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 August 31, 1997
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.)
4500 Park Granada Blvd., Calabasas, California 91302
- ---------------------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
(818) 225-3000
-----------------------------------------------------------------------
(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 October 14, 1997
Common Stock $.05 par value 107,937,247
<PAGE>
<TABLE>
<CAPTION>
PART I
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
August 31, February 28,
1997 1997
---------------- -----------------
(Dollar amounts in thousands,
except per share data)
ASSETS
<S> <C> <C>
Cash $ 17,576 $ 18,269
Mortgage loans and mortgage-backed securities held for sale 3,733,401 2,579,972
Other receivables 1,946,854 1,451,979
Property, equipment and leasehold improvements, at cost - net of
accumulated depreciation and amortization 203,596 190,104
Mortgage servicing rights 3,366,295 3,023,826
Other assets 1,091,760 825,142
---------------- ------------------
Total assets $10,359,482 $8,089,292
================ ==================
Borrower and investor custodial accounts (segregated in special
accounts - excluded from corporate assets) $2,484,304 $1,695,523
================ ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $5,932,200 $4,713,324
Drafts payable issued in connection with mortgage loan closings 350,712 221,757
Accounts payable and accrued liabilities 1,011,330 607,037
Deferred income taxes 750,217 635,643
---------------- ------------------
Total liabilities 8,044,459 6,177,761
Commitments and contingencies
- -
Company-obligated mandatorily redeemable securities of subsidiary
trusts holding company guaranteed related subordinated debt 500,000 300,000
Common stock - authorized, 240,000,000 shares of $.05 par value; issued and
outstanding, 107,407,149 shares at August 31, 1997
and 106,095,558 shares at February 28, 1997 5,370 5,305
Additional paid-in capital 959,169 917,942
Unrealized loss on available-for-sale securities (30,972) (30,545)
Retained earnings 881,456 718,829
---------------- ------------------
Total shareholders' equity 1,815,023 1,611,531
---------------- ------------------
Total liabilities and shareholders' equity $10,359,482 $8,089,292
================ ==================
Borrower and investor custodial accounts $2,484,304 $1,695,523
================ ==================
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 Six Months
Ended August 31, Ended August 31,
1997 1996 1997 1996
------------------------------ ------------------------------
(Dollar amounts in thousands, except per share data)
Revenues
<S> <C> <C> <C> <C>
Loan origination fees $ 65,155 $ 45,597 $ 118,654 $ 101,546
Gain on sale of loans 95,396 58,411 185,631 105,491
------------------------------ ------------------------------
Loan production revenue 160,551 104,008 304,285 207,037
Interest earned 103,682 86,039 185,862 174,886
Interest charges (99,988) (76,243) (181,822) (153,309)
------------------------------ ------------------------------
Net interest income 3,694 9,796 4,040 21,577
Loan servicing income 221,768 189,139 436,083 368,414
Amortization and impairment/recovery of
mortgage servicing rights (105,385) (34,623) (131,341) 13,662
Servicing hedge benefit (expense) 33,462 (17,725) (11,281) (118,151)
------------------------------ ------------------------------
Net loan administration income 149,845 136,791 293,461 263,925
Commissions, fees and other income 33,685 20,220 64,634 41,558
Gain on sale of subsidiary 57,381 - 57,381 -
------------------------------ ------------------------------
Total revenues 405,156 270,815 723,801 534,097
------------------------------ ------------------------------
Expenses
Salaries and related expenses 100,544 67,991 188,585 136,989
Occupancy and other office expenses 41,422 31,415 79,488 61,313
Guarantee fees 42,812 39,363 85,388 76,864
Marketing expenses 10,322 9,098 20,642 17,922
Other operating expenses 30,172 20,494 55,111 39,171
------------------------------ ------------------------------
Total expenses 225,272 168,361 429,214 332,259
------------------------------ ------------------------------
Earnings before income taxes 179,884 102,454 294,587 201,838
Provision for income taxes 70,155 39,957 114,889 78,717
------------------------------ ------------------------------
NET EARNINGS $ 109,729 $ 62,497 $ 179,698 $ 123,121
============================== ==============================
Earnings per share
Primary $0.99 $0.60 $1.63 $1.18
Fully diluted $0.98 $0.60 $1.62 $1.17
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)
Six Months
Ended August 31,
1997 1996
---------------- -----------------
(Dollar amounts in thousands)
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 179,698 $ 123,121
Adjustments to reconcile net earnings to net cash
used by operating activities:
Gain on sale of subsidiary (57,381) -
Amortization and impairment/recovery of mortgage servicing rights 131,341 (13,662)
Depreciation and other amortization 22,769 18,741
Deferred income taxes 114,574 78,717
Origination and purchase of loans held for sale (19,921,289) (20,172,169)
Principal repayments and sale of loans 18,767,433 21,261,645
---------------- ----------------
(Increase) decreasein mortgage loans and mortgage-backed securities
held for sale (1,153,856) 1,089,476
Increase in other receivables and other assets (686,831) (710,643)
Increase in accounts payable and accrued liabilities 382,884 491,596
---------------- ----------------
Net cash (used) provided by operating activities (1,066,802) 1,077,347
---------------- ----------------
Cash flows from investing activities:
Additions to mortgage servicing rights (473,653) (457,134)
Purchase of property, equipment and leasehold
improvements - net (32,290) (23,348)
---------------- ----------------
Net cash used by investing activities (505,943) (480,482)
---------------- ----------------
Cash flows from financing activities:
Net increase(decrease) in warehouse debt and other
short-term borrowings 1,319,563 (691,895)
Issuance of long-term debt 365,000 210,000
Repayment of long-term debt (336,732) (113,348)
Issuance of Company-obligated mandatorily redeemable securities
of subsidiary trusts holding company guaranteed related
subordinated debt 200,000 -
Issuance of common stock 41,292 7,809
Cash dividends paid (17,071) (16,384)
---------------- ----------------
Net cash provided (used) by financing activities 1,572,052 (603,818)
---------------- ----------------
Net decrease in cash (693) (6,953)
Cash at beginning of period 18,269 16,444
================ ================
Cash at end of period $ 17,576 $ 9,490
================ ================
Supplemental cash flow information:
Cash used to pay interest $ 188,589 $ 152,983
Cash used to pay income taxes $ 52 $ 10
Non-cash transactions:
Unrealized (loss) on available for sale securities, net of taxes $ (427) $ -
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
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 six-month period ended August 31, 1997 are
not necessarily indicative of the results that may be expected for the fiscal
year ending February 28, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the annual
report on Form 10-K for the fiscal year ended February 28, 1997 of Countrywide
Credit Industries, Inc. (the "Company").
Certain amounts reflected in the consolidated financial statements for the
six-month period ended August 31, 1996 have been reclassified to conform to the
presentation for the six-month period ended August 31, 1997.
<TABLE>
<CAPTION>
NOTE B - NOTES PAYABLE
Notes payable consisted of the following.
------------------------------------------------------------------ ---- --------------- --- -------------- --
(Dollar amounts in thousands) August 31, February 28,
1997 1997
------------------------------------------------------------------ ---- --------------- --- -------------- --
<S> <C> <C>
Commercial paper $2,718,060 $1,943,368
Medium-term notes, Series A, B, C, D and E 2,626,500 2,346,800
Repurchase agreements 386,553 220,637
Subordinated notes 200,000 200,000
Other notes payable 1,087 2,519
=============== ==============
$5,932,200 $4,713,324
=============== ==============
------------------------------------------------------------------ ---- --------------- --- -------------- --
</TABLE>
Revolving Credit Facility and Commercial Paper
As of August 31, 1997, Countrywide Home Loans, Inc. ("CHL"), the Company's
mortgage banking subsidiary, had an unsecured credit agreement (revolving credit
facility) with fifty commercial banks 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 August 31, 1997. The weighted average borrowing rate on commercial
paper borrowings for the six months ended August 31, 1997 was 5.57%. The
weighted average borrowing rate on commercial paper outstanding as of August 31,
1997 was 5.59%. 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. (See Note G)
<TABLE>
<CAPTION>
Medium-Term Notes
As of August 31, 1997, 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>
Series A $ $ 230,500 $ 230,500 6.53 % 8.79 % Mar. 1998 Mar. 2002
-
Series B - 396,000 396,000 6.02 % 6.98 % Mar. 1998 Aug. 2005
Series C 303,000 195,500 498,500 5.87 % 8.43 % Dec. 1997 Mar. 2004
Series D 115,000 386,500 501,500 5.92 % 6.28 % Aug. 1998 Sep. 2005
Series E 310,000 690,000 1,000,000 5.84 % 7.45 % Feb. 2000 Oct. 2008
===========================================
Total $ 728,000 $1,898,500 $ 2,626,500
===========================================
---------------------------------------------------------------------------------------------------------------
</TABLE>
As of August 31, 1997, 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 six
months ended August 31, 1997, including the effect of the interest rate swap
agreements, was 6.23%.
On July 29, 1997, the Company filed a $2.0 billion shelf registration with
the Securities and Exchange Commission ("SEC") covering Series F 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. There was no outstanding balance as of August 31, 1997.
Repurchase Agreements
As of August 31, 1997, 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 six months ended August
31, 1997 was 5.55%. The weighted average borrowing rate on repurchase agreements
outstanding as of August 31, 1997 was 5.66%. 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 August 31, 1997, CHL had uncommitted revolving credit facilities with
two government-sponsored entities. 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 both
facilities for the six months ended August 31, 1997 was 5.70%. As of August 31,
1997, the Company had no outstanding borrowings under these facilities.
NOTE C - COMPANY-OBLIGATED CAPITAL SECURITIES OF SUBSIDIARY TRUST
On December 11, 1996, Countrywide Capital I (the "Subsidiary Trust I"), a
subsidiary of the Company, issued $300 million of 8% Capital Trust Pass-through
Securities (the "8% Capital Securities"). In connection with the Subsidiary
Trust I issuance of the 8% Capital Securities, CHL issued to the Subsidiary
Trust I, $309 million of its 8% Junior Subordinated Deferrable Interest
Debentures (the "Subordinated Debt Securities I"). The Subordinated Debt
Securities I are due on December 15, 2026 with interest payable semi-annually in
arrears on June 15 and December 15 of each year. The Company has the right to
redeem the 8% Capital Securities any time on or after December 15, 2006. The
sole assets of the Subsidiary Trust I are and will be the Subordinated Debt
Securities I. The Company's obligations under a guarantee agreement, the related
indenture and declaration of trust, taken together with CHL's obligations under
the Subordinated Debt Securities I and the indenture constitute a full and
unconditional guarantee by the Company of the Subsidiary Trust I obligations
under the 8% Capital Securities.
On June 4, 1997, Countrywide Capital III (the "Subsidiary Trust III"), a
subsidiary of the Company, issued $200 million of 8.05% Subordinated Capital
Income Securities, Series A (the "8.05% Capital Securities"). In connection with
the Subsidiary Trust III issuance of 8.05% Capital Securities, CHL issued to the
Subsidiary Trust III, $206 million of its 8.05% Junior Subordinated Deferrable
Interest Debentures (the "Subordinated Debt Securities III"). The Subordinated
Debt Securities III are due on December 15, 2026 with interest payable
semi-annually in arrears on June 15 and December 15 of each year. The sole
assets of the Subsidiary Trust III are and will be the Subordinated Debt
Securities III. The Company's obligations under a guarantee agreement, the
related indenture and declaration of trust, taken together with CHL's
obligations under the Subordinated Debt Securities III and the indenture
constitute a full and unconditional guarantee by the Company of the Subsidiary
Trust III obligations under the 8.05 % Capital Securities. (See Note G)
In relation to Subsidiary Trusts I and III, CHL has the right to defer
payment of interest by extending the interest payment period, from time to time,
for up to 10 consecutive semi-annual periods. If interest payments on the
Debentures are so deferred, the Company and CHL shall not declare or pay
dividends on, or make a distribution with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital
stock.
<TABLE>
<CAPTION>
NOTE D - SERVICING HEDGE
The following summarizes the notional amounts of servicing hedge derivative
contracts.
- -------------------------------- ----------- --------------- ---------- -------- ------------- ------------ ------------
(Dollar amounts in millions) Long Call
Options on
Interest Interest Rate Principal Interest
Rate Futures Swap - Only Rate
Floors Caps Swaps Swaps Cap Swaptions
- -------------------------------- ----------- --------------- ---------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 28, 1997 $26,250 $ 4,200 $1,000 $ $ 268 $ 1,000 $ 1,750
-
Additions 6,000 7,100 - 1,300 - 1,000 500
Dispositions/Expirations (1,000) (8,200) - - - (500) (400)
=========== =============== ========== ======== ============= ============ ------------
Balance, August 31, 1997 $31,250 $ 3,100 $1,000 $1,300 $ 268 $ 1,500 $ 1,850
=========== =============== ========== ======== ============= ============ ------------
- -------------------------------- ----------- --------------- ---------- -------- ------------- ------------ ------------
</TABLE>
NOTE E - RESERVE FOR IMPAIRMENT OF MORTGAGE SERVICING RIGHTS
The following summarizes the aggregate activity in the reserve for
impairment of mortgage servicing rights.
- ------------------------------------- ------- ------------------------
(Dollar amounts in thousands) Aggregate Balances
------------------------
Balances, February 28, 1997 $ 2,668
additions 53
------------------------
Balances, August 31, 1997 $ 2,721
------------------------
- ------------------------------------- ------- ------------------------
NOTE F- LEGAL PROCEEDINGS
On September 29, 1997, the United States District Court adopted the
recommendation of a magistrate denying class certification in a lawsuit which
was filed against CHL and a mortgage broker by Jeff and Kathy Briggs as a
purported class action. The effect of the ruling is that the lawsuit will not
proceed as a class action and will be limited to the Briggs' own claims. The
Briggs have not sought appellate review of the Court's ruling. The suit alleges
that in connection with residential mortgage loan closings, CHL made certain
payments to mortgage brokers in violation of the Real Estate Settlement
Procedures Act. 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 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 financial position or results of operations.
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.
NOTE G - SUBSEQUENT EVENTS
On September 13, 1997, the Company declared a cash dividend of $0.08 per
common share payable October 31, 1997 to shareholders of record on October 15,
1997.
As of September 24, 1997, Countrywide Home Loans, Inc. ("CHL"), the
Company's mortgage banking subsidiary, replaced its revolving credit facility.
The new facility permits CHL to borrow an aggregate maximum amount of $4.0
billion, less commercial paper backed by the agreement. 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 under certain circumstances.
The interest rate on 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. The five
year facility of $3.0 billion expires on September 24, 2002 and the one year
facility of $1.0 billion expires on September 23, 1998.
Pursuant to a Registration Rights Agreement which was entered into in
connection with the issuance of the 8.05% Capital Securities, CHL and the
Company filed a registration statement with the Securities and Exchange
Commission on October 2, 1997. As soon as practicable after the effective date
of the registration statement, newly issued capital securities (the "New 8.05%
Capital Securities") will be offered in exchange for the 8.05% Capital
Securities. The New 8.05% Capital Securities are identical in all material
respects to the 8.05% Capital Securities, except that the New 8.05% Capital
Securities will have been registered under the Securities Act of 1933, as
amended, and therefore will not be subject to certain restrictions on transfer
applicable to the 8.05% Capital Securities.
<TABLE>
<CAPTION>
NOTE H - SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY
The following tables present summarized financial information for
Countrywide Home Loans, Inc.:
-- ----------------------------------------- ---- --------------------------------------------------- -------
(Dollar amounts in thousands) August 31, February 28,
1997 1997
-- ---------------------------------------------- -------- -------------- ---------- -------------- ---------
Balance Sheets:
Mortgage loans and mortgage-backed
<S> <C> <C>
securities held for sale $3,758,590 $2,579,972
Other assets 5,484,717 4,835,078
============== ==============
Total assets $9,243,307 $7,415,050
============== ==============
Short- and long-term debt $6,782,064 $5,220,277
Other liabilities 886,917 742,435
Equity 1,574,326 1,452,338
============== ==============
Total liabilities and equity $9,243,307 $7,415,050
============== ==============
-- ---------------------------------------------- -------- -------------- ---------- -------------- ---------
</TABLE>
<TABLE>
<CAPTION>
--- ----------------------------------------- --- -------------------------------------------------- --------
(Dollar amounts in thousands) Six Months Ended August 31,
--------------- ---------- ---------------
1997 1996
--- --------------------------------------------- ------- --------------- ---------- --------------- --------
Statements of Earnings:
<S> <C> <C>
Revenues $587,995 $485,763
Expenses 387,833 308,346
Provision for income taxes 77,747 69,193
=============== ===============
Net earnings $122,415 $108,224
=============== ===============
--- --------------------------------------------- ------- --------------- ---------- --------------- --------
</TABLE>
NOTE I - IMPLEMENTATION OF NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, Earnings per Share, which
supersedes APB Opinion No. 15, of the same name. SFAS No. 128 simplifies the
standards for computing earnings per share ("EPS") and makes them comparable to
international standards. SFAS No. 128 is effective for financial statements
issued for periods ending after December 15, 1997, with earlier application not
permitted. Upon adoption, all prior EPS data will be restated.
<PAGE>
<TABLE>
<CAPTION>
The following tables present basic and diluted EPS for the three months and six
months ended August 31, 1997 and 1996, computed under the provisions of SFAS No.
128.
