited in
dollar amount, by Type and otherwise) by the Majority Lenders and which approval
has not been revoked by the Majority Lenders in their sole discretion, any such
revocation notice to be given no later than ten (10) days prior to its intended
effective date, and (b) with the prior written approval of the Collateral Agent
and the Credit Agent (with notice thereof provided to the Lenders), such other
Person as the Company may propose; provided, however, that at any date Mortgage
Loans and Mortgage-Backed Securities included in the Borrowing Base covered by a
Take-Out Commitment issued by an "Approved Investor" which is not an "Approved
Investor" under subparagraph (a) of this definition may not have an aggregate
Collateral Value in excess of $100,000,000.00.
"Approved MBS Custodian" shall have the meaning given such
term in Paragraph 9(b)(2)(iii) of the Security Agreement.
"Approved Securities Offering" shall mean a proposed offering
of securities by the Company or an Affiliate of the Company secured or otherwise
supported in whole or part by Eligible Mortgage Loans and/or Eligible
Mortgage-Backed Securities, for which the following statements are true, unless
otherwise waived in writing by the Majority Lenders:
(a) The Company or such Affiliate, as applicable, has filed and made
effective a registration statement with the Securities and Exchange Commission
covering the offering of the proposed securities;
(b) The Company or such Affiliate, as applicable, has obtained all permits,
exemptions, and licenses necessary to effect such offering;
(c) Such offering has been priced and is the subject of a firm underwriting
commitment;
(d) Such securities qualify as "mortgage-related securities" under Section
3(a)(41) of the Securities Exchange Act of 1934, as amended; and
(e) In the reasonably anticipated course of events, the Company or such
Affiliate, as applicable, is expected to obtain a rating in one of the two
highest categories available for securities of a like nature from the rating
agency rating such securities.
"Assignment Agreement" shall mean an agreement in the form of Exhibit C
attached hereto.
"Balance Bank" shall mean each of the Lenders which have
executed a Balance Bank Agreement with the Company and the Credit Agent, said
Lenders being thereupon designated as a "Balance Bank" on the current Commitment
Schedule.
"Balance Bank Agreement" shall mean an agreement in the form
of Exhibit D attached hereto among the Company, the Credit Agent and each
Balance Bank.
"Balance Bank Discount" shall mean with respect to each
Primary Loan which is a Discount Loan, an amount determined by the Credit Agent
with respect to such Discount Loan such that, when the principal amount of such
Discount Loan is repaid by the Company on the last day of the Discount Loan
Interest Period with respect thereto, such principal amount will be equivalent
to the proceeds of such Discount Loan (net of the Balance Bank Discount) plus
interest on such proceeds calculated at a per annum rate equal to the Pricing
Spread.
"Book-Entry MBS" shall mean a Mortgaged-Backed Security (a)
which is not represented by an instrument, and (b) the ownership and transfer of
which is entered upon books maintained for that purpose by a depository.
"Borrowing Base" shall mean: (a) during any Unsecured Period, the Unsecured
Borrowing Base, and (b) during any Secured Period, the Secured Borrowing Base.
"BT" shall mean Bankers Trust Company, a New York State
banking corporation.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which banks in Los Angeles, California, New York, New York or
Chicago, Illinois are authorized or required to close.
"Capitalized Servicing Fees Receivable" shall mean the dollar
amount shown as "Capitalized Servicing Fees Receivable" on the balance sheet of
the Company as of the Applicable Financial Test Date delivered by the Company
pursuant to Paragraph 9(a)(2) of the Agreement.
"Cash" shall mean at any date: (a) as used in the computation
of the Collateral Value of the Unsecured Borrowing Base, the dollar amount of
"Cash" of the Company in the balance sheet of the Company as of the last day of
the immediately preceding calendar month, and (b) as used in the calculation of
permitted Total Debt pursuant to Paragraph 10(k) of the Agreement, the dollar
amount of "Cash" of the Company set forth in the balance sheet of the Company as
of the most recent Applicable Financial Test Date.
"Cash Market Position Valuation" shall have the meaning given to such term
in the definition of "Cash Position."
"Cash Position" shall mean at any date the "Cash Market
Position Valuation", which "Cash Market Position Valuation" shall represent with
respect to Take-Out Commitments and Hedge Contracts held by the Company
available to cover Mortgage Loans and Mortgage-Backed Securities included in the
computation of the Collateral Value of the Borrowing Base on such date (and
assuming that such Take-Out Commitments and Hedge Contracts are first allocated
to cover all other Mortgage Loans and Mortgage-Backed Securities owned by the
Company), the commitment prices under such Take-Out Commitments and Hedge
Contracts less the fair market value of the applicable security.
"Check Funding Account" shall mean such account maintained
with a Lender in the Company's name alone as may be approved by the Credit
Agent.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall have the meaning set forth in the Security Agreement.
"Collateral Agent" shall mean First Chicago National
Processing Corporation and any successors assuming the position of "Collateral
Agent" under the Security Agreement and the other Credit Documents.
"Collateral Confirmation Agreement" shall mean an agreement in
the form of Exhibit E attached hereto.
"Collateral Value of the Borrowing Base" shall mean: (a) on
any date during any Unsecured Period, the Collateral Value of the Unsecured
Borrowing Base, and (b) on any date during any Secured Period, the Collateral
Value of the Secured Borrowing Base.
"Collateral Value of the Secured Borrowing Base" shall mean on
any date during any Secured Period, the sum of:
(a) Ninety-eight percent (98%) of the Fair Market Value of each Eligible
Mortgage Loan (other than an Eligible Non-Agency Mortgage Loan, an Eligible
HELOC, and an Eligible Mortgage Loan secured by a second deed of trust (or
mortgage)) and each Eligible Mortgage-Backed Security included in the Secured
Borrowing Base on such date; plus
(b) Ninety-five percent (95%) of the Fair Market Value of each Eligible
Non-Agency Mortgage Loan included in the Secured Borrowing Base; plus
(c) Ninety percent (90%) of the Fair Market Value of each Eligible HELOC
included in the Secured Borrowing Base; plus
(d) Ninety percent (90%) of the outstanding principal balance of each
Eligible Mortgage Loan which is secured by a second deed of trust (or mortgage)
(other than an Eligible HELOC) included in the Secured Borrowing Base on such
date; plus
(e) One Hundred percent (100%) of the Cash Position on such date; plus
(f) The aggregate dollar amount of cash held in the Settlement Account on
such date which has been identified by the Company to the Collateral Agent as
representing the proceeds from the sale or other disposition of specific
Eligible Mortgage Loans and/or Eligible Mortgage-Backed Securities which have
therefore been deleted from the Borrowing Base; plus
(g) The least of: (1) three quarters of one percent (0.75%) of the
outstanding principal balances of Mortgage Loans being serviced by the Company
under the Pledged Eligible Mortgage Servicing Assets, (2) twenty percent (20%)
of the Aggregate Credit Limit, and (3) $500,000,000.00.
"Collateral Value of the Unsecured Borrowing Base" shall mean
on any date during any Unsecured Period, the sum of, at the last day of the
calendar month immediately preceding the month in which the "Collateral Value of
the Unsecured Borrowing Base" is being calculated:
(a) One Hundred percent (100%) of Cash; plus
(b) Ninety-seven percent (97%) of the dollar amount of Eligible Mortgage
Assets shown on the balance sheet of the Company; plus
(c) The least of: (1) three quarters of one percent (0.75%) of the
outstanding principal balances of Mortgage Loans being serviced by the Company
under Eligible Mortgage Servicing Assets, (2) twenty percent (20%) of the
Aggregate Credit Limit, and (3) $500,000,000.00.
"Commercial Paper Account" shall mean the account described as
such in the Depositary Agreement.
"Commitment Schedule" shall mean a schedule setting forth the
current Aggregate Credit Limit, Primary Loan Credit Limit, Aggregate Swing Line
Commitment, Aggregate Maximum Commitments, Maximum Primary Loan Commitments,
Primary Loan Percentage Shares, Swing Line Percentage Shares, L/C Commitments
and GNMA Pool Advance Commitment, as applicable, of the Lenders, as the same may
be modified from time to time consistent with the Credit Documents, with the
initial Commitment Schedule being attached hereto as Schedule I.
"Commonly Controlled Entity" of a Person shall mean a Person,
whether or not incorporated, which is under common control with such Person
within the meaning of Section 414(c) of the Code.
"Consolidated Total Debt" shall mean all Indebtedness of the
Parent and the Company, excluding: (a) Subordinated Parent Borrowings, (b)
Subordinated Debt, and (c) deferred taxes of the Company attributable to
capitalization of purchased servicing rights and excess servicing fees.
