<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
Form 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the period ended June 30, 1995
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 1-8972
CWM MORTGAGE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-3983415
(State or other jurisdiction of (I. R. S. Employer Identification No.)
incorporation or organization)
35 NORTH LAKE AVENUE, PASADENA, CALIFORNIA 91101-1857
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (800) 669-2300
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
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 close of the period covered by this report.
Common stock outstanding as of June 30, 1995: 40,573,656 shares
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CWM Mortgage Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
---------------- -----------------
<S> <C> <C>
ASSETS
Mortgage assets
Mortgage loans held for sale $ 613,260 $ 608,240
Mortgage loans held for investment 1,034,816 899,672
Collateral for CMOs 219,915 233,690
Master servicing fees receivable 132,441 120,954
Construction loans receivable 43,277 6,370
Revolving warehouse lines of credit 151,632 69,591
Cash 5,372 2,605
Investment in and advances to INMC 124,382 40,032
Other assets 24,214 16,490
---------------- -----------------
Total assets $ 2,349,309 $ 1,997,644
================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Reverse-repurchase agreements and other borrowings $ 1,820,421 $ 1,534,189
Collateralized mortgage obligations 188,826 202,259
Accounts payable and accrued liabilities 8,471 5,176
---------------- -----------------
Total liabilities 2,017,718 1,741,624
Commitments and contingencies - -
Shareholders' equity
Common stock - authorized, 100,000,000 shares of
$.01 par value; issued and outstanding, 40,573,656 shares
in 1995 and 32,281,156 in 1994 406 323
Additional paid-in capital 328,390 258,240
Net unrealized gain (loss) on available-for-sale securities
held by INMC 4,077 (890)
Cumulative earnings 122,329 100,137
Cumulative distributions to shareholders (123,611) (101,790)
---------------- -----------------
Total shareholders' equity 331,591 256,020
---------------- -----------------
Total liabilities and shareholders' equity $ 2,349,309 $ 1,997,644
================ =================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
CWM Mortgage Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
(Dollar amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
------------------------ -------------------------
1995 1994 1995 1994
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
REVENUES
Interest income
Mortgage loans held for sale $ 10,135 $ 8,221 $ 20,770 $ 19,279
Mortgage loans held for investment 20,978 2,709 41,184 2,709
Collateral for CMOs 4,562 5,497 9,243 11,746
Master servicing income 3,096 2,384 6,011 2,384
Construction loans 1,090 - 1,510 -
Revolving warehouse lines of credit 2,137 720 3,342 2,142
Advances to INMC 1,908 912 3,303 1,529
Other 33 23 64 48
---------- ----------- ---------- ----------
Total interest income 43,939 20,466 85,427 29,837
Interest expense
Reverse-repurchase agreements & other borrowings 26,706 6,573 50,817 13,685
Collateralized mortgage obligations 4,520 7,047 9,396 15,690
---------- ----------- ---------- ----------
Total interest expense 31,226 13,620 60,213 29,375
---------- ----------- ---------- ----------
Net interest income 12,713 6,846 25,214 10,462
Provision for loan losses 1,075 - 1,317 -
---------- ----------- ---------- ----------
Net interest income after provision for loan losses 11,638 6,846 23,897 10,462
Equity in earnings of INMC 2,493 (592) 1,870 1,196
Other, net 341 114 545 435
---------- ----------- ---------- ----------
Net revenues 14,472 6,368 26,312 12,093
EXPENSES
General and administrative 923 579 1,767 1,151
Management fees to affiliate 1,586 78 2,353 178
---------- ----------- ---------- ----------
Total expenses 2,509 657 4,120 1,329
---------- ----------- ---------- ----------
NET EARNINGS $ 11,963 $ 5,711 $ 22,192 $ 10,764
========== =========== ========== ==========
EARNINGS PER SHARE $0.30 $0.18 $0.57 $0.34
========== =========== ========== ==========
Weighted average shares outstanding 40,456,769 32,141,443 38,727,712 32,123,456
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
CWM Mortgage Holdings, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 22,192 $ 10,764
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Amortization and depreciation 6,975 4,254
Provision for loan losses 1,317 -
Equity in earnings of INMC (1,870) (1,196)
Purchases of mortgage loans held for sale (2,156,719) (2,793,066)
Principal repayments and proceeds from sale of mortgage loans 2,151,699 3,076,351
Change in other assets and liabilities (5,454) (3,115)
----------- -----------
Net cash provided by operating activities 18,140 293,992
Cash flows from investing activities:
Collateral for CMOs:
Principal payments on collateral 12,258 117,005
Net change in GICs held by trustees 1,150 6,162
----------- -----------
13,408 123,167
Purchases of mortgage loans held for investment (176,916) (171,009)
Principal payments on mortgage loans held for investment 43,259 -
Investment in master servicing fees receivable (19,117) (74,862)
(Increase) decrease in revolving warehouse lines of credit (82,233) 42,556
Net increase in construction loans receivable (37,042) -
Investment in INMC (15,842) (4,541)
Advances to INMC, net of cash repayments (61,671) (13,069)
----------- -----------
Net cash used in investing activities (336,154) (97,758)
Cash flows from financing activities:
Collateralized mortgage obligations:
Principal payments on securities (13,862) (122,775)
----------- -----------
(13,862) (122,775)
Net increase (decrease) in reverse-repurchase agreements 286,231 (63,618)
Net proceeds from issuance of common stock 70,233 655
Cash dividends paid (21,821) (8,999)
----------- -----------
Net cash provided by (used in) financing activities 320,781 (194,737)
----------- -----------
Net increase in cash 2,767 1,497
Cash at beginning of period 2,605 7,099
----------- -----------
Cash at end of period $ 5,372 $ 8,596
=========== ===========
Supplemental cash flow information:
Cash paid for interest $ 56,736 $ 23,965
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
CWM Mortgage Holdings, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. The consolidated financial statements include the accounts of CWM
Mortgage Holdings, Inc. and its qualified REIT subsidiaries ("CWM"). The
mortgage loan conduit operations are primarily conducted through Independent
National Mortgage Corporation, Inc. ("INMC"), a taxable corporation. CWM owns
all the preferred stock and a 99% economic interest in INMC. CWM's investment in
INMC is accounted for under a method similar to the equity method. In addition,
INMC is not consolidated for income tax purposes. As used herein, the "Company"
includes CWM and INMC.
All significant intercompany balances and transactions have been eliminated in
consolidation of CWM. Certain reclassifications have been made to the financial
statements for the period ended June 30, 1994 to conform to the June 30, 1995
financial statement presentation.
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 months ended June 30, 1995 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1995. For further information, refer to the consolidated financial statements
and footnotes thereto included in CWM's annual report on Form 10-K for the year
ended December 31, 1994.
NOTE B - RESERVE FOR CREDIT LOSSES
----------------------------------
The Company maintains a reserve for possible credit losses on mortgage loans
held for sale and investment, construction loans and warehouse lines of credit.
Additions to the reserve are based on an assessment of certain factors,
including but not limited to estimated future losses on the loans, general
economic conditions and trends in portfolio volume, composition, maturity and
delinquency statistics. Additionally, since the Company's various loan
portfolios are relatively immature, the Company looks at historical statistics
of loan portfolios with similar characteristics at other financial institutions.
Additions to the reserve are provided through a charge to earnings. Actual
losses on loans are recorded as a charge-off or a reduction to the loan loss
reserve. The balance in the reserve at December 31, 1994 totaled $500,000.
During the six months ended June 30, 1995, CWM and INMC provided $1.3
million and $650,000, respectively to the allowance for credit losses and CWM
recorded charge-offs of $42,000. The reserve is allocated to mortgage loans held
for investment, construction loans and warehouse lines of credit in the amount
of $990,000, $435,000 and $350,000, respectively. The reserve for credit losses
related to mortgage loans held for sale on INMC totaled $650,000 at June 30,
1995.
5
<PAGE>
NOTE C - INVESTMENT IN INMC
---------------------------
Summarized financial information for INMC follows (in thousands).
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
-------------------------------------
<S> <C> <C>
Mortgage loans held for sale $ 625,631 $ 180,602
Mortgage securities 254,584 138,472
Master servicing fees receivable 56,850 29,444
Other assets 21,781 16,045
-------------------------------------
Total assets $ 958,846 $ 364,563
=====================================
Reverse-repurchase agreements $ 816,085 $ 304,080
Other liabilities 17,911 20,212
Advances from CWM 78,136 16,464
Shareholders' equity 46,714 23,807
Total liabilities and -------------------------------------
shareholders' equity $ 958,846 $ 364,563
=====================================
Quarter ended Six months ended
June 30, June 30,
------------------------ ---------------------
1995 1994 1995 1994
Interest income
Mortgage loans held for sale $ 13,421 $ 4,650 $ 25,282 $11,585
Master servicing, net 2,188 (61) 3,412 (1,557)
Mortgage securities 4,669 375 8,073 375
------------------------ ---------------------
Total interest income 20,278 4,964 36,767 10,403
Interest expense 14,952 4,636 27,307 9,116
------------------------ ---------------------
Net interest income 5,326 328 9,460 1,287
Provision for loan losses 650 - 650 -
------------------------ ---------------------
Net interest income after
provision for loan losses 4,676 328 8,810 1,287
Gain (loss) on sale of mortgage
loans & securities 5,073 (3,862) 4,260 863
Gain on sale of servicing - 5,834 - 5,834
------------------------ ---------------------
Net revenues 9,749 2,300 13,070 7,984
Salaries and related expenses 3,258 2,069 5,840 3,693
General and administrative
expenses 1,925 1,249 3,741 2,182
Management fee to affiliate 224 14 232 26
------------------------ ---------------------
Total expenses 5,407 3,332 9,813 5,901
------------------------ ---------------------
Earnings (loss) before income
taxes 4,342 (1,032) 3,257 2,083
Income tax provision (benefit) 1,824 (434) 1,368 874
------------------------ ---------------------
Net earnings (loss) $ 2,518 $ (598) $ 1,889 $ 1,209
======================== =====================
</TABLE>
6
<PAGE>
Mortgage Securities. Mortgage securities consist of mortgage derivative products
including subordinated securities, principal-only securities and inverse
floaters invested in or retained in connection with the issuance of INMC's REMIC
securities. Contractual maturities on the mortgage securities range from 10 to
30 years. The following is a disclosure of the estimated fair value of mortgage
securities as of June 30, 1995 and December 31, 1994 (in thousands):
<TABLE>
<CAPTION>
Net Estimated Gross Gross
book fair unrealized unrealized
Classification value value gains losses
-------------- -------- --------- ---------- ----------
<S> <C> <C> <C> <C>
June 30, 1995:
Available-for-sale $247,483 $254,584 $11,495 $4,394
=============================================
December 31, 1994:
Available-for-sale $106,928 $105,378 $ 512 $2,062
Held-to-maturity 33,094 33,201 1,463 1,356
---------------------------------------------
Total $140,022 $138,579 $ 1,975 $3,418
=============================================
</TABLE>
During the quarter ended June 30, 1995, INMC sold mortgage securities classified
as available-for-sale with a net book value of $29.8 million (based on specific
identification) for proceeds of $32.5 million, resulting in a gross realized
gain of $2.7 million. For the six month period ended June 30, 1995, INMC sold
mortgage securities classified as available-for-sale with a net book value of
$64.5 million for proceeds of $69.1 million, resulting in a net gain of $4.6
million. This net gain was comprised of gross realized gains and gross realized
losses of $4.6 million and $25,000, respectively. All securities sold by INMC
during the six months ended June 30, 1994 occurred simultaneously with the trade
of the REMIC security. Accordingly, such assets and the related gains and losses
are not reported separately in the Consolidated Balance Sheet and Statement of
Earnings as of and for the six months ended June 30, 1994. INMC had no trading
securities at June 30, 1995 and December 31, 1994.
During the first quarter of 1995, INMC transferred its entire portfolio of
mortgage securities classified as held-to-maturity to available-for-sale. The
unrealized gain as of the date of transfer was $1.2 million. The decision to
transfer these securities to available-for-sale was based on a reassessment of
the purpose of such investments. INMC considers the category of available-for-
sale to more properly reflect INMC's intentions with respect to the mortgage
securities.
NOTE D - SUBSEQUENT EVENT
On July 19, 1995, the Board of Directors declared a cash dividend of $0.30 per
share to be paid on September 1, 1995 to shareholders of record on July 28,
1995.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
In its mortgage loan conduit business, the Company acts as an intermediary
between the originators of mortgage loans and permanent investors in mortgage-
backed securities secured by or representing an ownership interest in such
mortgage loans. The Company purchases "jumbo" and other "nonconforming" mortgage
loans from mortgage originators who generally retain the servicing rights. All
loans purchased by CWM, for which a REMIC transaction or whole loan sale is
contemplated, are committed for sale to INMC at the same price at which the
loans were acquired by CWM. INMC does not purchase any loans from entities other
than CWM. The Company's principal sources of income from its mortgage conduit
operations are gains recognized on the sale of mortgage loans, the net spread
between interest earned on mortgage loans and the interest costs associated with
the borrowings used to finance such loans pending their securitization and the
net interest earned on its long-term investment portfolio, mortgage securities
and master servicing fee income. In addition, the Company earns fee income and
net interest income through its warehouse lending programs which provide
warehouse and other types of credit to third-party mortgage loan originators.
Through the warehouse lending programs, financing is provided to small and
medium-size mortgage originators for the origination and sale of mortgage loans,
the retention, acquisition or sale of servicing rights, and the carrying of
mortgage loans pending foreclosure and/or repurchase from an investor.
In August 1994, the Company commenced its construction lending operations. The
Company offers both single-family subdivision construction lending to small-to-
medium size builders (tract construction) and consumer construction financing to
individual borrowers who wish to construct or remodel their principal or
secondary residences. The Company earns fee income and net interest income from
these programs.
In February 1995 the Company introduced a new division, Independent National
Finance Corporation (INFC), to purchase, securitize and sell mortgage loans to
borrowers with higher debt-to-income ratios and/or prior adverse credit
circumstances (i.e., "B and C" paper mortgages). The Company earns fee income
and net interest income from this program and will recognize gains from the sale
of such loans once an adequately sized pool of loans has been purchased. For the
six months ended June 30, 1995, $1.5 million in mortgage loans have been
purchased under this program.
Prior to 1993, the Company's principal source of earnings had been net interest
income generated from its mortgage portfolio which was primarily financed
through the issuance of CMOs (the "CMO Portfolio"). The amount of net interest
earned on the CMO Portfolio is directly affected by the rate of principal
repayment (including prepayments) of the related mortgage loans. When prevailing
mortgage interest rates are low relative to interest rates of existing mortgage
loans, prepayments on the underlying mortgage loans generally tend to increase
as mortgagors refinance their existing loans. The cash flow generated by these
prepayments is used to repay the CMOs which are collateralized by these mortgage
loans. However, the remaining mortgage loans typically carry a lower coupon, and
the interest spread between these loans and the underlying financing thus
narrows. The CMO Portfolio experienced accelerated prepayments during the
beginning of 1994, and since mortgage loan premiums, original issue discount and
bond issuance costs were required to be amortized, losses were ultimately
realized on the portfolio. As mortgage rates rose during 1994, principal
prepayments on the underlying mortgage loans declined and the Company
experienced stabilization of the CMO Portfolio resulting in a decrease in the
net interest expense on the CMO Portfolio in the first half of 1995 compared to
the same period of 1994.
8
<PAGE>
Financial Condition
Conduit Operations: Through INMC's mortgage loan conduit operations, the Company
purchases jumbo and other nonconforming loans from mortgage originators who
generally retain the servicing rights. During the six months ended June 30,
1995, the Company purchased $2.3 billion of non-conforming mortgage loans, which
were financed on an interim basis using equity and short-term borrowings in the
form of reverse-repurchase agreements and other borrowings. In general, the
Company, through INMC, sells the loans in the form of real estate mortgage
investment conduit ("REMICs") or whole loan sales or alternatively, through CWM,
invests in the loans on a long-term basis using financing provided by CMOs,
reverse-repurchase agreements and other borrowings. During the six months ended
June 30, 1995, INMC sold $1.7 billion of mortgage loans through the issuance of
10 series of multiple-class mortgage-backed securities in the form of REMICs and
sold $17 million of non-conforming mortgage loans as whole loans. At June 30,
1995, CWM was committed to purchase $351.8 million of mortgage loans from
various mortgage originators. The master servicing portfolio at June 30, 1995
had an aggregate outstanding principal balance of $8.2 billion with a weighted
average coupon of 7.99% compared to $4.8 billion at June 30, 1994 with a
weighted average coupon of 7.2%.
Construction Lending Operations: The Company's construction lending program
provides tract construction loans to small-to-medium size builders and consumer
construction financing to individual borrowers. At June 30, 1995 CWM had loan
commitments totaling $92.6 million for tract construction and $44.3 million for
consumer construction financing, of which $24.9 million and $20.1 million was
outstanding, respectively. The reserve for loan losses related to construction
loans totaled $435,000 at June 30, 1995. The Company had outstanding borrowings
under a revolving credit facility totaling $27.9 million at June 30, 1995
associated with the financing of construction loans.
Warehouse Lending Operations: The Company's warehouse lending program provides
secured short-term revolving financing to small- and medium-size mortgage
originators to finance mortgage loans from the closing of the loan until it is
sold to a permanent investor. Financing is also provided for the retention or
acquisition of servicing rights, receivables generated through the sale of
servicing rights, and the carrying of mortgage loans pending foreclosure and/or
repurchase from an investor. At June 30, 1995, CWM had extended committed lines
of credit under this program to 103 borrowers in the aggregate amount of $344.0
million, of which $152.0 million was outstanding. The aggregate committed lines
of credit increased from $264.5 million at June 30, 1994 with outstanding
balances of $49.5 million. The reserve for loan losses related to warehouse
loans totaled $350,000 and $0 at June 30, 1995 and 1994, respectively. Reverse-
repurchase agreements associated with CWM's financing of these lines of credit
totaled $132.8 million and $40.9 million at June 30, 1995 and 1994,
respectively.
CMO Portfolio: As of June 30, 1995, the CMO Portfolio was comprised of 14 series
of CMOs issued from CWM's inception. Collateral for CMOs decreased from $233.7
million at December 31, 1994 to $219.9 million at June 30, 1995. This decrease
of $13.8 million included repayments (including prepayments and premium and
discount amortization) of $12.5 million and a decrease in guaranteed investment
contracts ("GICs") held by trustees and accrued interest receivable of $1.1
million and $167,000 respectively. The fair value of the collateral for CMOs
totaled $217.1 million and $224.2 million at June 30, 1995 and December 31,
1994, respectively. CWM's CMOs outstanding decreased to $188.8 million at June
30, 1995 from $202.2 million at December 31, 1994. This decrease of $13.4
million resulted from principal payments (including discount amortization) on
CMOs of $13.3 million and a decrease in accrued interest payable on CMOs of
$133,000.
9
<PAGE>
Results of Operations
Quarter Ended June 30, 1995 Compared to Quarter Ended June 30, 1994
Net Earnings: CWM's net earnings were $12.0 million or $0.30 per share,
based on 40,456,769 weighted average shares outstanding for the quarter
ended June 30, 1995 compared to $5.7 million or $0.18 per share, based on
32,141,443 weighted average shares outstanding for the quarter ended
June 30, 1994. The increase in net earnings of $6.3 million was due to a
$4.7 million increase associated with CWM's mortgage conduit, warehouse and
construction lending activities, including CWM's equity in earnings (losses)
of INMC, combined with a $1.6 million decrease in net interest expense
associated with the CMO portfolio.
The increase in net earnings related to CWM's mortgage conduit, warehouse and
construction lending activities of $4.7 million is principally due to an
increase in net interest income of $4.3 million and an increase in the equity in
earnings of INMC of $3.1 million, offset by a provision for loan losses of $1.1
million and an increase in the management fee expense of $1.5 million.
Interest Income: Total interest income was $43.9 million for the quarter ended
June 30, 1995 and $20.5 million for the quarter ended June 30, 1994. This
increase in interest income of $23.4 million is primarily due to an increase in
interest on mortgage loans held for investment of $18.3 million with additional
increases in mortgage loans held for sale, warehouse lines of credit and
construction loans of $1.9 million, $1.4 million and $1.1 million, respectively.
Interest income earned on mortgage loans held for sale totaled $10.1 million and
8.2 million resulting in an effective yield of 9.48% and 7.92% for the quarters
ended June 30, 1995 and 1994, respectively. Interest income on mortgage loans
held for investment totaled $21.0 million and $2.7 resulting in an effective
yield of 7.98% and 6.92% for the quarters ended June 30, 1995 and 1994,
respectively.
Interest income earned on revolving warehouse lines of credit totaled $2.1
million and $720,000, with interest earned at an effective yield of 9.61% and
7.76% for the quarters ended June 30, 1995 and 1994, respectively. Interest
income on construction loans totaled $1.1 with interest earned at an effective
yield of 13.92% for the quarter ended June 30, 1995. Construction lending
operations began in August 1994 therefore there was no income from this
activity in the second quarter of 1994.
Interest income on collateral for CMOs was $4.6 million and $5.5 million for the
quarters ended June 30, 1995 and 1994, respectively. The decline was primarily
attributable to a decrease in the average aggregate principal amount of
collateral for CMOs outstanding, from $303.0 million for the quarter ended June
30, 1994 to $222.1 million for the quarter ended June 30, 1995, partially offset
by an increase in the effective yield earned on the collateral from 7.26% in the
second quarter of 1994 to 8.24% in the second quarter of 1995. Interest income
on collateral for CMOs includes the impact of amortization of premiums paid in
connection with acquiring the portfolio and a delay in the receipt of
prepayments and temporary investment in lower yielding short-term holdings
(GICs) until such amounts are used to repay CMOs. Accordingly, as interest rates
increase and prepayments decline, as in the second quarter of 1995 compared to
the second quarter of 1994, amortization of premium declines and the amount of
the non-earning asset associated with the delay in the receipt of prepayments
combined with the lower yielding GICs are reduced relative to the portfolio,
resulting in a higher effective yield.
Master Servicing, Net: Beginning in the second quarter of 1994, INMC began to
repay its debt to CWM by the transfer of its master servicing fees receivable
asset from INMC to CWM at its then carrying value which approximated market
value. In addition, in October 1994, CWM began investing in master servicing
fees receivable associated with REMIC securities issued by INMC. Accordingly, as
of June 30, 1995, CWM had master servicing fees receivable totaling $132.4
million. Gross master servicing income for CWM was $ 7.2 million for the quarter
ended June 30, 1995. This gross income was offset by amortization of master
servicing fees receivable of $4.1 million for the quarter ended June 30, 1995.
For the quarter ended June 30, 1994, gross master servicing totaled $3.8
million, offset by amortization of master servicing fees receivable of $1.4
million.
10
<PAGE>
Interest Expense: For the three months ended June 30, 1995 and 1994, total
interest expense was $31.2 million and $13.6 million, respectively. This
increase in interest expense of $17.6 million was due to an increase in interest
expense on reverse-repurchase agreements and other borrowings of $20.1 million
offset by a decrease in interest expense on CMOs of $2.5 million.
Interest expense on reverse-repurchase agreements and other borrowings used to
finance mortgage loans held for sale and investment, revolving warehouse lines
of credit, construction loans and master servicing fees receivable totaled $26.7
million for the quarter ended June 30, 1995, compared to $6.6 million for the
quarter ended June 30, 1994. This increase was principally the result of an
increase in the aggregate average balance of indebtedness outstanding for the
period from $554 million for the quarter ended June 30,1994 to $1.6 billion for
the quarter ended June 30, 1995 combined with an increase in the weighted
average effective rate applicable to such indebtedness from 4.76% to 6.80% for
the quarters ended June 30, 1994 and 1995, respectively.
Interest expense on CMOs was $4.5 million and $7.0 million for the three months
ended June 30, 1995 and 1994, respectively. This decrease was primarily
attributable to a decrease in average aggregate CMOs outstanding from $277.9
million for the quarter ended June 30, 1994 to $192.6 million for the quarter
ended June 30, 1995 and a decrease in the effective rate on the CMOs from 10.14%
in the second quarter of 1994 to 9.42% in the second quarter of 1995. The
decrease in the average balance of CMOs was directly related to the prepayment
activity on collateral for CMOs discussed above. The prepayments are ultimately
used to repay the related CMOs. As interest rates increase and prepayments
decline on the underlying collateral, the amortization of original issue
discount and bond issue costs also decreases resulting in a lower effective rate
on the portfolio.
Equity in Earnings of INMC: The 1995 second quarter earnings of $2.5 million
for INMC, in which CWM has a 99% economic interest, resulted principally from
net interest income of $5.3 million, including gross master servicing income of
$4.1 million and amortization of master servicing fees receivable of $1.9
million, gain on sale of loans and securities of $5.1 million, offset by
expenses of $5.4 million, a provision for loan losses of $650,000 and income
taxes of $1.8 million. During the second quarter of 1994, the $598,000 net loss
of INMC resulted principally from net interest income of $328,000, including
gross master servicing fees receivable totaling $2.8 million and amortization of
master servicing fees receivable of $2.9 million, gain on sale servicing of $5.8
million, a loss on sale of loans and securities of $3.9 million, expenses of
$3.3 million and income tax benefit of $434,000.
General and Administrative Expense: The increase in general and administrative
expense in the second quarter of 1995 compared to the second quarter of 1994 is
primarily the result of increased salaries and operating costs related to the
warehouse and construction lending operations as the Company has developed and
expanded these business lines.
Management Fees: For the three months ended June 30, 1995, management fees were
$1.6 million compared to $78,000 for the three months ended June 30, 1994. The
increase in the management fee of $1.5 million was primarily due to an increase
in incentive compensation for the second quarter of 1995, directly related to
the increase in CWM's earnings in the second quarter of 1995. Regular management
fees also increased due to increased average balances of the mortgage loans held
for investment and warehouse lines of credit.
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30, 1994
Net Earnings: CWM's net earnings were $22.2 million or $0.57 per share, based
on 38,727,712 weighted average shares outstanding for the six months ended June
30, 1995 compared to $10.8 million or $0.34 per share, based on 32,123,456
weighted average shares outstanding for the six months ended June 30, 1994. The
increase in net earnings of $11.4 million was primarily due to a $7.6 million
increase associated with CWM's mortgage conduit, warehouse and construction
lending activities, including CWM's equity in earnings of INMC, combined with a
$3.8 million decrease in net interest expense associated with the CMO portfolio.
The increase in net earnings related to CWM's mortgage conduit, warehouse and
construction lending activities of $7.6 million is principally due to an
11
<PAGE>
increase in net interest income of $10.9 million and an increase in the equity
in earnings of INMC of $674,000 offset by a provision for loan losses of $1.3
million, an increase in the management fee of $2.2 million and an increase in
general and administrative expense of $616,000.
Interest Income: Total interest income was $85.4 million for the six months
ended June 30, 1995 and $39.8 million for the six months ended June 30, 1994.
This increase in interest income of $45.6 million is primarily due to an
increase in interest on mortgage loans held for investment and interest on
master servicing of $38.5 million and $3.6 million, respectively, offset by a
decrease in interest income on collateral for CMOs of $2.5 million.
Additionally, interest on mortgage loans held for sale, warehouse lines of
credit, construction loans and advances to INMC increased $1.5 million,
$1.2 million, $1.5 million and $1.8 million, respectively.
Interest income earned on mortgage loans held for sale totaled $20.8 million
and $19.3 resulting in an effective yield of 9.47% and 7.18% for the six month
periods ended June 30, 1995 and 1994, respectively. Interest income on
mortgage loans held for investment totaled $41.2 million and $2.7 million
resulting in an effective yield of 8.12% and 6.92% for the six month periods
ended June 30, 1995 and 1994, respectively.
Interest income on revolving warehouse lines of credit totaled $3.3 million
and $2.1 million with interest earned at an effective yield of 9.75% and
7.39%, for the six month periods ended June 30, 1995 and 1994, respectively.
Interest income on construction loans totaled $1.5 million with interest
earned at an effective yield of 13.87% for the six months ended June 30, 1995.
Interest income on collateral for CMOs was $9.2 million and $11.7 million for
the six months ended June 30, 1995 and 1994, respectively. The decline was
primarily attributable to a decrease in the average aggregate principal amount
of collateral for CMOs outstanding, from $336.5 million for the six months
ended June 30, 1994 to $224.9 million for the six months ended June 30, 1995,
partially offset by an increase in the effective yield earned on the
collateral from 6.98% in the first half of 1994 to 8.29% in the first half
of 1995. Interest income on collateral for CMOs includes the impact of
amortization of premiums paid in connection with acquiring the portfolio and
a delay in the receipt of prepayments and temporary investment in lower
yielding short-term holdings (GICs) until such amounts are used to repay
CMOs. Accordingly, in periods of higher interest rates and reduced
prepayments, as in the first half of 1995 compared to the first half of
1994, amortization of premium declines and the amount of the non-earning
asset associated with the delay in the receipt of prepayments combined with
the lower yielding GICs are reduced relative to the portfolio, resulting in
a higher effective yield.
Master Servicing, Net: Gross master servicing income for CWM was $13.6
million for the six months ended June 30, 1995. This gross income was offset
by amortization of master servicing fees receivable of $7.6 million for the
six months ended June 30, 1995. Gross master servicing income for the six
months ended June 30, 1994 totaled $3.8 million, offset by amortization of
the master servicing fees receivable of $1.4 million.
Interest Expense: For the six months ended June 30, 1995 and 1994, total
interest expense was $60.2 million and $29.4 million, respectively. This
increase in interest expense of $30.8 million was due to an increase in
interest expense on reverse-repurchase agreements and other borrowings of
$37.1 million offset by a decrease in interest expense on CMOs of $6.3
million.
Interest expense on reverse-repurchase agreements and other borrowings used to
finance mortgage loans held for sale and investment, revolving warehouse lines
of credit, construction loans and master servicing fees receivable totaled
$50.8 million for the six months ended June 30, 1995 compared to $13.7
million for the six months ended June 30, 1994. The increase in interest
expense was principally the result of an increase in the aggregate average
balance of indebtedness outstanding for the period from $620.7 million for
the first half of 1994 to $1.5 billion for the first half of 1995, combined
with an increase in the weighted average effective rate applicable to such
indebtedness from 4.45% to 6.75% for the six months ended June 30, 1994 and
1995, respectively.
Interest expense on CMOs was $9.4 million and $15.7 million for the six months
ended June 30, 1995 and 1994, respectively. This decrease was primarily
attributable to a decrease in average aggregate CMOs outstanding from $308.2
million for the six months ended June 30, 1994 to $195.5 million for the
12
<PAGE>
six months ended June 30, 1995 and a decrease in the effective rate on the CMOs
from 10.18% in the first half of 1994 to 9.69% in the first half of 1995. The
decrease in the average balance of CMOs was directly related to the prepayment
activity on collateral for CMOs discussed above. The prepayments are ultimately
used to repay the related CMOs. As interest rates increase and prepayments
decline on the underlying collateral, the amortization of original issue
discount and bond issue costs also decreases resulting in a lower effective rate
on the portfolio.
Equity in Earnings of INMC: Net earnings for the six months ended June 30, 1995
for INMC of $1.9 million, in which CWM has a 99% economic interest, resulted
principally from net interest income of $9.5 million, including gross master
servicing fees receivable of $7.0 million and amortization of master servicing
fees receivable of $3.6 million, and gains on sale of loans and securities of
$4.3 million, offset by a provision for loan losses of $650,000, expenses of
$9.8 million, and income taxes of $1.4 million. During the first half of 1994,
net earnings of $1.2 million for INMC resulted principally from net interest
income of $1.3 million, including gross master servicing fees receivable of $6.7
million and amortization of master servicing fees receivable of $8.3 million,
gain on sale of loans and securities of $863,000 and a gain on sale of servicing
of $5.8 million, offset by expenses totaling $5.9 million and income taxes of
$874,000.
General and Administrative Expense: General and Administrative expenses
increased from $1.2 million for the first six months of 1994 to $1.8 million for
the same period of 1995. This increase is primarily the result of increased
salaries and operating costs related to the warehouse and construction lending
operations as the Company has developed and expanded these business lines.
Management Fees: For the six months ended June 30, 1995, management fees were
$2.4 million compared to $178,000 for the comparable 1994 period. This increase
was primarily due to an increase in incentive compensation for the first half of
1995, directly related to the increase in CWM's earnings for the period. Regular
management fees also increased in the six months ended June 30, 1995 due to
increased average balances of the mortgage loans held for investment and
warehouse lines of credit.
Liquidity and Capital Resources
The Company uses proceeds from the issuance of CMOs, reverse-repurchase
agreements, other borrowings and proceeds from the issuance of common stock to
meet its working capital needs. In addition, in connection with its mortgage
conduit operations, the Company issues REMIC securities to help meet such needs.
In February 1995, the Company completed an additional public offering in which
8.05 million shares of the Company's common stock were issued at an offering
price of $9.125 per share. The offering increased the total capitalization of
the Company to approximately $315 million. The net proceeds from this offering
of $69 million has been used to continue the Company's mortgage loan acquisition
and securitization activities, to expand its construction lending operations and
to fund INFC.
In May 1995, the Company entered into a committed credit facility in the
aggregate amount of $100 million with First Union National Bank of North
Carolina ("First Union"). The credit facility consists of six tranches secured
by, and for the purpose of financing, mortgage loans held for sale, mortgage
loans held for investment, tract construction loans, master servicing rights,
servicing-secured and servicing-receivable loans, and foreclosure and repurchase
loans. The financing for the tract construction loans, master servicing rights,
servicing-secured and servicing-receivable loans and foreclosure and repurchase
loans is committed for a period of two years. The Company and First Union are in
the process of seeking commitments from additional lenders with the objective of
raising the aggregate credit limit for the syndicated facility to $300 million.
The REIT provisions of the Internal Revenue Code restrict CWM's ability to
retain earnings and thereby replenish the capital committed to its mortgage
portfolio by requiring CWM to distribute to its shareholders substantially all
of its taxable income from operations.
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Management believes that the cash flow from operations and the current and
potential financing arrangements are sufficient to meet current liquidity
requirements. The Company's ability to meet future liquidity requirements is
subject to the renewal of credit facilities or obtaining other sources of
financing, including raising additional debt or equity from time to time.
Inflation
Interest rates often increase during periods of rising inflation. Higher
interest rates may depress the market value of the Company's investment
portfolio if the yield on such holdings does not keep pace with increases in
interest rates. As a result of decreased market values it could be necessary for
the Company to borrow additional funds and pledge additional assets to maintain
financing for its holdings that have not been financed to maturity through the
issuance of CMOs or other debt securities. Increases in short-term borrowing
rates relative to rates earned on holdings that have not been financed to
maturity through the issuance of CMOs or other debt securities may also
adversely affect the Company's earnings. However, the Company has implemented a
hedging strategy which may mitigate this adverse effect. In addition, high
levels of interest rates tend to decrease the rate at which mortgages prepay. A
decrease in the rate of prepayments may lengthen the estimated average lives of
the underlying mortgages supporting master servicing fees receivable and for
classes of the CMOs issued by the Company and may result in higher residual cash
flows from such assets than would otherwise have been obtained. However, higher
rates of interest may also discourage potential mortgagors from borrowing or
refinancing mortgage loans, thus decreasing the volume of loans available to be
purchased through the company's mortgage conduit operations.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
Exhibits
--------
3.1 Certificate of Incorporation, as amended
3.2 Bylaws, as amended
10.1 1995 Amended and Extended Management Agreement
10.2 Termination Agreement
10.3 1995 Amended and Extended Loan Purchase and Administrative
Services Agreement
*10.4 Facility I Credit Agreement
*10.5 Facility II Credit Agreement
10.6 Security and Collateral Agency Agreement
27 Financial Data Schedule
Reports on Form 8-K.
--------------------
None
-----------
* Certain confidential portions of this exhibit have been filed
separately with the Securities and Exchange Commission in connection
with a request for confidential treatment filed pursuant to Rule 406
under the Securities Act of 1933, as amended.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Pasadena, State of California, on August 14, 1995.
CWM MORTGAGE HOLDINGS, INC.
By: /Michael W. Perry
-----------------
Michael W. Perry
Executive Vice President and Chief
Operating Officer
By: /Carmella L. Grahn
--------------------
Carmella L. Grahn
Senior Vice President and Chief
Accounting Officer
16
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware, does hereby certify as follows:
ARTICLE I
NAME
----
The name of the Corporation is: Countrywide Mortgage Investments, Inc.
(the "Corporation").
ARTICLE II
REGISTERED AGENT
----------------
The address of the registered office of the Corporation in the State of
Delaware is: Corporation Trust Center, 1209 Orange Street, New Castle County,
Wilmington, Delaware 19801. The name of the Corporation's registered agent at
such registered office is The Corporation Trust Company.
<PAGE>
ARTICLE III
PURPOSE
-------
The purpose for which the Corporation is formed is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware as now or hereafter in force.
ARTICLE IV
CAPITAL STOCK
-------------
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is Thirty Million (30,000,000),
consisting of Thirty Million (30,000,000) shares of Common Stock having a par
value of $0.01 per share.
Section 2. All persons who shall acquire stock in the Corporation
shall acquire the same subject to the provisions of this Certificate of
Incorporation and the Bylaws of the Company.
Section 3. Each share of Common Stock shall entitle the owner
thereof to vote at the rate of one (1) vote for each share of Common Stock
held.
2
<PAGE>
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING AND
REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE DIRECTORS
AND STOCKHOLDERS
----------------
Section 1. The number of Directors shall be determined by or in the
manner provided in the Bylaws of the Corporation, as they may be amended from
time to time. The names and mailing addresses of the persons who shall serve as
directors until the first annual meeting of stockholders or until their
successors are duly elected and qualified are:
David S. Loeb
Countrywide Mortgage Investments, Inc.
155 North Lake Avenue
Pasadena, California 91109
Angelo R. Mozilo
Countrywide Mortgage Investments, Inc.
155 North Lake Avenue
Pasadena, California 91109
Frederick J. Napolitano
Pembroke Enterprises, Inc.
281 Independence Boulevard
Suite 626
Virginia Beach, Virginia 23462
Harley W. Snyder
Harley Snyder Company
407 East Lincoln Way
Valparaiso, Indiana 46383
Jack Carlson
9901 Bluegrass Road
Potomac, Maryland 20854
3
<PAGE>
Robert J. Donato
PaineWebber Incorporated
700 South Flower Street
Los Angeles, California 90017
The powers of the Incorporator shall terminate upon the filing of this
Certificate of Incorporation.
Section 2. The Board of Directors of the Corporation is hereby
empowered to authorize the issuance from time to time of shares of capital
stock, whether now or hereafter authorized, for such consideration as the Board
of Directors may deem advisable, subject to such limitations as may be set forth
in this Certificate of Incorporation or in the Bylaws of the Corporation or in
the Delaware General Corporation Law.
Section 3. No holder of shares of capital stock of the Corporation
shall, as such holder, have any right to purchase or subscribe for any shares of
the capital stock of the Corporation or any other security of the Corporation
which it may issue or sell (whether out of the number of shares authorized by
this Certificate of Incorporation, or out of any shares of the capital stock of
the Corporation hereafter authorized or acquired by it after the issue thereof,
or otherwise) other than such right, if any, as the Board of Directors, in its
discretion, may determine.
4
<PAGE>
Section 4. A Director of this Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except for liability (i) for any breach of the
Directors's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the Director derived any
improper personal benefit. If the Delaware General Corporation Law is amended
after the date hereof to permit the further elimination or limitation of the
personal liability of directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law, as so amended. Any repeal or modification
of this Section 4 of Article V by the stockholders of the Corporation shall not
adversely affect any right or protection of a Director of the Corporation in
respect of any act or omission occurring prior to the time of such repeal or
modification.
Section 5. The Corporation shall indemnify and shall advance
expenses to each Director, officer, employee and agent of this Corporation to
the fullest extent permitted by the Delaware General Corporation Law as now or
hereafter in force. The indemnification provided by this
5
<PAGE>
Section shall not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, and the
Board of Directors is expressly authorized to adopt bylaws and./or enter into
agreements whereby the Corporation agrees to indemnify and advance expenses to
its Directors, officers, employees and agents.
Section 6. The Board of Directors of the Corporation may make, alter
or repeal from time to time any of the Bylaws of the Corporation except any
particular Bylaw which is specified in the Bylaws as not subject to alteration
or repeal by the Board of Directors.
Section 7. The Board of Directors may authorize, subject to such
approval of stockholders and other conditions, if any, as may be required by any
applicable statute, bylaw, rule or regulation, the execution and performance by
the Corporation of one or more agreements with any person, corporation,
association, company, trust, partnership (limited or general) or other
organization whereby, subject to the supervision and control of the Board of
Directors, any such other person, corporation, association, company, trust,
partnership (limited or general), or other organization shall render or make
available to the Corporation managerial, investment,
6
<PAGE>
advisory and/or related services, office space and other services and facilities
(including the management or supervision of the investments of the Corporation)
upon such terms and conditions as may be provided in such agreement or
agreements (including the compensation payable thereunder by the Corporation).
Section 8. The Board of Directors may authorize any agreement of the
character described in Section 7 of this Article V or other contract or
transaction with any one or more Directors or officers or between the
Corporation and any other corporation, partnership (limited or general),
association, trust, company or other organization in which one or more of the
Corporation's Directors or officers are directors or officers, or similar
parties, or otherwise have a financial interest, and no such agreement, contract
or transaction shall be void or voidable solely by reason of the existence of
any such relationship or solely because the Director or officer so interested is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the agreement, contract or transaction, or solely
because such Director's votes are counted for such purpose if: (i) the material
facts as to the Director's or officer's relationship or interest and as to the
agreement or transaction are disclosed or are known to the Board of Directors or
such committee and the Board of
7
<PAGE>
Directors or committee in good faith authorizes, approves or ratifies the
agreement, contract or transaction by the affirmative vote of a majority of
the disinterested Directors, even though the disinterested Directors be less
than a quorum; or (ii) the material facts as to such Director's or Officer's
relationship or interest and as to the agreement or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the agreement,
contract or transaction is authorized, approved or ratified in good faith by a
majority of votes cast by the stockholders entitled to vote other than the votes
of shares owned of record or beneficially by the interested Director or officer;
or (iii) the agreement, contract or transaction is fair to the Corporation as of
the time it is authorized, approved or ratified by the Board of Directors, a
committee thereof or the stockholders. Any Director of the Corporation who is
also a director, officer, stockholder or member of such other entity may be
counted in determining the existence of a quorum at any meeting of the Board of
Directors or of a committee which authorizes any such agreement, contract or
transaction. If such a Director votes at a meeting to approve or disapprove a
transaction as described in this Section, such vote shall not affect the
validity of such a transaction provided the provisions of this Section are
otherwise satisfied.
8
<PAGE>
Section 9. Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual meeting
or at a special meeting of stock-holders of the Corporation. No action may be
taken by the written consent of the stockholders. Action need not be by written
ballot unless the chairman of the meeting shall so direct.
Section 10. The enumeration and definition of particular powers of
the Board of Directors included in the foregoing shall in no way be limited or
restricted by reference to or inference from the terms of any other clause of
this or any other Article of the Certificate of Incorporation of the
Corporation, or construed as or deemed by inference or otherwise in any manner
to exclude or limit the powers conferred upon the Board of Directors under the
General Corporation Law of the State of Delaware as now or hereafter in force.
ARTICLE VI
RESTRICTION ON ACQUISITION AND TRANSFER OF SHARES
-------------------------------------------------
Section 1. Whenever it is deemed by the Board of Directors to be
prudent in protecting the status of the Corporation as a "real estate investment
trust" under the Internal Revenue Code of 1986, as amended (the "Code"), the
9
<PAGE>
Board of Directors may require to be filed with the Corporation as a
condition to permitting any proposed transfer, and/or the registration of any
transfer, of shares of the Corporation a statement or affidavit from any
proposed transferee setting forth the number of shares already owned after
application of the attribution rules (the "Attribution Rules") of Section 544 of
the Code by the transferee and any related person(s) specified in the form
prescribed by the Board of Directors for that purpose. All contracts for the
sale or other transfer of shares of the Corporation shall be subject to this
provision.
Section 2. As a condition to the transfer and/or registration of
transfer of any shares of capital stock of the Corporation which would result in
any stockholder owning, directly or indirectly, shares in excess of 9% of the
outstanding shares of capital stock of the Corporation, the transferee of such
shares shall file with the Corporation an affidavit setting forth the number of
shares of capital stock of the Corporation owned directly and indirectly by the
person filing the affidavit. For purposes of this Section, shares of capital
stock not owned directly shall be deemed to be owned indirectly by a person if
that person or a group of which he is a member would be the beneficial owner of
such shares for purposes of Rule 13d-3, or any successor rule thereto,
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of
10
<PAGE>
1934 (the "Exchange Act"), and/or would be considered to own
such shares by reason of the Attribution Rules. The affidavit to be filed with
the Corporation shall set forth all information required to be reported in
returns filed by stockholders under Regulation 1.857-9 issued by the Internal
Revenue Service, or similar provisions of any successor regulation, and in
reports to be filed under Section 13(d) of the Exchange Act. The affidavit, or
an amendment thereto, must be filed with the Corporation within 10 days after
demand therefor and in any event at least 15 days prior to any transfer,
registration of transfer or transaction which, if consummated, would cause the
filing person to hold shares in excess of 9% of the outstanding shares of
capital stock of the Corporation. No transfer nor any registration of any
purported transfer in violation of the notice provisions of this Section shall
be valid or be given effect. Notwithstanding the foregoing, compliance with the
requirements of this Section 2 shall not validate any purported transfer which
would result in any stockholder owning, directly or indirectly, shares in excess
of the "Limit" as defined in Section 4 of this Article VI.
Section 3. Any acquisition of shares of capital stock of the
Corporation that would result in any stockholder owning, directly or indirectly,
shares in excess of the "Limit" as defined in Section 4 of this Article VI
11
<PAGE>
shall be void ab initio to the fullest extent permitted under applicable law and
the intended transferee of "Excess Shares," as defined in Section 4 of this
Article VI, shall be deemed never to have had an interest therein. If the
foregoing provision is determined to be void, voidable or invalid by virtue of
any legal decision, statute, rule or regulation, then the transferee of such
shares shall be deemed to have acted as agent on behalf of the Corporation in
acquiring such shares and to hold such shares on behalf of the Corporation.
Section 4. Notwithstanding any other provision hereof to the
contrary, and subject to the provisions of Section 5 of this Article VI, no
person, or persons acting as a group, shall at any time directly or indirectly
acquire ownership in the aggregate of more than 9.8% of the outstanding shares
of capital stock of the Corporation (the "Limit"). Shares which would, but for
this Section 4, be owned by a person or a group of persons in excess of the
Limit at any time shall be deemed "Excess Shares." For the purposes of
determining and dealing with Excess Shares, the term "ownership" shall be
defined to include shares of capital stock constructively owned by a person
under the Attribution Rules and shall also include shares of capital stock
beneficially owned by a person for purposes of Rule 13d-3, or any successor rule
thereto, promulgated by the Securities and Exchange Commission under the
Exchange Act
12
<PAGE>
and the term "group" shall have the same meaning as that term has for purposes
of Section 13(d)(3) of such Act. All shares of the Corporation which any person
has the right to acquire upon exercise of outstanding rights, options and
warrants, and upon conversion of any securities convertible into shares, if any,
shall be considered outstanding for purpose of the Limit if such inclusion will
cause such person to own more than the Limit. Unless otherwise required by
applicable law, the Corporation shall refuse to transfer or register the
transfer of, and shall instruct the transfer agent of the Corporation to refuse
to transfer or register the transfer of, shares to the extent that, as a result
of such transfer or registration of transfer, any person would hold Excess
Shares.
Section 5. The Limit set forth in Sections 3 and 4 of this Article
VI and the filing requirements of Section 2 of this Article VI shall not apply
to the acquisition of shares of the Corporation by the Corporation, by an
underwriter in connection with a public offering of shares of the Corporation,
or in any transaction involving the issuance of shares by the Corporation, in
which the Board of Directors determines that the underwriter or other person or
party initially acquiring such shares will timely distribute such shares to or
among others such that, following such distribution, none of such shares will be
Excess Shares.
13
<PAGE>
The Board of Directors in its discretion may exempt from the Limit under
Sections 3 and 4 of this Article VI and from the filing requirements of
Section 2 of this Article VI ownership or transfers of certain designated shares
while owned by or transferred to any subsidiary of this Corporation or to any
other person in connection with a reorganization, recapitalization, merger,
liquidation or similar transaction approved by the Board of Directors, provided
that such person has given the Board of Directors evidence and assurances
acceptable to the Board of Directors that the qualification of the Corporation
as a "real estate investment trust" under the Code would not be jeopardized
thereby.
Section 6. Notwithstanding Sections 3 and 4 of this Article VI, if
at any time more than 9.8% of the shares of capital stock of the Corporation has
become concentrated in the hands of a "beneficial owner" (as such term is
defined for purposes of Rule 13d-3, or any successor rule thereto promulgated by
the Securities and Exchange Commission, under the Exchange Act), such beneficial
owner and each of his "affiliates" (as such term is defined on December 1, 1986
in Rule 12b-2 under the Exchange Act) owning any shares of capital stock of the
Corporation shall be deemed to have offered to sell to the Corporation or its
designee, on a date fixed by the Corporation, as specified in the Corporation's
notice of its or its designee's
14
<PAGE>
acceptance of such offer of sale, such a number of shares of capital stock
sufficient, in the opinion of the Board of Directors, to maintain or bring the
direct or indirect ownership of shares of capital stock of the Corporation of
such beneficial owner to no more than the Limit. The price at which the
Corporation or its designee may purchase the outstanding shares of capital stock
of the Corporation pursuant to the preceding sentence of this Section (the
"Purchase Price") shall be equal to the closing sales price for the shares, if
then listed on a national securities exchange, or the average of the closing
sales prices for the shares if then listed on more than one national securities
exchange, or if the shares are not then listed on a national securities
exchange, the latest bid quotation for the shares if then traded over-the-
counter, on the last business day immediately preceding the day on which the
Corporation's notice of its acceptance of the beneficial owner's and/or his
affiliates' offer of sale is sent, or, if no such closing sales prices or
quotations are available, then the Purchase Price shall be equal to the net
asset value of such stock (determined on the basis of the fair market value of
the assets of the Corporation) as determined by the Board of Directors in
accordance with the provisions of applicable law. The Purchase Price of any
shares acquired by the Corporation or its designee shall be paid, at the option
of the Corporation, in cash or in the form of an unsecured, subordinated
promissory note of the Corporation or its
15
<PAGE>
designee bearing interest and having a term to maturity (to be not less than
five nor more than twenty years) as shall be determined by the Board of
Directors. Payment of the Purchase Price shall be made at such time and in such
manner as may be determined by the Board of Directors and specified in the
notice of acceptance sent to the beneficial owner and/or his affiliates. From
and after the date fixed for purchase by the Board of Directors and the tender
by the Corporation of the Purchase Price therefor, each as specified in the
Corporation's notice of its acceptance of the offer of sale, the holder of any
shares to be so purchased shall cease to be entitled to any rights as a holder
of such shares, excepting only the right to payment of the Purchase Price fixed
as aforesaid.
Section 7. Nothing contained in this Article VI or in any other
provision hereof shall limit the authority of the Board of Directors to take
such other action as it deems necessary or advisable to protect the Corporation
and the interests of its stockholders by preservation of the Corporation's
status as a "real estate investment trust" under the Code.
Section 8. For purposes of this Article VI only, the term "person"
shall include individuals, corporations, limited partnerships, general
partnerships, joint stock
16
<PAGE>
companies or associations, joint ventures, association, consortia, companies,
trusts, banks, trust companies, land trusts, common law trusts, business trusts
and other entities, and governments and agencies and political subdivisions
thereof; provided, however, that such term shall not include this Corporation or
any of its subsidiaries.
Section 9. If any provision of this Article VI or any application of
any such provision is determined to be invalid by any federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall- be
affected only to the extent necessary to comply with the determination of such
court.
ARTICLE VII
AMENDMENTS
----------
The Corporation reserves the right to adopt, repeal, rescind, alter,
restate or amend in any respect any provision contained in this Certificate of
Incorporation in the manner now or hereafter prescribed by applicable law, and
all rights conferred on stockholders herein are granted subject to this
reservation.
17
<PAGE>
ARTICLE VIII
INCORPORATOR
------------
The name of the incorporator is Andrea J. Melville. The
Incorporator's mailing address is 400 South Hope Street, Los Angeles, California
90071-2899.
IN WITNESS WHEREOF, the undersigned incorporator of Countrywide
Mortgage Investments, Inc. hereby executes the foregoing Certificate of
Incorporation and acknowledges the same to be her act and further acknowledges
that, to the best of her knowledge, the matters and facts set forth therein are
true in all material respects under the penalties of perjury.
Dated this 19th day of January, 1987.
\s\ Andrea Melville
-------------------
18
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
Countrywide Mortgage Investments, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
hereby certifies as follows:
1. That at a meeting of the Board of Directors of Countrywide Mortgage
Investments, Inc., (the "Corporation") resolutions were duly adopted setting
forth a proposed amendment of the Certificate of Incorporation of said
corporation, declaring said amendment to be advisable and calling for the
proposal to be presented to the shareholders of the Corporation at a Special
Meeting of the Shareholders. The resolution setting forth the proposed
amendment is as follows:
RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by revising Article IV, Section 1 thereof so that, as amended,
Article IV, Section 1 shall read as follows:
"CAPITAL STOCK
-------------
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is Sixty Million (60,000,000),
consisting of Sixty Million (60,000,000) shares of Common Stock having a
par value of $0.01 per share."
2. That thereafter, the Special Meeting of the Stockholders, held on
December 9, 1993, of said corporation was duly called and held, upon notice in
accordance with Section 222 of the General Corporation Law of the State of
Delaware at which meeting the necessary number of shares as required by statue
were voted in favor of the amendment.
3. That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, said Countrywide Mortgage Investments, Inc. has caused
this certificate to be signed by Angelo R. Mozilo, its President, and Sandor E.
Samuels, its Secretary, this 11th day of December, 1993.
BY: \s\ Angelo R. Mozilo
---------------------------
Angelo R. Mozilo
President
ATTEST:
\s\ Sandor E. Samuels
-----------------------
Sandor E. Samuels
Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
Countrywide Mortgage Investments, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
hereby certifies as follows:
1. That at a meeting of the Board of Directors of Countrywide
Mortgage Investments, Inc., (the "Corporation") resolutions were duly adopted
setting forth proposed amendments of the Certificate of Incorporation of said
Corporation, declaring said amendments to be advisable and calling for the
proposal to be presented to the stockholders of the Corporation at the Annual
Meeting of the Stockholders. The resolutions setting forth the proposed
amendments are as follows:
RESOLVED, That the Certificate of Incorporation of the Corporation be
amended by revising ARTICLE I so that, as amended, ARTICLE I shall read as
follows:
ARTICLE I
"NAME"
------
The name of the Corporation is: CWM Mortgage Holdings, Inc. (the
"Corporation").
RESOLVED FURTHER, That the Certificate of Incorporation of the Corporation
be further amended by adding a new ARTICLE VII to read as follows and by
renumbering the existing ARTICLES VII and VIII as ARTICLES VIII and IX,
respectively:
ARTICLE VII
ACQUISITION OF SHARES BY CERTAIN ORGANIZATIONS
----------------------------------------------
Section 1. Whenever it is deemed by the Board of Directors to be
prudent in avoiding
(a) the direct or indirect imposition of a penalty tax on the
Corporation (including the imposition of an entity-level tax on one or
more real estate mortgage investment conduits ("REMICs") or one or
more taxable mortgage pools in which the Corporation has acquired or
plans to acquire an interest) or
<PAGE>
(b) the endangerment of the tax status of one or more REMICs or
one or more taxable mortgage pools in which the Corporation has
acquired or plans to acquire an interest, the Board of Directors may
require to be filed with the Corporation a statement or affidavit from
any holder or proposed transferee of capital stock of the Corporation
stating whether the holder or proposed transferee is
(i) the United States, any state or political subdivision
thereof, any possession of the United States, any foreign
government, any international organization, or any agency or
instrumentality of the foregoing, or any other organization that
is exempt from federal income taxation (including taxation under
the unrelated business taxable income provisions of the Code) (a
"Disqualified Organization") or
(ii) a partnership, trust, real estate investment trust,
regulated investment company, or other pass-through entity in
which a Disqualified Organization holds or is permitted to hold a
direct or indirect beneficial interest (a "Pass-Through Entity").
Any contract for the sale or other transfer of shares of capital
stock of the Corporation shall be subject to this provision.
Furthermore, the Board of Directors shall have the right, but shall
not be required, to refuse to transfer any shares of capital stock of
the Corporation purportedly transferred, if either
(a) a statement or affidavit requested pursuant to this
Section 1 has not been received, or
(b) the proposed transferee is a Disqualified Organization or
Pass-Through Entity.
Section 2. Any acquisition of shares of capital stock of the
Corporation that could or would
(a) result in the direct or indirect imposition of a penalty tax
on the Corporation (including the imposition of an entity-level tax on
one or more REMICs or one or more taxable mortgage pools in which the
Corporation has acquired or plans to acquire an interest) or
(b) endanger the tax status of one or more REMICs or one or more
taxable mortgage pools in which the Corporation has acquired or plans
to acquire an interest shall be void ab initio to the fullest extent
permitted
2
<PAGE>
under applicable law and the intended transferee of the
subject shares shall be deemed never to have had an interest therein.
If the foregoing provision is determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the
transferee of those shares shall be deemed, at the option of the
Corporation, to have acted as agent on behalf of the Corporation in
acquiring those shares and to hold those shares on behalf of the
Corporation.
Section 3. Whenever it is deemed by the Board of Directors to be
prudent in avoiding
(a) the direct or indirect imposition of a penalty tax on the
Corporation (including the imposition of an entity-level tax on one or
more REMICs or one or more taxable mortgage pools in which the
Corporation has acquired or plans to acquire an interest) or
(b) the endangerment of the tax status of one or more REMICs or
one or more taxable mortgage pools in which the Corporation has
acquired or plans to acquire an interest, the Corporation may redeem
shares of its capital stock.
Any such redemption shall be conducted in accordance with the
procedures set forth in Section 6 of Article VI.
Section 4. Nothing contained in this Article or in any other
provision hereof shall limit the authority of the Board of Directors to
take any and all other action as it in its sole discretion deems necessary
or advisable to protect the Corporation or the interests of its
stockholders by avoiding
(a) the direct or indirect imposition of a penalty tax on the
Corporation (including the imposition of an entity-level tax on one or
more REMICs or one or more taxable mortgage pools in which the
Corporation has acquired or plans to acquire an interest) or
(b) the endangerment of the tax status of one or more REMICs or
one or more taxable mortgage pools in which the Corporation has
acquired or plans to acquire an interest.
Section 5. If any provision of this Article or any application of any
such provision is determined to be invalid by any federal or state court
having jurisdiction over the issue, the validity of the remaining
provisions shall be affected only to the extent necessary to comply with
the determination of that court.
3
<PAGE>
2. That thereafter, the Annual Meeting of the Stockholders of the
Corporation was duly called and held on May 17, 1994, upon notice in accordance
with Section 222 of the General Corporation Law of the State of Delaware at
which meeting the necessary number of shares as required by statute were voted
in favor of the amendments.
3. That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Countrywide Mortgage Investments, Inc. has caused
this certificate to be signed by Sterling Blair Albernathy, its Senior Vice
President, and Richard H. Wohl, its Secretary, this 20th day of May, 1994.
BY: \s\ Sterling Blair Abernathy
----------------------------
Sterling Blair Abernathy
Senior Vice President
ATTEST:
\s\ Richard H. Wohl
----------------------
Richard H. Wohl
Secretary
S:\APICK\cmiarmd1
4
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CWM MORTGAGE HOLDINGS, INC.
CWM Mortgage Holdings, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
hereby certifies as follows:
1. That at a meeting of the Board of Directors of CWM Mortgage
Holdings, Inc. (the "Corporation") resolutions were duly adopted setting forth a
proposed amendment of the Certificate of Incorporation of said Corporation,
declaring said amendment to be advisable and calling for the proposal to be
presented to the shareholders of the Corporation at the Annual Meeting of the
Shareholders. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, That the Certificate of Incorporation of the Corporation
be amended by revising Article IV, Section 1 thereof so that, as
amended, Article IV, Section 1 shall read in full as follows:
"CAPITAL STOCK
-------------
Section 1. The total number of shares of capital stock which the
Corporation shall have authority to issue is One Hundred Million
(100,000,000), consisting of One Hundred Million (100,000,000) shares
of Common Stock having a par value of $0.01 per share."
2. That thereafter, the Annual Meeting of the Shareholders of the
Corporation was duly called and held on May 17, 1995, upon notice in accordance
with Section 222 of the General Corporation Law of the State of Delaware at
which meeting the necessary number of shares as required by statute were voted
in favor of the amendment.
3. That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Michael W. Perry, its Executive Vice President, and Richard H. Wohl,
its Secretary, this 18th day of May, 1995.
\s\ Michael W. Perry
------------------------------
Michael W. Perry
Executive Vice President
ATTEST:
\s\ Richard H. Wohl
--------------------------
Richard H. Wohl
Secretary
-2-
<PAGE>
EXHIBIT 3.2
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
A DELAWARE CORPORATION
___________________
BYLAWS
___________________
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of the Corporation in
the State of Delaware shall be located at the principal place of business in
that state of the entity acting as the corporation's registered agent in the
State of Delaware.