- ------------------------ -- -- ----- ------------------------------------ -- ----- ----
Three Months Ended August 31,
-- -- ----- ------------------------------------ -- ----- ----
1997 1996
--------- --------- --------- ---------- --------- ---------
(Dollar amounts in Per-Share Per-Share
thousands, except per Net Amount Net Amount
share data) Earnings Shares Earnings Shares
- ------------------------ --------- --------- --------- ---------
Net earnings $109,729 $62,497
========= ==========
Basic EPS
Net earnings available
<S> <C> <C> <C> <C> <C> <C>
to common shareholders $109,729 107,052 $1.03 $62,497 102,551 $0.61
Effect of dilutive
stock options - 4,271 - 2,193
--------- --------- ---------- ---------
Diluted EPS
Net earnings available
to common shareholders $109,729 111,323 $0.98 $62,497 104,744 $0.60
========= ========= ========= ========== ========= ---------
- ------------------------ --------- --------- --------- - ---------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------ -- -- ----- ------------------------------------ -- ----- ----
Six Months Ended August 31,
-- -- ----- ------------------------------------ -- ----- ----
1997 1996
--------- --------- --------- ---------- --------- ---------
(Dollar amounts in Per-Share Per-Share
thousands, except per Net Amount Net Amount
share data) Earnings Shares Earnings Shares
- ------------------------ --------- --------- --------- ---------
Net earnings $179,698 $123,121
========= ==========
Basic EPS
Net earnings available
<S> <C> <C> <C> <C> <C> <C>
to common shareholders $179,698 106,655 $1.69 $123,121 102,433 $1.20
Effect of dilutive
stock options - 3,588 - 2,028
--------- --------- ---------- ---------
Diluted EPS
Net earnings available
to common shareholders $179,698 110,243 $1.63 $123,121 104,461 $1.18
========= ========= ========= ========== ========= ---------
- ------------------------ --------- --------- --------- - ---------- --------- ---------
</TABLE>
<PAGE>
FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. This Quarterly Report on Form
10-Q may contain 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 August 31, 1997 Compared to Quarter Ended August 31, 1996
Revenues from ongoing operations for the quarter ended August 31, 1997 increased
28% to $347.8 million from $270.8 million for the quarter ended August 31, 1996.
Net earnings from ongoing operations increased 20% to $74.7 million for the
quarter ended August 31, 1997 from $62.5 million for the quarter ended August
31, 1996. Both revenues and net earnings from ongoing operations for the quarter
ended August 31, 1997 exclude a nonrecurring gain of $57.4 million on the sale
of a subsidiary. The increase in revenues and net earnings from ongoing
operations for the quarter ended August 31, 1997 compared to the quarter ended
August 31, 1996 was primarily attributable to an increase in the size of the
Company's servicing portfolio, greater sales of higher-margin home equity loans
and an increase in the income of the non-mortgage banking subsidiaries. These
positive factors during the quarter ended August 31, 1997 were partially offset
by a decline in net interest income, an increase in amortization of the
servicing asset and an increase in expenses.
The total volume of loans produced increased 15% to $10.6 billion for the
quarter ended August 31, 1997 from $9.2 billion for the quarter ended August 31,
1996. The increase in loan production was primarily due to generally lower
interest rates that prevailed during the quarter ended August 31, 1997 compared
to the quarter ended August 31, 1996, as well as to the continuing expansion of
the Company's Consumer Markets and Wholesale divisions. Refinancings totaled
$3.0 billion, or 28% of total fundings, for the quarter ended August 31, 1997,
as compared to $2.1 billion, or 22% of total fundings, for the quarter ended
August 31, 1996. Fixed-rate mortgage loan production totaled $7.3 billion, or
70% of total fundings, for the quarter ended August 31, 1997, as compared to
$6.4 billion, or 70% of total fundings, for the quarter ended August 31, 1996.
Total loan volume in the Company's production divisions is summarized below.
- -------------------------------------------- ---------------------------------
(Dollar amounts in millions) Three Months Ended August 31,
- -------------------------------------------- ---------------------------------
1997 1996
------------- ----------
Consumer Markets Division $ 3,025 $ 1,887
Wholesale Lending Division 3,169 1,840
Correspondent Lending Division 4,367 5,443
============= ==========
Total Loan Volume $ 10,561 $ 9,170
============= ==========
- -------------------------------------------- ------------- -------- ---------
The factors which affect the relative volume of production among the
Company's three divisions include the price competitiveness of each division's
product offerings, the level of mortgage lending activity in each division's
market and the success of each division's sales and marketing efforts.
Included in the Company's total volume of loans produced are $377 million of
home equity loans funded in the quarter ended August 31, 1997 and $127 million
funded in the quarter ended August 31, 1996. Sub-prime credit quality loan
production, which is also included in the Company's total production volume, was
$388 million for the quarter ended August 31, 1997 and $191 million for the
quarter ended August 31, 1996.
At August 31, 1997 and 1996, the Company's pipeline of loans in process was
$6.0 billion and $4.3 billion, respectively. Historically, approximately 43% to
77% of the pipeline of loans in process has funded. In addition, at August 31,
1997, the Company had committed to make loans in the amount of $1.2 billion,
subject to property identification and approval of the loans (the "LOCK `N
SHOP(R) Pipeline"). At August 31, 1996, the LOCK `N SHOP(R) Pipeline was $1.7
billion. For the quarters ended August 31, 1997 and 1996, the Company received
153,223 and 116,101 new loan applications, respectively, at an average daily
rate of $252 million and $185 million, respectively. 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 August 31, 1997 as
compared to the quarter ended August 31, 1996 due to higher loan production. The
percentage increase in loan origination fees was more than the percentage
increase in total production. This is primarily because production by the
Consumer Markets and Wholesale Lending Divisions (which, due to their cost
structures, charge higher origination fees per dollar loaned than the
Correspondent Division) comprised 59% of the total fundings during the quarter
ended August 31, 1997 compared to 41% during the quarter ended August 31, 1996.
Gain on sale of loans improved during the quarter ended August 31, 1997, as
compared to the quarter ended August 31, 1996 due in part to improved pricing
margins on prime credit first quality mortgages. The sales of home equity loans
contributed $16.1 million to the gain on sale of loans during the quarter ended
August 31, 1997. No such gain was recognized during the quarter ended August 31,
1996. Sub-prime loans contributed $18.2 million and $20.3 million to the gain on
sale of loans for the quarters ended August 31, 1997 and 1996, respectively. In
general, loan origination fees and gain (loss) on sale of loans are affected by
numerous factors including the volume and mix of loans produced and sold, loan
pricing decisions, interest rate volatility and the general direction of
interest rates.
Net interest income (interest earned net of interest charges) decreased to
$3.7 million for the quarter ended August 31, 1997 from $9.8 million for the
quarter ended August 31, 1996. Net interest income is principally a function of:
(i) net interest income earned from the Company's mortgage loan warehouse ($18.3
million and $15.6 million for the quarters ended August 31, 1997 and 1996,
respectively); (ii) interest expense related to the Company's investment in
servicing rights ($51.5 million and $34.4 million for the quarters ended August
31, 1997 and 1996, respectively) and (iii) interest income earned from the
custodial balances associated with the Company's servicing portfolio ($34.5
million and $27.8 million for the quarters ended August 31, 1997 and 1996,
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 primarily attributed to an increase in the
average amount of mortgage loan warehouse due to higher production. The increase
in interest expense related to the investment in servicing rights resulted
primarily from a larger servicing portfolio. The increase in net interest income
earned from the custodial balances was related to an increase in the average
custodial balances, from the quarter ended August 31, 1996 to the quarter ended
August 31, 1997.
During the quarter ended August 31, 1997, loan administration income was
positively affected by the continued growth of the loan servicing portfolio. At
August 31, 1997, the Company serviced $169 billion of loans (including $5.3
billion of loans subserviced for others), compared to $149 billion (including
$2.5 billion of loans subserviced for others) at August 31, 1996, a 14%
increase. The growth in the Company's servicing portfolio during the quarter
ended August 31, 1997 was the result of loan production volume and the
acquisition of bulk servicing rights, partially offset by prepayments, partial
prepayments and scheduled repayments of mortgage loans. The weighted average
interest rate of the mortgage loans in the Company's servicing portfolio was
7.8% at both August 31, 1997 and 1996. 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 August 31, 1997, the prepayment rate of the
Company's servicing portfolio was 13%, as compared to 9% for the quarter ended
August 31, 1996. In general, the prepayment rate is affected by the overall
level of refinance activity, which in turn is driven by the relative level of
mortgage interest rates and activity in the home purchase market.
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 that may result from increased
current and projected future prepayment activity, the Company acquires financial
instruments, including derivative contracts, that increase in aggregate 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"),
interest rate swaps ("Swaps"), options on interest rate swaps ("Swaptions"),
interest rate caps, principal-only ("P/O") swaps and certain tranches of
collateralized mortgage obligations ("CMOs").
With the Swap Caps, 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."
With Swaps, the Company receives and pays interest on a specified notional
amount. The rate received is fixed; the rate paid is adjustable and is indexed
to the London Interbank Offered Rates for U.S. dollar deposits ("LIBOR").
With Swaptions, 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 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.
The CMOs, which consist primarily of P/O securities, have been purchased at
deep discounts to their par values. As interest rates decrease, prepayments on
the collateral underlying the CMOs should increase. This 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. Conversely, as interest rates
increase, prepayments on the collateral underlying the CMOs should decrease.
This 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.
The Servicing Hedge instruments utilized by the Company are designed to
protect the value of the investment in mortgage servicing rights ("MSRs") 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 MSRs increases while the value of the hedge instruments declines. With
respect to the options, Swaptions, floors, caps 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 August 31,
1997, the Company estimates that its maximum exposure to loss over the
contractual term is $19.9 million. With respect to the Swap contracts entered
into by the Company as of August 31, 1997, the Company estimates that its
maximum exposure to loss over the contractual term is $57.0 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 August 31, 1997, the Company recognized a net benefit of $33.5
million from its Servicing Hedge. The net benefit included unrealized net gains
of $30.6 million and realized gains of $2.9 million from the premium
amortization and sale of various financial instruments that comprise the
Servicing Hedge. In the quarter ended August 31, 1996, the Company recognized a
net expense of $17.7 million from its Servicing Hedge. The net expense included
unrealized losses of $0.8 million and net realized losses of $16.9 million from
the premium amortization and sale of various financial instruments that comprise
the Servicing Hedge. There can be no assurance that the Servicing Hedge will
generate gains in the future, or if gains are generated, that they will fully
offset impairment of the MSRs.
The Company recorded amortization and net impairment of its MSRs in the
quarter ended August 31, 1997 totaling $105.4 million (consisting of normal
amortization amounting to $71.2 million and impairment of $34.2 million),
compared to $34.6 million of amortization and a net recovery (consisting of
normal amortization amounting to $51.3 million and a net recovery of $16.7
million) in the quarter ended August 31, 1996. The factors affecting the amount
of amortization and impairment or recovery of the MSRs recorded in an accounting
period include the level of prepayments during the period, the change in
estimated future prepayments and the amount of Servicing Hedge gains or losses.
During the quarter ended August 31, 1997, the Company acquired bulk
servicing rights for loans with principal balances aggregating $194 million at a
price of 1.16% of the aggregate outstanding principal balances of the servicing
portfolios acquired. During the quarter ended August 31, 1996, the Company
acquired bulk servicing rights for loans with principal balances aggregating $45
million at a price of 0.87% of the aggregate outstanding principal balances of
the servicing portfolios acquired.
<TABLE>
<CAPTION>
Salaries and related expenses are summarized below for the quarters ended
August 31, 1997 and 1996.
-- --------------------------- -- -- --------- ------------------------------------------------- -- --- --- -----
(Dollar amounts in Quarter Ended August 31, 1997
thousands)
-- --------- ------------------------------------------------- -- --- --- -----
-- --------------------------- --
Production Loan Corporate Other
Activities Administration Administration Activities Total
-- --------------------------- -- ------------ -- ------------- - ------------- -- ------------- -- -------------
<S> <C> <C> <C> <C> <C>
Base Salaries $31,601 $10,920 $17,169 $5,646 $65,336
Incentive Bonus 18,681 319 4,196 2,908 26,104
Payroll Taxes and Benefits 4,961 1,967 1,648 528 9,104
------------ ------------- ------------- ------------- -------------
Total Salaries and Related
Expenses $55,243 $13,206 $23,013 $9,082 $100,544
============ ============= ============= ============= -------------
Average Number of 3,093 1,619 1,369 422 6,504
Employees
-- --------------------------- -- ------------ -- ------------- - ------------- -- ------------- -- -------------
</TABLE>
<TABLE>
<CAPTION>
-- --------------------------- -- --- -------- ------------------------------------------------- ---- --- -- ----
(Dollar amounts in Quarter Ended August 31, 1996
thousands)
--- -------- ------------------------------------------------- ---- --- -- ----
-- --------------------------- --
Production Loan Corporate Other
Activities Administration Administration Activities Total
-- --------------------------- -- ------------ - -------------- - ------------- -- ------------- -- -------------
<S> <C> <C> <C> <C> <C>
Base Salaries $22,319 $10,269 $13,315 $3,117 $49,020
Incentive Bonus 6,306 191 3,852 1,599 11,948
Payroll Taxes and Benefits 3,337 1,752 1,574 360 7,023
------------ -------------- ------------- ------------- -------------
Total Salaries and Related
Expenses $31,962 $12,212 $18,741 $5,076 $67,991
============ ============== ============= ============= -------------
Average Number of 2,246 1,519 1,090 240 5,095
Employees
-- --------------------------- -- ------------ - -------------- - ------------- -- ------------- -- -------------
</TABLE>
The amount of salaries increased during the quarter ended August 31, 1997
from the quarter ended August 31, 1996 reflecting the Company's strategy of
expanding and enhancing its Consumer Markets and Wholesale branch networks,
including new retail sub-prime branches. In addition, a larger servicing
portfolio and growth in the Company's non-mortgage banking subsidiaries also
contributed to the increase. Incentive bonuses earned during the quarter ended
August 31, 1997 increased primarily due to higher production and a change in
production mix.
Occupancy and other office expenses for the quarter ended August 31, 1997
increased to $41.4 million from $31.4 million for the quarter ended August 31,
1996, reflecting the Company's goal of expanding its Consumer Markets and
Wholesale branch networks, including the new retail sub-prime branches. In
addition, a larger servicing portfolio and growth in the Company's non-mortgage
banking activities 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 August 31, 1997, guarantee fees increased 9% to $42.8 million from
$39.4 million for the quarter ended August 31, 1996. 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 August 31, 1997 increased 13% to
$10.3 million from $9.1 million for the quarter ended August 31, 1996,
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 August 31, 1997 increased
from the quarter ended August 31, 1996 by $9.7 million, or 47%. This increase
was due primarily to higher loan production, a larger servicing portfolio,
increased reserves for bad debts, increased systems development and growth in
the Company's non-mortgage banking subsidiaries.
Profitability of Loan Production and Servicing Activities
In the quarter ended August 31, 1997, the Company's pre-tax income from its
loan production activities (which include loan origination and purchases,
warehousing and sales) was $49.6 million. In the quarter ended August 31, 1996,
the Company's comparable pre-tax income was $33.8 million. The increase of $15.8
million was primarily attributable to increased loan production, positive trends
in the production mix and greater sale of higher-margin home equity. These
positive results were partially offset by higher production and overhead costs.
In the quarter ended August 31, 1997, 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 $60.6 million as compared to $63.7 million in the quarter ended
August 31, 1996. The decrease of $3.1 million from August 31, 1996 to August 31,
1997 was due primarily to increased amortization and increased interest cost
resulting from higher cost basis in the MSRs. This was partially offset by an
increase in servicing fees and miscellaneous revenue.
Profitability of Other Activities
In addition to loan production and loan servicing, the Company offers
ancillary products and services related to its mortgage banking activities.
These include title insurance and escrow services, home appraisals, credit
cards, securities brokerage and servicing rights brokerage. For the quarter
ended August 31, 1997, these activities contributed $12.3 million to the
Company's pre-tax income compared to $4.9 million for the quarter ended August
31, 1996.
During the quarter ended August 31, 1997, Countrywide Asset Management
Corporation, a subsidiary of the Company, was sold to INMC Mortgage Holdings,
Inc. (INMC), a publicly traded real estate investment trust for 3.44 million
shares of INMC stock. The impact of this sale on earnings was a $57.4 million
gain on sale recorded in the second quarter.
RESULTS OF OPERATIONS
Six Months Ended August 31, 1997 Compared to Six Months Ended August 31, 1996
Revenues from ongoing operations for the six months ended August 31, 1997
increased 25% to $666.4 million from $534.1 million for the six months ended
August 31, 1996. Net earnings from ongoing operations increased 15% to $142
million for the six months ended August 31, 1997 from $123.1 million for the six
months ended August 31, 1996. Both revenues and net earnings from ongoing
operations for the six months ended August 31, 1997 exclude a nonrecurring gain
of $57.4 million on the sale of a subsidiary. The increase in revenues and net
earnings for the six months ended August 31, 1997 compared to the six months
ended August 31, 1996 was primarily attributable to an increase in the size of
the Company's servicing portfolio, improved pricing margins on prime credit
quality first mortgages and greater sales of higher-margin home equity and
sub-prime loans. These positive factors were partially offset by increased
expenses in the six months ended August 31, 1997 from the six months ended
August 31, 1996 which is mainly attributable to the ongoing branch expansion
effort, which has resulted in 30 Consumer Markets, 9 Wholesale and 20 sub-prime
retail branches being opened over the last nine months.
The total volume of loans produced decreased 1% to $19.9 billion for the six
months ended August 31, 1997 from $20.2 billion for the six months ended August
31, 1996. Refinancings totaled $5.8 billion, or 29% of total fundings, for the
six months ended August 31, 1997, as compared to $6.7 billion, or 33% of total
fundings, for the six months ended August 31, 1996. Fixed-rate loan production
totaled $13.7 billion, or 69% of total fundings, for the six months ended August
31, 1997, as compared to $15.5 billion, or 77% of total fundings, for the six
months ended August 31, 1996.
Included in the Company's total volume of loans produced are $673 million of
home equity loans funded in the six months ended August 31, 1997 and $233
million funded in the six months ended August 31, 1996. Sub-prime credit quality
loan production, which is also included in the Company's total production
volume, was $670 million for the six months ended August 31, 1997 and $379
million during the six months ended August 31, 1996.
Total loan volume in the Company's production divisions is summarized below.