"Contact Office" shall mean the office of the Credit Agent as
announced by the Credit Agent from time to time.
"Contractual Obligation" as to any Person shall mean any
provision of any security issued by such Person or of any agreement, instrument
or undertaking to which such Person is a party or by which it or any of its
property is bound.
"Corporate Base Rate" shall mean a rate per annum equal to the
corporate base rate of interest publicly announced by BT from time to time,
changing when and as of the date said corporate base rate changes.
"Covenant Compliance Certificate" shall mean: (a) with respect to the
Company, a certificate in the form of Exhibit F-1 attached hereto, and (b) with
respect to the Parent, a certificate in the form of Exhibit F-2 attached hereto.
"CPN" shall mean a commercial paper note issued by the Company
pursuant to documentation approved by the Majority Lenders as required by the
Credit Documents.
"CPN Issuance Request" shall mean a request in the form of
that attached hereto as Exhibit G.
"Credit Agent" shall mean BT and any successors assuming the
position of "Credit Agent" under the Credit Documents.
"Credit Documents" shall mean the Agreement, the Security
Agreement, the Notes, the Guaranty, the Subordination Agreement, the Fee Letter,
the Balance Bank Agreements and each other document, instrument or agreement
executed by the Company or the Parent in connection herewith or therewith, as
any of the same may be amended, extended or replaced from time to time, and with
reference to any individual "Credit Document" being deemed automatically to be a
reference to such Credit Document as so amended, extended or replaced.
"Credit Event" shall mean the making of a Loan or a GNMA Pool
Advance Loan or the issuance of a Letter of Credit pursuant to the Agreement, as
applicable.
"Current Assets" shall mean at any date cash, government
securities, mortgage inventory, prepaid expenses, accounts receivable and
mortgage receivables which are payable within one year of the date of
calculation and determined in accordance with GAAP and shall include in any
event deferred commitment fees.
"Current Liabilities" shall mean at any date amounts payable
in money, goods or services, within one year of the date of calculation and
determined in accordance with GAAP; provided, however, that "Current
Liabilities", when determined with respect to the Company, shall include, in any
event, Single and Double Level Subordinated Parent Debt constituting an advance
from the Parent to the Company from funds of the Parent derived by the Parent
from Indebtedness of the Parent which constitutes a "current liability" of the
Parent, determined in accordance with GAAP.
"Custodial Agreement" shall mean an agreement substantially in
the form of that attached hereto as Exhibit H.
"Custodian Settlement Account" shall have the meaning given
such term in Paragraph 9(c) of the Security Agreement.
"Deferred Commitment Fees" shall mean the dollar amount shown
as "Deferred Commitment Fees" on the balance sheet of the Company as of the
Applicable Financial Test Date delivered by the Company pursuant to Paragraph
9(a)(2) of the Agreement.
"Delivery Certificate" shall have the meaning given such term
in Paragraph 5 of the Security Agreement.
"Depositary Agreement" shall mean an issuing and paying
agreement with the Paying Agent governing the authentication and issuance of
CPNs, which agreement shall, during any Secured Period, be substantially in the
form of that attached hereto as Exhibit I.
"Determination of Availability" shall have the meaning given
such term in Paragraph 2(c)(3) of the Agreement.
"Determination of Collateral Value" shall have the meaning
given such term in Paragraph 7 of the Security Agreement.
"Direct Loan" shall mean a Primary Loan which is interest
bearing and as to which each Lender advances its Primary Loan Percentage Share
directly to the Company.
"Discount Loan Notes" shall have the meaning given such term
in Paragraph 5(c) of the Agreement.
"Discount Loan" shall mean a Primary Loan which is funded on a
discounted basis by a Balance Bank with a concurrent sale to the Lenders of
their Primary Loan Percentage Share thereof.
"Discount Loan Funding Date" shall have the meaning given such
term in Paragraph 2(b)(1) of the Agreement.
"Discount Loan Interest Period" shall mean with respect to
each Discount Loan, the period commencing on the Discount Loan Funding Date for
such Discount Loan and ending on the twentieth day (if the Discount Loan Funding
Date was the twenty-first day of the immediately preceding month) or fifth day
(if the Discount Loan Funding Date was the sixth day of the immediately
preceding month) of the next succeeding calendar month; provided, however, that
(a) if any Discount Loan Interest Period would otherwise end on a day that is
not a Eurodollar Business Day, such Discount Loan Interest Period shall be
extended to the next succeeding Eurodollar Business Day, and (b) any Discount
Loan Interest Period that would otherwise extend beyond the Maturity Date shall
end on the Maturity Date.
"Discount Loan Note" shall have the meaning given such terms
in Paragraph 5(c) of the Agreement.
"Double Level Subordinated Parent Debt" shall mean
Indebtedness of the Company to the Parent which is subject to the Subordination
Agreement and which constituted an advance from the Parent to the Company or
investment by the Parent in the Company from funds of the Parent obtained
through Subordinated Parent Borrowings.
"Effective Date" shall mean the date each of the conditions
set forth in Paragraph 7(a) of the Agreement is satisfied.
"Eligible Committed Conforming Mortgage Loan" shall mean a
Mortgage Loan with respect to which each of the following is accurate and
complete (and the Company by including said Mortgage Loan in any computation of
the Collateral Value of the Secured Borrowing Base shall be deemed to so
represent and warrant to the Credit Agent, the Collateral Agent and the Lenders
at and as of the date of such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan;
(b) Said Mortgage Loan is insured by the FHA, guaranteed by the VA and/or
fully conforms to all underwriting and other requirements of FNMA or FHLMC; and
(c) Said Mortgage Loan is covered by a Take-Out Commitment.
"Eligible Committed Non-Conforming Mortgage Loan" shall mean a
Mortgage Loan with respect to which each of the following are accurate and
complete (and the Company by including said Mortgage Loan in any computation of
the Collateral Value of the Secured Borrowing Base shall be deemed to so
represent and warrant to the Credit Agent, the Collateral Agent and the Lenders
at and as of the date of such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan;
(b) Said Mortgage Loan is covered by a Take-Out Commitment;
(c) Said Mortgage Loan conforms to the underwriting and other requirements
of FNMA or FHLMC in all material respects except as to acceptable original
principal balance; and
(d) The original principal balance of said Mortgage Loan did not exceed
$1,000,000.00; provided, however, that if the original principal balance of said
Mortgage Loan exceeded $600,000.00, the Fair Market Value of said Mortgage Loan
when added to the Fair Market Value of all other Eligible Committed
Non-Conforming Mortgage Loans with an original principal balance of more than
$600,000.00 included in the Secured Borrowing Base does not exceed
$250,000,000.00.
"Eligible HELOC" shall mean a Mortgage Loan with respect to
which each of the following is accurate and complete (and the Company by
including said Mortgage Loan in any computation of the Collateral Value of the
Secured Borrowing Base shall be deemed to so represent and warrant to the Credit
Agent, the Collateral Agent and the Lenders at and as of the date of such
computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan which is a home equity
line of credit;
(b) Said Mortgage Loan is secured by a first or second priority deed of
trust (or mortgage) on a one-to-four family residence;
(c) Said Mortgage Loan has a Loan-to-Value ratio (taking into account all
Liens secured by the related Property) of not more than one hundred percent
(100%);
(d) If said Mortgage Loan is subject to a Take-Out Commitment, said
Mortgage Loan meets all applicable requirements for sale to the Approved HELOC
Investor issuing such Take-Out Commitment;
(e) If said Mortgage Loan is not subject to a Take-Out Commitment, said
Mortgage Loan has been underwritten by the Company pursuant to underwriting
guidelines approved by Moody's or S&P in connection with the rating of a
Mortgage-Backed Security supported by said Mortgage Loan; and
(f) The Fair Market Value of said Mortgage Loan when added to the Fair
Market Value of all other Eligible HELOCs and all other Eligible Mortgage Loans
subject to a second priority deed of trust (or mortgage) included in the Secured
Borrowing Base does not exceed ten percent (10%) of the Primary Loan Credit
Limit.
"Eligible Mortgage Assets" shall mean the dollar amount of
Mortgage Loans Held For Sale and Receivables For Mortgage Loans Shipped shown on
the balance sheet of the Company, but excluding, in any event: (a) Mortgage
Loans and Mortgage-Backed Securities which are subject to a Lien, (b) Mortgage
Loans secured by Properties which are not 1-4 unit residential properties, and
(c) Mortgage Loans deemed to be unsaleable by the Company.