SECTION 2. Principal Executive Office. The principal executive office of
the Corporation shall be in the City of Pasadena, State of California.
SECTION 3. Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
Meetings of Stockholders
SECTION 1. Place of Meetings. Meetings of stockholders shall be held on
such date, at such time and at such place within the United States as shall be
determined from time to time by the Board of Directors and stated in the notice
of meeting or in a duly executed waiver of notice thereof.
SECTION 2. Annual Meeting. The annual meeting of stockholders of the
Corporation shall be held on such date, at such time and at such place as shall
be designated annually by the Board of Directors and stated in the notice of the
meeting or in a duly executed waiver of notice thereof, at which meeting the
stockholders shall elect a Board of Directors and transact such other business
as may properly be brought before the meeting.
SECTION 3. Special Meetings. At any time in the interval between annual
meetings, special meetings of the stockholders, unless otherwise provided by law
or by the Certificate of Incorporation, may be called by a majority of the Board
of Directors, a majority of the Unaffiliated Directors (as defined in Article
III, Section 3), the President or the Chairman of the Board of Directors. The
date, time and place of a special meeting shall be determined by the Board of
Directors or the officer calling the meeting and shall be stated in the written
notice of the meeting, which notice shall state the purpose or purposes for
which the meeting is called. Business of the Corporation transacted at any
special meeting of stockholders by whomever called shall be limited to the
purposes stated in the written notice thereof.
SECTION 4. Notice of Meetings; Waiver of Notice; Adjournment. Not less than
ten nor more than sixty days before the date of every stockholders' meeting, the
Secretary shall give to each stockholder of record entitled to vote at such
meeting, and to each stockholder not entitled to vote who is entitled by statute
to notice, written or printed notice stating the date, time and place of the
meeting and the purpose or purposes for which the meeting is called, either by
mail or by presenting it personally to the stockholder or by leaving it at his
residence or usual place of business. If mailed with postage thereon prepaid,
such notice shall be deemed to be given when deposited in the United States mail
addressed to the stockholder at his address as it appears on the records of the
Corporation.
Notice of any meeting of stockholders shall be deemed waived by any
stockholder who shall attend such meeting in person or by proxy, or who shall,
either before or after the meeting, submit a signed waiver of notice which is
filed with the records of the meeting. When a meeting is adjourned to another
time and place, unless the
<PAGE>
Board of Directors after the adjournment shall fix a new record date for an
adjourned meeting or the adjournment is for more than thirty days after the
original record date, notice of such adjourned meeting need not be given if the
time and place to which the meeting shall be adjourned were announced at the
meeting at which the adjournment is taken.
SECTION 5. Quorum. At any meeting of stockholders the presence in person or
by proxy of stockholders entitled to cast a majority of the shares of stock
entitled to vote at the meeting shall constitute a quorum, unless otherwise
provided by any statute or by the Certificate of Incorporation. In the absence
of a quorum no business may be transacted, except that the holders of a majority
of the shares of stock present in person or by proxy and entitled to vote may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, except as required by Section 4 above, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally noticed.
SECTION 6. Voting. The affirmative vote of a majority of the shares of
common stock which are present in person or represented by proxy and entitled to
vote on the matter at a meeting of stockholders, duly called and at which a
quorum is present, shall be sufficient to constitute the act of the stockholders
as to any matter which properly comes before the meeting, unless more than a
majority of the votes shall be required by statute or by the Certificate of
Incorporation. If a vote shall be taken on any question other than the election
of directors (which shall be by written ballot), then unless required by statute
or these bylaws, or determined by the chairman of the meeting to be advisable,
any such vote need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholders voting, or by his proxy, and shall state the number
of shares voted.
Unless a statute or the Certificate of Incorporation provides otherwise, each
holder of record of outstanding shares of stock of the Corporation having voting
power shall be entitled to one vote for every share of such stock on each matter
submitted to a vote at a meeting of stockholders. A stockholder may vote only
the shares owned by him as shown an the record of stockholders of the
Corporation as of the record date determined pursuant to Section 7 below or
pursuant to applicable law and may cast his shares in person or by proxy
executed in writing by the stockholder or by his duly authorized attorney-in-
fact, but no proxy shall be valid after three years from its date, unless
otherwise provided in the proxy. At all meetings of stockholders, unless the
voting is conducted by inspectors, all questions relating to the qualification
of voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting.
SECTION 7. Fixing of Record Date. The Board of Directors may fix, in
advance, a record date not more than sixty not less than ten days before the
date then fixed for the action requiring determination by the stockholders. All
persons who were holders of record of shares at such time, and no others, shall
be entitled to vote at such meeting and any adjournment thereof.
SECTION 8. Organization and Order of Business. At each meeting of the
stockholders, the Chairman of the Board of Directors, or in his absence or
inability to act, the President, or in the absence or inability to act of the
Chairman of the Board and the President, a Vice President, shall act as chairman
of the meeting. The Secretary, or in his absence or inability to act, any
person appointed by the chairman of the meeting, shall act as secretary of the
meeting and keep the minutes thereof. The order of business at all meetings of
the stockholders shall be as determined by the chairman of the meeting.
SECTION 9. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If the inspectors shall not be so appointed or if
any of them shall fail to appear or act, the chairman of the meeting may, and on
the request of any stockholder entitled to vote thereat shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the chairman of the meeting or any stockholder
2
<PAGE>
entitled to vote thereat, the inspectors shall make a report in writing of any
challenge, request or matter determined by them and shall execute a certificate
of any fact found by them. No director or candidate for the office of director
shall act as inspector of an election of directors. Inspectors need not be
stockholders.
ARTICLE III
Board of Directors
SECTION 1. Number of Directors. The number of directors of the Corporation
shall be six. By vote of a majority of the entire Board of Directors, the
number of directors fixed by these Bylaws may be increased or decreased by
resolution from time to time, but may not exceed nine nor be less than three.
The tenure of office of a director shall not be affected by any decrease in the
number of directors so made by the Board.
SECTION 2. General Powers. The business and affairs of the Corporation
shall be managed under the direction of its Board of Directors, which may
exercise all of the powers of the Corporation, except such as are by law or by
the Certificate of Incorporation or by these Bylaws conferred upon or reserved
to the stockholders.
SECTION 3. Affiliations of Board Members. A majority of the members of the
Board of Directors shall at all times be persons who are not Affiliates of an
individual or corporate management company to whom the Board has delegated
management duties as permitted in Section 18 of this Article and Article V,
Section 7 of the Certificate of Incorporation (a "Management Company") (such
directors being referred to as "Unaffiliated Directors").
As used in these Bylaws, the term "Affiliate" of another person means any
person directly or indirectly owning, controlling, or holding with power to
vote, five percent (5%) or more of the outstanding voting securities of such
other person or of any person directly or indirectly controlling, controlled by
or under common control with such other person; any person five percent (5%) or
more of whose outstanding voting securities are directly or indirectly owned,
controlled or held with power to vote by such other person; any person directly
or indirectly controlling, controlled by or under common control with, such
other person, and, any officer, director, partner, or employee of such other
person. The term "person" includes a natural person, corporation, partnership,
trust, company or other entity.
SECTION 4. Election and Term. Until the first annual meeting of
stockholders or until successors are duly elected and qualified, the Board shall
consist of the persons named as such in the Certificate of Incorporation. At
the first annual meeting of stockholders and at each annual meeting thereafter,
the stockholders shall elect directors, who need not be stockholders in the
Corporation, to hold office until the next annual meeting and until their
successors are elect and qualified or until their earlier resignation or
removal. Directors are eligible for re-election, and a director may resign at
any time by giving written notice to the Corporation.
SECTION 5. Vacancies. Any vacancy occurring in the Board of Directors for
any cause other than by reason of increase in the number of directors may be
filled by a majority of the remaining members of the Board of Directors,
although such majority is less than a quorum. Any vacancy occurring by reason
of an increase in the number of directors may be filled by action of a majority
of the entire Board of Directors. The vacancy for any reason of any director
who is not an Affiliate of a Management Company shall be filled by a majority
vote of the remaining members of the Board of Directors, including a majority
vote of the remaining Unaffiliated Directors. A director elected by the Board
of Directors to fill a vacancy shall be elected to hold office until the next
annual meeting of stockholders and until his or her successor is elected and
qualifies.
SECTION 6. Removal of Directors. Any director may be removed either with or
without cause, as provided by the General Corporation Law of the State of
Delaware.
SECTION 7. Place of Meetings. Meetings of the Board of Directors, regular
or special, may be held in or out of the State of Delaware at such place as the
Board of Directors may from time to time determine or as shall be specified in
the notice of such meeting.
3
<PAGE>
SECTION 8. Annual Meeting. The first meeting of each newly elected Board of
Directors shall be held as soon as practicable after the annual meeting of the
stockholders at which the directors were elected. The meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors. or as shall be
specified in a written waiver signed by all of the directors, except that no
notice shall be necessary if such meeting is held immediately after the
adjournment, and at the site, of the annual meeting of stockholders.
SECTION 9. Regular Meetings. Regular meetings of the Board of Directors may
be held without notice at such time and place as shall from time to time be
determined by the Board of Directors.
SECTION 10. Special Meetings. Special meetings of the Board of Directors
may be called by two or more directors of the Corporation or by the Chairman of
the Board of Directors or the President.
SECTION 11. Notice of Special Meetings. Notice of each special meeting of
the Board of Directors shall be given by the Secretary as hereinafter provided.
Such notice shall state the time and place of the meeting. Notice of each such
meeting shall be delivered to each director, either personally or by telephone,
telegraph, cable or wireless, at least twenty-four hours before the time at
which such meeting is to be held, or by first-class mail, postage prepaid, or
established nationwide courier service, delivery cost prepaid, addressed to each
director at his or her post-office address as it appears on the records of the
Corporation, at least four days before the day on which such meeting is to be
held. If mailed, such notice shall be deemed to be given when deposited in the
United States mail addressed to the director at his or her address as it appears
in the records of the Secretary. Special meetings of the Board of Directors may
be held at any time without notice if all directors are present or if those
directors not present waive notice of the meeting in writing either before or
after the date of the meeting.
SECTION 12. Quorum and Voting. At all meetings of the Board of Directors, a
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business, and the action of a majority of the directors present
at any meeting at which a quorum is present shall be the action of the Board of
Directors unless the concurrence of a greater proportion is required for such
action by statute, the Certificate of Incorporation or these Bylaws. If a
quorum shall not be present at any meeting of directors, the directors present
at the meeting may by a majority vote adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present.
Notwithstanding the first paragraph of this Section 12, any action pertaining
to a transaction involving the Corporation in which any Management Company, any
director or officer of the Corporation or any Affiliate of any of the foregoing
persons has an interest shall be approved in specific as to any isolated
transactions or in general as to any series of similar transactions by a
majority of the members of the Board of Directors who are not Affiliates of such
interested party, even if the non-interested directors constitute less than a
quorum. In approving any such transaction or series of transactions the non-
interested directors must determine that
(a) the transaction as contemplated is fair as to the Corporation and its
stockholders at the time it is authorized, approved or ratified;
(b) if an acquisition of property other than mortgage loans is involved,
the total consideration is not in excess of the appraised value of such
property being acquired; and
(c) if the transaction involves compensation to any Management Company or
its Affiliates for services rendered in a capacity other than that
contemplated by the management arrangements, to the knowledge of the
directors such compensation is not greater than the customary charges for
comparable services generally available from other competent unaffiliated
persons.
SECTION 13. Organization. The Chairman of the Board shall preside at each
meeting of the Board. In the absence or inability of the Chairman of the Board
to preside at a meeting, the President, or, in his absence or inability to act,
another director chosen by a majority of the directors present, shall act as
chairman of the meeting and preside thereat. The Secretary (or, in his absence
or inability to act, any person appointed by the Chairman) shall act as
secretary of the meeting and keep the minutes thereof.
4
<PAGE>
SECTION 14. Meeting by Conference Telephone. Members of the Board of
Directors may participate in a meeting of the Board of Directors or any
committee thereof by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means constitutes presence in
person at a meeting.
SECTION 15. Consent in Lieu of Meeting. Any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if a written consent to such action is signed by
all members of the Board of Directors or of such committee, as the case may be,
and such written consent is filed with the minutes of proceedings of the Board
or committee.
SECTION 16. Compensation. Directors may receive compensation for services
to the Corporation in their capacities as directors in such manner and in such
amounts as may be fixed from time to time by the Board of Directors, and
expenses of attendance at each regular or special meeting of the Board of
Directors, or of any committee thereof.
SECTION 17. Investment Policies and Restrictions. The investment policies
of the Corporation and the restrictions thereon shall be established from time
to time by the Board of Directors, including a majority of the Unaffiliated
Directors; provided, however, that the investment policies of the Corporation
and the limitations thereon shall be at all times in compliance with the
restrictions applicable to real estate investment trusts pursuant to the
Internal Revenue Code of 1986, as it may be amended from time to time. The
Unaffiliated Directors shall review the investment policies of the Corporation
at least annually to determine that the policies then being followed by the
Corporation are in the best interests of its stockholders. Each such
determination and the basis therefor shall be set forth in the minutes of the
Board of Directors.
SECTION 18. Management Arrangements. The Board may delegate the duty of
management of the assets and the administration of the Corporation's day-to-day
operations to a Management Company pursuant to a written contract or contracts,
or any renewal thereof, which have obtained the requisite approvals of the Board
of Directors, including a majority of the Unaffiliated Directors, or the
stockholders of the Corporation, as provided in the Certificate of
Incorporation.
The Board of Directors shall evaluate the performance of the Management
Company before entering into or renewing any management arrangement. The
minutes of meetings with respect to such evaluation shall reflect the criteria
used by the Board of Directors in making such evaluation. Upon any termination
of the initial management arrangements reflected in the Registration Statement,
the Board of Directors shall determine that any successor Management Company
possess sufficient qualifications (a) to perform the management function for the
Corporation and (b) to justify the compensation provided for in its contract
with the Corporation. Each contract for the services of a Management Company
entered into by the Board of Directors shall have a term of no more than one
year, but may be renewed annually at or prior to the expiration of the contract.
Each contract shall be terminable by a majority of the Unaffiliated Directors,
or the Management Company on sixty (60) days' written notice without cause.
The Unaffiliated Directors shall determine at least annually that the
compensation which the Corporation contracts to pay the Management Company is
reasonable in relation to the nature and quality of services performed and shall
also supervise performance of the Management Company and the compensation paid
to it by the Corporation to determine that the provisions of such contract are
being carried out. Each such determination shall be based upon the following
factors and all other factors the Unaffiliated Directors may deem relevant and
the findings of the Unaffiliated Directors on each of such factors shall be
recorded in the minutes of the Board of Directors:
(a) The size of the management fee in relation to the size, compensation
and profitability of the investment portfolio of the Corporation;
(b) The success of the Management Company in generating opportunities that
meet the investment objectives of the Corporation;
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(c) The rates charged to other corporations similar to the Corporation and
to other investors by advisers performing similar services;
(d) Additional revenues realized by the Management Company and its
Affiliates through their relationship with the Corporation, including loan
administration, underwriting or broker commissions, servicing, engineering,
inspection and other fees, whether paid by the Corporation or by others with
whom the Corporation does business;
(e) The quality and extent of service and advice furnished to the
Corporation;
(f) The performance of the investment portfolio of the Corporation,
including income, conservation or appreciation of capital, frequency of
problem investments and competence in dealing with distress situations; and
(g) The quality of the investment portfolio or the Corporation in
relationship to the investments generated by the Management Company for its
own account.
SECTION 19. Total Expenses. The Unaffiliated Directors shall determine,
from time to time but at least annually, that the total fees and expenses of the
Corporation are reasonable in light of all relevant factors. Within sixty days
after the end of any fiscal quarter of the Corporation for which "Total
Operating Expenses" (for the twelve months then ended) exceed two percent (2%)
of "Average Invested Assets" or twenty-five percent (25%) of the "Net Income",
whichever is greater, there shall be sent to the stockholders of the Corporation
a written disclosure of such fact, together with an explanation of the factors
the Unaffiliated Directors considered in arriving at the conclusion that such
higher operating expenses were justified. The Corporation shall also publish to
the stockholders quarterly (i) the ratio of the cost of raising capital during
the quarter to the capital raised and (ii) the aggregate amount of advisory fees
and the aggregate amount of other fees paid to any Management Company and all
Affiliates of such Management Company by the Corporation and including fees or
charges paid to such Management Company and all of its Affiliates by third
parties doing business with the Corporation.
As used herein, the following terms shall have the following meanings:
(a) "Total Operating Expenses" for any period shall mean the aggregate
expenses of every character which constitute ordinary operating expenses,
including additional expenses paid directly or indirectly by the Corporation
to a Management Company, its Affiliates or third parties based upon their
relationship with the Corporation, including loan administration, servicing,
and all other expenses paid by the Corporation, exclusive of expenses related
to raising capital, for interest, taxes and direct property acquisition,
disposition, operation, maintenance and management costs.
(b) "Average Invested Assets" for any period shall mean the average of the
aggregate book value of the assets of the Corporation, determined on a
consolidated basis, invested, directly or indirectly, in loans secured by
real estate, before deduction of reserves for depreciation and similar non-
cash reserves, computed taking the average of such values at the end of each
calendar month during such period.
(c) "Net Income" for any period shall mean total revenues applicable to
such period, less the expenses applicable to such period determined in
accordance with generally accepted accounting principles.
ARTICLE IV
Committees of Directors
SECTION 1. Executive and Other Committees. The Board of Directors may, by
resolution adopted by a majority of the Board, appoint from among its members an
Executive Committee, an Audit Committee or other committees each composed of two
or more directors. At least a majority of the members of any such committee
shall be composed of directors who are Unaffiliated Directors. Any such
committee shall have and may exercise
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all the powers and authority of the Board of Directors in the management of the
business and affairs of the Corporation and may authorize the seal of the
Corporation to be affixed to all papers which may require it except that no such
committee shall have such power or authority with respect to amending the Bylaws
or Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to shareholders the sale, lease or exchange of all
or substantially all of the Corporation's property or assets or the dissolution
or the revocation of a dissolution of the Corporation, and, unless the
resolution or the Bylaws or Certificate of Incorporation specifically so
provides, no such committee shall have the power or authority to declare a
dividend, to authorize the issuance of stock or to adopt a certificate of
ownership and merger.
SECTION 2. Minutes and Reports. The committees shall keep minutes of their
proceedings and shall report the same to the Board of Directors when requested
to do so, and any action taken by the committees shall be subject to revision
and alteration by the Board of Directors, provided that no rights of third
persons shall be affected by any such revision or alteration.
SECTION 3. Notice. Notice of committee meetings shall be given in the same
manner as notice for special meetings of the Board, and a waiver thereof in
writing, signed by the directors entitled to such notice and filed with the
records of the meeting, whether before or after the holding thereof, or actual
attendance at the committee meeting in person shall be deemed equivalent to the
giving of such notice to such director.
SECTION 4. Quorum, Voting and General. One-third, but not less than two, of
the members of any committee shall be present in person at any meeting of such
committee in order to constitute a quorum for the transaction of business. The
act of a majority of the committee members present at such meeting shall be an
act of the committee. The Board may designate a chairman of any committee and
such chairman or any two members of any committee may fix the time and place of
its meetings unless the Board shall otherwise provide. In the event of the
absence or disqualification of any member of any committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he, she or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member. The Board shall have the power at any time to
change the membership of any committee, to fill all vacancies, to designate
alternate members, to replace any absent or disqualified member or to dissolve
any such committee.
ARTICLE V
Officers and Agents
SECTION 1. Number and Qualification. The officers of the Corporation shall
be chosen by the Board of Directors and shall be a Chairman of the Board, a
President, one or more Vice Presidents, a Secretary and a Treasurer. The
Corporation may also have as officers one or more Assistant Secretaries and one
or more Assistant Treasurers. Two or more offices may be held by the same
person but no officer shall execute, acknowledge or verify any instrument in
more than one capacity, if such instrument is required by law, the Certificate
of Incorporation or these Bylaws to be executed, acknowledged or verified by two
or more officers. Such officers shall be elected by the Board of Directors at
its first meeting after each annual meeting of stockholders and shall serve at
the pleasure of the Board of Directors until resignation, removal,
disqualification or until their successors are chosen and qualified. The Board
of Directors may appoint such other officers and agents as it shall deem
necessary, who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Board.
SECTION 2. Compensation. The salaries of all officers and agents of the
Corporation shall be fixed by the Board of Directors.
SECTION 3. Removal and Vacancies. Any officer or agent may be removed by
the Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby. If the office of any officer becomes vacant
for any reason, the vacancy shall be filled by the Board of Directors for the
unexpired portion of the term of the office which shall be vacant.
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SECTION 4. The Chairman of the Board. The Chairman of the Board shall be
the chief executive officer of the Corporation. He shall direct, coordinate and
control the Corporation's business and activities and its operating expenses and
capital expenditures, and shall have general authority to exercise all the
powers necessary for the chief executive officer of the Corporation, all in
accordance with basic policies established by and subject to the control of the
Board of Directors. He may employ and discharge employees and agents of the
Corporation, except such as shall be appointed by the Board, and he may delegate
these powers. He shall have general authority to execute bonds, deeds and
contracts in the name and on behalf of the Corporation. As provided in Section
8 of Article II, he shall act as chairman at all meetings of the stockholders at
which he is present, and, as provided in Section 13 of Article III, he shall
preside at all meetings of the Board of Directors at which he is present. In
the absence of the Chairman of the Board, his duties shall be performed and his
authority may be exercised by the President, and, in the absence of the Chairman
of the Board and the President, such duties shall be performed and such
authority may be exercised by the Vice Presidents in order of their rank as
fixed by the Board of Directors, or if not ranked, the Vice President designated
by the Board of Directors, or in the absence of such Vice President, by such
officer as may have been designated by the most senior officer of the
Corporation who has made any such designation, with the right reserved to the
Board of Directors to make the designation or supersede any designation so made.
SECTION 5. The President. The President shall be the chief operating
officer of the Corporation. He shall implement the general directives, plans
and policies formulated by the Chairman of the Board pursuant to the Bylaws, in
general shall have authority to exercise all powers delegated to him by the
Chairman of the Board and shall establish operating and administrative plans and
policies and direct and coordinate the Corporation's organizational components,
within the scope of the authority delegated to him by the Board of Directors or
the Chairman of the Board. He shall have general authority to execute bonds,
deeds and contracts in the name and on behalf of the Corporation and
responsibility for the employment or appointment and discharge of such
employees, agents and officers, except such as shall be appointed by the Board,
as may be required to carry on the operation of the business. As provided in
Section 4 of this Article V, in the absence of the Chairman of the Board, the
President shall perform all the duties and exercise the authority of the
Chairman of the Board. In the absence of the President, his duties shall be
performed and his authority may be exercised by the Vice Presidents in order of
their rank as fixed by the Board of Directors, or if not ranked, the Vice
President designated by the Board of Directors, and, in the absence of the
President and such Vice President, by such officer as may have been designated
by the most senior officer of the Corporation who has made any such designation,
with the right reserved to the Board of Directors to make the designation or
supersede any designation so made.
SECTION 6. Vice Presidents. The Vice Presidents in order of their rank as
fixed by the Board of Directors, or if not ranked, the Vice President designated
by the Board of Directors, shall, in the absence or disability of the President,
perform the duties and exercise the powers of the President, and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
SECTION 7. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and shall record all the
proceedings of the meetings of the Corporation and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors, the Chairman of the Board or the President, under whose
supervision he shall act. He shall keep in safe custody the seal of the
Corporation and, when authorized by the Board of Directors, affix the same to
any instrument requiring it and, when so affixed, it shall be attested by his
signature.
SECTION 8. Assistant Secretaries. Each Assistant Secretary shall perform
such duties as may be assigned to him, and shall be under the supervision of
such officer, as the Board of Directors or, in the absence of action by it, as
the Chairman of the Board or the President may from time to time prescribe. In
the event of the absence or disability of the Secretary, the duties of the
Secretary shall be performed by such Assistant Secretary, or if there be more
than one such then by the one designated by the Chairman of the Board or the
President.
SECTION 9. Treasurer. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall
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deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the Corporation. If required by the
Board of Directors, he shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board for the faithful
performance of the duties of his office and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
SECTION 10. Assistant Treasurers. Each Assistant Treasurer shall perform
such duties as may be assigned to him, and shall be under the supervision of
such officer, as the Board of Directors or, in the absence of action by it, as
the Chairman of the Board or the President may from time to time prescribe. In
the event of the absence or disability of the Treasurer, the duties of the
Treasurer shall be performed by such Assistant Treasurer, or if there be more
than one such then by the one designated by the Chairman of the Board or the
President.
SECTION 11. Delegation of Duties. In case of the absence of any officer of
the Corporation, or for any other reason that the Board may deem sufficient, the
Board may confer for the time being the powers or duties, or any of them, of
such officer upon any other officer or upon any director.
ARTICLE VI
Certificates of Stock
SECTION 1. Form and Number. Each stockholder shall be entitled upon request
to a certificate or certificates in such form as shall be approved by the Board
which shall represent and certify the number and kind and class of shares owned
by him in the Corporation; provided, however, that certificates for fractional
shares shall not be issued. Each certificate shall be signed by the Chairman of
the Board or the President or a Vice President and countersigned by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
and may be sealed with the corporate seal. The signatures may be either manual
or facsimile signatures and the seal may be either facsimile or any other form
of seal. In case any officer who has signed any certificate ceases to be an
officer of the Corporation before the certificate is issued, the certificate may
nevertheless be issued by the Corporation with the same effect as if the officer
had not ceased to be such officer as of the date of its issue. Each stock
certificate shall include on its face the name of the Corporation, the name of
the stockholder and the class of stock and number of shares represented by the
certificate. A stock certificate may not be issued by the Corporation until the
stock represented by it is fully paid by the stockholder.
SECTION 2. Legends. Every stock certificate representing shares of stock
which are restricted as to transferability by the Corporation shall contain a
full statement of the restriction or state that the Corporation will furnish
information about the restriction to the stockholder on request and without
charge.
SECTION 3. Transfers of Shares. No transfers of shares of stock of the
Corporation shall be made if (i) void ab initio pursuant to Article VI of the
Corporation's Certificate of Incorporation, or (ii) the Board of Directors,
pursuant to such Article VI, shall have refused to transfer such shares.
Permitted transfers of shares of stock of the Corporation shall be made on the
stock records of the Corporation only upon the instruction of the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary or with a transfer agent or transfer
clerk, and on surrender of the certificate or certificates, if issued, for such
shares properly endorsed or accompanied by a duly executed stock transfer power
and the payment of all taxes thereon. Upon Surrender to the Corporation or the
transfer agent of the Corporation of the certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, as to any transfers not prohibited by such Article VI of the
Certificate of Incorporation or by action of the Board of Directors thereunder,
it shall be the duty of the Corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
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SECTION 4. Regulations. The Board of Directors may make such additional
rules and regulations, not inconsistent with these Bylaws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation. It may appoint, or authorize any officer or
officers to appoint, one or more transfer agents or one or more transfer clerks
and one or more registrars and may require all certificates for shares of stock
to bear the signature or signatures of any of them.
SECTION 5. Lost, Destroyed or Mutilated Certificates. The holder of any
certificates representing shares of stock of the Corporation shall immediately
notify the Corporation of any loss, destruction or mutilation of such
certificate, and the Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
stolen, lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such stolen, lost or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and to give the Corporation a bond,
with sufficient surety, to indemnify it against any loss or claim which may
arise by reason of the issuance of a new certificate.
ARTICLE VII
Dividends
Dividends upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in the Corporation's own shares,
subject to the provisions of any statute and of the Certificate of
Incorporation. Before payment of any dividend, there may be set aside out of
any funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose as the directors shall think conducive to the interests of the
Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
The Board may fix, in advance, a date not more than sixty days preceding the
date fixed for the payment of any dividend or the making of any distribution or
the allotment of rights to subscribe for securities of the Corporation, or for
the delivery of evidences of rights or evidences of interests arising out of any
change, conversion or exchange of stock or other securities, as the record date
for the determination of the stockholders entitled to receive any such dividend,
distribution, allotment, rights or interests, and in such case only the
stockholders of record at the time so fixed shall be entitled to receive such
dividend, distribution, allotment, rights or interests.
ARTICLE VIII
Indemnification
SECTION 1. Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by the General Corporation Law of the State of Delaware, as
the same exists or may hereafter be amended, (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said law permitted the Corporation
to provide prior to such amendment) against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) actually and reasonably incurred
or suffered
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by such person in connection therewith and such indemnification shall continue
as to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and administrators.
The right to indemnification conferred in this Section shall be a contract right
and shall include the right to be paid by the Corporation the expenses incurred
in defending any such proceeding in advance of its final disposition; provided,
however, that, if the General Corporation Law of the State of Delaware requires,
the payment of such expenses incurred by a director or officer in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of a proceeding, shall be made only upon delivery to
the Corporation of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Section or
otherwise.
SECTION 2. Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
SECTION 3. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the General Corporation Law of the State of Delaware.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall be the same as the calendar year and
shall end on December 31 of each year.
ARTICLE X
Depositories and Custodians
SECTION 1. Depositories. The funds of the Corporation shall be deposited
with such banks or other depositories as the Board of Directors of the
Corporation may from time to time determine.
SECTION 2. Custodians. All securities and other investments shall be
deposited in the safe keeping of such banks or other companies as the Board of
Directors of the Corporation may from time to time determine.
ARTICLE XI
Execution of Instruments
Checks, notes, drafts, acceptances, bills of exchange and other orders or
obligations for the payment of money shall be signed by such officer or officers
or person or persons as the Board of Directors by resolution shall from time to
time designate.
ARTICLE XII
Independent Public Accountants
A firm of independent public accountants shall sign or certify the annual
financial statements of the Corporation and shall be selected annually by the
Board of Directors.
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ARTICLE XIII
Stock Ledger, List of Shareholders, Books and Records
SECTION 1. Stock Ledger. The Corporation shall maintain at its principal
executive office, or at the office of its transfer agent or registrar, an
original stock ledger containing the names and addresses of all stockholders and
the number of shares held by each stockholder. Such stock ledger may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection.
SECTION 2. Stockholder List. The Secretary or other officer in charge of
the stock ledger of the Corporation shall prepare and make, at least ten (10)
days prior to a meeting of stockholders, a complete list of stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares of stock of the Corporation
registered in the name of each stockholder. Such list shall be open to
examination by any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list also shall be
produced and kept at the place and time of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 3. Inspection of Books and Records. There shall be kept at the
principal executive office of the Corporation correct and complete books and
records of account of all the business and transactions of the Corporation.
In accordance with the General Corporation Laws of Delaware, any stockholder
of the Corporation or his agent may inspect and copy during usual business hours
the Corporation's stock ledger, an existing list of stockholders and other books
and records.
ARTICLE XIV
Amendments
The Board of Directors shall have the power, at any regular meeting or at any
special meeting if notice thereof be included in the notice of such special
meeting, to alter, modify or repeal any Bylaws of the Corporation and to make
new Bylaws, except that the Board of Directors shall not alter, modify or repeal
any of the following provisions of the Bylaws
(a) Article III, Section 3;
(b) The third sentence of Article III, Section 5;
(c) The second paragraph of Article III, Section 12;
(d) Article III, Section 17-19;
(e) The second sentence of Article IV, Section 1; and
(f) This Article XIV.
The stockholders shall have the power, at any annual meeting or at any
special meeting if notice thereof be included in the notice of such special
meeting, to alter, modify or repeal any Bylaws of the Corporation and to make
new Bylaws.
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AMENDMENT TO BYLAWS OF
----------------------
COUNTRYWIDE MORTGAGE INVESTMENTS, INC.
--------------------------------------
The following resolution was duly adopted by the Board of Directors of
the Company, by unanimous written consent without a meeting, effective as of
July 22, 1993:
NOW, THEREFORE, BE IT RESOLVED, that the Bylaws of the Company be
hereby amended as follows:
Article VI of the Bylaws is hereby amended by deleting the first
sentence of Section 3 of said Article and adding in its place a new sentence to
read in full as set forth below:
"No transfers of shares of stock of the Company shall be made if (i)
void ab initio pursuant to Article VI of the Company's Certificate of
Incorporation, (ii) the Board of Directors, pursuant to such Article VI, shall
have refused to transfer such shares, or (iii) prohibited pursuant to Article XV
of the Bylaws."
The Bylaws of the company are hereby further amended by adding a new
Article XV to read in full as set forth below:
"ARTICLE XV
ACQUISITION OF SHARES BY CERTAIN ORGANIZATIONS
Section 1. Affidavits of Stockholders and Transferees. Whenever it is
deemed by the Board of Directors to be prudent in avoiding
(a) the direct or indirect imposition of a penalty tax on the Company
(including the imposition of an entity-level tax on one or more real estate
mortgage investment conduits ("REMICs") or one or more taxable mortgage
pools in which the Company has acquired or plans to acquire an interest) or
(b) the endangerment of the tax status of one or more REMICs or one or
more taxable mortgage pools in which the Company has acquired or plans to
acquire an interest, the Board of Directors may require to be filed with
the Company a statement or affidavit from any holder or proposed transferee
of capital stock of the Company stating whether the holder or proposed
transferee is
(i) the United States, any state or political subdivision
thereof, any possession of the United States, any foreign government,
any international organization, or any agency or instrumentality of
the foregoing, or any other organization that is exempt from federal
income taxation (including taxation under the unrelated business
taxable income
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provisions of the Code) (a "Disqualified Organization")
or
(ii) a partnership, trust, real estate investment trust,
regulated investment company, or other pass-through entity in which a
Disqualified Organization holds or is permitted to hold a direct or
indirect beneficial interest (a "Pass-Through Entity").
Any contract for the sale or other transfer of shares of capital stock of the
Company shall be subject to this provision. Furthermore, the Board of
Directors shall have the right, but shall not be required, to refuse to
transfer any shares of capital stock of the Company purportedly transferred, if
either
(a) a statement or affidavit requested pursuant to this Section 1 has
not been received, or
(b) the proposed transferee is a Disqualified Organization or Pass-
Through Entity.
Section 2. Void Transfers. Any acquisition of shares of capital stock of
the Company that could or would
(a) result in the direct or indirect imposition of a penalty tax on
the Company (including the imposition of an entity-level tax on one or more
REMICs or one or more taxable mortgage pools in which the Company has
acquired or plans to acquire an interest) or
(b) endanger the tax status of one or more REMICs or one or more
taxable mortgage pools in which the company has acquired or plans to
acquire an interest
shall be void ab initio to the fullest extent permitted under applicable law
and the intended transferee of the subject shares shall be deemed never to have
had an interest therein.
If the foregoing provision is determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the transferee
of those shares shall be deemed, at the option of the Company, to have acted as
agent on behalf of the Company in acquiring those shares and to hold those
shares on behalf of the Company.
Section 3. Redemption of Shares. Whenever it is deemed by the Board of
Directors to be prudent in avoiding
(a) the direct or indirect imposition of a penalty tax on the Company
(including the imposition of an entity-level tax on one or more REMICs or
one or more taxable
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<PAGE>
mortgage pools in which the Company has acquired or plans to acquire an
interest) or
(b) the endangerment of the tax status of one or more REMICs or one or
more taxable mortgage pools in which the Company has acquired or plans to
acquire an interest,
the Company may redeem shares of its capital stock.
Any such redemption shall be conducted in accordance with the
procedures set forth in Article VI, Section 6 of the Certificate of
Incorporation of the Company regarding the repurchase of Excess Shares (as
defined therein).
Section 4. Application of Article. Nothing contained in this Article or in
any other provision hereof shall limit the authority of the Board of Directors
to take any and all other action as it in its sole discretion deems necessary or
advisable to protect the Company or the interests of its stockholders by
avoiding
(a) the direct or indirect imposition of a penalty tax on the Company
(including the imposition of an entity-level tax on one or more REMICs or
one or more taxable mortgage pools in which the Company has acquired or
plans to acquire an interest) or
(b) the endangerment of the tax status of one or more REMICs or one or
more taxable mortgage pools in which the Company has acquired or plans to
acquire an interest.
Section 5. Severability. If any provision of this Article or any
application of any such provision is determined to be invalid by any federal or
state court having jurisdiction over the issue, the validity of the remaining
provisions shall be affected only to the extent necessary to comply with the
determination of that court."
3
<PAGE>
AMENDMENT TO BYLAWS OF
-----------------------
CWM MORTGAGE HOLDINGS, INC.
---------------------------
The following resolution was duly adopted by the Board of Directors of the
Corporation at a meeting duly called and held on May 17, 1995:
NOW, THEREFORE, BE IT RESOLVED, that the Bylaws of the Corporation be
amended by adding to ARTICLE II a new Section 10 to read as follows:
"SECTION 10. Nominations for Directors. Nominations for
the election of members of the Board of Directors at the annual
meeting of stockholders may be made by the Board of Directors
or by any holder of any outstanding class of voting stock of the
Corporation entitled to vote for the election of directors.
Nominations for the election of members of the Board of Directors
shall be stated in writing and filed with the Secretary of the
corporation on or before thirty days prior to the date of the
annual meeting of stockholders, and such nominations so stated,
proposed and filed with the Secretary shall be considered at the
annual meeting."
<PAGE>
EXHIBIT 10.1
1995 AMENDED AND EXTENDED
MANAGEMENT AGREEMENT
THIS AGREEMENT, initially made as of September 3, 1985 and amended and
extended from time to time thereafter, is amended and extended as of May 15,
1995 by and between CWM MORTGAGE HOLDINGS, INC. (formerly known as Countrywide
Mortgage Investments, Inc.), a Delaware corporation which has elected to qualify
as a real estate investment trust (the "Company"), and COUNTRYWIDE ASSET
MANAGEMENT CORPORATION, a Delaware corporation, and its permitted successors and
assigns under this agreement (the "Manager").
WITNESSETH
WHEREAS, the Company has elected to qualify for the tax benefits
accorded by Sections 856 to 860 of the Internal Revenue Code of 1986, as
amended; and
WHEREAS, the Company, directly or through Subsidiaries, in the conduct
of its business primarily operates a mortgage loan conduit, engages in warehouse
lending and construction lending, purchases and sells credit-impaired mortgage
loans, and invests in mortgage loans and mortgage-related securities meeting the
investment criteria established from time to time by its Board of Directors; and
WHEREAS, the Company desires to retain the Manager to manage the
operations and investments of the Company and its Subsidiaries and to perform
administrative services for the Company and its Subsidiaries, each in the manner
and on the terms set forth in this Agreement; and
WHEREAS, the Company and the Manager wish to amend and extend their
agreement originally entered into as of September 3, 1985 for a one year period
through May 14, 1996;
NOW, THEREFORE, in consideration of the mutual agreements set forth in
this Agreement, the Company and the Manager agree as follows:
Section 1. Definitions. Whenever used in this Agreement, the
--------- -----------
following terms, unless the context otherwise requires, shall have the following
meanings:
(a) "Affiliate" of another person shall mean any person directly or
indirectly owning, controlling or holding with power to vote, more than 5% of
the outstanding voting securities of such other person; any person 5% or more of
whose outstanding voting securities are directly or indirectly owned, controlled
or held with power to vote by such other person; any person directly or
indirectly controlling, controlled by or under common control with, such other
<PAGE>
person; and any officer, director, partner or employee of such other person.
The term "person" includes a natural person, corporation, partnership, trust,
company or other entity.
(b) "Agency Securities" shall mean (i) fully modified pass-through
mortgage-backed certificates guaranteed as to timely payment of principal and
interest by the Government National Mortgage Association, (ii) mortgage
participation certificates guaranteed as to payment of interest and principal by
the Federal Home Loan Mortgage Corporation and (iii) mortgage pass-through
certificates guaranteed as to payment of interest and principal by the Federal
National Mortgage Association.
(c) "Agreement" shall mean this 1995 Amended and Extended
Management Agreement.
(d) "Average Invested Assets" for any period shall mean the average of
the aggregate book value of the assets of the mortgage conduit operations of the
Company and its Subsidiaries invested, directly or indirectly, in loans secured
by real estate (including without limitation whole mortgage loans, retained
undivided interests in mortgage loans and Agency Securities, but not including
any whole mortgage loans, retained undivided interests in mortgage loans, or
Agency Securities pledged to secure the issuance of collateralized mortgage
obligations or other mortgage collateralized debt or sold in the form of
mortgage backed securities in transactions entered into by the Company or a
Subsidiary), computed by taking the average of such values at the end of each
calendar month during such period.
(e) "Average Net Worth" for any period shall mean the arithmetic
average of the Net Worth of the Company at the beginning of such period and at
the end of each calendar month during such period.
(f) "Board of Directors" shall mean the Board of Directors of the
Company.
(g) "CCI" shall mean Countrywide Credit Industries, Inc., a Delaware
corporation.
(h) "CFC" shall mean Countrywide Funding Corporation, a Subsidiary of
CCI, and a New York corporation.
(i) "Commitment" shall mean any document containing the terms pursuant
to which the Company or any Subsidiary agrees to purchase on a forward basis any
specified mortgage loans, including purchases from Affiliates of the Manager.
(j) "Consolidated Average Invested Assets" for any period shall mean
the Average Invested Assets for the Company and its consolidated subsidiaries
taken as a whole, computed by taking the average of such values at the end of
each calendar month during such period.
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<PAGE>
(k) "Governing Instruments" shall mean the articles or certificate of
incorporation, trust agreement and bylaws of the Company or any Subsidiary, as
applicable.
(l) "INMC" shall mean Independent National Mortgage Corporation, a
Delaware corporation.
(m) "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended.
(n) "Loan Purchase Agreement" shall mean the 1995 Amended and Extended
Loan Purchase and Administrative Services Agreement, dated as of May 15, 1995,
as thereafter amended or supplemented, between the Company and CFC.
(o) "Mortgage Backed Securities" shall mean the collateralized
mortgage obligations, mortgage collateralized debt, mortgage pass-through
securities including real estate mortgage investment conduits or other mortgage-
related securities issued by the Company or a Subsidiary of the Company.
(p) "Net Income" for any period shall mean total revenues applicable
to such period, less the expenses applicable to such period determined in
accordance with generally accepted accounting principles.
(q) "Net Worth" at any time shall mean the sum of the gross proceeds
from any offerings of equity securities by the Company (before deducting any
underwriting discounts and commissions and other expenses and costs relating to
the offering), plus or minus any retained earnings or losses of the Company,
computed in accordance with generally accepted accounting principles.
(r) "Return on Equity" for a period shall be calculated by dividing
the Company's Net Income for such period by the Company's Average Net Worth for
such period.
(s) "Servicing Agreement" shall mean an agreement between the Company
or any Subsidiary and each seller or servicer of mortgage loans purchased by the
Company, including CFC, which agreement governs the sale and/or servicing of
such mortgage loans.
(t) "Shareholders" shall mean the owners of the shares of the Company.
(u) "Subsidiary" shall mean any corporation, whether now existing or
in the future established, of which the Company, directly or indirectly, owns
more than 50% of the outstanding voting securities of any class or classes, any
business trust, partnership or similar non-corporate form in which the Company,
directly or indirectly, owns more than 50% of the beneficial interests, and
INMC.
3
<PAGE>
(v) "Ten Year Average Yield" shall mean the average yield to maturity
for actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities of 10 years).
(w) "Ten Year U.S. Treasury Rate" for a quarterly period shall mean
the arithmetic average of the weekly per annum Ten Year Average Yields published
by the Federal Reserve Board during such quarter. In the event that the Federal
Reserve Board does not publish a weekly per annum Ten Year Average Yield during
any week in a quarter, then the Ten Year U.S. Treasury Rate for such week shall
be the weekly per annum Ten Year Average Yields published by any Federal Reserve
Bank or by any U.S. Government department or agency selected by the Company for
such week. In the event that the Company determines in good faith that for any
reason the Company cannot determine the Ten Year U.S. Treasury Rate for any
quarter as provided above, then the Ten Year U.S. Treasury Rate for such quarter
shall be the arithmetic average of the per annum average yields to maturity
based upon the daily closing bids during such quarter for each of the issues of
actively traded marketable U.S. Treasury fixed interest rate securities (other
than securities which can, at the option of the holder, be surrendered at face
value in payment of any federal estate tax) with a final maturity date not less
than eight nor more than twelve years from the date of each such quotation, as
chosen and quoted for each business day (or less frequently if daily quotations
shall not be generally available) in each such quarterly period in New York City
to the Company by at least three recognized dealers in U.S. Government
securities selected by the Company.
(x) "Unaffiliated Directors" shall mean those members of the Board of
Directors of the Company who are not Affiliates of the Manager.
Section 2. General Duties of the Manager. Subject to the supervision
--------- -----------------------------
of the Board of Directors and in accordance with the Governing Instruments, the
Manager shall provide services to the Company and INMC, and to the extent
directed by the Board of Directors, shall provide similar services to any other
Subsidiary of the Company, as follows:
(a) conduct the day-to-day mortgage loan conduit, warehouse lending
and construction lending and other operations of the Company and INMC as
approved by the Board of Directors, including without limitation, the purchase,
accumulation, financing and securitization of mortgage loans, the establishment
and financing of warehouse lending and construction lending facilities, the
management of assets and investments and the administration thereof; and
(b) provide such reports and analysis to the Board of Directors
regarding the operating strategies and results of the Company and its
Subsidiaries as the Board may reasonably request.
The Manager shall perform its duties and shall take actions on behalf
of the Company and its Subsidiaries consistent with (i) the operating policies
and criteria established from time to time by the Board of Directors or any
authorized officer with respect thereto, and (ii) the obligations of the Company
and its Subsidiaries under the various agreements to which each is
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<PAGE>
a party. So long as the Manager is serving as the Manager under this Agreement,
it shall be and remain a Subsidiary of and wholly owned, directly or indirectly,
by CCI.
Section 3. Additional Activities of Manager. Except as provided in
--------- --------------------------------
the Letter Agreement between CCI and the Company attached hereto as Exhibit A,
nothing herein shall prevent the Manager or its Affiliates from engaging in
other businesses or from rendering services of any kind to any other person or
entity, including investment in or advisory service to others investing in any
type of real estate investment, including investments which meet the principal
investment objectives of the Company or any Subsidiary of the Company.
Directors, officers, employees and agents of the Manager or Affiliates of the
Manager may serve as directors, officers, employees, agents, nominees or
signatories for the Company or any Subsidiary of the Company, to the extent
permitted by its Governing Instruments, as from time to time amended, or by any
resolutions duly adopted by the Board of Directors pursuant to its Governing
Instruments. When executing documents or otherwise acting in such capacities for
the Company or any Subsidiary of the Company, such persons shall use their
respective titles in the Company or such Subsidiary.
Section 4. Purchases and Sales of Investments and Loans from the
--------- -----------------------------------------------------
Manager and its Affiliates. The Manager agrees that sales of investments to and
--------------------------
purchases of investments from the Manager and its Affiliates, including without
limitation purchases and sales of mortgage loans, Agency Securities and
Commitments, shall only be made as stated in an agreement therefor setting forth
in general the operating policies and guidelines within which such sales or
purchases may be made, which agreement has been approved by the Board of
Directors, including a majority of the Unaffiliated Directors. Notwithstanding
the terms of any other agreements between the manager or its Affiliates and the
Company, the Manager further agrees that all such sales and purchases will be
made upon terms no less favorable to the Company than are generally available to
other third parties. The Manager shall purchase or exercise the Company's option
to purchase mortgage loans from CFC in accordance with the Company's rights and
obligations under the Loan Purchase Agreement or any other applicable agreement
between the Company and CFC which is approved by the Board of Directors,
including a majority of the Unaffiliated Directors.
Section 5. Repurchase Obligation.
--------- ---------------------
(a) The Manager agrees that if the Company purchases any mortgage
loan, Agency Security or other investment which does not meet the investment
and/or purchase criteria and policies of the Company and/or INMC as
applicable at the time of purchase, the Manager will repurchase or will cause
the repurchase of such mortgage loan, Agency Security or other investment from
the Company for an amount not less than the unpaid principal balance of the
mortgage loan, Agency Security or other investment as of the date of repurchase,
less any amounts received by the Company representing prepaid interest not
accrued as of the date of repurchase, plus any amounts representing accrued and
unpaid interest to the date of repurchase and any amounts incurred by the
Company, including, but not limited to reasonable fees and out-of-pocket
expenses of counsel, in enforcing the obligation of the Manager to repurchase or
cause the repurchase of such mortgage loan. In lieu of repurchasing or causing
the repurchase of any mortgage loan, Agency Security or other investment, the
Manager may, in its discretion,
5
<PAGE>
substitute or cause the substitution, respectively, of a mortgage loan, Agency
Security or other investment having an unpaid principal amount and yield at
least equivalent to and a maturity not later than the defective mortgage loan,
Agency Security or other investment and otherwise meeting the investment and/or
purchase criteria and policies of the Company and/or INMC as applicable and the
terms of the agreement, if any, pursuant to which the mortgage loan, Agency
Security or other investment has been securitized.
(b) The Manager shall be subrogated to any and all rights of the
Company or any Subsidiary, and the Company agrees to assign to the Manager or
direct its Subsidiary to assign to the Manager its rights, under any Servicing
Agreement with any third party with respect to any mortgage loan repurchased or
substituted for, by or on behalf of the Manager under Subsection (a).
Section 6. Bank Accounts. The Manager may establish and maintain one
--------- -------------
or more bank accounts in the name of the Company or any Subsidiary, at the
direction of the Board of Directors, and may collect and deposit into any such
account or accounts, and disburse from any such account or accounts, any money
on behalf of the Company or any Subsidiary, under such terms and conditions as
the Board of Directors may approve; and the Manager shall from time to time
render appropriate accountings of such collections and payment to the Board of
Directors and, when requested, to the auditors of the Company or any Subsidiary.
Section 7. Records; Confidentiality. The Manager shall maintain
--------- ------------------------
appropriate books of account and records relating to services performed
hereunder, which books of account and records shall be accessible for inspection
by the Company or any Subsidiary at any time during normal business hours. The
Manager agrees to keep confidential any and all information it obtains from time
to time in connection with the services it renders under this Agreement and
shall not disclose any portion thereof to non-affiliated third parties except
with the prior written consent of the Company.
Section 8. Obligations of Manager.
--------- ----------------------
(a) The Manager shall use its best efforts to provide that each
mortgage loan conforms to the purchase criteria of the Company or INMC as
applicable and shall require each seller or transferor of mortgage loans to the
Company or INMC in connection with such purchase or transfer to make all
applicable representations and warranties contained in the Servicing Agreement
for such loans. The Manager shall take such other action as the Manager deems
necessary or appropriate with regard to the protection of the Company's or
INMC's investments.
(b) Anything else in this Agreement to the contrary notwithstanding,
the Manager shall refrain from any action which in its sole judgment made in
good faith would adversely affect the status of the Company, or any Subsidiary
which elects to so qualify, as a real estate investment trust as defined and
limited in Section 856 through 860 of the Internal Revenue Code or which in its
sole judgment made in good faith would violate any law, rule or regulation of
any governmental body or agency having jurisdiction over the Company or any
Subsidiary or which would otherwise not be permitted by the Company's or its
Subsidiary's Governing
6
<PAGE>
Instruments except if such action shall be ordered by the Board of Directors, in
which event the Manager shall promptly notify the Board of Directors of the
Manager's judgment that such action would adversely affect such status or
violate any such law, rule or regulation or the Governing Instruments and shall
refrain from taking such action pending further clarification or instructions
from the Board of Directors. If the Board of Directors thereafter instructs the
Manager, despite the Manager's notification as provided herein, to take any such
action and the Manager so acts upon the instructions given, the Manager shall
not be responsible for any loss of the Company's or Subsidiary's status as a
real estate investment trust or violation of any law, rule or regulation or the
Governing Instruments caused thereby.
Section 9. Fidelity Bond. The Manager shall maintain a fidelity bond
--------- -------------
with a responsible surety company in an amount approved by the Board of
Directors covering all officers and employees of the Manager handling funds of
the Company or any Subsidiary and any documents or papers, which bond shall
protect the Company or any Subsidiary against all losses of any such property
from acts of such officers and employees through theft, embezzlement, fraud,
negligent acts, errors and omissions or otherwise. The premium for said bond
shall be paid by the Manager.
Section 10. Compensation.
---------- ------------
(a) Manager will receive a base management fee equal to the Average
Invested Assets multiplied by 1/8 of 1%.
(b) The Manager shall be paid for services rendered with respect to
warehouse lending and construction lending warehouse lending activities a
management fee in an amount equal to two tenths of 1% of the average daily
balance of the amounts outstanding under warehouse lines of credit extended by
the Company or its Subsidiaries to originators of mortgage loans.
(c) If the Company's annualized Return on Equity during any fiscal
quarter (computed by multiplying the Return on Equity for such fiscal quarter by
four) is in excess of the Ten Year U.S. Treasury Rate, plus 2% after taking into
account any recovery of the Manager's fees under Subsection (d), the Company
will pay the Manager as incentive compensation for such quarter an amount equal
to 25% of the amount by which the annualized Return on Equity of the Company for
such fiscal quarter exceeds the Ten Year U.S. Treasury Rate plus 2%, but in no
event shall any payment of incentive compensation under this Subsection reduce
the Company's annualized Return on Equity for such quarter to less than the Ten
Year U.S. Treasury Rate plus 2%. For purposes of the calculation contained in
this Subsection (b), all Net Income of the Company and any Subsidiaries shall be
deemed to have been distributed on the last day of each quarter. The incentive
compensation shall be paid to the Manager within 60 days after the end of each
fiscal quarter on an interim basis, subject to adjustment under Subsection (d).
(d) The Manager shall compute the compensation payable under
Subsections (a), (b) and (c) within 45 days after the end of each fiscal
quarter. A copy of the computations made by the Manager to calculate its
compensation shall thereafter by promptly delivered to the Company and, upon
such delivery, payment of the interim compensation earned under
7
<PAGE>
Subsections (a), (b) and (c) shown therein shall be due and payable within 60
days after the end of such fiscal quarter. The aggregate amount of the Manager's
compensation for each fiscal year shall be adjusted within 120 days after the
end of such fiscal year so as to provide compensation for such year in the
annual amounts stated in Subsections (a), (b) and (c) and any excess owed to, or
shortfall owed by, the Manager with respect to such compensation, collectively,
shall be promptly remitted by, or paid to, the Company.
(e) Notwithstanding the definition of Average Invested Assets, in the
event the Company implements a strategy of investing directly or indirectly in
loans secured by real estate which are not intended to be securitized, the base
management fee in Subsection (a) shall be paid with respect to these assets.
Section 11. Operating Expenses. The Manager shall be reimbursed by
---------- ------------------
the Company for its operating expenses on a monthly basis. Any allocation of
general administrative costs and overhead by the Manager to the Company shall be
supported by documentation establishing that each other applicable affiliate of
the Manager is also charged a pro rata share of such expenses. Promptly
following the end of each month for which reimbursement is due, the Manager
shall submit an itemized accounting of its expenses to the Company, and the
Company shall pay within 30 days of the receipt of the accounting. The Board of
Directors shall have the authority to approve the incurrence of any expenses by
the Manager for the account of the Company, either prior to or after such
expenses have been incurred. The Manager shall be required to request and
receive the approval of the Board of Directors with respect to the compensation
and expense reimbursement provided to the executive officers of the Company. In
the event the Company determines that any expenses, costs or overhead charged by
the Manager can be reduced by the Company's utilizing another provider or
source, the Company shall so notify the Manager, and thirty (30) days after the
delivery of such notice (the "Notice Effective Date"), the Company shall have
the right to utilize any other such provider or source pursuant to such
arrangements as the Company may from time to time make; provided that any
expenses, costs or overhead allocable by the Manager to the Company in
accordance with the terms of this section shall be reimbursed by the Company for
the period up to and including the Notice Effective Date.
Section 12. Limits of Manager Responsibility. The Manager assumes no
---------- --------------------------------
responsibility under this Agreement other than to render the services called for
hereunder in good faith and shall not be responsible for any action of the Board
of Directors in following or declining to follow any advice or recommendations
of the Manager, including as set forth in Subsection 8(b) above. The Manager,
its directors, officers, shareholders and employees will not be liable to the
Company, any Subsidiary, the Unaffiliated Directors of the Company or the
Company's or any Subsidiary's shareholders for any acts performed by the
Manager, its directors, officers, shareholders or employees in accordance with
this Agreement, except by reason of acts constituting bad faith, willful
misconduct, gross negligence or reckless disregard of their duties. The Company
or any Subsidiaries, as applicable, shall reimburse, indemnify and hold harmless
the Manager, its shareholders, directors, officers or employees for and from any
and all expenses, losses, damages, liabilities, demands, charges and claims of
any nature whatsoever in respect of or arising from any acts or omissions of the
Manager, its shareholders, directors, officers and
8
<PAGE>
employees made in good faith in the performance of the Manager's duties under
this Agreement and not constituting bad faith, willful misconduct, gross
negligence or reckless disregard of duties.
Section 13. No Joint Venture. The Company and the Manager are not
---------- ----------------
partners or joint venturers with each other and nothing herein shall be
construed to make them such partners or joint venturers or impose any liability
as such on either of them.
Section 14. Term; Termination. This agreement shall continue in
---------- -----------------
force through May 14, 1996, and thereafter it may be extended only with the
consent of the Manager and by the affirmative vote of a majority of the
Unaffiliated Directors.
Each extension shall be executed in writing by all parties hereto
before the expiration of this Agreement or of any extension thereof. Each such
extension shall be effective for a period in no case exceeding twelve months.
Notwithstanding any other provision to the contrary, this Agreement,
or any extension hereof, may be terminated by any party, upon sixty (60) days'
written notice, by majority vote of the Unaffiliated Directors or by majority
vote of the Shareholders, in the case of termination by the Company, or, in the
case of termination by the Manager, by majority vote of the directors of the
Manager.
If this Agreement is terminated pursuant to this Section, such
termination shall be without any further liability or obligation of either party
to the other, except as provided in Section 17.
Section 15. Assignment; Subcontract.
---------- -----------------------
(a) This Agreement may not be assigned, in whole or in part, by the
Manager, unless such assignment is to a corporation, association, trust or other
organization which shall acquire the property and carry on the business of the
Manager, if at the time of such assignment a majority of the voting stock of
such assignee organization shall be owned, directly or indirectly, by CCI or any
of its Affiliates or unless such assignment is consented to in writing by the
Company with the consent of a majority of the Unaffiliated Directors. Such a
permitted assignment shall bind the assignee hereunder in the same manner as the
Manager is bound under this Agreement and, to further evidence its obligations,
under this Agreement, the assignee shall execute and deliver to the Company a
counterpart of this Agreement. This Agreement shall not be assignable by the
Company without the consent of the Manager, except in the case of assignment by
the Company to a real estate investment trust or other organization which is a
successor (by merger, consolidation, or otherwise purchase of assets) to the
Company, in which case such successor organization shall be bound hereunder and
by the terms of said assignment in the same manner as the Company is bound
hereunder.
(b) Notwithstanding the foregoing, the Company and the Manager agree
that the Manager may enter into a subcontract with CFC or any of its Affiliates
pursuant to which CFC or such Affiliate will provide such of the management
services required under this
9
<PAGE>
Agreement as the Manager deems necessary, and the Company hereby consents to the
entering into and performance of such subcontract; provided, however, that no
such arrangement between the Manager and CFC or any of its Affiliates shall
relieve the Manager of any of its duties or obligations under this Agreement;
and, provided further, that if any subcontract results in operating expenses to
be paid by the Company to the Manager, such expenses shall be in the amount
actually incurred by the Manager. In the event the Company determines that any
expenses, costs or overhead charged by such subcontractor can be reduced by the
Company's utilizing another provider or source, the Company shall so notify the
Manager, and thirty (30) days after the delivery of such notice (the "Notice
Effective Date"), the Company shall have the right to utilize any other such
provider or source pursuant to such arrangements as the Company may from time to
time make; provided that any expenses, costs or overhead allocable by the
Manager to the Company in accordance with the terms of this section shall be
reimbursed by the Company for the period up to and including the Notice
Effective Date.
Section 16. Termination by Company for Cause. At the option solely
---------- --------------------------------
of the Company, this Agreement shall be and become terminated upon thirty days'
written notice of termination from the Board of Directors to the Manager if any
of the following events shall occur:
(a) If the Manager shall violate any provision of this Agreement and,
after notice of such violation, shall not cure such default within 30 days; or
(b) There is entered an order for relief or similar decree or order
with respect to the Manager by a court having jurisdiction in the premises in an
involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency or
other similar laws; or the Manager (i) ceases or admits in writing its inability
to pay debts as they become due and payable, or makes a general assignment for
the benefit of, or enters into any composition or arrangement with, creditors;
(ii) applies for, or consents (by admission of material allegations of a
petition or otherwise) to the appointment of a receiver, trustee, assignee,
custodian, liquidator or sequestrator (or other similar official) of the Manager
or of any substantial part of its properties or assets, or authorizes such an
application or consent, or proceedings seeking such appointment are commenced
without such authorization, consent or application against the Manager and
continue undismissed for 30 days; (iii) authorizes or files a voluntary petition
in bankruptcy, or applies for or consents (by admission of material allegations
of a petition or otherwise) to the application of any bankruptcy,
reorganization, arrangement, readjustment of debt, insolvency, dissolution,
liquidation or other similar law of any jurisdiction, or authorizes such
application or consent, or proceedings to such end are instituted against the
Manager without such authorization, application or consent and remain
undismissed for 30 days or result in adjudication of bankruptcy or insolvency;
or (iv) permits or suffers all or any substantial part of its properties or
assets to be sequestered or attached by court order and the order remains
undismissed for 30 days.