- -------------------------------------------- ----------------------------------
(Dollar amounts in millions) Six Months Ended August 31,
- -------------------------------------------- ----------------------------------
1997 1996
------------- -----------
Consumer Markets Division $ 5,372 $ 4,230
Wholesale Lending Division 5,831 3,923
Correspondent Lending Division 8,718 12,019
============= ===========
Total Loan Volume $ 19,921 $ 20,172
============= ===========
- -------------------------------------------- ------------- -------- -----------
Loan origination fees increased during the six months ended August 31, 1997
as compared to the six months ended August 31, 1996. This was primarily because
production by the Consumer Markets Division and the Wholesale Lending Division
(which, due to their cost structures, charge higher origination fees per dollar
loaned than the Correspondent Division), comprised a greater percentage of total
production in the six months ended August 31, 1997 than in the six months ended
August 31, 1996 as a result of the continuing expansion of these divisions. Gain
on sale of loans improved during the six months ended August 31, 1997 as
compared to the six months ended August 31, 1996 primarily due to greater sales
of higher margin home equity and sub-prime loans and improved pricing margins on
prime credit quality first mortgages.
Net interest income (interest earned net of interest charges) decreased to
$4.0 million for the six months ended August 31, 1997 from $21.6 million for the
six months ended August 31, 1996. Consolidated net interest income is
principally a function of: (i) net interest income earned from the Company's
mortgage loan warehouse ($32.1 million and $31.6 million for the six months
ended August 31, 1997 and 1996, respectively); (ii) interest expense related to
the Company's investment in servicing rights ($96.1 million and $70.1 million
for the six months ended August 31, 1997 and 1996, respectively) and (iii)
interest income earned from the custodial balances associated with the Company's
servicing portfolio ($64.1 million and $59.3 million for the six months ended
August 31, 1997 and 1996, respectively). The Company earns interest on, and
incurs interest expense to carry, mortgage loans held in its warehouse. The
increase in interest expense on the investment in servicing rights resulted
primarily from a larger servicing portfolio and an increase in 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
(caused by growth of the servicing portfolio), offset somewhat by a decrease in
the earnings rate, from the six months ended August 31, 1996 to the six months
ended August 31, 1997.
During the six months ended August 31, 1997, loan administration income was
positively affected by the continued growth of the loan servicing portfolio. The
growth in the Company's servicing portfolio during the six months ended August
31, 1997 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 prepayment rate of the Company's servicing portfolio was 12% for the
six months period ended August 31, 1997 and August 31,1996.
During the six months ended August 31, 1997, the Company recognized a net
expense of $11.3 million from its Servicing Hedge. The net expense included
unrealized losses of $8.7 million and net realized losses of $2.6 million from
the amortization and sale of various financial instruments that comprise the
Servicing Hedge. During the six months ended August 31, 1996, the Company
recognized a net expense of $118.2 million from its Servicing Hedge. The net
expense included unrealized losses of $88.3 million and net realized losses of
$29.9 million from the amortization and sale of various financial instruments
that comprise the Servicing Hedge.
The Company recorded amortization and net recovery of its MSRs in the six
months ended August 31, 1997 totaling $131.3 million (consisting of normal
amortization amounting to $136.9 million and net recovery of $5.6 million),
compared to amortization and net recovery of its MSRs of $13.7 million
(consisting of normal amortization amounting to $103.8 million and net recovery
of $117.5 million) in the six months ended August 31, 1996.
During the six months ended August 31, 1997, the Company acquired bulk
servicing rights for loans with principal balances aggregating $360 million at a
price of approximately 1.16% of the aggregate outstanding principal balance of
the servicing portfolios acquired. During the six months ended August 31, 1996,
the Company acquired bulk servicing rights for loans with principal balances
aggregating $1.1 billion at a price of approximately 1.76% of the aggregate
outstanding principal balance of the servicing portfolios acquired.
<TABLE>
<CAPTION>
Salaries and related expenses are summarized below for the six months ended
August 31, 1997 and 1996.
-- --------------------------- -- -- --------- ------------------------------------------------- -- --- --- -----
(Dollar amounts in Six Months Ended August 31, 1997
thousands)
-- --------- ------------------------------------------------- -- --- --- -----
-- --------------------------- --
Production Loan Corporate Other
Activities Administration Administration Activities Total
-- --------------------------- -- ------------ -- ------------- - ------------- -- ------------- -- -------------
<S> <C> <C> <C> <C> <C>
Base Salaries $ 60,164 $ 21,675 $ 33,226 $ 10,902 $ 125,967
Incentive Bonus 30,373 585 8,445 4,970 44,373
Payroll Taxes and Benefits 9,905 4,082 3,206 1,052 18,245
------------ ------------- ------------- ------------- -------------
Total Salaries and Related
Expenses $100,442 $ $ $ 16,924 $ 188,585
26,342 44,877
============ ============= ============= ============= -------------
Average Number of 2,972 1,621 1,330 408 6,331
Employees
-- --------------------------- -- ------------ -- ------------- - ------------- -- ------------- -- -------------
</TABLE>
<TABLE>
<CAPTION>
-- --------------------------- -- -- --------- ------------------------------------------------- -- --- --- -----
(Dollar amounts in Six Months Ended August 31, 1996
thousands)
-- --------- ------------------------------------------------- -- --- --- -----
-- --------------------------- --
Production Loan Corporate Other
Activities Administration Administration Activities Total
-- --------------------------- -- ------------ -- ------------- - ------------- -- ------------- -- -------------
<S> <C> <C> <C> <C> <C>
Base Salaries $43,151 $19,902 $25,442 $6,156 $ 94,651
Incentive Bonus 17,015 343 7,260 2,788 27,406
Payroll Taxes and Benefits 7,216 3,621 3,300 795 14,932
------------ ------------- ------------- ------------- -------------
Total Salaries and Related
Expenses $67,382 $23,866 $36,002 $9,739 $136,989
============ ============= ============= ============= -------------
Average Number of 2,175 1,490 1,047 246 4,958
Employees
-- --------------------------- -- ------------ -- ------------- - ------------- -- ------------- -- -------------
</TABLE>
The amount of salaries increased during the six months ended August 31, 1997
from the six months ended August 31, 1996 primarily due to an increased number
of employees resulting from expansion of the Consumer Markets and Wholesale
division branch networks, a larger servicing portfolio and growth in the
Company's non-mortgage banking activities. The increase in incentive bonuses was
due primarily to the increased Consumer Markets and Wholesale divisions
production.
Occupancy and other office expenses for the six months ended August 31, 1997
increased to $79.5 million from $61.3 million for the six months ended August
31, 1996, reflecting the Company's goal of expanding its Consumer Markets and
Wholesale branch networks. In addition, a larger servicing portfolio and growth
in the Company's non-mortgage banking activities also contributed to the
increase.
Guarantee fees for the six months ended August 31, 1997 increased 11% to
$85.4 million from $76.9 million for the six months ended August 31, 1996. This
increase resulted from an increase in the servicing portfolio, changes in the
mix of permanent investors and terms negotiated at the time of loan sales.
Marketing expenses for the six months ended August 31, 1997 increased 15% to
$20.6 million from $17.9 million for the six months ended August 31, 1996,
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 six months ended August 31, 1997 increased
from the six months ended August 31, 1996 by $15.9 million, or 41%. This
increase was due primarily to higher loan production, a larger servicing
portfolio, increased reserves for bad debts and increased systems development in
the six months ended August 31, 1997 than in the six months ended August 31,
1996.
Profitability of Loan Production and Servicing Activities
In the six months ended August 31, 1997, the Company's pre-tax income from
its loan production activities (which include loan origination and purchases,
warehousing and sales) was $95.3 million. In the six months ended August 31,
1996, the Company's comparable pre-tax income was $64.7 million. The increase of
$30.6 million was primarily attributable to a larger gain on sale of loans
resulting from the sale of higher margin sub-prime loans and home equity loans
and improved pricing margins on prime credit quality first mortgages. These
positive results were partially offset by higher production costs. In the six
months ended August 31, 1997, 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, acting as tax payment agent
and marketing foreclosed properties) was $120.3 million as compared to $126.4
million in the six months ended August 31, 1996. The decrease of $6.1 million
was principally due to increased amortization resulting from a higher cost basis
in the MSRs. This was partially offset by an increase in servicing fees and
miscellaneous revenues.
Profitability of Other Activities
Other ancillary products and services contributed $20.8 million to the
Company's pre-tax income in the six months ended August 31, 1997, compared to
$10.7 million during the six months ended August 31, 1996. This increase to
pre-tax income primarily results from improved performance of the title
insurance, escrow and Capital Markets businesses.
During the six months ended August 31, 1997, Countrywide Asset Management
Corporation, a subsidiary of the Company, was sold to INMC Mortgage Holdings,
Inc., (INMC) a publicly traded real estate investment trust for 3.44 million
shares of INMC stock. The impact of this sale on earnings was a $57.4 million
gain.
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 MSRs 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 MSRs, a decreased rate of interest earned from the custodial
balances and increased Interest Costs Incurred on Payoffs. The impacts of
changing interest rates on servicing-related earnings are reduced by performance
of the Servicing Hedge, which is designed to mitigate the impact on earnings of
higher amortization and impairment that may result from declining interest
rates.
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 partially offset such incremental expenses.
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 the revolving credit
facility, medium-term notes, MBS repurchase agreements, unsecured notes payable
subordinated notes, an optional cash purchase feature in the dividend
reinvestment plan, redeemable capital trust pass-through securities and cash
flow from operations. In the past, the Company has utilized whole loan
repurchase agreements, pre-sale funding facilities, servicing-secured bank
facilities, private placements of unsecured notes and other financings, direct
borrowings from the revolving credit facility and public offerings of preferred
stock.
Certain of the debt obligations of the Company and Countrywide Home Loans
Inc. ("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, 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.
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 June
1997, Countrywide Capital III, a statutory business trust and a subsidiary of
the Company, issued $200 million of 8.05% Company-obligated subordinated capital
income securities, the proceeds of which were used to purchase subordinated debt
securities from the Company. The Company plans to use the net proceeds from the
sale of the subordinated debt securities for general corporate purposes,
principally for investment in mortgage servicing rights.
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 six months ended August 31, 1997, the Company's
operating activities used cash of approximately $1.1 billion primarily to
increase its mortgage loans and MBS held for sale. These are generally financed
with short-term borrowings as discussed under "Financing Activities."
Investing Activities The primary investing activity for which cash was used
during the six months ended August 31, 1997 was the investment in servicing. Net
cash used by investing activities was $512 million and $565 million for the six
months ended August 31, 1997 and August 31, 1996, respectively.
Financing Activities Net cash provided by financing activities amounted to
$1.6 billion for the six months ended August 31, 1997 and net cash used by
financing activities amounted to $604 million for the six months ended August
31, 1996. The increase in cash flow from financing activities was primarily the
result of an increase in net short-term borrowings used to finance the increase
in mortgage loans and MBS held for sale as discussed under "Operating
Activities".
PROSPECTIVE TRENDS
Applications and Pipeline of Loans in Process
For the month ended September 30, 1997, the Company received new loan
applications at an average daily rate of $295 million compared to a daily
application rate for the month ended September 30, 1996 of $195 million. The
Company's pipeline of loans in process was $6.8 billion and $4.2 billion at
September 30, 1997 and 1996, respectively. 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
Pipeline at September 30, 1997 was $1.1 billion and at September 30, 1996 was
$1.8 billion. 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
Mortgage interest rates were generally lower during the quarter ended August
31, 1997 compared to the quarter ended August 31, 1996. Loan production
increased 15% from the quarter ended August 31, 1996 to the quarter ended August
31, 1997. The Company benefited from a relatively strong home purchase market
during the quarter ended August 31, 1997. In addition, sub-prime and home equity
loan fundings, which are generally less sensitive to interest rate fluctuations
than prime credit quality first mortgages, also increased from the quarter ended
August 31, 1996.
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, in all cases, been completed, or
through internal growth. The Company believes that 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 24% of its
total production during the six months ended August 31, 1997, down from 25% for
the six months ended August 31, 1996. The Company is continuing its efforts to
expand its production capacity outside of California. To the extent that
California's mortgage loan production constitutes a significant portion of the
Company's production, 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
4.25% at August 31, 1997 from 3.10% at August 31, 1996. 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 47% of the portfolio at August 31, 1996 to 49% at
August 31, 1997. In addition, the weighted average age of the portfolio was 29
months at August 31, 1997, up from 27 months at August 31, 1996. Delinquency
rates tend to increase as loans age, reaching a peak at three to five years of
age. However, 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 0.63% at August 31, 1997 from 0.53% at August 31,
1996. Generally, the Company is not exposed to credit risk other than as
discussed below. Because the Company services substantially all prime credit
quality loans on a non-recourse basis, foreclosure losses are generally the
responsibility of the investor or insurer and not the Company. The Company
retains credit risk on the home equity and sub-prime loans it sells in the form
of pools backing securities. As such, through retention of a subordinated
interest in the trust, the Company bears primary responsibility for credit
losses on the loans. At August 31, 1997, the Company had investments in such
subordinated interests amounting to $170 million, which represents the maximum
exposure to credit losses on the securitized home equity and sub-prime loans.
While the Company does not retain credit risk with respect to the prime credit
quality mortgage loans it sells, it does have potential liability under
representations and warranties made to purchasers and insurers of the loans. In
the event of a breach of the representations and warranties, the Company may be
required to repurchase a mortgage loan and any subsequent loss on the mortgage
loan may be borne by the Company. Similarly, government loans serviced by the
Company (27% of the Company's servicing portfolio at August 31, 1997) are
insured by the Federal Housing Administration or partially guaranteed against
loss by the Department of Veterans Administration. The Company is exposed to
credit losses to the extent that the partial guarantee provided by the
Department of Veterans Administration is inadequate to cover the total credit
losses incurred.
The Company's bad debt expense is primarily driven by the exposures
associated with foreclosure activity. Bad debt expense is included with other
operating expenses and amounted to $16.4 million for the six months ended August
31, 1997 and $11.8 million for the six months ended August 31, 1996.
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, the value of the Servicing Hedge
generally declines and the value of MSRs generally increases. There can be no
assurance that, in periods of increasing interest rates, the increase in value
of the MSRs 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 MSRs.
Implementation of New Accounting Standard
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, Earnings per Share, which
supersedes APB Opinion No. 15, of the same name. SFAS No. 128 simplifies the
standards for computing earnings per share ("EPS") and makes them comparable to
international standards. SFAS No. 128 is effective for financial statements
issued for periods ending after December 15, 1997, with earlier application not
permitted. Upon adoption, all prior EPS data will be restated.
<TABLE>
<CAPTION>
The following tables present basic and diluted EPS for the three months and six
months ended August 31, 1997 and 1996, computed under the provisions of SFAS No.
128.
- ------------------------ -- -- ----- ------------------------------------ -- ----- ----
Three Months Ended August 31,
-- -- ----- ------------------------------------ -- ----- ----
1997 1996
--------- --------- --------- ---------- --------- ---------
(Dollar amounts in
thousands, except per Net Per-Share Net Per-Share
share data) Earnings Shares Amount Earnings Shares Amount
- ------------------------ -------- --------- --------- --------- --------- ---------
Net earnings $109,729 $62,497
========= ==========
Basic EPS
Net earnings available
<S> <C> <C> <C> <C> <C> <C>
to common shareholders $109,729 107,052 $1.03 $62,497 102,551 $0.61
Effect of dilutive
stock options - 4,271 - 2,193
--------- --------- ---------- ---------
Diluted EPS
Net earnings available
to common shareholders $109,729 111,323 $0.98 $62,497 104,744 $0.60
========= ========= ========= ========== ========= ---------
- ------------------------ --------- --------- --------- - ---------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------ -- -- ----- ------------------------------------ -- ----- ----
Six Months Ended August 31,
-- -- ----- ------------------------------------ -- ----- ----
1997 1996
--------- --------- --------- ---------- --------- ---------
(Dollar amounts in
thousands, except per Net Per-Share Net Per-Share
share data) Earnings Shares Amount Earnings Shares Amount
- ------------------------ --------- --------- --------- ---------- --------- ---------
Net earnings $179,698 $123,121
========= ==========
Basic EPS
Net earnings available
<S> <C> <C> <C> <C> <C> <C>
to common shareholders $179,698 106,655 $1.69 $123,121 102,433 $1.20
Effect of dilutive
stock options - 3,588 - 2,028
--------- --------- ---------- ---------
Diluted EPS
Net earnings available
to common shareholders $179,698 110,243 $1.63 $123,121 104,461 $1.18
========= ========= ========= ========== ========= ---------
</TABLE>
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
\pnf4
10.8 Revolving Credit Agreement dated as of the 24th day of September,
1997, 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 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
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
COUNTRYWIDE CREDIT INDUSTRIES, INC.
(Registrant)
DATE: October 14, 1997 /s/ Stanford L. Kurland
-------------------------------------
Senior Managing Director and
Chief Operating Officer
DATE: October 14, 1997 /s/ Carlos M. Garcia
-------------------------------------
Managing Director; Chief Financial
Officer and Chief Accounting Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit Number Document Description
10.7 Revolving Credit Agreement dated as of the 24th day of September,
1997, 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 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).
<PAGE>
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (the "Agreement") is made and
dated as of the 24th day of September, 1997, 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, 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
A. Pursuant to that certain Revolving Credit Agreement dated
as of May 20, 1996 among certain of the Lenders, the Credit Agent, the Company
and others (as amended and extended from time to time to date, the "Existing
Agreement"), certain of the Lenders agreed to extend credit to the Company on
the terms and subject to the conditions set forth more particularly therein.
B. The current parties to the Existing Agreement desire to
terminate the Existing Agreement and replace the credit facility evidenced
thereby with this Agreement.