"Eligible Mortgage-Backed Security" shall mean a
Mortgage-Backed Security owned or issued by the Company meeting the terms of
subparagraph (a) or (b) of the definition of a "Mortgage-Backed Security" with
respect to which the following statements shall be accurate and complete (and
the Company by including said Mortgage-Backed Security in any computation of the
Collateral Value of the Secured Borrowing Base shall be deemed to so represent
and warrant to the Credit Agent, the Collateral Agent and the Lenders at and as
of the date of such computation):
(a) Said Mortgage-Backed Security is a binding and valid obligation of the
obligor thereon, in full force and effect and enforceable in accordance with its
terms;
(b) Said Mortgage-Backed Security is free of any default and from any
rescission, cancellation or avoidance, and all right thereof, whether by
operation of law or otherwise;
(c) Said Mortgage-Backed Security has either been deposited with and is
held by the Collateral Agent under the Security Agreement or an Approved MBS
Custodian under a Custodial Agreement, properly endorsed in blank for transfer
or, if uncertificated, the Collateral Agent or Approved MBS Custodian has caused
an appropriate notation to be made on the records of the appropriate Federal
Reserve Bank or such other records as is necessary to perfect the Lien of the
Collateral Agent for the benefit of the Secured Parties therein; or, if said
Mortgage-Backed Security has been withdrawn from the possession of the
Collateral Agent on terms and subject to conditions set forth in the Security
Agreement, and if said Mortgage-Backed Security was shipped by the Collateral
Agent directly to a permanent investor for purchase, the full purchase price
therefor has been received by the Credit Agent (or said Mortgage-Backed Security
returned to the Collateral Agent) within ten (10) days from the date of shipment
by the Collateral Agent;
(d) At all times said Mortgage-Backed Security will be free and clear of
all liens, encumbrances, charges, rights and interests of any kind, except in
favor of the Collateral Agent for the benefit of the Secured Parties;
(e) Said Mortgage-Backed Security has not been included in the Secured
Borrowing Base for a period of time in excess of one hundred eighty (180) days
and, if said Mortgage-Backed Security has been included in the Secured Borrowing
Base for a period of time in excess of ninety (90) days, the Fair Market Value
of said Mortgage-Backed Security when added to the Fair Market Value of all
other Mortgage-Backed Securities and all Mortgage Loans included in the Secured
Borrowing Base for a period of time in excess of ninety (90) days, does not
exceed $250,000,000.00;
(f) Said Mortgage-Backed Security is covered by a Take-Out Commitment or
Hedge Contract which is in full force and effect and the Company and, in the
case of the Take-Out Commitment, said Mortgage-Backed Security are in full
compliance therewith; and
(g) The Collateral Agent, upon the written request of the Majority Lenders
given through the Credit Agent at any time and from time to time, in their sole
discretion, has not declared said Mortgage-Backed Security, for whatever reason,
to be ineligible for inclusion in the Secured Borrowing Base.
"Eligible Mortgage Loan" shall mean a Mortgage Loan conforming
to the requirements of one Type of Mortgage Loan with respect to which each of
the following statements shall be accurate and complete (and the Company by
including said Mortgage Loan in any computation of the Collateral Value of the
Secured Borrowing Base shall be deemed to so represent and warrant to the Credit
Agent, the Collateral Agent and the Lenders at and as of the date of such
computation):
(a) Said Mortgage Loan is a binding and valid obligation of the Obligor
thereon, in full force and effect and enforceable in accordance with its terms;
(b) Said Mortgage Loan is genuine, in all respects as appearing on its face
or as represented in the books and records of the Company, and all information
set forth therein is true and correct, and, unless said Mortgage Loan is an
Eligible HELOC, the proceeds of said Mortgage Loan have been fully disbursed (or
will be fully disbursed upon the closing and recordation thereof);
(c) Said Mortgage Loan is free of any default of any party thereto
(including the Company), counterclaims, offsets and defenses and from any
rescission, cancellation or avoidance, and all right thereof, whether by
operation of law or otherwise;
(d) No payment under said Mortgage Loan is more than sixty (60) days past
due the payment due date set forth in the underlying promissory note and deed of
trust (or mortgage);
(e) Said Mortgage Loan contains the entire agreement of the parties thereto
with respect to the subject matter thereof, has not been modified or amended in
any respect and is free of concessions or understandings with the Obligor
thereon of any kind not expressed in writing therein;
(f) Said Mortgage Loan is in all respects as required by and in accordance
with all applicable laws and regulations governing the same, including, without
limitation, the federal Consumer Credit Protection Act and the regulations
promulgated thereunder and all applicable usury laws and restrictions, and all
notices, disclosures and other statements or information required by law or
regulation to be given, and any other act required by law or regulation to be
performed, in connection with said Mortgage Loan have been given and performed
as required;
(g) All advance payments and other deposits on said Mortgage Loan have been
paid in cash, and, unless said Mortgage Loan is an Eligible HELOC, no part of
said sums has been loaned, directly or indirectly, by the Company to the Obligor
thereon, and other than as disclosed to the Collateral Agent in writing there
have been no prepayments on said Mortgage Loan;
(h) At all times said Mortgage Loan (with the exception of the subject
Property) will be owned by the Company free and clear of all liens,
encumbrances, charges, rights and interests of any kind, except pursuant to the
Security Agreement;
(i) The Property covered by said Mortgage Loan is insured against loss or
damage by fire and all other hazards normally included within standard extended
coverage in accordance with the provisions of said Mortgage Loan with the
Company named as loss payee thereon;
(j) The Property covered by said Mortgage Loan is free and clear of all
Liens except in favor of the Company (which has assigned any and all such Liens
to the Collateral Agent for the benefit of the Secured Parties), subject only to
Liens junior, subordinate and inferior to the Lien of the Company and (1) the
Lien of current real property taxes and assessments not yet due and payable; (2)
covenants, conditions and restrictions, rights of way, easements and other
matters of the public record, as of the date of recording, being acceptable to
mortgage lending institutions generally and specifically referred to in a
lender's title insurance policy delivered to the originator of said Mortgage
Loan and (i) referred to or otherwise considered in the appraisal made for the
originator of said Mortgage Loan or (ii) which do not materially adversely
affect the appraised value of such Property as set forth in such appraisal; (3)
other matters to which like properties are commonly subject which do not
materially interfere with the benefits of the security intended to be provided
by said Mortgage Loan or the use, enjoyment, value or marketability of the
related Property; and (4) if said Mortgage Loan is not secured by a first
priority deed of trust (or mortgage), said Mortgage Loan is secured by a second
priority deed of trust (or mortgage) and the Fair Market Value of said Mortgage
Loan when added to the Fair Market Value of all other Eligible Mortgage Loans
which are secured by second priority deeds of trust (or mortgages) and all
Eligible HELOCS included in the Secured Borrowing Base does not exceed ten
percent (10%) of the Primary Loan Credit Limit;
(k) If said Mortgage Loan has been withdrawn from the possession of the
Collateral Agent on terms and subject to conditions set forth in the Security
Agreement:
(1) If said Mortgage Loan was withdrawn by the Company for purposes of
correcting clerical or other non-substantial documentation problems, the
promissory note relating to said Mortgage Loan and any other Required Documents
or Additional Required Documents which were released to the Company were
returned to the Collateral Agent within ten (10) days from the date of
withdrawal of said Mortgage Loan (or, if such day is not a Business Day, on the
immediately succeeding Business Day) and the Fair Market Value of said Mortgage
Loan when added to the Fair Market Value of all other Mortgage Loans included in
the Secured Borrowing Base which have been similarly released to the Company
does not exceed $1,000,000.00;
(2) If said Mortgage Loan was shipped by the Collateral Agent directly to a
permanent investor for purchase, the full purchase price therefor has been
received by the Credit Agent (or said Mortgage Loan returned to the Collateral
Agent) within forty five (45) days from the date of shipment by the Collateral
Agent (or, if said Mortgage Loan is being purchased in connection with a bond
program, within sixty (60) days from the date of shipment by the Collateral
Agent); and
(3) If said Mortgage Loan was shipped by the Collateral Agent directly to a
custodian or trustee for purposes of formation of a pool supporting a
Mortgage-Backed Security, (i) such Mortgage-Backed Security is issued and sold
and the purchase price therefor has been received by the Credit Agent, (ii) such
Mortgage-Backed Security is held by an Approved MBS Custodian for the pro rata,
pari passu benefit of the Secured Parties, or (iii) said Mortgage Loan is
returned to the Collateral Agent, in each case within sixty (60) days from the
date of shipment by the Collateral Agent;
(l) Unless said Mortgage Loan is an Eligible Uncommitted Agency Mortgage
Loan, an Eligible HELOC or an Eligible Non-Agency Mortgage Loan, said Mortgage