(c) The Manager agrees that if any of the events specified in
paragraph (b) of this Section 16 shall occur, it will give prompt written notice
thereof to the Board of Directors after the happening of such event.
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Section 17. Action Upon Termination. From and after the effective
---------- -----------------------
date of termination of this Agreement, pursuant to Sections 14, 15, or 16
hereof, the Manager shall not be entitled to compensation for further services
hereunder, but shall be paid all compensation accruing to the date of
termination, subject to adjustment on an annualized basis in accordance with
Section 10(d). The Manager shall forthwith upon such termination:
(a) Pay over to the Company or any Subsidiary, as applicable, all
money collected and held for the account of the Company or any Subsidiary
pursuant to this Agreement, after deducting any accrued compensation and
reimbursement for its expenses to which it is then entitled;
(b) Deliver to the Board of Directors a full accounting, including a
statement showing all payments collected by it and a statement of all money held
by it, covering the period following the date of the last accounting furnished
to the Board of Directors with respect to the Company or any Subsidiary; and
(c) Deliver to the Board of Directors all property and documents of
the Company or any Subsidiary then in the custody of the Manager.
Section 18. Release of Money or Other Property Upon Written Request.
---------- -------------------------------------------------------
The Manager agrees that any money or other property of the Company or any
Subsidiary held by the Manager under this Agreement shall be held for the
Company or such Subsidiary in a custodial capacity, and the Manager's records
shall be appropriately marked to reflect clearly the ownership of such money or
other property by the Company or such Subsidiary. Upon the receipt by the
Manager of a written request signed by a duly authorized officer of the Company
requesting the Manager to release to the Company or any Subsidiary any money or
other property then held by the Manager for the account of the Company or any
Subsidiary under this Agreement, the Manager shall release such money or other
property to the Company or any Subsidiary within a reasonable period of time,
but in no event later than 60 days following such request. The Manager shall not
be liable to the Company, any Subsidiary, the Unaffiliated Directors, or the
Company's Shareholders for any acts thereafter performed or omissions thereafter
to act by the Company or any Subsidiary of the Company in connection with the
money or other property released to the Company or any Subsidiary in accordance
with this Section. The Company and any Subsidiary receiving released money or
other property hereby agree to indemnify the Manager, its directors, officers,
shareholders and employees against any and all expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever, which arise
in connection with the Manager's release of such money or other property to the
Company or such Subsidiary in accordance with the terms of this Section unless
the Manager's release of such money constitutes bad faith, willful misconduct,
gross negligence or reckless disregard of duties. This provision shall be in
addition to any right of the Manager to indemnification under Section 12.
11
<PAGE>
Section 19. Representations and Warranties.
---------- ------------------------------
(a) The Company hereby represents and warrants to the Manager as
follows:
(i) Corporate Existence. The Company is duly organized, validly
-------------------
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power to own its assets and to transact the
business in which it is now engaged and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, except for failures to be so qualified, authorized or licensed
that could not in the aggregate have a material adverse effect on the business
operations, assets or financial condition of the Company and its Subsidiaries,
taken as a whole. The Company does not do business under any fictitious business
name.
(ii) Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
Company has the corporate power, authority and legal right to execute, deliver
and perform this Agreement and all obligations required hereunder and has taken
all necessary corporate action authorize this Agreement on the terms and
conditions hereof and its execution, delivery and performance of this Agreement
and all obligations required hereunder. Except such as have been obtained, no
consent of any other person including, without limitation, stockholders and
creditors of the Company, and no license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority is required by the Company in connection with this
Agreement or the execution, delivery, performance, validity or enforceability of
this Agreement and all obligations required hereunder. This Agreement has been,
and each instrument or document required hereunder will be, executed and
delivered by a duly authorized officer of the Company, and this Agreement
constitutes, and each instrument or document required hereunder when executed
and delivered hereunder will constitute, the legally valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
(iii) No Legal Bar to This Agreement. The execution, delivery and
------------------------------
performance of this Agreement and the documents or instruments required
hereunder, will not violate any provision of any existing law or regulation
binding on the Company, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on the Company, or the certificate
of incorporation or by-laws of, or any securities issued by the Company or of
any mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Company is a party or by which the Company or any of
its assets may be bound, the violation of which would have a material adverse
effect on the business operations, assets or financial condition of the Company
and its Subsidiaries, taken as a whole, and will not result in, or require, the
creation or imposition of any lien on any of its property, assets or revenues
pursuant to the provisions of any such mortgage, indenture, lease, contract or
other agreement, instrument or undertaking.
12
<PAGE>
(b) The Manager hereby represents and warrants to the Company as
follows:
(i) Corporate Existence. The Manager is duly organized, validly
-------------------
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power to own its assets and to transact the
business in which it is now engaged and is duly qualified as a foreign
corporation and in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, except for failures to be so qualified, authorized or licensed
that could not in the aggregate have a material adverse effect on the business
operations, assets or financial condition of the Manager and its Subsidiaries,
taken as a whole. The Manager does not do business under any fictitious business
name.
(ii) Corporate Power; Authorization; Enforceable Obligations.
-------------------------------------------------------
The Manager has the corporate power, authority and legal right to execute,
deliver and perform this Agreement and all obligations required hereunder and
has taken all necessary corporate action to authorize this Agreement on the
terms and conditions hereof and its execution, delivery and performance of this
Agreement and all obligations required hereunder. Except such as have been
obtained, no consent of any other person including, without limitation,
stockholders and creditors of the Manager, and no license, permit, approval or
authorization of, exemption by, notice or report to, or registration, filing or
declaration with, any governmental authority is required by the Manager in
connection with this Agreement or the execution, delivery, performance, validity
or enforceability of this Agreement and all obligations required hereunder. This
Agreement has been, and each instrument or document required hereunder will be,
executed and delivered by a duly authorized officer of the Manager, and this
Agreement constitutes, and each instrument or document required hereunder when
executed and delivered hereunder will constitute, the legally valid and binding
obligation of the Manager enforceable against the Manager in accordance with its
terms.
(iii) No Legal Bar to This Agreement. The execution, delivery and
------------------------------
performance of this Agreement and the documents or instruments required
hereunder, will not violate any provision of any existing law or regulation
binding on the Manager, or any order, judgment, award or decree of any court,
arbitrator or governmental authority binding on the Manager, or the certificate
of incorporation or by-laws of, or any securities issued by the Manager or of
any mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Manager is a party or by which the Manager or any of
its assets may be bound, the violation of which would have a material adverse
effect on the business operations, assets or financial condition of the Manager
and its Subsidiaries, taken as a whole, and will not result in, or require, the
creation or imposition of any lien on any of its property, assets or revenues
pursuant to the provisions of any such mortgage, indenture, lease, contract or
other agreement, instrument or undertaking.
Section 20. Notices. Any notice, report, or other communication
---------- -------
required or permitted to be given hereunder shall be in writing unless some
other method of giving such notice, report, or other communication is accepted
by the party to whom it is given, and shall be given by being delivered at the
following addresses of the parties hereto:
13
<PAGE>
The Company: CWM Mortgage Holdings Mortgage
35 North Lake Avenue
P.O. Box 7211
Pasadena, California 91109-7311
Attention: General Counsel
The Manager: Countrywide Asset Management Corporation
155 North Lake Avenue
P.O. Box 7137
Pasadena, California 91109-7137
Attention: General Counsel
Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 20.
Section 21. Name Change Upon Termination of Management Agreement.
---------- ----------------------------------------------------
The Company agrees that, if at any time the Manager or any Affiliate of CCI
shall cease to serve generally as manager of the Company or any Subsidiary, upon
receipt of a written request from the Manager, the Company and such Subsidiary
will cause their Governing Instruments to be amended so as to change their names
to a name that does not include "Countrywide" or any approximation thereof;
provided, however, that such requirement shall not apply to any trust in which
the Company or any of its Subsidiaries has sold a majority of the beneficial
interest, and which has issued Mortgage Backed Securities that remain
outstanding in whole or in part.
Section 22. Amendments. This Agreement shall not be amended,
---------- ----------
changed, modified, terminated or discharged in whole or in part except by an
instrument in writing signed by all parties hereto, or their respective
successors or assigns, or otherwise as provided herein.
Section 23. Successors and Assigns. This Agreement shall bind any
---------- ----------------------
successors or assigns of the parties hereto as herein provided.
Section 24. Governing Law. This Agreement shall be governed,
---------- -------------
construed and interpreted in accordance with the laws of the State of
California.
Section 25. Headlines and Cross References. The section headings
---------- ------------------------------
hereof have been inserted for convenience of reference only and shall not be
construed to affect the meaning, construction or effect of this Agreement. Any
reference in this Agreement to a "Section" or "subsection" shall be construed,
respectively, as referring to a section of this Agreement or a subsection of a
section of this Agreement in which the reference appears.
Section 26. Severability. The invalidity or unenforceability of any
---------- ------------
provision of this Agreement shall not affect the validity of any other
provision, and all other provisions shall remain in full force and effect.
14
<PAGE>
Section 27. Entire Agreement. This instrument contains the entire
---------- ----------------
agreement between the parties as to the rights granted and the obligations
assumed in this instrument.
Section 28. Waiver. Any forbearance by a party to this Agreement in
---------- ------
exercising any right or remedy under this Agreement or otherwise afforded by
applicable law shall not be a waiver of or preclude the exercise of that or any
other right or remedy.
Section 29. Execution in Counterparts. This Agreement may be
---------- -------------------------
executed in one or more counterparts, any of which shall constitute an original
as against any party whose signature appears on it, and all of which shall
together constitute a single instrument. This Agreement shall become binding
when one or more counterparts, individually or taken together, bear the
signatures of both parties.
Section 30. Guaranty of Manager's Obligations. The Manager agrees
---------- ---------------------------------
that in order to insure the performance of its duties under this Agreement, it
will be necessary for CFC to guarantee the full performance of the Manager, and
this Agreement is conditioned upon the execution and delivery to the Company of
a Guaranty Agreement in the form attached to this Agreement as Exhibit B. Such
Guaranty Agreement shall remain in effect through the term of this Agreement,
including any renewals or extensions; provided, however, that the Guaranty
Agreement may be terminated by the Guarantor as provided therein at such time as
the Manager and the Guarantor are no longer Affiliates.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized as of the day and year
first above written.
CWM MORTGAGE HOLDINGS, INC.
By: \s\ Michael W. Perry
--------------------
Michael W. Perry
Executive Vice President
COUNTRYWIDE ASSET MANAGEMENT CORPORATION
By: \s\ Stanford L. Kurland
-----------------------
Stanford L. Kurland
President
15
<PAGE>
EXHIBIT 10.2
TERMINATION AGREEMENT
This Termination Agreement (this "Agreement") is entered into as of
the 16th day of May, 1995, by and among CWM Mortgage Holdings, Inc., a Delaware
----
corporation ("CWM"), Independent National Mortgage Corporation, a Delaware
corporation ("INMC"), Independent Lending Corporation, a Delaware corporation
(formerly known as Warehouse Lending Corporation of America, Inc.) ("ILC"), and
Countrywide Funding Corporation, a New York corporation ("CFC"). CWM, INMC and
ILC are referred to collectively herein as the "Borrower."
RECITALS
WHEREAS, Borrower and CFC previously entered into that certain Amended
and Restated Credit Agreement dated September 30, 1994 (the "Credit Agreement"),
and desire to terminate such Credit Agreement; and
WHEREAS, Borrower does not currently have any outstanding borrowings
under the Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing recitals and other
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. All of the rights and obligations of the parties under the Credit Agreement
are hereby terminated.
2. Each party hereto hereby represents and warrants that it has the requisite
power and authority to enter into this Agreement and that the execution,
delivery and performance of this Agreement has been duly authorized.
3. This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original.
4. The formation, construction and performance of this Agreement shall be
construed in accordance with the laws of the State of California, without
reference to its conflict of laws principles.
-1-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the day and year
first above written.
CWM MORTGAGE HOLDINGS, INC.
By: \s\ Michael W. Perry
-------------------------------------
Michael W. Perry
Executive Vice President and
Chief Operating Officer
INDEPENDENT NATIONAL MORTGAGE CORPORATION
By: \s\ Michael W. Perry
-------------------------------------
Michael W. Perry
President and Chief Executive Officer
INDEPENDENT LENDING CORPORATION
By: \s\ Michael W. Perry
-------------------------------------
Michael W. Perry
Chairman
COUNTRYWIDE FUNDING CORPORATION
By: \s\ Stanford L. Kurland
-------------------------------------
Stanford L. Kurland
Senior Managing Director and
Chief Operating Officer
-2-
<PAGE>
Exhibit 10.3
1995 AMENDED AND EXTENDED
LOAN PURCHASE AND ADMINISTRATIVE SERVICES AGREEMENT
THIS AGREEMENT is made as of May 15, 1995, by and between CWM Mortgage
Holdings, Inc. (formerly known as Countrywide Mortgage Investments, Inc.), a
Delaware corporation (the "Company"), and Countrywide Funding Corporation, a New
York corporation ("CFC").
WITNESSETH:
WHEREAS, the Company has elected to qualify for the tax benefits
accorded by Sections 856 to 860 of the Internal Revenue Code of 1986, as
amended; and
WHEREAS, the Company, directly or through Subsidiaries, in the conduct
of its business primarily operates a mortgage loan conduit, engages in warehouse
lending and construction lending, and invests in mortgage loans and mortgage-
related securities meeting the investment criteria established from time to time
by the Board of Directors; and
WHEREAS, the Company may desire to purchase mortgage loans originated
or purchased by CFC and may want CFC to cause the issuance of Agency Securities
supported by pools of such mortgage loans on its behalf; and
WHEREAS, the Company may desire to appoint CFC to service mortgage
loans originated by others and purchased by the Company through its mortgage
loan conduit operations; and
WHEREAS, the Company and CFC desire to amend and extend the Loan
Purchase and Administrative Services Agreement originally entered into as of
September 3, 1985, for a one-year period through May 14, 1996, upon the terms
and subject to the conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:
Section 1. Definitions. Whenever used in this Agreement, the
--------- -----------
following terms, unless the context otherwise requires, shall have the following
meanings:
(a) "Affiliate" shall have the meaning attributed to such term in the
Management Agreement.
(b) "Agency Securities" shall mean GNMA Certificates, FHLMC
Certificates and/or FNMA Certificates.
(c) "Agreement" shall mean this 1995 Amended and Extended Loan
Purchase and Administrative Services Agreement.
(d) "Board of Directors" shall mean the Board of Directors of the
Company.
(e) "Conforming Loan" shall mean an FHA Loan, a VA Loan or a
conventional mortgage loan eligible for sale to FNMA or FHLMC.
1
<PAGE>
(f) "FHA Loan" shall mean any mortgage loan insured by the Federal
Housing Administration under the National Housing Act.
(g) "FHLMC" shall mean the Federal Home Loan Mortgage Corporation, a
corporation organized and existing under the laws of the United States, or any
successor thereto.
(h) "FHLMC Certificate" shall mean a mortgage participation
certificate, guaranteed as to payment of interest and principal by FHLMC and
backed by a pool of conventional mortgage loans.
(i) "FNMA" shall mean the Federal National Mortgage Association, a
corporation organized and existing under the laws of the United States, or any
successor thereto.
(j) "FNMA Certificate" shall mean a guaranteed mortgage pass-through
certificate, guaranteed as to timely payment of interest and principal by FNMA
and backed by a pool of FHA Loans, VA Loans, and/or conventional mortgage loans.
(k) "GNMA" shall mean the Government National Mortgage Association, a
wholly owned corporate instrumentality of the United States within the
Department of Housing and Urban Development, or any successor thereto.
(l) "GNMA Certificate" shall mean a fully modified pass-through
mortgage-backed certificate guaranteed as to timely payment of interest and
principal by GNMA and backed by a pool of FHA Loans or VA Loans.
(m) "Jumbo Loan" shall mean any mortgage loan which is not a
Conforming Loan.
(n) "Management Agreement" shall mean that certain agreement dated as
of May 15, 1995 between the Company and the Manager governing the management of
the Company's investments and day-to-day operations.
(o) "Manager" shall mean Countrywide Asset Management Corporation, or
any successor thereto, under a Management Agreement with the Company.
(p) "Mortgage Backed Securities" shall have the meaning attributed to
such term in the Management Agreement.
(q) "Subsidiary" shall have the meaning attributed to such term in the
Management Agreement.
(r) "Unaffiliated Directors" shall mean those members of the Board of
Directors who are not Affiliates of the Manager.
(s) "VA Loan" shall mean any mortgage loan guaranteed by the Veterans
Administration under the Servicemen's Readjustment Act of 1944, as amended, or
Chapter 37 of Title 38, United States Code.
Section 2. Purchase of Mortgage Loans and Agency Securities from CFC
--------- ---------------------------------------------------------
by the Company. (a) CFC may sell to the Company mortgage loans, Agency
--------------
Securities and other mortgage-related assets meeting the Company's investment
criteria. CFC agrees that all such sales shall be made in accordance with the
normal and customary industry practices with respect to the sale of mortgage
loans, Agency Securities and other mortgage-related assets. CFC agrees
2
<PAGE>
that all mortgage loans or other investments sold by it to the Company will
meet the investment criteria of the Company in effect at the time of sales.
(b) CFC agrees that, any sale of mortgage loans, Agency Securities and
other mortgage-related assets from CFC to the Company will be made at prices no
less favorable to the Company than are available to CFC from other purchasers.
(c) The Company agrees that prior to the delivery of each mortgage
loan purchased, it shall have no interest in such mortgage loan. CFC shall bear
all expenses and costs associated with the mortgage loans prior to delivery,
including the costs associated with mortgage loans that are not sold. Upon the
delivery of such mortgage loan, the Company shall be the sole beneficial owner
of such mortgage loan although legal title to the mortgage and the mortgage note
will be held by CFC if so directed by the Company to permit the issuance of
Agency Securities under Section 3.
(d) Notwithstanding the fact that the Company is the beneficial owner
of the mortgage loans it purchases, the Company and CFC agree that from and
after the date first written above, the Conforming Loans sold to the Company
under this Agreement shall be sold "servicing retained" and the servicing rights
therefor shall remain with CFC or the other holder thereof. Notwithstanding the
foregoing, neither CFC nor such holder may assign its servicing rights to such
Conforming Loans without the consent of the Company prior to the issuance of
Agency Securities backed by such Conforming Loans. The Company agrees that it
will not unreasonably withhold its consent to such an assignment of servicing
rights. CFC's rights to assign the servicing rights to Conforming Loans that
have been pooled and exchanged for Agency Securities shall be subject to
Subsection 3(c).
(e) CFC hereby represents and warrants that at the time of sale of
mortgage loans to the Company such mortgage loans will meet the representations
and warranties required to be made by sellers of mortgage loans to the Company
or any Subsidiary pursuant to the Seller/Servicer Guide incorporated by
reference into the Seller/Servicer Contract executed by CFC.
(f) CFC shall act as an independent contractor and not as an agent of
the Company for purposes of originating and purchasing mortgage loans and
selling to the Company mortgage loans and Agency Securities and other
investments.
Section 3. Pooling of Mortgage Loans; Issuance of Agency Securities;
--------- ---------------------------------------------------------
Payments of Certain Amounts to Company. (a) If directed by the Company, CFC on
--------------------------------------
behalf of the Company will pool any FHA Loans and VA Loans purchased by the
Company in accordance with the requirements of FNMA and will use its best
efforts to have GNMA Certificates issued backed by such FHA Loans and VA Loans.
In connection therewith, CFC will (i) apply to GNMA for a commitment to
guarantee mortgage-backed securities by the issuance of such GNMA Certificates;
(ii) once such a commitment has been issued by GNMA, deliver the pool of
mortgage loans to a custodian (selected by CFC and acceptable to the Company,
subject to GNMA requirements) to be held for the benefit of the holder of the
Certificates; and (iii) once the custodian verifies to GNMA that it has custody
of the pool, enter into or cause to be created an appropriate GNMA guaranty
pursuant to which CFC will issue a GNMA Certificate owned by and registered in
the name of or deposited into a depository institution for the account of the
Company. After the issuance of such GNMA Certificates, CFC will retain all
responsibilities and duties to GNMA, including the payment of all GNMA guaranty
fees, with respect to such FHA Loans, VA Loans and GNMA Certificates and will
service such FHA Loans and VA Loans after the issuance of the GNMA Certificates
in accordance with GNMA requirements.
3
<PAGE>
(b) If directed by the Company, CFC on behalf of the Company will pool
any conventional mortgage loans and/or FHA Loans and VA Loans purchased by the
Company in accordance with the requirements of FNMA and/or the requirements of
FHLMC and will use its best efforts to have FNMA Certificates and/or FHLMC
Certificates issued backed by such conventional mortgage loans, FHA Loans and VA
Loans, but only if CFC in its sole discretion determines that such conventional
mortgage loans, FHA Loans and VA Loans meet all FNMA or FHLMC underwriting and
other requirements for such issuance. In connection therewith, CFC will (i)
apply to FNMA or FHLMC for a commitment to issue FNMA Certificates or FHLMC
Certificates and (ii) once such commitment has been approved, CFC will contract
with FNMA or FHLMC to pool such conventional mortgage loans, FHA Loans and VA
Loans and cause to be issued FNMA Certificates or FHLMC Certificates backed by
such loans, which FNMA Certificates or FHLMC Certificates will be owned by and
will be registered in the name of or deposited into a depository institution for
the account of the Company. After the issuance of such FNMA Certificates and
FHLMC Certificates, CFC will retain all responsibilities and duties to FNMA and
FHLMC, including the payment of all FNMA or FHLMC guaranty fees, with respect to
such conventional mortgage loans, FHA Loans, VA Loans, FNMA Certificates and
FHLMC Certificates and will service such conventional mortgage loans, FHA Loans
and VA Loans after the issuance of the FNMA or FHLMC Certificates which they
back, in accordance with FNMA and FHLMC requirements.
(c) If Agency Securities are issued to the Company pursuant to this
Section, CFC agrees that for such time as it is servicing the mortgage loans
underlying each Agency Security on behalf of the Company, in addition to all
duties and obligations imposed on CFC by the servicing agreement which
incorporates the appropriate GNMA, FNMA or FHLMC requirements, CFC shall remit
to the Company at the same time it remits each periodic installment of principal
and interest on the Agency Security, the amount, if any, representing the
difference between (i) the scheduled installment of principal and interest on
the mortgage loans underlying the Agency Security, less the applicable GNMA,
FNMA or FHLMC guaranty fee and CFC's servicing fee as agreed to between the
Company and CFC, and (ii) the scheduled installment of principal and interest on
the Agency Security. The obligation of CFC to remit such amounts to the Company
shall arise upon receipt by CFC from the mortgagor of the scheduled installment
of principal and interest on the underlying mortgage loan. CFC agrees that in
the event it assigns its right to service the mortgage loans underlying Agency
Securities, either the successor servicer of such mortgage loans will continue
to remit the amounts referred to above to the Company or CFC will remit to the
Company an amount representing the present value of the anticipated amounts
which would otherwise be received by the Company over the life of the mortgage
loans under this Subsection.
Section 4. Obligation to Assume Servicing. In the event the Company
--------- ------------------------------
or any Subsidiary acquires rights to service mortgage loans or terminates the
servicing rights of any entity which has sold mortgage loans to the Company or
any Subsidiary on a servicing retained basis, the Company and CFC agree to
negotiate a servicing agreement pursuant to which CFC will assume the servicing
function.
Section 5. Additional Activities of CFC. Nothing herein shall
--------- ----------------------------
prevent CFC or its Affiliates from engaging in other businesses or from
rendering services of any kind to any other person or entity, including the
performance of monitoring, administering or servicing activities for others
investing in any type of real estate investment.
Section 6. Bank Accounts. Fidelity Bond. (a) CFC may establish and
--------- ------------------------------
maintain in connection with the services performed hereunder one or more bank
accounts in the name of the Company, at the direction of the Company, and may
collect and deposit into any such account or accounts, and disburse from any
such account or accounts, moneys on behalf of the Company, under such terms and
conditions as the Company may approve; and CFC shall from time to time
4
<PAGE>
render appropriate accountings of such collections and payments to the Company
and, when requested, to the auditors of the Company.
(b) CFC shall maintain a fidelity bond with a responsible surety
company in an amount approved by the Board of Directors covering all officers
and employees of CFC handling funds of the Company and any documents or papers,
which bond shall protect the Company against all losses of any such property
from acts of such officers and employees through theft, embezzlement, fraud,
negligent acts, errors and omissions or otherwise, the premium for said bond to
be paid by CFC.
Section 7. Records; Confidentiality. CFC shall maintain appropriate
--------- ------------------------
books of account and records relating to services performed hereunder, which
books of account and records shall be accessible for inspection and copying by
the Company at any time during normal business hours. CFC agrees to keep
confidential any and all information it obtains from time to time in connection
with the services it renders hereunder and shall not disclose any portion
thereof to nonaffiliated third parties except with the prior written consent of
the Company.
Section 8. Term; Termination. (a) This Agreement shall continue in
--------- -----------------
force through May 14, 1996, and thereafter it may be extended only with the
consent of CFC and by the affirmative vote of a majority of the Unaffiliated
Directors. Each extension shall be executed in writing by both parties hereto
before the expiration of this Agreement or of any extension thereof.
(b) CFC may terminate this Agreement upon 30 days' written notice if
at any time any of the Affiliates of Countrywide Credit Industries, Inc. are no
longer serving as Manager.
(c) Notwithstanding any other provision herein to the contrary, this
Agreement, or any extension hereof, may be terminated by the Company with cause,
upon 30 days' written notice, or by either party without cause, upon 60 days'
written notice, by majority vote of the Unaffiliated Directors or by vote of the
holders of a majority of the outstanding shares of common stock of the Company,
in the case of termination by the Company, or in the case of termination by CFC,
by majority vote of the Directors of CFC.
Section 9. Assignment. This Agreement shall not be assignable in
--------- ----------
whole or in part by CFC, unless such assignment is to a corporation,
association, trust or other organization which shall acquire the property and
carry on the business of CFC, if at the time of such assignment a majority of
the voting stock of such assignee organization shall be owned, directly or
indirectly, by Countrywide Credit Industries, Inc. or unless such assignment is
consented to in writing by the Company with the consent of a majority of the
Unaffiliated Directors. Such an assignment shall bind the assignee hereunder in
the same manner as CFC is bound hereunder, and, to further evidence its
obligations hereunder, the assignee shall execute and deliver to the Company a
counterpart of this Agreement. This Agreement shall not be assignable by the
Company without the consent of CFC, except in the case of an assignment by the
Company to a corporation or other organization which is a successor (by merger,
consolidation or purchase of assets) to the Company, in which case such
successor organization shall be bound hereunder by the terms of said assignment
in the same manner as the Company is bound hereunder.
Section 10. Termination by Company for Cause. At the option solely
---------- --------------------------------
of the Company, this Agreement may be and become terminated upon receipt of
thirty days' written notice of termination from the Board of Directors to CFC is
any of the following events shall occur:
(a) If CFC shall violate any provisions of this Agreement and, after
notice of such violation, shall not cure such default within 30 days; or
5
<PAGE>
(b) There is entered an order for relief or similar decree or order
with respect to CFC by a court having jurisdiction in the premises in an
involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency or
other similar laws; or CFC (i) ceases or admits in writing its inability to pay
its debts as they become due and payable, or makes a general assignment for the
benefit of, or enters into any composition or arrangement with, creditors; (ii)
applies for, or consents (by admission of material allegations of a petition or
otherwise) to the appointment of a receiver, trustee, assignee, custodian,
liquidator or sequestrator (or other similar official) of CFC or of any
substantial part of its properties or assets, or authorizes such an application
or consent, or proceedings seeking such appointment are commenced without such
authorization, consent or application against CFC and continue undismissed for
30 days; (iii) authorizes or files a voluntary petition in bankruptcy, or
applies for or consents (by admission of material allegations of a petition or
otherwise) to the application of any bankruptcy, reorganization, arrangement,
readjustment of debt, insolvency, dissolution, liquidation or other similar law
of any jurisdiction, or authorizes such application or consent, or proceedings
to such end are instituted against CFC without such authorization, application
or consent and remain undismissed for 30 days or result in adjudication of
bankruptcy or insolvency; or (iv) permits or suffers all or any substantial part
of its properties or assets to be sequestered or attached by court order and the
order remains undismissed for 30 days.
(c) CFC agrees that if any of the events specified in paragraph (b) of
this Section 10 shall occur, it will give prompt written notice thereof to the
Board of Directors after the happening of such event.
Section 11. Action Upon Termination. From and after the effective
---------- -----------------------
date of termination of this Agreement, pursuant to Sections 8, 9 or 10 hereof,
CFC shall not be entitled to compensation for further services hereunder, but
shall be paid all compensation accruing to the date of termination. CFC shall
forthwith upon such termination:
(a) Pay over to the Company any money collected and held for the
account of the Company pursuant to this Agreement or otherwise, after deducting
any accrued compensation to which it is then entitled;
(b) Deliver to the Board of Directors a full accounting, including a
statement showing any payments collected by it and a statement of any money held
by it, covering the period following the date of the last accounting furnished
to the Board of Directors; and
(c) Deliver to the Board of Directors all property and documents of
the Company then in the custody of CFC, except to the extent that to do so would
conflict with the terms of its servicing agreement with the Company.
Section 12. Release of Money or other Property Upon Written Request.
---------- -------------------------------------------------------
CFC agrees that any money or other property of the Company held by CFC under
this Agreement shall be held for the Company in a custodial capacity, and CFC's
records shall be appropriately marked to clearly reflect the ownership of such
money or other property of the Company. CFC shall release its custody of any
money or other property only in accordance with written instructions from the
Company.
Section 13. Notices. Any notice, report or other communication
---------- -------
required or permitted to be given hereunder shall be in writing, unless some
other method of giving such notice , report or other communication is accepted
by the party to whom it is given, and shall be given by being delivered at the
following addresses of the parties hereto:
The Company: CWM Mortgage Holdings, Inc.
6
<PAGE>
35 North Lake Avenue
Pasadena, California 91101-1857
Attention: General Counsel
CFC: Countrywide Funding Corporation
155 North Lake Avenue
Post Office 7137
Pasadena, California 91109-7137
Attention: General Counsel
Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 13.
Section 14. No Joint Venture. The Company and CFC are not partners
---------- ----------------
or joint venturers with each other and nothing herein shall be construed to make
them such partners or joint venturers or impose any liability as such on either
of them.
Section 15. Amendments. This Agreement shall not be amended,
---------- ----------
changed, modified, terminated or discharged in whole or in part, and the
performance of any obligation hereunder may not be waived, except by an
instrument in writing signed by both parties hereto, or their respective
successors or permitted assigns, or otherwise as provided herein.
Section 16. Successors and Assigns. This Agreement shall bind any
---------- ----------------------
successors or permitted assigns of the parties hereto as herein provided.
Section 17. Severability. The invalidity or unenforceability of any
---------- ------------
provision of this Agreement shall not affect the validity of any other
provision, and all other provisions shall remain in full force and effect.
Section 18. Entire Agreement. This instrument contains the entire
---------- ----------------
agreement between the parties as to the rights granted and the obligations
assumed in this instrument.
Section 19. Waiver. Any forbearance by a party to this Agreement in
---------- ------
exercising any right or remedy under this Agreement or otherwise afforded by
applicable laws shall not be a waiver of or preclude the exercise of that or any
other right or remedy.
Section 20. Governing Law. This Agreement shall be governed by,
---------- -------------
construed under and interpreted in accordance with the laws of the State of
California.
Section 21. Supplemental Servicing. From and after the date of this
---------- ----------------------
Agreement the Supplemental Servicing Agreement dated as of May 15, 1987, by and
among the Company, CFC and the Manager shall be of no further force and effect.
Section 22. Headings and Cross-References. The section headings
---------- -----------------------------
hereof have been inserted for convenience of reference only and shall not be
construed to affect the meaning, construction or effect of this Agreement. Any
reference in this Agreement to a "Section" or "Subsection" shall be construed,
respectively, as referring to a section of this Agreement or a subsection of a
section of this Agreement in which the reference appears.
Section 23. Execution in Counterparts. This Agreement may be
---------- -------------------------
executed in one or more counterparts, any of which shall constitute an original
as against any party whose signature appears on it, and all of which shall
together constitute a single instrument. This Agreement shall become binding
when one or more counterparts, individually or taken together, bear the
signatures of both parties.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers thereunto duly authorized as of the day and year
first above written.
CWM MORTGAGE HOLDINGS, INC.
By: \s\ Michael W. Perry
--------------------
Michael W. Perry
Title: Executive Vice President
COUNTRYWIDE FUNDING CORPORATION
By: \s\ Kevin W. Bartlett
---------------------
Kevin W. Bartlett
Title: Managing Director
The undersigned, as Manager, consents to the foregoing terms and
provisions of this Agreement and agrees to be bound by them in performing its
duties as Manager of the Company.
COUNTRYWIDE ASSET MANAGEMENT
CORPORATION
By: \s\ Stanford L. Kurland
-----------------------
Stanford L. Kurland
Title: President
8
<PAGE>
EXHIBIT 10.4
Confidential Portion
FACILITY I marked "XXXX"
---------- CONFIDENTIAL
CREDIT AGREEMENT TREATMENT PREVIOUSLY
---------------- REQUESTED
THIS FACILITY I CREDIT AGREEMENT (the "Agreement") is made as of the
30th day of May, 1995, by and among CWM MORTGAGE HOLDINGS, INC., a Delaware
corporation ("CWM"), INDEPENDENT NATIONAL MORTGAGE CORPORATION, a Delaware
corporation ("INMC"), INDEPENDENT LENDING CORPORATION, a Delaware corporation
("ILC" and, together with CWM and INMC, the "Companies"), the lenders from time
to time party hereto, their respective successors and assigns (each a "Lender"
and collectively the "Lenders"); and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, a national banking association, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent").
STATEMENT OF PURPOSE
--------------------
The Companies have requested the Lenders to extend to the Companies
various revolving credit facilities, and the Lenders have agreed to do so on the
terms and subject to the conditions set forth herein. All capitalized terms not
otherwise defined herein are defined in Paragraph 12 hereof.
Now, therefore, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
---------
1. Tranche A Credit Facility.
-------------------------
(a) Lending Limit. Subject to the conditions set forth herein,
-------------
the Lenders severally agree that they shall from time to time up to and
including the Business Day immediately preceding the Maturity Date, advance and
readvance their respective Percentage Shares of loans (the "Tranche A Loans" or
a "Tranche A Loan") to the Companies in amounts not to exceed, in the aggregate
at any one time outstanding (determined after giving effect to the other
transactions contemplated by the Loan Request pursuant to which said Tranche A
Loan was requested), the lesser of:
(1) The Aggregate Tranche A Credit Limit; and
<PAGE>
(2) The Collateral Value of the Tranche A Borrowing Base.
Provided, however, that notwithstanding anything contained herein to the
-------- -------
contrary, at no time may the sum of all Tranche A Loans outstanding and all
Tranche B Loans outstanding exceed the Aggregate Facility Commitment at such
time.
(b) Interest Rate. All Tranche A Loans shall bear interest at the
-------------
Applicable Corporate Rate, unless the Companies elect to have a Tranche A Loan
bear interest at (i) the Applicable Eurodollar Rate as permitted herein or (ii)
an interest rate established pursuant to Paragraph 3(u) below.
(c) Payment of Interest. The Companies shall pay to the
-------------------
Administrative Agent for distribution to each Lender interest on Tranche A Loans
outstanding hereunder from the date disbursed to but not including the date of
payment. Interest on Tranche A Corporate Rate Loans shall be payable monthly,
in arrears, as provided in Paragraph 3(l) below, and interest on a Tranche A
Eurodollar Loan shall be payable at the end of the applicable Interest Period.
2. Tranche B Credit Facility.
-------------------------
(a) Lending Limit. Subject to the conditions set forth herein,
-------------
the Lenders severally agree that they shall from time to time up to and
including the Business Day immediately preceding the Maturity Date, advance and
readvance loans (the "Tranche B Loans" or a "Tranche B Loan") to the Companies
in amounts not to exceed, in the aggregate at any one time outstanding
(determined after giving effect to the other transactions contemplated by the
Loan Request pursuant to which said Tranche B Loan was requested), the lesser
of:
(1) The Aggregate Tranche B Credit Limit; and
(2) The Collateral Value of the Tranche B Borrowing Base.
Provided, however, that notwithstanding anything contained herein to the
-------- -------
contrary, at no time may the sum of all Tranche A Loans outstanding and all
Tranche B Loans outstanding exceed the Aggregate Facility Commitment at such
time.
2
<PAGE>
(b) Interest Rate. All Tranche B Loans shall bear interest at the
-------------
Applicable Corporate Rate, unless the Companies elect to have a Tranche B Loan
bear interest at (i) the Applicable Eurodollar Rate as permitted herein or (ii)
an interest rate established pursuant to Paragraph 3(u) below.
(c) Payment of Interest. The Companies shall pay to the
-------------------
Administrative Agent for distribution to each Lender interest on Tranche B Loans
outstanding hereunder from the date disbursed to but not including the date of
payment. Interest on Tranche B Corporate Rate Loans shall be payable monthly,
in arrears, as provided in Paragraph 3(l) below, and interest on a Tranche B
Eurodollar Loan shall be payable at the end of the applicable Interest Period.
3. Miscellaneous Lending Provisions.
--------------------------------
(a) Conversion and Continuation.
---------------------------
(1) The Companies may elect from time to time to convert
Eurodollar Loans to Corporate Rate Loans by giving the Administrative
Agent at least one Business Day's prior irrevocable notice of such
election. Any conversion of Eurodollar Loans may only be made on the
last day of the applicable Interest Period. The Companies may elect
from time to time to convert Corporate Rate Loans to Eurodollar Loans
by giving the Administrative Agent at least one Eurodollar Business
Day's prior irrevocable notice of such election. All such elections
shall be made by means of a Loan Request. Upon receipt of a Loan
Request, the Administrative Agent shall promptly notify each of the
Lenders affected thereby thereof. No Corporate Rate Loan shall be
converted into a Eurodollar Loan if an Event of Default has occurred
and is continuing on the day occurring one Eurodollar Business Day
prior to the date of the conversion requested by the Companies or on
the date of conversion. All or any part of outstanding Loans may be
converted as provided herein, provided that partial conversions shall
be in a principal amount of $1,000,000 or whole multiples of $100,000
in excess thereof.
(2) (A) Any Eurodollar Loan may be continued as such upon the
expiration of the Interest Period with respect thereto by the
Companies giving the Administrative Agent at least one Eurodollar
Business Day's prior irrevocable notice of such election as set forth
in a Loan Request, and (B) if the Companies shall fail to give notice
as provided above, the
3
<PAGE>
Companies shall be deemed to have elected to continue the affected
Eurodollar Loan on the last day of the relevant Interest Period as a
Eurodollar Loan having the same Interest Period as the continued
Eurodollar Loan; provided, however, that no Eurodollar Loan may be
continued as such when any Event of Default has occurred and is
continuing on the day occurring one Eurodollar Business Day prior to
the proposed date of such continuation, but shall be automatically
converted to a Corporate Rate Loan on the last day of the then current
Interest Period applicable thereto, and the Administrative Agent shall
notify the Lenders affected thereby and the Companies promptly that
such automatic conversion will occur.
(3) Notwithstanding anything contained in this Agreement to
the contrary, at no time shall there be Eurodollar Loans outstanding
with more than five (5) dif ferent Interest Periods.
(b) Inability to Determine Rate. If the Administrative Agent
---------------------------
determines (which determination shall be conclusive and binding upon the
Companies, provided such determination is made on a reasonable basis) that by
reason of circumstances affecting the London interbank eurodollar market
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for any Interest Period, the Administrative Agent shall forthwith give facsimile
notice of such determination, confirmed in writing, to each Lender affected
thereby and to the Companies. If such notice is given: (1) no Loan may be
funded as a Eurodollar Loan, (2) any Loan that was to have been converted to a
Eurodollar Loan shall, subject to the provisions hereof, be continued as a
Corporate 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 a
Corporate Rate Loan. Until such notice has been withdrawn by the Administrative
Agent, the Companies shall not have the right to convert a Loan to a Eurodollar
Loan or fund any Loan as a Eurodollar Loan or to continue a Eurodollar Loan as
such. The Administrative Agent shall withdraw such notice in the event that the
circumstances giving rise thereto no longer exist and that adequate and
reasonable means exist for ascertaining the Eurodollar Rate for the Interest
Period requested by the Companies, and following withdrawal of such notice by
the Administrative Agent, the Companies shall have the right to fund any Loan as
a Eurodollar Loan or convert a Loan to a Eurodollar Loan or to continue a
Eurodollar Loan in accordance with the terms and conditions of this Agreement.
4
<PAGE>
(c) Illegality. Notwithstanding any other provisions herein, if
----------
any law, regulation, treaty or directive or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement: (1) the
commitment of such Lender hereunder to continue Eurodollar Loans or to convert
Corporate Rate Loans to Eurodollar Loans shall forthwith be suspended and the
Administrative Agent shall forthwith give facsimile notice to the Companies of
such illegality, and upon giving such notice, (2) such Lender's Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
Corporate Rate Loans at the end of their respective Interest Periods or within
such earlier period as required by law. In the event of a conversion of any such
Loan prior to the end of its applicable Interest Period the Companies hereby
agree promptly to pay any Lender affected thereby, upon demand, the amounts
required pursuant to Paragraph 3(f) below, 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 all other amounts payable hereunder. If subsequently
the Administrative Agent determines that the cause of such illegality has ceased
to exist, the Administrative Agent will so advise the Companies by facsimile
notice and the Companies may convert such Corporate Rate Loans to Eurodollar
Loans or request that any Loan be funded as a Eurodollar Loan as provided in
Paragraph 3(j) below. Notwithstanding anything contained herein to the contrary,
in the event that any law, regulation, treaty or directive or any change therein
or in the interpretation or application thereof shall make it unlawful for any
Lender to make or maintain Eurodollar Loans as contemplated by this Agreement,
then in lieu of the provisions and procedures set forth above, the Company may,
at its sole option, elect to require such Lender to assign all of its Maximum
Commitment and Loans to another Lender or to another party meeting the criteria
set forth in Paragraph 11(i) below, which such assignment shall be made pursuant
to the terms and provisions contained in Paragraph 11(i) below.
(d) Requirements of Law; Increased Costs. In the event that any
------------------------------------
change subsequent to the date hereof in any applicable law, order, regulation,
treaty or directive issued by any central bank or other Governmental Authority,
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) by any central bank or other Governmental Authority:
5
<PAGE>
(1) subjects any Lender to any tax of any kind whatsoever
with respect to this Agreement or any Loans made hereunder, or changes the
basis of taxation of payments to such Lender of principal, fee, interest or
any other amount payable hereunder (except for change in the rate of tax on
the overall net income of such Lender);
(2) imposes, modifies or holds applicable any reserve,
capital requirement of general application to similarly situated financial
institutions, special deposit, compulsory loan or similar requirements
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 Eurodollar Rate, the Applicable
Eurodollar Rate or the Corporate Rate; or
(3) imposes on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender of
making, renewing or maintaining any Loan or to reduce any amount receivable in
respect thereof or to reduce the rate of return on the capital of such Lender or
any Person controlling such Lender, then, in any such case, the Companies shall
promptly pay to the Administrative Agent for remittance to such Lender, upon its
written demand made through the Administrative Agent, any additional amounts
necessary to compensate such Lender for such additional cost or reduced amounts
receivable or rate of return as determined by such Lender with respect to this
Agreement or Loans made hereunder, subject to the limitations set forth in the
following sentence. If a Lender becomes entitled to claim any additional
amounts pursuant to this Paragraph 3(d), it shall, promptly after it obtains
knowledge thereof and determines to request compensation hereunder, notify the
Companies in writing through the Administrative Agent of the event by reason of
which it has become so entitled, provided that (A) any amounts owed by the
Companies to such Lender pursuant to this Paragraph 3(d) shall begin to accrue
on the later to occur of (1) the date on which such amounts began to be
incurred, and (2) the date which is thirty (30) days prior to the date such
notice is submitted to the Companies, and (B) such Lender, through the
Administrative Agent, will designate a different lending office for those Loans
affected by such event if such designation will avoid the need for, or reduce
the amount of, such compensation, so long as any such designation is reasonably
convenient for such Lender. A certificate as to any
6
<PAGE>
additional amounts payable pursuant to the foregoing sentence containing the
calculation thereof in reasonable detail submitted by a Lender, through the
Administrative Agent, to the Companies shall be conclusive in the absence of
manifest error. The provisions hereof shall survive the termination of this
Agreement and payment of the outstanding Loans and all other amounts payable
hereunder. Notwithstanding anything contained herein to the contrary, in the
event that any change occurs as described in subparagraphs (1), (2) or (3)
hereof, the result of which is to increase the cost to any Lender of making,
renewing or maintaining any Loan or to reduce any amount receivable in respect
thereof or to reduce the rate of return on the capital of such Lender or any
Person controlling such Lender, then in lieu of the provisions, payments and
procedures set forth above, the Company may, at its sole option, elect to
require such Lender to assign all of its Maximum Commitment and Loans to another
Lender or to another party meeting the criteria set forth in Paragraph 11(i)
below, which such assignment shall be made pursuant to the terms and provisions
contained in Paragraph 11(i) below.
(e) Funding. Each Lender shall be entitled to fund all or any
-------
portion of its Loans in any manner it may determine in its sole discretion, but
all calculations and transactions hereunder shall be conducted as though all
Lenders actually fund all Eurodollar Loans through the purchase in London of
offshore dollar deposits in the amount of the relevant Eurodollar Loan in
maturities corresponding to the applicable Interest Period.
(f) Funding Indemnification -- Prepayment. In addition to all
-------------------------------------
other payment obligations hereunder, in the event any Loan which is outstanding
as a Eurodollar Loan is prepaid prior to the last day of the applicable Interest
Period, whether following a voluntary prepayment or a mandatory prepayment, the
Companies shall immediately pay to the Lenders holding the Eurodollar Loans
prepaid, through the Administrative Agent, an amount equal to the excess, if
any, of (i) the amount of interest which would have accrued on the principal
amount of the Eurodollar Loan so prepaid to the last day of the Interest Period
for such Eurodollar Loan at the applicable rate of interest hereunder for such
Eurodollar Loan over (ii) the interest component of the amount the
Administrative Agent would have bid in the London interbank market for dollar
deposits of lending banks of amounts comparable to such principal amount repaid
and maturities comparable to such period, as reasonably determined by the
Administrative Agent, together with an additional amount compensating each such
Lender for losses and reasonable expenses incurred by such Lender in connection
with such
7
<PAGE>
prepayment, including, without limitation, such as may arise out of a
re-employment of funds obtained by such Lender and from fees payable to
terminate the deposits from which such funds were obtained, such interest
amount, losses, and expenses and the method of calculation thereof being set
forth in reasonable detail and a statement delivered to the Companies by such
Lender. Under no circumstances shall any Lender have any obligation to remit
monies to the Companies upon prepayment of any Eurodollar Loan even under
circumstances which do not result in the necessity of the payment by the
Companies of any amount hereunder. The provisions hereof shall survive
termination of this Agreement and payment of the outstanding Loans and all
amounts payable hereunder.
(g) Funding Indemnification -- Default or Failure to Continue or
------------------------------------------------------------
Convert. In addition to all other payment obligations hereunder, in the event
-------
the Companies shall fail to continue or to make a conversion to a Eurodollar
Loan after the Companies have given notice thereof as provided in Paragraph 3(a)
above, or if after giving a notice to have any Lender make a Eurodollar Loan,
such Lender is not obligated to do so due to the existence of an Event of
Default, then the Companies shall immediately pay any Lender holding the
Eurodollar Loan not continued or converted, or which would have been obligated
to make such Eurodollar Loan, through the Administrative Agent, an additional
amount compensating each such Lender for losses and expenses incurred by such
Lender in connection with such failure to continue or convert a Eurodollar Loan,
or the occurrence of an Event of Default including, without limitation, such as
may arise out of re-employment of funds obtained by such Lender and from fees
payable to terminate the deposits from which such funds were obtained, such
losses and expenses and the method of calculation thereof being set forth in
reasonable detail in a statement delivered to the Companies by such Lender. The
provisions hereof shall survive termination of this Agreement and payment of the
outstanding Loans and all other amounts payable hereunder.
(h) INTENTIONALLY DELETED.
---------------------
(i) Use of Proceeds. (i) The proceeds of all Tranche A Loans
---------------
shall be used by the Companies solely for the purpose of acquiring Eligible A/B
Mortgage Loans to be held for sale by the Companies; and (ii) the proceeds of
all Tranche B Loans shall be used by the Companies solely for the purpose of
acquiring or retaining Eligible A/B Mortgage Loans to be held for investment by
the Companies; provided, however, that so long as the aggregate principal amount
-------- -------
of outstanding Loans is less than the aggregate of
8
<PAGE>
the Collateral Value of the Tranche A Borrowing Base and the Collateral Value of
the Tranche B Borrowing Base, the Companies may use the proceeds of any Loans
for any general corporate purpose of the Companies.
(j) Request For Loans; Making of Loans.
----------------------------------
(1) If the Companies desire to borrow a Corporate Rate Loan
hereunder, the Companies shall make a Loan Request to the Administrative
Agent no later than 2:00 p.m. (Charlotte, North Carolina time) on the
proposed funding date, which Loan Request shall be forwarded promptly by
the Administrative Agent to the Lenders by facsimile transmission no later
than 3:00 p.m. (Charlotte, North Carolina time) on such date. The
applicable Lenders shall make available the amount of their respective
Percentage Shares of the proposed Corporate Rate Loan by crediting the
amount thereof in immediately available same day funds to the Funding
Account no later than 3:30 p.m. (Charlotte, North Carolina time) on such
date.
(2) If the Companies desire to borrow or continue a
Eurodollar Loan or to convert a Corporate Rate Loan to a Eurodollar Loan as
provided in Paragraph 3(a) above, the Companies shall make a Loan Request
to the Administrative Agent no later than 2:00 p.m. (Charlotte, North
Carolina time) on the day occurring at least one Eurodollar Business Day
prior to the date of the borrowing, conversion or continuation requested
therein, and the Administrative Agent shall notify the Lenders of the
contents of such Loan Request no later than 3:00 p.m. (Charlotte, North
Carolina time) on such Business Day. The applicable Lenders shall make
available the amount of their respective Percentage Shares of the proposed
Eurodollar Loan by crediting the amount thereof in immediately available
same day funds to the Funding Account no later than 3:30 p.m. (Charlotte,
North Carolina time) on the proposed date of borrowing. Notwithstanding any
provision hereof to the contrary, the parties agree that each Eurodollar
Loan shall be in a principal amount of $1,000,000 or whole multiples of
$100,000 in excess thereof.
(3) Each Corporate Rate Loan and each Eurodollar Loan shall
be allocated among and funded by the Lenders in accordance with their
applicable Percentage Shares. The failure of any Lender to make its
Percentage Share of any Loan to be made by it as part of any borrowing
shall not relieve any other Lender of its obligation hereunder to advance
its
9
<PAGE>
applicable portion of the principal amount thereof but no Lender shall be
responsible for the failure of any other Lender to make the advance
required of it.
(4) Notwithstanding anything herein to the contrary, a "Loan
Request" made under and pursuant to the terms of the Facility II Agreement
shall be considered to be a Loan Request for all purposes hereunder, and
the Companies shall not be required to submit an additional Loan Request
hereunder, if (i) such "Loan Request" made under and pursuant to the terms
of the Facility II Agreement has been made with respect to Tranche A Loans
or Tranche B Loans and (ii) at the time of making such "Loan Request", the
maximum amount which may be outstanding at any time as Tranche A Loans and
Tranche B Loans under the Facility II Agreement is outstanding.
(k) Notes. The joint and several obligation of the Companies to
-----
repay the Loans shall be evidenced by notes payable to the order of each Lender,
as applicable, in the form set forth as Exhibit A-1 in the Addendum
(collectively, the "Notes") .
(l) Interest and Fee Billing and Payment; Notice of Interest
--------------------------------------------------------
Rates.
-----
(1) The Administrative Agent shall (A) in the case of the
Corporate Rate Loans on or before the fifth Business Day of each month, and
(B) in the case of Eurodollar Loans, on the last day of the applicable
Interest Period, deliver to the Companies an interest and fee billing for
the immediately preceding month or Interest Period, as the case may be,
which billing shall set forth interest accrued and payable on Loans and
fees payable hereunder for such period to be collected by the
Administrative Agent and which billing shall be payable, in the case of a
billing delivered pursuant to subparagraph (A) above, no later than the
second Business Day following receipt thereof by the Companies and, in the
case of a billing delivered pursuant to subparagraph (B) above, on the last
day of the applicable Interest Period.
(2) In the event that any Lender has entered into a separate
letter agreement with the Companies pursuant to Paragraph 3(u) below
regarding interest rates for Loans made by such Lender, such Lender shall
be responsible for notifying the Administrative Agent, on or before the
third Business Day of each month, of the interest owing to such Lender for
such month pursuant to such letter agreement, and the Administra-
10
<PAGE>
tive Agent shall incorporate such interest amount delivered to it by such
Lender into the interest and fee billing referred to in subparagraph (1)
above. The Administrative Agent shall have no duty to independently confirm
the accuracy of any such information delivered to it by any Lender.
(3) The Administrative Agent shall, on each day on which a
Loan is made, confirm to the Companies the interest rate which is to be
applicable to each such Loan (other than interest rates established
pursuant to Paragraph 3(u) below), each such interest rate to be expressed
as a decimal and rounded to the nearest 1/1000th of one percent. Such
confirmation shall take the form of a verbal confirmation by the
Administrative Agent to a designated representative of the Companies,
followed by a written confirmation of such rate no later than the close of
business of the Administrative Agent on the Business Day following the
making of such Loan.
(m) Repayment of Principal. Subject to the prepayment
----------------------
requirements of Paragraph 3(r) below and the required application of proceeds
from the sale or other disposition of Mortgage Loans or servicing rights as
provided in the Security Agreement and in the Custodial Agreement, the Companies
shall pay the principal amount of each Eurodollar Loan which is not continued or
converted pursuant to Paragraph 3(a) on the last day of the applicable Interest
Period relating thereto and shall pay the principal amount of all other Loans on
the Maturity Date.
(n) Borrowing Base Conformity; Mandatory Prepayments.
------------------------------------------------
(1) The Companies shall cause to be maintained with the
Collateral Agent a Tranche A Borrowing Base such that the Collateral Value
of the Tranche A Borrowing Base is not less than, at any date, the sum of
the aggregate dollar amount of outstanding Tranche A Loans.
(2) The Companies shall cause to be maintained with the
Collateral Agent a Tranche B Borrowing Base such that the Collateral Value
of the Tranche B Borrowing Base is not less than, at any date, the sum of
the aggregate dollar amount of outstanding Tranche B Loans.
(3) The Companies shall prepay Loans to the Administrative
Agent on behalf of the Lenders, upon telephonic or facsimile demand by the
Administrative Agent, on any day (A) in the amount by which the aggregate
principal amount of out-
11
<PAGE>
standing Tranche A Loans exceeds the Collateral Value of the Tranche A
Borrowing Base, (B) in the amount by which the aggregate principal amount
of outstanding Tranche B Loans exceeds the Collateral Value of the Tranche
B Borrowing Base, or (C) in the amount by which the sum of the aggregate
principal amounts of outstanding Tranche A Loans and Tranche B Loans
exceeds the Aggregate Facility Commitment; said prepayment to be made on
the date on which demand is made by the Administrative Agent if made prior
to 12:00 p.m. (Charlotte, North Carolina time) or, if made later than 12:00
p.m. (Charlotte, North Carolina time), before 12:00 p.m. (Charlotte, North
Carolina time) on the next Business Day.
(4) The Companies shall prepay Corporate Rate Loans to the
Administrative Agent on behalf of Lenders, upon telephonic or facsimile
demand by the Administrative Agent, on any day in the amount equal to the
lesser of (y) the aggregate principal amount of outstanding Loans or (z)
the amount by which 1. the maximum amount which may be outstanding at any
--
time as Tranche A Loans and Tranche B Loans under the Facility II Agreement
exceeds 2. the aggregate principal amount of outstanding Tranche A Loans
--
and Tranche B Loans under the Facility II Agreement; provided, however,
-------- -------
that in no event shall this Paragraph 3(n)(4) be construed to require the
Companies to prepay Eurodollar Loans prior to the expiration of the
applicable Interest Period therefore.
(5) If at such time as the Companies shall be required to
prepay Loans under this Paragraph 3(n) there shall not have occurred and be
continuing an Event of Default or Potential Default hereunder, in lieu of
prepaying the Loans as required, the Companies may deliver to the
Collateral Agent additional Collateral such that after giving effect to the
inclusion of such Collateral in the respective Borrowing Bases, the
Companies shall be in compliance with the requirements of subparagraphs (1)
and (2) above.
(o) Nature and Place of Payments. All payments made on account of
----------------------------
the Obligations shall be made to the Administrative Agent for distribution to
the Lenders and the Administrative Agent is hereby irrevocably authorized to
debit the Settlement Account and distribute amounts held therein as provided in
Paragraph 3(s) below on account thereof. All payments made on account of the
Obligations shall be made without setoff or counterclaim in lawful money of the
United States of America in immediately available same day funds, free and clear
of and without deduction for any taxes,
12
<PAGE>
fees or other charges of any nature whatsoever imposed by any taxing authority
and if received by the Administrative Agent by 3:30 p.m. on any Business Day
(Charlotte, North Carolina time) such payment will be credited on such Business
Day. If a payment is received after 3:30 p.m. (Charlotte, North Carolina time)
by the Administrative Agent, such payment will be credited on the next
succeeding Business Day and interest thereon shall be payable at the then
applicable rate until credited, provided, that the Administrative Agent shall
--------
use its best efforts to credit such payment on the Business Day received. All
amounts received by the Administrative Agent on account of the Obligations shall
be disbursed by the Administrative Agent to the applicable Lenders by wire
transfer on the date of receipt if received by the Administrative Agent by the
applicable deadline for payment thereof as specified above, or if received
later, on the next succeeding Business Day. If any payment required to be made
by the Companies 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.
(p) Post-Maturity Interest. Any Obligations not paid when due
----------------------
(whether at stated maturity, upon acceleration or otherwise) shall bear interest
from the date due until paid in full at a per annum rate equal to XXXXX percent
(XX%) above the interest rate otherwise applicable thereto or if such
Obligations do not otherwise bear interest, XXXXX percent (XX%) above the
Applicable Corporate Rate.
(q) Computations. All computations of interest and fees payable
------------
hereunder shall be based upon a year of 360 days for the actual number of days
elapsed.
(r) Prepayments.
-----------
(1) The Companies may voluntarily prepay Loans hereunder,
(including Eurodollar Loans subject to and on the conditions contained in
Paragraph 3(f)) in whole at any time or in part from time to time upon
notice to the Administrative Agent on or prior to the date of such
prepayment; provided that any partial prepayment shall be in a minimum
--------
amount of $250,000.
(2) Loans hereunder are subject to mandatory prepayment
pursuant to Paragraph 3(n) above and, in addition, by application of
proceeds of the sale or other disposition of
13
<PAGE>
Collateral as provided in the Security Agreement and in the Custodial
Agreement.
(3) The Companies shall pay in connection with any prepayment
hereunder all interest accrued but unpaid on Loans to which such prepayment
is applied pursuant to Paragraph 3(s) below and any amounts payable
pursuant to Paragraph 3(f) above concurrently with payment to the
Administrative Agent of any principal amounts.
(s) Allocation of Payments Received.
-------------------------------
(1) Prior to the occurrence of an Event of Default and
acceleration of all Loans outstanding hereunder or termination of the
commitments of the Lenders to advance Loans hereunder, principal amounts
received by the Administrative Agent with respect to Loans shall be
allocated among the Lenders on account of the Obligations pro rata in
accordance with their respective Percentage Shares.
(2) Following the occurrence of an Event of Default and
acceleration of all Loans outstanding hereunder or termination of the
commitments of the Lenders to advance Loans hereunder, all amounts received
by the Administrative Agent on account of the Obligations shall be
disbursed by the Administrative Agent as follows:
(i) First, to the payment of reasonable costs and
expenses incurred by the Administrative Agent and Collateral Agent
in the performance of their duties and enforcement of their rights
under the Credit Documents, including, without limitation, all
reasonable costs and expenses of collection, reasonable attorneys'
fees, court costs and foreclosure expenses;
(ii) Second, to the Lenders, pro rata in accordance
with their respective Repayment Shares, until the outstanding
Loans and other Obligations shall have been paid in full, provided
--------
that all such amounts described herein shall be applied first to
interest and then to principal, as applicable; and
(iii) Third, to such Persons as may be legally
entitled thereto.
(t) Fees. The Companies shall pay the following fees:
----
14
<PAGE>
(1) To the Administrative Agent for the account of the
Lenders, an annual commitment fee equal to XXXXXXXXXXXXXXXXXX percent (XXXX%) of
the Aggregate Facility Commitment, such fee to be payable upon the date hereof
and annually upon each anniversary of the date hereof.
(2) To the Administrative Agent for its own account, such
arrangement, agency and syndication fees as have been agreed to in writing by
the Companies and the Administrative Agent pursuant to that certain letter
agreement dated as of February 17, 1995, as such fees may be adjusted from time
to time by agreement of the Companies and the Administrative Agent.