NOW, THEREFORE, in consideration of the above Recitals and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
AGREEMENT
1. Credit Facilities.
1(a) Multi-Year Facility. On the terms and subject to the conditions set
forth herein, the Multi-Year Lenders (as such term and capitalized terms not
otherwise defined herein are defined in the Glossary attached hereto as Annex I)
severally agree that they shall, from time to time to but not including the
Multi-Year Facility Maturity Date, directly, or indirectly by purchase from a
Multi-Year Balance Bank, advance their Multi-Year Facility Percentage Share of
loans (the "Multi-Year Loans" or a "Multi-Year Loan") to the Company in amounts
such that:
(1) The aggregate amount of Multi-Year Loans outstanding does not exceed at
any date the lesser of:
(i) The Multi-Year Facility Credit Limit minus the aggregate dollar amount
of Multi-Year Swing Loans outstanding; and
(ii) The Aggregate Credit Limit minus the sum of: a. Loans (other than
Multi-Year Loans) outstanding, b. the GNMA Pool Advance Commitment, c.
Outstanding CPNs, and d. outstanding Funding Checks; and
(2) The aggregate dollar amount of each Multi-Year Lender's Multi-Year
Facility Percentage Share of Multi-Year Loans and Multi-Year Swing Loans
outstanding does not exceed such Multi-Year Lender's Maximum Multi-Year Facility
Commitment.
In calculating the availability of Multi-Year Loans on any date, Loans
outstanding, including, without limitation, Multi-Year Swing Loans, and
Outstanding CPNs shall include all Loans and Outstanding CPNs to be funded or
issued on such date and shall exclude any of such items which will be repaid on
such date. The Company may request that Multi-Year Loans be made, at the
election of the Company as set forth on the related Loan Request, Interest Rate
Election and Payoff Notice:
(y) By the Multi-Year 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 Event and, thereafter, on a Discount Loan Funding Date; and, provided,
further, that as a condition precedent to the Company's right to request any
Multi-Year 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 Multi-Year Balance Bank and each of the
Multi-Year Lenders); and/or
(z) By the Multi-Year Lenders in the form of Direct Loans on any Business
Day.
1(b) Short Term Facility. On the terms and subject to the conditions set
forth herein, the Short Term Lenders severally agree that they shall, from time
to time to but not including the Short Term Facility Maturity Date, directly, or
indirectly by purchase from a Short Term Balance Bank, advance their Short Term
Loan Percentage Share of loans (the "Short Term Loans" or a "Short Term Loan")
to the Company in amounts such that:
(1) The aggregate amount of Short Term Loans outstanding does not exceed at
any date the lesser of:
(i) The Short Term Facility Credit Limit minus the aggregate dollar amount
of Short Term Swing Loans outstanding; and
(ii) The Aggregate Credit Limit minus the sum of: a. Loans (other than
Short Term Loans) outstanding, b. the GNMA Pool Advance Commitment, c.
Outstanding CPNs, and d. outstanding Funding Checks; and
(2) The aggregate dollar amount of each Short Term Lender's Short Term
Facility Percentage Share of Short Term Loans and Short Term Swing Loans
outstanding does not exceed such Short Term Lender's Maximum Short Term Facility
Commitment.
In calculating the availability of Short Term Loans on any date, Loans
outstanding, including, without limitation, Short Term Swing Loans, and
Outstanding CPNs shall include all Loans and Outstanding CPNs to be funded or
issued on such date and shall exclude any of such items which will be repaid on
such date. The Company may request that Short Term Loans be made, at the
election of the Company as set forth on the related Loan Request, Interest Rate
Election and Payoff Notice:
(y) By the Short Term 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, on a Discount Loan Funding Date; and, provided,
further, that as a condition precedent to the Company's right to request any
Short Term 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 Short Term Balance Bank and each of the
Lenders); and/or
(z) By the Short Term Lenders in the form of Direct Loans on any Business
Day.
1(c) Negotiated Loan Facility. On the terms and subject to the conditions
set forth herein, any Lender may from time to time 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 Multi-Year Facility Maturity Date if such Lender is a
Multi-Year Lender or if such Lender is not a Multi-Year Lender, the Short Term
Facility 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: (1) the Aggregate Credit Limit, minus (2) the sum of: (i) Loans
(other than Negotiated Loans) outstanding, (ii) the GNMA Pool Advance
Commitment, (iii) Outstanding CPNs, and (iv) outstanding Funding Checks. In
calculating the availability of Negotiated Loans on any date, Loans outstanding
and Outstanding CPNs shall include all Loans and Outstanding CPNs to be funded
or issued on such date and to exclude any of such items which will be repaid 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 Multi-Year Loans
and/or Short Term Loans, as applicable, to the extent of such Lender's Maximum
Multi-Year Facility Commitment and/or Maximum Short Term Facility 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
Multi-Year Facility Commitment and/or Maximum Short Term Facility Commitment, as
applicable.
1(d) Swing Loan Facilities. On the terms and subject to the conditions set
forth herein:
(1) Each of the Multi-Year Swing Line Lenders agrees that it shall, from
time to time to but not including the Multi-Year Facility Maturity Date, advance
its Multi-Year Swing Line Percentage Share of loans (the "Multi-Year Swing
Loans" or a "Multi-Year Swing Loan") to the Company in amounts such that the
aggregate amount of Multi-Year Swing Loans outstanding does not exceed at any
date the least of:
(i) The Aggregate Multi-Year Swing Line Commitment;
(ii) The Multi-Year Facility Credit Limit minus the sum of Multi-Year Loans
outstanding; and
(iii) The Aggregate Credit Limit minus the sum of: a. Loans (other than
Multi-Year Swing Loans) outstanding, b. the GNMA Pool Advance Commitment, c.
Outstanding CPNs, and d. outstanding Funding Checks.
In calculating the availability of Multi-Year Swing Loans on any date,
Loans outstanding and Outstanding CPNs shall include all Loans and
Outstanding CPNs to be funded or issued on such date and shall exclude
any of such items which will be repaid on such date. At the request of
any Multi-Year 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 Multi-Year Lender
(including each of the Multi-Year Swing Line Lenders) absolutely and
unconditionally agrees to refund Multi-Year Swing Loans held by the
Multi-Year Swing Line Lenders by advancing its Multi-Year Facility
Percentage Share thereof to the Credit Agent for disbursement to the
Multi-Year Swing Line Lenders pro rata, in accordance with their
respective Multi-Year 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 Multi-Year
Lenders hereunder for the purpose of refunding Multi-Year Swing Loans
shall, for all purposes of the Credit Documents: (y) constitute
Multi-Year Loans to the extent of such Lender's Multi-Year Facility
Percentage Share thereof, and (z) be advanced as Alternate Base Rate
Loans. In the event, for whatever reason, the Multi-Year Lenders are
not able to advance their respective Multi-Year Facility Percentage
Shares for the purpose of refunding Multi-Year Swing Loans as required
hereunder, then each of the Multi-Year Lenders (including each of the
Multi-Year Swing Line Lenders) absolutely and unconditionally agrees to
purchase and take from the Multi-Year Swing Line Lenders on demand an
undivided participation interest in Multi-Year Swing Loans outstanding
in an amount equal to their respective Multi-Year Facility Percentage
Shares of such Multi-Year Swing Loans. Notwithstanding anything
contained herein, in no event shall any Multi-Year Lender be required
to advance its Multi-Year Percentage Share of any Multi-Year Swing Loan
or to purchase any undivided participation interest in any Multi-Year
Swing Loan: a. unless such Multi-Year Swing Loan was initially made in
accordance with the requirements of this Agreement (as such
requirements may be amended or waived from time to time as permitted
hereunder) or b. if upon such advance or purchase the aggregate dollar
amount of Multi-Year Loans and Multi-Year Swing Loans held by such
Multi-Year Lender would exceed such Multi-Year Lender's Maximum
Multi-Year Facility Commitment.
(2) Each of the Short Term Swing Line Lenders agrees that it shall, from
time to time to but not including the Short Term Facility Maturity Date, advance
its Short Term Swing Line Percentage Share of loans (the "Short Term Swing
Loans" or a "Short Term Swing Loan") to the Company in amounts such that the
aggregate amount of Short Term Swing Loans outstanding does not exceed at any
date the least of:
(i) The Aggregate Short Term Swing Line Commitment;
(ii) The Short Term Facility Credit Limit minus the sum of Short Term Loans
outstanding; and
(iii) The Aggregate Credit Limit minus the sum of: a. Loans (other than
Short Term Swing Loans) outstanding, b. the GNMA Pool Advance Commitment, c.
Outstanding CPNs, and d. outstanding Funding Checks.
In calculating the availability of Short Term Swing Loans on any date,
Loans outstanding and Outstanding CPNs shall include all Loans and
Outstanding CPNs to be funded or issued on such date and shall exclude
any of such items which will be repaid on such date. At the request of
any Short Term 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 Short Term Lender
(including each of the Short Term Swing Line Lenders) absolutely and
unconditionally agrees to refund Short Term Swing Loans held by the
Short Term Swing Line Lenders by advancing its Short Term Facility
Percentage Share thereof to the Credit Agent for disbursement to the
Short Term Swing Line Lenders pro rata, in accordance with their
respective Short Term 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 Short Term
Lenders hereunder for the purpose of refunding Short Term Swing Loans
shall, for all purposes of the Credit Documents: (y) constitute Short
Term Loans to the extent of such Lender's Short Term Facility
Percentage Share thereof, and (z) be advanced as Alternate Base Rate
Loans. In the event, for whatever reason, the Short Term Lenders are
not able to advance their respective Short Term Facility Percentage
Shares for the purpose of refunding Short Term Swing Loans as required
hereunder, then each of the Short Term Lenders (including each of the
Short Term Swing Line Lenders) absolutely and unconditionally agrees to
purchase and take from the Short Term Swing Line Lenders on demand an
undivided participation interest in Short Term Swing Loans outstanding
in an amount equal to their respective Short Term Facility Percentage
Shares of such Short Term Swing Loans. Notwithstanding anything
contained herein, in no event shall any Short Term Lender be required
to advance its Short Term Percentage Share of any Short Term Swing Loan
or to purchase any undivided participation interest in any Short Term
Swing Loan: a. unless such Short Term Swing Loan was initially made in
accordance with the requirements of this Agreement (as such
requirements may be amended or waived from time to time as permitted
hereunder) or b. if upon such advance or purchase the aggregate dollar
amount of Short Term Loans and Short Term Swing Loans held by such
Short Term Lender would exceed such Short Term Lender's Maximum Short
Term Facility Commitment.
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 Multi-Year
Facility 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; Funding.
2(a) Requests for Credit Events. 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, it shall deliver a Loan Request, Interest Rate Election and Payoff Notice
to the Credit Agent no later than: (1) in the case of Multi-Year Loans, Short
Term Loans and GNMA Pool Advance Loans, 10:00 a.m. (Los Angeles time) on such
date; (2) in the case of Negotiated Loans, 12:00 noon (Los Angeles time) on such
date; and (3) in the case of Swing Loans, 11:00 a.m. (Los Angeles time) on such
date; provided, however, that in the event the Credit Agent receives a request
for a Multi-Year Swing Loan or a Short Term Swing Loan after 11:00 a.m. (Los
Angeles time) on a Business Day, the Credit Agent shall work with the Multi-Year
Swing Line Lenders and the Short Term Swing Lenders, as applicable, on a best
efforts basis with a view toward funding the requested Multi-Year Swing Loans or
Short Term Swing Loans no later than 1:00 p.m. (Los Angeles time) on such date,
the Company expressly acknowledging and agreeing that there is no assurance that
any such funding can be provided. Said Loan Request, Interest Rate Election and
Payoff Notice shall, as applicable, identify the Lender which has agreed to fund
any Negotiated Loan. 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 shall be submitted to the Credit Agent on any date. Any
request for Multi-Year Loans or Short Term Loans shall be in such amount that
the aggregate dollar amount of Multi-Year Loans or Short Term Loans, as
applicable, which the Lenders are required to actually newly fund with respect
thereto is not less than $5,000,000.00, and any request for Multi-Year Swing
Loans or Short Term Swing Loans shall be in an amount not less than
$1,000,000.00. 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(b) 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 as follows:
(1) Each Balance Bank shall make Discount Loans net of the applicable
Balance Bank Discount, each Lender shall make its Multi-Year Facility Percentage
Share of Multi-Year Loans which are Direct Loans or Short Term Facility
Percentage Share of Short Term Facility Loans which are 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;
(2) 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
(3) Each Multi-Year Swing Line Lender and each Short Term Swing Lender
shall make its Multi-Year Swing Line Percentage Share or Short Term Swing Line
Percentage Share of each Multi-Year Swing Loan or Short Term Swing Loan, as
applicable, 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(c) Sale and Assignment of Discount Loans by Balance Banks. Simultaneously
with the making of a Multi-Year Loan as a Discount Loan by a Multi-Year Balance
Bank on a Discount Loan Funding Date, or the making of a Short Term Loan as a
Discount Loan by a Short Term Balance Bank on a Discount Loan Funding Date, such
Balance Bank agrees to sell and assign, and does hereby sell and assign, to each
Multi-Year Lender or Short Term Lender, as applicable (including such Balance
Bank in its capacity as a Lender), and each Lender irrevocably agrees to
purchase and acquire, its Multi-Year Facility Percentage Share or Short Term
Facility Percentage Share, as applicable, of such Discount Loan for a purchase
price equal to such Lender's Multi-Year Facility Percentage Share or Short Term
Facility Percentage Share, as applicable, 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 as provided
herein. The Company and the Credit Agent shall deem and treat each Lender as the
creditor in respect of its Multi-Year Facility Percentage Share or Short Term
Facility Percentage Share, as applicable, 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 Multi-Year Facility Percentage Share or Short Term Facility
Percentage Share, as applicable.
2(d) Funding. Each Lender shall be entitled to fund all or any portion of
its Multi-Year Facility Percentage Share of Multi-Year Loans, its Short Term
Facility Percentage Share of Short Term Loans, its Negotiated Loans, its
Multi-Year Swing Line Percentage Share of Multi-Year Swing Loans, its Short Term
Swing Line Percentage Share of Short Term 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; Prepayments.
3(a) Required Principal Payments. Subject to the provisions of Paragraph
3(b) below, the Company shall pay: (1) 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, the
unpaid principal balance of each Multi-Year Loan which is an Alternate Base Rate
Loan and each Multi-Year Swing Loan on the Multi-Year Facility Maturity Date and
the unpaid principal balance of each Short Term Loan which is an Alternate Base
Rate Loan and each Short Term Swing Loan on the Short Term Facility Maturity
Date; and (2) to the Lender or Lenders making Negotiated Loans and the GNMA Pool
Advance Lender, 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: (i) the thirtieth day following the date advanced and (ii) the Multi-Year
Facility Maturity Date. The Company shall give notice to the Credit Agent of any
payment under subparagraph (2) above on the date such payment is made.
3(b) Prepayments. The Company:
(1) 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) Shall pay in connection with any prepayment hereunder any amount
payable on account thereof pursuant to Paragraph 4(h) below concurrently with
such prepayment.
4. Calculation and Payment of Interest; Related Provisions.
4(a) Interest on Direct Loans.
(1) The Company shall pay interest to each Multi-Year Lender on such
Multi-Year Lender's Multi-Year Facility Percentage Share of Multi-Year Loans
outstanding as Direct Loans and shall pay interest to each Short Term Lender on
such Short Term Lender's Short Term Facility Percentage Share of Short Term
Loans outstanding as Direct Loans 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. Direct Loans bearing
interest at the Alternate Base Rate shall be referred to herein as "Alternate
Base Rate Loans"; and 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 Eurodollar Interest Period. The Company may elect
from time to time to convert Direct Loans from Alternate Base Rate Loans to
Eurodollar Loans or to have Direct Loans funded as Eurodollar Loans by giving
the Credit Agent at least three Eurodollar Business Days' prior irrevocable
notice of such election by delivery of a duly executed Loan Request, Interest
Rate Election and Payoff Notice. Upon receipt of any such notice, the Credit
Agent shall promptly notify each of the Lenders affected thereby thereof. No
Direct Loan shall be funded as or converted into a Eurodollar Loan if an Event
of Default or Potential Default has occurred and is continuing on the day
occurring two Business Days prior to the date of the funding or conversion
requested by the Company.
(3) Any Eurodollar Loan may be continued as such upon the expiration of the
Interest Period applicable thereto by giving the Credit Agent (which shall
notify the Lenders) at least three Eurodollar Business Days' prior irrevocable
notice of such election as set forth on a duly executed Loan Request, Interest
Rate Election and Payoff Notice; provided, however, that no Eurodollar Loan may
be continued as such when any Event of Default or Potential Default has occurred
and is continuing, but shall be automatically converted to an Alternate Base
Rate Loan on the last day of the then current Interest Period applicable
thereto. The Credit Agent shall notify the Lenders and the Company promptly that
such automatic conversion will occur. If the Company shall fail to give notice
as provided above, the Company shall be deemed to have elected to convert the
affected Eurodollar Loan to an Alternate Base Rate Loan on the last day of the
Interest Period applicable thereto.
(4) The Credit Agent shall give prompt written notice (or notice by
telephone immediately confirmed in writing) to the Company and the Lenders of
the applicable interest rate determined by the Credit Agent.
(5) Under no circumstances shall the Lenders be required to make or
maintain Eurodollar Loans under this Agreement with more than an aggregate
number of eight (8) different Interest Periods.
4(b) Interest on Discount Loans. Since Discount Loans will be funded by the
Balance Banks net of the applicable Balance Bank Discount, no additional
interest shall be payable thereon prior to the maturity date thereof.
4(c) Interest on Negotiated Loans. The Company shall pay interest to any
Lender making a Negotiated Loan from the date advanced to but not including the
date of payment calculated at the Negotiated Loan Interest Rate applicable
thereto.
4(d) Interest on Swing Loans. The Company shall pay interest to each
Multi-Year Swing Line Lender on such Multi-Year Swing Line Lender's Multi-Year
Swing Line Percentage Share of Multi-Year Swing Loans and each Short Term Swing
Line Lender on such Short Term Swing Line Lender's Short Term Swing Line
Percentage Share of Short Term Swing Loans outstanding, as applicable, 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. 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) Payment of Interest. The Company shall pay interest, in each case as
more specifically provided in Paragraph 5(d) below:
(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; and
(2) On Eurodollar Loans and Negotiated Loans on the last day of the
applicable Interest Period relating thereto.