Loan is covered by a Take-Out Commitment which is in full force and effect and
the Company and said Mortgage Loan are in full compliance therewith;
(m) If said Mortgage Loan is an Eligible Uncommitted Agency Mortgage Loan,
said Mortgage Loan is hedged pursuant to a Hedge Contract;
(n) If said Mortgage Loan is FHA insured or VA guaranteed, such insurance
or guaranty is in full force and effect (or there is in effect a binding
commitment to issue such insurance or guaranty);
(o) The Property securing said Mortgage Loan is located in the continental
United States, Alaska or Hawaii;
(p) If the improvements on the related Property do not consist of a
one-to-four family residence, said Mortgage Loan is includable in the Secured
Borrowing Base as an Eligible Committed Conforming Mortgage Loan, the Approved
Investor holding the related Take-Out Commitment has pre-approved said Mortgage
Loan in writing with a copy of such pre-approval having been provided to the
Collateral Agent and the Fair Market Value of said Mortgage Loan when added to
the Fair Market Value of all other similar Mortgage Loans included in the
Secured Borrowing Base does not exceed $25,000,000.00;
(q) The Required Documents for said Mortgage Loan have been delivered to
the Collateral Agent prior to the inclusion of said Mortgage Loan in the Secured
Borrowing Base and, if the Collateral Agent has so requested in writing, the
Additional Required Documents have also been delivered to the Collateral Agent;
provided, however, that even if the Required Documents (and, if applicable, the
Additional Required Documents) have not been so delivered to the Collateral
Agent, said Mortgage Loan may still qualify as an "Eligible Mortgage Loan" if:
(1) The Collateral Agent has received a Collateral Confirmation Agreement
relating to said Mortgage Loan at or prior to 10:00 a.m. (Los Angeles time) on
the date said Mortgage Loan is first included in the Secured Borrowing Base,
(2) Such items are delivered to the Collateral Agent within seven (7)
calendar days after said Mortgage Loan is first included in the Secured
Borrowing Base, and
(3) The Fair Market Value of said Mortgage Loan, when added to the sum of:
(i) the Fair Market Value of all other closed and recorded Mortgage Loans for
which the Collateral Agent has not received the Required Documents, plus (ii)
the Fair Market Value of all Mortgage Loans included in the Secured Borrowing
Base which are not closed and recorded and for which the Collateral Agent has
not received such items, does not exceed: a. thirty-five percent (35%) of the
Aggregate Credit Limit during the period from the fifth Business Day immediately
preceding the end of each calendar month through the fifth Business Day of the
next succeeding month, or b. twenty percent (20%) of the Aggregate Credit Limit
at any other date;
(r) Said Mortgage Loan is not subject to any servicing arrangement with any
Person other than the Company nor are any servicing rights relating to said
Mortgage Loan subject to any Lien or negative pledge in favor of any Person
other than as permitted under the Credit Documents;
(s) Said Mortgage Loan has not been included in the Secured Borrowing Base
for a period of time in excess of one hundred eighty (180) days and, if said
Mortgage Loan has been included in the Secured Borrowing Base for a period of
time in excess of ninety (90) days, the Fair Market Value of said Mortgage Loan,
when added to the Fair Market Value of all other Mortgage Loans and all
Mortgage-Backed Securities included in the Secured Borrowing Base for a period
of time in excess of ninety (90) days, does not exceed $250,000,000.00;
(t) The appraisal obtained by the Company in connection with the
origination of said Mortgage Loan satisfies all appraisal requirements for
similar loans originated by federally insured depositary institutions;
(u) The Collateral Agent, upon the written request of the Majority Lenders,
given at any time and from time to time, in their sole discretion, has not
declared said Mortgage Loan, for whatever reason, to be ineligible for inclusion
in the Secured Borrowing Base;
(v) If said Mortgage Loan was not closed and recorded at the date said
Mortgage Loan was first included in the Secured Borrowing Base: (1) said
Mortgage Loan was closed and recorded no later than the second Business Day
immediately following the date first included in the Secured Borrowing Base, and
(2) the Fair Market Value of said Mortgage Loan when added to the sum of: (i)
the Fair Market Value of all other Mortgage Loans included in the Secured
Borrowing Base which are not closed and recorded, plus (ii) the Fair Market
Value of all Mortgage Loans which are closed and recorded but for which the
Collateral Agent has not received the Required Documents, does not exceed: a.
thirty-five percent (35%) of the Aggregate Credit Limit during the period from
the fifth Business Day immediately preceding the end of each calendar month
through the fifth Business Day of the next succeeding month; or b. twenty
percent (20%) of the Aggregate Credit Limit at any other date; and
(w) Other than as allowed under subparagraph (p) above, the improvements on
the related Property consist of a one-to-four family residence.
In determining the eligibility of any Mortgage Loan, any of the requirements for
eligibility (other than the requirements contained in subparagraphs (h), (i),
(l) and (n) above) may be waived by the Collateral Agent (with the consent of
the Credit Agent), with notice of such waiver to be given to all Lenders in the
next collateral report provided to the Lenders pursuant to Paragraph 11(b) of
the Security Agreement (if such waiver is in force on the date of such
collateral report); provided, however, that any Mortgage Loan which is accepted
by the Collateral Agent as an Eligible Mortgage Loan pursuant to such waiver (an
"Eligible Waiver Mortgage Loan") shall cease to be an Eligible Waiver Mortgage
Loan upon written notice of the retraction of such waiver given to the Company
by the Collateral Agent or the Majority Lenders (through the Collateral Agent)
unless at the time of giving such notice the deficiency which originally
required such waiver has been cured and such Eligible Waiver Mortgage Loan meets
all other requirements for an Eligible Mortgage Loan; and, provided further,
that the Fair Market Value of any Mortgage Loan accepted as an Eligible Waiver
Mortgage Loan, when added to the Fair Market Values of all other Eligible Waiver
Mortgage Loans included in the computation of the Collateral Value of the
Secured Borrowing Base at any date, shall not exceed $50,000,000.00.
"Eligible Mortgage Servicing Assets" shall mean all now
existing and hereafter arising rights of the Company to service, collect and
administer Mortgage Loans under Servicing Contracts (whether directly or as
assignee of the rights of the original servicer thereunder) between the Company
and FNMA or FHLMC, as to which each of the following is accurate and complete
(and the Company by including such servicing rights in "Eligible Mortgage
Servicing Assets" in any calculation of the Unsecured Borrowing Base shall be
deemed to so represent and warrant to the Credit Agent and each of the Lenders
at and as of the date of such calculation):
(a) The related Servicing Contract is in full force and effect, is genuine,
is in all respects as appearing on its face and as represented in the books and
records of the Company, is free of any default of the Company and of
counterclaims, offsets and defenses and there does not exist any fact or
circumstance that would entitle FNMA or FHLMC, as applicable, as the investor
thereunder, to terminate said Servicing Contract for cause;
(b) The assignment by the Company of its rights under the related Servicing
Contract as collateral for the Obligations (subject only to obtaining a standard
form acknowledgement from the applicable investor) would not violate any law or
regulation the effect of which violation would be to render void or voidable
such assignment or to permit the termination of the rights of the Company under
such Servicing Agreement;
(c) The servicing obligations under the related Servicing Contract are
being performed on a non-recourse basis directly by the Company and not by
others pursuant to subservicing arrangements; and
(d) The Mortgage Loans being serviced under the related Servicing Contract
are first priority one-to-four family residential Mortgage Loans and such
Mortgage Loans are not owned by the Company.
"Eligible Non-Agency Mortgage Loan" shall mean a Mortgage Loan
with respect to which each of the following are accurate and complete (and the
Company by including said Mortgage Loan in any computation of the Collateral
Value of the Secured Borrowing Base shall be deemed to so represent and warrant
to the Credit Agent, the Collateral Agent and the Lenders at and as of the date
of such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan;
(b) Said Mortgage Loan is secured by a first priority deed of trust (or
mortgage) on the related Property;
(c) Said Mortgage Loan does not conform to the underwriting or other
criteria for purchase by FNMA or FHLMC;
(d) Said Mortgage Loan has not been previously included in the Borrowing
Base;
(e) If said Mortgage Loan is subject to a Take-Out Commitment, said
Mortgage Loan (1) has been expressly pre-approved in writing by the Approved
Investor issuing such Take-Out Commitment for purchase thereunder, (2) meets all
applicable requirements for sale to the Approved Investor issuing such Take-Out
Commitment, and (3) will be sold to the Approved Investor issuing such Take-Out
Commitment on a non-recourse basis;
(f) If said Mortgage Loan is not subject to a Take-Out Commitment, said
Mortgage Loan has been underwritten by the Company pursuant to underwriting
guidelines approved by Moody's or S&P in connection with the rating of a
Mortgage-Backed Security supported by such Mortgage Loan; and
(g) The Fair Market Value of said Mortgage Loan when added to the Fair
Market Value of all other Eligible Non-Agency Mortgage Loans included in the
Secured Borrowing Base does not exceed ten percent (10%) of the Primary Loan
Credit Limit.