(3) To the Collateral Agent for its own account, such
collateral handling fees as are agreed to in writing by the Companies and the
Collateral Agent.
(u) Notwithstanding anything contained in this Agreement to the
contrary, each of the Lenders shall have the option of entering into separate
letter agreements from time to time with the Companies whereunder each such
Lender may establish an interest rate for Loans made by such Lender hereunder
which corresponds to the balance contained in accounts of the Companies held by
or maintained with each such Lender.
(v) 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
Companies and the Administrative Agent (i) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 or successor applicable form,
as the case may be, or other manner of certification, establishing that payments
of interest hereunder are either not subject to or totally exempt from United
States Federal withholding tax and (ii) an Internal Revenue Service Form W-8 or
W-9 or successor applicable form. Each such Lender also agrees to deliver to the
Companies and the Administrative 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 such Lender to the
Companies, and such extensions or renewals thereof as may reasonably be
requested by the Companies or the Administrative 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
15
<PAGE>
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 each of the Companies and the
Administrative 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. Security Agreement; Custodial Agreement; Additional Documents.
-------------------------------------------------------------
(a) Security Agreement. On or before the date hereof, the
------------------
Companies shall execute and deliver to the Administrative Agent: (1) a security
and collateral agency agreement in the form set forth as Exhibit B in the
---------
Addendum (the "Security Agreement"), pursuant to which the Companies shall
pledge, assign and grant to the Administrative Agent for the benefit of the
Lenders, a perfected security interest in and lien upon the Collateral, and (2)
such UCC financing statements as the Administrative Agent may reasonably request
in connection therewith.
(b) Custodial Agreement. On or before the date hereof, the
-------------------
Companies shall execute and deliver to the Collateral Agent and the
Administrative Agent that certain Custodial and Intercreditor Agreement dated as
of May 23, 1995 among the Companies, the Administrative Agent, Merrill Lynch
Mortgage Capital Inc., Merrill Lynch Credit Corporation, Lehman Commercial Paper
Inc., Nomura Asset Capital Corporation and Bankers Trust Company of California,
N.A. in the form set forth as Exhibit C in the Addendum (the "Custodial
---------
Agreement"), pursuant to which the Companies and the other parties thereto shall
agree, with respect to that portion of the Collateral comprising the Tranche A
Borrowing Base and the Tranche B Borrowing Base, as to the custody thereof by
the Collateral Agent and the relative interests of the parties to the Custodial
Agreement therein.
(c) Further Documents. The Companies agree to execute and
-----------------
deliver and to cause to be executed and delivered to the Collateral Agent from
time to time such confirmatory and supplementary security agreements, financing
statements and other documents, instruments and agreements as the Administrative
Agent or the Collateral Agent may reasonably request, which are consistent with
the terms of the Credit Documents and which are in the Administrative Agent's or
the Collateral Agent's judgment reason-
16
<PAGE>
ably necessary or desirable to obtain for the Collateral Agent on behalf of the
Lenders, the benefit of the Credit Documents and the Collateral.
5. Conditions to Making of Loans.
-----------------------------
(a) First Loan. As conditions precedent to any Lender's
----------
obligation to make the first Loan hereunder:
(1) The Companies shall have delivered to the Administrative
Agent, in form and substance reasonably satisfactory to the Administrative
Agent and its counsel, each of the following (with sufficient copies for
each of the Lenders):
(i) A duly executed copy of this Agreement;
(ii) A duly executed copy of each of the Security
Agreement and the Custodial Agreement;
(iii) Duly executed copies of each of the Notes;
(iv) Duly executed copies of all financing statements
and other documents, instruments and agreements, properly
executed, deemed necessary or appropriate by the Collateral Agent,
in its reasonable discretion, to obtain for the Collateral Agent
on behalf of the Lenders a perfected security interest in and lien
upon the Collateral;
(v) Such credit applications, financial statements,
and authorizations with respect to the Companies as any Lender may
reasonably request;
(vi) Certified copies of resolutions of the Board of
Directors of each of CWM, INMC and ILC approving the execution and
delivery of the Credit Documents to which such Person is a party,
the performance of the Obligations thereunder and the consummation
of the transactions contemplated thereby;
(vii) A certificate of the Secretary or an Assistant
Secretary of each of CWM, INMC and ILC certifying the names and
true signatures of the officers
17
<PAGE>
of such Person authorized to execute and deliver the Credit
Documents to which such Person is a party;
(viii) A copy of the Certificates of Incorporation of
each of CWM, INMC and ILC, certified by the Secretary of State of
the respective state of organization of such Person as of a recent
date;
(ix) A copy of the Bylaws of each of CWM, INMC and
ILC, certified by the respective Secretary or an Assistant
Secretary of such Person as of the date of this Agreement as being
accurate and complete;
(x) Certificates of the Secretary of State of the
State of Delaware, certifying as of a recent date that each of
CWM, INMC and ILC is in good standing;
(xi) An opinion of counsel (which may be in-house
corporate counsel) for the Companies acceptable to the
Administrative Agent;
(xii) Evidence reasonably satisfactory to the
Administrative Agent that each of the Funding Account and the
Settlement Account has been opened;
(xiii) A schedule of the initial Approved Investors and
Approved Repo Lenders;
(xiv) A duly completed Borrowing Base Schedule dated as
of the date of the first Loan hereunder and certified by Borrower
to be true in all material respects; and
(xv) A Covenant Compliance Certificate demonstrating
in detail satisfactory to the Lenders that the Companies are in
compliance with the covenants set forth in Paragraphs 8(g), 8(h)
and 8(i) below.
(2) All acts and conditions (including, without limitation,
the obtaining of any necessary regulatory approvals and the making of any
required filings, recordings or 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
18
<PAGE>
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 reasonably
satisfactory in form and substance to the Administrative Agent and its
counsel.
(4) All fees required to be paid to the Administrative Agent
and the Lenders on or before the date hereof pursuant to Paragraph 3(t)
above, shall have been paid prior to (or will be paid concurrently with)
the making of the first Loan hereunder.
(b) Ongoing Loans. As conditions precedent to each Lender's
-------------
obligation to make any Loan hereunder, including the first Loan and including
the conversion of any Loan to another type of Loan or the continuation of any
Eurodollar Loan after the end of the applicable Interest Period, at and as of
the date of advance, conversion or continuance thereof;
(1) There shall have been delivered to the Administrative
Agent a Loan Request therefor;
(2) The representations and warranties of the Companies
contained in the Credit Documents shall be accurate and complete in all
material respects as if made on and as of the date of such advance,
conversion or continuance;
(3) There shall not have occurred an Event of Default or
Potential Default which has not been waived pursuant to Paragraph 11(b)
hereof by the requisite number of Lenders;
(4) Following the funding of the requested Loan: (i) the
aggregate principal amount of Tranche A Loans outstanding will not exceed
the lesser of: a. the Aggregate Tranche A Credit Limit and b. the
- -
Collateral Value of the Tranche A Borrowing Base, (ii) the aggregate
principal amount of Tranche B Loans outstanding will not exceed the lesser
of: a. the Aggregate Tranche B Credit Limit and b. the Collateral Value of
- -
the Tranche B Borrowing Base, (iii) the aggregate principal amount of Loans
outstanding advanced by any Lender will not exceed its Maximum Commitment,
and (iv) the aggregate
19
<PAGE>
principal amount of all Loans outstanding will not exceed the Aggregate
Facility Commitment;
(5) The Required Documents for the Mortgage Loans being
funded with the proceeds of such Loan shall have been received by the
Collateral Agent (except as otherwise provided in subparagraph (o) of the
definition of "Eligible A/B Mortgage Loan");
(6) The maximum amount which may be outstanding at any time
as Tranche A Loans and Tranche B Loans under the Facility II Agreement is
outstanding; and
(7) If the Administrative Agent is being requested to include
any Mortgage Loan being funded with a Tranche A Loan or a Tranche B Loan as
an Eligible A/B Mortgage Loan pursuant to a waiver of eligibility
requirements as set forth in the last paragraph of the definition of
"Eligible A/B Mortgage Loan," the Companies shall have notified the
Administrative Agent and the Collateral Agent of the noncompliance or
nonconformity of such Mortgage Loan.
By making a Loan Request to the Administrative Agent hereunder, the Companies
shall be deemed to have represented and warranted the accuracy and completeness
of the statements set forth in subparagraphs (b)(2) through (b)(7) above.
6. Representations and Warranties of the Companies.
-----------------------------------------------
Each of CWM, INMC, and ILC represents and warrants to the
Administrative Agent and each Lender, and the Companies collectively represent
and warrant to the Administrative Agent and each Lender, as applicable, that:
(a) Financial Condition. (i) The consolidated financial
-------------------
statements of CWM, and the financial statements of INMC, each dated as of the
Statement Date and for the fiscal period then ended, copies of which have been
furnished to each Lender, present fairly, in accordance with GAAP, the financial
condition of the Companies at such dates and the results of their operations and
cash flows, for the fiscal period then ended.
(b) No Change. As of the date hereof there has been no material
---------
adverse change in the business, operations, assets or financial condition of the
Companies, taken as a whole, from that
20
<PAGE>
shown on the financial statements dated as of the Statement Date referred to in
Paragraph 6(a) above.
(c) Corporate Existence; Compliance with Law. Each of CWM, INMC
----------------------------------------
and ILC: (1) is duly organized, validly existing and in good standing as a
corporation under the laws of the State of Delaware, and is qualified to do
business in each jurisdiction where its ownership of property or conduct of
business requires such qualification and where failure to qualify would have a
material adverse effect on the Companies, taken as a whole, or their property or
business or on the ability of the Companies to pay or perform the Obligations,
(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, the failure to comply with which would have a material adverse
effect on the business, operations, assets or financial condition of the
Companies, taken as a whole, or on the Collateral.
(d) Corporate Power; Authorization; Enforceable Obligations. Each
-------------------------------------------------------
of CWM, INMC and ILC has the corporate power and authority and the legal right
to execute, deliver and perform the Credit Documents 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 CWM, INMC and ILC and constitute legal, valid and binding
obligations of each such Person enforceable against such Person in accordance
with their respective terms, subject to the effect of applicable bankruptcy and
other similar laws affecting the rights of creditors generally and the effect of
equitable principles whether applied in an action at law or a suit in equity.
(e) No Legal Bar. The execution, delivery and performance of the
------------
Credit Documents, the borrowing hereunder and the use of the proceeds thereof,
will not violate any Requirement of Law or any Contractual Obligation of either
CWM, INMC or ILC the violation of which would have a material adverse effect on
the business, operations, assets or financial condition of the Companies, taken
as a whole, or on the Collateral or create or result in the creation of any Lien
(except the Lien created by the Security Agreement or by the Custodial
Agreement) on any assets of the Companies.
21
<PAGE>
(f) No Material Litigation. Except as disclosed on Exhibit D set
---------------------- ---------
forth in the Addendum, no litigation, investigation or proceeding of or before
any court, arbitrator or Governmental Authority is pending or, to the knowledge
of the Companies, threatened by or against CWM, INMC or ILC or against any of
the properties or revenues of such Person which, if adversely determined, would
have a material adverse effect on the business, operations, property or
financial condition of the Companies, taken as a whole, or on the Collateral.
(g) Taxes. To the best of the Companies' knowledge, all tax
-----
returns that are required to be filed by or on behalf of the Companies have been
filed (or the time for such filing has been extended in accordance with
applicable law or regulations) and all taxes shown or to be shown to be due and
payable on said returns or on any assessments made against the Companies or any
of their property (other than taxes which are being contested in good faith by
appropriate proceedings and as to which the Companies have established adequate
reserves in conformity with GAAP) have been paid or provided for.
(h) Investment Company Act. Neither CWM, INMC nor ILC is an
----------------------
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(i) Federal Reserve Board Regulations. Neither CWM, INMC nor ILC
---------------------------------
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 issued hereunder will be used, directly
or indirectly, 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 pertaining to the foregoing.
(j) ERISA. Each of CWM, INMC and ILC and each of such Person's
-----
ERISA Affiliates are in compliance in all respects with the requirements of
ERISA and no Reportable Event has occurred under any Plan maintained by any of
such Persons or any of such Persons' ERISA Affiliates which is likely to result
in the termination of such Plan for purposes of Title IV of ERISA.
22
<PAGE>
(k) Assets. The Companies are the legal and beneficial owners of
------
all property and assets reflected in the interim financial statements referred
to in Paragraph 6(a) above, except property and assets sold or otherwise
disposed of in the ordinary course of business subsequent to the date thereof.
There are no outstanding Liens on any of the Companies' properties or assets,
and there are no security agreements to which any of CWM, INMC or ILC is a
party, nor any title retention agreements, whether in the form of leases or
otherwise, of any personal property, except as permitted under Paragraph 6(a)
below.
(l) Securities Acts. Neither CWM, INMC nor ILC has issued any
---------------
unregistered securities in violation of the registration requirements of Section
5 of the Securities Act of 1933, as amended, or any other existing applicable
law, and each of such Persons is in compliance, in all material respects, with
all existing applicable rules, regulations and requirements under the Securities
Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended.
Neither CWM, INMC nor ILC is required to qualify an indenture under the Trust
Indenture Act of 1939, as amended, in connection with such Person's execution
and delivery of the Notes.
(m) Consents, etc. No consent, approval, authorization of, or
--------------
registration, declaration or filing with, any Governmental Authority is required
on the part of the Companies in connection with the execution and delivery of
the Credit Documents (other than filings to perfect the security interests
granted in the Credit Documents) or the performance of or compliance with the
terms, provisions and conditions hereof or thereof, except such consents as have
been obtained by the Companies.
(n) Joint Benefit. The Companies engage in complimentary lines
-------------
of business and therefore each Loan made hereunder to any of the Companies
benefits all of the Companies.
7. Affirmative Covenants. Each of CWM, INMC and ILC hereby covenants
---------------------
and agrees, and the Companies, jointly and severally, hereby covenant and agree,
with the Administrative Agent and each Lender that, as long as any Obligations
remain unpaid or any Lender has any obligation to make Loans hereunder, each of
CWM, INMC and ILC, or the Companies, as applicable, shall:
(a) Financial Statements. Furnish or cause to be furnished to
--------------------
the Administrative Agent:
(1) Within ninety (90) days after the last day of each fiscal
year of the Companies, a copy of the 10-K state-
23
<PAGE>
ment as filed annually by the Companies with the Securities and Exchange
Commission;
(2) Within forty-five (45) days after the last day of each
fiscal quarter of the Companies, a copy of the 10-Q statement as filed
quarterly by the Companies with the Securities and Exchange Commission; and
(3) Within ten (10) days after the last day of each calendar
month, a Covenant Compliance Certificate of an Authorized Officer of the
Companies, demonstrating in detail reasonably satisfactory to the
Administrative Agent the Companies' compliance with the financial covenants
set forth in Paragraphs 8(g), 8(h) and 8(i) below as of and at the end of
such month.
(b) Certificates; Reports; Other Information. Furnish or cause to
----------------------------------------
be furnished to the Administrative Agent and the Collateral Agent:
(1) No less frequently than monthly, within thirty (30) days
after the last day of each calendar month unless otherwise requested in
writing, reports in form and content satisfactory to the Administrative
Agent containing the following information: (A) a Loan Purchase/Sale
Schedule for such month; (B) a Delinquency Report for such month; (C) the
Borrowing Base Schedule for such month; (D) with respect to each of the
Tranche A Facility and the Tranche B Facility, a Position Report for such
month; and (E) with respect to the Tranche A Facility, an investor
commitment summary relating to the status of the Take-out Commitments and
Hedging Arrangements.
(2) Promptly, such additional financial and other
information, including, without limitation, financial statements of the
Companies or any Approved Investor or Approved Repo Lender, and information
regarding the Collateral as the Administrative Agent, the Collateral Agent
or any Lender, through the Administrative Agent, may from time to time
reasonably request;
(3) To the Administrative Agent upon request therefor after
the occurrence and during the continuance of an Event of Default, the
Additional Required Documents in connection with any Mortgage Loan which
has been funded with the proceeds of any Loan; and
24
<PAGE>
(4) To the Administrative Agent (to be forwarded by the
Administrative Agent to each of the Lenders) a copy of any 8-K statement or
S-3 registration statement filed by the Companies with the Securities and
Exchange Commission as promptly as possible after such filing.
(c) INTENTIONALLY OMITTED.
(d) Maintenance of Existence and Properties. Maintain the
---------------------------------------
corporate existence of each of CWM, INMC and ILC and obtain and maintain all
rights, privileges, licenses, approvals, franchises, properties and assets
necessary or desirable in the normal conduct of the business of the Companies,
and comply with all Contractual Obligations and Requirements of Law, except
where the failure to so comply would not have a material adverse effect on the
business, operations, assets or financial condition of the Companies, taken as a
whole, or on the Collateral. CWM will at all times remain qualified as a REIT,
ILC will at all times remain qualified as a "qualified REIT subsidiary," as
defined in the Code, and CWM will at all times own at least ninety-nine percent
(99%) of the economic interest in INMC.
(e) Inspection of Property; Books and Records; Audits.
-------------------------------------------------
(1) 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
(2) Permit: (i) representatives of the Administrative Agent,
the Collateral Agent or any Lender to a. visit and inspect any of the
-
properties of the Companies and examine and make abstracts from any of the
books and records of the Companies at any reasonable time and as often as
may reasonably be desired by the Administrative Agent, the Collateral Agent
or any Lender (but, prior to the occurrence of an Event of Default, only
upon not less than two Business Days' prior notice), and b. discuss the
-
business, operations, properties and financial and other condition of the
Companies with officers and employees of the Companies, and with their
independent certified public accountants, and (ii) representatives of the
Collateral Agent and the Administrative Agent to conduct periodic
operational audits of the Companies' business and operations. The expenses
of the Administrative Agent, the Collateral Agent or any Lender incurred in
connection with any
25
<PAGE>
visit, inspection, examination, discussion or audit performed pursuant to
this Paragraph 7(e)(2) shall be borne by such parties incurring such
expenses except as otherwise provided in Paragraph 7(g).
(f) Notices. Promptly give written notice to the Administrative
-------
Agent (which shall promptly transmit a copy of such notice to each of the
Lenders) of:
(1) The occurrence of any Potential Default or Event of
Default known to the Chief Executive Officer, President, Chief Operating
Officer, Chief Accounting Officer, Senior Vice President of Warehouse
Lending or Senior Vice President of Construction Lending, or Senior Vice
President of Secondary Marketing of CWM and the proposed method of cure
thereof;
(2) Any litigation or proceeding affecting the Companies or
the Collateral which could have a material adverse effect on the Collateral
or the business, operations, property, or financial condition of the
Companies, taken as a whole; and
(3) A material adverse change known to the Chief Executive
Officer, President, Chief Operating Officer, Chief Accounting Officer,
Senior Vice President of Warehouse Lending or Senior Vice President of
Construction Lending, or Senior Vice President of Secondary Marketing of
any of the Companies in the business, operations, property or financial
condition of the Companies, taken as a whole; and
(4) Any changes in the following senior management positions
of any of the Companies: Chief Executive Officer, President, Chief
Operating Officer, Chief Accounting Officer, Senior Vice President of
Warehouse Lending, Senior Vice President of Construction Lending, or Senior
Vice President of Secondary Marketing.
(g) Expenses. Pay all reasonable out-of-pocket costs and
--------
expenses (including reasonable fees and disbursements of counsel): (1) of the
Administrative Agent and the Collateral Agent incident to the preparation and
negotiation of the Credit Documents, (2) of the Administrative Agent and the
Collateral Agent associated with any periodic audits conducted pursuant to
Paragraph 7(e)(2)(ii) above if such audit discloses a material adverse change in
the financial condition or operations of the Companies, taken as
26
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a whole, and (3) of the Administrative Agent, the Collateral Agent and each of
the Lenders incident to the enforcement of payment of the Obligations, whether
by judicial proceedings or otherwise, including, without limitation, in
connection with bankruptcy, insolvency, liquidations, reorganization, moratorium
or other similar proceedings involving the Companies or a "workout" of the
Obligations. The obligations of the Companies under this Paragraph 7(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.
(h) Credit Documents. Comply with and observe all terms and
----------------
conditions of the Credit Documents.
(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 to the Administrative Agent, and furnish the
Administrative Agent on request full information as to all such insurance, and
to provide within five (5) days after receipt of such request, certificates or
other documents evidencing the renewal of each such policy.
8. Negative Covenants. Each of CWM, INMC and ILC hereby agrees, and
------------------
the Companies, jointly and severally, hereby agree, that, as long as any
Obligations remain unpaid or any Lender has any obligation to make Loans
hereunder, CWM, INMC and ILC, and the Companies, as applicable, shall not at any
time, directly or indirectly:
(a) Liens. Create, incur, assume or suffer to exist, any Lien
-----
upon the Collateral except as contemplated by the Security Agreement or the
Custodial Agreement, or create, incur, assume or suffer to exist any Lien upon
any of the other property and assets of the Companies except:
(1) Liens 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 Companies shall have set aside on the books of the Companies
and shall maintain adequate reserves for the payment of same in conformity
with GAAP;
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<PAGE>
(2) Liens, deposits or pledges made to secure statutory
obligations, surety or appeal bonds, or bonds for the release of
attachments or for stay of execution, or to secure the performance of bids,
tenders, contracts (other than for the payment of borrowed money), leases
or for purposes of like general nature in the ordinary course of the
Companies business;
(3) Purchase money security interests for property (except
Mortgage Loans) hereafter acquired, conditional sale agreements, or other
title retention agreements, with respect to property hereafter acquired;
provided, however, that no such security interest or agreement shall affect
any servicing rights or extend to any property other than the property
acquired; and
(4) Liens securing Permitted Secured Debt (including without
limitation liens securing Indebtedness incurred pursuant to the Facility II
Agreement).
(b) Indebtedness. Create, incur, assume or suffer to exist, or
------------
otherwise become or be liable in respect of any Indebtedness except:
(1) The Obligations;
(2) Trade debt or accounts payable incurred in the ordinary
course of business, paid within sixty (60) days after the same has become
due and payable or which is being contested in good faith, provided
provision is made to the reasonable satisfaction of the Administrative
Agent for the eventual payment thereof in the event it is found that such
contested trade debt is payable by the Companies;
(3) Indebtedness secured by Liens permitted under Paragraph
8(a) above;
(4) Indebtedness which is unsecured;
(5) Indebtedness incurred pursuant to repurchase and
gestation financing agreements, whether such Indebtedness is shown on the
books of the Companies as a sale or as a financing;
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<PAGE>
(6) Indebtedness which is by its terms subordinated in right
of payment to the Obligations and which is evidenced by instruments and
agreements in form and content reasonably satisfactory to the
Administrative Agent;
(7) Indebtedness attributable to collateralized mortgage
obligations of the Companies or any Affiliate thereof;
(8) Indebtedness incurred pursuant to additional financing
secured by Construction Loans (as defined in the Facility II Agreement) of
the type which serve as Collateral for the Tranche D Facility (as defined
in the Facility II Agreement); provided, however, that the Companies may
-------- -------
not enter into any such financing arrangement, nor incur additional
outstanding Indebtedness under any such existing financing arrangement, at
any time when the amount of availability under the Tranche D Facility
equals or exceeds the amount of additional Indebtedness sought to be
incurred;
(9) Permitted Other Debt; and
(10) Indebtedness not specifically referred to above but
reflected in the financial statements referred to in Paragraph 8(a) above,
and extensions, renewals, and refinancings of such Indebtedness.
(c) Consolidation and Merger; Change of Business. (i) Liquidate
--------------------------------------------
or dissolve or enter into any consolidation, merger; (ii) form or enter into any
partnership, joint venture, syndicate or other combination which would have a
material adverse effect on the business, operations, assets or financial
condition of the Companies taken as a whole; or (iii) make any material change
in the nature of its business as a mortgage banker, mortgage conduit, mortgage
lender, warehouse lender, construction lender, servicing-secured lender or
servicing-receivable lender as currently conducted or conduct any business other
than in substantially the same fields of enterprise as currently conducted.
(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 business as currently conducted (it being
expressly agreed and understood that the acquisition of non-recourse servicing
is a normal course of business activity and that the acquisition of recourse
servicing is not a normal course of business activity).
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<PAGE>
(e) Underwriting Policies. Materially change, without the prior
---------------------
written consent of the Administrative Agent, (i) its programs and procedures
with respect to the underwriting and purchase of Eligible A/B Mortgage Loans
which are described in the INMC Seller/Servicer Guide, or (ii) its programs and
procedures with respect to the underwriting and purchase of Construction-to-
Permanent Mortgage Loans.
(f) Sale of Assets. Sell, lease, assign, transfer or otherwise
--------------
dispose of any of its assets (other than obsolete, no longer useful or worn out
property), whether now owned or hereafter acquired, other than in the ordinary
course of business as currently conducted and at fair market value (it being
expressly agreed and understood that the sale or other disposition of Mortgage-
Backed Securities and Mortgage Loans with or without servicing released and of
mortgage servicing rights is in the ordinary course of business).
(g) Indebtedness to Net Worth Ratio of CWM. Permit the ratio of
--------------------------------------
the consolidated Adjusted Total Indebtedness of CWM to the consolidated Book Net
Worth of CWM at any date (each as shown on the most recent consolidated
financial statements of CWM delivered to the Administrative Agent pursuant to
Paragraph 7(a)) to be more than XXXX:1.0.
(h) Minimum Consolidated Book Net Worth of CWM. Permit the
------------------------------------------
consolidated Book Net Worth of CWM at any date (as shown on the most recent
consolidated financial statements of CWM delivered to the Administrative Agent
pursuant to Paragraph 7(a)) to be less than the greater of (i) $XXXXXXXXXXX or
(ii) XXXXXX percent (XXX%) of the consolidated Book Net Worth of CWM as of the
date hereof, less the amount of any qualified REIT dividends payable as of the
date hereof.
(i) Minimum Book Net Worth of INMC. Permit the Book Net Worth of
------------------------------
INMC at any date (as shown on the most recent financial statements of INMC
delivered to the Administrative Agent pursuant to Paragraph 7(a)) to be less
than $XXXXXXXXXXXX.
9. Events of Default. Upon the occurrence of any of the following
-----------------
events (an "Event of Default"):
(a) Companies shall fail to pay (or prepay pursuant to Paragraph
3(n) above) principal or interest on any Loan, or any fee payable to the
Administrative Agent for its own account or for the
30
<PAGE>
benefit of the Lenders pursuant to Paragraph 3(t) above, when due; or
(b) Any representation or warranty made or deemed made by the
Companies in any Credit Document or in connection with any Credit Document shall
be inaccurate or incomplete in any material respect on or as of the date made or
deemed made; or
(c) Either CWM, INMC or ILC shall fail to maintain its corporate
existence; or
(d) The Companies 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 after notice of such default from the Administrative Agent
to the Companies; or
(e) There shall exist an "Event of Default" under, and as defined
in, the Facility II Agreement; or
(f) The Companies shall default in any payment of principal of or
interest on any Indebtedness (other than the Loans, and Indebtedness incurred
pursuant to the Facility II Agreement), in the aggregate principal amount of
$500,000 or more (and without regard for the dollar amount of the defaulted
payment), or any other event shall occur, the effect of which is to permit such
Indebtedness to be declared or otherwise to become due prior to its stated
maturity; or
(g) (1) Either CWM, INMC or ILC shall commence any case,
proceeding or other action (i) relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to such Person, or seeking to adjudicate such Person a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to such
Person or its debts, or (ii) seeking appointment of a receiver, trustee,
custodian or other similar official for such Person or for all or any
substantial part of its assets, or such Person shall make a general assignment
for the benefit of its creditors; or (2) there shall be commenced against any of
CWM, INMC or ILC 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 any of CWM, INMC or ILC any case, proceeding or other action seeking
issuance of a warrant of attach-
31
<PAGE>
ment, execution, distraint or similar process against all or substantially all
of the assets of such Person which results in the entry of an order for any such
relief which shall not have been vacated, discharged, stayed, satisfied or
bonded pending appeal within sixty (60) days from the entry thereof; or (4) any
of CWM, INMC or ILC shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in (other than in connection with a
final settlement), any of the acts set forth in clauses (1), (2) or (3) above;
or (5) any of CWM, INMC or ILC shall generally not, or shall be unable to, or
shall admit in writing its inability to pay its debts as they become due; or
(h) The Companies or any of their ERISA Affiliates 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 not 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 Administrative 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 Companies or any of their ERISA Affiliates 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, is likely to subject the Companies or any of their
respective ERISA Affiliates to any tax, penalty or other liabilities in the
aggregate material in relation to the business, operations, property or
financial condition of the Companies taken as a whole;
(i) One or more judgments or decrees in an aggregate amount in
excess of $500,000 not covered by insurance shall be entered against the
Companies and all such judgments or decrees shall not have been vacated,
discharged, stayed, satisfied or bonded pending appeal within sixty (60) days
from the entry thereof.
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<PAGE>
THEN:
(1) Automatically upon the occurrence of an Event of Default
under Paragraph 9(g) above; and
(2) At the option of any Lender upon the occurrence of an
Event of Default under Paragraph 9(a) above; and
(3) In all other cases, at the option of the Majority
Lenders,
each Lender's obligation to make Loans hereunder shall terminate and the
principal balance of outstanding Loans and interest accrued but unpaid thereon
shall become immediately due and payable, without demand upon or presentment to
the Companies, which are expressly waived by the Companies. Upon the occurrence
of any Event of Default hereunder, and promptly upon notice by the
Administrative Agent to the other Lenders, if (a) the ratio of the amount of
Loans outstanding held by any Lender to the aggregate amount of Loans
outstanding held by all Lenders at the time of determination exceeds (b) such
Lender's Percentage Share, then each Lender shall purchase or sell, as
applicable, for cash and at face value and without recourse, such participations
in the Loans made by the other Lenders as shall be necessary to cause (x) the
ratio of the amount of Loans outstanding held by any Lender to the aggregate
amount of Loans outstanding held by all Lenders at such date to equal (y) such
Lender's Percentage Share.
10. The Administrative Agent.
------------------------
(a) Appointment. Each Lender irrevocably appoints the
-----------
Administrative Agent as the agent for such Lender under the Credit Documents and
to act as secured party, agent, bailee and custodian for the exclusive benefit
of the Lenders with respect to the Collateral, and each such Lender hereby
irrevocably authorizes the Administrative 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
thereto by the terms of the Credit Documents, together with such other powers as
are reasonably incidental thereto including, without limitation, all powers and
duties specifically set forth in the Security Agreement or the Custodial
Agreement to be exercised and performed by the Administrative Agent. The
Administrative Agent is specifically authorized to execute and deliver on behalf
of all of the Lenders, the Security
33
<PAGE>
Agreement and the Custodial Agreement and to appoint Bankers Trust of
California, N.A. as the Collateral Agent to act on behalf of the Lenders with
respect to A/B Collateral and DEF Collateral (as those terms are defined in the
Security Agreement) as described in the Security Agreement and the Custodial
Agreement, including, without limitation, to act on behalf of the Lenders to
release Collateral pursuant to the terms of the Security Agreement and the
Custodial Agreement. The Lenders specifically authorize the Administrative Agent
to agree to indemnify the Collateral Agent from and to pay to the Collateral
Agent all costs (including, without limitation, costs incurred by Collateral
Agent as a result of any examination performed by any Lender under Paragraph 12
of the Security Agreement) as set out in the Security Agreement and to the
extent, if any, that the Companies are not required to or do not reimburse the
Administrative Agent for any such indemnification or costs, then the Lenders
will do so ratably in accordance with their Percentage Shares, unless such cost
is related to an examination by a Lender under Paragraph 12 of the Security
Agreement, in which case all such costs will be borne by the examining Lender.
The Administrative Agent shall have no duties or responsibilities except those
expressly set forth therein, nor any fiduciary relationship with any Lender, and
no implied covenants, responsibilities, obligations or liabilities shall be read
into the Credit Documents or otherwise exist against the Administrative Agent.
(b) Delegation of Duties. The Administrative 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 such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care.
(c) Exculpatory Provisions. Neither the Administrative Agent nor
----------------------
any of its officers, directors, employees, agents, counsel, attorneys-in-fact or
Affiliates shall be (1) liable to any Lender, the Collateral Agent, or the
Companies for any action taken or omitted to be taken by it or such Person under
or in connection with the Credit Documents (except for its or such Person's own
gross negligence or willful misconduct), or (2) responsible in any manner to any
of the Lenders, the Collateral Agent or the Companies for: (i) any recitals,
statements, representations or warranties made by the Companies 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 the
Administrative Agent under or in connection with, the Credit Documents (except
such as are prepared by the Administrative Agent
34
<PAGE>
and, then, only to the extent the Administrative 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
Companies to perform their obligations thereunder or (ii) assuring compliance of
the Credit Documents and the transactions contemplated by the Credit Documents
with any law or regulation binding on such Person, it being expressly
acknowledged, agreed and understood that each such Person has obtained
independent advice satisfactory to it in all such respects. The Administrative
Agent shall be under no 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 the Administrative 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 Companies. The Administrative 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.
(d) Reliance by Administrative Agent. The Administrative Agent
--------------------------------
shall be entitled to rely, and shall be fully protected in relying, upon any
note, writing, resolution, notice, consent, certification, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Companies), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative 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 expense arising out of the Administrative
Agent's gross negligence or
35
<PAGE>
willful misconduct). The Administrative 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 the
Administrative 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.
(e) Notice of Default; Agreement to Advance. The Administrative
---------------------------------------
Agent shall be deemed to have no knowledge or notice of the occurrence of any
Event of Default or Potential Default hereunder unless the Administrative Agent
has received notice from a Lender or the Companies 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 the Administrative
Agent receives such a notice, the Administrative Agent shall give notice thereof
to the Lenders and the Collateral Agent.
(f) Non-Reliance on Administrative Agent and Other Lenders. Each
------------------------------------------------------
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of the
Companies, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative 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 Companies and made its
own decision to extend credit hereunder and enter into the Credit Documents.
Each Lender also represents that it will, independently and without reliance
upon the Administrative Agent or any other Lender, 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
Companies. Except for notices, reports and other documents expressly required
to be
36
<PAGE>
furnished to the Lenders by the Administrative Agent hereunder, the
Administrative 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 Companies which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
(g) Indemnification. The Companies, jointly and severally, agree
---------------
to indemnify, defend and hold harmless the Administrative Agent in its capacity
as such and each Lender from and against any and all claims, obligations,
penalties, actions, suits, judgments, reasonable costs and disbursements,
losses, liabilities and damages (including, without limitation, reasonable
attorneys' fees) of any kind whatsoever which may at any time be imposed on,
assessed against or incurred by such Person in any way resulting from any action
taken or omitted to be taken by the Companies relating to or arising out of the
Credit Documents or any documents contemplated by or referred to therein or the
transactions contemplated thereby. The Administrative Agent agrees that it will
promptly notify the Companies of any such claim, action or suit asserted or
commenced against it and that the Companies may assume the defense thereof with
counsel reasonably satisfactory to the Administrative Agent at the Companies'
sole expense, that the Administrative Agent will cooperate with the Companies on
such defense, and that the Administrative Agent will not settle any such claim,
action or suit without the consent of the Companies; provided, however, that in
-------- -------
the event the Administrative Agent is not reasonably satisfied with such
defense, the Administrative Agent may assume such defense with counsel
satisfactory to the Administrative Agent at the Companies' sole expense. The
Lenders agree to indemnify and hold harmless the Administrative Agent in its
capacity as such ratably in accordance with their Percentage Shares to the
extent required by the Companies hereunder if the Administrative Agent is not
reimbursed by the Companies hereunder and without limiting the obligation of the
Companies to do so. The indemnification obligations of the Companies and Lenders
under this Paragraph 10(g) shall survive termination of this Agreement and
payment in full of the Obligations.
(h) Administrative Agent in Its Individual Capacity. The
-----------------------------------------------
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Companies as though the
Administrative Agent were not the Administrative Agent hereunder. With respect
to such loans made or
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<PAGE>
renewed by it and any note issued to it hereunder, the Administrative Agent
shall have the same rights and powers under the Credit Documents as any Lender
hereunder and may exercise the same as though it were not the Administrative
Agent, and the terms "Lender" and "Lenders" shall include the Administrative
Agent in its individual capacity.
(i) Successor Agents. The Administrative Agent may resign as
----------------
such under the Credit Documents upon ninety (90) days' prior written notice to
the other parties hereto. If the Administrative Agent shall resign, then, on or
before the effective date of such resignation, the Majority Lenders shall
appoint a successor agent reasonably acceptable to the Companies or, if the
Majority Lenders are unable to agree on the appointment of a successor agent,
the Administrative Agent shall appoint a successor agent for the Lenders, which
successor agent shall be reasonably acceptable to the Companies, whereupon such
successor agent shall succeed to the rights, powers and duties of the
Administrative Agent, and the term "Administrative Agent" shall mean such
successor agent effective upon its appointment, and the former Administrative
Agent's rights, powers and duties shall be terminated without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any of the other Credit Documents or successors
thereto. After the Administrative Agent's resignation hereunder, the provisions
of this Paragraph 10(i) shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Administrative Agent under the Credit
Documents.
10(j) Authority to Execute Security Agreement. The Lenders hereby
---------------------------------------
authorize Administrative Agent to execute the Security Agreement in its capacity
as agent for each of the Lenders on behalf of the Lenders, and the Lenders
specifically consent to the terms thereof, including without limitation the
appointment of the Collateral Agent as set forth therein pursuant to the terms
contained therein, and the authority of the Collateral Agent to administer the
Collateral pursuant to the terms thereof. The Lenders hereby agree to be bound
by all provisions of the Security Agreement which may be applicable to the
Lenders, including without limitation any indemnification provisions running
from the Lenders or any of them to the Collateral Agent contained therein.
10(k) Authority to Execute Custodial Agreement. The Lenders hereby
----------------------------------------
authorize Administrative Agent to execute the Custodial Agreement in its
capacity as agent for each of the Lenders on behalf of the Lenders, and the
Lenders specifically consent to
38
<PAGE>
the terms thereof, including without limitation the authority of the Collateral
Agent to administer the Collateral pursuant to the terms thereof. The Lenders
hereby agree to be bound by all provisions of the Custodial Agreement which may
be applicable to the Lenders, including without limitation any indemnification
provisions running from the Lenders or any of them to the Collateral Agent or
the Administrative Agent contained therein.
10(l) Sharing of Set-Offs. If 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 Companies agree that each Lender so purchasing a portion of
another 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.
11. Miscellaneous Provisions.
------------------------
(a) No Assignment by Companies. The Companies may not assign
--------------------------
their rights or obligations under this Agreement 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 Companies, their
successors and assigns.
(b) Amendment. This Agreement may be amended by the
---------
Administrative Agent, an assigning Lender and the party accepting the assignment
solely in order to reflect an assignment under Paragraph 11(i) hereof. Except as
set forth in the preceding
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<PAGE>
sentence, neither this Agreement nor any of the other Credit Documents may be
amended or terms or provisions hereof or thereof waived unless such amendment or
waiver is in writing and signed by the Majority Lenders and the Companies;
provided, however, that without the prior written consent of one hundred percent
(100%) of the Lenders and the Companies, no amendment or waiver shall:
(1) Waive or amend any term or provision of Paragraphs 3(c),
3(d), 3(f), 3(g), 10(g) or 10(l) above or this Paragraph 11(b);
(2) Waive or amend the definition of Eligible A/B Mortgage
Loan, Unit Collateral Value, Tranche A Borrowing Base, Tranche B
Borrowing Base, Collateral Value of the Tranche A Borrowing Base, or
Collateral Value of the Tranche B Borrowing Base;
(3) Reduce the principal of, or rate of interest on, the
Loans or reduce any fees payable hereunder or extend the required
payment dates of any of the Obligations;
(4) Except as expressly provided for hereunder, modify the
Aggregate Tranche A Credit Limit or the Aggregate Tranche B Credit
Limit;
(5) Modify any Lender's Maximum Commitment;
(6) Modify the definition of "Majority Lenders", "Percentage
Share", or "Repayment Share";
(7) Extend the Maturity Date;
(8) Release any Collateral except as expressly permitted
under the Credit Documents; or
(9) Modify any provision in the Credit Documents which
expressly requires consent of one hundred percent (100%) of the
Lenders.
In addition, no amendment or waiver shall, unless agreed to in writing by the
affected Agent, modify the rights or duties of such Agent. It is expressly
agreed and understood that the failure by the required Lenders to elect to
accelerate amounts outstanding hereunder or to terminate the obligation of the
Lenders to make Loans hereunder shall not constitute an amendment or waiver of
any term or provision of this Agreement.
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<PAGE>
(c) Cumulative Rights; No Waiver. The rights, powers and
----------------------------
remedies of the Administrative Agent, the Collateral Agent, and the Lenders
under the Credit Documents are cumulative and in addition to all rights, powers
and remedies provided under any and all agreements among the Companies and the
Administrative Agent, the Collateral Agent and the Lenders relating hereto, at
law, in equity or otherwise. Any delay or failure by the Administrative Agent,
the Collateral Agent or the Lenders to exercise any right, power or remedy shall
not constitute a waiver thereof by the Administrative Agent, the Collateral
Agent and the Lenders, and no single or partial exercise by the Administrative
Agent, the Collateral Agent, and the Lenders of any right, power or remedy shall
preclude other or further exercise thereof or any exercise of any other rights,
powers or remedies.
(d) Entire Agreement. This Agreement, the documents and
----------------
agreements referred to herein and that certain letter agreement among the
Administrative Agent and the Companies dated as of February 17, 1995, 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.
(e) Survival. All representations, warranties, covenants and
--------
agreements on the part of the Companies contained in the Credit Documents 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.
(f) Notices. All notices given by any party to the others under
-------
the Credit Documents shall be in writing unless otherwise provided for herein,
delivered personally or by depositing the same in the United States mail,
registered, with postage prepaid, addressed to the party at the address set
forth on Schedule II set forth in the Addendum, or by facsimile addressed to the
-----------
party at the number set forth on Schedule II set forth in the Addendum. Any
-----------
party may change the address to which notices are to be sent by notice of such
change to each other party given as provided herein. Such notices shall be
effective on the date received or, if mailed, on the third Business Day
following the date mailed.
(g) Governing Law/Waiver of Jury Trial. This Agreement shall be
----------------------------------
governed by and construed in accordance with the laws of the State of North
Carolina. TO THE EXTENT PERMITTED BY LAW, THE COMPANIES HEREBY JOINTLY AND
SEVERALLY KNOWINGLY, VOLUNTARILY AND
41
<PAGE>
INTENTIONALLY WAIVE ANY RIGHTS ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE CREDIT DOCUMENTS. THIS PROVISION IS A MATERIAL INDUCEMENT
FOR THE AGENTS AND THE LENDERS ENTERING INTO THE CREDIT DOCUMENTS.
(h) Sub-Participation by Lenders. Any Lender may at any time
----------------------------
sell to one or more financial institutions (each of such financial institutions
being herein called a "Participant") 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 11(h)
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 Companies, the Administrative Agent, the Collateral
Agent and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under
the Credit Documents; and
(4) The participation agreement between such Lender and the
Participant shall provide that the sole voting rights of the Participant
are with respect to those items on which such Lender is entitled to vote
pursuant to Paragraphs 11(b)(3), 11(b)(7) and 11(b)(8) above or any vote to
amend Paragraph 11(b).
(i) Assignments by Lenders. Any Lender may assign all or any
----------------------
part of such Lender's Maximum Commitment, subject to the consent of the
Companies, which consent shall not be unreasonably withheld, to any other Lender
or to any other party not a party to this Agreement as of the date hereof;
provided, however, that the accepting Lender or other accepting party shall be a
financial institution with capital of at least $100,000,000; except that 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. Any assignment hereunder shall be in form and content approved by the
Administrative Agent which such approval shall not be unreasonably withheld.
Upon any such assignment (i) this Agreement will be amended by the parties
hereto and by the party receiving the assignment to reflect such assign-
42
<PAGE>
ment, (ii) the Administrative Agent will deliver an updated Commitment Schedule
to the Companies and the Lenders reflecting such assignment, (iii) the
outstanding Loans will be reallocated among the Lenders (including the party
receiving the assignment) in accordance with such updated Commitment Schedule,
and (iv) if the party receiving the assignment is not currently a party to the
Agreement, the Companies will deliver a Note to such party.
(j) Addition of New Lender. The Company may at any time propose
----------------------
that a financial institution become an additional Lender hereunder other than by
assignment of the Maximum Commitment of an existing Lender; provided, however,
that such additional party shall be a financial institution with capital of at
least $100,000,000 and shall be subject to the consent of the Administrative
Agent, which consent shall not be unreasonably withheld. Upon the addition of
any such party as an additional Lender hereunder, (i) this Agreement will be
amended by the parties hereto and by the party becoming an additional Lender
hereunder to reflect the addition of such party as a Lender hereunder, (ii) the
Administrative Agent will deliver an updated Commitment Schedule to the
Companies and the Lenders reflecting the addition of such party as a Lender,
(iii) the outstanding Loans will be reallocated among the Lenders (including the
additional Lender) in accordance with such updated Commitment Schedule, and (iv)
the Companies will deliver a Note to such party.
(k) Counterparts. This Agreement and the other Credit Documents
------------
may be executed in any number of counterparts, all of which together shall
constitute one agreement.
11(l) Adjustment of Borrowing Base. On any date on which the sum
----------------------------
of (i) the Aggregate Unit Collateral Values of all Eligible A/B Mortgage Loans
included in the Tranche A Borrowing Base or the Tranche B Borrowing Base which
are of the type described in the last paragraph of the definition of "Eligible
A/B Mortgage Loan" (it being understood that for the purpose of this provision,
the terms "Eligible A/B Mortgage Loans," "Tranche A Borrowing Base" and "Tranche
B Borrowing Base" shall mean both such terms as defined herein and such terms as
---- ---
defined in the Facility I Agreement), (ii) the Collateral Value of the Tranche D
Borrowing Base attributable to Construction Loans of the type described in the
second proviso to the definition of "Construction Loan" (or, if any such
Construction Loan is nonconforming solely due to the sales price or construction
cost of any single-family tract home to be constructed in connection therewith,
the sales price or construction cost of such home), (iii) the Collateral Value
of the Tranche E Borrowing
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<PAGE>
Base attributable to Servicing Loans of the type described in the proviso to the
definition of "Servicing Loan", and (iv) the Collateral Value of the Tranche F
Borrowing Base attributable to Foreclosure/Repurchase Loans of the type
described in the proviso to the definition of "Foreclosure/Repurchase Loan,"
(collectively, the "Non-conforming Collateral Amount") (it being understood that
for the purposes of this Paragraph 11(l), the terms "Collateral Value of the
Tranche D Borrowing Base," "Collateral Value of the Tranche E Borrowing Base,"
"Collateral Value of the Tranche F Borrowing Base," "Construction Loan,"
"Servicing Loan" and "Foreclosure/Repurchase Loan" shall have the meanings given
such terms in the Facility II Agreement) exceeds $XXXXXXXXXX, the Administrative
Agent, after consultation with the Companies, shall make such adjustments to the
Tranche A Borrowing Base and the Tranche B Borrowing Base, and shall remove
Collateral from the computation of some or all of such Borrowing Bases, as may
be necessary to cause the Non-Conforming Collateral Amount to be less than or
equal to $XXXXXXXXXX.
12. Definitions. For purposes of this Agreement, the terms set forth
-----------
below shall have the following meanings:
"Addendum" shall mean the Addendum of Schedules and Exhibits attached
--------
to this Agreement and incorporated herein by reference, such Addendum to be
considered to be a part of this Agreement for all purposes.
"Additional Required Documents" shall mean, with respect to any Loan,
-----------------------------
those items described on Exhibit E set forth in the Addendum.
---------
"Adjusted Total Indebtedness", as to any Person, shall mean the
---------------------------
consolidated Indebtedness of such Person less the amount of such Indebtedness
----
attributable to collateralized mortgage obligations of such Person.
"Administrative Agent" shall have the meaning given such term in the
--------------------
introductory paragraph hereof.
"Affiliate" shall mean, as to any Person, any other Person directly or
---------
indirectly controlling, controlled by or under direct or indirect common control
with, such Person. "Control" as used herein means the power to direct the
management and policies of such Person.
44
<PAGE>
"Agent" shall have the meaning given such term in Paragraph 10(a)
-----
above.
"Aggregate Facility Commitment" shall mean, at any time, the sum of
-----------------------------
the Lenders' Maximum Commitments at such time, which sum shall not exceed
$150,000,000 at any time.
"Aggregate Tranche A Credit Limit" shall mean, at any time,
--------------------------------
XXXXXXXXXXX percent (XXX%) of the Aggregate Facility Commitment at such time.
"Aggregate Tranche B Credit Limit" shall mean, at any time,
--------------------------------
XXXXXXXXXXX percent (XXX%) of the Aggregate Facility Commitment at such time.
"Agreement" shall mean this Agreement, as the same may be amended,
---------
extended or replaced from time to time.
"Applicable Corporate Rate" shall mean, with respect to any Corporate
-------------------------
Rate Loan, the Corporate Rate plus the Applicable Spread.
"Applicable Eurodollar Rate" shall mean, with respect to any
--------------------------
Eurodollar Loan for the Interest Period applicable to such Eurodollar Loan, the
rate per annum (rounded upward, if necessary, to the next higher 1/1000 of one
percent (.001%)) calculated in accordance with the following formula:
ER +
-------
Applicable Eurodollar Rate = 1-ERP AS
where
ER = Eurodollar Rate
ERP = Eurodollar Reserve Percentage
AS = Applicable Spread
"Applicable Spread" shall mean (i) with respect to any Tranche A Loan,
-----------------
XXXXXXXXXXXXXXXXX percent (XXX%); and (ii) with respect to any Tranche B Loan,
XXXXXXXXXXXXXXXXX percent (XXX%).
"Approved Investor" shall mean any Person pre-approved in writing
-----------------
(which pre-approval may be limited in dollar amounts by type and otherwise) by
the Administrative Agent in its reasonable business judgement (including those
shown on Schedule III set forth in the Addendum) and which approval has not been
------------
revoked by such Administrative Agent in its reasonable business judgement (such
45
<PAGE>
revocation to be effective on the tenth Business Day following notice thereof
given to the Companies in writing). (It being agreed that Administrative Agent
will promptly notify the Lenders in writing of any additional Approved Investor
or any previous Approved Investor for which approval has been revoked.)
"Approved Repo Lender" shall mean any Approved Investor or any other
--------------------
entity pre-approved in writing by the Administrative Agent in its reasonable
business judgement (including those shown on Schedule III set forth in the
------------
Addendum) and which approval has not been revoked by the Administrative Agent in
its reasonable business judgement (such revocation to be effective on the tenth
Business Day following notice thereof given to the Companies in writing). (It
being agreed that Administrative Agent will promptly notify the Lenders in
writing of any additional Approved Repo Lender or any previous Approved Repo
Lender for which approval has been revoked.)
"Authorized Officers" shall mean, with respect to the Companies, any
-------------------
of the officers set forth on Schedule IV set forth in the Addendum.
-----------
"Book Net Worth", as to any Person, shall mean the excess of
--------------
consolidated total assets of such Person over consolidated total liabilities of
such Person, each as determined in accordance with GAAP.
"Borrowing Base Schedule" shall mean a schedule prepared by Collateral
-----------------------
Agent and certified to by the Companies in the form of that set forth as Exhibit
-------
F-1 in the Addendum.
---
"Business Day" shall mean any day other than a Saturday, a Sunday or a
------------
day on which banks in Charlotte, North Carolina or Los Angeles, California are
authorized or obligated to close their regular banking business.
"Capitalized Lease Obligations" of any Person shall mean the
-----------------------------
obligations of such Person to pay rent or other amounts under any lease of (or
other arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
46
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Collateral" shall mean the "A/B Collateral," as such term is defined
----------
in the Security Agreement.
"Collateral Agent" shall mean Bankers Trust Company of California,
----------------
N.A., a national banking association, or such other Person which may be
designated as such in accordance with the terms of the Credit Documents.
"Collateral Value of the Tranche A Borrowing Base" shall mean at any
------------------------------------------------
date the sum of the Unit Collateral Values of all Eligible A/B Mortgage Loans
included in the Tranche A Borrowing Base at such date (including Eligible A/B
Mortgage Loans shipped into pools supporting Mortgage Backed Securities pending
sale of such Mortgage Backed Securities and delivery of the sale proceeds
thereof to the Settlement Account), provided, however, that in no event will the
-------- -------
Collateral Value of the Tranche A Borrowing Base exceed the aggregate amount of
Take-Out Commitments and Hedging Arrangements covering the Eligible A/B Mortgage
Loans contained in the Tranche A Borrowing Base at such time (which amount shall
be subject to adjustment as provided in Paragraph 11(l) above).
"Collateral Value of the Tranche B Borrowing Base" shall mean at any
------------------------------------------------
date the sum of the Unit Collateral Values of all Eligible A/B Mortgage Loans
included in the Tranche B Borrowing Base at such date (which amount shall be
subject to adjustment as provided in Paragraph 11(l) above).
"Commitment Schedule" shall mean a schedule in the form provided by
-------------------
the Administrative Agent, with the initial Commitment Schedule being set forth
as Schedule I-1 in the Addendum.
------------
"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 Internal Revenue Code.
"Companies" shall have the meaning given such term in the introductory
---------
paragraph hereof.
"Construction-to-Permanent Mortgage Loan" shall mean a Mortgage Loan
---------------------------------------
made to an Obligor to finance the construction of a single family residence,
which Mortgage Loan converts from a construction loan to a permanent loan upon
completion of the
47
<PAGE>
construction of such improvements, and which Mortgage Loan shall conform to the
underwriting guidelines of the Companies for Construction-to-Permanent Mortgage
Loans.
"Contact Office" shall mean the office of the Administrative Agent at
--------------
One First Union Center, 301 South College Street, Charlotte, North Carolina
28288.
"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 Rate" shall mean, for any day, a fluctuating interest rate
--------------
per annum equal to the weekly average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers for each seven-day period ending on Wednesday of each week which
includes such day, as published in Statistical Release H.15 by the Federal
Reserve System, or, if such rate is not so published for any week, the average
of the quotations for such day on such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by the Administrative Agent.
"Corporate Rate Loan" shall mean a Tranche A Corporate Rate Loan or a
-------------------
Tranche B Corporate Rate Loan, as applicable.
"Corporate Rate Loans" shall mean, collectively, Tranche A Corporate
--------------------
Rate Loans and Tranche B Corporate Rate Loans.
"Covenant Compliance Certificate" shall mean a certificate in the form
-------------------------------
set forth as Exhibit G in the Addendum.
---------
"Credit Documents" shall mean this Agreement, the Security Agreement,
----------------
the Custodial Agreement, the Notes and each other document, instrument and
agreement executed by the Companies in connection herewith, as any of the same
may be amended, extended or replaced from time to time.
"Custodial Agreement" shall have the meaning given such term in
-------------------
Paragraph 4(b) above, as the same may be amended, extended or replaced from time
to time.
"CWM" shall mean CWM Mortgage Holdings, Inc., a Delaware corporation.
---
48
<PAGE>
"Delinquency Report" shall mean a report substantially in the form set
------------------
forth as Exhibit M in the Addendum.
---------
"Eligible A/B Mortgage Loan" shall mean a Mortgage Loan with respect
--------------------------
to which each of the following statements shall be accurate and complete (and
the Companies by confirming the inclusion of such Mortgage Loan in any
computation of the Collateral Value of the Tranche A Borrowing Base or the
Collateral Value of the Tranche B Borrowing Base shall be deemed to so represent
and warrant to the Administrative Agent and the Lenders at and as of the date of
such computation):
(a) Said Mortgage Loan is a binding and valid obligation of the
Obligor thereon, in full force and effect and enforceable in accordance with its
terms, subject to the effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally and the effect of equitable
principles whether applied in an action at law or a suit in equity.
(b) Said Mortgage Loan is genuine in all respects as appearing on
its face and as represented in the books and records of the Companies and all
information set forth therein is true and correct.
(c) Said Mortgage Loan is free of any default of any party thereto
(including the Companies), other than as expressly permitted pursuant to
subparagraph (d) below, counterclaims, offsets and defenses and from any
rescission, cancellation or avoidance, whether by operation of law or otherwise.
(d) No payment under said Mortgage Loan is more than sixty (60)
days past due the payment due date set forth in the underlying promissory note
and deed of trust (or mortgage); provided, however, that a Mortgage Loan which
-------- -------
is more than sixty (60) days delinquent may be an Eligible A/B Mortgage Loan and
may be included in the Tranche B Borrowing Base so long as the Unit Collateral
Value of said Mortgage Loan, when added to the Unit Collateral Values of all
other Mortgage Loans included in the Tranche B Borrowing Base which are more
than sixty (60) days delinquent, does not exceed XXXX percent (XX%) of the
Collateral Value of the Tranche B Borrowing Base (including the Collateral Value
of Mortgage Loans more than 60 days past due included or to be included in the
Tranche B Borrowing Base).
49
<PAGE>
(e) Said Mortgage Loan contains the entire agreement of the
parties thereto with respect to the subject matter thereof, has not been
modified or amended in any material respect and is free of concessions or
understandings with the Obligor thereon of any kind not expressed in writing
therein.
(f) Said Mortgage Loan complies in all material respects as
required by and in accordance with all applicable laws and regulations governing
the same, including, without limitation, the federal Consumer Credit Protection
Act and the regulations promulgated thereunder and all applicable usury laws and
restrictions, and all notices, disclosures and other statements or information
required by law or regulation to be given, and any other act required by law or
regulation to be performed, in connection with said Mortgage Loan have been
given and performed substantially as required.
(g) All advance payments and other deposits on said Mortgage Loan
have been paid in cash, and no part of said sums has been loaned, directly or
indirectly, by the Companies to the Obligor and there have been no prepayments
on account of said Mortgage Loan except as disclosed to the Collateral Agent.
(h) At all times said Mortgage Loan will be free and clear of all
Liens, except in favor of the Collateral Agent for the benefit of the Lenders.
(i) The Property covered by said Mortgage Loan is insured against
loss or damage by fire and all other hazards normally included within standard
extended coverage in accordance with the provisions of said Mortgage Loan.
(j) The Property covered by said Mortgage Loan is free and clear
of all Liens except of the Companies subject only to (1) the Lien of current
real property taxes and assessments not yet delinquent; (2) covenants,
conditions and restrictions, rights of way, easements and other matters of the
public record, as of the date of recording, as are acceptable to mortgage
lending institutions generally and specifically referred to in a lender's title
insurance policy delivered to the originator of the Mortgage Loan and (i)
referred to or otherwise considered in the appraisal made for the originator of
the Mortgage Loan or (ii) which do not materially adversely affect the appraised
value of the Property as set forth in such appraisal; (3) other matters to which
like properties are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by the
50
<PAGE>
Mortgage Loan or the use, enjoyment, value or marketability of the related
Property; and (4) Liens subordinate in priority to the Lien in favor of the
Companies; provided, however, that the Property may be subject to one (1) Lien
-------- -------
prior to the Lien in favor of the Companies.
(k) If said Mortgage Loan has been withdrawn from the possession
of the Collateral Agent, and (1) shipped by the Collateral Agent to the
Companies for purposes of correcting clerical or other nonsubstantive
documentation problems pursuant to a trust receipt, or (2) shipped by the
Collateral Agent directly to a permanent investor for purchase, or (3) shipped
by the Collateral Agent directly to a custodian for purposes of formation of a
pool supporting a Mortgage-Backed Security, such shipment shall in all aspects
conform to the requirements of Section 5 of the Custodial Agreement in form,
aggregate number of Mortgage Loans permitted to be shipped, and amount of time
such Mortgage Loans may remain withdrawn from Collateral Agent's possession.
(l) If such Mortgage Loan was originated by the Companies, the
date of the underlying promissory note is no earlier than (i) if such Mortgage
Loan is included in the Tranche A Borrowing Base, forty-five (45) days prior to
the date said Mortgage Loan is first submitted to the Collateral Agent, (ii) if
such Mortgage Loan is included in the Tranche B Borrowing Base and has not
previously been included in the Tranche A Borrowing Base, forty-five (45) days
prior to the date said Mortgage Loan is first submitted to the Collateral Agent,
and (iii) if such Mortgage Loan is included in the Tranche B Borrowing Base and
was previously included in the Tranche A Borrowing Base, one hundred sixty-five
(165) days prior to the date said Mortgage Loan is first submitted to the
Collateral Agent for inclusion in the Tranche B Borrowing Base (provided,
--------
however, that for the purpose hereof, the phrases "Tranche A Borrowing Base" and
-------
"Tranche B Borrowing Base" shall be deemed to mean both such terms as defined in
this Agreement and as defined in the Facility II Agreement).
---
(m) If such Mortgage Loan was acquired by the Companies, such
Mortgage Loan was included in the Tranche A Borrowing Base within forty-five
(45) days of the acquisition of such Mortgage Loan (provided, however, that for
-------- -------
the purpose hereof, the phrase "Tranche A Borrowing Base" shall be deemed to
mean such term as defined in this Agreement and as defined in the Facility II
---
Agreement).