4(g) 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 Multi-Year
Loan or Short Term 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 Multi-Year Loan or a Short Term 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(h) Funding Indemnification. In addition to all other payment obligations
hereunder, in the event: (1) any Multi-Year Loan or Short Term 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 acceleration
upon the occurrence of an Event of Default 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 Multi-Year Loan or Short Term 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 affected 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 the 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(i) 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 Multi-Year Facility Percentage Share or Short
Term Facility Percentage Share of Discount Loans: (1) the commitment of such
Lender hereunder to purchase its Multi-Year Facility Percentage Share or Short
Term Facility Percentage Share of Discount Loans or to make, continue or convert
into Eurodollar Loans, as applicable, shall forthwith be cancelled and (2) such
Lender's Multi-Year Facility Percentage Share or Short Term Facility Percentage
Share, as applicable, of 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
Multi-Year Facility Percentage Share or Short Term Facility Percentage Share, as
applicable, 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(h) 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(j) 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 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 or a GNMA Pool
Advance Loan; 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 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(j), 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(j) shall survive the termination of this Agreement and the payment
of all other Obligations.
4(k) 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(k)(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(l) 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 prior to the occurrence of
an Event of Default and acceleration of the Obligations, and through the Credit
Agent thereafter, 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.
4(m) Obligation of Lenders to Mitigate; Replacement of Lenders. Each Lender
agrees that:
(1) As promptly as practicable after the officer of such Lender responsible
for administering the Loans of such Lender becomes aware of any event or
condition that would entitle such Lender to receive payments under Paragraph
4(j) above or to cease making Eurodollar Loans or to cease purchasing its
Multi-Year Facility Percentage Share or Short Term Facility Percentage Share of
Discount Loans pursuant to Paragraph 4(i) above, such Lender will use reasonable
efforts (i) to make, issue, fund or maintain the affected Loans of such Lender
through another lending office of such Lender or (ii) take such other measures
as such Lender may deem reasonable, if as a result thereof the additional
amounts which would otherwise be required to be paid to such Lender pursuant to
Paragraph 4(j) above would be materially reduced or eliminated or the conditions
rendering such Lender incapable of making Eurodollar Loans or purchasing its
Multi-Year Facility Percentage Share or Short Term Facility Percentage Share of
Discount Loans under Paragraph 4(i) above no longer would be applicable, and if,
as determined by such Lender in its sole discretion, the making, issuing,
funding or maintaining or purchasing of such Loans through such other lending
office or in accordance with such other measures, as the case may be, would not
otherwise materially adversely affect such Loans or the interests of such
Lender.
(2) If the Company receives a notice pursuant to Paragraph 4(j) above or a
notice pursuant to Paragraph 4(i) above stating that a Lender is unable to
extend Eurodollar Loans or purchase its Multi-Year Facility Percentage Share or
Short Term Facility Percentage Share of Discount Loans (for reasons not
generally applicable to the Majority Lenders), so long as (i) no Potential
Default or Event of Default shall have occurred and be continuing, (ii) the
Company has obtained a commitment from another Lender or another financial
institution reasonably acceptable to the Credit Agent to purchase at par such
Lender's Loans, Maximum Multi-Year Facility Commitment and Maximum Short Term
Facility Commitment, accrued interest and fees and to assume all obligations of
the Lender to be replaced under the Credit Documents, and (iii) such Lender to
be replaced is unwilling to withdraw the notice delivered to the Company, upon
thirty (30) days' prior written notice to such Lender and the Credit Agent and
payment of any amounts due under Paragraph 4(j) above, the Company may require,
at the Company's expense and subject to Paragraph 4(h) above, the Lender giving
such notice to assign, without recourse, all of its Loans, Maximum Multi-Year
Facility Commitment, Maximum Short Term Facility Commitment, accrued interest
and fees to such other Lender or financial institution pursuant to the
provisions of Paragraph 14 below.
5. Miscellaneous Lending Provisions.
5(a) Use of Proceeds. The proceeds of Loans shall be utilized by the
Company solely for the purpose of originating and/or acquiring Mortgage
Loans, to repay Indebtedness of the Company (including Indebtedness of the
Company to the Parent permitted to be repaid by the Company to the Parent
pursuant to the terms of the Credit Documents and including CPNs) and for
other general corporate purposes. The proceeds of the GNMA Pool Advance
Loans shall be used solely for the purpose of fulfilling the Company's
obligations to GNMA as described in the GNMA Pool Advance Agreement.
5(b) Assumption of Funding/Purchase. The Credit Agent may (but shall
not be obligated to) assume that each Multi-Year Lender has advanced its
Multi-Year Facility Percentage Share of Multi-Year Loans, that each Short
Term Lender has advanced its Short Term Facility Percentage Share of Short
Term Loans and that each Lender has advanced other Loans required to be
funded by such Lender hereunder and that the GNMA Pool Advance Lender has
advanced such GNMA Pool Advance Loans as are to be advanced by it 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 Multi-Year Facility Percentage Share or Short Term Facility
Percentage Share, as applicable, of the subject Loan or, as applicable, the
other subject Loans or the subject GNMA Pool Advance Loans for all purposes
of the Credit Documents. Nothing contained herein shall affect the
liability of any Lender for its failure to make its Multi-Year Facility
Percentage Share of Multi-Year Loans or its Short Term Facility Percentage
Share of Short Term Loans or its other Loans or GNMA Pool Advance Loans
available to the Company as required pursuant to this Agreement and the
other Credit Documents.
5(c) Evidence of Indebtedness. The obligation of the Company to repay
Loans and GNMA Pool Advance Loans shall be evidenced by notations on the
books and records of the Credit Agent and the Lenders. Such accounts shall
be conclusive absent manifest error. Any failure to record the advance of
any Loan or GNMA Pool Advance Loan, the interest rate applicable thereto or
any other information regarding the Obligations, or any error in doing so,
shall not limit or otherwise affect the obligation of the Company with
respect to any of the Obligations. Upon the request of any Lender, the
Company shall promptly execute a promissory note or promissory notes in
favor of such Lender evidencing the Obligations held by such Lender
hereunder.
5(d) Interest and Fee Billing and Payment. The Credit Agent shall:
(1) On or before the first Business Day of each month notify the
Company (which notification may be telephonic) of the estimated amount of
interest payable with respect to Alternate Base Rate Loans 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;
(
2) 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;
(3) On or before the first Business Day of the first month of each
calendar quarter notify the Company (which notification may be telephonic)
of the amount of facility fees payable pursuant to the Fee Letters on the
fifth day of such month for the period from and including the first day of
the first month of the immediately preceding calendar quarter to and
including the last day of such calendar quarter, with the actual amount
confirmed by notification by the Credit Agent to the Company (which
notification may be telephonic and which, if telephonic, shall be promptly
confirmed in writing) given no later than 9:00 a.m. (Los Angeles time) on
the due date of payment thereof; and
(4) From time to time upon the request of any Lender, deliver to the
Company a funding indemnification billing for amounts payable to such
Lender pursuant to Paragraph 4(h) above or a billing for amounts payable to
such Lender pursuant to Paragraphs 4(j), 4(k) and 4(l) above and Paragraph
5(l) below.
The Company shall pay the full amount of interest and fees of which it
has been notified pursuant to subparagraphs (1) and (3) above on the fifth
day of each month, shall pay the full amount of interest of which it has
been notified pursuant to subparagraph (2) above on the date such
notification is given and shall pay the full amount of each billing
delivered to it pursuant to subparagraph (4) above within five Business
Days thereafter. Interest payable with respect to GNMA Pool Advance Loans
prior to the occurrence of an Event of Default and acceleration of the
Obligations shall be billed to the Company directly by the GNMA Pool
Advance Lender in accordance with the timeframes set forth in subparagraph
(1) 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 prior to the
occurrence of an Event of Default and acceleration of the Obligations 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. Following the
occurrence of an Event of Default and acceleration of the Obligations,
interest payable on Loans and GNMA Pool Advance Loans shall be billed
through the Credit Agent.
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, subject to Paragraph
5(h) below, direct pursuant to a Loan Request, Interest Rate Election and
Payoff Notice, 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. Following the occurrence of an Event of
Default and until such Event of Default is cured or waived as provided
herein, Obligations shall bear interest at a per annum rate equal to the
Alternate Base Rate plus three percent (3%).
5(g) Computations. All computations of interest and fees payable
hereunder and under the Fee Letters 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.
(1) 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 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.
(2) Prior to the occurrence of an Event of Default and acceleration of
the Obligations, 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 requirements that amounts disbursed to the
Multi-Year Lenders on account of Multi-Year Loans be disbursed pro rata in
accordance with the Multi-Year Lenders' respective Multi-Year Facility
Percentage Shares, that amounts disbursed to the Multi-Year Swing Line
Lenders on account of Multi-Year Swing Loans be disbursed pro rata in
accordance with the Multi-Year Swing Line Lenders' respective Multi-Year
Swing Line Percentage Shares, that amounts disbursed to the Short Term
Lenders on account of Short Term Loans be disbursed pro rata in accordance
with the Short Term Lenders' respective Short Term Facility Percentage
Shares and that amounts disbursed to the Short Term Swing Line Lenders on
account of Short Term Swing Loans be disbursed pro rata in accordance with
the Short Term Swing Line Lenders' respective Short Term Swing Line
Percentage Shares.
(3) Following the occurrence of an Event of Default and acceleration
of the Obligations, amounts received by the Credit Agent on account of the
Obligations shall be disbursed as follows: (i) first among the Lenders, pro
rata in accordance with their respective Aggregate Percentage Shares, on
account of the Obligations until the Obligations have been paid in full,
and (ii) then, to the Credit Agent with respect to the remaining
Obligations held by it in its capacity as Credit Agent until such
Obligations have been paid in full.
5(i) Fees. The Company shall pay:
(1) To the Credit Agent, such fees as may from time to time be agreed
upon in writing by the Credit Agent and the Company;
(2) To each of the Multi-Year Lenders, the facility fees described in
the Multi-Year Facility Fee Letter and to each of the Short Term Lenders,
the facility fees described in the Short Term Facility Fee Letter;
(3) To each of the Balance Banks, the additional fees described in the
Balance Bank Agreements; and
(4) To the GNMA Pool Advance Lender, fees on account of the GNMA Pool
Advance Commitment in such amounts and at such times as may be established
in writing from time to time by the Company and the GNMA Pool Advance
Lender.
5(j) Wire Transfers of Funds. Notwithstanding anything to the contrary
contained herein and in the other Credit Documents, funds which the Credit
Agent and the Lenders are transmitting by wire transfer shall be deemed to
have been sent and received upon release by the transmitting party of such
funds into the Federal Reserve Wire System.
5(k) Reduction in Aggregate Credit Limit. Upon not less than thirty
(30) days' prior written notice to the Credit Agent, which shall promptly
transmit such notice to each of the Lenders, the Company may permanently
reduce the Aggregate Credit Limit in full or in 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 GNMA Pool Advance Commitment, Outstanding CPNs and
outstanding Funding Checks shall not exceed the Aggregate Credit Limit as
so reduced.
5(l) Capital Requirements. The Company shall pay from time to time
upon demand such amounts as any Lender may determine to be necessary to
compensate such Lender for all reasonable costs which such Lender
determines are attributable to its making, agreeing to make, purchasing or
maintaining its Multi-Year Facility Percentage Share of any Multi-Year
Loan, its Short Term Facility Percentage Share of any Short Term Loan or
other Loan or GNMA Pool Advance Loan under this Agreement or its obligation
to make or purchase its Multi-Year Facility Percentage Share of any
Multi-Year Loan or its Short Term Facility Percentage Share of any Short
Term Loan 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. Guaranty; Subordination; Additional Documents.
6(a) Guaranty and Subordination Agreement. As 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(b) 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 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 Credit Agent, the Documentation Agent, the
Syndication Agent and the Lenders the benefit of the Credit Documents.
7. Conditions Precedent.
7(a) First Credit Event. As conditions precedent to the Effective Date
and the first Credit Event hereunder:
(1) There shall have been delivered to the Credit Agent, in form and
substance and in quantities reasonably satisfactory to the Lenders and
their counsel, each of the following:
(i) A duly executed copy of this Agreement;
(ii) A duly executed copy of each of the Guaranty and the
Subordination Agreement;
(iii) A duly executed copy of each of the Multi-Year Facility Fee
Letter and the Short Term Facility 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 A dated as of
the date of this Agreement;
(ix) A Covenant Compliance Certificate, dated as of May 31, 1997, 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) and 10(j) 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 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 and the Existing Agreement
and any obligations of the Lenders to make advances or issue Letters of
Credit thereunder terminated.
(6) No material adverse change in the business, operations, assets or
financial or other condition of the Company or the Company and its
consolidated Subsidiaries taken as a whole shall have occurred since the
Statement Date and the Company by presenting the initial Loan Request,
Interest Rate Election and Payoff Notice shall be deemed to have so
represented and warranted hereunder.
7(b) All Credit Events. As conditions precedent to each Credit Event
hereunder, at and as of the date of, and after giving effect to, such
Credit Event:
(1) The representations and warranties of the Company and the Parent
contained in the Credit Documents shall be accurate and complete in all
respects as of such date;
(2) If there has occurred a Potential Default or an Event of Default
(other than under Paragraph 11(a) below or under Paragraph 11(e) below
resulting from a breach or potential breach of Paragraph 10(i) or 10(j)
below), the Majority Lenders have not elected in writing to cease funding
Loans hereunder;
(3) If there has occurred an Event of Default under Paragraph 11(a)
below, one hundred percent (100%) of the Lenders have elected in writing to
waive such Event of Default;
(4) If there has occurred an Event of Default or Potential Default
under Paragraph 11(e) below resulting from a breach or potential breach of
Paragraph 10(i) or 10(j) below, the Majority Lenders have elected in
writing to waive such Event of Default or Potential Default;
(5) 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;
(6) The Company shall have delivered to the Credit Agent a duly
executed Loan Request, Interest Rate Election and Payoff Notice requesting
such Credit Event; and
(7) 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.
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.
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 that:
8(a) Financial Condition. The financial statements, respectively dated
the Statement Date and May 31, 1997, copies of which have heretofore been
furnished to each Lender, are complete and correct and present fairly in
accordance with GAAP the consolidated and consolidating financial condition
of the Company and its consolidated Subsidiaries at such dates and the
consolidated and consolidating results of their operations and changes in
financial position for the fiscal periods then ended.
8(b) Corporate Existence; Compliance with Law. Each of the Company and
its Subsidiaries: (1) is duly organized, validly existing and in good
standing as a corporation under the laws of the state of its incorporation,
and is in good standing as a foreign corporation in each jurisdiction where
its ownership of property or conduct of business requires such
qualification and where failure to be in good standing could have a
material adverse effect on the Company, any of its Subsidiaries, or their
respective property and/or business or on the ability of the Company or the
Parent to pay or perform the Credit Documents; (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.
8(c) Corporate Power; Authorization; Enforceable Obligations. Each of
the Company and the Parent has the corporate power and authority and the
legal right to execute, deliver and perform the Credit Documents to which
it is a party and has taken all necessary corporate action to authorize the
execution, delivery and performance of the Credit Documents. The Credit
Documents have been duly executed and delivered on behalf of each of the
Company and the Parent and constitute legal, valid and binding obligations
of such party enforceable against such party in accordance with their
respective terms.
8(d) No Legal Bar. The execution, delivery and performance of the
Credit Documents, the borrowing thereunder and the use of the proceeds
thereof, will not violate any Requirement of Law or any Contractual
Obligation of the Company or the Parent to the extent that failure to
comply therewith could have a material adverse effect on the Company or its
property and/or business or on the ability of the Company or the Parent to
pay or perform the Credit Documents.
8(e) No Material Litigation. Except as disclosed on Exhibit B attached
hereto, no litigation, investigation or proceeding of or before any court,
arbitrator or Governmental Authority is pending or, to the knowledge of the
Company, threatened by or against the Company or any of its Subsidiaries or
against any of such parties' properties or revenues involving amounts, in
the case of any such individual litigation, investigation or proceeding, in
excess of $10,000,000.00 or which, regardless of the amount in controversy,
is likely to be adversely determined and which, if adversely determined,
could have a material adverse effect on the business, operations, property
or financial or other condition of the Company or any of its Subsidiaries.
8(f) Taxes. The Company and each of its Subsidiaries have filed or
caused to be filed all tax returns that are required to be filed and have
paid all taxes (other than incidental local business and other municipal
taxes which are not material to the operation of the Company and its
Subsidiaries) shown to be due and payable on said returns or on any
assessments made against them or any of their property other than taxes
which are being contested in good faith by appropriate proceedings and as
to which the Company or the applicable Subsidiary has established adequate
reserves in conformity with GAAP.
8(g) Investment Company Act. The Company is not an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
8(h) Subsidiaries. Exhibit C 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 of the Company.
All of the issued and outstanding shares of capital stock of the
Subsidiaries of the Company have been duly authorized and issued and are
fully paid and non-assessable.
8(i) Federal Reserve Board Regulations. Neither the Company nor any of
its Subsidiaries is engaged or will engage, principally or as one of its
important activities, in the business of extending credit for the purpose
of "purchasing" or "carrying" any "margin stock" within the respective
meanings of such terms under Regulation U. No part of the proceeds of any
Loan made hereunder will be used for "purchasing" or "carrying" "margin
stock" as so defined or for any purpose which violates, or which would be
inconsistent with, the provisions of the Regulations of the Board of
Governors of the Federal Reserve System.
8(j) ERISA. The Company and each of its Subsidiaries are in compliance
in all material respects with the requirements of ERISA and no Reportable
Event has occurred under any Plan maintained by the Parent, the Company or
any of its or their Subsidiaries which is likely to result in the
termination of such Plan for purposes of Title IV of ERISA.