"Eligible Uncommitted Agency Mortgage Loan" shall mean a
Mortgage Loan with respect to which each of the following are accurate and
complete (and the Company by including said Mortgage Loan in any computation of
the Collateral Value of the Secured Borrowing Base shall be deemed to so
represent and warrant to the Credit Agent, the Collateral Agent and the Lenders
at and as of the date of such computation):
(a) Said Mortgage Loan is an Eligible Mortgage Loan;
(b) Said Mortgage Loan is insured by the FHA, guaranteed by the VA and/or
conforms to the underwriting and other requirements of FNMA or FHLMC in all
material respects except as to acceptable original principal balance;
(c) The original principal balance of said Mortgage Loan did not exceed
$600,000.00; and
(d) The Fair Market Value of said Mortgage Loan when added to the Fair
Market Value of all other Eligible Uncommitted Agency Mortgage Loans included in
the Secured Borrowing Base does not exceed $250,000,000.00.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may from time to time be supplemented or amended.
"Eurodollar Business Day" shall mean a Business Day upon which
commercial banks in London, England are open for domestic and international
business.
"Eurodollar Interest Period" shall mean the period of time
commencing on the date as of which the Company has elected certain Direct Loans
to be Eurodollar Loans and ending 1, 2 or 3 months thereafter (as designated by
the Company in the related Loan Request, Interest Rate Election and Payoff
Notice); provided, however, that (a) any Eurodollar Interest Period which would
otherwise end on a day which is not a Eurodollar Business Day shall be extended
to the next succeeding Eurodollar Business Day unless by such extension it would
fall in another calendar month, in which case such Eurodollar Interest Period
shall end on the immediately preceding Eurodollar Business Day; (b) any
Eurodollar Interest Period which begins on a day for which there is no
numerically corresponding day in the calendar month during which such Eurodollar
Interest Period is to end shall, subject to the provisions of clause (a) hereof,
end on the last day of such calendar month; and (c) no Eurodollar Interest
Period shall extend beyond the Maturity Date.
"Eurodollar Loans" shall mean Direct Loans at such time as
they are made and/or being maintained at a rate of interest based upon the
Eurodollar Rate.
"Eurodollar Rate" shall mean with respect to any Eurodollar
Interest Period or Discount Loan Interest Period, the rate per annum equal to
the rate set forth at Telerate Page 3750 at approximately 11:00 a.m. London time
two Eurodollar Business Days prior to the first day of the proposed Eurodollar
Interest Period or Discount Loan Interest Period for deposits in dollars in an
amount equal to the aggregate amount of Loans proposed to be subject to such
rate during such Eurodollar Interest Period or Discount Loan Interest Period and
for a period of time equal to such Eurodollar Interest Period or Discount Loan
Interest Period; provided, however, that if such information is not available on
Telerate the "Eurodollar Rate" shall be determined from information supplied to
the Credit Agent by a nationally recognized reporting service for similar
information acceptable to the Credit Agent.
"Event of Default" shall have the meaning set forth in Paragraph 11 of the
Agreement.
"Excess Collateral" shall have the meaning given such term in
Paragraph 10(b) of the Security Agreement.
"Fair Market Value" shall mean at any date with respect to the
Secured Borrowing Base, that amount calculated by multiplying the aggregate
original principal balances of all Eligible Mortgage Loans (other than Eligible
Mortgage Loans where the underlying promissory notes have dates which are more
than three (3) months prior to the date said Mortgage Loans were first included
in the Secured Borrowing Base, and Eligible HELOCS, in which case the most
recently reported aggregate current outstanding principal balances of such
Mortgage Loans shall be used in calculating "Fair Market Value") and Eligible
Mortgage-Backed Securities included in the calculation of the Collateral Value
of the Secured Borrowing Base at such date by the Applicable Valuation Factor.
"Federal Funds Effective Rate" shall mean for any day an
interest rate per annum equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers on such day, as published for such day (or, if such day
is not a Business Day, for the immediately preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations at approximately 8:00
a.m. (Los Angeles time) on such day on such transactions received by the Credit
Agent from three Federal funds brokers of recognized standing selected by the
Credit Agent in its sole discretion.
"Fee Letter" shall mean a letter duly executed by the Company
and the Lenders in the form of that attached hereto as Exhibit J.
"FHA" shall mean the Federal Housing Administration and any successor
agency.
"FHLMC" shall mean the Federal Home Loan Mortgage Corporation
and any successor agency.
"FNBC" shall mean The First National Bank of Chicago.
"FNMA" shall mean the Federal National Mortgage Association and any
successor agency.
"Funding Account" shall mean an account maintained in the
Company's name alone with the Credit Agent, as announced to the Lenders by the
Credit Agent from time to time.
"Funding Check" shall mean a check issued by or on behalf of
the Company the proceeds of which will be used to close the origination of a
Mortgage Loan designated for inclusion in the Collateral Value of the Borrowing
Base and which check has not been presented for payment and cleared.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time.
"GNMA" shall mean the Government National Mortgage Association and any
successor agency.
"GNMA Pool Advance Agreement" shall mean such agreement as
GNMA may require be executed between the Company and the GNMA Pool Advance
Lender setting forth the obligations of the GNMA Pool Advance Lender to fund
advances on behalf of the Company to GNMA, the current form of such agreement,
between the Company and FNBC, as the current GNMA Pool Advance Lender, being
attached hereto as Exhibit K.
"GNMA Pool Advance Commitment" shall mean $10,000,000.00, as
such amount may be reduced as provided in the GNMA Pool Advance Agreement and
reported to the Credit Agent by the Company.
"GNMA Pool Advance Lender" shall mean one of the Lenders, with
the initial GNMA Pool Advance Lender being FNBC.
"GNMA Pool Advance Loan" shall have the meaning given such
term in Paragraph 1(e) of the Agreement.
"GNMA Pool Advance Note" shall have the meaning given such
term in Paragraph 5(c) of the Agreement.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranty" shall mean a guaranty duly executed by the Parent
in the form of that attached hereto as Exhibit L.
"Hedge Contract" shall mean a contract (excluding any such
contract relating to servicing rights of the Company) to buy or sell an
instrument on the futures market or the futures options market or an option or
financial future purchased over the counter for future delivery of such
instrument, each of the above issued in accordance with the requirements of the
Company's Hedging Program.
"Hedging Program" shall mean a program for hedging interest
rate risks by the Company, which program shall provide, without limitation, that
all Hedge Contracts will be placed with registered broker-dealers, futures
commission merchants or clearing houses, if applicable, with whom the Company
has written, assignable agreements.
"Indebtedness" of any Person shall mean all items of
indebtedness which, in accordance with GAAP, would be included in determining
liabilities as shown on the liability side of a statement of condition of such
Person as of the date as of which indebtedness is to be determined, including,
without limitation, all obligations for money borrowed and capitalized lease
obligations, and shall also include all indebtedness and liabilities of others
assumed or guaranteed by such Person or in respect of which such Person is
secondarily or contingently liable (other than by endorsement of instruments in
the course of collection) whether by reason of any agreement to acquire such
indebtedness or to supply or advance sums or otherwise.
"Interest Period" shall mean, as the context requires, a
Discount Loan Interest Period, a Eurodollar Interest Period and/or a Negotiated
Loan Interest Period.
"L/C Commitment" shall mean for any L/C Issuing Lender at any
date the maximum dollar face amount of Letters of Credit which such L/C Issuing
Lender has agreed to issue under the Agreement, as set forth on the Commitment
Schedule attached hereto as Schedule I, as such amount may be increased or
decreased with the consent of the Company and such L/C Issuing Lender; provided,
however, that in no event may the sum of all L/C Commitments exceed
$150,000,000.00.
"L/C Drawing" shall mean any drawing under a Letter of Credit.
"L/C Issuing Lender" shall mean one or more of the Lenders
which have agreed with the Company to act in such capacity.
"Lender Discount" shall mean with respect to each Discount
Loan, an amount determined by the Credit Agent with respect to such Discount
Loan such that, when the principal amount of such Discount Loan is repaid by the
Company on the last day of the Discount Loan Interest Period with respect
thereto, such principal amount will be equivalent to the proceeds of such
Discount Loan (net of the Lender Discount) plus interest on such net proceeds
calculated at a rate per annum equal to the Applicable Eurodollar Rate in
respect of such Discount Loan for such Discount Loan Interest Period.