51
<PAGE>
(n) The improvements on the Property were not constructed with
the proceeds of the Mortgage Loan and consist of a completed one-to-four unit
single family residence, including but not limited to a condominium, planned
unit development, a townhouse or a co-op; provided, however, that a Mortgage
-------- -------
Loan, the proceeds of which were used to construct the improvements on the
Property relating thereto, may be an Eligible A/B Mortgage Loan and may be
included in the Tranche B Borrowing Base so long as (i) it is a Construction-to-
Permanent Mortgage Loan and (ii) the Unit Collateral Value of said Construction-
to-Permanent Mortgage Loan, when added to the Unit Collateral Values of all
other Construction-to-Permanent Mortgage Loans included in the Tranche B
Borrowing Base, does not exceed the greater of (i) XXXXXXX percent (XX%) of the
Aggregate Tranche B Credit Limit, or (ii) XXXXX percent (XX%) of the Collateral
Value of the Tranche B Borrowing Base (including the Collateral Value of
Construction-to-Permanent Loans included or to be included in the Tranche B
Borrowing Base).
(o) There has been delivered to the Collateral Agent the Required
Documents for said Mortgage Loan; provided, however, that a Mortgage Loan, the
-------- -------
Required Documents for which have not been delivered to the Collateral Agent,
may be an Eligible A/B Mortgage Loan and may be included in the Tranche A
Borrowing Base or in the Tranche B Borrowing Base so long as (i) such Mortgage
Loan meets the requirements set forth for a "Wet Mortgage Loan" as defined in
and pursuant to Section 3.3 of the Custodial Agreement, including the ultimate
delivery of the Required Documents in connection therewith to the Collateral
Agent within the time specified in such Section 3.3; and (ii) the Unit
Collateral Value of said Mortgage Loan, when added to the Unit Collateral Value
of all other Mortgage Loans included in the Tranche A Borrowing Base or the
Tranche B Borrowing Base which are "Wet Mortgage Loans" under the Custodial
Agreement, does not exceed XXXXXX percent (XX%) of the aggregate outstanding
principal amount of all Tranche A Loans and Tranche B Loans at such time.
(p) The servicing rights relating to said Mortgage Loan are not
subject to any Lien, claim, interest or negative pledge in favor of any Person
other than as permitted hereunder.
(q) INTENTIONALLY OMITTED.
(r) Said Mortgage Loan has not previously been delivered to the
Collateral Agent, then shipped to an investor or certifying custodian and
returned to the Collateral Agent on account of a deficiency or impairment of
such Mortgage Loan which
52
<PAGE>
would cause such Mortgage Loan to be unsuitable for purchase at a price
customarily obtainable for Mortgage Loans meeting the requirements set forth in
the INMC Seller/Servicer Guide or inclusion in a pool containing other Mortgage
Loans generally conforming to the requirements set forth in the INMC
Seller/Servicer Guide.
(s) The Companies or other originator of such Mortgage Loan
obtained such appraisal in connection with the origination of said Mortgage Loan
as would satisfy all appraisal requirements for said Mortgage Loan if such had
been originated by a federally insured depositary institution.
(t) Said Mortgage Loan is covered by a Take-Out Commitment or a
Hedging Arrangement which is in full force and effect on the date such Mortgage
Loan was closed and continues to be so covered, and the Companies and the
Mortgage Loan are in full compliance therewith (provided, however, that said
-------- -------
Mortgage Loan need not be covered by a Take-Out Commitment or a Hedging
Arrangement if said Mortgage Loan is included in the Tranche B Borrowing Base or
if the Administrative Agent in its sole discretion determines that such Mortgage
Loan is not subject to material interest rate risk exposure); and
(u) Said Mortgage Loan has been underwritten and purchased
pursuant to the programs and procedures set forth in the INMC Seller/Servicer
Guide.
In determining the eligibility set forth above of any Mortgage Loan, any of the
requirements for eligibility set forth above may be waived by the Administrative
Agent in its sole discretion upon request for such waiver by the Companies prior
to the delivery of such Mortgage Loan to the Collateral Agent with notice of
such waiver to be given to all Lenders in the next collateral report provided to
the Lenders pursuant to Paragraph 7 of the Security Agreement if such waiver is
in force on the date of such collateral report; provided, however, that the Unit
-------- -------
Collateral Value of any Mortgage Loan approved by the Administrative Agent as an
Eligible A/B Mortgage Loan pursuant to such a waiver, when added to (i) the
Aggregate Unit Collateral Values of all other Eligible A/B Mortgage Loans
included in the Tranche A Borrowing Base or the Tranche B Borrowing Base which
have been approved by the Administrative Agent pursuant to such a waiver, (ii)
the Collateral Value of the Tranche D Borrowing Base attributable to
Construction Loans of the type discussed in the second proviso to the definition
of "Construction Loan" (or, if any such Construction Loan is nonconforming
solely
53
<PAGE>
due to the sales price or construction cost of any single-family tract home to
be constructed in connection therewith, the sales price or construction cost of
such home), (iii) the Collateral Value of the Tranche E Borrowing Base
attributable to Servicing Loans of the type described in the proviso to the
definition of "Servicing Loan, and (iv) the Collateral Value of the Tranche F
Borrowing Base attributable to Foreclosure/Repurchase Loans of the type
described in the proviso to the definition of "Foreclosure/Repurchase Loan,"
does not exceed $XXXXXXXXXXXXX (it being understood that for the purpose of this
proviso, (A) the terms "Tranche A Borrowing Base" and "Tranche B Borrowing Base"
shall mean both such terms as defined herein and such terms as defined in the
---- ---
Facility II Agreement, and (B) the terms "Collateral Value of the Tranche D
Borrowing Base," "Collateral Value of the Tranche E Borrowing Base," "Collateral
Value of the Tranche F Borrowing Base," "Construction Loans," "Servicing Loans,"
and "Foreclosure/Repurchase Loans" shall have the meanings given to such terms
in the Facility II Agreement), and further provided, that the Unit Collateral
------- --------
Value of any Mortgage Loan approved by the Administrative Agent as an Eligible
A/B Mortgage Loan pursuant to such a waiver, when added to the Aggregate Unit
Collateral Values of all other Eligible A/B Mortgage Loans included in the
Tranche A Borrowing Base or the Tranche B Borrowing Base which have been
approved by the Administrative Agent pursuant to such a waiver, does not exceed
XXXXXX percent (XX%) of the Aggregate Tranche A Credit Limit (it being
understood that for the purposes of this provision, the terms "Aggregate Tranche
A Credit Limit," "Tranche A Borrowing Base," "Tranche B Borrowing Base,"
"Tranche A Loans" and "Tranche B Loan" shall mean both such terms as defined
----
herein and such terms as defined in the Facility II Agreement).
---
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as the same may from time to time be supplemented or amended.
"ERISA Affiliate" shall mean, with respect to any Person, any trade or
---------------
business (whether or not incorporated) that is a member of the group of which
such Person is a member and which is treated as a single employer under Section
414 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder in effect from time to time.
"Eurodollar Business Day" shall mean a Business Day upon which
-----------------------
commercial banks in London, England and New York, New York are open for domestic
and international business (including dealings in United States dollars).
54
<PAGE>
"Eurodollar Loan" shall mean a Tranche A Eurodollar Loan or a Tranche
---------------
B Eurodollar Loan, as applicable.
"Eurodollar Loans" shall mean, collectively, Tranche A Eurodollar
----------------
Loans and Tranche B Eurodollar Loans.
"Eurodollar Rate" shall mean, with respect to any Eurodollar Loan for
---------------
the Interest Period applicable to such Eurodollar Loan, the arithmetic average
of the rates at which deposits in immediately available U.S. dollars in an
amount equal to the aggregate amount of Eurodollar Loans proposed to be subject
to such rates having a maturity approximately equal to such Interest Period are
offered to or by reference banks in the London interbank market, as determined
by the Administrative Agent by reference to page 3750 of the Telerate Systems
Incorporated screen service as of 11:00 a.m. (London time) one Eurodollar
Business Day prior to the first day of such Interest Period.
"Eurodollar Reserve Percentage" shall mean for any day, that
-----------------------------
percentage expressed as a decimal, which is in effect on such day, as specified
by the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum aggregate reserve requirement (including all basis,
supplemental, marginal and other reserves) which is imposed on eurocurrency
liabilities.
"Event of Default" shall have the meaning set forth in Paragraph 9
----------------
above.
"Facility II Agreement" shall mean that certain Facility II Credit
---------------------
Agreement among the Companies, the Lenders and the Administrative Agent
providing for the extension of certain two-year revolving credit facilities, as
such agreement may be amended, extended or restated from time to time.
"Fair Market Value" shall mean, with respect to any Mortgage Loan, the
-----------------
market bid price obtainable for such Mortgage Loan, as determined on a
reasonable basis by the Administrative Agent with reference to the average of
bids therefor obtained from at least three (3) dealers with a general reputation
as being reputable in the pricing of Mortgage Loans.
"First Union" shall mean First Union National Bank of North Carolina,
-----------
a national banking association.
55
<PAGE>
"Funding Account" shall mean, collectively, Account No. XXXXXXXXXXXXX,
---------------
Account No. XXXXXXXXXXXXX, Accounting No. XXXXXXXXXXXXX, Account No.
XXXXXXXXXXXXX, Account No. XXXXXXXXXXXXX and Account No. XXXXXXXXXXXXX, which
accounts are maintained in the Administrative Agent's name alone with the
Administrative Agent at the Contact Office.
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America in effect from time to time.
"Governmental Authority" shall mean any nation or government, any
----------------------
state or other political subdivision thereof, or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hedging Arrangement" shall mean an arrangement or agreement to which
-------------------
the Companies are party which is designed to diminish the Companies' interest
rate risk exposure, which such arrangements or agreements shall be made in
accordance with the Companies' standard practices as disclosed to and reasonably
approved by the Administrative Agent from time to time.
"ILC" shall mean Independent Lending Corporation, a Delaware
---
corporation.
"Indebtedness" of any Person shall mean all items of indebtedness
------------
which, in accordance with GAAP and practices thereof, 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, all amounts for which such Person may be
obligated under gestation or other repurchase facilities, 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.
"INMC" shall mean Independent National Mortgage Corporation, a
----
Delaware corporation.
"Interest Period" shall mean with respect to any Eurodollar Loan the
---------------
period commencing on the date advanced and ending one, two or three weeks, or
one, two, three or six months, thereafter, as
56
<PAGE>
designated in the related Loan Request, provided, however, that (i) any 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 Interest
Period shall end on the immediately preceding Eurodollar Business Day; (ii) any
Interest Period applicable to a Eurodollar Loan which begins on a day for which
there is no numerically corresponding day in the calendar month during which
such Interest Period is to end shall, subject to the provisions of clause (i)
hereof, end on the last day of such calendar month; and (iii) no such Interest
Period shall extend beyond the Maturity Date.
"Lender" shall have the meaning given such term in the introductory
------
paragraph hereof.
"Lien" shall mean any security interest, mortgage, pledge, lien, claim
----
on property, 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 Tranche A Loan or a Tranche B Loan, as applicable.
----
"Loan Purchase/Sale Schedule" shall mean a schedule substantially in
---------------------------
the form of that set forth as Exhibit L in the Addendum.
---------
"Loan Request" shall mean a request for a Loan conveyed to the
------------
Administrative Agent from an duly Authorized Officer of the Companies, with such
request to be confirmed in writing upon the request of the Administrative Agent.
"Loans" shall mean, collectively, Tranche A Loans and Tranche B Loans.
-----
"Majority Lenders" shall mean the Lenders holding not less than fifty-
----------------
one percent (51%) of the Repayment Shares.
"Maturity Date" shall mean the earlier of: (a) May 29, 1996 as such
-------------
date may be extended from time to time in writing by one hundred percent (100%)
of the Lenders, in their sole discretion and (b) the date the Lenders terminate
their obligation to make further Loans hereunder pursuant to Paragraph 9 above.
57
<PAGE>
"Maximum Commitment" shall mean, with respect to any Lender, the
------------------
dollar amount specified as such Lender's "Maximum Commitment" in the Commitment
Schedule set forth as Schedule I-1 in the Addendum.
------------
"Mortgage-Backed Security" shall mean any security (including, without
------------------------
limitation, a participation certificate) that represents an interest in a pool
of mortgages, deeds of trusts or other instruments creating a Lien on Property
which is improved by a completed single family residence, including but not
limited to a condominium, planned unit development or townhouse.
"Mortgage Loan" shall mean a residential real estate secured loan,
-------------
including, without limitation: (a) a promissory note, any reformation thereof
and related deed of trust (or mortgage) and security agreement; (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 mortgagee or beneficiary to return premiums or
payments with respect thereto; and (c) all right, title and interest of the
mortgagee or beneficiary in the Property covered by said deed of trust (or
mortgage).
"Multiemployer Plan" shall mean, as to the Companies or any of their
------------------
ERISA Affiliates, a Plan of such Person which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Notes" shall have the meaning given such term in Paragraph 3(k)
-----
above.
"Obligations" shall mean any and all debts, obligations and
-----------
liabilities of the Companies to the Administrative Agent, the Collateral Agent
or the Lenders (whether now existing or hereafter arising, voluntary or
involuntary, whether or not jointly owed with others, direct or indirect,
absolute or contingent, liquidated or unliquidated, and whether or not from time
to time decreased or extinguished and later increased, created or incurred),
arising out of or related to the Credit Documents.
"Obligor" shall mean the Person or Persons obligated to pay the
-------
Indebtedness which is the subject of a Mortgage Loan.
"Participant" shall have the meaning given such term in Paragraph
-----------
11(h) above.
58
<PAGE>
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA and any successor thereto.
"Percentage Share" shall mean, with respect to each Lender, the ratio
----------------
expressed as a percentage which (a) such Lender's Maximum Commitment bears to
(b) the Aggregate Facility Commitment.
"Permitted Other Debt" shall mean that Indebtedness described as
--------------------
"Permitted Other Debt" on Exhibit H set forth in the Addendum.
---------
"Permitted Secured Debt" shall mean that Indebtedness which is the
----------------------
subject of a Lien and described as "Permitted Secured Debt" on Exhibit H set
---------
forth in the Addendum.
"Person" shall mean any corporation, natural person, firm, joint
------
venture, partnership, limited liability company, trust, unincorporated
organization or Governmental Authority.
"Plan" shall mean, as the Companies or any of their ERISA Affiliates,
----
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.
"Position Report" shall mean a report substantially in the form of
---------------
that set forth as Exhibit I in the Addendum.
---------
"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.
"Proceeds" shall mean whatever is receivable or received when
--------
Collateral or proceeds are sold, collected, exchanged or otherwise disposed of,
whether such disposition is voluntary or involuntary, and includes, without
limitation, all rights to payment, including return premiums, with respect to
any insurance relating thereto.
"Property" shall mean the real property, including the improvements
--------
thereon, and the personal property (tangible and intangible) which are
encumbered pursuant to a Mortgage Loan.
"REIT" shall mean have the meaning given to such term in the Code.
----
59
<PAGE>
"Repayment Share" shall mean with respect to each Lender the ratio
---------------
expressed as a percentage that (i) the aggregate outstanding Loans held by each
Lender bears to (ii) the aggregate outstanding Loans held by all Lenders.
"Reportable Event" shall mean a reportable event as defined in Title
----------------
IV of ERISA, except actions of general applicability by the Secretary of Labor
under Section 110 of ERISA.
"Required Documents" shall mean, with respect to any Loan, those items
------------------
described on Exhibit J set forth in the Addendum.
---------
"Requirements of Law" shall mean, as to any Person, the Articles or
-------------------
Certificate of Incorporation and Bylaws 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.
"Security Agreement" shall have the meaning given such term in
------------------
Paragraph 4(a) above, as the same may be amended, extended or replaced from time
to time.
"Settlement Account" shall mean that certain account maintained in the
------------------
name of the Collateral Agent which account shall be the same account as the
"Financial Institution Settlement Account" to be established and maintained for
and on behalf of the Administrative Agent pursuant to Section 5.2(a) of the
Custodial Agreement.
"Single Employer Plan" shall mean, as to the Companies or any of their
--------------------
ERISA Affiliates, any Plan of such Person which is not a Multiemployer Plan.
"Statement Date" shall mean December 31, 1994.
--------------
"Take-Out Commitment" with respect to any Mortgage Loan shall mean a
-------------------
bona fide current, unused and unexpired whole loan commitment or forward sale
Mortgage Backed Security (including, without limitation, a Warehouse-Related
MBS) commitment issued in favor of and held by the Companies made by an Approved
Investor, under which said Approved Investor agrees, prior to the expiration
thereof, upon the satisfaction of certain terms and conditions therein, to
purchase such Mortgage Loan or related Mortgage Backed Security
60
<PAGE>
(including, without limitation, a Warehouse-Related MBS) at a Take-Out Price,
which commitment is not subject to any term or condition which is not customary
in commitments of like nature or which, in the reasonably anticipated course of
events, cannot be fully complied with prior to the expiration thereof.
"Take-Out Price" with respect to any Mortgage Loan shall mean the
--------------
specified price to be paid for such Mortgage Loan under the applicable Take-Out
Commitment covering said Mortgage Loan.
"Tranche A Borrowing Base" shall mean at any date all Eligible A/B
------------------------
Mortgage Loans purchased by CWM or INMC pursuant to the programs and procedures
described in the INMC Seller-Servicer Guide which have not been included as
Collateral in excess of one hundred twenty (120) days and which have been
delivered to and held by the Collateral Agent or otherwise identified as "A/B
Collateral" under the Security Agreement as collateral security for the
Obligations.
"Tranche A Corporate Rate Loans" shall mean Tranche A Loans at such
------------------------------
time as they are bearing interest at the Applicable Corporate Rate or at a rate
specified pursuant to Paragraph 3(u) hereof.
"Tranche A Eurodollar Loans" shall mean Tranche A Loans at such time
--------------------------
as they are bearing interest at the Applicable Eurodollar Rate.
"Tranche A Facility" shall mean that revolving credit facility
------------------
extended by the Lenders to the Companies pursuant to Section 1 hereof.
"Tranche A Loan" and "Tranche A Loans" shall have the meanings given
-------------- ---------------
such terms in Paragraph 1(a) above.
"Tranche B Borrowing Base" shall mean at any date all Eligible A/B
------------------------
Mortgage Loans purchased by CWM or INMC pursuant to the programs and procedures
described in the INMC Seller-Servicer Guide which have been delivered to and
held by the Collateral Agent or otherwise identified as "A/B Collateral" under
the Security Agreement as collateral security for the Obligations and which have
not been designated by the Companies to be included in the Tranche A Borrowing
Base.
"Tranche B Corporate Rate Loans" shall mean Tranche B Loans at such
------------------------------
times as they are bearing interest at the Applicable Corporate Rate or at a rate
specified pursuant to Paragraph 3(u) hereof.
61
<PAGE>
"Tranche B Eurodollar Loans" shall mean Tranche B Loans at such time
--------------------------
as they are bearing interest at the Applicable Eurodollar Rate.
"Tranche B Facility" shall mean that revolving credit facility
------------------
extended by the Lenders to the Companies pursuant to Section 2 hereof.
"Tranche B Loan" and "Tranche B Loans" shall have the meanings given
-------------- ---------------
such terms in Paragraph 2(a) above.
"Unit Collateral Value" shall mean,
---------------------
(v) with respect to each Eligible A/B Mortgage Loan included in
the Tranche A Borrowing Base; XXXXXXXXXXXX percent (XX%) of the lesser of: (1)
the unpaid principal balance thereof at the time the Eligible A/B Mortgage Loan
is included in the Tranche A Borrowing Base, or (2) the Fair Market Value.
(w) with respect to each Eligible A/B Mortgage Loan included in
the Tranche B Borrowing Base:
(1) if such Eligible A/B Mortgage Loan is sixty (60) days
delinquent or less, XXXXXXXXXXX percent (XX%) of the lesser of: (1)
the unpaid principal amount thereof at the time the Eligible A/B
Mortgage Loan is included in the Tranche B Borrowing Base (or, in the
case of a Construction-to-Permanent Mortgage Loan, the greater of a.
-
the principal amount thereof disbursed at the date of determination or
b. the maximum principal amount thereof disbursed at any time), and
-
(2) the Fair Market Value.
(2) if such Eligible A/B Mortgage Loan is more than sixty
(60) days delinquent, XXXXXX percent (XX%) of the lesser of: (1) the
unpaid principal amount thereof at the time the Eligible A/B Mortgage
Loan is included in the Tranche B Borrowing Base (or, in the case of a
Construction-to-Permanent Mortgage Loan, the greater of a. the
-
principal amount thereof disbursed at the date of determination or b.
-
the maximum principal amount thereof disbursed at any time), and (2)
the Fair Market Value.
"Warehouse-Related MBS" shall have the meaning given to such term in
---------------------
the Security Agreement.
62
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
CWM MORTGAGE HOLDINGS, INC.,
a Delaware corporation
By________________________________
Name______________________________
Title_____________________________
INDEPENDENT NATIONAL MORTGAGE
CORPORATION, a Delaware
corporation
By________________________________
Name______________________________
Title_____________________________
INDEPENDENT LENDING CORPORATION
a Delaware corporation
By________________________________
Name______________________________
Title_____________________________
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a
national banking association, as Administrative Agent
and a Lender
By________________________________
Name______________________________
Title_____________________________
63
<PAGE>
EXHIBIT 10.5
Confidential Portion
marked "XXXX"
CONFIDENTIAL
FACILITY II TREATMENT PREVIOUSLY
----------- REQUESTED
CREDIT AGREEMENT
----------------
THIS FACILITY II CREDIT AGREEMENT (the "Agreement") is made as of the
30th day of May, 1995, by and among CWM MORTGAGE HOLDINGS, INC., a Delaware
corporation ("CWM"), INDEPENDENT NATIONAL MORTGAGE CORPORATION, a Delaware
corporation ("INMC"), INDEPENDENT LENDING CORPORATION, a Delaware corporation
("ILC" and, together with CWM and INMC, the "Companies"), the lenders from time
to time party hereto, their respective successors and assigns (each a "Lender"
and collectively the "Lenders"); and FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, a national banking association, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent").
STATEMENT OF PURPOSE
--------------------
The Companies have requested the Lenders to extend to the Companies
various revolving credit facilities, and the Lenders have agreed to do so on the
terms and subject to the conditions set forth herein. All capitalized terms not
otherwise defined herein are defined in Paragraph 16 hereof.
Now, therefore, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
AGREEMENT
---------
1. Tranche A Credit Facility.
-------------------------
(a) Lending Limit. Subject to the conditions set forth herein, the
-------------
Lenders severally agree that they shall from time to time up to and including
the Business Day immediately preceding the Maturity Date, advance and readvance
their respective Percentage Shares of loans (the "Tranche A Loans" or a "Tranche
A Loan") to the Companies in amounts not to exceed, in the aggregate at any one
time outstanding (determined after giving effect to the other transactions
contemplated by the Loan Request pursuant to which said Tranche A Loan was
requested), the lesser of:
(1) The Aggregate Tranche A Credit Limit; and
(2) The Collateral Value of the Tranche A Borrowing Base.
<PAGE>
Provided, however, that notwithstanding anything contained herein to the
-------- -------
contrary, at no time may the sum of all Tranche A Loans outstanding, all Tranche
B Loans outstanding, all Tranche C Loans outstanding, all Tranche D Loans
outstanding, all Tranche E Loans outstanding and all Tranche F Loans outstanding
exceed the Aggregate Facility Commitment at such time.
(b) Interest Rate. All Tranche A Loans shall bear interest at the
-------------
Applicable Corporate Rate, unless the Companies elect to have a Tranche A Loan
bear interest at (i) the Applicable Eurodollar Rate as permitted herein or (ii)
an interest rate established pursuant to Paragraph 7(u) below.
(c) Payment of Interest. The Companies shall pay to the
-------------------
Administrative Agent for distribution to each Lender interest on Tranche A Loans
outstanding hereunder from the date disbursed to but not including the date of
payment. Interest on Tranche A Corporate Rate Loans shall be payable monthly,
in arrears, as provided in Paragraph 7(l) below, and interest on a Tranche A
Eurodollar Loan shall be payable at the end of the applicable Interest Period.
2. Tranche B Credit Facility.
-------------------------
(a) Lending Limit. Subject to the conditions set forth herein, the
-------------
Lenders severally agree that they shall from time to time up to and including
the Business Day immediately preceding the Maturity Date, advance and readvance
loans (the "Tranche B Loans" or a "Tranche B Loan") to the Companies in amounts
not to exceed, in the aggregate at any one time outstanding (determined after
giving effect to the other transactions contemplated by the Loan Request
pursuant to which said Tranche B Loan was requested), the lesser of:
(1) The Aggregate Tranche B Credit Limit; and
(2) The Collateral Value of the Tranche B Borrowing Base.
Provided, however, that notwithstanding anything contained herein to the
-------- -------
contrary, at no time may the sum of all Tranche A Loans outstanding, all Tranche
B Loans outstanding, all Tranche C Loans outstanding, all Tranche D Loans
outstanding, all Tranche E Loans outstanding and all Tranche F Loans outstanding
exceed the Aggregate Facility Commitment at such time.
2
<PAGE>
(b) Interest Rate. All Tranche B Loans shall bear interest at the
-------------
Applicable Corporate Rate, unless the Companies elect to have a Tranche B Loan
bear interest at (i) the Applicable Eurodollar Rate as permitted herein or (ii)
an interest rate established pursuant to Paragraph 7(u) below.
(c) Payment of Interest. The Companies shall pay to the
-------------------
Administrative Agent for distribution to each Lender interest on Tranche B Loans
outstanding hereunder from the date disbursed to but not including the date of
payment. Interest on Tranche B Corporate Rate Loans shall be payable monthly,
in arrears, as provided in Paragraph 7(l) below, and interest on a Tranche B
Eurodollar Loan shall be payable at the end of the applicable Interest Period.
3. Tranche C Credit Facility.
-------------------------
(a) Lending Limit. Subject to the conditions set forth herein, the
-------------
Lenders severally agree that they shall from time to time up to and including
the Business Day immediately preceding the Maturity Date, advance and readvance
their respective Percentage Shares of loans (the "Tranche C Loans" or a "Tranche
C Loan") to the Companies in amounts not to exceed, in the aggregate at any one
time outstanding (determined after giving effect to the other transactions
contemplated by the Loan Request pursuant to which said Tranche C Loan was
requested), the lesser of:
(1) The Aggregate Tranche C Credit Limit; and
(2) The Collateral Value of the Tranche C Borrowing Base.
Provided, however, that notwithstanding anything contained herein to the
-------- -------
contrary, at no time may the sum of all Tranche A Loans outstanding, all Tranche
B Loans outstanding, all Tranche C Loans outstanding, all Tranche D Loans
outstanding, all Tranche E Loans outstanding and all Tranche F Loans outstanding
exceed the Aggregate Facility Commitment at such time.
(b) Interest Rate. All Tranche C Loans shall bear interest at the
-------------
Applicable Corporate Rate, unless the Companies elect to have a Tranche C Loan
bear interest at (i) the Applicable Eurodollar Rate as permitted herein or (ii)
an interest rate established pursuant to Paragraph 7(u) below.
(c) Payment of Interest. The Companies shall pay to the
-------------------
Administrative Agent for distribution to each Lender interest on Tranche C Loans
outstanding hereunder from the date disbursed to
3
<PAGE>
but not including the date of payment. Interest on Tranche C Corporate Rate
Loans shall be payable monthly, in arrears, as provided in Paragraph 7(l) below,
and interest on a Tranche C Eurodollar Loan shall be payable at the end of the
applicable Interest Period.
4. Tranche D Credit Facility.
-------------------------
(a) Lending Limit. Subject to the conditions set forth herein, the
-------------
Lenders severally agree that they shall from time to time up to and including
the Business Day immediately preceding the Maturity Date, advance and readvance
their respective Percentage Shares of loans (the "Tranche D Loans" or a "Tranche
D Loan") to the Companies in amounts not to exceed, in the aggregate at any one
time outstanding (determined after giving effect to the other transactions
contemplated by the Loan Request pursuant to which said Tranche D Loan was
requested), the lesser of:
(1) The Aggregate Tranche D Credit Limit; and
(2) The Collateral Value of the Tranche D Borrowing Base.
Provided, however, that notwithstanding anything contained herein to the
-------- -------
contrary, at no time may the sum of all Tranche A Loans outstanding, all Tranche
B Loans outstanding, all Tranche C Loans outstanding, all Tranche D Loans
outstanding, all Tranche E Loans outstanding and all Tranche F Loans outstanding
exceed the Aggregate Facility Commitment at such time.
(b) Interest Rate. All Tranche D Loans shall bear interest at the
-------------
Applicable Corporate Rate, unless the Companies elect to have a Tranche D Loan
bear interest at (i) the Applicable Eurodollar Rate as permitted herein or (ii)
an interest rate established pursuant to Paragraph 7(u) below.
(c) Payment of Interest. The Companies shall pay to the
-------------------
Administrative Agent for distribution to each Lender interest on Tranche D Loans
outstanding hereunder from the date disbursed to but not including the date of
payment. Interest on Tranche D Corporate Rate Loans shall be payable monthly,
in arrears, as provided in Paragraph 7(l) below, and interest on a Tranche D
Eurodollar Loan shall be payable at the end of the applicable Interest Period.
5. Tranche E Credit Facility.
-------------------------
4
<PAGE>
(a) Lending Limit. Subject to the conditions set forth herein, the
-------------
Lenders severally agree that they shall from time to time up to and including
the Business Day immediately preceding the Maturity Date, advance and readvance
their respective Percentage Shares of loans (the "Tranche E Loans" or a "Tranche
E Loan") to the Companies in amounts not to exceed, in the aggregate at any one
time outstanding (determined after giving effect to the other transactions
contemplated by the Loan Request pursuant to which said Tranche E Loan was
requested), the lesser of:
(1) The Aggregate Tranche E Credit Limit; and
(2) The Collateral Value of the Tranche E Borrowing Base.
Provided, however, that notwithstanding anything contained herein to the
-------- -------
contrary, at no time may the sum of all Tranche A Loans outstanding, all Tranche
B Loans outstanding, all Tranche C Loans outstanding, all Tranche D Loans
outstanding, all Tranche E Loans outstanding and all Tranche F Loans outstanding
exceed the Aggregate Facility Commitment at such time.
(b) Interest Rate. All Tranche E Loans shall bear interest at the
-------------
Applicable Corporate Rate, unless the Companies elect to have a Tranche E Loan
bear interest at (i) the Applicable Eurodollar Rate as permitted herein or (ii)
an interest rate established pursuant to Paragraph 7(u) below.
(c) Payment of Interest. The Companies shall pay to the
-------------------
Administrative Agent for distribution to each Lender interest on Tranche E Loans
outstanding hereunder from the date disbursed to but not including the date of
payment. Interest on Tranche E Corporate Rate Loans shall be payable monthly,
in arrears, as provided in Paragraph 7(l) below, and interest on a Tranche E
Eurodollar Loan shall be payable at the end of the applicable Interest Period.
6. Tranche F Credit Facility.
-------------------------
(a) Lending Limit. Subject to the conditions set forth herein, the
-------------
Lenders severally agree that they shall from time to time up to and including
the Business Day immediately preceding the Maturity Date, advance and readvance
their respective Percentage Shares of loans (the "Tranche F Loans" or a "Tranche
F Loan") to the Companies in amounts not to exceed, in the aggregate at any one
time outstanding (determined after giving effect to the other transactions
contemplated by the Loan Request pursuant to which said Tranche F Loan was
requested), the lesser of:
5
<PAGE>
(1) The Aggregate Tranche F Credit Limit; and
(2) The Collateral Value of the Tranche F Borrowing Base.
Provided, however, that notwithstanding anything contained herein to the
-------- -------
contrary, at no time may the sum of all Tranche A Loans outstanding, all Tranche
B Loans outstanding, all Tranche C Loans outstanding, all Tranche D Loans
outstanding, all Tranche E Loans outstanding and all Tranche F Loans outstanding
exceed the Aggregate Facility Commitment at such time.
(b) Interest Rate. All Tranche F Loans shall bear interest at the
-------------
Applicable Corporate Rate, unless the Companies elect to have a Tranche F Loan
bear interest at (i) the Applicable Eurodollar Rate as permitted herein or (ii)
an interest rate established pursuant to Paragraph 7(u) below.
(c) Payment of Interest. The Companies shall pay to the
-------------------
Administrative Agent for distribution to each Lender interest on Tranche F Loans
outstanding hereunder from the date disbursed to but not including the date of
payment. Interest on Tranche F Corporate Rate Loans shall be payable monthly,
in arrears, as provided in Paragraph 7(l) below, and interest on a Tranche F
Eurodollar Loan shall be payable at the end of the applicable Interest Period.
7. Miscellaneous Lending Provisions.
--------------------------------
(a) Conversion and Continuation.
---------------------------
(1) The Companies may elect from time to time to convert
Eurodollar Loans to Corporate Rate Loans by giving the Administrative Agent
at least one Business Day's prior irrevocable notice of such election. Any
conversion of Eurodollar Loans may only be made on the last day of the
applicable Interest Period. The Companies may elect from time to time to
convert Corporate Rate Loans to Eurodollar Loans by giving the
Administrative Agent at least one Eurodollar Business Day's prior
irrevocable notice of such election. All such elections shall be made by
means of a Loan Request. Upon receipt of a Loan Request, the
Administrative Agent shall promptly notify each of the Lenders affected
thereby thereof. No Corporate Rate Loan shall be converted into a
Eurodollar Loan if an Event of Default has occurred and is continuing on
the day occurring one Eurodollar Business Day prior to the date of the
conversion requested by the Companies or on the
6
<PAGE>
date of conversion. All or any part of outstanding Loans may be converted
as provided herein, provided that partial conversions shall be in a
principal amount of $1,000,000 or whole multiples of $100,000 in excess
thereof.
(2) (A) Any Eurodollar Loan may be continued as such upon the
expiration of the Interest Period with respect thereto by the Companies
giving the Administrative Agent at least one Eurodollar Business Day's
prior irrevocable notice of such election as set forth in a Loan Request,
and (B) if the Companies shall fail to give notice as provided above, the
Companies shall be deemed to have elected to continue the affected
Eurodollar Loan on the last day of the relevant Interest Period as a
Eurodollar Loan having the same Interest Period as the continued Eurodollar
Loan; provided, however, that no Eurodollar Loan may be continued as such
when any Event of Default has occurred and is continuing on the day
occurring one Eurodollar Business Day prior to the proposed date of such
continuation, but shall be automatically converted to a Corporate Rate Loan
on the last day of the then current Interest Period applicable thereto, and
the Administrative Agent shall notify the Lenders affected thereby and the
Companies promptly that such automatic conversion will occur.
(3) Notwithstanding anything contained in this Agreement to the
contrary, at no time shall there be Eurodollar Loans outstanding with more
than five (5) different Interest Periods.
(b) Inability to Determine Rate. If the Administrative Agent
---------------------------
determines (which determination shall be conclusive and binding upon the
Companies, provided such determination is made on a reasonable basis) that by
reason of circumstances affecting the London interbank eurodollar market
adequate and reasonable means do not exist for ascertaining the Eurodollar Rate
for any Interest Period, the Administrative Agent shall forthwith give facsimile
notice of such determination, confirmed in writing, to each Lender affected
thereby and to the Companies. If such notice is given: (1) no Loan may be
funded as a Eurodollar Loan, (2) any Loan that was to have been converted to a
Eurodollar Loan shall, subject to the provisions hereof, be continued as a
Corporate 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 a
Corporate Rate Loan. Until such notice has been withdrawn by the Administrative
Agent, the Companies shall not have the right to convert a Loan to a Eurodollar
Loan or fund any Loan as a Eurodollar Loan or to continue a Eurodollar Loan as
such. The Administra-
7
<PAGE>
tive Agent shall withdraw such notice in the event that the circumstances giving
rise thereto no longer exist and that adequate and reasonable means exist for
ascertaining the Eurodollar Rate for the Interest Period requested by the
Companies, and following withdrawal of such notice by the Administrative Agent,
the Companies shall have the right to fund any Loan as a Eurodollar Loan or
convert a Loan to a Eurodollar Loan or to continue a Eurodollar Loan in
accordance with the terms and conditions of this Agreement.
(c) Illegality. Notwithstanding any other provisions herein, if any
----------
law, regulation, treaty or directive or any change therein or in the
interpretation or application thereof, shall make it unlawful for any Lender to
make or maintain Eurodollar Loans as contemplated by this Agreement: (1) the
commitment of such Lender hereunder to continue Eurodollar Loans or to convert
Corporate Rate Loans to Eurodollar Loans shall forthwith be suspended and the
Administrative Agent shall forthwith give facsimile notice to the Companies of
such illegality, and upon giving such notice, (2) such Lender's Loans then
outstanding as Eurodollar Loans, if any, shall be converted automatically to
Corporate Rate Loans at the end of their respective Interest Periods or within
such earlier period as required by law. In the event of a conversion of any
such Loan prior to the end of its applicable Interest Period the Companies
hereby agree promptly to pay any Lender affected thereby, upon demand, the
amounts required pursuant to Paragraph 7(f) below, 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 all other amounts payable hereunder.
If subsequently the Administrative Agent determines that the cause of such
illegality has ceased to exist, the Administrative Agent will so advise the
Companies by facsimile notice and the Companies may convert such Corporate Rate
Loans to Eurodollar Loans or request that any Loan be funded as a Eurodollar
Loan as provided in Paragraph 7(j) below. Notwithstanding anything contained
herein to the contrary, in the event that any law, regulation, treaty or
directive or any change therein or in the interpretation or application thereof
shall make it unlawful for any Lender to make or maintain Eurodollar Loans as
contemplated by this Agreement, then in lieu of the provisions and procedures
set forth above, the Company may, at its sole option, elect to require such
Lender to assign all of its Maximum Commitment and Loans to another Lender or to
another party meeting the criteria set forth in Paragraph 15(i) below, which
such assignment shall be made pursuant to the terms and provisions contained in
Paragraph 15(i) below.
8
<PAGE>
(d) Requirements of Law; Increased Costs. In the event that any
------------------------------------
change subsequent to the date hereof in any applicable law, order, regulation,
treaty or directive issued by any central bank or other Governmental Authority,
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) by any central bank or other Governmental Authority:
(1) subjects any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Loans made hereunder, or changes the basis
of taxation of payments to such Lender of principal, fee, interest or any
other amount payable hereunder (except for change in the rate of tax on the
overall net income of such Lender);
(2) imposes, modifies or holds applicable any reserve, capital
requirement of general application to similarly situated financial
institutions, special deposit, compulsory loan or similar requirements
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 Eurodollar Rate, the Applicable
Eurodollar Rate or the Corporate Rate; or
(3) imposes on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender of
making, renewing or maintaining any Loan or to reduce any amount receivable in
respect thereof or to reduce the rate of return on the capital of such Lender or
any Person controlling such Lender, then, in any such case, the Companies shall
promptly pay to the Administrative Agent for remittance to such Lender, upon its
written demand made through the Administrative Agent, any additional amounts
necessary to compensate such Lender for such additional cost or reduced amounts
receivable or rate of return as determined by such Lender with respect to this
Agreement or Loans made hereunder, subject to the limitations set forth in the
following sentence. If a Lender becomes entitled to claim any additional
amounts pursuant to this Paragraph 7(d), it shall, promptly after it obtains
knowledge thereof and determines to request compensation hereunder, notify the
Companies in writing through the Administrative Agent of the event by reason of
which it has become so entitled, provided that (A) any amounts owed by the
Companies to such Lender pursuant to this Paragraph 7(d) shall begin to accrue
on the later to occur of (1) the date on which such amounts began to be
incurred, and (2) the date which is thirty (30)
9
<PAGE>
days prior to the date such notice is submitted to the Companies, and (B) such
Lender, through the Administrative Agent, will designate a different lending
office for those Loans affected by such event if such designation will avoid the
need for, or reduce the amount of, such compensation, so long as any such
designation is reasonably convenient for such Lender. A certificate as to any
additional amounts payable pursuant to the foregoing sentence containing the
calculation thereof in reasonable detail submitted by a Lender, through the
Administrative Agent, to the Companies shall be conclusive in the absence of
manifest error. The provisions hereof shall survive the termination of this
Agreement and payment of the outstanding Loans and all other amounts payable
hereunder. Notwithstanding anything contained herein to the contrary, in the
event that any change occurs as described in subparagraphs (1), (2) or (3)
hereof, the result of which is to increase the cost to any Lender of making,
renewing or maintaining any Loan or to reduce any amount receivable in respect
thereof or to reduce the rate of return on the capital of such Lender or any
Person controlling such Lender, then in lieu of the provisions, payments and
procedures set forth above, the Company may, at its sole option, elect to
require such Lender to assign all of its Maximum Commitment and Loans to another
Lender or to another party meeting the criteria set forth in Paragraph 15(i)
below, which such assignment shall be made pursuant to the terms and provisions
contained in Paragraph 15(i) below.
(e) Funding. Each Lender shall be entitled to fund all or any portion
-------
of its Loans in any manner it may determine in its sole discretion, but all
calculations and transactions hereunder shall be conducted as though all Lenders
actually fund all Eurodollar Loans through the purchase in London of offshore
dollar deposits in the amount of the relevant Eurodollar Loan in maturities
corresponding to the applicable Interest Period.
(f) Funding Indemnification -- Prepayment. In addition to all other
-------------------------------------
payment obligations hereunder, in the event any Loan which is outstanding as a
Eurodollar Loan is prepaid prior to the last day of the applicable Interest
Period, whether following a voluntary prepayment or a mandatory prepayment, the
Companies shall immediately pay to the Lenders holding the Eurodollar Loans
prepaid, through the Administrative Agent, an amount equal to the excess, if
any, of (i) the amount of interest which would have accrued on the principal
amount of the Eurodollar Loan so prepaid to the last day of the Interest Period
for such Eurodollar Loan at the applicable rate of interest hereunder for such
Eurodollar Loan over (ii) the interest component of the amount the
Administrative Agent would have bid in the London interbank market for dollar
deposits of lending banks of amounts comparable to such principal
10
<PAGE>
amount repaid and maturities comparable to such period, as reasonably determined
by the Administrative Agent, together with an additional amount compensating
each such Lender for losses and reasonable expenses incurred by such Lender in
connection with such prepayment, including, without limitation, such as may
arise out of a re-employment of funds obtained by such Lender and from fees
payable to terminate the deposits from which such funds were obtained, such
interest amount, losses, and expenses and the method of calculation thereof
being set forth in reasonable detail and a statement delivered to the Companies
by such Lender. Under no circumstances shall any Lender have any obligation to
remit monies to the Companies upon prepayment of any Eurodollar Loan even under
circumstances which do not result in the necessity of the payment by the
Companies of any amount hereunder. The provisions hereof shall survive
termination of this Agreement and payment of the outstanding Loans and all
amounts payable hereunder.
(g) Funding Indemnification -- Default or Failure to Continue or
------------------------------------------------------------
Convert. In addition to all other payment obligations hereunder, in the event
-------
the Companies shall fail to continue or to make a conversion to a Eurodollar
Loan after the Companies have given notice thereof as provided in Paragraph 7(a)
above, or if after giving a notice to have any Lender make a Eurodollar Loan,
such Lender is not obligated to do so due to the existence of an Event of
Default, then the Companies shall immediately pay any Lender holding the
Eurodollar Loan not continued or converted, or which would have been obligated
to make such Eurodollar Loan, through the Administrative Agent, an additional
amount compensating each such Lender for losses and expenses incurred by such
Lender in connection with such failure to continue or convert a Eurodollar Loan,
or the occurrence of an Event of Default including, without limitation, such as
may arise out of re-employment of funds obtained by such Lender and from fees
payable to terminate the deposits from which such funds were obtained, such
losses and expenses and the method of calculation thereof being set forth in
reasonable detail in a statement delivered to the Companies by such Lender. The
provisions hereof shall survive termination of this Agreement and payment of the
outstanding Loans and all other amounts payable hereunder.
(h) INTENTIONALLY DELETED.
---------------------
(i) Use of Proceeds. (i) The proceeds of all Tranche A Loans shall
---------------
be used by the Companies solely for the purpose of acquiring Eligible A/B
Mortgage Loans to be held for sale by the Companies; (ii) the proceeds of all
Tranche B Loans shall be used by the Companies solely for the purpose of
acquiring or retaining Eligible A/B Mortgage Loans to be held for investment by
the
11
<PAGE>
Companies; (iii) the proceeds of all Tranche C Loans shall be used by the
Companies solely for the purpose of acquiring and maintaining Servicing
Contracts and Master Servicing Contracts; (iv) the proceeds of all Tranche D
Loans shall be used by the Companies solely for the purpose of originating
Construction Loans, which Construction Loans shall be secured by mortgages or
deeds of trust from sub-borrowers in favor of the Companies with respect to the
real property and improvements being pledged and constructed with the proceeds
thereof; (v) the proceeds of all Tranche E Loans shall be used by the Companies
solely for the purpose of originating Servicing Loans, which Servicing Loans
shall be secured by the servicing rights and servicing receivables pledged by
sub-borrowers to the Companies; and (vi) the proceeds of all Tranche F Loans
shall be used by the Companies solely for the purpose of originating
Foreclosure/Repurchase Loans, which Foreclosure/Repurchase Loans shall be
secured by the Foreclosure Mortgage Loans and Repurchase Mortgage Loans pledged
by sub-borrowers to the Companies; provided, however, that so long as the
-------- -------
aggregate principal amount of outstanding Loans is less than the aggregate of
the Collateral Value of the Tranche A Borrowing Base, the Collateral Value of
the Tranche B Borrowing Base, the Collateral Value of the Tranche C Borrowing
Base, the Collateral Value of the Tranche D Borrowing Base, the Collateral Value
of the Tranche E Borrowing Base, and the Collateral Value of the Tranche F
Borrowing Base, the Companies may use the proceeds of any Loans for any general
corporate purpose of the Companies.
(j) Request For Loans; Making of Loans.
----------------------------------
(1) If the Companies desire to borrow a Corporate Rate Loan
hereunder, the Companies shall make a Loan Request to the Administrative
Agent no later than 2:00 p.m. (Charlotte, North Carolina time) on the
proposed funding date, which Loan Request shall be forwarded promptly by
the Administrative Agent to the Lenders by facsimile transmission no later
than 3:00 p.m. (Charlotte, North Carolina time) on such date. The
applicable Lenders shall make available the amount of their respective
Percentage Shares of the proposed Corporate Rate Loan by crediting the
amount thereof in immediately available same day funds to the Funding
Account no later than 3:30 p.m. (Charlotte, North Carolina time) on such
date.
(2) If the Companies desire to borrow or continue a Eurodollar
Loan or to convert a Corporate Rate Loan to a Eurodollar Loan as provided
in Paragraph 7(a) above, the Companies shall make a Loan Request to the
Administrative Agent no later than 2:00 p.m. (Charlotte, North Carolina
time) on the day occurring at least one Eurodollar Business Day
12
<PAGE>
prior to the date of the borrowing, conversion or continuation requested
therein, and the Administrative Agent shall notify the Lenders of the
contents of such Loan Request no later than 3:00 p.m. (Charlotte, North
Carolina time) on such Business Day. The applicable Lenders shall make
available the amount of their respective Percentage Shares of the proposed
Eurodollar Loan by crediting the amount thereof in immediately available
same day funds to the Funding Account no later than 3:30 p.m. (Charlotte,
North Carolina time) on the proposed day of borrowing. Notwithstanding any
provision hereof to the contrary, the parties agree that each Eurodollar
Loan shall be in a principal amount of $1,000,000 or whole multiples of
$100,000 in excess thereof.
(3) Each Corporate Rate Loan and each Eurodollar Loan shall be
allocated among and funded by the Lenders in accordance with their
applicable Percentage Shares. The failure of any Lender to make its
Percentage Share of any Loan to be made by it as part of any borrowing
shall not relieve any other Lender of its obligation hereunder to advance
its applicable portion of the principal amount thereof but no Lender shall
be responsible for the failure of any other Lender to make the advance
required of it.
(4) Notwithstanding anything herein to the contrary, on any day
on which (i) the maximum amount which may be outstanding at any time as
Tranche A Loans and Tranche B Loans under this Agreement is not
outstanding, (ii) there are Tranche A Corporate Rate Loans or Tranche B
Corporate Rate Loans outstanding under the Facility I Agreement, and (iii)
the conditions set forth in Paragraphs 9(b)(2), 9(b)(3), 9(b)(4) and
9(b)(5) are met (both before and after giving effect to the Loans
referenced in this Paragraph 7(j)(4)), the Administrative Agent shall
notify the Lenders by facsimile transmission no later than 3:00 p.m.
(Charlotte, North Carolina time) on such date of a proposed Corporate Rate
Loan to be made on such date, and the applicable Lenders shall make
available the amount of their respective Percentage Shares of the proposed
Corporate Rate Loan in an aggregate amount not to exceed the principal
amount of "Corporate Rate Loans" made under the Facility I Agreement to be
prepaid pursuant to and as required under Paragraph 3(n)(4) of the Facility
I Agreement by crediting the amount thereof in immediately available same
day funds to the Funding Account no later than 3:30 p.m. (Charlotte, North
Carolina time) on such date. The Administrative Agent shall use the
proceeds of all Loans made pursuant to this Paragraph 7(j)(4) to prepay
"Corporate Rate Loans" made under the Facility I Agreement pursuant to and
as
13
<PAGE>
required under Paragraph 3(n)(4) of the Facility I Agreement. All
amounts so advanced by the Lenders under this Paragraph 7(j)(4) shall be
considered to be Tranche A Loans or Tranche B Loans, as applicable, for all
purposes under this Agreement notwithstanding the fact that no Loan Request
shall have been submitted by the Companies in connection therewith.
(k) Notes. The joint and several obligation of the Companies to repay
-----
the Loans shall be evidenced by notes payable to the order of each Lender, as
applicable, in the form set forth as Exhibit A-2 in the Addendum (collectively,
-----------
the "Notes").
(l) Interest and Fee Billing and Payment; Notice of Interest Rates.
--------------------------------------------------------------
(1) The Administrative Agent shall (A) in the case of the
Corporate Rate Loans on or before the fifth Business Day of each month, and
(B) in the case of Eurodollar Loans, on the last day of the applicable
Interest Period, deliver to the Companies an interest and fee billing for
the immediately preceding month or Interest Period, as the case may be,
which billing shall set forth interest accrued and payable on Loans and
fees payable hereunder for such period to be collected by the
Administrative Agent and which billing shall be payable, in the case of a
billing delivered pursuant to subparagraph (A) above, no later than the
second Business Day following receipt thereof by the Companies and, in the
case of a billing delivered pursuant to subparagraph (B) above, on the last
day of the applicable Interest Period.
(2) In the event that any Lender has entered into a separate
letter agreement with the Companies pursuant to Paragraph 7(u) below
regarding interest rates for Loans made by such Lender, such Lender shall
be responsible for notifying the Administrative Agent, on or before the
third Business Day of each month, of the interest owing to such Lender for
such month pursuant to such letter agreement, and the Administrative Agent
shall incorporate such interest amount delivered to it by such Lender into
the interest and fee billing referred to in subparagraph (1) above. The
Administrative Agent shall have no duty to independently confirm the
accuracy of any such information delivered to it by any Lender.
(3) The Administrative Agent shall, on each day on which a Loan
is made, confirm to the Companies the interest rate which is to be
applicable to each such Loan (other than interest rates established
pursuant to Paragraph 7(u) below),
14
<PAGE>
each such interest rate to be expressed as a decimal and rounded to the
nearest 1/1000th of one percent. Such confirmation shall take the form of a
verbal confirmation by the Administrative Agent to a designated
representative of the Companies, followed by a written confirmation of such
rate no later than the close of business of the Administrative Agent on the
Business Day following the making of such Loan.
(m) Repayment of Principal. Subject to the prepayment requirements of
----------------------
Paragraph 7(r) below and the required application of proceeds from the sale or
other disposition of Mortgage Loans or servicing rights as provided in the
Security Agreement and in the Custodial Agreement, the Companies shall pay the
principal amount of each Eurodollar Loan which is not continued or converted
pursuant to Paragraph 7(a) on the last day of the applicable Interest Period
relating thereto and shall pay the principal amount of all other Loans on the
Maturity Date.
(n) Borrowing Base Conformity; Mandatory Prepayments.
------------------------------------------------
(1) The Companies shall cause to be maintained with the
Collateral Agent a Tranche A Borrowing Base such that the Collateral Value
of the Tranche A Borrowing Base is not less than, at any date, the sum of
the aggregate dollar amount of outstanding Tranche A Loans.
(2) The Companies shall cause to be maintained with the
Collateral Agent a Tranche B Borrowing Base such that the Collateral Value
of the Tranche B Borrowing Base is not less than, at any date, the sum of
the aggregate dollar amount of outstanding Tranche B Loans.
(3) The Companies shall cause to be maintained with the
Administrative Agent a Tranche C Borrowing Base such that the Collateral
Value of the Tranche C Borrowing Base is not less than, at any date, the
sum of the aggregate dollar amount of outstanding Tranche C Loans.
(4) The Companies shall cause to be maintained with the
Collateral Agent a Tranche D Borrowing Base such that the Collateral Value
of the Tranche D Borrowing Base is not less than, at any date, the sum of
the aggregate dollar amount of outstanding Tranche D Loans.
(5) The Companies shall cause to be maintained with the
Collateral Agent a Tranche E Borrowing Base such that the Collateral Value
of the Tranche E Borrowing Base is not
15
<PAGE>
less than, at any date, the sum of the aggregate dollar amount of
outstanding Tranche E Loans.
(6) The Companies shall cause to be maintained with the
Collateral Agent a Tranche F Borrowing Base such that the Collateral Value
of the Tranche F Borrowing Base is not less than, at any date, the sum of
the aggregate dollar amount of outstanding Tranche F Loans.
(7) The Companies shall prepay Loans to the Administrative Agent
on behalf of the Lenders, upon telephonic or facsimile demand by the
Administrative Agent, on any day (A) in the amount by which the aggregate
principal amount of outstanding Tranche A Loans exceeds the Collateral
Value of the Tranche A Borrowing Base, (B) in the amount by which the
aggregate principal amount of outstanding Tranche B Loans exceeds the
Collateral Value of the Tranche B Borrowing Base, (C) in the amount by
which the aggregate principal amount of outstanding Tranche C Loans exceeds
the Collateral Value of the Tranche C Borrowing Base, (D) in the amount by
which the aggregate principal amount of outstanding Tranche D Loans exceeds
the Collateral Value of the Tranche D Borrowing Base, (E) in the amount by
which the aggregate principal amount of outstanding Tranche E Loans exceeds
the Collateral Value of the Tranche E Borrowing Base, (F) in the amount by
which the aggregate principal amount of outstanding Tranche F Loans exceeds
the Collateral Value of the Tranche F Borrowing Base, or (G) in the amount
by which the sum of the aggregate principal amounts of outstanding Tranche
A Loans, Tranche B Loans, Tranche C Loans, Tranche D Loans, Tranche E Loans
and Tranche F Loans exceeds the Aggregate Facility Commitment; said
prepayment to be made on the date on which demand is made by the
Administrative Agent if made prior to 12:00 p.m. (Charlotte, North Carolina
time) or, if made later than 12:00 p.m. (Charlotte, North Carolina time),
before 12:00 p.m. (Charlotte, North Carolina time) on the next Business
Day.
(8) If at such time as the Companies shall be required to prepay
Loans under this Paragraph 7(n) there shall not have occurred and be
continuing an Event of Default or Potential Default hereunder, in lieu of
prepaying the Loans as required, the Companies may deliver to the
Collateral Agent or the Administrative Agent, as applicable, additional
Collateral such that after giving effect to the inclusion of such
Collateral in the respective Borrowing Bases, the Companies shall be in
compliance with the requirements of subparagraphs (1) through (6) above.
16
<PAGE>
(o) Nature and Place of Payments. All payments made on account of the
----------------------------
Obligations shall be made to the Administrative Agent for distribution to the
Lenders and the Administrative Agent is hereby irrevocably authorized to debit
the Settlement Account and distribute amounts held therein as provided in
Paragraph 7(s) below on account thereof. All payments made on account of the
Obligations shall be made without setoff or counterclaim in lawful money of the
United States of America in immediately available same day funds, free and clear
of and without deduction for any taxes, fees or other charges of any nature
whatsoever imposed by any taxing authority and if received by the Administrative
Agent by 3:30 p.m. on any Business Day (Charlotte, North Carolina time) such
payment will be credited on such Business Day. If a payment is received after
3:30 p.m. (Charlotte, North Carolina time) by the Administrative Agent, such
payment will be credited on the next succeeding Business Day and interest
thereon shall be payable at the then applicable rate until credited, provided,
--------
that the Administrative Agent shall use its best efforts to credit such payment
on the Business Day received. All amounts received by the Administrative Agent
on account of the Obligations shall be disbursed by the Administrative Agent to
the applicable Lenders by wire transfer on the date of receipt if received by
the Administrative Agent by the applicable deadline for payment thereof as
specified above, or if received later, on the next succeeding Business Day. If
any payment required to be made by the Companies 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.
(p) Post-Maturity Interest. Any Obligations not paid when due
----------------------
(whether at stated maturity, upon acceleration or otherwise) shall bear interest
from the date due until paid in full at a per annum rate equal to XXXXX percent
(XX%) above the interest rate otherwise applicable thereto or if such
Obligations do not otherwise bear interest, XXXXX percent (XX%) above the
Applicable Corporate Rate.
(q) Computations. All computations of interest and fees payable
------------
hereunder shall be based upon a year of 360 days for the actual number of days
elapsed.
(r) Prepayments.
-----------
(1) The Companies may voluntarily prepay Loans hereunder,
(including Eurodollar Loans subject to and on the conditions contained in
Paragraph 7(f)) in whole at any time or in part from time to time upon
notice to the Administrative
17
<PAGE>
Agent on or prior to the date of such prepayment; provided that any partial
--------
prepayment shall be in a minimum amount of $250,000.
(2) Loans hereunder are subject to mandatory prepayment pursuant
to Paragraph 7(n) above and, in addition, by application of proceeds of the
sale or other disposition of Collateral as provided in the Security
Agreement and in the Custodial Agreement.
(3) The Companies shall pay in connection with any prepayment
hereunder all interest accrued but unpaid on Loans to which such prepayment
is applied pursuant to Paragraph 7(s) below and any amounts payable
pursuant to Paragraph 7(f) above concurrently with payment to the
Administrative Agent of any principal amounts.
(s) Allocation of Payments Received.
-------------------------------
(1) Prior to the occurrence of an Event of Default and
acceleration of all Loans outstanding hereunder or termination of the
commitments of the Lenders to advance Loans hereunder, principal amounts
received by the Administrative Agent with respect to Loans shall be
allocated among the Lenders on account of the Obligations pro rata in
accordance with their respective Percentage Shares.
(2) Following the occurrence of an Event of Default and
acceleration of all Loans outstanding hereunder or termination of the
commitments of the Lenders to advance Loans hereunder, all amounts received
by the Administrative Agent on account of the Obligations shall be
disbursed by the Administrative Agent as follows:
(i) First, to the payment of reasonable costs and expenses
incurred by the Administrative Agent and Collateral Agent in the
performance of their duties and enforcement of their rights under the
Credit Documents, including, without limitation, all reasonable costs
and expenses of collection, reasonable attorneys' fees, court costs
and foreclosure expenses;
(ii) Second, to the Lenders, pro rata in accordance with
their respective Repayment Shares, until the outstanding Loans and
other Obligations shall have been paid in full, provided that all such
--------
amounts described herein shall be applied first to interest and then
to principal, as applicable; and
18
<PAGE>
(iii) Third, to such Persons as may be legally entitled
thereto.
(t) Fees. The Companies shall pay the following fees:
----
(1) To the Administrative Agent for the account of the Lenders, an
annual commitment fee equal to XXXXXXXXXXXXXXXXXX percent (XXXX%) of the
Aggregate Facility Commitment, such fee to be payable upon the date hereof and
annually upon each anniversary of the date hereof.
(2) To the Administrative Agent for its own account, such
arrangement, agency and syndication fees as have been agreed to in writing by
the Companies and the Administrative Agent pursuant to that certain letter
agreement dated as of February 17, 1995, as such fees may be adjusted from time
to time by agreement of the Companies and the Administrative Agent.
(3) To the Collateral Agent for its own account, such collateral
handling fees as are agreed to in writing by the Companies and the Collateral
Agent.
(u) Notwithstanding anything contained in this Agreement to the
contrary, each of the Lenders shall have the option of entering into separate
letter agreements from time to time with the Companies whereunder each such
Lender may establish an interest rate for Loans made by such Lender hereunder
which corresponds to the balance contained in accounts of the Companies held by
or maintained with each such Lender.
(v) 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
Companies and the Administrative Agent (i) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224 or successor applicable form,
as the case may be, or other manner of certification, establishing that payments
of interest hereunder are either not subject to or totally exempt from United
States Federal withholding tax and (ii) an Internal Revenue Service Form W-8 or
W-9 or successor applicable form. Each such Lender also agrees to deliver to
the Companies and the Administrative 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 such Lender to the
Companies, and such extensions or renewals thereof as may reasonably be
requested by the Companies or
19
<PAGE>
the Administrative 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 each
of the Companies and the Administrative 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.