8(k) Assets. The Company and each of its Subsidiaries have good and
marketable title to all property and assets reflected in the financial
statements referred to in Paragraph 8(a) above, except property and assets
sold or otherwise disposed of in the ordinary course of business subsequent
to that date. Neither the Company nor any of its Subsidiaries has
outstanding Liens on any of its properties or assets nor are there any
security agreements to which the Company or any of its Subsidiaries is a
party, or title retention agreements, whether in the form of leases or
otherwise, of any personal property except as reflected in said financial
statements referred to in Paragraph 8(a) above or as permitted under
Paragraph 10(a) below.
9. Affirmative Covenants. The Company hereby covenants and agrees with
the Credit Agent and each Lender that, as long as any Obligations remain
unpaid or any Lender has any obligation to make or purchase all or any
portion of any Loans or to make GNMA Pool Advance Loans, the Company shall:
9(a) Financial Statements. Furnish or cause to be furnished directly
to the Credit Agent and each Lender:
(1) Within ninety (90) days after the last day of each fiscal year of
the Parent, consolidated statements of income and statements of changes in
cash flow of the Parent and its Subsidiaries for such year and a balance
sheet as of the end of such year (including therein as supplemental
information, consolidating statements of income and statements of changes
in cash flow and balance sheets as of the end of such year) in each case
presented fairly in accordance with GAAP and, in the case of the Company,
the requirements of HUD Handbook IG 4000.3 REV and accompanied, in all
cases, by an unqualified report of a firm of independent certified public
accountants acceptable to the Majority Lenders;
(2) Within forty-five (45) days after the last day of each fiscal
quarter, 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, 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 covenants set forth in Paragraphs 10(g),
10(i) and 10(j) below as of and at such Applicable Financial Test Date, and
the Parent's compliance with the covenants set forth in Paragraphs 11(d)
and 11(e) of the Guaranty, as of and at such Applicable Financial Test
Date;
(4) As soon as is available any written report pertaining to material
items in respect of the internal control matters of the Parent or the
Company submitted to any of such Persons by their respective independent
accountants in connection with each annual or interim special audit of the
financial condition of such Persons made by such independent public
accountants; and
(5) Copies of all proxy statements, financial statements, and reports
which the Parent sends to its stockholders, and copies of all regular,
periodic and special reports, and all registration statements under the
Securities Act of 1933, as amended (the "Act"), which the Parent or the
Company files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or with any
national securities exchange; provided, however, that there shall not be
required to be delivered hereunder to the Credit Agent such copies for any
Lender of prospectuses relating to future series of offerings under
registration statements filed under Rule 415 of the Act or other items
which such Lender has indicated in writing to the Parent or the Company
from time to time need not be delivered to such Lender.
9(b) Certificates; Reports; Other Information. Furnish or cause to be
furnished directly to the Credit Agent and each Lender:
(1) 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).
(2) 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, 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 and GNMA Pool Advance Loans
hereunder or to enable another financial institution to become a signatory
hereto.
(3) Promptly upon receipt thereof by the Company, copies of all audit
reports prepared by or on behalf of FNMA, FHLMC and GNMA.
9(c) Payment of Indebtedness. Pay, discharge or otherwise satisfy at
or before maturity or before it becomes delinquent, defaulted or
accelerated, as the case may be, all its Indebtedness, except: (1)
Indebtedness (other than Indebtedness with respect to CPNs) being contested
in good faith and for which provision is made to the satisfaction of the
Majority Lenders for the payment thereof in the event the Company is found
to be obligated to pay such Indebtedness and which Indebtedness is
thereupon promptly paid by the Company, and (2) additional Indebtedness
(other than Indebtedness with respect to CPNs) in the aggregate not to
exceed $100,000.00.
9(d) Maintenance of Existence and Properties. Maintain all rights,
privileges, licenses, approvals, franchises, properties and assets
necessary in the normal conduct of its business, and comply with all
Contractual Obligations and Requirements of Law. The Company will at all
times be a FNMA, FHLMC and GNMA-approved Seller/ Servicer and a
wholly-owned Subsidiary of the Parent.
9(e) Inspection of Property; Books and Records; Discussions. Keep
proper books of record and account in which full, true and correct entries
in conformity with GAAP and all Requirements of Law shall be made of all
dealings and transactions in relation to its business and activities, and
permit representatives of each Lender (at no cost or expense to the Company
unless there shall have occurred and be continuing an Event of Default) to
visit and inspect 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 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. Promptly give written notice to the Credit Agent (who
shall promptly notify each of the Lenders thereof) of:
(1) The occurrence of any Potential Default or Event of Default;
(2) Any litigation or proceeding affecting the Company or any of its
Subsidiaries 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 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; and
(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.
9(g) Expenses. Pay all reasonable out-of-pocket expenses (including
fees and disbursements of counsel) of the Credit 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 and each of the Lenders incident to the protection of
the rights of the Lenders and the Credit Agent under the Credit Documents,
and incident to the enforcement of payment of the Obligations, whether by
judicial proceedings or otherwise, including, without limitation, in
connection with bankruptcy, insolvency, liquidation, reorganization,
moratorium or other similar proceedings involving the Parent or the Company
or a "workout" of the Obligations. The obligations of the Company under
this Paragraph 9(g) shall be effective and enforceable whether or not any
Loan is advanced by any Lender hereunder and shall survive payment of all
other Obligations.
9(h) Credit Documents. Comply with and observe all terms and
conditions of the Credit Documents.
9(i) Insurance. Obtain and maintain insurance with responsible
companies in such amounts and against such risks as are usually carried by
corporations engaged in similar businesses similarly situated, including,
without limitation, errors and omissions coverage and fidelity coverage in
form and substance acceptable under FNMA or FHLMC guidelines, and furnish
the Lenders on request full information as to all such insurance.
9(j) CPN Program. Obtain the written approval of the Majority Lenders
to any modification of the documentation relating to the issuance of CPNs
of the Company as in effect on the date of this Agreement.
9(k) Hedging Program. Maintain at all times a Hedging Program
consistent with the Hedging Program in effect at and as of the Effective
Date.
10. Negative Covenants. The Company hereby agrees that, as long as any
Obligations remain unpaid or any Lender has any obligation to make or
purchase all or any portion of any Loans or to make GNMA Pool Advance Loans
hereunder, the Company shall not, directly or indirectly:
10(a) Liens. Create, incur, assume or suffer to exist any Lien upon
any of its property and assets (including servicing rights) other than:
(1) Liens or charges for current taxes, assessments or other
governmental charges which are not delinquent or which remain payable
without penalty, or the validity of which are contested in good faith by
appropriate proceedings upon stay of execution of the enforcement thereof,
provided the Company shall have set aside on its books and shall maintain
adequate reserves for the payment of same in conformity with GAAP;
(2) Liens, deposits or pledges made to secure statutory obligations,
surety or appeal bonds, or bonds for the release of attachments or for stay
of execution, or to secure the performance of bids, tenders, contracts
(other than for the payment of borrowed money), leases or 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;
(5) Liens on property and assets of the Company securing short term
Indebtedness of the Company (Indebtedness with a maturity of one year or
less and not automatically renewable by the Company at its sole option) in
an amount not to exceed at any date twenty five percent (25%) of Mortgage
Loans and MBS Held for Sale; and
(6) Liens on servicing rights of the Company securing Indebtedness in
an amount not to exceed at any date ten percent (10%) of Mortgage Servicing
Rights.
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) or 10(j) below (assuming such compliance were tested at
such date immediately following such creation, incurrence or assumption).
10(c) Consolidation and Merger. Liquidate or dissolve or enter into
any consolidation, merger, partnership, joint venture, syndicate or other
combination, except that the Company may be consolidated with or merged
with any corporation provided that (1) in any such merger or consolidation
the Company shall be the surviving or resulting corporation and (2) at the
time of and immediately after the effectiveness of such merger or
consolidation there shall not have occurred and be continuing an Event of
Default or Potential Default.
10(d) Acquisitions. Purchase or acquire or incur liability for the
purchase or acquisition of any or all of the assets or business of any
Person other than in the normal course of a mortgage banking-related
business (it being expressly agreed and understood that the acquisition of
servicing is a normal course of business activity); provided, however, that
the Company may acquire all or a portion of the stock or assets of another
mortgage company or companies so long as no Event of Default or Potential
Default shall exist immediately following the consummation of such
acquisition, and, provided, further, that the Company shall be in
compliance with the financial covenants set forth in Paragraphs 10(i) and
10(j) below, assuming for purposes of this Paragraph 10(d) that the
"Applicable Financial Test Date" referenced in such covenants is the day
immediately following the consummation of such acquisition.
10(e) Payment of Dividends. Declare or pay any dividends upon any
shares of the Company's stock now or hereafter outstanding, except
dividends payable in the capital stock of the Company, or make any
distribution of assets to its stockholders as such, whether in cash,
property or securities, if at the date of payment or distribution (either
before or after giving effect thereto) there should exist an Event of
Default or Potential Default.
10(f) Purchase or Retirement of Stock. Acquire, purchase, redeem or
retire any shares
of its capital stock now or hereafter outstanding for value.
10(g) Investments; Advances; Receivables. Make or commit to make any
advance, loan or extension of credit ("Advances") to, or hold any
receivable ("Receivable") of, or make or commit to make any capital
contribution to, or purchase any stock, bonds, notes, debentures or other
securities ("Investments") of, or make any other investment in, any Person,
except: (1) Advances constituting Mortgage Loans made in the ordinary
course of the Company's business and (2) Investments in, unsecured and
secured Advances to, and Receivables of, any Affiliate (and Servicing
Pass-Through Ventures which are not otherwise Affiliates) in an aggregate
amount not to exceed ten percent (10%) of the net worth of the Company
determined in accordance with GAAP, it being agreed and understood that any
unsecured Advances made by the Company to any Affiliate must be funded with
equity of the Company and that any secured Advances made by the Company to
any Affiliate must be fully secured on a first priority, perfected basis,
by readily marketable securities pledged by such Affiliate.
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) 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
$1,200,000,000.00.
10(j) 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 Mortgage Loans and MBS
Held for Sale (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 Mortgage Servicing Rights, plus
(8) Fifty percent (50%) of Other Assets, excluding any unsecured
Advances made to Affiliates permitted under Paragraph 10(g)(2) above.
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 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) and 10(j) above); 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;
THEN:
(1) Automatically upon the occurrence of an Event of Default under
Paragraph 11(g) above,
(2) 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
(3) In all other cases, at the option of the Majority Lenders, each
Lender's obligation to make or purchase Loans and the obligation of the
GNMA Pool Advance Lender to make GNMA Pool Advance Loans 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, without demand upon or notice or presentment
to the Company, all of which are hereby waived.
12. Agency Provisions.
12(a) Appointment. Each Lender hereby irrevocably designates and
appoints each Agent as the agent of such Lender under the Credit Documents
and each Lender hereby irrevocably authorizes each Agent, as the agent for
such Lender, to take such action on its behalf under the provisions of the
Credit Documents and to exercise such powers and perform such duties as are
expressly delegated to such Agent by the terms of the Credit Documents,
together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in the Credit
Documents, no Agent shall have any duties or responsibilities, except those
expressly set forth herein or therein, or any fiduciary relationship with
any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into the Credit Documents or
otherwise exist against any Agent.
12(b) Delegation of Duties. 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. The Credit Agent shall not be responsible for
the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care.
12(c) Exculpatory Provisions. No Agent nor any of its 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) assuring compliance of the Credit Documents
and/or the transactions contemplated by the Credit Documents with any law
or regulation binding upon such Person, it being expressly acknowledged,
agreed and understood that each such Person has obtained independent advice
satisfactory to it in all such regards. No Agent shall be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, the
Credit Documents (other than agreements required to be complied with by
such Agent thereunder and subject to the standards of care set forth herein
with respect thereto) or to inspect the properties, books or records of the
Company. Each Agent shall be entitled to refrain from exercising any
discretionary powers or actions under this Agreement or any other Credit
Document until it shall have received the prior written consent of one
hundred percent (100%) of the Lenders to such action.
12(d) Reliance by Agent. Each Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, consent, certification, affidavit, letter, cablegram, telegram,
telecopy, telex or teletype message, statement, order or other document or
conversation reasonably 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 each Lender designated
on the current Commitment Schedule as a Lender hereunder for all purposes
of the Credit Documents unless a written notice of assignment, negotiation
or transfer of such Lender's interests hereunder and thereunder as
permitted pursuant to Paragraph 14 below shall have been filed with the
Credit Agent. Each Agent shall be fully justified in failing or refusing to
take any action under the Credit Documents unless it shall first receive
such advice or concurrence of the Majority Lenders (or all Lenders, as
required under the Credit Documents) or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any
action (other than liability and/or expense arising out of such Agent's
gross negligence or willful misconduct). Each Agent shall in all cases be
fully protected in acting, or in refraining from acting, under the Credit
Documents in accordance with a request of the Majority Lenders (or all
Lenders, if applicable) absent gross negligence and willful misconduct on
the part of such Agent in the method in which it acts or refrains from
acting in accordance therewith, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders.
12(e) Notice of Default; Agreement to Advance. No Agent shall be
deemed to have knowledge or notice of the occurrence of any Event of
Default or Potential Default unless such Agent has received notice from a
Lender or the Company referring to the Credit Documents, describing such
Event of Default or Potential Default and stating that such notice is a
"notice of default". In the event that any Agent receives such a notice,
such Agent shall give notice thereof to the Lenders and the other Agents.
12(f) Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that no Agent nor any of its respective officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by such Agent hereafter
taken, including any review of the affairs of the Company, shall be deemed
to constitute any representation or warranty by such Agent to any Lender.
Each Lender represents to each Agent that it has, independently and without
reliance upon such Agent or any other Lender or their respective counsel,
and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, operations,
property, financial and other condition and creditworthiness of the Company
and made its own decision to extend credit hereunder and enter into this
Agreement. Each Lender also represents that it will, independently and
without reliance upon any Agent or any other Lender or their respective
counsel, and based on such documents, information and legal advice
(including, without limitation, advice of regulatory counsel to it) as it
shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in entering into the Credit Documents
and taking or not taking action thereunder, and to make such investigation
as it deems necessary to inform itself as to the business, operations,
property, financial and other condition and creditworthiness of the
Company. Except for notices, reports and other documents expressly required
to be furnished to the Lenders by an Agent hereunder, such Agent shall not
have any duty or responsibility to provide any Lender with any legal advice
or credit or other information concerning the business, operations,
property, financial and other condition or creditworthiness of the Company
which may come into the possession of such Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
12(g) Indemnification. The Company agrees to indemnify, defend and
hold harmless each Agent in its capacity as such from and against any and
all claims, obligations, penalties, actions, suits, judgments, costs,
disbursements, losses, liabilities and/or damages (including, without
limitation, attorneys' fees) of any kind whatsoever which may at any time
be imposed on, assessed against or incurred by such Agent in any way (1)
relating to or arising out of the Credit Documents or any documents
contemplated by or referred to therein or the transactions contemplated
thereby or any action taken or omitted to be taken by such Agent in
connection with the foregoing; provided, the Company shall not be liable
for any portion of any such claims, obligations, etc., arising out of or
resulting from the gross negligence or willful misconduct of such Agent or
(2) resulting from any action taken or omitted to be taken by such Agent in
accordance with written instructions given as provided in the Credit
Documents or (3) relating to any one or more of the matters covered by
Paragraph 12(c) above. The Lenders agree to indemnify and hold harmless
each Agent in its capacity as such ratably in accordance with their
Aggregate Percentage Shares to the extent required by the Company hereunder
if any Agent is not reimbursed by the Company hereunder and without
limiting the obligation of the Company to do so. To the extent
indemnification payments made by the Lenders pursuant to this Paragraph
12(g) are subsequently recovered by any 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. Any Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Company as though such Agent were not an Agent hereunder.
With respect to such loans made or renewed by them and any note issued to
them hereunder, each Agent shall have the same rights and powers under the
Credit Documents as any Lender thereunder and may exercise the same as
though it were not an Agent, and the terms "Lender" and "Lenders" shall
include Agents in their individual capacities.
12(i) Successor Agents. Any Agent may resign as such under the Credit
Documents upon ninety (90) days' prior written notice to the Lenders and
the Company and the Credit Agent shall resign in the event its Aggregate
Maximum Commitment shall be less than $25,000,000.00. In addition, in the
event any Agent fails to perform its obligations under the Credit Documents
in any material manner and fails to correct its performance within thirty
(30) days of written notice of such failure of performance given by not
less than the Majority Lenders, then such Agent may be removed upon thirty
(30) days notice given by not less than the Majority Lenders. If an Agent
shall resign or be so removed, then, on or before the effective date of
such resignation or removal, the Majority Lenders shall appoint a successor
agent reasonably acceptable to the Company or, if the Majority Lenders are
unable to agree on the appointment of a successor agent, such Agent shall
appoint a successor agent for the Lenders, which successor agent shall be
reasonably acceptable to the Company, whereupon such successor agent shall
succeed to the rights, powers and duties of such Agent, and the term
"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. If following the occurrence and during the
continuance of an Event of Default any Lender (a "benefitted Lender") shall
at any time receive any payment of all or part of the Obligations held by
it or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off or otherwise) in a greater proportion than any
such payment to and collateral received by any other Lender, if any, in
respect of such other Lender's portion of the Obligations, or interest
thereon, such benefitted Lender shall purchase for cash from the other
Lenders such portion of each such other Lender's Obligations, or shall
provide such other Lenders with the benefits of such collateral, or the
proceeds thereof, as shall be necessary to cause such benefitted Lender to
share the excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders; provided, however, that if all or any portion of
such excess payment or benefits is thereafter recovered from such
benefitted Lender, such purchase shall be rescinded, and the purchase price
and benefits returned, to the extent of such recovery but without interest.
The Company agrees that each Lender so purchasing a portion of another
Lender's Obligations may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if
such Lender were the direct holder of such portion.