"Lenders" shall mean, collectively and severally, the
"Lenders" under (and as defined in the introductory paragraph of) the Agreement
and such additional lenders who may become "Lenders" pursuant to Paragraph 14(a)
of the Agreement.
"Letter of Credit" shall have the meaning given such term in
Paragraph 1(d) of the Agreement.
"Lien" shall mean any security interest, mortgage, pledge,
lien, claim, charge or encumbrance (including any conditional sale or other
title retention agreement), any lease in the nature thereof, and the filing of
or agreement to give any financing statement under the Uniform Commercial Code
of any jurisdiction.
"Loan" shall mean a Primary Loan, a Negotiated Loan or a Swing
Loan, as applicable, and "Loans" shall mean all such loans, collectively and
severally.
"Loan Request, Interest Rate Election and Payoff Notice" shall
mean a written request, election and notice in form satisfactory to the Credit
Agent.
"Loan-to-Value Ratio" shall mean with respect to any Mortgage
Loan the ratio of the principal amount of such Mortgage Loan outstanding at the
origination thereof (or in the case of an Eligible HELOC, the face amount of the
promissory note evidencing such Eligible HELOC plus the principal amount
outstanding under the first priority deed of trust (or mortgage) on the related
Property, if any) divided by the lesser of (a) the most recent selling price of
the related Property, and (b) the appraised value of the related Property.
"Majority Lenders" shall mean at any date those Lenders
holding not less than sixty two percent (62%) of the Aggregate Percentage
Shares.
"Margins" shall mean the dollar amount shown as "Margins" on
the most recent Covenant Compliance Certificate delivered by the Company
pursuant to Paragraph 9(a)(3) of the Agreement and shall equal the sum of: (a)
that dollar portion of "Other Receivables" shown on the balance sheet of the
Company as of the Applicable Financial Test Date delivered by the Company
pursuant to Paragraph 9(a)(2) of the Agreement constituting margins (relating to
cash and government securities with a maturity of less than one year), plus (b)
Letters of Credit outstanding as of such Applicable Financial Test Date, plus
(c) unrepaid L/C Drawings as of such Applicable Financial Test Date.
"Maturity Date" shall mean May 14, 2000, as such date may be
extended from time to time in writing by one hundred percent (100%) of the
Lenders, in their sole discretion; provided, however, that the Company may
request in writing an extension of such date not less than ninety (90) days
prior thereto and the Lenders must respond within thirty (30) days prior to the
then current Maturity Date indicating whether one hundred percent (100%) of the
Lenders, in their sole discretion, desire to extend such Maturity Date (failure
to so respond by any of the Lenders being deemed to constitute the refusal of
the Lenders to grant such an extension).
"Maximum Primary Loan Commitment" shall mean for any Lender at
any date that amount set forth on the Commitment Schedule attached hereto as
Schedule I as such Lender's "Maximum Primary Loan Commitment," as such amount
may be increased or decreased as provided in the Credit Documents.
"MBSCC" shall have the meaning given such term in Paragraph
1(d) of the Agreement.
"Moody's" shall mean Moody's Investors Service, Inc.
"Mortgage-Backed Securities" shall mean (a) securities
(including, without limitation, participation certificates) guaranteed by GNMA
that represent interests in a pool of mortgages, deeds of trusts or other
instruments creating a Lien on Property which is improved by a completed single
family dwelling (one-to-four family units), (b) securities (including
participation certificates) issued by FNMA or FHLMC that represent interests in
such a pool, (c) securities issued under Approved Securities Offerings, and (d)
privately-placed securities representing undivided interests in or otherwise
supported by such a pool.
"Mortgage Claims Receivable" shall mean that dollar amount
shown as such on the balance sheet of the Company as of the end of the calendar
month immediately preceding the month in which "Mortgage Claims Receivable" is
calculated.
"Mortgage Loan" shall mean a residential real estate secured
loan, including, without limitation: (a) a promissory note and related deed of
trust (or mortgage) and/or security agreements; (b) all guaranties and insurance
policies, including, without limitation, all mortgage and title insurance
policies and all fire and extended coverage insurance policies and rights of the
owner of such mortgage loan to return premiums or payments with respect thereto;
and (c) all right, title and interest of the owner of such mortgage loan in the
Property covered by said deed of trust (or mortgage).
"Mortgage Loans Held For Sale" shall mean that dollar amount
shown as such on the balance sheet of the Company as of the end of the calendar
month immediately preceding the month in which "Mortgage Loans Held For Sale" is
calculated.
"Multiemployer Plan" as to any Person shall mean a Plan of
such Person which is a multiemployer plan as defined in Section 4001(a)(3) of
ERISA.
"Negative Security Event" shall mean any of the following:
(a) There shall occur an Event of Default; or
(b) Unless such occurrence shall be waived in writing by the Majority
Lenders, the Company's long term unsecured debt rating shall be lower than
"BBB-" with S&P or lower than "Baa3" with Moody's.
"Negotiated Loan" shall have the meaning given such term in
Paragraph 1(b) of the Agreement.
"Negotiated Loan Interest Period" shall mean as to any
Negotiated Loan the period of time from the date such Negotiated Loan is
advanced until the principal amount thereof is payable in full, as agreed by the
Company and the Lender which makes such Negotiated Loan; provided, however, that
in no event shall any Negotiated Loan Interest Period extend beyond the Maturity
Date.
"Negotiated Loan Interest Rate" shall mean as to any
Negotiated Loan such fixed rate per annum as the Company and the Lender which
agreed to advance such Negotiated Loan have agreed.
"Negotiated Loan Notes" shall have the meaning given such term
in Paragraph 5(c) of the Agreement.
"Notes" shall mean, collectively and severally, the Direct
Loan Notes, the Discount Loan Notes, the Negotiated Loan Notes, the Swing Loan
Notes, and the GNMA Pool Advance Note.
"Obligations" shall mean any and all debts, obligations and
liabilities of the Company to the Lenders and the Agents (whether now existing
or hereafter arising, voluntary or involuntary, whether or not jointly owed with
others, direct or indirect, absolute or contingent, liquidated or unliquidated,
and whether or not from time to time decreased or extinguished and later
increased, created or incurred), arising out of or related to the Credit
Documents.
"Obligor" shall mean the individual or individuals obligated
to pay the indebtedness which is the subject of a Mortgage Loan.
"Other Assets" shall mean the dollar amount shown as "Other
Assets" on the most recent Covenant Compliance Certificate delivered by the
Company pursuant to Paragraph 9(a)(3) of the Agreement and shall consist of all
assets of the Company shown on the balance sheet of the Company (including
servicing hedge investments) as of the most recent Applicable Financial Test
Date other than assets included in the calculation of subparagraphs (1) through
(7) of Paragraph 10(k) of the Agreement; provided, however, that in no event
shall Other Assets include intangible assets.
"Outstanding CPN" shall mean each CPN issued at any time under
the Depositary Agreement which has not been presented for payment and for which
payment has not been made in full.
"Outstanding Letter of Credit" shall mean a Letter of Credit
issued under the Agreement which has not expired unutilized or been drawn upon
in its full face amount.
"Overnight Transaction Loan Rate" shall mean on any day the
rate per annum determined by the Credit Agent for such day to be its transaction
loan rate, plus the Pricing Spread.
"Parent" shall mean Countrywide Credit Industries, Inc., a Delaware
corporation.
"Parent Notes" shall mean all promissory notes or other
Indebtedness issued by the Parent pursuant to either of those certain Form S-3
Registration Statements filed on behalf of the Parent with the Securities and
Exchange Commission on January 20, 1988, and July 25, 1989, respectively, as the
same may be amended, extended or supplemented from time to time.
"Participant" shall mean a Person to whom has been sold an
undivided participation interest in the Obligations as permitted under the
Credit Documents.
"Paying Agent" shall mean such Person acceptable to the
Company and the Credit Agent as shall agree to act as issuing and paying agent
under the Depositary Agreement with respect to the CPNs, the current such Person
being FNBC.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any successor
agency.
"Perfected Assignment" shall mean, as to any Book-Entry MBS,
that the related Mortgage-Backed Security has been transferred to the Collateral
Agent or any entity designated by the Collateral Agent so that the Collateral
Agent or such entity may maintain such Mortgage-Backed Security as depository in
one of its book-entry accounts with a Federal Reserve Bank or the Mortgage
Backed Securities Clearing Corporation Depositary System and a pledge to the
Collateral Agent for the benefit of the Secured Parties has been registered with
the Collateral Agent or such entity or the Company has taken such other such
action as the Collateral Agent may request to protect, maintain or perfect the
Collateral Agent's security interest in such Book-Entry MBS for the benefit of
the Secured Parties.