8. Security Agreement; Custodial Agreement; Additional Documents.
-------------------------------------------------------------
(a) Security Agreement. On or before the date hereof, the Companies
------------------
shall execute and deliver to the Administrative Agent: (1) a security and
collateral agency agreement in the form set forth as Exhibit B in the Addendum
---------
(the "Security Agreement"), pursuant to which the Companies shall pledge, assign
and grant to the Administrative Agent, for the benefit of the Lenders, a
perfected security interest in and lien upon the Collateral, (2) such UCC
financing statements as the Administrative Agent may reasonably request in
connection therewith, and (3) acknowledgement and consent forms, each in form
and substance acceptable to the Administrative Agent, duly executed by each
investor under a Servicing Contract (other than an investor who is one of the
Companies) or by each MBS Fiduciary under a Master Servicing Contract covering
Assigned Servicing Rights or, if such acknowledgment and consent forms are not
available with respect to any Servicing Contract, other evidence reasonably
satisfactory to the Administrative Agent that the Companies' interest in such
Servicing Contract can be pledged as Collateral (for purposes of the foregoing,
a consent may consist of one or more separate documents which, taken as a whole,
evidence the consent of the applicable investor or MBS Fiduciary to the
assignment of the Companies' interest, an agreement to appoint an entity
acceptable to the Administrative Agent as a successor servicer or master
servicer, and a suitable Resignation Letter).
(b) Custodial Agreement. On or before the date hereof, the Companies
-------------------
shall execute and deliver to the Collateral Agent and the Administrative Agent
that certain Custodial and Intercreditor Agreement dated as of May 23, 1995
among the Companies, the Administrative Agent, Merrill Lynch Mortgage Capital
Inc., Merrill Lynch Credit Corporation, Lehman Commercial Paper Inc., Nomura
Asset Capital Corporation and Bankers Trust Company of California,
20
<PAGE>
N.A. in the form set forth as Exhibit C in the Addendum (the "Custodial
---------
Agreement"), pursuant to which the Companies and the other parties thereto shall
agree, with respect to that portion of the Collateral comprising the Tranche A
Borrowing Base and the Tranche B Borrowing Base, as to the custody thereof by
the Collateral Agent and the relative interests of the parties to the Custodial
Agreement therein.
(c) Further Documents. The Companies agree to execute and deliver and
-----------------
to cause to be executed and delivered to the Collateral Agent or the
Administrative Agent from time to time such confirmatory and supplementary
security agreements, financing statements and other documents, instruments and
agreements as the Administrative Agent or the Collateral Agent may reasonably
request, which are consistent with the terms of the Credit Documents and which
are in the Administrative Agent's or the Collateral Agent's judgment reasonably
necessary or desirable to obtain for the Collateral Agent or the Administrative
Agent, as applicable, on behalf of the Lenders, the benefit of the Credit
Documents and the Collateral.
9. Conditions to Making of Loans.
-----------------------------
(a) First Loan. As conditions precedent to any Lender's obligation to
----------
make the first Loan hereunder:
(1) The Companies shall have delivered to the Administrative
Agent, in form and substance reasonably satisfactory to the Administrative
Agent and its counsel, each of the following (with sufficient copies for
each of the Lenders):
(i) A duly executed copy of this Agreement;
(ii) A duly executed copy of each of the Security Agreement
and the Custodial Agreement;
(iii) Duly executed copies of each of the Notes;
(iv) Duly executed copies of all financing statements and
other documents, instruments and agreements, properly executed, deemed
necessary or appropriate by the Collateral Agent or the Administrative
Agent, in such Person's reasonable discretion, to obtain for the
Collateral Agent or the Administrative Agent, as applicable, on behalf
of the Lenders a perfected security interest in and lien upon the
Collateral, and,
21
<PAGE>
prior to the making of the first Tranche C Loan hereunder, consents
duly executed by each investor under a Servicing Contract (other than
an investor who is one of the Companies) or by each MBS Fiduciary
under a Master Servicing Contract covering Assigned Servicing Rights
as more particularly set forth in Paragraph 8(a)(3) above;
(v) Such credit applications, financial statements, and
authorizations with respect to the Companies as any Lender may
reasonably request;
(vi) Certified copies of resolutions of the Board of
Directors of each of CWM, INMC and ILC approving the execution and
delivery of the Credit Documents to which such Person is a party, the
performance of the Obligations thereunder and the consummation of the
transactions contemplated thereby;
(vii) A certificate of the Secretary or an Assistant
Secretary of each of CWM, INMC and ILC certifying the names and true
signatures of the officers of such Person authorized to execute and
deliver the Credit Documents to which such Person is a party;
(viii) A copy of the Certificates of Incorporation of each
of CWM, INMC and ILC, certified by the Secretary of State of the
respective state of organization of such Person as of a recent date;
(ix) A copy of the Bylaws of each of CWM, INMC and ILC,
certified by the respective Secretary or an Assistant Secretary of
such Person as of the date of this Agreement as being accurate and
complete;
(x) Certificates of the Secretary of State of the State of
Delaware, certifying as of a recent date that each of CWM, INMC and
ILC is in good standing;
(xi) An opinion of counsel (which may be in-house corporate
counsel) for the Companies acceptable to the Administrative Agent;
(xii) Evidence reasonably satisfactory to the Administrative
Agent that each of the Funding Account and the Settlement Account has
been opened;
(xiii) A schedule of the initial Approved Investors, Approved
Repo Lenders and Approved Sub-Servicers;
22
<PAGE>
(xiv) A duly completed Borrowing Base Schedule dated as
of the date of the first Loan hereunder and certified by Borrower to
be true in all material respects;
(xv) A Covenant Compliance Certificate demonstrating in
detail satisfactory to the Lenders that the Companies are in
compliance with the covenants set forth in Paragraphs 12(g), 12(h) and
12(i) below; and
(xvi) Resignation Letters, duly executed by the Companies
and undated, with respect to each existing Master Servicing Contract
covering Assigned Servicing Rights.
(2) All acts and conditions (including, without limitation, the
obtaining of any necessary regulatory approvals and the making of any
required filings, recordings or 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 reasonably
satisfactory in form and substance to the Administrative Agent and its
counsel.
(4) All fees required to be paid to the Administrative Agent and
the Lenders on or before the date hereof pursuant to Paragraph 7(t) above,
shall have been paid prior to (or will be paid concurrently with) the
making of the first Loan hereunder.
(b) Ongoing Loans. As conditions precedent to each Lender's
-------------
obligation to make any Loan hereunder, including the first Loan and including
the conversion of any Loan to another type of Loan or the continuation of any
Eurodollar Loan after the end of the applicable Interest Period, at and as of
the date of advance, conversion or continuance thereof;
(1) There shall have been delivered to the Administrative Agent a
Loan Request therefor;
23
<PAGE>
(2) The representations and warranties of the Companies contained
in the Credit Documents shall be accurate and complete in all material
respects as if made on and as of the date of such advance, conversion or
continuance;
(3) There shall not have occurred an Event of Default or
Potential Default which has not been waived pursuant to Paragraph 15(b)
hereof by the requisite number of Lenders;
(4) Following the funding of the requested Loan: (i) the
aggregate principal amount of Tranche A Loans outstanding will not exceed
the lesser of: a. the Aggregate Tranche A Credit Limit and b. the
- -
Collateral Value of the Tranche A Borrowing Base, (ii) the aggregate
principal amount of Tranche B Loans outstanding will not exceed the lesser
of: a. the Aggregate Tranche B Credit Limit and b. the Collateral Value of
- -
the Tranche B Borrowing Base, (iii) the aggregate principal amount of
Tranche C Loans outstanding will not exceed the lesser of: a. the
-
Aggregate Tranche C Credit Limit and b. the Collateral Value of the Tranche
-
C Borrowing Base, (iv) the aggregate principal amount of Tranche D Loans
outstanding will not exceed the lesser of: a. the Aggregate Tranche D
-
Credit Limit and b. the Collateral Value of the Tranche D Borrowing Base,
-
(v) the aggregate principal amount of Tranche E Loans outstanding will not
exceed the lesser of: a. the Aggregate Tranche E Credit Limit and b. the
- -
Collateral Value of the Tranche E Borrowing Base, (vi) the aggregate
principal amount of Tranche F Loans outstanding will not exceed the lesser
of: a. the Aggregate Tranche F Credit Limit and b. the Collateral Value of
- -
the Tranche F Borrowing Base, (vii) the aggregate principal amount of Loans
outstanding advanced by any Lender will not exceed its Maximum Commitment,
and (viii) the aggregate principal amount of all Loans outstanding will not
exceed the Aggregate Facility Commitment;
(5) (i) If the Loan is a Tranche A Loan or a Tranche B Loan, the
Required Documents for the Mortgage Loans being funded therewith shall have
been received by the Collateral Agent (except as otherwise provided in
subparagraph (o) of the definition of "Eligible A/B Mortgage Loan"); (ii)
if the Loan is a Tranche C Loan, the Required Documents in connection
therewith shall have been received by the Administrative Agent; (iii) if
the Loan is a Tranche D Loan, the Required Documents for the Construction
Loan being funded therewith shall have been received by the Collateral
Agent; (iv) if the Loan is a Tranche E Loan, the Required Documents for the
Servicing Loan being funded therewith shall have been
24
<PAGE>
received by the Collateral Agent; and (v) if the Loan is a Tranche F Loan,
the Required Documents for the Foreclosure/Repurchase Loan being funded
therewith shall have been received by the Collateral Agent; and
(6) (i) If the Loan is a Tranche A Loan or a Tranche B Loan and
the Administrative Agent is being requested to include any Mortgage Loan
being funded therewith as an Eligible A/B Mortgage Loan pursuant to a
waiver of eligibility requirements as set forth in the last paragraph of
the definition of "Eligible A/B Mortgage Loan," or (ii) if the Loan is a
Tranche D Loan and the Construction Loan being funded therewith does not
conform to the terms of an approved underwriting program, including,
without limitation, due to the sales price or construction cost of any
single-family tract home to be constructed therewith, or (iii) if the Loan
is a Tranche E Loan and the Servicing Loan being funded therewith does not
conform to the terms of any approved underwriting program, or (iv) if the
Loan is a Tranche F Loan and the Foreclosure/Repurchase Loan being funded
therewith does not conform to the terms of an approved underwriting
program, the Companies shall have notified the Administrative Agent and the
Collateral Agent of the noncompliance or nonconformity of such Mortgage
Loan, Construction Loan, Servicing Loan or Foreclosure/Repurchase Loan, as
applicable.
By making a Loan Request to the Administrative Agent hereunder, the Companies
shall be deemed to have represented and warranted the accuracy and completeness
of the statements set forth in subparagraphs (b)(2) through (b)(6) above.
10. Representations and Warranties of the Companies.
-----------------------------------------------
Each of CWM, INMC, and ILC represents and warrants to the Administrative
Agent and each Lender, and the Companies collectively represent and warrant to
the Administrative Agent and each Lender, as applicable, that:
(a) Financial Condition. (i) The consolidated financial statements of
-------------------
CWM, and the financial statements of INMC, each dated as of the Statement Date
and for the fiscal period then ended, copies of which have been furnished to
each Lender, present fairly, in accordance with GAAP, the financial condition of
the Companies at such dates and the results of their operations and cash flows,
for the fiscal period then ended.
(b) No Change. As of the date hereof there has been no material
---------
adverse change in the business, operations, assets
25
<PAGE>
or financial condition of the Companies, taken as a whole, from that shown on
the financial statements dated as of the Statement Date referred to in Paragraph
10(a) above.
(c) Corporate Existence; Compliance with Law. Each of CWM, INMC and
----------------------------------------
ILC: (1) is duly organized, validly existing and in good standing as a
corporation under the laws of the State of Delaware, and is qualified to do
business in each jurisdiction where its ownership of property or conduct of
business requires such qualification and where failure to qualify would have a
material adverse effect on the Companies, taken as a whole, or their property or
business or on the ability of the Companies to pay or perform the Obligations,
(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, the failure to comply with which would have a material adverse
effect on the business, operations, assets or financial condition of the
Companies, taken as a whole, or on the Collateral.
(d) Corporate Power; Authorization; Enforceable Obligations. Each of
-------------------------------------------------------
CWM, INMC and ILC has the corporate power and authority and the legal right to
execute, deliver and perform the Credit Documents 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 CWM, INMC and ILC and constitute legal, valid and binding
obligations of each such Person enforceable against such Person in accordance
with their respective terms, subject to the effect of applicable bankruptcy and
other similar laws affecting the rights of creditors generally and the effect of
equitable principles whether applied in an action at law or a suit in equity.
(e) No Legal Bar. The execution, delivery and performance of the
------------
Credit Documents, the borrowing hereunder and the use of the proceeds thereof,
will not violate any Requirement of Law or any Contractual Obligation of either
CWM, INMC or ILC the violation of which would have a material adverse effect on
the business, operations, assets or financial condition of the Companies, taken
as a whole, or on the Collateral or create or result in the creation of any Lien
(except the Lien created by the Security Agreement or by the Custodial
Agreement) on any assets of the Companies.
(f) No Material Litigation. Except as disclosed on Exhibit D set
---------------------- ---------
forth in the Addendum, no litigation, investigation
26
<PAGE>
or proceeding of or before any court, arbitrator or Governmental Authority is
pending or, to the knowledge of the Companies, threatened by or against CWM,
INMC or ILC or against any of the properties or revenues of such Person which,
if adversely determined, would have a material adverse effect on the business,
operations, property or financial condition of the Companies, taken as a whole,
or on the Collateral.
(g) Taxes. To the best of the Companies' knowledge, all tax returns
-----
that are required to be filed by or on behalf of the Companies have been filed
(or the time for such filing has been extended in accordance with applicable law
or regulations) and all taxes shown or to be shown to be due and payable on said
returns or on any assessments made against the Companies or any of their
property (other than taxes which are being contested in good faith by
appropriate proceedings and as to which the Companies have established adequate
reserves in conformity with GAAP) have been paid or provided for.
(h) Investment Company Act. Neither CWM, INMC nor ILC is an
----------------------
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
(i) Federal Reserve Board Regulations. Neither CWM, INMC nor ILC 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 issued hereunder will be used, directly
or indirectly, 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 pertaining to the foregoing.
(j) ERISA. Each of CWM, INMC and ILC and each of such Person's ERISA
-----
Affiliates are in compliance in all respects with the requirements of ERISA and
no Reportable Event has occurred under any Plan maintained by any of such
Persons or any of such Persons' ERISA Affiliates which is likely to result in
the termination of such Plan for purposes of Title IV of ERISA.
(k) Assets. The Companies are the legal and beneficial owners of all
------
property and assets reflected in the interim financial statements referred to in
Paragraph 10(a) above, except property and assets sold or otherwise disposed of
in the ordinary course of business subsequent to the date thereof. There are no
27
<PAGE>
outstanding Liens on any of the Companies' properties or assets, and there are
no security agreements to which any of CWM, INMC or ILC is a party, nor any
title retention agreements, whether in the form of leases or otherwise, of any
personal property, except as permitted under Paragraph 12(a) below.
(l) Securities Acts. Neither CWM, INMC nor ILC has issued any
---------------
unregistered securities in violation of the registration requirements of Section
5 of the Securities Act of 1933, as amended, or any other existing applicable
law, and each of such Persons is in compliance, in all material respects, with
all existing applicable rules, regulations and requirements under the Securities
Act of 1933, as amended, or the Securities and Exchange Act of 1934, as amended.
Neither CWM, INMC nor ILC is required to qualify an indenture under the Trust
Indenture Act of 1939, as amended, in connection with such Person's execution
and delivery of the Notes.
(m) Consents, etc. No consent, approval, authorization of, or
--------------
registration, declaration or filing with, any Governmental Authority is required
on the part of the Companies in connection with the execution and delivery of
the Credit Documents (other than the consents referred to in Paragraph 8(a)(3)
above and filings to perfect the security interests granted in the Credit
Documents) or the performance of or compliance with the terms, provisions and
conditions hereof or thereof, except such consents as have been obtained by the
Companies.
(n) Joint Benefit. The Companies engage in complimentary lines of
-------------
business and therefore each Loan made hereunder to any of the Companies benefits
all of the Companies.
11. Affirmative Covenants. Each of CWM, INMC and ILC hereby covenants
---------------------
and agrees, and the Companies, jointly and severally, hereby covenant and agree,
with the Administrative Agent and each Lender that, as long as any Obligations
remain unpaid or any Lender has any obligation to make Loans hereunder, each of
CWM, INMC and ILC, or the Companies, as applicable, shall:
(a) Financial Statements. Furnish or cause to be furnished to the
--------------------
Administrative Agent:
(1) Within ninety (90) days after the last day of each fiscal
year of the Companies, a copy of the 10-K statement as filed annually by
the Companies with the Securities and Exchange Commission;
(2) Within forty-five (45) days after the last day of each fiscal
quarter of the Companies, a copy of the 10-Q
28
<PAGE>
statement as filed quarterly by the Companies with the Securities and
Exchange Commission; and
(3) Within ten (10) days after the last day of each calendar
month, a Covenant Compliance Certificate of an Authorized Officer of the
Companies, demonstrating in detail reasonably satisfactory to the
Administrative Agent the Companies' compliance with the financial covenants
set forth in Paragraphs 12(g), 12(h) and 12(i) below as of and at the end
of such month.
(b) Certificates; Reports; Other Information. Furnish or cause to be
----------------------------------------
furnished to the Administrative Agent and the Collateral Agent:
(1) No less frequently than monthly, within thirty (30) days
after the last day of each calendar month unless otherwise requested in
writing, reports in form and content satisfactory to the Administrative
Agent containing the following information: (A) a Loan Purchase/Sale
Schedule for such month; (B) a Delinquency Report for such month; (C) a
Master Servicing Delinquency Report for such month; (D) a Servicing Report
for such month; (E) a Master Servicing Report for such month; (F) with
respect to the Tranche D Facility, 1. a Monthly Tract Sales Report for
-
such month, 2. a Daily Trial Balance Report for such month, 3. a Budget
- -
Status Report for such month, and 4. a Life of Loan/Unit History Report for
-
such month; (G) with respect to each of the Tranche D Facility, the Tranche
E Facility and the Tranche F Facility, Origination and Repayment Statistics
Reports in the forms of Exhibits U, V, and W, respectively, set forth in
---------- - -
the Addendum; (H) the Borrowing Base Schedule for such month; (I) with
respect to each of the Tranche A Facility and the Tranche B Facility, a
Position Report for such month; and (J) with respect to the Tranche A
Facility, an investor commitment summary relating to the status of the
Take-out Commitments and Hedging Arrangements.
(2) Promptly, such additional financial and other information,
including, without limitation, financial statements of the Companies or any
Approved Investor, Approved Repo Lender or Approved Sub-Servicer, and
information regarding the Collateral as the Administrative Agent, the
Collateral Agent or any Lender, through the Administrative Agent, may from
time to time reasonably request;
(3) Promptly, and in any event within five (5) business days
after received or sent by the Companies, (i)
29
<PAGE>
true and complete copies of any and all notices, correspondences and
similar documentation prepared by, or on behalf of any investor under a
Servicing Contract or any MBS Fiduciary under a Master Servicing Contract
in the event such notices, correspondence or documentation declare or
allege that any Company is (or will be after the passage of time) in
default under a Servicing Contract or Master Servicing Contract or which
terminates or threatens to terminate a Servicing Contract or Master
Servicing Contract;
(4) To the Administrative Agent (to be forwarded by the
Administrative Agent to each of the Lenders) a copy of any 8-K statement or
S-3 registration statement filed by the Companies with the Securities and
Exchange Commission as promptly as possible after such filing;
(5) To the Administrative Agent with respect to any Construction
Loan which is secured by a mortgage or deed of trust on a single-family
tract home which has remained unsold for more than one hundred eighty (180)
days, within thirty (30) days after such single-family tract home has
remained unsold for more than one hundred eighty (180) days, an appraisal
of such home prepared by an independent third party appraiser proposed by
the Companies and acceptable to the Administrative Agent;
(6) To the Administrative Agent on a semiannual basis within
thirty (30) days after each April 1 and October 1, an appraisal of the
Assigned Servicing Rights relating to Master Servicing Contracts prepared
by an independent third party proposed by the Companies and acceptable to
the Administrative Agent; provided, however, that (A) the Administrative
-------- -------
Agent reserves the right to request such appraisal with respect to Assigned
Servicing Rights related to Master Servicing Contracts more frequently than
semiannually if deemed necessary in the reasonable business judgment of the
Administrative Agent, and (B) the Companies shall deliver a similar
appraisal to the Administrative Agent with respect to Assigned Servicing
Rights related to Servicing Contracts for all such Assigned Servicing
Rights owned by the Companies in excess of six (6) months, such appraisal
to be delivered within thirty (30) days after such Assigned Servicing
Rights have been owned for six (6) months by the Companies.
(7) To the Administrative Agent upon entry by the Companies into
any Master Servicing Contract with a new MBS Fiduciary or any Servicing
Contract with a new investor, a Resignation Letter with respect to such MBS
Fiduciary or
30
<PAGE>
investor, which Resignation Letter shall be executed by the Companies and
undated; and
(8) To the Administrative Agent upon request therefor after the
occurrence and during the continuance of an Event of Default, the
Additional Required Documents in connection with any Mortgage Loan,
Construction Loan, Servicing Loan or Foreclosure/ Repurchase Loan which has
been funded with the proceeds of any Loan.
(c) INTENTIONALLY OMITTED.
(d) Maintenance of Existence and Properties. Maintain the corporate
---------------------------------------
existence of each of CWM, INMC and ILC and obtain and maintain all rights,
privileges, licenses, approvals, franchises, properties and assets necessary or
desirable in the normal conduct of the business of the Companies, and comply
with all Contractual Obligations and Requirements of Law, except where the
failure to so comply would not have a material adverse effect on the business,
operations, assets or financial condition of the Companies, taken as a whole, or
on the Collateral. CWM will at all times remain qualified as a REIT, ILC will at
all times remain qualified as a "qualified REIT subsidiary," as defined in the
Code, and CWM will at all times own at least ninety-nine percent (99%) of the
economic interest in INMC.
(e) Inspection of Property; Books and Records; Audits.
-------------------------------------------------
(1) 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
(2) Permit: (i) representatives of the Administrative Agent, the
Collateral Agent or any Lender to a. visit and inspect any of the
-
properties of the Companies and examine and make abstracts from any of the
books and records of the Companies at any reasonable time and as often as
may reasonably be desired by the Administrative Agent, the Collateral Agent
or any Lender (but, prior to the occurrence of an Event of Default, only
upon not less than two Business Days' prior notice), and b. discuss the
-
business, operations, properties and financial and other condition of the
Companies with officers and employees of the Companies, and with their
independent certified public accountants, and (ii) representatives of the
Collateral Agent and the Administrative Agent to conduct periodic
operational audits of the Companies' business and operations. The expenses
of the Administrative Agent, the Collateral Agent or any Lender incurred in
connection with any
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visit, inspection, examination, discussion or audit performed pursuant to
this Paragraph 11(e)(2) shall be borne by such parties incurring such
expenses except as otherwise provided in Paragraph 11(g).
(f) Notices. Promptly give written notice to the Administrative Agent
-------
(which shall promptly transmit a copy of such notice to each of the Lenders) of:
(1) The occurrence of any Potential Default or Event of Default
known to the Chief Executive Officer, President, Chief Operating Officer,
Chief Accounting Officer, Senior Vice President of Warehouse Lending,
Senior Vice President of Construction Lending or Senior Vice President of
Secondary Marketing of CWM and the proposed method of cure thereof;
(2) Any litigation or proceeding affecting the Companies or the
Collateral which could have a material adverse effect on the Collateral or
the business, operations, property, or financial condition of the
Companies, taken as a whole; and
(3) A material adverse change known to the Chief Executive
Officer, President, Chief Operating Officer, Chief Accounting Officer,
Senior Vice President of Warehouse Lending or Senior Vice President of
Construction Lending or Senior Vice President of Secondary Marketing of any
of the Companies in the business, operations, property or financial
condition of the Companies, taken as a whole; and
(4) Any changes in the following senior management positions of
any of the Companies: Chief Executive Officer, President, Chief Operating
Officer, Chief Accounting Officer, Senior Vice President of Warehouse
Lending, Senior Vice President of Construction Lending or Senior Vice
President of Secondary Marketing.
(g) Expenses. Pay all reasonable out-of-pocket costs and expenses
--------
(including reasonable fees and disbursements of counsel): (1) of the
Administrative Agent and the Collateral Agent incident to the preparation and
negotiation of the Credit Documents, (2) of the Administrative Agent and the
Collateral Agent associated with any periodic audits conducted pursuant to
Paragraph 11(e)(2)(ii) above if such audit discloses a material adverse change
in the financial condition or operations of the Companies, taken as a whole, and
(3) of the Administrative Agent, the Collateral Agent and each of the Lenders
incident to the enforce-
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ment of payment of the Obligations, whether by judicial proceedings or
otherwise, including, without limitation, in connection with bankruptcy,
insolvency, liquidations, reorganization, moratorium or other similar
proceedings involving the Companies or a "workout" of the Obligations. The
obligations of the Companies under this Paragraph 11(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.
(h) Credit Documents. Comply with and observe all terms and
----------------
conditions of the Credit Documents.
(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 to the Administrative Agent, and furnish the
Administrative Agent on request full information as to all such insurance, and
to provide within five (5) days after receipt of such request, certificates or
other documents evidencing the renewal of each such policy.
12. Negative Covenants. Each of CWM, INMC and ILC hereby agrees, and
------------------
the Companies, jointly and severally, hereby agree, that, as long as any
Obligations remain unpaid or any Lender has any obligation to make Loans
hereunder, CWM, INMC and ILC, and the Companies, as applicable, shall not at any
time, directly or indirectly:
(a) Liens. Create, incur, assume or suffer to exist, any Lien upon
-----
the Collateral except as contemplated by the Security Agreement or the Custodial
Agreement, or create, incur, assume or suffer to exist any Lien upon any of the
other property and assets (including the Assigned Servicing Rights and any other
servicing rights) of the Companies except:
(1) Liens 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
Companies shall have set aside on the books of the Companies 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
33
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the release of attachments or for stay of execution, or to secure the
performance of bids, tenders, contracts (other than for the payment of
borrowed money), leases or for purposes of like general nature in the
ordinary course of the Companies business;
(3) Purchase money security interests for property (except
Mortgage Loans) hereafter acquired, conditional sale agreements, or other
title retention agreements, with respect to property hereafter acquired;
provided, however, that no such security interest or agreement shall affect
any servicing rights or extend to any property other than the property
acquired; and
(4) Liens securing Permitted Secured Debt (including without
limitation liens securing Indebtedness incurred pursuant to the Facility I
Agreement).
(b) Indebtedness. Create, incur, assume or suffer to exist, or
------------
otherwise become or be liable in respect of any Indebtedness except:
(1) The Obligations;
(2) Trade debt or accounts payable incurred in the ordinary
course of business, paid within sixty (60) days after the same has become
due and payable or which is being contested in good faith, provided
provision is made to the reasonable satisfaction of the Administrative
Agent for the eventual payment thereof in the event it is found that such
contested trade debt is payable by the Companies;
(3) Indebtedness secured by Liens permitted under Paragraph 12(a)
above;
(4) Indebtedness which is unsecured;
(5) Indebtedness incurred pursuant to repurchase and gestation
financing agreements, whether such Indebtedness is shown on the books of
the Companies as a sale or as a financing;
(6) Indebtedness which is by its terms subordinated in right of
payment to the Obligations and which is evidenced by instruments and
agreements in form and content reasonably satisfactory to the
Administrative Agent;
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<PAGE>
(7) Indebtedness attributable to collateralized mortgage
obligations of the Companies or any Affiliate thereof;
(8) Indebtedness incurred pursuant to additional financing
secured by Construction Loans of the type which serve as Collateral for the
Tranche D Facility; provided, however, that the Companies may not enter
-------- -------
into any such financing arrangement, nor incur additional outstanding
Indebtedness under any such existing financing arrangement, at any time
when the amount of availability under the Tranche D Facility equals or
exceeds the amount of additional Indebtedness sought to be incurred;
(9) Permitted Other Debt; and
(10) Indebtedness not specifically referred to above but
reflected in the financial statements referred to in Paragraph 12(a) above,
and extensions, renewals, and refinancings of such Indebtedness.
(c) Consolidation and Merger; Change of Business. (i) Liquidate or
--------------------------------------------
dissolve or enter into any consolidation, merger; (ii) form or enter into any
partnership, joint venture, syndicate or other combination which would have a
material adverse effect on the business, operations, assets or financial
condition of the Companies taken as a whole; or (iii) make any material change
in the nature of its business as a mortgage banker, mortgage conduit, mortgage
lender, warehouse lender, construction lender, servicing-secured lender or
servicing-receivable lender as currently conducted or conduct any business other
than in substantially the same fields of enterprise as currently conducted.
(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 business as currently conducted (it being
expressly agreed and understood that the acquisition of non-recourse servicing
is a normal course of business activity and that the acquisition of recourse
servicing is not a normal course of business activity).
(e) Underwriting Policies. Materially change, without the prior
---------------------
written consent of the Administrative Agent, (i) its programs and procedures
with respect to the underwriting and purchase of Eligible A/B Mortgage Loans
which are described in the INMC Seller/Servicer Guide, (ii) its programs and
procedures with respect to the underwriting and purchase of Construction-to-
Permanent Mortgage Loans, (iii) its underwriting policies with respect to any
construction lending programs, including without limitation programs whereunder
the
35
<PAGE>
Companies shall extend Construction Loans, (iv) its underwriting policies with
respect to any programs whereunder the Companies shall extend Servicing Loans,
or (v) its underwriting policies with respect to any programs whereunder the
Companies shall extend Foreclosure/Repurchase Loans.
(f) Sale of Assets. Sell, lease, assign, transfer or otherwise
--------------
dispose of any of its assets (other than obsolete, no longer useful or worn out
property), whether now owned or hereafter acquired, other than in the ordinary
course of business as currently conducted and at fair market value (it being
expressly agreed and understood that the sale or other disposition of Mortgage-
Backed Securities and Mortgage Loans with or without servicing released and of
mortgage servicing rights is in the ordinary course of business).
(g) Indebtedness to Net Worth Ratio of CWM. Permit the ratio of the
--------------------------------------
consolidated Adjusted Total Indebtedness of CWM to the consolidated Book Net
Worth of CWM at any date (each as shown on the most recent consolidated
financial statements of CWM delivered to the Administrative Agent pursuant to
Paragraph 11(a)) to be more than XXXX:1.0.
(h) Minimum Consolidated Book Net Worth of CWM. Permit the
------------------------------------------
consolidated Book Net Worth of CWM at any date (as shown on the most recent
consolidated financial statements of CWM delivered to the Administrative Agent
pursuant to Paragraph 11(a)) to be less than the greater of (i) $XXXXXXXXXXX or
(ii) XXXXXX percent (XX%) of the consolidated Book Net Worth of CWM as of the
date hereof, less the amount of any qualified REIT dividends payable as of the
date hereof.
(i) Minimum Book Net Worth of INMC. Permit the Book Net Worth of INMC
------------------------------
at any date (as shown on the most recent financial statements of INMC delivered
to the Administrative Agent pursuant to Paragraph 11(a)) to be less than
$XXXXXXXXX.
13. Events of Default. Upon the occurrence of any of the following
-----------------
events (an "Event of Default"):
(a) Companies shall fail to pay (or prepay pursuant to Paragraph 7(n)
above) principal or interest on any Loan, or any fee payable to the
Administrative Agent for its own account or for the benefit of the Lenders
pursuant to Paragraph 7(t) above, when due; or
36
<PAGE>
(b) Any representation or warranty made or deemed made by the
Companies in any Credit Document or in connection with any Credit Document shall
be inaccurate or incomplete in any material respect on or as of the date made or
deemed made; or
(c) Either CWM, INMC or ILC shall fail to maintain its corporate
existence; or
(d) The Companies 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 after notice of such default from the Administrative Agent to
the Companies; or
(e) There shall exist an "Event of Default" under, and as defined in,
the Facility I Agreement; or
(f) The Companies shall default in any payment of principal of or
interest on any Indebtedness (other than the Loans, and Indebtedness incurred
pursuant to the Facility I Agreement), in the aggregate principal amount of
$500,000 or more (and without regard for the dollar amount of the defaulted
payment), or any other event shall occur, the effect of which is to permit such
Indebtedness to be declared or otherwise to become due prior to its stated
maturity; or
(g) (1) Either CWM, INMC or ILC shall commence any case, proceeding or
other action (i) relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to such
Person, or seeking to adjudicate such Person a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation, dissolution,
composition or other relief with respect to such Person or its debts, or (ii)
seeking appointment of a receiver, trustee, custodian or other similar official
for such Person or for all or any substantial part of its assets, or such Person
shall make a general assignment for the benefit of its creditors; or (2) there
shall be commenced against any of CWM, INMC or ILC 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 any of CWM, INMC or ILC any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or substantially all of the
assets of such Person which results in the entry of an order for any such relief
which shall not have been vacated, discharged, stayed, satisfied or bonded
pending appeal within sixty (60) days from the entry thereof; or (4) any of CWM,
37
<PAGE>
INMC or ILC shall take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in (other than in connection with a final
settlement), any of the acts set forth in clauses (1), (2) or (3) above; or (5)
any of CWM, INMC or ILC shall generally not, or shall be unable to, or shall
admit in writing its inability to pay its debts as they become due; or
(h) The Companies or any of their ERISA Affiliates 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 not 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 Administrative 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 Companies or any of their ERISA Affiliates 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, is likely to subject the Companies or any of their
respective ERISA Affiliates to any tax, penalty or other liabilities in the
aggregate material in relation to the business, operations, property or
financial condition of the Companies taken as a whole;
(i) One or more judgments or decrees in an aggregate amount in excess
of $500,000 not covered by insurance shall be entered against the Companies and
all such judgments or decrees shall not have been vacated, discharged, stayed,
satisfied or bonded pending appeal within sixty (60) days from the entry
thereof.
THEN:
(1) Automatically upon the occurrence of an Event of Default
under Paragraph 13(g) above; and
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<PAGE>
(2) At the option of any Lender upon the occurrence of an Event
of Default under Paragraph 13(a) above; and
(3) In all other cases, at the option of the Majority Lenders,
each Lender's obligation to make Loans hereunder shall terminate and the
principal balance of outstanding Loans and interest accrued but unpaid thereon
shall become immediately due and payable, without demand upon or presentment to
the Companies, which are expressly waived by the Companies. Upon the occurrence
of any Event of Default hereunder, and promptly upon notice by the
Administrative Agent to the other Lenders, if (a) the ratio of the amount of
Loans outstanding held by any Lender to the aggregate amount of Loans
outstanding held by all Lenders at the time of determination exceeds (b) such
Lender's Percentage Share, then each Lender shall purchase or sell, as
applicable, for cash and at face value and without recourse, such participations
in the Loans made by the other Lenders as shall be necessary to cause (x) the
ratio of the amount of Loans outstanding held by any Lender to the aggregate
amount of Loans outstanding held by all Lenders at such date to equal (y) such
Lender's Percentage Share.
14. The Administrative Agent.
------------------------
(a) Appointment. Each Lender irrevocably appoints the Administrative
-----------
Agent as the agent for such Lender under the Credit Documents and to act as
secured party, agent, bailee and custodian for the exclusive benefit of the
Lenders with respect to the Collateral, and each such Lender hereby irrevocably
authorizes the Administrative 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 thereto
by the terms of the Credit Documents, together with such other powers as are
reasonably incidental thereto including, without limitation, all powers and
duties specifically set forth in the Security Agreement or the Custodial
Agreement to be exercised and performed by the Administrative Agent. The
Administrative Agent is specifically authorized to execute and deliver on behalf
of all of the Lenders, the Security Agreement and the Custodial Agreement and to
appoint Bankers Trust of California, N.A. as the Collateral Agent to act on
behalf of the Lenders with respect to A/B Collateral and DEF Collateral (as
those terms are defined in the Security Agreement) as described in the Security
Agreement and the Custodial Agreement, including, without limitation, to act on
behalf of the Lenders to release Collateral pursuant to the terms of the
Security Agreement and the Custodial Agreement. The Lenders specifically
authorize the Administrative
39
<PAGE>
Agent to agree to indemnify the Collateral Agent from and to pay to the
Collateral Agent all costs (including, without limitation, costs incurred by
Collateral Agent as a result of any examination performed by any Lender under
Paragraph 12 of the Security Agreement) as set out in the Security Agreement and
to the extent, if any, that the Companies are not required to or do not
reimburse the Administrative Agent for any such indemnification or costs, then
the Lenders will do so ratably in accordance with their Percentage Shares,
unless such cost is related to an examination by a Lender under Paragraph 12 of
the Security Agreement, in which case all such costs will be borne by the
examining Lender. The Administrative Agent shall have no duties or
responsibilities except those expressly set forth therein, nor any fiduciary
relationship with any Lender, and no implied covenants, responsibilities,
obligations or liabilities shall be read into the Credit Documents or otherwise
exist against the Administrative Agent.
(b) Delegation of Duties. The Administrative 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 such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care.
(c) Exculpatory Provisions. Neither the Administrative Agent nor any
----------------------
of its officers, directors, employees, agents, counsel, attorneys-in-fact or
Affiliates shall be (1) liable to any Lender, the Collateral Agent, or the
Companies for any action taken or omitted to be taken by it or such Person under
or in connection with the Credit Documents (except for its or such Person's own
gross negligence or willful misconduct), or (2) responsible in any manner to any
of the Lenders, the Collateral Agent or the Companies for: (i) any recitals,
statements, representations or warranties made by the Companies 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 the
Administrative Agent under or in connection with, the Credit Documents (except
such as are prepared by the Administrative Agent and, then, only to the extent
the Administrative 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 Companies to perform their
obligations thereunder, or (ii) any action taken or omitted to be taken by the
Administrative Agent with respect to the Other Collateral (as defined in the
Security Agreement) in accordance with written instructions given
40
<PAGE>
as permitted under the Credit Documents, or (iii) assuring compliance of the
Credit Documents and the transactions contemplated by the Credit Documents with
any law or regulation binding on such Person, it being expressly acknowledged,
agreed and understood that each such Person has obtained independent advice
satisfactory to it in all such respects. The Administrative Agent shall be under
no 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 the
Administrative 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 Companies. The Administrative 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.
(d) Reliance by Administrative Agent. The Administrative Agent shall
--------------------------------
be entitled to rely, and shall be fully protected in relying, upon any note,
writing, resolution, notice, consent, certification, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Companies), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative 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 expense arising out of the Administrative
Agent's gross negligence or willful misconduct). The Administrative 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 the Administrative 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.
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(e) Notice of Default; Agreement to Advance. The Administrative Agent
---------------------------------------
shall be deemed to have no knowledge or notice of the occurrence of any Event of
Default or Potential Default hereunder unless the Administrative Agent has
received notice from a Lender or the Companies 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 the Administrative
Agent receives such a notice, the Administrative Agent shall give notice thereof
to the Lenders and the Collateral Agent.
(f) Non-Reliance on Administrative Agent and Other Lenders. Each
------------------------------------------------------
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of the
Companies, shall be deemed to constitute any representation or warranty by the
Administrative Agent to any Lender. Each Lender represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
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 Companies and made its own decision
to extend credit hereunder and enter into the Credit Documents. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, 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
Companies. Except for notices, reports and other documents expressly required to
be furnished to the Lenders by the Administrative Agent hereunder, the
Administrative 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 Companies which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
42
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(g) Indemnification. The Companies, jointly and severally, agree to
---------------
indemnify, defend and hold harmless the Administrative Agent in its capacity as
such and each Lender from and against any and all claims, obligations,
penalties, actions, suits, judgments, reasonable costs and disbursements,
losses, liabilities and damages (including, without limitation, reasonable
attorneys' fees) of any kind whatsoever which may at any time be imposed on,
assessed against or incurred by such Person in any way resulting from any action
taken or omitted to be taken by the Companies relating to or arising out of the
Credit Documents or any documents contemplated by or referred to therein or the
transactions contemplated thereby. The Administrative Agent agrees that it will
promptly notify the Companies of any such claim, action or suit asserted or
commenced against it and that the Companies may assume the defense thereof with
counsel reasonably satisfactory to the Administrative Agent at the Companies'
sole expense, that the Administrative Agent will cooperate with the Companies on
such defense, and that the Administrative Agent will not settle any such claim,
action or suit without the consent of the Companies; provided, however, that in
-------- -------
the event the Administrative Agent is not reasonably satisfied with such
defense, the Administrative Agent may assume such defense with counsel
satisfactory to the Administrative Agent at the Companies' sole expense. The
Lenders agree to indemnify and hold harmless the Administrative Agent in its
capacity as such ratably in accordance with their Percentage Shares to the
extent required by the Companies hereunder if the Administrative Agent is not
reimbursed by the Companies hereunder and without limiting the obligation of the
Companies to do so. The indemnification obligations of the Companies and Lenders
under this Paragraph 14(g) shall survive termination of this Agreement and
payment in full of the Obligations.
(h) Administrative Agent in Its Individual Capacity. The
-----------------------------------------------
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Companies as though the
Administrative Agent were not the Administrative Agent hereunder. With respect
to such loans made or renewed by it and any note issued to it hereunder, the
Administrative Agent shall have the same rights and powers under the Credit
Documents as any Lender hereunder and may exercise the same as though it were
not the Administrative Agent, and the terms "Lender" and "Lenders" shall include
the Administrative Agent in its individual capacity.
(i) Successor Agents. The Administrative Agent may resign as such
----------------
under the Credit Documents upon ninety (90) days' prior written notice to the
other parties hereto. If the Administrative Agent shall resign, then, on or
before the effective date
43
<PAGE>
of such resignation, the Majority Lenders shall appoint a successor agent
reasonably acceptable to the Companies or, if the Majority Lenders are unable to
agree on the appointment of a successor agent, the Administrative Agent shall
appoint a successor agent for the Lenders, which successor agent shall be
reasonably acceptable to the Companies, whereupon such successor agent shall
succeed to the rights, powers and duties of the Administrative Agent, and the
term "Administrative Agent" shall mean such successor agent effective upon its
appointment, and the former Administrative Agent's rights, powers and duties
shall be terminated without any other or further act or deed on the part of such
former Administrative Agent or any of the parties to this Agreement or any of
the other Credit Documents or successors thereto. After the Administrative
Agent's resignation hereunder, the provisions of this Paragraph 14(i) shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Administrative Agent under the Credit Documents.
(j) Authority to Execute Security Agreement. The Lenders hereby
---------------------------------------
authorize Administrative Agent to execute the Security Agreement in its capacity
as agent for each of the Lenders on behalf of the Lenders, and the Lenders
specifically consent to the terms thereof, including without limitation the
appointment of the Collateral Agent as set forth therein pursuant to the terms
contained therein, the authority of the Collateral Agent to administer A/B
Collateral and DEF Collateral (as each such term is defined therein) pursuant to
the terms thereof, and the authority of the Administrative Agent to administer
Other Collateral (as defined therein) pursuant to the terms thereof. The
Lenders hereby agree to be bound by all provisions of the Security Agreement
which may be applicable to the Lenders, including without limitation any
indemnification provisions running from the Lenders or any of them to the
Collateral Agent contained therein.
(k) Authority to Execute Custodial Agreement. The Lenders hereby
----------------------------------------
authorize Administrative Agent to execute the Custodial Agreement in its
capacity as agent for each of the Lenders on behalf of the Lenders, and the
Lenders specifically consent to the terms thereof, including without limitation
the authority of the Collateral Agent to administer A/B Collateral and DEF
Collateral (as each such term is defined in the Security Agreement) pursuant to
the terms thereof. The Lenders hereby agree to be bound by all provisions of
the Custodial Agreement which may be applicable to the Lenders, including
without limitation any indemnification provisions running from the Lenders or
any of them to the Collateral Agent or the Administrative Agent contained
therein.
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(l) Sharing of Set-Offs. If 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
Companies agree that each Lender so purchasing a portion of another 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.
15. Miscellaneous Provisions.
------------------------
(a) No Assignment by Companies. The Companies may not assign their
--------------------------
rights or obligations under this Agreement 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 Companies, their
successors and assigns.
(b) Amendment. This Agreement may be amended by the Administrative
---------
Agent, an assigning Lender and the party accepting the assignment solely in
order to reflect an assignment under Paragraph 15(i) hereof. Except as set forth
in the preceding sentence, neither this Agreement nor any of the other Credit
Documents may be amended or terms or provisions hereof or thereof waived unless
such amendment or waiver is in writing and signed by the Majority Lenders and
the Companies; provided, however, that without the prior written consent of one
hundred percent (100%) of the Lenders and the Companies, no amendment or waiver
shall:
(1) Waive or amend any term or provision of Paragraphs 7(c),
7(d), 7(f), 7(g), 14(g) or 14(l) above or this Paragraph 15(b);
45
<PAGE>
(2) Waive or amend the definitions of Eligible A/B Mortgage Loan,
Construction Loan, Servicing Loan, Foreclosure/Repurchase Loan, Unit
Collateral Value, Tranche A Borrowing Base, Tranche B Borrowing Base,
Tranche C Borrowing Base, Tranche D Borrowing Base, Tranche E Borrowing
Base, Tranche F Borrowing Base, Collateral Value of the Tranche A Borrowing
Base, Collateral Value of the Tranche B Borrowing Base, Collateral Value of
the Tranche C Borrowing Base, Collateral Value of the Tranche D Borrowing
Base, Collateral Value of the Tranche E Borrowing Base, or Collateral Value
of the Tranche F Borrowing Base;
(3) Reduce the principal of, or rate of interest on, the Loans or
reduce any fees payable hereunder or extend the required payment dates of
any of the Obligations;
(4) Except as expressly provided for hereunder, modify the
Aggregate Tranche A Credit Limit, the Aggregate Tranche B Credit Limit, the
Aggregate Tranche C Credit Limit, the Aggregate Tranche D Credit Limit, the
Aggregate Tranche E Credit Limit or the Aggregate Tranche F Credit Limit;
(5) Modify any Lender's Maximum Commitment;
(6) Modify the definition of "Majority Lenders", "Percentage
Share", or "Repayment Share";
(7) Extend the Maturity Date;
(8) Release any Collateral except as expressly permitted under
the Credit Documents; or
(9) Modify any provision in the Credit Documents which expressly
requires consent of one hundred percent (100%) of the Lenders.
In addition, no amendment or waiver shall, unless agreed to in writing by the
affected Agent, modify the rights or duties of such Agent. It is expressly
agreed and understood that the failure by the required Lenders to elect to
accelerate amounts outstanding hereunder or to terminate the obligation of the
Lenders to make Loans hereunder shall not constitute an amendment or waiver of
any term or provision of this Agreement.
(c) Cumulative Rights; No Waiver. The rights, powers and remedies of
----------------------------
the Administrative Agent, the Collateral Agent, and the Lenders under the Credit
Documents are cumulative and in
46
<PAGE>
addition to all rights, powers and remedies provided under any and all
agreements among the Companies and the Administrative Agent, the Collateral
Agent and the Lenders relating hereto, at law, in equity or otherwise. Any delay
or failure by the Administrative Agent, the Collateral Agent or the Lenders to
exercise any right, power or remedy shall not constitute a waiver thereof by the
Administrative Agent, the Collateral Agent and the Lenders, and no single or
partial exercise by the Administrative Agent, the Collateral Agent, and the
Lenders of any right, power or remedy shall preclude other or further exercise
thereof or any exercise of any other rights, powers or remedies.
(d) Entire Agreement. This Agreement, the documents and agreements
----------------
referred to herein and that certain letter agreement among the Administrative
Agent and the Companies dated as of February 17, 1995, 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.
(e) Survival. All representations, warranties, covenants and
--------
agreements on the part of the Companies contained in the Credit Documents 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.
(f) Notices. All notices given by any party to the others under the
-------
Credit Documents shall be in writing unless otherwise provided for herein,
delivered personally or by depositing the same in the United States mail,
registered, with postage prepaid, addressed to the party at the address set
forth on Schedule II set forth in the Addendum, or by facsimile addressed to the
-----------
party at the number set forth on Schedule II set forth in the Addendum. Any
-----------
party may change the address to which notices are to be sent by notice of such
change to each other party given as provided herein. Such notices shall be
effective on the date received or, if mailed, on the third Business Day
following the date mailed.
(g) Governing Law/Waiver of Jury Trial. This Agreement shall be
----------------------------------
governed by and construed in accordance with the laws of the State of North
Carolina. TO THE EXTENT PERMITTED BY LAW, THE COMPANIES HEREBY JOINTLY AND
SEVERALLY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS ANY OF THEM
MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THE CREDIT DOCUMENTS. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS AND THE LENDERS ENTERING INTO
THE CREDIT DOCUMENTS.
47
<PAGE>
(h) Sub-Participation by Lenders. Any Lender may at any time sell to
----------------------------
one or more financial institutions (each of such financial institutions being
herein called a "Participant") 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 15(h) 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 Companies, the Administrative Agent, the Collateral Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under the
Credit Documents; and
(4) The participation agreement between such Lender and the
Participant shall provide that the sole voting rights of the Participant
are with respect to those items on which such Lender is entitled to vote
pursuant to Paragraphs 15(b)(3), 15(b)(7) and 15(b)(8) above or any vote to
amend Paragraph 15(b).
(i) Assignments by Lenders. Any Lender may assign all or any part of
----------------------
such Lender's Maximum Commitment, subject to the consent of the Companies, which
consent shall not be unreasonably withheld, to any other Lender or to any other
party not a party to this Agreement as of the date hereof; provided, however,
that the accepting Lender or other accepting party shall be a financial
institution with capital of at least $100,000,000; except that 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. Any
assignment hereunder shall be in form and content approved by the Administrative
Agent which such approval shall not be unreasonably withheld. Upon any such
assignment (i) this Agreement will be amended by the parties hereto and by the
party receiving the assignment to reflect such assignment, (ii) the
Administrative Agent will deliver an updated Commitment Schedule to the
Companies and the Lenders reflecting such assignment, (iii) the outstanding
Loans will be reallocated among the Lenders (including the party receiving the
assignment) in accordance with such updated Commitment Schedule, and (iv) if the
party receiving the assignment is not currently a party to the Agreement, the
Companies will deliver a Note to such party.
48
<PAGE>
(j) Addition of New Lender. The Company may at any time propose that
----------------------
a financial institution become an additional Lender hereunder other than by
assignment of the Maximum Commitment of an existing Lender; provided, however,
that such additional party shall be a financial institution with capital of at
least $100,000,000 and shall be subject to the consent of the Administrative
Agent, which consent shall not be unreasonably withheld. Upon the addition of
any such party as an additional Lender hereunder, (i) this Agreement will be
amended by the parties hereto and by the party becoming an additional Lender
hereunder to reflect the addition of such party as a Lender hereunder, (ii) the
Administrative Agent will deliver an updated Commitment Schedule to the
Companies and the Lenders reflecting the addition of such party as a Lender,
(iii) the outstanding Loans will be reallocated among the Lenders (including the
additional Lender) in accordance with such updated Commitment Schedule, and (iv)
the Companies will deliver a Note to such party.
(k) Counterparts. This Agreement and the other Credit Documents may
------------
be executed in any number of counterparts, all of which together shall
constitute one agreement.
15(l) Adjustment of Borrowing Base. On any date on which the sum of
----------------------------
(i) the Aggregate Unit Collateral Values of all Eligible A/B Mortgage Loans
included in the Tranche A Borrowing Base or the Tranche B Borrowing Base which
are of the type described in the last paragraph of the definition of "Eligible
A/B Mortgage Loan" (it being understood that for the purpose of this provision,
the terms "Eligible A/B Mortgage Loans," "Tranche A Borrowing Base" and "Tranche
B Borrowing Base" shall mean both such terms as defined herein and such terms as
---- ---
defined in the Facility I Agreement), (ii) the Collateral Value of the Tranche D
Borrowing Base attributable to Construction Loans of the type described in the
second proviso to the definition of "Construction Loan" (or, if any such
Construction Loan is nonconforming solely due to the sales price or construction
cost of any single-family tract home to be constructed in connection therewith,
the sales price or construction cost of such home), (iii) the Collateral Value
of the Tranche E Borrowing Base attributable to Servicing Loans of the type
described in the proviso to the definition of "Servicing Loan", and (iv) the
Collateral Value of the Tranche F Borrowing Base attributable to
Foreclosure/Repurchase Loans of the type described in the proviso to the
definition of "Foreclosure/Repurchase Loan," (collectively, the "Nonconforming
Collateral Amount") exceeds $XXXXXXXXXX, the Administrative Agent, after
consultation with the Companies, shall make such adjustments to the Tranche A
Borrowing Base, the Tranche B Borrowing Base, the Tranche D Borrowing Base, the
Tranche E Borrowing Base and the Tranche F Borrowing Base, and shall remove
49
<PAGE>
Collateral from the computation of some or all of such Borrowing Bases, as may
be necessary to cause the Nonconforming Collateral Amount to be less than or
equal to $XXXXXXXXXX.
16. Definitions. For purposes of this Agreement, the terms set forth
-----------
below shall have the following meanings:
"Addendum" shall mean the Addendum of Schedules and Exhibits attached to
--------
this Agreement and incorporated herein by reference, such Addendum to be
considered to be a part of this Agreement for all purposes.
"Additional Required Documents" shall mean, with respect to any Loan, those
-----------------------------
items described on Exhibit E set forth in the Addendum.
---------
"Adjusted Total Indebtedness", as to any Person, shall mean the
---------------------------
consolidated Indebtedness of such Person less the amount of such Indebtedness
----
attributable to collateralized mortgage obligations of such Person.
"Administrative Agent" shall have the meaning given such term in the
--------------------
introductory paragraph hereof.
"Affiliate" shall mean, as to any Person, any other Person directly or
---------
indirectly controlling, controlled by or under direct or indirect common control
with, such Person. "Control" as used herein means the power to direct the
management and policies of such Person.
"Agent" shall have the meaning given such term in Paragraph 14(a) above.
-----
"Aggregate Facility Commitment" shall mean, at any time, the sum of the
-----------------------------
Lenders' Maximum Commitments at such time, which sum shall not exceed
$150,000,000 at any time.
"Aggregate Tranche A Credit Limit" shall mean, at any time, XXXXXXXXXXX
--------------------------------
percent (XXX%) of the Aggregate Facility Commitment at such time.
"Aggregate Tranche B Credit Limit" shall mean, at any time, XXXXXXXXXXX
--------------------------------
percent (XXX%) of the Aggregate Facility Commitment at such time.
"Aggregate Tranche C Credit Limit" shall mean, at any time, XXXXXXXXXXX
--------------------------------
percent (XXX%) of the Aggregate Facility Commitment at such time.
50
<PAGE>
"Aggregate Tranche D Credit Limit" shall mean, at any time, XXXXXXXXXXX
--------------------------------
percent (XXX%) of the Aggregate Facility Commitment at such time.
"Aggregate Tranche E Credit Limit" shall mean, at any time, XXXXXXXXXXX
--------------------------------
percent (XXX%) of the Aggregate Facility Commitment at such time.
"Aggregate Tranche F Credit Limit" shall mean, at any time, XXXXXXXXXXX
--------------------------------
percent (XXX%) of the Aggregate Facility Commitment at such time.
"Agreement" shall mean this Agreement, as the same may be amended, extended
---------
or replaced from time to time.
"Applicable Corporate Rate" shall mean, with respect to any Corporate Rate
-------------------------
Loan, the Corporate Rate plus the Applicable Spread.
"Applicable Eurodollar Rate" shall mean, with respect to any Eurodollar
--------------------------
Loan for the Interest Period applicable to such Eurodollar Loan, the rate per
annum (rounded upward, if necessary, to the next higher 1/1000 of one percent
(.001%)) calculated in accordance with the following formula:
ER +
----------
Applicable Eurodollar Rate = 1-ERP AS
where
ER = Eurodollar Rate
ERP = Eurodollar Reserve Percentage
AS = Applicable Spread
"Applicable Spread" shall mean (i) with respect to any Tranche A Loan,
-----------------
XXXXXXXXXXXXXXXXX percent (XXX%); (ii) with respect to any Tranche B Loan,
XXXXXXXXXXXXXXXXX percent (XXX%); (iii) with respect to any Tranche C Loan,
XXXXXXXXXXXXXXXXXX percent (XXXXX%); (iv) with respect to any Tranche D Loan,
XXXXXXXXXXXXXXXXXXXX percent (XXXXX%); (v) with respect to any Tranche E Loan,
XXXXXXX XXXXXXXXXXXX percent (XXXXX%); and (vi) with respect to any Tranche F
Loan, XXXXXXXXXXXXXXXXXXXX percent (XXXXX%).
"Approved Investor" shall mean any Person pre-approved in writing (which
-----------------
pre-approval may be limited in dollar amounts by type and otherwise) by the
Administrative Agent in its reasonable business judgement (including those shown
on Schedule III set forth in the Addendum) and which approval has not been
------------
revoked by such
51
<PAGE>
Administrative Agent in its reasonable business judgement (such revocation to be
effective on the tenth Business Day following notice thereof given to the
Companies in writing). (It being agreed that Administrative Agent will promptly
notify the Lenders in writing of any additional Approved Investor or any
previous Approved Investor for which approval has been revoked.)
"Approved Repo Lender" shall mean any Approved Investor or any other entity
--------------------
pre-approved in writing by the Administrative Agent in its reasonable business
judgement (including those shown on Schedule III set forth in the Addendum) and
------------
which approval has not been revoked by the Administrative Agent in its
reasonable business judgement (such revocation to be effective on the tenth
Business Day following notice thereof given to the Companies in writing). (It
being agreed that Administrative Agent will promptly notify the Lenders in
writing of any additional Approved Repo Lender or any previous Approved Repo
Lender for which approval has been revoked.)
"Approved Sub-Servicer" shall mean any Person pre-approved in writing
---------------------
(which pre-approval may be limited in dollar amounts or otherwise) by the
Administrative Agent in its reasonable business judgement (including those shown
on Schedule III set forth in the Addendum) and which approval has not been
------------
revoked by the Administrative Agent in its reasonable business judgement (such
revocation to be effective on the later of (i) the tenth Business Day following
notice thereof given to the Companies in writing or (ii) the first day upon
which the applicable Servicing Contact or Servicing Contracts with such
subservicer may be terminated by the Companies without payment of any
termination fees or similar sums). (It being agreed that Administrative Agent
will promptly notify the Lenders in writing of any additional Approved Sub-
Servicer or any previous Approved Sub-Servicer for which approval has been
revoked.)
"Assigned Servicing Rights" shall mean all now existing and hereafter
-------------------------
arising rights of the Companies to service, collect and administer Mortgage
Loans, and to receive fees and other compensation therefor under Servicing
Contracts and Master Servicing Contracts (whether directly or as assignee of the
right of the original servicer thereunder) between the Companies and private
investors or, in the case of Master Servicing Contracts, an MBS Fiduciary (if
but only if the related Servicing Contracts or Master Servicing Contracts, as
applicable, are satisfactory in form and content to the Administrative Agent and
if but only if the investors under such Servicing Contracts or the MBS Fiduciary
under such Master Servicing Contracts, as applicable, have consented to the
assignment of the related servicing rights to the Administrative Agent for the
benefit of the Lenders pursuant to written
52
<PAGE>
consents in form and content satisfactory to the Administrative Agent in its
sole discretion, or in lieu of such a written consent, the Administrative Agent
has received evidence reasonably satisfactory to it that such servicing rights
may be assigned to the Administrative Agent for the benefit of the Lenders) as
to which each of the following is accurate and complete (and the Companies by
including such servicing rights as "Assigned Servicing Rights" in any
calculation of the Collateral Value of the Tranche C Borrowing Base shall be
deemed to so represent and warrant to the Administrative Agent and the Lenders):
(a) The related Servicing Contract or Master Servicing Contract, as
applicable, is in full force and effect, is genuine, is in all respects as
appearing on its face or as represented in the books and records of the
Companies, is free of any default of the Companies and of counterclaims, offsets
and defenses and there does not exist any fact or circumstance that would
entitle the investor or MBS Fiduciary thereunder to terminate said Servicing
Contract or Master Servicing Contract, as applicable, for cause;
(b) The assignment by the Companies of the rights of the Companies under
the related Servicing Contract or Master Servicing Contract, as applicable, as
collateral for the Obligations consistent with the requirements of this
Agreement will not violate any law or regulation the effect of which violation
is to render void or voidable such assignment or to permit the termination of
the rights of the Companies under the related Servicing Contract or Master
Servicing Contract, as applicable;
(c) The servicing obligations under the related Servicing Contract or
Master Servicing Contract, as applicable, are being performed, on a non-recourse
basis, directly by the Companies and not by others pursuant to sub-servicing
arrangements except such sub-servicing arrangements with Approved Sub-Servicers;
and
(d) The Mortgage Loans being serviced under the related Servicing Contract
or Master Servicing Contract, as applicable, are not home equity loans, are not
owned by the Companies and are all first priority Mortgage Loans.
"Assigned Servicing Rights Fair Market Value" shall mean on any date (i)
-------------------------------------------
with respect to Assigned Servicing Rights pertaining to Servicing Contracts, the
purchase price paid by the Companies for such Assigned Servicing Rights,
provided, however, that (A) with respect to any Assigned Servicing Rights
-------- -------
pertaining to Servicing Contracts owned by the Companies in excess of six (6)
months, the Assigned Servicing Rights Fair Market Value of such Assigned
Servicing Rights shall be the lesser of (1) the purchase
53
<PAGE>
price paid by the Companies for such Assigned Servicing Rights or (2) the market
value of such Assigned Servicing Rights, expressed as a percentage, as set forth
in the most recent appraisal of such Assigned Servicing Rights delivered
pursuant to Paragraph 11(b)(6) above, provided further that notwithstanding
-------- -------
anything contained herein to the contrary, the Assigned Servicing Rights Fair
Market Value with respect to any Assigned Servicing Rights pertaining to
Servicing Contracts which have been owned by the Companies in excess of one (1)
year shall be zero; and (ii) with respect to Assigned Servicing Rights
pertaining to Master Servicing Contracts, the lesser of (A) the book value of
such Assigned Servicing Rights, expressed as a percentage, or (B) the market
value, expressed as a percentage, of such Assigned Servicing Rights as set forth
in the most recent appraisal delivered pursuant to Paragraph 11(b)(6) above.