13. Miscellaneous Provisions.
13(a) No Assignment. The Company may not assign its rights or
obligations under the Credit Documents without the prior written consent of
one hundred percent (100%) of the Lenders. Subject to the foregoing, all
provisions contained in this Agreement or any document or agreement
referred to herein or relating hereto shall inure to the benefit of each
Lender, its successors and assigns, and shall be binding upon the Company,
its successors and assigns.
13(b) Amendment. The Credit Documents may not be amended or terms or
provisions hereof waived unless such amendment or waiver is in writing and
signed by the Majority Lenders and the Company; provided, however, that
without the prior written consent of one hundred percent (100%) of the
Lenders, no amendment or waiver shall:
(1) Waive or amend any term or provision of Paragraph 4(h), 4(i) or
4(j) 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 (other than fees payable
pursuant to the Multi-Year Facility Fee Letter or the Short Term Facility
Fee Letter), or extend the required payment date of principal or interest
on the Obligations or any fees except as a result of the extension of the
Multi-Year Facility Maturity Date (which extension shall require only the
consent of the Multi-Year Lenders) or the Short Term Facility Maturity Date
(which extension shall require only the consent of the Short Term Lenders);
(3) Increase the Aggregate Credit Limit above $6,000,000,000.00;
(4) Modify any Lender's Multi-Year Facility Percentage Share,
Multi-Year Swing Line Percentage Share, Short Term Facility Percentage
Share or Short Term Swing Line Percentage Share except modifications
resulting from an increase, permanent or temporary, in a Lender's Maximum
Multi-Year Facility Commitment, Multi-Year Swing Line Commitment, Maximum
Short Term Facility Commitment and/or Short Term Swing Line Commitment made
as permitted under this Agreement;
(5) Modify the definition of "Majority Lenders";
(6) Include any Person other than the Lenders signatory hereto as a
"Lender" hereunder except as expressly permitted pursuant to Paragraph
14(a) below; or
(7) Cancel or terminate the Guaranty or permit the revocation of the
Subordination Agreement; provided, however, that nothing contained herein
shall in any manner or to any extent be deemed to supersede any provision
of the Credit Documents which expressly designates which Lenders are
empowered to modify such provision, including, without limitation, any
provision of the Credit Documents which expressly requires the consent of
one hundred percent (100%) of the Lenders to any modification thereof. 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.
13(c) Cumulative Rights; No Waiver. The rights, powers and remedies of
the Lenders hereunder are cumulative and in addition to all rights, powers
and remedies provided under any and all agreements between the Company and
the Lenders relating hereto, at law, in equity or otherwise. Any delay or
failure by the Lenders to exercise any right, power or remedy shall not
constitute a waiver thereof by the Lenders, and no single or partial
exercise by the Lenders of any right, power or remedy shall preclude any
other or further exercise thereof or any exercise of any other rights,
powers or remedies.
13(d) Entire Agreement; Severability. This Agreement and the documents
and agreements referred to herein embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements
and understandings relating to the subject matter hereof and thereof. All
waivers by the Company provided for in the Credit Documents have been
specifically negotiated by the parties with full cognizance and
understanding of their rights. If any of the provisions of the Credit
Documents shall be held invalid or unenforceable, the Credit Documents
shall be construed as if not containing such provisions, and the rights and
obligations of the parties hereto shall be construed and enforced
accordingly.
13(e) Survival. All representations, warranties, covenants and
agreements herein contained on the part of the Company shall survive the
termination of this Agreement and shall be effective until the Obligations
are paid and performed in full or longer as expressly provided herein.
13(f) Notices. All notices given by any party to any of the others
shall be in writing (which may be by facsimile transmission), delivered
personally, by commercial courier service or by depositing the same in the
United States mail, registered, with postage prepaid, addressed to such
party at the address set forth on Annex II attached hereto. Any party may
change the address to which notices are to be sent by notice of such change
to the other party or parties given as provided herein.
13(g) Governing Law. This Agreement shall be deemed to be a contract
made under the laws of the State of California, and for all purposes shall
be construed in accordance with the laws of said State, without regard to
principles of conflicts of law.
13(h) Counterparts. This Agreement may be executed in counterparts
each of which when so executed shall be deemed to be an original and all of
which when taken together shall constitute one and the same agreement.
14. Additional Lenders; Assignments and Participations; Increases in
Availability.
14(a) Addition of New Lender.
(1) Subject to the limitation on the Aggregate Credit Limit set forth
in the definition of such term, 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 and, as applicable, Maximum
Multi-Year Facility Commitment, Maximum Short Term Facility Commitment,
Multi-Year Facility Percentage Share, Short Term Facility Percentage Share,
Multi-Year Swing Line Commitment, Short Term Swing Line Commitment,
Multi-Year Swing Line Percentage Share, Short Term Swing Line Percentage
Share 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, such Applicant Financial Institution
shall execute a replacement GNMA Pool Advance Agreement and cooperate with
the current GNMA Pool Advance Lender 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 Company and, if such Applicant Financial Institution will be acquiring
a portion of an existing Lender's Aggregate Maximum 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 and each of the
Lenders a Commitment Schedule to be effective as of such Adjustment Date,
reflecting the inclusion of such Applicant Financial Institution as a party
hereto and a Lender hereunder.
(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,
as applicable, an amount equal to such Applicant Financial Institution's
Multi-Year Facility Percentage Share of Multi-Year Loans outstanding and/or
Short Term Facility Percentage Share of Short Term 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, as applicable, their 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 Multi-Year Percentage Shares and Short
Term 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 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 Applicant Financial Institution shall pay to the Credit Agent
a registration fee of $3,500.00.
Subject to the requirements described above, the Applicant Financial
Institution shall become a party hereto and a Lender hereunder and shall be
entitled to all rights, benefits and privileges accorded a Lender under the
Credit Documents and shall be subject to all obligations of a Lender under
the Credit Documents.
14(b) Assignments Among Existing Lenders. Any Lender may at any time
agree to assign a portion of such Lender's Aggregate Maximum Commitment to
a Transferee Lender. In such event the Lender and the Transferee Lender
shall so notify the Credit 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 and each of the
Lenders a Commitment Schedule to be effective as of such Adjustment Date
reflecting the assignment.
(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, as applicable, such Transferee Lender's Multi-Year Facility Percentage
Share and Short Term Facility Percentage Share of Multi-Year Loans and
Short Term Loans, respectively, outstanding in excess of such Transferee
Lender's previous Multi-Term Facility Percentage Share and Short Term
Facility 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,
such Transferee Lender shall execute a replacement GNMA Pool Advance
Agreement and cooperate with the current GNMA Pool Advance Lender to effect
such intent.
14(c) Minimum Loan Commitment. Notwithstanding anything to the
contrary contained herein, the inclusion of any Applicant Financial
Institution as a Lender hereunder pursuant to Paragraph 14(a) above and the
assignment by a Lender of a portion of such Lender's Aggregate Maximum
Commitment 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. 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 and the other Lenders shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under the Credit Documents;
(4) The participation agreement between such Lender and the Person
purchasing such participation interest (a "Participant") shall provide
that: (i) the participation interest of the Participant is an undivided
interest in such Lender's Aggregate Maximum Commitment, and (ii) the sole
voting rights of the Participant are with respect to those items on which
such Lender is entitled to vote pursuant to Paragraphs 13(b)(2) and
13(b)(7) above; and
(5) Such Lender shall not enter into participation agreements with
more than two Participants for each $25,000,000.00 of Aggregate Maximum
Commitment held by such Lender.
The Company acknowledges and agrees that each Participant shall be
considered a Lender for purposes of Paragraphs 4(h), 4(i), 4(j) and 5(l)
above; provided, however, that in no event shall any Participant be
entitled to receive any payment or compensation in excess of that to which
such Participant's selling Lender would be entitled with respect to the
participation interest held by such Participant if such Lender had not sold
any participation interest to such Participant.
14(e) Federal Reserve Bank. Notwithstanding the provisions of
Paragraphs 14(a) and 14(b) above, any Lender may at any time pledge or
assign all or any portion of such Lender's rights under this Agreement and
the other Credit Documents to a Federal Reserve Bank.
<PAGE>
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 Multi-Year Facility Percentage Share
and/or Short Term Facility 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 and each of the Lenders a
Commitment Schedule to be effective as of such Adjustment Date. On the
Temporary Increase Termination Date the aggregate amount of such Increasing
Lender's Primary Loan Percentage Share of outstanding Primary Loans in
excess of its Maximum Primary Loan Commitment after giving effect to the
termination of the subject increase shall, if but only if at such Temporary
Increase Termination Date there does not exist an Event of Default, be
payable in full. If at the Temporary Increase Termination Date there exists
an Event of Default, the temporary increase of the Increasing Lender shall
continue in effect and, unless otherwise agreed by one hundred percent
(100%) of the Lenders, shall be treated thereafter as a permanent increase
in said Increasing Lender's Aggregate Maximum Commitment.
14(g) Provision of Information; Confidentiality. The Company hereby
acknowledges and agrees that in connection with the proposed assignment or
subparticipation by a Lender of its interest in the Obligations, such
Lender may disclose to prospective assignees and Participants any and all
information provided to such Lender hereunder; provided, however, that such
information shall be furnished to such prospective assignees and
Participants on a confidential basis.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the day and year first above written.
COUNTRYWIDE HOME LOANS, INC., a New York corporation
By
Name
Title
BANKERS TRUST COMPANY, as Co-Arranger and Credit Agent
By
Name
Title
THE BANK OF NEW YORK, 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, as Syndication Agent
By
Name
Title
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Senior
Managing Agent
By
Name
Title
CANADIAN IMPERIAL BANK OF COMMERCE, as a Senior Managing Agent
By ________________________________________________________
Name ______________________________________________________
Title _____________________________________________________
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as a Senior Managing
Agent
By ________________________________________________________
Name ______________________________________________________
Title _____________________________________________________
NATIONSBANK OF TEXAS, N.A., as a Senior Managing Agent
By ________________________________________________________
Name ______________________________________________________
Title _____________________________________________________
ROYAL BANK OF CANADA, as a Senior Managing Agent
By ________________________________________________________
Name ______________________________________________________
Title _____________________________________________________
CREDIT LYONNAIS, SAN FRANCSICO BRANCH, as a Co-Agent
By ________________________________________________________
Name ______________________________________________________
Title _____________________________________________________
FLEET NATIONAL BANK, as a Co-Agent
By ________________________________________________________
Name ______________________________________________________
Title _____________________________________________________
THE ASAHI BANK, LTD., LOS ANGELES AGENCY, as a Lender
By
Name
Title
BANCA CRT S.p.A., as a Lender
By
Name
Title
By
Name
Title
BANCA DI NAPOLI S.p.A., NEW YORK BRANCH, as a Lender
By
Name
Title
By
Name
Title _____________________________________________________
BANCA DI ROMA, SAN FRANCISCO BRANCH, as a Lender
By
Name
Title
By
Name
Title _____________________________________________________
BANCA MONTE DEI PASCHI DI SIENA S.p.A., NEW YORK BRANCH,
as a Lender
By
Name
Title
By
Name
Title
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as a Lender
By
Name
Title
BANK 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
BANK ONE, TEXAS, N.A., 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
BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH,
as a Lender
By ________________________________________________________
Name ______________________________________________________
Title _____________________________________________________
By ________________________________________________________
Name ______________________________________________________
Title _____________________________________________________
CANADIAN IMPERIAL BANK OF COMMERCE, as a Lender
By
Name
Title
THE CHASE MANHATTAN BANK, as a Lender
By
Name
Title
CORESTATES BANK, N.A., as a Lender
By
Name
Title
CREDIT LYONNAIS, SAN FRANCISCO BRANCH, as a Lender
By
Name
Title
THE DAI-ICHI KANGYO BANK, LTD.,LOS ANGELES AGENCY, as a Lender
By
Name
Title
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN ISLANDS BRANCHES,
as a Lender
By
Name
Title
By
Name
Title
THE FIFTH THIRD BANK, as a Lender
By
Name
Title
THE FIRST NATIONAL BANK OF CHICAGO, as a Lender
By
Name
Title
FIRST UNION NATIONAL BANK, formerly known as 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
KREDIETBANK N.V., as a Lender
By
Name
Title
By ________________________________________________________
Name ______________________________________________________
Title _____________________________________________________
LASALLE NATIONAL BANK, as a Lender
By
Name
Title
THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY, as a
Lender
By
Name
Title
MELLON BANK, N.A., as a Lender
By
Name
Title
THE MITSUBISHI TRUST AND BANKING CORPORATION, LOS ANGELES AGENCY,
as a Lender
By
Name
Title
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, 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
STAR BANK, NATIONAL ASSOCIATION, as a Lender
By
Name
Title
THE SUMITOMO BANK, LIMITED, LOS ANGELES BRANCH, as a Lender
By
Name
Title
THE SUMITOMO TRUST AND BANKING CO., 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
U. S. BANK NATIONAL ASSOCIATION, formerly known as 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
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 Form of Officer's Certificate
B Litigation Schedule
C Schedule of Existing Subsidiaries
Annex I: Glossary
Annex II: Schedule of Notice Addresses
<PAGE>
la-154936
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
September 24, 1997
<PAGE>
LA-154936 4
154936v.6
TABLE OF CONTENTS
Page
RECITALS......................................................................28
AGREEMENT.....................................................................28
1. Credit Facilities.......................................................28
1(a) Multi-Year Facility...............................................28
1(b) Short Term Facility...............................................29
1(c) Negotiated Loan Facility..........................................30
1(d) Swing Loan Facilities.............................................31
1(e) GNMA Pool Advance Facility........................................33
2. Requests for Credit Events and Issuance of CPNs; Funding................33
2(a) Requests for Credit Events........................................33
2(b) Funding of Loans and GNMA Pool Advance Loans......................34
2(c) Sale and Assignment of Discount Loans by Balance Banks............34
2(d) Funding...........................................................35
3. Payment of Principal; Prepayments.......................................35
3(a) Required Principal Payments.......................................35
3(b) Prepayments.......................................................35
4. Calculation and Payment of Interest; Related Provisions.................36
4(a) Interest on Direct Loans..........................................36
4(b) Interest on Discount Loans........................................37
4(c) Interest on Negotiated Loans......................................37
4(d) Interest on Swing Loans...........................................37
4(e) Interest on GNMA Pool Advance Loans...............................37
4(f) Payment of Interest...............................................37
4(g) Inability to Determine Rate.......................................38
4(h) Funding Indemnification...........................................38
4(i) Illegality; Impracticality........................................38
4(j) Requirements of Law; Increased Costs..............................39
4(k) Taxes.............................................................40
4(l) Treatment of Qualifying Balances; Indemnity.......................41
4(m) Obligation of Lenders to Mitigate; Replacement of Lenders.........41
5. Miscellaneous Lending Provisions........................................42
5(a) Use of Proceeds...................................................42
5(b) Assumption of Funding/Purchase....................................42
5(c) Evidence of Indebtedness..........................................43
5(d) Interest and Fee Billing and Payment..............................43
5(e) Nature and Place of Payments......................................44
5(f) Post-Default Interest.............................................45
5(g) Computations......................................................45
5(h) Disbursement of Payments Received.................................45
5(i) Fees..............................................................46
5(j) Wire Transfers of Funds...........................................46
5(k) Reduction in Aggregate Credit Limit...............................46
5(l) Capital Requirements..............................................46
6. Security Agreement; Guaranty; Subordination; Additional Documents.......47
6(a) Guaranty and Subordination Agreement..............................47
6(b) Further Documents.................................................47
7. Conditions Precedent....................................................47
7(a) First Credit Event................................................47
7(b) All Credit Events.................................................49
8. Representations and Warranties of the Company...........................50
8(a) Financial Condition...............................................50
8(b) Corporate Existence; Compliance with Law..........................50
8(c) Corporate Power; Authorization; Enforceable.......................50
8(d) No Legal Bar......................................................51
8(e) No Material Litigation............................................51
8(f) Taxes.............................................................51
8(g) Investment Company Act............................................51
8(h) Subsidiaries......................................................51
8(i) Federal Reserve Board Regulations.................................51
8(j) ERISA.............................................................52
8(k) Assets............................................................52
9. Affirmative Covenants...................................................52
9(a) Financial Statements..............................................52
9(b) Certificates; Reports; Other Information..........................53
9(c) Payment of Indebtedness...........................................54
9(d) Maintenance of Existence and Properties...........................54
9(e) Inspection of Property; Books and Records;........................54
9(f) Notices...........................................................54
9(g) Expenses..........................................................55
9(h) Credit Documents..................................................55
9(i) Insurance.........................................................55
9(j) CPN Program.......................................................55
9(k) Hedging Program...................................................55
10. Negative Covenants.....................................................55
10(a) Liens............................................................55
10(b) Indebtedness.....................................................56
10(c) Consolidation and Merger.........................................56
10(d) Acquisitions.....................................................56
10(e) Payment of Dividends.............................................57
10(f) Purchase or Retirement of Stock..................................57
10(g) Investments; Advances; Receivables...............................57
10(h) Sale of Assets...................................................57
10(i) Minimum Net Worth................................................58
10(j) Maximum Total Debt...............................................58
11. Events of Default......................................................58
12. Agency Provisions......................................................61
12(a) Appointment......................................................61
12(b) Delegation of Duties.............................................61
12(c) Exculpatory Provisions...........................................61
12(d) Reliance by Agent................................................62
12(e) Notice of Default; Agreement to Advance..........................62
12(f) Non-Reliance on Agent and Other Lenders..........................62
12(g) Indemnification..................................................63
12(h) Agent in Its Individual Capacity.................................63
12(i) Successor Agents.................................................63
12(j) Sharing of Set-Offs..............................................64
13. Miscellaneous Provisions...............................................64
13(a) No Assignment....................................................64
13(b) Amendment........................................................64
13(c) Cumulative Rights; No Waiver.....................................65
13(d) Entire Agreement; Severability...................................66
13(e) Survival.........................................................66
13(f) Notices..........................................................66
13(g) Governing Law....................................................66
13(h) Counterparts.....................................................66
14. Additional Lenders; Assignments and Participations; Increases
in Availability;.......................................................66
14(a) Addition of New Lender..........................................66
14(b) Assignments Among Existing Lenders...............................68
14(c) Minimum Loan Commitment..........................................69
14(d) Sub-Participations by Lenders....................................69
14(e) Federal Reserve Bank.............................................70
14(f) Increases in Availability........................................43
14(g) Provision of Information; Confidentiality........................71
<PAGE>
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Page 25
COUNTRYWIDE CREDIT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Page 5
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.