"Person" shall mean any corporation, limited liability
company, natural person, firm, joint venture, partnership, trust, unincorporated
organization, government or any department or agency of any government.
"Plan" shall mean as to any Person, any pension plan that is
covered by Title IV of ERISA and in respect of which such Person or a Commonly
Controlled Entity of such Person is an "employer" as defined in Section 3(5) of
ERISA.
"Pledged Eligible Mortgage Servicing Assets" shall mean now
existing and hereafter acquired Eligible Mortgage Servicing Assets as to which
each of the following is accurate and complete (and the Company by including
said Eligible Mortgage Servicing Assets in any calculation of the Collateral
Value of the Secured Borrowing Base shall be deemed to so represent and warrant
to the Credit Agent, the Collateral Agent and each of the Lenders):
(a) The Company has granted to the Secured Parties, and the Collateral
Agent holds on behalf of the Secured Parties, a first priority, perfected
security interest in said Eligible Mortgage Servicing Assets; and
(b) There has been delivered to the Collateral Agent from FNMA and/or
FHLMC, as applicable, written consent, in form and content satisfactory to the
Collateral Agent and executed by the Company, to the assignment by the Company
of the related Servicing Contracts to the Collateral Agent for the benefit of
the Secured Parties.
"Pool Loan Purchases" shall mean that dollar amount shown as
such on the balance sheet of the Company as of the end of the calendar month
immediately preceding the month in which "Pool Loan Purchases" is calculated.
"Positive Security Event" shall mean that there has not
occurred and is continuing an Event of Default, and the Company's long term
unsecured debt rating is at least "BBB-" with S&P and "Baa3" with Moody's.
"Potential Default" shall mean an event which but for the
lapse of time or the giving of notice, or both, would constitute an Event of
Default.
"Pre-Disbursement Account" shall mean an account maintained in
the Credit Agent's name with the Credit Agent, as announced to the Lenders by
the Credit Agent from time to time.
"Pre-Funding Notice" shall mean a notice in the form of Exhibit N attached
hereto.
"Pricing Spread" shall be determined for each Eurodollar
Interest Period and each Discount Loan Interest Period on the first Business Day
of such Interest Period, and with respect to each Swing Loan for each day such
Swing Loan is outstanding, as follows: If on such day the Company's long term
unsecured debt rating is: (a) at least "A+" with S&P or "A1" with Moody's, the
Pricing Spread shall be 0.17%, (b) at least "A-" with S&P or "A3" with Moody's,
the Pricing Spread shall be 0.275%; (c) at least "BBB+" with S&P or "Baa1" with
Moody's, the Pricing Spread shall be 0.325%; (d) at least "BBB" with S&P or
"Baa2" with Moody's, the Pricing Spread shall be 0.375% and (e) below "BBB" with
S&P and "Baa2" with Moody's, the Pricing Spread shall be 0.425%; provided,
however, that if on any day for whatever reason the Company's long term
unsecured debt rating is not available from S&P or Moody's or is not otherwise
determinable hereunder (including, without limitation, by reference to an
alternate rating agency of recognized standing), the Pricing Spread shall be
deemed to be 0.425%.
"Primary Loan" shall have the meaning given such term in
Paragraph 1(a) of the Agreement.
"Primary Loan Credit Limit" shall mean at any date the
aggregate of the Lenders' Maximum Primary Loan Commitments at such date, as set
forth on the then effective Commitment Schedule; provided, however, that in no
event shall the Primary Loan Credit Limit exceed at any date the Aggregate
Credit Limit minus the aggregate L/C Commitments and the GNMA Pool Advance
Commitment at such date.
"Primary Loan Percentage Share" shall mean for any Lender at
any date that percentage which the dollar amount of such Lender's Maximum
Primary Loan Commitment bears to the Primary Loan Credit Limit.
"Proceeds" shall mean whatever is receivable or received when
Collateral or proceeds are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes, without
limitation, all rights to payment, including return premiums, with respect to
any insurance relating thereto.
"Property" shall mean the real property, including the
improvements thereon, and the personal property (tangible and intangible) which
are encumbered pursuant to a Mortgage Loan.
"Property and Equipment" shall mean the dollar amount shown as
"Property, Equipment and Leasehold Improvements" on the balance sheet of the
Company as of the Applicable Financial Test Date delivered by the Company
pursuant to Paragraph 9(a)(2) of the Agreement.
"Purchased Servicing Rights" shall mean the dollar amount
shown as "Purchased Servicing Rights" on the balance sheet of the Company as of
the Applicable Financial Test Date delivered by the Company pursuant to
Paragraph 9(a)(2) of the Agreement.
"Qualifying Balances" shall have the meaning with respect to
each Balance Bank given such term in Annex I to the Balance Bank Agreement
between the Company and such Balance Bank.
"Receivables For Mortgage Loans Shipped" shall mean that
dollar amount shown as such on the balance sheet of the Company as of the end of
the calendar month immediately preceding the month in which "Receivables For
Mortgage Loans Shipped" is calculated.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System from time to time in effect and shall
include any successor or other regulation of said Board of Governors relating to
reserve requirements applicable to member banks of the Federal Reserve System.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System (12 C.F.R. ss. 221), as the same may
from time to time be amended, supplemented or superseded.
"Release Request" shall mean a request in the form of that
attached hereto as Exhibit O.
"Reportable Event" shall mean any of the events set forth in Section
4043(b) of ERISA.
"Requested CPNs" shall mean during any Secured Period as of
any date the aggregate dollar amount of CPNs, if any, listed on the CPN Issuance
Request delivered by the Company to the Collateral Agent on the immediately
preceding Business Day.
"Required Documents" shall mean with respect to any Mortgage
Loan those items listed on Exhibit P attached hereto.
"Requirements of Law" shall mean as to any Person the
Certificate of Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or a final
and binding determination of an arbitrator or a determination of a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Reserve Requirement" shall mean with respect to an Interest
Period for a Eurodollar Loan or a Discount Loan, the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other reserves and
taking into account any transitional adjustments) which is imposed under
Regulation D on eurocurrency liabilities.
"S&P" shall mean Standard & Poor's Ratings Services.
"Secured Borrowing Base" shall mean at any date all assets,
including all Eligible Mortgage Loans, all Eligible Mortgage-Backed Securities
and all Pledged Eligible Mortgage Servicing Assets, included by the Collateral
Agent in the calculation of the Collateral Value of the Secured Borrowing Base
at such date.
"Secured Obligations" shall have the meaning given such term
in Paragraph 3 of the Security Agreement.
"Secured Parties" shall have the meaning given such term in
Paragraph 1 of the Security Agreement.
"Secured Period" shall mean any period commencing on the date
there shall occur a Negative Security Event to but not including the date there
shall occur a Positive Security Event.
"Secured Period Borrowing Base Certificate" shall mean a
certificate in the form of that attached hereto as Exhibit Q.
"Security Agreement" shall mean a Security and Collateral
Agency Agreement in the form of that attached hereto as Exhibit R, as the same
may be amended, extended or replaced from time to time.
"Servicing Contract" shall mean the written agreement between
FNMA or FHLMC and the Company providing for the servicing of Mortgage Loans,
including pools of Mortgage Loans underlying Mortgage-Backed Securities, and
shall include all manuals, guides, laws, rules and regulations incorporated by
reference in or otherwise governing the terms of the relationship of such
investor and the Company thereunder.
"Servicing Pass-Through Venture" shall mean any corporation,
partnership, joint venture, trust or other entity legally separate from the
Company and formed for the purpose of acquiring (either from the Company or from
unaffiliated parties) the right to service mortgage loans for a fee and selling
or pledging all or any portion of the related servicing fee income to finance
all or part of the acquisition of such servicing rights.
"Settlement Account" shall mean: (a) during any Unsecured
Period, such account or accounts as the Company may designate from time to time
in writing, and (b) during any Secured Period, Account No. 19-13433 maintained
in FNBC's name at One First National Plaza, Suite 0098, Chicago, Illinois
60670-0098.
"Single Employer Plan" shall mean as to any Person any Plan of
such Person which is not a Multiemployer Plan.
"Single Level Subordinated Parent Debt" shall mean
Indebtedness of the Company to the Parent which although subject to the
Subordination Agreement (and therefore constituting Subordinated Debt) is not
Double Level Subordinated Parent Debt.
"Statement Date" shall mean February 29, 1996.
"Subordinated Debt" shall mean Indebtedness of the Company
subordinated to the Obligations in the manner and to the extent required by the
Majority Lenders pursuant to written subordination agreements satisfactory in
form and substance to the Majority Lenders.