"Authorized Officers" shall mean, with respect to the Companies, any of the
-------------------
officers set forth on Schedule IV set forth in the Addendum.
-----------
"Book Net Worth", as to any Person, shall mean the excess of consolidated
--------------
total assets of such Person over consolidated total liabilities of such Person,
each as determined in accordance with GAAP.
"Borrowing Base Schedule" shall mean a schedule prepared by Collateral
-----------------------
Agent and Administrative Agent and certified to by the Companies in the form of
that set forth as Exhibit F-2 in the Addendum.
-----------
"Budget Status Report" shall mean a schedule substantially in the form of
--------------------
that set forth as Exhibit S in the Addendum.
---------
"Business Day" shall mean any day other than a Saturday, a Sunday or a day
------------
on which banks in Charlotte, North Carolina or Los Angeles, California are
authorized or obligated to close their regular banking business.
"Capitalized Lease Obligations" of any Person shall mean the obligations of
-----------------------------
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
54
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Collateral" shall mean, collectively, the "A/B Collateral", the "DEF
----------
Collateral" and the "Other Collateral", as each such term is defined in the
Security Agreement.
"Collateral Agent" shall mean Bankers Trust Company of California, N.A., a
----------------
national banking association, or such other Person which may be designated as
such in accordance with the terms of the Credit Documents.
"Collateral Value of the Tranche A Borrowing Base" shall mean at any date
------------------------------------------------
the sum of the Unit Collateral Values of all Eligible A/B Mortgage Loans
included in the Tranche A Borrowing Base at such date (including Eligible A/B
Mortgage Loans shipped into pools supporting Mortgage Backed Securities pending
sale of such Mortgage Backed Securities and delivery of the sale proceeds
thereof to the Settlement Account) (which amount shall be subject to adjustment
as provided in Paragraph 15(l) above).
"Collateral Value of the Tranche B Borrowing Base" shall mean at any date
------------------------------------------------
the sum of the Unit Collateral Values of all Eligible A/B Mortgage Loans
included in the Tranche B Borrowing Base at such date (which amount shall be
subject to adjustment as provided in Paragraph 15(l) above).
"Collateral Value of the Tranche C Borrowing Base" shall mean at any date
------------------------------------------------
the product of the aggregate outstanding principal balance of those Mortgage
Loans being serviced under the Assigned Servicing Rights and included in the
Tranche C Borrowing Base on such date, multiplied by the then current Assigned
----------
Servicing Rights Fair Market Value, multiplied by XXXXXX percent (XX%).
----------
"Collateral Value of the Tranche D Borrowing Base" shall mean at any date
------------------------------------------------
the product of the aggregate outstanding principal balance of those Construction
Loans made by the Companies and included in the Tranche D Borrowing Base at such
date which are less than thirty (30) days delinquent, multiplied by XXXXXX
----------
percent (XX%); (which amount shall be subject to adjustment as provided in
Paragraph 15(l) above) provided, however, that the Collateral Value of the
-------- -------
Tranche D Borrowing Base shall be subject to the following reductions: (i) in
the event that any Construction Loan is secured by a mortgage or deed of trust
on a single-family tract home which has remained unsold for more than one
hundred eighty (180) days but less than three hundred sixty-five (365) days, the
Collateral Value of the Tranche D Borrowing Base shall be reduced by the product
of (A) the appraised value of such single-family tract home as shown on the
appraisal delivered to the Administrative Agent by the Companies pursuant to
Paragraph 11(b)(5), multiplied by (B) XXXXXXXXXXXX percent (XX%), multiplied by
---------- ----------
(C) XXXXXX percent (XX%); and (ii) in the event that any Construction Loan is
secured by a mortgage or deed of trust on a single-family tract home which has
remained unsold for three hundred sixty-five (365) days or more, the Collateral
Value of the Tranche D Borrowing Base shall be reduced by the product of (A) the
appraised value of such single-family tract home as shown
55
<PAGE>
on the appraisal delivered to the Administrative Agent by the Companies pursuant
to Paragraph 11(b)(5), multiplied by (B) XXXXXXXXXXXX percent (XX%), multiplied
---------- ----------
by (C) XXXXXX percent (XX%).
"Collateral Value of the Tranche E Borrowing Base" shall mean at any date
------------------------------------------------
the product of the aggregate outstanding principal balance of those Servicing
Loans made by the Companies to sub-borrowers and included in the Tranche E
Borrowing Base at such date which are less than thirty (30) days delinquent,
multiplied by XXXXXX percent (XX%) (which amount shall be subject to adjustment
----------
as provided in Paragraph 15(l) above).
"Collateral Value of the Tranche F Borrowing Base" shall mean at any date
------------------------------------------------
the product of the aggregate outstanding principal balance on such date of those
Foreclosure/Repurchase Loans made by the Companies to sub-borrowers and included
in the Tranche F Borrowing Base at such date which are less than thirty (30)
days delinquent, multiplied by XXXXXXX percent (XX%) (which amount shall be
----------
subject to adjustment as provided in Paragraph 15(l) above).
"Commitment Schedule" shall mean a schedule in the form provided by the
-------------------
Administrative Agent, with the initial Commitment Schedule being set forth
hereto as Schedule I-2 in the Addendum.
------------
"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 Internal Revenue Code.
"Companies" shall have the meaning given such term in the introductory
---------
paragraph hereof.
"Construction Loan" shall mean a loan extended by the Companies to a
-----------------
homebuilder for the purpose of enabling such homebuilder to construct single-
family tract homes which such loan shall be made pursuant to an underwriting
program the terms of which shall be approved by the Administrative Agent, and
which such loan shall be secured by mortgages or deeds of trust executed by such
homebuilder in favor of the Companies on all parcels of real
56
<PAGE>
property on which such single-family tract homes are constructed with the
proceeds thereof; provided, however, that in no event may the sales price or
-------- -------
construction cost of any single-family tract home to be constructed with the
proceeds of any Construction Loan exceed $850,000.00 unless such single-family
tract home is specifically approved by the Administrative Agent in its sole
discretion; further provided, that a loan otherwise meeting the requirements of
----------------
this definition but which is not made pursuant to the terms of an approved
underwriting program may be a Construction Loan hereunder for the purposes
hereof so long as (i) the Collateral Value of the Tranche D Borrowing Base
----------
attributable to such a loan (or, if any such loan is nonconforming due solely to
the sales price or construction cost of any single-family tract home to be
constructed in connection therewith, the sales price or construction cost of
such home), when added to (A) the Collateral Value of the Tranche D Borrowing
Base attributable to all other such loans (or, if any such loan is nonconforming
due solely to the sales price or construction cost of any single-family tract
home to be constructed in connection therewith, the sales price or construction
cost of such home), (B) the Aggregate Unit Collateral Values of all Eligible A/B
Mortgage Loans included in the Tranche A Borrowing Base or the Tranche B
Borrowing Base which are of the type described in the last paragraph of the
definition of "Eligible A/B Mortgage Loan" (it being understood that for the
purpose of this provision, the terms "Eligible A/B Mortgage Loans," "Tranche A
Borrowing Base" and "Tranche B Borrowing Base" shall mean both such terms as
----
defined herein and such terms as defined in the Facility I Agreement), (C) the
---
Collateral Value of the Tranche E Borrowing Base attributable to Servicing Loans
of the type described in the proviso to the definition of "Servicing Loan", and
(D) the Collateral Value of the Tranche F Borrowing Base attributable to
Foreclosure/Repurchase Loans of the type described in the proviso to the
definition of "Foreclosure/Repurchase Loan," does not exceed $XXXXXXXXXX, and
(ii) the Collateral Value of the Tranche D Borrowing Base attributable to such a
loan, when added to the Collateral Value of the Tranche D Borrowing Base
attributable to all other such loans, does not exceed XXXXXX percent (XX%) of
the Aggregate Tranche D Credit Limit.
"Construction-to-Permanent Mortgage Loan" shall mean a Mortgage Loan made
---------------------------------------
to an Obligor to finance the construction of a single family residence, which
Mortgage Loan converts from a construction loan to a permanent loan upon
completion of the construction of such improvements, and which Mortgage Loan
shall conform to the underwriting guidelines of the Companies for Construction-
to-Permanent Mortgage Loans.
57
<PAGE>
"Contact Office" shall mean the office of the Administrative Agent at One
--------------
First Union Center, 301 South College Street, Charlotte, North Carolina 28288.
"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 Rate" shall mean, for any day, a fluctuating interest rate per
--------------
annum equal to the weekly average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers for each seven-day period ending on Wednesday of each week which
includes such day, as published in Statistical Release H.15 by the Federal
Reserve System, or, if such rate is not so published for any week, the average
of the quotations for such day on such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by the Administrative Agent.
"Corporate Rate Loan" shall mean a Tranche A Corporate Rate Loan, a Tranche
-------------------
B Corporate Rate Loan, a Tranche C Corporate Rate Loan, a Tranche D Corporate
Rate Loan, a Tranche E Corporate Rate Loan, or a Tranche F Corporate Rate Loan,
as applicable.
"Corporate Rate Loans" shall mean, collectively, Tranche A Corporate Rate
--------------------
Loans, Tranche B Corporate Rate Loans, Tranche C Corporate Rate Loans, Tranche D
Corporate Rate Loans, Tranche E Corporate Rate Loans and Tranche F Corporate
Rate Loans.
"Covenant Compliance Certificate" shall mean a certificate in the form set
-------------------------------
forth as Exhibit G in the Addendum.
---------
"Credit Documents" shall mean this Agreement, the Security Agreement, the
----------------
Custodial Agreement, the Notes and each other document, instrument and agreement
executed by the Companies in connection herewith, as any of the same may be
amended, extended or replaced from time to time.
"Custodial Agreement" shall have the meaning given such term in Paragraph
-------------------
8(b) above, as the same may be amended, extended or replaced from time to time.
"CWM" shall mean CWM Mortgage Holdings, Inc., a Delaware corporation.
---
58
<PAGE>
"Daily Trial Balance Report" shall mean a report substantially in the form
--------------------------
set forth as Exhibit R in the Addendum.
---------
"Delinquency Report" shall mean a report substantially in the form set
------------------
forth as Exhibit M in the Addendum.
---------
"Eligible A/B Mortgage Loan" shall mean a Mortgage Loan with respect to
--------------------------
which each of the following statements shall be accurate and complete (and the
Companies by confirming the inclusion of such Mortgage Loan in any computation
of the Collateral Value of the Tranche A Borrowing Base or the Collateral Value
of the Tranche B Borrowing Base shall be deemed to so represent and warrant to
the Administrative Agent and the Lenders at and as of the date of such
computation):
(a) Said Mortgage Loan is a binding and valid obligation of the
Obligor thereon, in full force and effect and enforceable in accordance with its
terms, subject to the effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally and the effect of equitable
principles whether applied in an action at law or a suit in equity.
(b) Said Mortgage Loan is genuine in all respects as appearing on its
face and as represented in the books and records of the Companies and all
information set forth therein is true and correct.
(c) Said Mortgage Loan is free of any default of any party thereto
(including the Companies), other than as expressly permitted pursuant to
subparagraph (d) below, counterclaims, offsets and defenses and from any
rescission, cancellation or avoidance, whether by operation of law or otherwise.
(d) No payment under said Mortgage Loan is more than sixty (60) days
past due the payment due date set forth in the underlying promissory note and
deed of trust (or mortgage); provided, however, that a Mortgage Loan which is
-------- -------
more than sixty (60) days delinquent may be an Eligible A/B Mortgage Loan and
may be included in the Tranche B Borrowing Base so long as the Unit Collateral
Value of said Mortgage Loan, when added to the Unit Collateral Values of all
other Mortgage Loans included in the Tranche B Borrowing Base which are more
than sixty (60) days delinquent, does not exceed XXXX percent (XX%) of the
Collateral Value of the Tranche B Borrowing Base (including the Collateral Value
of Mortgage Loans more than 60 days past due included or to be included in the
Tranche B Borrowing Base).
59
<PAGE>
(e) Said Mortgage Loan contains the entire agreement of the parties
thereto with respect to the subject matter thereof, has not been modified or
amended in any material respect and is free of concessions or understandings
with the Obligor thereon of any kind not expressed in writing therein.
(f) Said Mortgage Loan complies in all material respects as required
by and in accordance with all applicable laws and regulations governing the
same, including, without limitation, the federal Consumer Credit Protection Act
and the regulations promulgated thereunder and all applicable usury laws and
restrictions, and all notices, disclosures and other statements or information
required by law or regulation to be given, and any other act required by law or
regulation to be performed, in connection with said Mortgage Loan have been
given and performed substantially as required.
(g) All advance payments and other deposits on said Mortgage Loan have
been paid in cash, and no part of said sums has been loaned, directly or
indirectly, by the Companies to the Obligor and there have been no prepayments
on account of said Mortgage Loan except as disclosed to the Collateral Agent.
(h) At all times said Mortgage Loan will be free and clear of all
Liens, except in favor of the Collateral Agent for the benefit of the Lenders.
(i) The Property covered by said Mortgage Loan is insured against loss
or damage by fire and all other hazards normally included within standard
extended coverage in accordance with the provisions of said Mortgage Loan.
(j) The Property covered by said Mortgage Loan is free and clear of
all Liens except of the Companies subject only to (1) the Lien of current real
property taxes and assessments not yet delinquent; (2) covenants, conditions and
restrictions, rights of way, easements and other matters of the public record,
as of the date of recording, as are acceptable to mortgage lending institutions
generally and specifically referred to in a lender's title insurance policy
delivered to the originator of the Mortgage Loan and (i) referred to or
otherwise considered in the appraisal made for the originator of the Mortgage
Loan or (ii) which do not materially adversely affect the appraised value of the
Property as set forth in such appraisal; (3) other matters to which like
properties are commonly subject which do not materially interfere with the
benefits of the security intended to be provided by the Mortgage Loan or the
use, enjoyment, value or marketability of the related Property; and (4) Liens
subordinate in priority to the Lien
60
<PAGE>
in favor of the Companies; provided, however, that the Property may be subject
-------- -------
to one (1) Lien prior to the Lien in favor of the Companies.
(k) If said Mortgage Loan has been withdrawn from the possession of
the Collateral Agent, and (1) shipped by the Collateral Agent to the Companies
for purposes of correcting clerical or other nonsubstantive documentation
problems pursuant to a trust receipt, or (2) shipped by the Collateral Agent
directly to a permanent investor for purchase, or (3) shipped by the Collateral
Agent directly to a custodian for purposes of formation of a pool supporting a
Mortgage-Backed Security, such shipment shall in all aspects conform to the
requirements of Section 5 of the Custodial Agreement in form, aggregate number
of Mortgage Loans permitted to be shipped, and amount of time such Mortgage
Loans may remain withdrawn from Collateral Agent's possession.
(l) If such Mortgage Loan was originated by the Companies, the date of
the underlying promissory note is no earlier than (i) if such Mortgage Loan is
included in the Tranche A Borrowing Base, forty-five (45) days prior to the date
said Mortgage Loan is first submitted to the Collateral Agent, (ii) if such
Mortgage Loan is included in the Tranche B Borrowing Base and has not previously
been included in the Tranche A Borrowing Base, forty-five (45) days prior to the
date said Mortgage Loan is first submitted to the Collateral Agent, and (iii) if
such Mortgage Loan is included in the Tranche B Borrowing Base and was
previously included in the Tranche A Borrowing Base, one hundred sixty-five
(165) days prior to the date said Mortgage Loan is first submitted to the
Collateral Agent for inclusion in the Tranche B Borrowing Base (provided,
--------
however, that for the purpose hereof, the phrases "Tranche A Borrowing Base" and
-------
"Tranche B Borrowing Base" shall be deemed to mean both such terms as defined in
this Agreement and as defined in the Facility I Agreement).
---
(m) If such Mortgage Loan was acquired by the Companies, such Mortgage
Loan was included in the Tranche A Borrowing Base within forty-five (45) days of
the acquisition of such Mortgage Loan (provided, however, that for the purpose
-------- -------
hereof, the phrase "Tranche A Borrowing Base" shall be deemed to mean such term
as defined in this Agreement and as defined in the Facility I Agreement).
---
61
<PAGE>
(n) The improvements on the Property were not constructed with the
proceeds of the Mortgage Loan and consist of a completed one-to-four unit single
family residence, including but not limited to a condominium, planned unit
development, a townhouse or a co-op; provided, however, that a Mortgage Loan,
-------- -------
the proceeds of which were used to construct the improvements on the Property
relating thereto, may be an Eligible A/B Mortgage Loan and may be included in
the Tranche B Borrowing Base so long as (i) it is a Construction-to-Permanent
Mortgage Loan and (ii) the Unit Collateral Value of said Construction-to-
Permanent Mortgage Loan, when added to the Unit Collateral Values of all other
Construction-to-Permanent Mortgage Loans included in the Tranche B Borrowing
Base, does not exceed the greater of (i) XXXXXX percent (XX%) of the Aggregate
Tranche B Credit Limit, or (ii) XXXXX percent (XX%) of the Collateral Value of
the Tranche B Borrowing Base (including the Collateral Value of Construction-to-
Permanent Loans included or to be included in the Tranche B Borrowing Base).
(o) There has been delivered to the Collateral Agent the Required
Documents for said Mortgage Loan; provided, however, that a Mortgage Loan, the
-------- -------
Required Documents for which have not been delivered to the Collateral Agent,
may be an Eligible A/B Mortgage Loan and may be included in the Tranche A
Borrowing Base or in the Tranche B Borrowing Base so long as (i) such Mortgage
Loan meets the requirements set forth for a "Wet Mortgage Loan" as defined in
and pursuant to Section 3.3 of the Custodial Agreement, including the ultimate
delivery of the Required Documents in connection therewith to the Collateral
Agent within the time specified in such Section 3.3; and (ii) the Unit
Collateral Value of said Mortgage Loan, when added to the Unit Collateral Value
of all other Mortgage Loans included in the Tranche A Borrowing Base or the
Tranche B Borrowing Base which are "Wet Mortgage Loans" under the Custodial
Agreement, does not exceed XXXXXX percent (XX%) of the aggregate outstanding
principal amount of all Tranche A Loans and Tranche B Loans at such time.
(p) The servicing rights relating to said Mortgage Loan are not
subject to any Lien, claim, interest or negative pledge in favor of any Person
other than as permitted hereunder.
(q) INTENTIONALLY OMITTED.
(r) Said Mortgage Loan has not previously been delivered to the
Collateral Agent, then shipped to an investor or certifying custodian and
returned to the Collateral Agent on account of a deficiency or impairment of
such Mortgage Loan which would cause such Mortgage Loan to be unsuitable for
purchase at a price customarily obtainable for Mortgage Loans meeting the
62
<PAGE>
requirements set forth in the INMC Seller/Servicer Guide or inclusion in a pool
containing other Mortgage Loans generally conforming to the requirements set
forth in the INMC Seller/Servicer Guide.
(s) The Companies or other originator of such Mortgage Loan obtained
such appraisal in connection with the origination of said Mortgage Loan as would
satisfy all appraisal requirements for said Mortgage Loan if such had been
originated by a federally insured depositary institution.
(t) Said Mortgage Loan is covered by a Take-Out Commitment or a
Hedging Arrangement which is in full force and effect on the date such Mortgage
Loan was closed and continues to be so covered, and the Companies and the
Mortgage Loan are in full compliance therewith (provided, however, that said
-------- -------
Mortgage Loan need not be covered by a Take-Out Commitment or a Hedging
Arrangement if said Mortgage Loan is included in the Tranche B Borrowing Base or
if the Administrative Agent in its sole discretion determines that such Mortgage
Loan is not subject to material interest rate risk exposure).
(u) Said Mortgage Loan has been underwritten and purchased pursuant to
the programs and procedures set forth in the INMC Seller/Servicer Guide.
In determining the eligibility set forth above of any Mortgage Loan, any of the
requirements for eligibility set forth above may be waived by the Administrative
Agent in its sole discretion upon request for such waiver by the Companies prior
to the delivery of such Mortgage Loan to the Collateral Agent with notice of
such waiver to be given to all Lenders in the next collateral report provided to
the Lenders pursuant to Paragraph 7 of the Security Agreement if such waiver is
in force on the date of such collateral report; provided, however, that the Unit
-------- -------
Collateral Value of any Mortgage Loan approved by the Administrative Agent as an
Eligible A/B Mortgage Loan pursuant to such a waiver, when added to (i) the
Aggregate Unit Collateral Values of all other Eligible A/B Mortgage Loans
included in the Tranche A Borrowing Base or the Tranche B Borrowing Base which
have been approved by the Administrative Agent pursuant to such a waiver, (ii)
the Collateral Value of the Tranche D Borrowing Base attributable to
Construction Loans of the type described in the second proviso to the definition
of "Construction Loan" (or, if any such Construction Loan is nonconforming
solely due to the sales price or construction cost of any single-family tract
home to be constructed in connection therewith, the sales price or construction
cost of such home), (iii) the Collateral Value of the Tranche E Borrowing Base
attributable to Servicing
63
<PAGE>
Loans of the type described in the proviso to the definition of "Servicing
Loan", and (iv) the Collateral Value of the Tranche F Borrowing Base
attributable to Foreclosure/Repurchase Loans of the type described in the
proviso to the definition of "Foreclosure/Repurchase Loan", does not exceed
$XXXXXXXXXXXXX (it being understood that for the purposes of this proviso, the
terms "Tranche A Borrowing Base" and "Tranche B Borrowing Base" shall mean
both such terms as defined herein and Facility I Agreement), and further
---- --- -------
provided, that the Unit Collateral Value of any Mortgage Loan approved by the
--------
Administrative Agent as an Eligible A/B Mortgage Loan pursuant to such a waiver,
when added to the Aggregate Unit Collateral Values of all other Eligible A/B
Mortgage Loans included in the Tranche A Borrowing Base or the Tranche B
Borrowing Base which have been approved by the Administrative Agent pursuant to
such a waiver, does not exceed XXXXXX percent (XX%) of the Aggregate Tranche A
Credit Limit (it being understood that for the purposes of this proviso, the
terms "Aggregate Tranche A Credit Limit," "Tranche A Borrowing Base," "Tranche B
Borrowing Base," "Tranche A Loans" and "Tranche B Loans" shall mean both such
----
terms as defined herein and such terms as defined in the Facility I Agreement).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
the same may from time to time be supplemented or amended.
"ERISA Affiliate" shall mean, with respect to any Person, any trade or
---------------
business (whether or not incorporated) that is a member of the group of which
such Person is a member and which is treated as a single employer under Section
414 of the Internal Revenue Code of 1986, as amended, and the rules and
regulations thereunder in effect from time to time.
"Eurodollar Business Day" shall mean a Business Day upon which commercial
-----------------------
banks in London, England and New York, New York are open for domestic and
international business (including dealings in United States dollars).
"Eurodollar Loan" shall mean a Tranche A Eurodollar Loan, a Tranche B
---------------
Eurodollar Loan, a Tranche C Eurodollar Loan, a Tranche D Eurodollar Loan, a
Tranche E Eurodollar Loan or a Tranche F Eurodollar Loan, as applicable.
"Eurodollar Loans" shall mean, collectively, Tranche A Eurodollar Loans,
----------------
Tranche B Eurodollar Loans, Tranche C Eurodollar Loans, Tranche D Eurodollar
Loans, Tranche E Eurodollar Loans and Tranche F Eurodollar Loans.
64
<PAGE>
"Eurodollar Rate" shall mean, with respect to any Eurodollar Loan for the
---------------
Interest Period applicable to such Eurodollar Loan, the arithmetic average of
the rates at which deposits in immediately available U.S. dollars in an amount
equal to the aggregate amount of Eurodollar Loans proposed to be subject to such
rates having a maturity approximately equal to such Interest Period are offered
to or by reference banks in the London interbank market, as determined by the
Administrative Agent by reference to page 3750 of the Telerate Systems
Incorporated screen service as of 11:00 a.m. (London time) one Eurodollar
Business Day prior to the first day of such Interest Period.
"Eurodollar Reserve Percentage" shall mean for any day, that percentage
-----------------------------
expressed as a decimal, which is in effect on such day, as specified by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum aggregate reserve requirement (including all basis,
supplemental, marginal and other reserves) which is imposed on eurocurrency
liabilities.
"Event of Default" shall have the meaning set forth in Paragraph 13 above.
----------------
"Facility I Agreement" shall mean that certain Facility I Credit Agreement
--------------------
among the Companies, the Lenders and the Administrative Agent providing for the
extension of certain 364-day revolving credit facilities, as such agreement may
be amended, extended or restated from time to time.
"Fair Market Value" shall mean, with respect to any Mortgage Loan, the
-----------------
market bid price obtainable for such Mortgage Loan, as determined on a
reasonable basis by the Administrative Agent with reference to the average of
bids therefor obtained from at least three (3) dealers with a general reputation
as being reputable in the pricing of Mortgage Loans.
"First Union" shall mean First Union National Bank of North Carolina, a
-----------
national banking association.
"Foreclosure Mortgage Loan" shall mean a Mortgage Loan (i) which is
-------------------------
included in the first priority mortgage/trust deed servicing portfolio of
Mortgage Loans of a sub-borrower to whom the Companies have extended a
Foreclosure/Repurchase Loan secured by said Mortgage Loan, and (ii) with respect
to which such sub-borrower is diligently pursuing the foreclosure of such
Mortgage Loan.
"Foreclosure/Repurchase Loan" shall mean a loan extended by the Companies
---------------------------
to a sub-borrower for the purpose of enabling such
65
<PAGE>
sub-borrower to finance the acquisition of Foreclosure Mortgage Loans or
Repurchase Mortgage Loans, which loan shall be made pursuant to an underwriting
program the terms of which shall be approved by the Administrative Agent and
secured by all such Foreclosure Mortgage Loans and Repurchase Mortgage Loans
acquired by such sub-borrower with the proceeds thereof; provided, however, that
-------- -------
a loan otherwise meeting the requirements of this definition but which is not
made pursuant to the terms of an approved underwriting program may be a
Foreclosure/Repurchase Loan hereunder for the purposes hereof so long as (i) the
----------
Collateral Value of the Tranche F Borrowing Base attributable to such a loan,
when added to (A) the Collateral Value of the Tranche F Borrowing Base
attributable to all other such loans, (B) the Aggregate Unit Collateral Values
of all Eligible A/B Mortgage Loans included in the Tranche A Borrowing Base or
the Tranche B Borrowing Base which are of the type described in the last
paragraph of the definition of "Eligible A/B Mortgage Loan" (it being understood
that for the purpose of this provision, the terms "Eligible A/B Mortgage Loans,"
"Tranche A Borrowing Base" and "Tranche B Borrowing Base" shall mean both such
----
terms as defined herein and such terms as defined in the Facility I Agreement),
---
(C) the Collateral Value of the Tranche E Borrowing Base attributable to
Servicing Loans of the type described in the proviso to the definition of
"Servicing Loan", and (D) the Collateral Value of the Tranche D Borrowing Base
attributable to Construction Loans of the type described in the second proviso
to the definition of "Construction Loan" (or, if any such Construction Loan is
nonconforming solely due to the sales price or construction cost of any single-
family tract home to be constructed in connection therewith, the sales price or
construction cost of such home), does not exceed $XXXXXXXXXX, and (ii) the
Collateral Value of the Tranche F Borrowing Base attributable to such a loan,
when added to the Collateral Value of the Tranche F Borrowing Base attributable
to all other such loans, does not exceed XXXXXX percent (XX%) of the Aggregate
Tranche F Credit Limit.
"Funding Account" shall mean, collectively, Account No. XXXXXXXXXXXXX,
---------------
Account No. XXXXXXXXXXXXX, Account No. XXXXXXXXXXXXX, Account No. XXXXXXXXXXXXX,
Account No. XXXXXXXXXXXXX and Account No. XXXXXXXXXXXXX which accounts are
maintained in the Administrative Agent's name alone with the Administrative
Agent at the Contact Office.
"GAAP" shall mean generally accepted accounting principles in the United
----
States of America in effect from time to time.
"Governmental Authority" shall mean any nation or government, any state or
----------------------
other political subdivision thereof, or any entity
66
<PAGE>
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Hedging Arrangement" shall mean an arrangement or agreement to which the
-------------------
Companies are party which is designed to diminish the Companies' interest rate
risk exposure, which such arrangements or agreements shall be made in accordance
with the Companies' standard practices as disclosed to and reasonably approved
by the Administrative Agent from time to time.
"ILC" shall mean Independent Lending Corporation, a Delaware corporation.
---
"Indebtedness" of any Person shall mean all items of indebtedness which, in
------------
accordance with GAAP and practices thereof, 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, all amounts for which such Person may be obligated under gestation
or other repurchase facilities, 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.
"INMC" shall mean Independent National Mortgage Corporation, a Delaware
----
corporation.
"Interest Period" shall mean with respect to any Eurodollar Loan the period
---------------
commencing on the date advanced and ending one, two or three weeks, or one, two,
three or six months, thereafter, as designated in the related Loan Request,
provided, however, that (i) any 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 Interest Period shall end on the
immediately preceding Eurodollar Business Day; (ii) any Interest Period
applicable to a Eurodollar Loan which begins on a day for which there is no
numerically corresponding day in the calendar month during which such Interest
Period is to end shall, subject to the provisions of clause (i) hereof, end on
the last day of such calendar month; and (iii) no such Interest Period shall
extend beyond the Maturity Date.
67
<PAGE>
"Lender" shall have the meaning given such term in the introductory
------
paragraph hereof.
"Lien" shall mean any security interest, mortgage, pledge, lien, claim on
----
property, 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.
"Life of Loan/Unit History Report" shall mean a report substantially in the
--------------------------------
form set forth as Exhibit T in the Addendum.
---------
"Loan" shall mean a Tranche A Loan, a Tranche B Loan, a Tranche C Loan, a
----
Tranche D Loan, a Tranche E Loan or a Tranche F Loan, as applicable.
"Loan Purchase/Sale Schedule" shall mean a schedule substantially in the
---------------------------
form of that set forth as Exhibit L in the Addendum.
---------
"Loan Request" shall mean a request for a Loan conveyed to the
------------
Administrative Agent from an duly Authorized Officer of the Companies, with such
request to be confirmed in writing upon the request of the Administrative Agent.
"Loans" shall mean, collectively, Tranche A Loans, Tranche B Loans, Tranche
-----
C Loans, Tranche D Loans, Tranche E Loans and Tranche F Loans.
"Majority Lenders" shall mean the Lenders holding not less than fifty-one
----------------
percent (51%) of the Repayment Shares.
"Master Servicing Contract" shall mean the written agreement between an MBS
-------------------------
Fiduciary and one or more of the Companies or their Affiliates providing for the
servicing of a pool or pools of Mortgage Loans underlying Mortgage-Backed
Securities and shall include all manuals, guides, laws, rules and regulations
incorporated by reference in or otherwise governing the terms of the
relationship of such MBS Fiduciary and the Companies thereunder, each of which
Master Servicing Contracts shall be substantially in the form approved by the
Administrative Agent on or prior to the date hereof and shall not contain
material changes to such pre-approved form without the prior consent of the
Administrative Agent.
"Master Servicing Delinquency Report" shall mean a report substantially in
-----------------------------------
the form of that set forth as Exhibit N in the Addendum.
---------
68
<PAGE>
"Master Servicing Report" shall mean a report substantially in the form of
-----------------------
that set forth as Exhibit P in the Addendum.
---------
"Maturity Date" shall mean the earlier of: (a) May 29, 1997, as such
-------------
date may be extended from time to time in writing by one hundred percent (100%)
of the Lenders, in their sole discretion and (b) the date the Lenders terminate
their obligation to make further Loans hereunder pursuant to Paragraph 13 above.
"Maximum Commitment" shall mean, with respect to any Lender, the dollar
------------------
amount specified as such Lender's "Maximum Commitment" in the Commitment
Schedule set forth as Schedule I-2 in the Addendum.
------------
"MBS Fiduciary" shall refer to an indenture trustee or similar fiduciary in
-------------
its capacity as title holder of a pool or pools of Mortgage Loans underlying
Mortgage-Backed Securities issued by one or more of the Companies or entities
formed by one or more of the Companies or by Affiliates for the purpose of
issuing Mortgage-Backed Securities.
"Monthly Tract Sales Report" shall mean a report substantially in the form
--------------------------
of that set forth as Exhibit Q in the Addendum.
---------
"Mortgage-Backed Security" shall mean any security (including, without
------------------------
limitation, a participation certificate) that represents an interest in a pool
of mortgages, deeds of trusts or other instruments creating a Lien on Property
which is improved by a completed single family residence, including but not
limited to a condominium, planned unit development or townhouse.
"Mortgage Loan" shall mean a residential real estate secured loan,
-------------
including, without limitation: (a) a promissory note, any reformation thereof
and related deed of trust (or mortgage) and security agreement; (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 mortgagee or beneficiary to return premiums or
payments with respect thereto; and (c) all right, title and interest of the
mortgagee or beneficiary in the Property covered by said deed of trust (or
mortgage).
"Multiemployer Plan" shall mean, as to the Companies or any of their ERISA
------------------
Affiliates, a Plan of such Person which is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
69
<PAGE>
"Notes" shall have the meaning given such term in Paragraph 7(k) above.
-----
"Obligations" shall mean any and all debts, obligations and liabilities of
-----------
the Companies to the Administrative Agent, the Collateral Agent or the Lenders
(whether now existing or hereafter arising, voluntary or involuntary, whether or
not jointly owed with others, direct or indirect, absolute or contingent,
liquidated or unliquidated, and whether or not from time to time decreased or
extinguished and later increased, created or incurred), arising out of or
related to the Credit Documents.
"Obligor" shall mean the Person or Persons obligated to pay the
-------
Indebtedness which is the subject of a Mortgage Loan.
"Participant" shall have the meaning given such term in Paragraph 15(h)
-----------
above.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
----
pursuant to Subtitle A of Title IV of ERISA and any successor thereto.
"Percentage Share" shall mean, with respect to each Lender, the ratio
----------------
expressed as a percentage which (a) such Lender's Maximum Commitment bears to
(b) the Aggregate Facility Commitment.
"Permitted Other Debt" shall mean that Indebtedness described as "Permitted
--------------------
Other Debt" on Exhibit H set forth in the Addendum.
---------
"Permitted Secured Debt" shall mean that Indebtedness which is the subject
----------------------
of a Lien and described as "Permitted Secured Debt" on Exhibit H set forth in
---------
the Addendum.
"Person" shall mean any corporation, natural person, firm, joint venture,
------
partnership, limited liability company, trust, unincorporated organization or
Governmental Authority.
"Plan" shall mean, as the Companies or any of their ERISA Affiliates, 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.
"Position Report" shall mean a report substantially in the form of that set
---------------
forth as Exhibit I in the Addendum.
---------
70
<PAGE>
"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.
"Proceeds" shall mean whatever is receivable or received when Collateral or
--------
proceeds are sold, collected, exchanged or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes, without limitation, all
rights to payment, including return premiums, with respect to any insurance
relating thereto.
"Property" shall mean the real property, including the improvements
--------
thereon, and the personal property (tangible and intangible) which are
encumbered pursuant to a Mortgage Loan.
"REIT" shall mean have the meaning given to such term in the Code.
----
"Repayment Share" shall mean with respect to each Lender the ratio
---------------
expressed as a percentage that (i) the aggregate outstanding Loans held by each
Lender bears to (ii) the aggregate outstanding Loans held by all Lenders.
"Reportable Event" shall mean a reportable event as defined in Title IV of
----------------
ERISA, except actions of general applicability by the Secretary of Labor under
Section 110 of ERISA.
"Repurchase Mortgage Loan" shall mean a Mortgage Loan (i) which is included
------------------------
in the first priority mortgage/trust deed servicing portfolio of Mortgage Loans
of a sub-borrower to whom the Companies have extended a Foreclosure/Repurchase
Loan secured by said Mortgage Loan, and (ii) with respect to which such sub-
borrower has received notice that such Mortgage Loan is required to be
repurchased in accordance with the servicing arrangement between such sub-
borrower, as servicer, and the owner of said Mortgage Loan.
"Required Documents" shall mean, with respect to any Loan, those items
------------------
described on Exhibit J set forth in the Addendum.
---------
"Requirements of Law" shall mean, as to any Person, the Articles or
-------------------
Certificate of Incorporation and Bylaws 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.
71
<PAGE>
"Resignation Letter" shall mean, with respect to any Master Servicing
------------------
Contract or Servicing Contract covering Assigned Servicing Rights, a letter from
the Companies to the applicable MBS Fiduciary or investor thereunder whereunder
the Companies resign as master servicer or servicer, such letter to be in a form
acceptable to the Administrative Agent.
"Security Agreement" shall have the meaning given such term in Paragraph
------------------
8(a) above, as the same may be amended, extended or replaced from time to time.
"Servicing Contract" shall mean the agreement (which need not be in the
------------------
form of a written contract) between an investor and the Companies providing for
the servicing of Mortgage Loans, including pools of Mortgage Loans underlying
Mortgage-Backed Securities, and shall include all manuals, guides, laws, rules
and regulations incorporated by reference in or otherwise governing the terms of
the relationship of such investor and the Companies thereunder.
"Servicing Loan" shall mean a loan extended by the Companies to a sub-
--------------
borrower pursuant to a revolving servicing-secured or servicing-receivables line
of credit between the Companies and such sub-borrower, which such loan shall be
made pursuant to an underwriting program the terms of which shall be approved by
the Administrative Agent, and secured by all the servicing rights or servicing
receivables, as the case may be, of such sub-borrower; provided, however, that a
-------- -------
loan otherwise meeting the requirements of this definition but which is not made
pursuant to the terms of an approved underwriting program may be a Servicing
Loan hereunder for the purposes hereof so long as (i) the Collateral Value of
----------
the Tranche E Borrowing Base attributable to such a loan, when added to (A) the
Collateral Value of the Tranche E Borrowing Base attributable to all other such
loans, (B) the Aggregate Unit Collateral Values of all Eligible A/B Mortgage
Loans included in the Tranche A Borrowing Base or the Tranche B Borrowing Base
which are of the type described in the last paragraph of the definition of
"Eligible A/B Mortgage Loan" (it being understood that for the purpose of this
provision, the terms "Eligible A/B Mortgage Loans," "Tranche A Borrowing Base"
and "Tranche B Borrowing Base" shall mean both such terms as defined herein and
---- ---
such terms as defined in the Facility I Agreement), (C) the Collateral Value of
the Tranche F Borrowing Base attributable to Foreclosure/Repurchase Loans of the
type described in the proviso to the definition of "Foreclosure/Repurchase
Loan", and (D) the Collateral Value of the Tranche D Borrowing Base attributable
to Construction Loans of the type described in the second proviso to the
definition of "Construction Loan" (or, if any such Construction Loan is
nonconforming solely due to the sales price or construction cost of any single-
family
72
<PAGE>
tract home to be constructed in connection therewith, the sales price or
construction cost of such home), does not exceed XXXXXXXXXXX, and (ii) the
Collateral Value of the Tranche E Borrowing Base attributable to such a loan,
when added to the Collateral Value of the Tranche E Borrowing Base attributable
to all other such loans, does not exceed XXXXXX percent (XX%) of the Aggregate
Tranche E Credit Limit.
"Servicing Report" shall mean a report substantially in the form of that
----------------
set forth as Exhibit O in the Addendum.
---------
"Settlement Account" shall mean that certain account maintained in the name
------------------
of the Collateral Agent which account shall be the same account as the
"Financial Institution Settlement Account" to be established and maintained for
and on behalf of the Administrative Agent pursuant to Section 5.2(a) of the
Custodial Agreement.
"Single Employer Plan" shall mean, as to the Companies or any of their
--------------------
ERISA Affiliates, any Plan of such Person which is not a Multiemployer Plan.
"Statement Date" shall mean December 31, 1994.
--------------
"Take-Out Commitment" with respect to any Mortgage Loan shall mean a bona
-------------------
fide current, unused and unexpired whole loan commitment or forward sale
Mortgage Backed Security (including, without limitation, a Warehouse-Related
MBS) commitment issued in favor of and held by the Companies made by an Approved
Investor, under which said Approved Investor agrees, prior to the expiration
thereof, upon the satisfaction of certain terms and conditions therein, to
purchase such Mortgage Loan or related Mortgage Backed Security (including,
without limitation, a Warehouse-Related MBS) at a Take-Out Price, which
commitment is not subject to any term or condition which is not customary in
commitments of like nature or which, in the reasonably anticipated course of
events, cannot be fully complied with prior to the expiration thereof.
"Take-Out Price" with respect to any Mortgage Loan shall mean the specified
--------------
price to be paid for such Mortgage Loan under the applicable Take-Out Commitment
covering said Mortgage Loan.
"Tranche A Borrowing Base" shall mean at any date all Eligible A/B Mortgage
------------------------
Loans purchased by CWM or INMC pursuant to the programs and procedures described
in the INMC Seller-Servicer Guide which have not been included as Collateral in
---
excess of one hundred twenty (120) days and which have been delivered to and
held by the
73
<PAGE>
Collateral Agent or otherwise identified as "A/B Collateral" under the Security
Agreement as collateral security for the Obligations.
"Tranche A Corporate Rate Loans" shall mean Tranche A Loans at such time as
------------------------------
they are bearing interest at the Applicable Corporate Rate or at a rate
specified pursuant to Paragraph 7(u) hereof.
"Tranche A Eurodollar Loans" shall mean Tranche A Loans at such time as
--------------------------
they are bearing interest at the Applicable Eurodollar Rate.
"Tranche A Facility" shall mean that revolving credit facility extended by
------------------
the Lenders to the Companies pursuant to Section 1 hereof.
"Tranche A Loan" and "Tranche A Loans" shall have the meanings given such
-------------- ---------------
terms in Paragraph 1(a) above.
"Tranche B Borrowing Base" shall mean at any date all Eligible A/B Mortgage
------------------------
Loans purchased by CWM or INMC pursuant to the programs and procedures described
in the INMC Seller-Servicer Guide which have been delivered to and held by the
Collateral Agent or otherwise identified as "A/B Collateral" under the Security
Agreement as collateral security for the Obligations and which have not been
designated by the Companies to be included in the Tranche A Borrowing Base.
"Tranche B Corporate Rate Loans" shall mean Tranche B Loans at such times
------------------------------
as they are bearing interest at the Applicable Corporate Rate or at a rate
specified pursuant to Paragraph 7(u) hereof.
"Tranche B Eurodollar Loans" shall mean Tranche B Loans at such time as
--------------------------
they are bearing interest at the Applicable Eurodollar Rate.
"Tranche B Facility" shall mean that revolving credit facility extended by
------------------
the Lenders to the Companies pursuant to Section 2 hereof.
"Tranche B Loan" and "Tranche B Loans" shall have the meanings given such
-------------- ---------------
terms in Paragraph 2(a) above.
"Tranche C Borrowing Base" shall mean at any date all Assigned Servicing
------------------------
Rights identified as "Other Collateral" under the Security Agreement as
collateral security for the Obligations.
74
<PAGE>
"Tranche C Corporate Rate Loans" shall mean Tranche C Loans at such time as
------------------------------
they are bearing interest at the Applicable Corporate Rate or at a rate
specified pursuant to Paragraph 7(u) hereof.
"Tranche C Eurodollar Loans" shall mean Tranche C Loans at such time as
--------------------------
they are bearing interest at the Applicable Eurodollar Rate.
"Tranche C Facility" shall mean that revolving credit facility extended by
------------------
the Lenders to the Companies pursuant to Section 3 hereof.
"Tranche C Loan" and "Tranche C Loans" shall have the meanings given such
-------------- ---------------
terms in Paragraph 3(a) above.
"Tranche D Borrowing Base" shall mean at any date all Construction Loans
------------------------
made by the Companies to homebuilders which have been delivered to and held by
the Collateral Agent or otherwise identified as "DEF Collateral" under the
Security Agreement as collateral security for the Obligations.
"Tranche D Corporate Rate Loans" shall mean Tranche D Loans at such time as
------------------------------
they are bearing interest at the Applicable Corporate Rate or at a rate
specified pursuant to Paragraph 7(u) hereof.
"Tranche D Eurodollar Loans" shall mean Tranche D Loans at such time as
--------------------------
they are bearing interest at the Applicable Eurodollar Rate.
"Tranche D Facility" shall mean that revolving credit facility extended by
------------------
the Lenders to the Companies pursuant to Section 4 hereof.
"Tranche D Loan" and "Tranche D Loans" shall have the meanings given such
-------------- ---------------
terms in Paragraph 4(a) above.
"Tranche E Borrowing Base" shall mean at any date all Servicing Loans made
------------------------
by the Companies to sub-borrowers which have been delivered to and held by the
Collateral Agent or otherwise identified as "DEF Collateral" under the Security
Agreement as collateral security for the Obligations.
"Tranche E Corporate Rate Loans" shall mean Tranche E Loans at such time as
------------------------------
they are bearing interest at the Applicable Corporate Rate or at a rate
specified pursuant to Paragraph 7(u) hereof.
75
<PAGE>
"Tranche E Eurodollar Loans" shall mean Tranche E Loans at such time as
--------------------------
they are bearing interest at the Applicable Eurodollar Rate.
"Tranche E Facility" shall mean that revolving credit facility extended by
------------------
the Lenders to the Companies pursuant to Section 5 hereof.
"Tranche E Loan" and "Tranche E Loans" shall have the meanings given such
-------------- ---------------
terms in Paragraph 5(a) above.
"Tranche F Borrowing Base" shall mean at any date all
------------------------
Foreclosure/Repurchase Loans made by the Companies to sub-borrowers which have
been delivered to and held by the Collateral Agent or otherwise identified as
"DEF Collateral" under the Security Agreement as collateral security for the
Obligations.
"Tranche F Corporate Rate Loans" shall mean Tranche F Loans at such time as
------------------------------
they are bearing interest at the Applicable Corporate Rate or at a rate
specified pursuant to Paragraph 7(u) hereof.
"Tranche F Eurodollar Loans" shall mean Tranche F Loans at such time as
--------------------------
they are bearing interest at the Applicable Eurodollar Rate.
"Tranche F Facility" shall mean that revolving credit facility extended by
------------------
the Lenders to the Companies pursuant to Section 6 hereof.
"Tranche F Loan" and "Tranche F Loans" shall have the meanings given such
-------------- ---------------
terms in Paragraph 6(a) above.
"Unit Collateral Value" shall mean,
---------------------
(v) with respect to each Eligible A/B Mortgage Loan included in the
Tranche A Borrowing Base; XXXXXXXXXXXX percent (XX%) of the lesser of: (1) the
unpaid principal balance thereof at the time the Eligible A/B Mortgage Loan is
included in the Tranche A Borrowing Base, or (2) the Fair Market Value.
(w) with respect to each Eligible A/B Mortgage Loan included in the
Tranche B Borrowing Base:
(1) if such Eligible A/B Mortgage Loan is sixty (60) days
delinquent or less, XXXXXXXXXXX percent (XX%) of the lesser of: (1) the
unpaid principal amount thereof at the time the Eligible A/B Mortgage Loan
is included in the Tranche B Borrowing Base (or, in the case of a
Construction-to-
76
<PAGE>
Permanent Mortgage Loan, the greater of a. the principal amount thereof
-
disbursed at the date of determination or b. the maximum principal amount
-
thereof disbursed at any time), and (2) the Fair Market Value.
(2) if such Eligible A/B Mortgage Loan is more than sixty (60)
days delinquent, XXXXXX percent (XX%) of the lesser of: (1) the unpaid
principal amount thereof at the time the Eligible A/B Mortgage Loan is
included in the Tranche B Borrowing Base (or, in the case of a
Construction-to-Permanent Mortgage Loan, the greater of a. the principal
-
amount thereof disbursed at the date of determination or b. the maximum
-
principal amount thereof disbursed at any time), and (2) the Fair Market
Value.
"Warehouse-Related MBS" shall have the meaning given to such term in the
---------------------
Security Agreement.
77
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
CWM MORTGAGE HOLDINGS, INC.,
a Delaware corporation
By ______________________________________________
Name ____________________________________________
Title ___________________________________________
INDEPENDENT NATIONAL MORTGAGE
CORPORATION, a Delaware
corporation
By ______________________________________________
Name ____________________________________________
Title ___________________________________________
INDEPENDENT LENDING CORPORATION
a Delaware corporation
By ______________________________________________
Name ____________________________________________
Title ___________________________________________
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a
national banking association, as Administrative Agent
and a Lender
By ______________________________________________
Name ____________________________________________
Title ___________________________________________
78
<PAGE>
EXHIBIT 10.6
SECURITY AND COLLATERAL AGENCY AGREEMENT
----------------------------------------
THIS SECURITY AND COLLATERAL AGENCY AGREEMENT (the "Security Agreement") is
made and dated as of the 30th day of May, 1995 by and among CWM MORTGAGE
HOLDINGS, INC., a Delaware corporation ("CWM"), INDEPENDENT NATIONAL MORTGAGE
CORPORATION, a Delaware corporation ("INMC"), INDEPENDENT LENDING CORPORATION, a
Delaware corporation ("ILC" and, together with CWM and INMC, the "Companies"),
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association
("FUNB"), acting in its capacity as administrative agent for the lenders from
time to time participating in the Facility II Agreement (as defined below) (in
such capacity, the "Facility II Administrative Agent"), and in its capacity as
administrative agent for the lenders from time to time participating in the
Facility I Agreement (as defined below) (in such capacity, the "Facility I
Administrative Agent" and for convenience, FUNB, acting in either capacity, is
sometimes referred to herein as the "Administrative Agent") (the Facility II
Administrative Agent and the Facility I Administrative Agent being collectively
referred to herein as the "Administrative Agent"), and BANKERS TRUST COMPANY OF
CALIFORNIA, N.A., a national banking association ("BT"), acting in its capacity
as collateral agent for the Administrative Agent (in such capacity, the
"Collateral Agent").
RECITALS
--------
A. Pursuant to that certain Facility II Credit Agreement of even date
herewith among the Companies, the lenders party thereto (the "Facility II
Lenders"), the Facility II Administrative Agent (as same may be amended,
extended or replaced from time to time, the "Facility II Agreement"), the
Facility II Lenders have agreed to extend credit to the Companies on the terms
and subject to the conditions set forth therein.
B. Pursuant to that certain Facility I Credit Agreement of even date
herewith among the Companies, the lenders party thereto (the "Facility I
Lenders"), and the Facility I Administrative Agent (as same may be amended,
extended or replaced from time to time, the "Facility I Agreement"), the
Facility I Lenders have agreed to extend credit to the Companies on the terms
and subject to the conditions set forth therein.
C. The Collateral Agent and the Administrative Agent have entered into
that certain Custodial and Intercreditor Agreement dated as of May 23, 1995
among the Companies, Merrill Lynch Mortgage Capital Inc., Merrill Lynch Credit
Corporation, Lehman
<PAGE>
Commercial Paper Inc., Nomura Asset Capital Corporation, the Collateral Agent,
the Administrative Agent and other lenders (as the same may be amended, extended
or replaced from time to time, the "Custodial Agreement") pursuant to which the
A/B Collateral (as defined herein) and Proceeds under this Security Agreement
shall be held, administered and allocated.
D. As a condition precedent to the effectiveness of the Facility II
Agreement and the Facility I Agreement, the Companies are required to execute
and deliver to the Collateral Agent and the Administrative Agent this Security
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. Defined Terms. All capitalized terms used and not otherwise defined
-------------
herein shall have the same meanings given to such term in the Facility II
Agreement, except that (i) for purposes hereof, the phrase "Required Documents"
refers to the documents listed on Exhibit 2 attached hereto and (ii) any
---------
capitalized term used and not defined herein which appears in both the Facility
II Agreement and the Facility I Agreement shall refer to in this Security
Agreement, collectively, both the meaning given to such term in the Facility II
----
Agreement and the meaning given to such term in the Facility I Agreement (for
example, the term "Credit Documents" as used herein shall mean, collectively,
the "Credit Documents" as defined in the Facility II Agreement and the "Credit
Documents" as defined in the Facility I Agreement). In case of an irresolvable
conflict between the provisions of the Facility II Agreement and the Facility I
Agreement, the Facility II Agreement shall govern for the purposes hereof.
2. Appointment of Administrative Agent; Appointment of Collateral Agent.
--------------------------------------------------------------------
(a) By executing and delivering the Facility II Agreement or otherwise
becoming a "Lender" thereunder, each Facility II Lender has appointed the
Administrative Agent to act as secured party, agent, bailee and custodian for
the exclusive benefit of the Facility II Lenders, with respect to the Collateral
(as defined below). By executing and delivering the Facility I Agreement or
otherwise becoming a "Lender" thereunder, each Facility I Lender has appointed
the Administrative Agent to act as secured party, agent, bailee and custodian
for the exclusive benefit of the
2
<PAGE>
Facility I Lenders, with respect to the A/B Collateral (as defined below). The
Administrative Agent hereby accepts such appointment and agrees to maintain and
hold all Collateral at any time delivered to it as secured party, agent, bailee
and custodian for the exclusive benefit of Lenders. The Administrative Agent is
acting and will act with respect to the Collateral for the exclusive benefit of
Lenders and is not, and shall not at any time in the future be, subject with
respect to the Collateral, in any manner or to any extent, to the direction or
control of the Companies except as expressly permitted hereunder and under the
other Credit Documents. The Administrative Agent agrees to act in accordance
with this Security Agreement and the other Credit Documents and in accordance
with any written instructions properly delivered pursuant hereto. Under no
circumstances shall the Administrative Agent deliver possession of Collateral to
the Companies except in accordance with the express terms of this Security
Agreement or the Custodial Agreement.
(b) The Administrative Agent hereby appoints the Collateral Agent to act as
agent, bailee and custodian for the exclusive benefit of the Administrative
Agent, with respect to that portion of the A/B Collateral and the DEF Collateral
(as defined below) described in Paragraphs 5(a)(i), 5(a)(viii), 5(b)(i),
5(b)(ii), 5(b)(iii), and 5(b)(vii) below, and the products and Proceeds thereof,
to the extent such Collateral is received by or maintained by the Collateral
Agent (the "BT Collateral"). The Collateral Agent hereby accepts such
appointment and agrees to maintain and hold all such BT Collateral at any time
delivered to it as agent, bailee and custodian for the exclusive benefit of the
Administrative Agent. The Collateral Agent is acting and will act with respect
to the BT Collateral for the exclusive benefit of the Administrative Agent and
is not, and shall not at any time in the future be, subject with respect to the
BT Collateral, in any manner or to any extent, to the direction or control of
the Companies except as expressly permitted hereunder or under the Custodial
Agreement or as directed by the Administrative Agent. The Collateral Agent
agrees to act in accordance with this Security Agreement and the Custodial
Agreement and in accordance with any written instructions of the Administrative
Agent properly delivered pursuant hereto (provided, however, that in the event
-------- -------
of any conflict between the terms of this Security Agreement and the terms of
the Custodial Agreement, the terms of this Security Agreement shall control).
Under no circumstances shall the Collateral Agent deliver possession of BT
Collateral to the Companies except in accordance with the express terms of this
Security Agreement or the Custodial Agreement.
4. Delivery of Collateral; Periodic Reports.
----------------------------------------
3
<PAGE>
(a) The Companies shall deliver BT Collateral (which is of a type which is
capable to be delivered), or cause BT Collateral (which is of a type which is
capable to be delivered) to be delivered, to the Collateral Agent hereunder
(and, in the case of BT Collateral which is A/B Collateral, under the terms of
the Custodial Agreement), and shall deliver all other Collateral (collectively,
the "Non-BT Collateral"), or cause Non-BT Collateral (which is of a type which
is capable to be delivered) to be delivered, to the Administrative Agent
hereunder. Delivery of Collateral (as hereinafter defined) delivered to the
Collateral Agent or the Administrative Agent in connection with the making of
any Loan shall be effected by delivery of the Required Documents listed on
Exhibit 2 hereto evidencing or relating to such Collateral for such type of Loan
---------
(provided, however, that such Required Documents shall not be required to be
-------- -------
delivered with respect to any "Wet Mortgage Loan," as defined in Section 3.3 of
the Custodial Agreement, which is submitted for inclusion in the Tranche A
Borrowing Base, until the expiration of the time period set forth therein),
together with a Mortgage Loan Schedule with respect to each Mortgage Loan
(including, without limitation, "Wet Mortgage Loans") submitted for inclusion in
the Tranche A Borrowing Base or the Tranche B Borrowing Base, as more fully set
forth in Paragraph 6 below, by 6:00 a.m. (California time) on the Business Day
on which such Loan is being requested. The responsibility of the Collateral
Agent to review the BT Collateral relating to A/B Collateral shall be in
accordance with the provisions set forth in the Custodial Agreement for review
of A/B Collateral, and the responsibility of the Collateral Agent to review the
BT Collateral relating to DEF Collateral is limited to the review steps
described on Exhibit 1A hereto, said review of all BT Collateral delivered by
----------
6:00 a.m. on any Business Day to be completed by 11:00 a.m. (California time) on
such Business Day. The responsibility of the Administrative Agent to review
Other Collateral is limited to the review steps described on Exhibit 1B hereto,
----------
said review of Collateral delivered on any Business Day to be completed before
the opening of business of the Administrative Agent on the next succeeding
Business Day. All Required Documents at any time delivered to the Collateral
Agent hereunder shall be held and maintained in accordance with the methods set
forth in the Custodial Agreement for maintenance of A/B Collateral regardless of
whether such Required Documents relate to A/B Collateral or to DEF Collateral.
All Required Documents at any time delivered to the Administrative Agent
hereunder shall be held by the Administrative Agent in a fire resistant vault,
drawer or other suitable depositary maintained and controlled solely by the
Administrative Agent, conspicuously marked to show the respective interests of
the Facility II Lenders therein and not commingled
4
<PAGE>
with any other assets or property of, or held by, the Administrative Agent.
(b) The Companies shall also deliver on computer readable media to the
Collateral Agent, no later than the third Business Day of each month, (i) a
Mortgage Loan Schedule (in the form of Exhibit 3A attached hereto) with respect
----------
to each Mortgage Loan held by the Collateral Agent for inclusion in the Tranche
A Borrowing Base or the Tranche B Borrowing Base as of the last day of the
preceding month, such Mortgage Loan Schedule to set forth, with respect to each
Mortgage Loan so held, the loan number, the unpaid principal balance thereof as
of the last day of the preceding month, the "paid-to date" of the Mortgage Loan,
and whether a Mortgage Loan is a Construction-to-Permanent Loan; (ii) a DEF
Schedule (in the form of Exhibit 3B attached hereto) with respect to each
----------
Construction Loan, Servicing Loan or Foreclosure/Repurchase Loan held by the
Collateral Agent for inclusion in the Tranche D Borrowing Base, the Tranche E
Borrowing Base or the Tranche F Borrowing Base, as applicable, as of the last
day of the preceding month, such schedule to set forth with respect to each such
loan the obligor's name, the unpaid principal balance thereof as of the last day
of the preceding month, and the "paid-to date" thereof; (iii) such other
information which is necessary to calculate the Collateral Value of any
Borrowing Base. The Collateral Agent will promptly provide a written copy of
each such item.
(c) The Administrative Agent shall deliver to the Collateral Agent,
simultaneously with the delivery by the Companies to the Collateral Agent of
Required Documents with respect to any Eligible A/B Mortgage Loan, Construction
Loan, Servicing Loan or Foreclosure/Repurchase Loan which does not conform to
the requirements therefor contained in the Facility II Agreement but which is
intended to be included in the Tranche A Borrowing Base, the Tranche B Borrowing
Base, the Tranche D Borrowing Base, the Tranche E Borrowing Base or the Tranche
F Borrowing Base, as applicable, a waiver in the form of Exhibit 4 attached
---------
hereto indicating that the Administrative Agent has waived such nonconformity
and consents to the inclusion of such Collateral in the applicable Borrowing
Base.
5. Grant of Security Interest. The Companies hereby pledge, assign and
--------------------------
grant to the Administrative Agent (i) for the pro rata, pari passu benefit of
the Lenders, a security interest in the property described in Paragraph 5(a)
below (collectively and severally, the "A/B Collateral"), to secure payment and
performance of the Obligations, (ii) for the pro rata, pari passu benefit of the
Facility II Lenders, a security interest in the property described in Paragraph
5(b) below (collectively and severally, the "DEF Collateral"), to secure payment
and performance of the
5
<PAGE>
Obligations, and (iii) for the pro rata, pari passu benefit of the Facility II
Lenders, a security interest in the property described in Paragraph 5(c) below
(collectively and severally, the "Other Collateral"), to secure payment and
performance of the Obligations. The A/B Collateral, the DEF Collateral and the
Other Collateral may be hereinafter referred to collectively from time to time
as the "Collateral."