"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.
"Advance" shall have the meaning given such term in Paragraph
10(g) of the Agreement.
"Affiliate" shall mean any Person directly or indirectly
controlling, controlled by or under direct or indirect common control
with, any other Person; provided, however, that in no event shall the
term "Affiliate" be deemed to include Independent National Mortgage
Corporation, formerly known as CWM Mortgage Holdings, Inc. "Control"
as used herein means the power to direct the management and policies
of a Person.
"Agents" shall mean, collectively and severally, the Credit
Agent, the Syndication Agent and the Documentation Agent.
"Aggregate Credit Limit" shall mean at any date the sum (not to
exceed $6,000,000,000.00) of the Multi-Year Facility Credit Limit, the
Short Term Facility Credit Limit 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 Multi-Year Facility Commitment, plus, if
applicable, such Lender's Maximum Short Term Facility Commitment plus,
if applicable, for the GNMA Pool Advance Lender the GNMA Pool Advance
Commitment.
"Aggregate Multi-Year Swing Line Commitment" shall mean at any
date the sum of the Multi-Year Swing Line Commitments of the
Multi-Year Swing Line Lenders at such date.
"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) or Paragraph 1(b)
of the Agreement) by such Lender plus, if applicable, the aggregate
dollar amount of outstanding GNMA Pool Advance Loans held by such
Lender, bears to (b) the aggregate dollar amount of outstanding Loans,
plus the aggregate dollar amount of outstanding GNMA Pool Advance
Loans.
"Aggregate Short Term Swing Line Commitment" shall mean at any
date the sum of the Short Term Swing Line Commitments of the Short
Term Swing Line Lenders at such date.
"Agreement" shall mean that certain Revolving Credit Agreement
dated as of September 24, 1997 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, the last day of each fiscal quarter of such
Person.
"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 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 Mortgage Loans and/or
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 B attached hereto.
"Balance Bank" shall mean, collectively and severally, each of
the Multi-Year Balance Banks and each of the Short Term Balance Banks.
"Balance Bank Agreement" shall mean: (a) with respect to
Multi-Year Loans, an agreement in the form of Exhibit C-1 attached
hereto among the Company, the Credit Agent and a Balance Bank which is
a Multi-Year Lender, and (b). with respect to Short Term Loans, an
agreement in the form of Exhibit C-2 attached hereto among the
Company, the Credit Agent and a Balance Bank which is a Short Term
Lender
"Balance Bank Discount" shall mean with respect to each
Multi-Year Loan and each Short Term 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.
"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.
"Cash" shall mean at any date 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.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commitment Schedule" shall mean a schedule setting forth: (a)
the current Aggregate Credit Limit, Multi-Year Facility Credit Limit,
Short Term Facility Credit Limit, Aggregate Multi-Year Swing Line
Commitment and Aggregate Short Term Swing Line Commitment, and (b) for
each Lender, such Lender's Aggregate Maximum Commitment, Maximum
Multi-Year Facility Commitment, Maximum Short Term Facility
Commitment, Multi-Year Facility Percentage Share, Short Term Facility
Percentage Share, Multi-Year Swing Line Commitment, Short Term Swing
Line Commitment, Multi-Year Swing Line Percentage Share, Short Term
Swing Line Percentage Share and GNMA Pool Advance Commitment, as
applicable, as such schedule may be modified from time to time
consistent with the Credit Documents, with the Commitment Schedule in
effect at the Effective Date 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.
"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 D-1 attached hereto,
and (b) with respect to the Parent, a certificate in the form of
Exhibit D-2 attached hereto.
"CPN" shall mean a commercial paper note issued by the Company in
the ordinary course of business.
"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 Guaranty, the
Subordination Agreement, the Fee Letters, 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, as applicable.
"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.
"Direct Loan" shall mean a Multi-Year Loan or a Short Term Loan
which is interest bearing and as to which each Multi-Year Lender or
Short Term Lender, as applicable, advances its Multi-Year Facility
Percentage Share or Short Term Facility Percentage Share, as
applicable, directly to the Company.
"Discount Loan" shall mean a Multi-Year Loan or a Short Term Loan
which is funded on a discounted basis by a Multi-Year Balance Bank or
a Short Term Balance Bank, as applicable, with a concurrent sale to
each Multi-Year Lender or each Short Term Lender, as applicable, of
its Multi-Year Facility Percentage Share thereof or Short Term
Facility Percentage Share thereof, as applicable.
"Discount Loan Funding Date" shall mean: (a) with respect to each
outstanding Discount Loan, the last day of the Discount Loan Interest
Period with respect thereto, or (b) if no Discount Loans are then
outstanding, on the fifth and twentieth days of each calendar month
(or if such day is not a Business Day, the next succeeding Business
Day).
"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, (b) any Discount Loan Interest Period
for a Discount Loan which is a Multi-Year Loan that would
otherwise extend beyond the Multi-Year Maturity Date shall end on
the Multi-Year Maturity Date, and (c) any Discount Loan Interest
Period for a Discount Loan which is a Short Term Loan that would
otherwise extend beyond the Short Term Maturity Date shall end on
the Short Term Maturity Date.
"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 Mortgage Assets" shall mean the dollar amount of
Mortgage Loans and MBS Held for Sale 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.
"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; (c) no Eurodollar Interest Period for a
Multi-Year Loan which is a Eurodollar Loan shall extend beyond
the Multi-Year Maturity Date, and (d) no Eurodollar Interest
Period for a Short Term Loan which is a Eurodollar Loan shall
extend beyond the Short Term 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 such 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 given such term in
Paragraph 11 of the Agreement.
"Existing Agreement" shall have the meaning given such term
in Recital A of the Agreement.
"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 Letters" shall mean, jointly, the Multi-Year Facility
Fee Letter and the Short Term Facility Fee Letter.
"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 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.
"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 Multi-Year
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.
"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 E.
"Hedge Contract" shall mean a contract 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.
"Investments" shall have the meaning given such term in
Paragraph 10(g) of the Agreement.
"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.
"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 Multi-Year Loan, a Short Term Loan, a
Multi-Year Swing Loan, a Short Term Swing Loan or a Negotiated
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.
"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 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).
"Maximum Multi-Year Facility Commitment" shall mean at any
date for any Multi-Year Lender at any date the maximum dollar
portion of Multi-Year Loans that such Multi-Year Lender has
agreed to make or to participate in, as set forth on the current
Commitment Schedule, as such amount may be increased or decreased
as provided in the Credit Documents.
"Maximum Short Term Facility Commitment" shall mean for any
Short Term Lender at any date the maximum dollar portion of Short Term Loans
that such Short Term Lender has agreed to make or to participate in, as set
forth on the current Commitment Schedule, as such amount may be increased or
decreased as provided in the Credit Documents.
"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)
senior tranches of 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 loan to return premiums or payments with respect thereto; and (c)
all right, title and interest of the owner of such loan in the property covered
by said deed of trust (or mortgage).
"Mortgage Loans and MBS 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 and MBS
Held For Sale" is calculated.
"Mortgage Servicing Rights" shall mean the dollar amount shown
as "Mortgage 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.
"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.
"Multi-Year Balance Bank" shall mean each of the Multi-Year
Lenders which has executed a Balance Bank Agreement with the Company and the
Credit Agent.
"Multi-Year Facility Credit Limit" shall mean at any date the
aggregate of the Multi-Year Lenders' Maximum Multi-Year Facility Commitments at
such date, as set forth on the current Commitment Schedule; provided, however,
that in no event shall the Multi-Year Facility Credit Limit exceed at any date
the Aggregate Credit Limit minus the Short Term Facility Credit Limit at such
date and minus the GNMA Pool Advance Commitment at such date.
"Multi-Year Facility Fee Letter" shall mean a letter executed
by the Company and each of the Multi-Year Lenders setting forth the fees payable
by the Company to the Multi-Year Lenders, as such letter may be amended from
time to time by written agreement of the Company and one hundred percent (100%)
of the Multi-Year Lenders.
"Multi-Year Facility Maturity Date" shall mean September 24,
2002, as such date may be extended from time to time in writing by one hundred
percent (100%) of the Multi-Year Lenders, in their sole discretion.
"Multi-Year Facility Percentage Share" shall mean for any
Multi-Year Lender at any date that percentage which the dollar amount of such
Multi-Year Lender's Maximum Multi-Year Facility Commitment bears to the
Multi-Year Facility Credit Limit.
"Multi-Year Lenders" shall mean at any date those Lenders
holding a Multi-Year Facility Percentage Share as set forth on the current
Commitment Schedule.
"Multi-Year Loan" shall have the meaning given such term in
Paragraph 1(a) of the Agreement.
"Multi-Year Swing Line Commitment" shall mean for any
Multi-Year Swing Line Lender at any date the maximum dollar portion of
Multi-Year Swing Loans that such Multi-Year Swing Line Lender has agreed to
make, as set forth on the current Commitment Schedule, as such amount may be
increased or decreased as provided in the Credit Documents.
"Multi-Year Swing Line Lenders" shall mean at any date those
Multi-Year Lenders holding a Multi-Year Swing Line Percentage Share as set forth
on the current Commitment Schedule.
"Multi-Year Swing Line Percentage Share" shall mean for any
Multi-Year Swing Line Lender at any date that percentage which the dollar amount
of such Multi-Year Swing Line Lender's Multi-Year Swing Line Commitment bears to
the Aggregate Multi-Year Swing Line Commitment.
"Multi-Year Swing Loans" shall have the meaning given such
term in Paragraph 1(d)(1) of the Agreement.
"Negotiated Loan" shall have the meaning given such term in
Paragraph 1(c) 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, subject to the
restrictions on the term of Negotiated Loans set forth in Paragraph 1(c) of the
Agreement.
"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.
"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.
"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(j) of the Agreement; provided, however, that in no event
shall Other Assets include intangible assets.
"Outstanding CPN" shall mean each CPN issued by the Company
which has not been presented for payment and for which payment has not been made
in full.
"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.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA and any successor
agency.
"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.
"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.
"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-Funding Notice" shall mean: (a) with respect to
Multi-Year Loans, a notice in the form of Exhibit F-1 attached hereto, and (b)
with respect to Short Term Loans, a notice in the form of Exhibit F-2 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:
(a) With respect to each Eurodollar Loan which is a
Multi-Year Loan and each Multi-Year Swing Loan, if on such day
the Company's long term unsecured debt rating is: (1) at least
"A+" with S&P or "A1" with Moody's, the Pricing Spread shall be
0.17%, (2) at least "A-" with S&P or "A3" with Moody's, the
Pricing Spread shall be 0.275%; (3) at least "BBB+" with S&P or
"Baa1" with Moody's, the Pricing Spread shall be 0.325%; (4) at
least "BBB" with S&P or "Baa2" with Moody's, the Pricing Spread
shall be 0.375% and (5) 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%; and
(b) With respect to each Eurodollar Loan which is a Short
Term Loan and each Short Term Swing Loan, the Pricing Spread
shall be 0.295%.
"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.
"Qualifying Balances" shall have the meaning with respect to
each Balance Bank given such term in Annex I to the Balance Bank Agreement among
the Company, the Credit Agent and such Balance Bank.
"Receivables" shall have the meaning given such term in
Paragraph 10(g) of the Agreement.
"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.
"Reportable Event" shall mean any of the events set forth in
Section 4043(b) of ERISA.
"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.
"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.
"Short Term Balance Bank" shall mean each of the Short Term
Lenders which has executed a Balance Bank Agreement with the Company and the
Credit Agent.
"Short Term Facility Credit Limit" shall mean at any date the
aggregate of the Short Term Lenders' Maximum Short Term Facility Commitments at
such date, as set forth on the current Commitment Schedule; provided, however,
that in no event shall the Short Term Facility Credit Limit exceed at any date
the Aggregate Credit Limit minus the Multi-Year Facility Credit Limit at such
date and minus the GNMA Pool Advance Commitment at such date.
"Short Term Facility Fee Letter" shall mean a letter executed
by the Company and each of the Short Term Lenders setting forth the fees payable
by the Company to the Short Term Lenders, as such letter may be amended from
time to time by written agreement of the Company and one hundred percent (100%)
of the Short Term Lenders.
"Short Term Facility Maturity Date" shall mean September 23,
1998, as such date may be extended from time to time in writing by one hundred
percent (100%) of the Short Term Lenders, in their sole discretion.
"Short Term Facility Percentage Share" shall mean for any
Short Term Lender at any date that percentage which the dollar amount of such
Short Term Lender's Maximum Short Term Facility Commitment bears to the Short
Term Facility Credit Limit.
"Short Term Lenders" shall mean at any date those Lenders
holding a Short Term Facility Percentage Share as set forth on the current
Commitment Schedule.
"Short Term Loan" shall have the meaning given such term in
Paragraph 1(b) of the Agreement.
"Short Term Swing Line Commitment" shall mean for any Short
Term Swing Line Lender at any date the maximum dollar portion of Short Term
Swing Loans that such Short Term Swing Line Lender has agreed to make, as set
forth on the current Commitment Schedule, as such amount may be increased or
decreased as provided in the Credit Documents.
"Short Term Swing Line Lenders" shall mean at any date those
Short Term Lenders holding a Short Term Swing Line Percentage Share as set forth
on the current Commitment Schedule.
"Short Term Swing Line Percentage Share" shall mean for any
Short Term Swing Line Lender at any date that percentage which the dollar amount
of such Short Term Swing Line Lender's Short Term Swing Line Commitment bears to
the Aggregate Short Term Swing Line Commitment.
"Short Term Swing Loans" shall have the meaning given such
term in Paragraph 1(d)(2) of the Agreement.
"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 28, 1997.
"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 G 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 Loan" shall mean, collectively and severally, each of
the Multi-Year Swing Loans and each of the Short Term Swing Loans.
"Taxes" shall have the meaning given such term in Paragraph
4(k) 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.
"VA" shall mean the Veterans Administration and any
successor agency.
<PAGE>
SCHEDULE OF EXHIBITS
TO GLOSSARY
EXHIBIT DESCRIPTION
A Form of Additional Lender Agreement
B Form of Assignment Agreement
C Form of Balance Bank Agreement
D-1 Form of Covenant Compliance Certificate (Company)
D-2 Form of Covenant Compliance Certificate (Parent)
E Form of Parent Guaranty
F Form of Pre-Funding Notice
G Form of Parent Subordination Agreement
<PAGE>
<TABLE>
<CAPTION>
Exhibit 11.1
COUNTRYWIDE CREDIT INDUSTRIES, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Six Months
Ended August 31,
1997 1996
---------------- -----------------
(Dollar amounts in thousands,
except per share data)
Primary
<S> <C> <C>
Net earnings applicable to common stock $179,698 $123,121
================ =================
Average shares outstanding 106,655 102,433
Net effect of dilutive stock options --
based on the treasury stock method
using average market price 3,588 2,028
---------------- -----------------
Total average shares 110,243 104,461
================ =================
Per share amount $1.63 $1.18
================ =================
Fully diluted
Net earnings applicable to common stock $179,698 $123,121
================ =================
Average shares outstanding 106,655 102,433
Net effect of dilutive stock options --
based on the treasury stock method using
the closing market price, if higher than
average market price. 4,469 2,362
---------------- -----------------
Total average shares 111,124 104,795
================ =================
Per share amount $1.62 $1.17
================ =================
</TABLE>
<PAGE>
<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 six months ended August 31, 1997 and 1996 and for the five
fiscal years ended February 29(28), 1997 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).
Six Months Ended
August 31, Fiscal Years Ended February 29(28),
------------------------- ------------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
------------ ------------ ------------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net earnings $179,698 $123,121 $257,358 $195,720 $ 88,407 $179,460 $140,073
Income tax expense 114,889 78,717 164,540 130,480 58,938 119,640 93,382
Interest charges 181,822 153,309 316,705 281,573 205,464 219,898 128,612
Interest portion of rental
expense 2,306 3,675 7,420 6,803 7,379 6,372 4,350
------------ ------------ ------------- ------------ ------------- ------------ ------------
Earnings available to cover
fixed charges $478,715 $358,822 $746,023 $614,576 $360,188 $525,370 $366,417
============ ============ ============= ============ ============= ============ ============
Fixed charges
Interest charges $181,822 $153,309 $316,705 $281,573 $205,464 $219,898 $128,612
Interest portion of rental
expense 2,306 3,675 7,420 6,803 7,379 6,372 4,350
------------ ------------ ------------- ------------ ------------- ------------ ------------
Total fixed charges $184,128 $156,984 $324,125 $288,376 $212,843 $226,270 $132,962
============ ============ ============= ============ ============= ============ ============
Ratio of earnings to fixed
charges 2.60 2.29 2.30 2.13 1.69 2.32 2.76
============ ============ ============= ============ ============= ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Feb-28-1998
<PERIOD-END> Aug-31-1997
<CASH> 17,576
<SECURITIES> 0
<RECEIVABLES> 1,946,854
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 320,742
<DEPRECIATION> 117,146
<TOTAL-ASSETS> 10,359,482
<CURRENT-LIABILITIES> 0
<BONDS> 2,826,500
0
0
<COMMON> 5,370
<OTHER-SE> 1,809,653
<TOTAL-LIABILITY-AND-EQUITY> 10,359,482
<SALES> 0
<TOTAL-REVENUES> 723,801
<CGS> 0
<TOTAL-COSTS> 429,214
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 294,587
<INCOME-TAX> 114,889
<INCOME-CONTINUING> 179,698
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 179,698
<EPS-PRIMARY> 1.63
<EPS-DILUTED> 1.62
<FN> Total revenues includes $181,822 of interest expense
related to mortgage loan activities.
</FN>
</TABLE>