"Subordinated Parent Borrowings" shall mean Indebtedness of
the Parent subordinated to other Indebtedness of the Parent to the extent
satisfactory to the Majority Lenders, it being expressly agreed and understood
that Indebtedness of the Parent under the Parent Notes does not constitute
Subordinated Parent Borrowings.
"Subordination Agreement" shall mean a subordination agreement
in the form of Exhibit S attached hereto, as the same may be amended, extended
or replaced from time to time.
"Subsidiary" shall mean any corporation more than fifty
percent (50%) of the stock of which having by the terms thereof ordinary voting
power to vote for the election of directors, managers or trustees of such
corporation (irrespective of whether or not at the time stock of any other class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) shall, at the time as of which any
determination is being made, be owned, either directly and/or through
Subsidiaries.
"Swing Line Commitment" shall mean for any Swing Line Lender
at any date that amount set forth on the Commitment Schedule attached hereto as
Schedule I as such Swing Line Lender's "Swing Line Commitment," as such amount
may be increased or decreased by written consent of the Company and one hundred
percent (100%) of the Swing Line Lenders and the Majority Lenders.
"Swing Line Lenders" shall mean those Lenders which have
agreed to advance Swing Loans hereunder, with the initial Swing Line Lenders
being BT, FNBC, The Bank of New York and The Chase Manhattan Bank, N.A.
"Swing Line Percentage Share" shall mean for any Swing Line
Lender at any date that percentage which the dollar amount of such Swing Line
Lender's Swing Line Commitment bears to the Aggregate Swing Line Commitment.
"Swing Loan" shall have the meaning given such term in
Paragraph 1(c) of the Agreement.
"Swing Loan Notes" shall have the meaning given such term in
Paragraph 5(c) of the Agreement.
"Take-Out Commitment" with respect to any Mortgage Loan or
Mortgage-Backed Security shall mean: (a) a bona fide current, unused and
unexpired commitment issued in favor of and held by the Company made by an
Approved Investor, under which said Approved Investor agrees, prior to the
expiration thereof, upon the satisfaction of certain terms and conditions
therein, to purchase such Mortgage-Backed Security or Mortgage Loan (or a
security secured or otherwise supported by a pool of residential mortgage loans
to include such Mortgage Loan) at a specified price, which commitment is not
subject to any term or condition which is not customary in commitments of like
nature or which, in the reasonably anticipated course of events, cannot be fully
complied with prior to the expiration thereof; or (b) if a Mortgage Loan is
designated to secure or otherwise support an Approved Securities Offering, a
firm underwriting agreement in full force and effect with an Approved Investor.
"Taxes" shall have the meaning given such term in Paragraph
4(l) of the Agreement.
"Total Debt" shall mean all Indebtedness of the Company and
its Subsidiaries excluding Subordinated Debt (other than Single Level
Subordinated Parent Debt) and deferred taxes of the Company attributable to
capitalization of purchased servicing rights and excess servicing fees.
"Transferee Lender" shall mean an existing Lender to which
another existing Lender transfers a portion of its Aggregate Maximum Commitment.
"Type" for any Mortgage Loan shall mean an Eligible Committed
Conforming Mortgage Loan, an Eligible Committed Non-Conforming Mortgage Loan, an
Eligible Uncommitted Agency Mortgage Loan, an Eligible HELOC, an Eligible
Non-Agency Mortgage Loan or any other classification of Mortgage Loans as to
which one hundred percent (100%) of the Lenders, the Credit Agent and the
Collateral Agent have established in writing, in their sole discretion, the
criteria for inclusion of such Mortgage Loans in the calculation of the
Collateral Value of the Secured Borrowing Base, including, without limitation,
the aggregate dollar amount includable, the permissible period of time
includable and the characteristics of such Mortgage Loans.
"Unsecured Borrowing Base" shall mean at any date all assets,
including all Eligible Mortgage Assets and all Eligible Mortgage Servicing
Assets, included by the Company in the calculation of the Collateral Value of
the Unsecured Borrowing Base at such date.
"Unsecured Period" shall mean the period from the Effective
Date to but not including the date there shall occur a Negative Security Event
and, thereafter, any period commencing on the date there shall occur a Positive
Security Event to but not including the date there shall occur a Negative
Security Event.
"Unsecured Period Borrowing Base Certificate" shall mean a
certificate in the form of that attached hereto as Exhibit T.
"VA" shall mean the Veterans Administration and any successor agency.
"Verified Outstanding CPNs" shall mean at any date, the
aggregate dollar amount of Outstanding CPNs at the opening of business of the
Paying Agent on such date less the aggregate dollar amount of CPNs which by
their terms will mature on such date and plus the aggregate dollar amount of
Requested CPNs, all as determined by the Company (or during any Secured Period
as determined by the Collateral Agent, in its reasonable discretion, based upon
information supplied to the Collateral Agent by the Paying Agent and the Company
as provided herein and in the Depositary Agreement).
"Warehouse-Related MBS" shall have the meaning given such term
in Paragraph 9(b)(2) of the Security Agreement.
"Wet Funded Loans" shall mean on any date during any Secured
Period Mortgage Loans the Required Documents for which have not been received by
the Collateral Agent.
<TABLE>
<CAPTION>
Exhibit 11.1
COUNTRYWIDE CREDIT INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months
Ended May 31,
1996 1995
---------------- -----------------
(Dollar amounts in thousands,
except per share data)
Primary
<S> <C> <C>
Net earnings applicable to common stock $60,624 $36,176
================ =================
Average shares outstanding 102,316 91,440
Net effect of dilutive stock options --
based on the treasury stock method
using average market price 1,894 1,243
---------------- -----------------
Total average shares 104,210 92,683
================ =================
Per share amount $0.58 $0.39
================ =================
Fully diluted
Net earnings applicable to common stock $60,624 $36,176
================ =================
Average shares outstanding 102,316 91,440
Net effect of dilutive stock options --
based on the treasury stock method using
the closing market price, if higher than
average market price. 2,110 1,409
---------------- -----------------
Total average shares 104,426 92,849
================ =================
Per share amount $0.58 $0.39
================ =================
</TABLE>
<TABLE>
<CAPTION>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 12.1 - COMPUTATION OF THE RATIO OF EARNINGS TO FIXED CHARGES
(Dollar amounts in thousands)
The following table sets forth the ratio of earnings to fixed charges of the
Company for the three months ended May 31, 1996 and 1995 and for the five fiscal
years ended February 29(28), 1996 computed by dividing net fixed charges
(interest expense on all debt plus the interest element (one-third) of operating
leases) into earnings (income before income taxes and fixed charges).
Three Months Ended
May 31, For Fiscal Years Ended February 29(28),
------------------------- ------------------------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
------------ ------------ ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net earnings $60,624 $36,176 $195,720 $88,407 $179,460 $140,073 $60,196
Income tax expense 38,760 24,118 130,480 58,938 119,640 93,382 40,131
Interest charges 77,066 61,973 281,573 205,464 219,898 128,612 69,760
Interest portion of rental
expense 1,816 1,682 6,803 7,379 6,372 4,350 2,814
------------ ------------ ------------- ------------ ------------- ------------ ------------
Earnings available to cover
fixed charges $178,266 $123,949 $614,576 $360,188 $525,370 $366,417 $172,901
============ ============ ============= ============ ============= ============ ============
Fixed charges
Interest charges $77,066 $61,973 $281,573 $205,464 $219,898 $128,612 $69,760
Interest portion of rental
expense 1,816 1,682 6,803 7,379 6,372 4,350 2,814
------------ ------------ ------------- ------------ ------------- ------------ ------------
Total fixed charges $78,882 $63,655 $288,376 $212,843 $226,270 $132,962 $72,574
============ ============ ============= ============ ============= ============ ============
Ratio of earnings to fixed
charges 2.26 1.95 2.13 1.69 2.32 2.76 2.38
============ ============ ============= ============ ============= ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1997
<PERIOD-END> MAY-31-1996
<CASH> 7,876
<SECURITIES> 0
<RECEIVABLES> 1,047,288
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 226,703
<DEPRECIATION> 79,235
<TOTAL-ASSETS> 9,241,207
<CURRENT-LIABILITIES> 0
<BONDS> 1,952,279
0
0
<COMMON> 5,121
<OTHER-SE> 1,371,307
<TOTAL-LIABILITY-AND-EQUITY> 9,241,207
<SALES> 0
<TOTAL-REVENUES> 263,282
<CGS> 0
<TOTAL-COSTS> 163,898
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 99,384
<INCOME-TAX> 38,760
<INCOME-CONTINUING> 60,624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 60,624
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.58
<FN>
Total Revenues includes $77,066 of interest expense related to
mortgage loan activities.
</FN>
</TABLE>