6. Collateral.
----------
(a) The A/B Collateral shall consist of all now existing and hereafter
arising right, title and interest of the Companies in, under and to each of the
following:
(i) All Mortgage Loans (including, without limitation, all Eligible
A/B Mortgage Loans but not including Construction Loans or any Mortgage Loans
---
securing Foreclosure/Repurchase Loans) now owned or hereafter acquired or
originated by the Companies or any of them and delivered to the Collateral Agent
or otherwise identified as A/B Collateral, in each case until the release
thereof as provided in Paragraph 5 of the Custodial Agreement or in Paragraphs 8
and 25 hereof, including, without limitation, the promissory notes or other
instruments or agreements evidencing the indebtedness of Obligors thereon, all
mortgages, deeds to secure debt, trust deeds and security agreements related
thereto, all rights to payment thereunder, all rights in the Properties securing
payment of the indebtedness of the Obligors thereon, all rights under documents
related thereto, such as guaranties and insurance policies (issued by
governmental agencies or otherwise), including, without limitation, mortgage and
title insurance policies, fire and extended coverage insurance policies
(including the right to any return premiums) and FHA insurance and VA
guaranties, and all rights in cash deposits consisting of impounds, insurance
premiums or other funds held on account thereof;
(ii) All Mortgage-Backed Securities secured or otherwise supported by
those Mortgage Loans described in subparagraph (a)(i) above (collectively,
"Warehouse-Related MBS's") now owned or hereafter acquired by the Companies or
any of them, all right to the payment of monies and non-cash distributions on
account thereof and all new, substituted and additional securities at any time
issued with respect thereto;
(iii) All rights of the Companies or any of them (but not the
obligations relating thereto) under all Take-Out Commitments or Hedging
Arrangements, now existing or hereafter arising, covering any part of the
foregoing A/B Collateral, all rights to deliver those Mortgage Loans described
in subparagraph (a)(i) above
6
<PAGE>
and those Warehouse-Related MBS's described in subparagraph (a)(ii) above to
permanent investors and other purchasers pursuant thereto and all proceeds
resulting from the disposition of such A/B Collateral pursuant thereto;
(iv) All now existing and hereafter arising rights to service,
administer and collect Mortgage Loans and Warehouse-Related MBS's included in
the computation of the Collateral Value of the Tranche A Borrowing Base or the
Collateral Value of the Tranche B Borrowing Base on the date of determination
(it being acknowledged and agreed that prior to the occurrence of an Event of
Default and acceleration of the Obligations, the security interest in such
servicing rights granted hereunder shall be automatically terminated without
need for further action upon the sale, transfer or other disposition of the
related Mortgage Loan or Warehouse-Related MBS, or removal of such Mortgage Loan
or Warehouse-Related MBS from the Tranche A Borrowing Base and the Tranche B
Borrowing Base, each in accordance with the provisions of the Credit Documents),
and all rights to the payment of money on account of such servicing,
administration and collection activities;
(v) All now existing and hereafter arising accounts, contract rights
and general intangibles constituting or relating to any of the foregoing A/B
Collateral;
(vi) All now existing and hereafter acquired files, documents,
instruments, surveys, certificates, correspondence, appraisals, computer
programs, tapes, discs, cards, accounting records and other books, records,
information and data of the Companies or any of them relating to the foregoing
A/B Collateral (including all information, records, data, programs, tapes,
discs, and cards necessary or helpful in the administration or servicing of the
foregoing A/B Collateral);
(vii) The Funding Account, and any and all funds at any time held
in such account;
(viii) The Financial Institution Settlement Account (as defined in the
Custodial Agreement) established for the benefit of the Administrative Agent,
and the Administrative Agent's pro rata share of the Joint Settlement Account
(as defined in the Custodial Agreement), and any and all funds at any time held
in any such accounts; and
(ix) All products and Proceeds of the foregoing A/B Collateral arising
prior to the release of such Collateral pursuant to Paragraph 5 of the Custodial
A greement or in Paragraphs 8 and 25 hereof.
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<PAGE>
(b) The DEF Collateral shall consist of all now existing and hereafter
arising right, title and interest of the Companies in, under and to each of the
following:
(i) All Construction Loans and all Mortgage Loans securing
Foreclosure/Repurchase Loans now owned or hereafter acquired or originated by
the Companies or any of them and delivered to the Collateral Agent or otherwise
identified as DEF Collateral, in each case until the release thereof as provided
in Paragraphs 8 and 25 hereof, including, without limitation, the promissory
notes or other instruments or agreements evidencing the indebtedness of obligors
thereon, all mortgages, deeds to secure debt, trust deeds and security
agreements related thereto, all rights to payment thereunder, all rights in the
real property securing payment of the indebtedness of the Obligors thereon, all
rights under documents related thereto, such as guaranties and insurance
policies (issued by governmental agencies or otherwise), including, without
limitation, mortgage and title insurance policies, fire and extended coverage
insurance policies (including the right to any return premiums) and FHA
insurance and VA guaranties, and all rights in cash deposits consisting of
impounds, insurance premiums or other funds held on account thereof;
(ii) All Servicing Loans originated (now or hereafter) by the
Companies or any of them and delivered to the Collateral Agent or otherwise
identified as DEF Collateral, in each case until the release thereof as provided
in Paragraphs 8 and 25 hereof, including, without limitation, the promissory
notes or other instruments or agreements evidencing the indebtedness of the
applicable sub-borrowers thereon, all security agreements related thereto, all
rights of the Companies to payment thereunder, all rights in the servicing
contracts securing payment of the indebtedness of the applicable sub-borrowers
thereon (including without limitation all rights to service, administer or
collect Mortgage Loans, including pools of Mortgage Loans underlying Mortgage-
Backed Securities, thereunder, all rights to the payment of monies thereunder on
account of servicing, administration or collection activities thereunder, on
account of the termination thereof, and as reimbursement for costs and expenses
incurred and advances made by the applicable sub-borrowers on account of
obligations of the Obligors under the Mortgage Loans serviced thereunder), and
all rights under guaranties, indemnifications or other documents, instruments or
agreements providing collateral security or credit support for the obligations
of the investors under such servicing contracts to make payments with respect
thereto;
(iii) All Foreclosure/Repurchase Loans originated (now or
hereafter) by the Companies or any of them and delivered to the
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<PAGE>
Collateral Agent or otherwise identified as DEF Collateral, in each case until
the release thereof as provided in Paragraphs 8 and 25 hereof, including,
without limitation, the promissory notes or other instruments or agreements
evidencing the indebtedness of the applicable sub-borrowers thereon, all
security agreements related thereto, all rights to payment thereunder, all
rights in the instruments, documents, agreements or underlying property securing
payment of the indebtedness of the applicable sub-borrowers thereon, all rights
under documents related thereto, such as guaranties and insurance policies, and
all rights in cash deposits or other funds held on account thereof;
(iv) All now existing and hereafter arising accounts, contract rights
and general intangibles constituting or relating to any of the foregoing DEF
Collateral;
(v) All now existing and hereafter acquired files, documents,
instruments, surveys, certificates, correspondence, appraisals, computer
programs, tapes, discs, cards, accounting records and other books, records,
information and data of the Companies or any of them relating to the foregoing
DEF Collateral (including all information, records, data, programs, tapes,
discs, and cards necessary or helpful in the administration or servicing of the
foregoing DEF Collateral;
(vi) The Funding Account and any and all funds at any time held in
such account;
(vii) All products and Proceeds of the foregoing DEF Collateral
arising prior to the release of such Collateral pursuant to Paragraphs 8 and 25
hereof.
(c) The Other Collateral shall consist of all now existing and hereafter
arising right, title and interest of the Companies in, under and to each of the
following:
(i) All Servicing Contracts and Master Servicing Contracts listed on
Schedule 1 hereto (as such Schedule 1 may be amended, modified, or replaced from
---------- ----------
time to time), including, without limitation, all now existing and hereafter
arising rights to service, administer or collect Mortgage Loans, including pools
of Mortgage Loans underlying Mortgage-Based Securities, thereunder, in each case
until the release thereof as provided in Paragraphs 8 and 25 hereof;
(ii) All now existing and hereafter arising right to the payment of
monies under the Servicing Contracts and Master Servicing Contracts listed on
Schedule 1 hereto (as such Schedule 1 may be amended, modified, or replaced from
---------- ----------
time to time), on
9
<PAGE>
account of servicing, administration or collection activities thereunder, on
account of the termination of any such Servicing Contract or Master Servicing
Contract and as reimbursement for costs and expenses incurred and advances made
by the Companies or any of them on account of obligations of the Obligors under
said Mortgage Loans;
(iii) All now existing and hereafter arising rights under
guaranties, indemnifications and other documents, instruments and agreements
providing collateral security or credit support for the obligations of the
investors or MBS Fiduciaries to make the payments referred to in subparagraph
(ii) above;
(iv) All now existing and hereafter arising accounts, contract rights
and general intangibles constituting or relating to any of the foregoing Other
Collateral;
(v) All now existing and hereafter acquired files, documents,
instruments, surveys, certificates, correspondence, appraisals, computer
programs, tapes, discs, cards, accounting records and other books, records,
information and data of the Companies or any of them relating to the foregoing
Other Collateral (including all information, records, data, programs, tapes,
discs, and cards necessary or helpful in the administration or servicing of the
foregoing Other Collateral or in providing servicing as required under the
Servicing Contracts, the Master Servicing Contracts or any other servicing
contract described above);
(vi) The Funding Account and any and all funds at any time held in
such account; and
(vii) All products and Proceeds of the foregoing Other Collateral
arising prior to the release of such Collateral pursuant to Paragraphs 8 and 25
hereof.
In connection with any of the items listed in Paragraphs 5(a), 5(b) or
5(c) above which are delivered to or held by the Collateral Agent or the
Administrative Agent, each of the Collateral Agent and the Administrative Agent
agrees that it will hold and use, and will cause any agents and attorneys-in-
fact appointed by it pursuant to the terms hereof to hold and use, such items in
accordance with all applicable laws relating to the financial privacy of the
obligors thereon.
6. Review of Collateral.
--------------------
(a) Each delivery of Required Documents relating to A/B Collateral to the
Collateral Agent shall be accompanied by a schedule prepared on computer-
readable media containing the
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<PAGE>
information set forth on Exhibit 3A (the "Mortgage Loan Schedule"). Each
----------
delivery of Required Documents relating to DEF Collateral to the Collateral
Agent shall be accompanied by a schedule prepared on computer-readable media
containing the information set forth on Exhibit 3B (the "DEF Schedule").
----------
(b) Upon any receipt of Required Documents related to BT Collateral which
is A/B Collateral with respect to any Loan requested by the Companies, the
Collateral Agent shall conduct such review of the same as may be required under
and pursuant to the terms of the Custodial Agreement. The obligations of the
Collateral Agent with respect to any non-conforming Required Documents delivered
in connection with any BT Collateral which is A/B Collateral shall be as set
forth in the Custodial Agreement. In the event that the Companies had been
requested to deliver to the Administrative Agent the Additional Required
Documents related to A/B Collateral with respect to any Loan requested by the
Companies, the Administrative Agent shall conduct such review of the same as it
may deem appropriate. The Collateral Agent shall not be required to make any
independent examination of any BT Collateral which is A/B Collateral beyond the
review specifically required herein. Specifically, the Collateral Agent shall
make no representations as to: (i) The validity, genuineness, legality or
enforceability of any of the BT Collateral which is A/B Collateral delivered to
it, or (ii) the collectability, insurability, effectiveness or suitability of
any such BT Collateral which is A/B Collateral.
(c) Upon any receipt of Required Documents and related DEF Schedule related
to BT Collateral which is DEF Collateral with respect to any Loan requested by
the Companies, the Collateral Agent shall review the same and verify that:
(i) All Required Documents relating to such items of BT Collateral
which is DEF Collateral as set forth in the related DEF Schedule appear regular
on their face and are in the possession of the Collateral Agent; and
(ii) The statements set forth on Exhibit 1A hereto are accurate and
----------
complete in all respects.
In the event that the Companies had been requested to deliver to the
Administrative Agent the Additional Required Documents related to DEF Collateral
with respect to any Loan requested by the Companies, the Administrative Agent
shall conduct such review of the same as it may deem appropriate. The
Collateral Agent shall not be required to make any independent examination of
any DEF Collateral beyond the review specifically required herein.
Specifically, the Collateral Agent shall make no representations as
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<PAGE>
to: (i) The validity, genuineness, legality or enforceability of any of the DEF
Collateral delivered to it, or (ii) the collectability, insurability,
effectiveness or suitability of any such DEF Collateral.
Such verification of the Required Documents delivered in connection with BT
Collateral which is DEF Collateral delivered during any period covered by a
Borrowing Base Schedule shall be set forth in such schedule. If the Collateral
Agent notes any exception in the review described in this subparagraph (c), the
Collateral Agent shall prepare a report noting same (a "DEF Exception Report")
and deliver it to the Administrative Agent and the Companies as soon as possible
but in no event later than simultaneously with the delivery of its next
Borrowing Base Schedule. The Construction Loans, Servicing Loans or
Foreclosure/Repurchase Loans on the DEF Exception Report shall not be included
in the Tranche D Borrowing Base, the Tranche E Borrowing Base or the Tranche F
Borrowing Base, as applicable, or on the Borrowing Base Schedule.
(d) Upon any receipt of Required Documents related to Other Collateral with
respect to any Loan requested by the Companies, the Administrative Agent shall
review the same and verify that:
(viii) All Required Documents relating to such item of Other
Collateral appear regular on their face and are in the possession of the
Administrative Agent; and
(ix) The statements set forth on Exhibit 1B hereto are accurate and
----------
complete in all respects.
Such verification for Other Collateral delivered during any period covered by a
collateral report referred to in Paragraph 7 below shall be set forth in such
report. If the Administrative Agent notes any exception in the review described
in subparagraph (i) or (ii) above or questions, in its reasonable discretion,
the genuineness, regularity, propriety, or accuracy of any item of Other
Collateral, the Administrative Agent shall so note in its next collateral report
delivered to Facility II Lenders. In the event that the Companies had been
requested to deliver the Additional Required Documents related to Other
Collateral with respect to any Loan requested by the Companies, the
Administrative Agent shall review and verify such Additional Required Documents
consistent with the obligations set forth above.
7. Collateral Value Determination; Determination Assumptions.
----------------------------------------------------------
(d) No later than 11:00 a.m. (California time) on each Business Day,
the Collateral Agent shall compute, in accordance
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<PAGE>
with Exhibit F of the Agreement, (i) the Collateral Value of the Tranche A
Borrowing Base (including, without limitation, "Wet Mortgage Loans" as defined
in the Custodial Agreement) and the Collateral Value of the Tranche B Borrowing
Base (an "A/B Collateral Value Determination"), and (ii) the Collateral Value of
the Tranche D Borrowing Base, the Collateral Value of the Tranche E Borrowing
Base and the Collateral Value of the Tranche F Borrowing Base (a "DEF Collateral
Value Determination") by completing the Borrowing Base Schedule as of 6:00 a.m.
(California time) on the same Business Day and notify the Administrative Agent
and the Companies thereof via facsimile. Such computations shall be made without
reduction for uncleared drafts relating to Mortgage Loans. The Companies shall
certify as to the accuracy of such determinations and shall return such
determinations after completing the information regarding uncleared drafts, with
such certification attached, to the Collateral Agent and the Administrative
Agent via facsimile no later than 11:00 a.m. (California time) on each such
Business Day.
(e) No later than 11:00 a.m. (California time) on each Business Day,
the Collateral Agent shall prepare and deliver to the Companies and the
Administrative Agent via facsimile a schedule showing (i) the composition of the
Tranche A Borrowing Base, on a per-Eligible A/B Mortgage Loan basis (including,
without limitation, Wet Mortgage Loans), (ii) the composition of the Tranche B
Borrowing Base, on a per-Eligible A/B Mortgage Loan basis, (iii) the composition
of the Tranche D Borrowing Base, (iv) the composition of the Tranche E Borrowing
Base, and (v) the composition of the Tranche F Borrowing Base, all as of 6:00
a.m. (California time) on the same Business Day. Such computations shall be
made without reduction for uncleared drafts relating to Mortgage Loans.
(c) No later than 8:00 a.m. (Charlotte, North Carolina time) on the
third Business Day of each month, the Administrative Agent shall compute, in
accordance with Exhibit F of the Agreement, the Collateral Value of the Tranche
C Borrowing Base (an "Other Collateral Value Determination") as of 5:00 p.m.
(California time) on the last Business Day of the preceding month and notify the
Companies thereof.
(d) No later than 8:00 a.m. (Charlotte, North Carolina time) on the
third Business Day of each month, the Administrative Agent shall prepare and
deliver to the Companies via facsimile a schedule showing the composition of the
Tranche C Borrowing Base, as of 5:00 p.m. (California time) on the last Business
Day of the preceding month. The Companies shall certify as to the accuracy of
such schedule and shall return such schedule, with such certification attached,
to the Administrative Agent via facsimile no later
13
<PAGE>
than 11:00 a.m. (Charlotte, North Carolina time) on the same Business Day such
schedule is delivered to the Companies.
(e) In making any collateral value determination or other calculation
involving determination of the Collateral Value of any Borrowing Base, the
Collateral Agent shall be permitted to rely, on information supplied by the
Companies to the Collateral Agent on the Mortgage Loan Schedule or DEF Schedule,
or the information described in Paragraph 3(b) hereof, most recently received by
the Collateral Agent with respect to such loan, without independent
investigation of the correctness thereof.
8. Handling of Collateral; Release of Security Interest.
----------------------------------------------------
(f) Prior to the occurrence of an Event of Default, from time to time
until otherwise notified by the Administrative Agent in writing (which may be
via facsimile with telephonic confirmation), the Collateral Agent is hereby
authorized to release documentation relating to Eligible A/B Mortgage Loans to
the Companies pursuant to the terms and provisions set forth in Section 5.1 of
the Custodial Agreement. The Companies hereby agree that any request by the
Companies for release of A/B Collateral under this subparagraph (a) shall be in
the form of Exhibit D-1 to the Custodial Agreement and shall be in compliance
with all terms and conditions of such release set forth herein and in Section
5.1 of the Custodial Agreement.
(g) Prior to the occurrence of an Event of Default, and subject to the
provisions of Paragraphs 8(c) and 8(d) below, upon written request of the
Companies to the Administrative Agent, the Administrative Agent is hereby
authorized, and does hereby agree to release free and clear of the security
interest granted to the Administrative Agent hereunder, and Administrative Agent
will direct the Collateral Agent and the Collateral Agent will release the
documentation relating to A/B Collateral and DEF Collateral, and the
Administrative Agent will release free and clear of the security interest
granted to the Administrative Agent, the Other Collateral to the Companies or as
directed by the Companies so long as after such release (i) the Collateral Value
of the Tranche A Borrowing Base relating to Mortgage Loans in which the
Administrative Agent retains a security interest hereunder equals or exceeds the
aggregate outstanding principal balance of the Tranche A Loans, (ii) the
Collateral Value of the Tranche B Borrowing Base relating to Mortgage Loans in
which the Administrative Agent retains a security interest hereunder equals or
exceeds the aggregate outstanding principal balance of the Tranche B Loans,
(iii) the Collateral Value of the Tranche C Borrowing Base relating to Assigned
Servicing Rights in which the Administrative Agent retains a security interest
hereunder equals or exceeds the
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<PAGE>
aggregate outstanding principal balance of the Tranche C Loans, (iv) the
Collateral Value of the Tranche D Borrowing Base relating to Construction Loans
in which the Administrative Agent retains a security interest hereunder equals
or exceeds the aggregate outstanding principal balance of the Tranche D Loans,
(v) the Collateral Value of the Tranche E Borrowing Base relating to Servicing
Loans in which the Administrative Agent retains a security interest hereunder
equals or exceeds the aggregate outstanding principal balance of the Tranche E
Loans, and (vi) the Collateral Value of the Tranche F Borrowing Base relating to
Foreclosure/Repurchase Loans in which the Administrative Agent retains a
security interest hereunder equals or exceeds the aggregate outstanding
principal balance of the Tranche F Loans. Any such request for release made to
the Collateral Agent with respect to A/B Collateral shall be made pursuant to
Exhibit D-1 or D-2, as applicable, of the Custodial Agreement. Upon receipt of a
request for such a release made to the Collateral Agent for A/B Collateral, the
Collateral Agent will forward a copy to the Administrative Agent and the
Administrative Agent will, no later than the next Business Day, verify and
approve in writing the aggregate outstanding principal balance of the Loans for
purposes of making the foregoing computation and shall authorize the release of
such A/B Collateral. Any request for release of DEF Collateral will be sent
directly to the Administrative Agent and the Administrative Agent, after
verification of the applicable Loan balances, will authorize, in writing, the
Collateral Agent to release the DEF Collateral if the requirements of this
Paragraph 8(b) are met; provided, that the Collateral Agent shall not release
--------
such A/B Collateral or DEF Collateral without the express authorization of the
Administrative Agent. The Collateral Agent agrees to transmit all Collateral
released pursuant to this Paragraph 8(b) as directed by the Companies at the
Companies' expense, and, upon request by the Companies, to endorse any related
notes (without recourse) and to execute assignments of any related mortgages or
deeds of trust (including, without limitation, mortgages or deeds of trust
relating to Construction Loans) and other instruments of transfer or release as
the Companies shall reasonably request.
(h) (i) Subject to the provisions of Paragraph 8(d) below, the
Administrative Agent shall, no later than ten (10) Business Days following
receipt of the written request therefor by the Companies, release from the
security interest created hereby specifically identified portions of Other
Collateral consisting of rights under Servicing Contracts or Master Servicing
Contracts in connection with the sale of such rights, said release of lien to be
evidenced by the execution and delivery by the Administrative Agent to the
Companies, at no cost or expense to the Collateral Agent, the Administrative
Agent or any Facility II Lender, of an appropriate form of UCC financing
statement release and such other
15
<PAGE>
documents as the Companies may reasonably request (the "Tranche C Release
Documents"); provided, however, that (A) at the date of receipt from the
Companies of a release request hereunder and at the date of delivery by the
Administrative Agent to the Companies of the Tranche C Release Documents
relating thereto (and both before and after giving effect to the requested
release) there shall not exist an Event of Default or Potential Default, and (B)
the aggregate outstanding principal balance of Tranche C Loans will not exceed
the Collateral Value of the Tranche C Borrowing Base.
(ii) Subject to the provisions of Paragraph 8(d) below, the
Administrative Agent shall, no later than ten (10) Business Days following
receipt of the written request therefor by the Companies, release from the
security interest created hereby specifically identified portions of DEF
Collateral consisting of rights under those servicing contracts securing
Servicing Loans, in connection with the sale of such rights, said release of
lien to be evidenced by the execution and delivery by the Administrative Agent
to the Companies, at no cost or expense to the Administrative Agent or any
Facility II Lender, of an appropriate form of UCC financing statement release
and such other documents as the Companies may reasonably request (such forms to
be prepared by the Companies or the Administrative Agent) (the "Tranche E
Release Documents"); provided, however, that (A) at the date of receipt from the
Companies of a release request hereunder and at the date of delivery by the
Administrative Agent to the Companies of the Tranche E Release Documents
relating thereto (and both before and after giving effect to the requested
release) there shall not exist an Event of Default or Potential Default, and (B)
the aggregate outstanding principal balance of Tranche E Loans will not exceed
the Collateral Value of the Tranche E Borrowing Base.
(i) Except as expressly set forth herein or in the Custodial
Agreement, the Collateral Agent shall not release any item of Collateral from
the security interest created hereby without the prior written consent of the
Administrative Agent. Except as expressly set forth herein, the Administrative
Agent shall not release any item of Collateral from the security interest
created hereby without the prior written consent of one hundred percent (100%)
of the Lenders.
(j) Prior to the occurrence of an Event of Default, the Collateral
Agent and the Administrative Agent shall take such steps as either of them may
be reasonably directed from time to time by the Companies in writing (and, in
the case of directions to the Collateral Agent, which are approved by the
Administrative Agent in writing) which are not inconsistent with the provisions
of this Security Agreement, the Custodial Agreement and the other Credit
Documents and which the Companies deem necessary to enable the
16
<PAGE>
Companies to perform and comply with Take-Out Commitments or Hedging
Arrangements and with other agreements for the sale or other disposition in
whole or in part of Mortgage Loans.
(k) Prior to the occurrence of an Event of Default and acceleration of
the Obligations and if, but only if, such action is not inconsistent with the
express provisions of this Security Agreement, the Custodial Agreement and the
other Credit Documents and would not create an Event of Default or Potential
Default, the Companies may, in connection with their respective residential
mortgage banking businesses: originate, acquire and service Mortgage Loans;
receive payments on Mortgage Loans from the Obligors thereon and impounds and
fees in connection therewith; retain, use and apply fees and payments made on
account of the Mortgage Loans by the Obligors thereunder; disburse from impound
accounts; in the ordinary course of the Companies' business, create, use,
destroy and transfer records, files and other items described in Paragraphs
5(a)(vi), 5(b)(v) or 5(c)(v) above; sell or otherwise dispose of Mortgage Loans
not included in the computation of the Collateral Value of the Tranche A
Borrowing Base or the Collateral Value of the Tranche B Borrowing Base, with or
without servicing rights; pledge Mortgage Loans to the extent permitted under
the Credit Documents; sell servicing rights; and enter into, exercise rights
under, perform, modify, waive and cancel any Take-Out Commitments or Hedging
Arrangements.
(l) Following the occurrence of an Event of Default, the Collateral
Agent and the Administrative Agent shall not, and shall incur no liability to
the Companies or any other Person for refusing to, deliver any item of
Collateral to the Companies or any other Person (other than under existing Take-
Out Commitments) without the express prior written consent and at the direction
of, in the case of delivery by the Collateral Agent, the Administrative Agent
and, in the case of delivery by the Administrative Agent, one hundred percent
(100%) of the Lenders.
(h) All amounts payable on account of the sale or release pursuant to
Paragraph 8(b) requiring payment by the Companies, of Mortgage Loans included in
the Tranche A Borrowing Base or the Tranche B Borrowing Base, will be instructed
to be paid directly by the purchaser or the Companies, as the case may be, to
the Joint Settlement Account or to the Financial Institution Settlement Account
maintained in the name of the Administrative Agent, each of which Joint
Settlement Account and such Financial Institution Settlement Account shall be
maintained by the Collateral Agent and shall be "no access" accounts to the
Companies, the Administrative Agent and Collateral Agent except to the extent
expressly permitted hereunder or under the Custodial Agreement. Pursuant to
Paragraph 4 above, the Companies have granted a
17
<PAGE>
security interest in and lien upon the Financial Institution Settlement Account
maintained in the name of the Administrative Agent, and on the Administrative
Agent's pro rata share of the Joint Settlement Account, and in any and all
amounts at any time held therein or pertaining thereto, to the Administrative
Agent as collateral security for the Obligations. This Paragraph 8(h) shall
constitute notice to the Collateral Agent of such security interest pursuant to
the Uniform Commercial Code of all relevant jurisdictions and any other law or
regulation requiring such notice. The Collateral Agent shall hold the Financial
Institution Settlement Account maintained in the name of the Administrative
Agent, and the Administrative Agent's pro rata share of the Joint Settlement
Account, and all funds at any time held therein or pertaining thereto, for the
benefit of the Administrative Agent with all rights of a secured party under the
Uniform Commercial Code of all relevant jurisdictions. This Paragraph 8(h) shall
further constitute irrevocable notice to the Collateral Agent that the accounts
referred to above are "no access" accounts to the Companies, the Administrative
Agent and the Collateral Agent except to the extent expressly permitted
hereunder and under the Custodial Agreement. Upon written direction of the
Administrative Agent, funds held in the Financial Institution Settlement Account
maintained in the name of the Administrative Agent, and the Administrative
Agent's pro rata share of funds held in the Joint Settlement Account, shall be
disbursed by the Collateral Agent pursuant to the instructions of the
Administrative Agent in accordance with the provisions of the Agreement and of
the Custodial Agreement.
9. Reports. The Collateral Agent shall deliver to the Administrative
-------
Agent, from time to time, such other reports and information as the
Administrative Agent may from time to time reasonably request. In preparing any
such reports the Collateral Agent shall be entitled to rely, without independent
investigation (other than the review steps described in the Custodial Agreement
and on Exhibit 1A hereto), on information supplied to the Collateral Agent by
----------
the Companies. Any expense incurred by the Collateral Agent in preparing such
reports shall be paid by the Companies.
10. No Reliance. The Collateral Agent shall not be responsible to the
-----------
Administrative Agent, the Companies or any Lender, and the Administrative Agent
shall not be responsible to the Collateral Agent, the Companies or any Lender,
for any recitals, statements, representations or warranties contained herein, in
the Custodial Agreement or in any other Credit Document; or for the execution,
effectiveness, genuineness, validity, enforceability, collectability, accuracy,
completeness or sufficiency of this Security Agreement, the Custodial Agreement
or any other Credit Document or instruments executed and delivered, or
18
<PAGE>
which could have been executed or delivered, in connection with this Security
Agreement, the Custodial Agreement or the other Credit Documents, including,
without limitation, the attachment, creation, effectiveness or perfection of the
security interests granted or purported to be granted hereunder in and to the
Collateral. The Collateral Agent shall be entitled to refrain from exercising
any discretionary powers or actions under this Security Agreement or any other
Credit Document until the Collateral Agent shall have received the prior written
consent of the Administrative Agent to such action and shall have been
indemnified by the Administrative Agent for the performance of such actions. The
Administrative Agent shall be entitled to refrain from exercising any
discretionary powers or actions under this Security Agreement, the Custodial
Agreement or any other Credit Document until such Person shall have received the
prior written consent of one hundred percent (100%) of the Lenders to such
action.
11. Fees of the Collateral Agent. The Custodian shall charge such fees
----------------------------
for its services under this Agreement as are set forth in a separate agreement
between the Custodian and the Companies, the payment of which fees, together
with the Custodian's expenses in connection herewith, shall be solely the
obligation of the Companies.
12. Availability of Documents. The Administrative Agent and Lenders and
-------------------------
its and their agents, accountants, attorneys and auditors will be permitted
during normal business hours at any time and from time to time upon reasonable
advance written notice to the Companies and to the Collateral Agent (but in no
event less than two (2) Business Days) to examine (to the extent permitted by
applicable law) the files, documents, records and other papers in the possession
or under the control of the Collateral Agent or the Administrative Agent
relating to any or all Collateral and to make copies thereof. Prior to the
occurrence of an Event of Default, any such activity will be at the cost and
expense of the Administrative Agent or Lender conducting such activity;
following the occurrence of an Event of Default, all reasonable costs and
expenses associated with the exercise by Administrative Agent or Lenders of
their rights under this Paragraph 12 which have been reasonably incurred shall
be promptly paid by the Companies upon demand of Administrative Agent or any
Lender made through the Administrative Agent; provided, that if the Companies
--------
shall not pay any expenses of the Collateral Agent relating to the exercise of
the rights of Administrative Agent or Lenders under this Paragraph 12, the
Administrative Agent or the Lenders, as applicable, shall pay such costs and
expenses.
13. Representations and Warranties. The Companies hereby jointly and
------------------------------
severally represent and warrant that: (a) the
19
<PAGE>
Companies are the sole owners of the Collateral (or, in the case of after-
acquired Collateral, at the time the Companies acquire rights in the Collateral,
will be the sole owners thereof); (b) except for security interests in favor of
the Administrative Agent for the benefit of the Lenders hereunder, no Person
(other than the investors party to the Servicing Contracts or to the servicing
contracts constituting security for the Servicing Loans, and the MBS Fiduciaries
party to the Master Servicing Contracts) has (or, in the case of after-acquired
Collateral, at the time the Companies acquire rights therein, will have) any
right, title, claim or interest (by way of lien or otherwise) in, against or to
the Collateral and, in any event, the Administrative Agent has a perfected,
first priority security interest therein for the benefit of the Lenders; (c) all
information heretofore, herein or hereafter supplied to the Collateral Agent, to
the Administrative Agent or to any Lender by or on behalf of the Companies with
respect to the Collateral is or will be accurate and complete in all material
respects; (d) each Mortgage Loan is, at all dates when it is submitted by the
Companies for inclusion in the computation of the Collateral Value of the
Tranche A Borrowing Base or the Collateral Value of the Tranche B Borrowing
Base, an Eligible A/B Mortgage Loan; and (e) each Construction Loan, Servicing
Loan, and Foreclosure/Repurchase Loan meets, at all dates when it is included by
the Companies in the Tranche D Borrowing Base, the Tranche E Borrowing Base or
the Tranche F Borrowing Base, as applicable, the respective requirements
contained in the definitions of such terms as set forth in the Facility II
Agreement.
14. Covenants of the Companies. The Companies hereby agree: (a) to
--------------------------
procure, execute and deliver from time to time any endorsements, assignments,
financing statements and other writings deemed necessary by the Administrative
Agent to perfect, maintain and protect the security interest of the
Administrative Agent hereunder in the Collateral for the benefit of the Lenders
and the priority thereof and to deliver promptly to the Collateral Agent or the
Administrative Agent, as applicable, all originals of Collateral or Proceeds
consisting of chattel paper or instruments; (b) not to surrender or lose
possession of (other than to the Collateral Agent or the Administrative Agent,
as applicable), sell, encumber, or otherwise dispose of or transfer, any
Collateral or right or interest therein other than shipment of Mortgage Loans
and Mortgage-Backed Securities under Take-Out Commitments and as otherwise
permitted under Paragraph 8 above, in the Facility II Agreement or in the
Facility I Agreement; (c) at the times and in the manner expressly provided for
herein and in the Custodial Agreement, to account fully for and promptly to
deliver to the Collateral Agent or the Administrative Agent, as applicable, in
the form received, all Required Documents and other Collateral capable of being
delivered or Proceeds received, endorsed to the Collateral Agent or
20
<PAGE>
the Administrative Agent, as applicable, as appropriate and accompanied by such
assignments and powers, duly executed, as the Administrative Agent shall
reasonably request, and until so delivered all Collateral and Proceeds shall be
held in trust for the Administrative Agent separate from all other property of
the Companies and identified as subject to a security interest in favor of the
Administrative Agent in its capacity as agent and bailee of the Lenders; (d) at
any reasonable time, following reasonable advance written notice to the
Companies by the Collateral Agent or the Administrative Agent, to exhibit to and
allow inspection by such Person (or Persons designated by such Person) of the
Collateral and the records concerning the Collateral; (e) to keep the records
concerning the Collateral at the location(s) set forth in Paragraph 22 below and
not to remove the records from such location(s) without the prior written
consent of the Collateral Agent and the Administrative Agent which consent shall
not be unreasonably withheld; (f) at the request of the Administrative Agent, to
place on each of its records pertaining to the Collateral a legend, in form and
content satisfactory to the Administrative Agent, indicating that a security
interest in such Collateral has been granted to the Administrative Agent; (g)
not to modify (other than as permitted under the Custodial Agreement or the
Agreement), compromise, extend, rescind or cancel any deed of trust, mortgage,
note or other document, instrument or agreement connected with any Mortgage
Loan, Construction Loan, Servicing Loan or Foreclosure/Repurchase Loan pledged
under this Security Agreement, or any Servicing Contract or Master Servicing
Contract pledged under this Security Agreement, or any document relating thereto
or connected therewith or consent to a postponement of strict compliance on the
part of any party thereto with any term or provision thereof, without the
consent of the Administrative Agent; (h) to keep the Collateral insured against
loss, damage, theft, and other risks customarily covered by insurance, and such
other risks as the Collateral Agent or the Administrative Agent may request; (i)
to do all acts that a prudent investor would deem necessary or desirable to
maintain, preserve and protect the Collateral; (j) not knowingly to use or
permit any Collateral to be used unlawfully or in violation of any provision of
this Security Agreement or the Custodial Agreement or any applicable statute,
regulation or ordinance or any policy of insurance covering the Collateral; (k)
to pay (or require to be paid) prior to their becoming delinquent all taxes,
assessments, insurance premiums, charges, encumbrances, and liens now or
hereafter imposed upon or affecting any Collateral, except where covered by an
adequate bond or insurance reasonably satisfactory to the Administrative Agent
or where being contested in good faith by appropriate proceedings and for which
provision is made to the reasonable satisfaction of the Administrative Agent for
the payment thereof in the event the Companies are found by the final
determination of a court of competent jurisdic-
21
<PAGE>
tion to be obligated to pay such taxes, assessments, insurance premiums,
charges, encumbrances or liens; (l) to notify the Collateral Agent and the
Administrative Agent before any such change shall occur of any change in the
name, identity or structure (through merger, consolidation or otherwise) of any
of the Companies; (m) to appear in and defend, at the Companies' cost and
expense, any action or proceeding which may affect its title to, or the
Administrative Agent's interest for the benefit of the Lenders in, the
Collateral; (n) to keep accurate and complete records of the Collateral and to
provide the Collateral Agent and the Administrative Agent with such records and
such reports and information relating to the Collateral as the Collateral Agent
or the Administrative Agent, as applicable, may request from time to time; and
(o) to comply with all terms and conditions of all Servicing Contracts and
Master Servicing Contracts to which any of the Companies is a party and to
comply with all laws, regulations and ordinances relating to the possession,
operation, maintenance and control of the Collateral which if not complied with
would have a material adverse effect on the business or financial condition of
the Companies.
22
<PAGE>
15. Collection of Collateral Payments.
----------------------------------
(m) The Companies shall, at their sole cost and expense, endeavor to
obtain payment, when due and payable, of (i) all sums due or to become due with
respect to any A/B Collateral (each such payment being referred to as an "A/B
Collateral Payment"), (ii) all sums due or to become due with respect to any DEF
Collateral (each such payment being referred to as a "DEF Collateral Payment"),
and (iii) all sums due or to become due with respect to any Other Collateral
(each such payment being referred to as an "Other Collateral Payment")
including, without limitation, in each case, the taking of such action with
respect thereto as the Administrative Agent may reasonably request and, prior to
such request, as the Companies may reasonably deem advisable; provided, however,
that the Companies shall not, without the prior written consent of the
Administrative Agent, grant or agree to any rebate, refund, compromise or
extension with respect to any A/B Collateral Payment, DEF Collateral Payment, or
Other Collateral Payment, as applicable, except as may be required by applicable
laws or regulations or at the order of a Governmental Authority, or accept any
prepayment on account thereof, except in accordance with the terms of the
Required Documents. Upon the request of the Administrative Agent following the
occurrence, and during the continuance, of an Event of Default (and subject to
the requirements of applicable law), the Companies will notify and direct any
party who is or might become obligated to make any A/B Collateral Payment, DEF
Collateral Payment or Other Collateral Payment, to make payment thereof to the
Administrative Agent (or to the Companies in care of the Administrative Agent)
at such address as the Administrative Agent may designate. The Companies will
reimburse the Administrative Agent and the Collateral Agent promptly upon demand
for all reasonable out-of-pocket costs and expenses, including reasonable
attorneys' fees and litigation expenses, incurred by either such Person in
seeking to collect any A/B Collateral Payment, DEF Collateral Payment or other
Collateral Payment.
(n) If there shall occur and be continuing an Event of Default, upon
the request of the Administrative Agent (which request shall be made only upon
direction of the Majority Lenders) the Companies will transmit and deliver to
the Administrative Agent, forthwith upon receipt and in the form received, all
cash, checks, drafts and other instruments for the payment of money (properly
endorsed where required so that such items may be collected by the
Administrative Agent) which may be received by the Companies any time as payment
on account of any A/B Collateral Payment, DEF Collateral Payment or Other
Collateral Payment and if such request shall be made, until delivery to the
Administrative Agent, such items will be held in trust for the Administrative
23
<PAGE>
Agent and will not be commingled by the Companies with any of their other funds
or property. Thereafter, the Administrative Agent is hereby authorized and
empowered to endorse the name of the Companies on any check, draft or other
instrument for the payment of money received by the Administrative Agent on
account of any A/B Collateral Payment, DEF Collateral Payment or other
Collateral Payment if the Administrative Agent believes such endorsement is
necessary or desirable for purposes of collection.
(o) The Companies hereby agree, jointly and severally, to indemnify,
defend and save harmless each of the Collateral Agent and the Administrative
Agent and their respective agents, officers, employees and representatives from
and against any and all claims, obligations, penalties, actions, suits,
judgments, reasonable costs and disbursements, losses, liabilities and damages
(including, without limitation, reasonably attorneys' fees) of any kind
whatsoever which may at any time be imposed on, assessed against or incurred by
such Person in any way resulting from any action taken or omitted to be taken by
the Companies relating to or arising out of the collection of A/B Collateral
Payments, DEF Collateral Payments or Other Collateral Payments, and such
obligation of the Companies shall continue in effect after and notwithstanding
the discharge of the Obligations and the release of the security interest
granted in Paragraph 4 above. Each of the Collateral Agent and the
Administrative Agent agrees that it will promptly notify the Companies of any
claim, action or suit asserted or commenced against it and that the Companies
may assume the defense thereof with counsel reasonably satisfactory to the
Collateral Agent and the Administrative Agent at the Companies' sole expense,
that it will cooperate with the Companies on such defense, and that such Person
will not settle any such claim, action or suit without the consent of the
Companies; provided, however, that in the event the Collateral Agent or the
-------- -------
Administrative Agent, as applicable, is not reasonably satisfied with such
defense, such Persons may assume such defense with counsel satisfactory to such
Persons at the Companies' sole expense.
16. Delivery of Collateral by Collateral Agent. The Collateral Agent
------------------------------------------
hereby agrees that following the occurrence and during the continuance of an
Event of Default, upon written notice by the Administrative Agent to the
Collateral Agent (which notice shall be given only upon direction of the
Majority Lenders), the Collateral Agent shall immediately deliver to the
Administrative Agent all Collateral held by the Collateral Agent for the benefit
of the Administrative Agent under and pursuant to the terms of this Security
Agreement which is capable of being delivered, together with any endorsements,
assignments or releases reasonably requested by the Administrative Agent with
respect to such Collateral and copies of any electronic files which may have
been maintained by
24
<PAGE>
the Collateral Agent with respect to such Collateral. As part of such delivery,
all items, if any, (including promissory notes) endorsed to the order of the
Collateral Agent will be endorsed by the Collateral Agent to the order of the
Administrative Agent and, if any assignments of mortgages, deeds of trust, etc.,
name the Collateral Agent as assignee, then the Collateral Agent will execute,
acknowledge and deliver in recordable form appropriate assignments naming the
Administrative Agent as assignee of such mortgages, deeds of trust, etc.
17. Authorized Action by Administrative Agent. The Companies hereby
-----------------------------------------
irrevocably appoint the Administrative Agent as their attorney-in-fact to do
(but the Administrative Agent shall not be obligated to and shall incur no
liability to the Companies or any third party for failure so to do) at any time
and from time to time following the occurrence and during the continuance of an
Event of Default at the request and direction, given after the occurrence of an
Event of Default, of the Majority Lenders (which request and direction must be
in writing if so requested by the Administrative Agent), any act which the
Companies are obligated by this Security Agreement to do, and to exercise such
rights and powers as the Companies might exercise with respect to the
Collateral, including, without limitation, the right to (i) collect by legal
proceedings or otherwise and endorse, receive and receipt for all dividends,
interest, payments, proceeds and other sums and property now or hereafter
payable on or on account of the Collateral; (ii) enter into any extension,
reorganization, deposit, merger, consolidation or other agreement pertaining to,
or deposit, surrender, accept, hold or apply other property in exchange for the
Collateral; (iii) insure, process and preserve the Collateral; (iv) transfer the
Collateral to the Administrative Agent's own or its nominee's name; and (v) make
any compromise or settlement, and take any other action it deems advisable with
respect to the Collateral. Notwithstanding anything contained herein, in no
event shall the Administrative Agent be required to make any presentment, demand
or protest, or give any notice and the Administrative Agent need not take any
action to preserve any rights against any prior party or any other person in
connection with the Obligations or with respect to the Collateral.
18. The Collateral Agent.
--------------------
(p) Appointment. The Administrative Agent hereby appoints the Collateral
-----------
Agent as the agent for the Administrative Agent under the Credit Documents and
authorizes the Collateral Agent as agent of the Administrative Agent to take
such action on its behalf under the provisions of this Security Agreement and to
exercise such powers and perform such duties as are expressly delegated thereto
by the terms of this Security Agreement, together with such
25
<PAGE>
other powers as are reasonably incidental thereto, and which the Collateral
Agent is expressly directed to undertake by the Administrative Agent. The
Collateral Agent shall have no duties or responsibilities except those expressly
set forth herein, nor any fiduciary relationship with any Lender, and no implied
covenants, responsibilities, obligations or liabilities shall be read into the
Credit Documents or otherwise exist against the Collateral Agent.
(q) Delegation of Duties. The Collateral Agent may execute any of its
--------------------
duties under this Security Agreement by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning such duties. The
Collateral Agent shall not be responsible for the negligence or misconduct of
any agents or attorneys-in-fact selected by it with reasonable care.
(r) Exculpatory Provisions. Neither the Collateral Agent nor any of its
----------------------
officers, directors, employees, agents, counsel, attorneys-in-fact or Affiliates
shall be liable to any Lender or the Administrative Agent 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 negligence or willful
misconduct). In no event shall the Collateral Agent or any of its officers,
directors, employees, agents, counsel, attorneys in-fact or Affiliates be held
liable for any special, indirect, punitive or consequential damages resulting
from any action taken or omitted to be taken by such Person hereunder or in
connection herewith. The Collateral Agent shall be under no obligation to the
Administrative Agent 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 the Collateral
Agent thereunder and subject to the standards of care set forth therein with
respect thereto) or to inspect the properties, books or records of the
Companies. The Collateral 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 the
Administrative Agent to such action.
(s) Reliance by Collateral Agent. The Collateral Agent shall be entitled
----------------------------
to rely, and shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certification, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Companies), independent accountants and other experts selected by the Collateral
Agent. The Collateral Agent may deem and treat the payee of any Note as the
owner thereof for all
26
<PAGE>
purposes unless a written notice of assignment, negotiation or transfer thereof
shall have been filed with the Collateral Agent. The Collateral 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
Administrative Agent or it shall first be indemnified to its satisfaction by the
Administrative Agent or 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 expense arising out of the Collateral Agent's gross
negligence or willful misconduct). The Collateral 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 Administrative Agent absent gross
negligence and willful misconduct on the part of the Collateral 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 the Administrative Agent.
(t) Notice of Default; Agreement to Advance. The Collateral Agent shall be
---------------------------------------
deemed to have no knowledge or notice of the occurrence of any Event of Default
or Potential Default under the Credit Documents unless the Collateral Agent has
received notice from the Administrative Agent or the Companies 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 the
Collateral Agent receives such a notice, the Collateral Agent shall give notice
thereof to the Companies and the Administrative Agent. The Collateral Agent
shall take such action with respect to such Event of Default or Potential
Default as is set forth in Paragraph 16 and as shall be reasonably directed by
the Administrative Agent; provided, however that unless and until the Collateral
Agent shall have received such directions, the Collateral Agent may (but shall
not be obligated to) take such action or refrain from taking such action (in
each case consistent with the provisions of the Credit Documents), with respect
to such Event of Default or Potential Default, as it shall deem advisable in the
best interest of the Administrative Agent.
(u) Indemnification. The Companies hereby agree, jointly and severally, to
---------------
indemnify, defend and save harmless each of the Collateral Agent and the
Administrative Agent and their respective agents, officers, employees and
representatives from and against any and all claims, obligations, penalties,
actions, suits, judgments, reasonable costs and disbursements, losses,
liabilities and damages (including, without limitation, reasonable attorneys'
fees) of any kind whatsoever which may at any time be imposed on, assessed
against or incurred by such Person in any way resulting from any action taken or
omitted to be taken by the Companies
27
<PAGE>
relating to or arising out of this Security Agreement or any documents
contemplated hereby or referred to herein or the transactions contemplated
hereby, and such obligation of the Companies shall continue in effect after and
notwithstanding the discharge of the Obligations and the release of the security
interest granted in Paragraph 5 above. Each of the Collateral Agent and the
Administrative Agent agrees that it will promptly notify the Companies of any
claim, action or suit asserted or commenced against it and that the Companies
may assume the defense thereof with counsel reasonably satisfactory to the
Collateral Agent and the Administrative Agent at the Companies' sole expense,
that it will cooperate with the Companies on such defense, and that such Person
will not settle any such claim, action or suit without the consent of the
Companies which consent will not be unreasonably withheld; provided, however,
-------- -------
that in the event the Collateral Agent or the Administrative Agent, as
applicable, is not reasonably satisfied with such defense, such Persons may
assume such defense with counsel satisfactory to such Persons at the
Companies' sole expense. The Lenders agree to indemnify and hold harmless the
Collateral Agent in its capacity as such ratably in accordance with their
Percentage Shares to the extent required by the Companies hereunder if the
Collateral Agent is not reimbursed by the Companies pursuant to the terms hereof
and without limiting the obligation of the Companies to do so. The
indemnification obligations of the Companies and Lenders under this Paragraph
18(f) shall survive termination of the Credit Documents and payment in full of
the Obligations.
(v) Collateral Agent in Its Individual Capacity. The Collateral Agent and
-------------------------------------------
its Affiliates may make loans to, accept deposits from and generally engage in
any kind of business with the Companies as though the Collateral Agent were not
the Collateral Agent hereunder. With respect to such loans made or renewed by
it and any note issued to it under the Credit Documents, the Collateral Agent
shall have the same rights and powers under the Credit Documents as any Lender
under the Credit Documents and may exercise the same as though it were not the
Collateral Agent, and the terms "Lender" and "Lenders" shall include the
Collateral Agent in its individual capacity.
28
<PAGE>
(w) Successor Agents.
----------------
(i) The Collateral Agent may resign as such under the Credit Documents
upon sixty (60) days' prior written notice to the other parties hereto. If the
Collateral Agent shall resign, then, on or before the effective date of such
resignation, the Administrative Agent shall appoint a successor agent reasonably
acceptable to the Companies, whereupon such successor agent shall succeed to the
rights, powers and duties of the Collateral Agent, and the term "Collateral
Agent" shall mean such successor agent effective upon its appointment, and the
former Collateral Agent's rights, powers and duties shall be terminated without
any other or further act or deed on the part of such former Collateral Agent or
any of the parties to this Agreement or any of the other Credit Documents or
successors thereto. Upon such appointment, the resigned Collateral Agent will
deliver all Collateral to the successor Collateral Agent and take all other
steps deemed necessary by the Administrative Agent to vest the successor
Collateral Agent with all rights, titles, and powers given to the Collateral
Agent hereunder. After the Collateral Agent's resignation hereunder, the
provisions of this Paragraph 18(h)(i) shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Collateral Agent under
the Credit Documents.
(ii) The appointment of BT as Collateral Agent hereunder shall
terminate upon the removal of BT as Custodian under the Custodial Agreement
pursuant to the terms thereof. In the event that BT is removed as Custodian
under the Custodial Agreement, the party appointed as BT's successor Custodian
under the Custodial Agreement shall also become the Collateral Agent hereunder
and shall succeed to the rights, powers and duties of the Collateral Agent, and
the term "Collateral Agent" shall mean the party appointed as BT's successor
Custodian under the Custodial Agreement, and BT's rights, powers and duties as
Collateral Agent hereunder shall be terminated without any other or further act
or deed on the part of BT or any of the parties to this Agreement or any of the
other Credit Documents or successors thereto. Provided, however, that
-------- -------
notwithstanding anything contained in this Paragraph 18(h)(ii) to the contrary,
if BT is removed as Custodian under the Custodial Agreement, and the
Administrative Agent does not approve the appointment of the party appointed as
BT's successor Custodian under the Custodial Agreement as Collateral Agent
hereunder, then FUNB shall become the Collateral Agent hereunder and shall
succeed to the rights, powers and duties of the Collateral Agent, and the term
"Collateral Agent" shall mean FUNB, and BT's rights, powers and duties as
Collateral Agent hereunder shall be terminated without any other or further act
or deed on the part of BT or any of the parties to this Agreement or any of the
other Credit Documents or successors thereto. In the event that FUNB does
become
29
<PAGE>
the Collateral Agent hereunder as set forth in the immediately preceding
sentence, then the parties hereto agree to enter into such amendments,
modifications and restatements to or of this Security Agreement, and any
documents, instruments or agreements executed in connection herewith, as may be
deemed necessary by the Administrative Agent regarding the handling of the A/B
Collateral and the DEF Collateral and the continuation and perfection of the
Administrative Agent's security interest therein for the benefit of the Lenders.
19. Default and Remedies. Upon the occurrence of an Event of Default and
--------------------
following the acceleration of the Obligations, the Administrative Agent shall at
the request and direction of the Majority Lenders (which request and direction
must be in writing if so requested by the Administrative Agent), without notice
to or demand upon the Companies: (i) foreclose or otherwise enforce the
Administrative Agent's security interest for the benefit of the Lenders in the
Collateral in any manner permitted by law or provided for hereunder (to the
extent permitted by law); (ii) sell or otherwise dispose of the Collateral or
any part thereof at one or more public or private sales, whether or not such
Collateral is present at the place of sale, for cash or credit or future
delivery and without assumption of any credit risk, on such terms and in such
manner as the Administrative Agent may determine; (iii) require the Companies to
assemble the Collateral or books and records relating thereto and make such
available to the Administrative Agent at a place to be designated by the
Administrative Agent reasonably convenient to the Companies and the
Administrative Agent; (iv) enter onto property where any Collateral or books and
records relating thereto are located and take possession thereof with or without
judicial process and without a breach of the peace; (v) prior to the disposition
of the Collateral, prepare it for disposition in any commercially reasonable
manner and to the extent the Administrative Agent deems appropriate; and (vi)
deliver the Resignation Letters to the appropriate MBS Fiduciaries or investors
named therein (it being understood that such Resignation Letters shall be held
in escrow by the Administrative Agent prior to the occurrence of an Event of
Default and acceleration of the Obligations, and that delivery of such
Resignation Letters shall occur only upon the occurrence of an Event of Default
----
and following acceleration of the Obligations). Upon any sale or other
disposition pursuant to this Security Agreement, the Administrative Agent shall
have the right to deliver, assign and transfer to the purchaser thereof the
Collateral or portion thereof so sold or disposed of and all proceeds thereof
shall be allocated in the manner set forth in Paragraph 7(s)(2) of the Facility
II Agreement or Paragraph 3(s)(2) of the Facility I Agreement. Each purchaser
at any such sale or other disposition shall hold the Collateral free from any
claim or right of whatever kind, including any equity
30
<PAGE>
or right of redemption of the Companies, and the Companies specifically waive
(to the extent permitted by law) all rights of redemption, stay or appraisal
which they have or may have under any rule of law or statute now existing or
hereafter adopted.
20. Binding Upon Successors. All rights of the Collateral Agent, the
-----------------------
Administrative Agent, the Lenders and the Companies under this Security
Agreement shall inure to the benefit of the Collateral Agent, the Administrative
Agent, the Lenders and the Companies and their respective successors and
assigns, and all obligations of the Companies shall bind their successors and
assigns.
21. Entire Agreement; Severability. This Security Agreement, together
------------------------------
with the Custodial Agreement, contains the entire security agreement and
collateral agency agreement with respect to the Collateral among the Lenders,
the Companies, the Collateral Agent and the Administrative Agent. All waivers
by the Companies provided for in this Security Agreement or in the Custodial
Agreement have been specifically negotiated by the parties with full cognizance
and understanding of their rights. If any of the provisions of this Security
Agreement shall be held invalid or unenforceable, this Security Agreement shall
be construed as if not containing such provisions, and the rights and
obligations of the parties hereto shall be construed and enforced accordingly.
22. Choice of Law. This Security Agreement shall be construed in
-------------
accordance with and governed by the laws of the State of North Carolina and,
where applicable and except as otherwise defined herein, terms used herein shall
have the meanings given them in the Uniform Commercial Code as in effect from
time to time in the State of North Carolina.
23. Place of Business; Records. The Companies represent and warrant that
--------------------------
their chief place of business is at 35 North Lake Avenue, Pasadena, California
91101 and that all books and records concerning the Collateral are kept at such
chief place of business.
24. Notice. Any written notice, consent or other communication provided
------
for in this Security Agreement shall be delivered or sent to the applicable
parties at the following addresses:
31
<PAGE>
COMPANIES:
CWM Mortgage Holdings, Inc.
Independent National Mortgage Corporation
Independent Lending Corporation
35 North Lake Avenue
Pasadena, California 91101
Attn: Mr. Steven E. West
Facsimile No.: (818) 304-5899
ADMINISTRATIVE AGENT:
First Union National Bank of North Carolina
One First Union Center, CORP-6, TW-19
301 South College Street
Charlotte, North Carolina 28288
Attn: Ms. Carolyn Eskridge
Facsimile No.: (704) 374-7102
COLLATERAL AGENT:
Bankers Trust Company of California, N.A.
3 Park Plaza, 16th Floor
Irving, California 92714
Attn: Ms. Michelle Lambott
Facsimile No.: (714) 440-6568
25. Defeasance. If the obligations of the Lenders to advance Loans to the
----------
Companies shall have expired or been terminated as provided in the Facility II
Agreement or the Facility I Agreement and all Obligations of the Companies
secured hereby shall have been fully paid, performed, released or otherwise
satisfied or discharged, the security interests created hereunder shall
terminate and the Collateral Agent (upon the direction of the Administrative
Agent) or the Administrative Agent, as applicable, shall promptly deliver any
Collateral then held by such Person to the Companies. Each of the Collateral
Agent and the Administrative Agent agrees to transmit all Collateral delivered
pursuant to this Paragraph 25 as directed by the Companies at the Companies'
expense, and, upon request by the Companies, to endorse the related notes
(without recourse) and to execute assignments of the related mortgages or deeds
of trust, UCC financing statement assignments, and other instruments of transfer
or release as the Companies shall reasonably request and the Administrative
Agent shall approve.
26. Transmission of Collateral. Written instructions as to the method of
--------------------------
shipment and shipper(s) the Collateral Agent and the Administrative Agent are
directed to utilize in connection with the
32
<PAGE>
transmission of Collateral by such
Persons in the performance of their duties hereunder shall be delivered by the
Administrative Agent or the Companies (the "Requesting Party") to the Collateral
Agent or the Administrative Agent prior to any shipment of Collateral hereunder
by the Collateral Agent or the Administrative Agent. The Requesting Party will
arrange for the provision of such services at the expense of the Companies (or,
at the option of the Collateral Agent or the Administrative Agent, the Companies
shall reimburse such Person for all such costs and expense incurred by such
Person) and such insurance against loss or damage to the Collateral as the
Administrative Agent or the Companies deem appropriate. In the event the
Collateral Agent or the Administrative Agent does not receive written directions
as to the method of shipment and shipper(s) from the Requesting Party, each of
the Collateral Agent and the Administrative Agent is hereby authorized to
utilize a nationally recognized courier service. The Collateral Agent and the
Administrative Agent shall be entitled to reimbursement from the Companies for
all reasonable costs and expenses incurred by such Persons for utilizing such
courier service.
33
<PAGE>
EXECUTED as of the day and year first above written.
CWM MORTGAGE HOLDINGS, INC., a Delaware
corporation
By:_____________________________
Name:___________________________
Title:__________________________
INDEPENDENT NATIONAL MORTGAGE CORPORATION, a
Delaware corporation
By:_____________________________
Name:___________________________
Title:__________________________
INDEPENDENT LENDING CORPORA-TION, a Delaware
corporation
By:_____________________________
Name:___________________________
Title:__________________________
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
a national banking association, as Facility
II Administrative Agent and Facility I
Administrative Agent
By:_____________________________
Name:___________________________
Title:__________________________
34
<PAGE>
BANKERS TRUST COMPANY OF CALIFORNIA, N.A., a
national banking association, as Facility II
Collateral Agent and Facility I Collateral
Agent
By:_____________________________
Name:___________________________
Title:__________________________
35
<PAGE>
SCHEDULE OF EXHIBITS AND SCHEDULES
TO
SECURITY AGREEMENT
EXHIBIT DOCUMENT
------- --------
1A Required Review Steps (DEF Collateral)
1B Required Review Steps (Other Collateral)
2 Required Documents
3A Form of Mortgage Loan Schedule (A/B Collateral)
3B Form of Delivery Certificate (DEF Collateral)
4 Form of Waiver
SCHEDULE DOCUMENT
-------- --------
1 List of Servicing Contracts and Master
Servicing Contracts
36
<PAGE>
EXHIBIT 1A
----------
TO SECURITY
-----------
AGREEMENT
---------
Required Review Steps (DEF Collateral)
--------------------------------------
BY THE COLLATERAL AGENT, WITH RESPECT TO ALL REQUIRED DOCUMENTS DELIVERED
TOGETHER WITH A DEF SCHEDULE:
A. Construction Loans and Mortgage Loans acquired with the proceeds
of Foreclosure/Repurchase Loans:
a. The note (including intervening endorsements, if any), the
mortgage/deed of trust, the assignment(s) of the
mortgage/deed of trust (including intervening assignments,
if any) and the DEF Schedule are consistent as to borrower
name, loan face amount and the loan number.
b. The note and mortgage/deed of trust each bears an original
signature or signatures which appear to be those of the
person or persons named as the maker and mortgagor/trustor,
or, in the case of a copy of the mortgage/deed of trust,
certified by an Authorized Officer of the Companies or a
person purporting to be an officer of a sub-borrower of the
Foreclosure/Repurchase Loan, such copy bears what appears to
be a reproduction of such signature or signatures.
c. Except for (a) the endorsement(s) to the Companies or, if
applicable, the sub-borrower, of the note in the event such
loan was purchased or acquired by the Companies or, if
applicable, a sub-borrower and (b) the endorsement in blank
of the note by the Companies or, if applicable a sub-
borrower, the note, the mortgage/deed of trust, and the
assignment(s) of the mortgage/deed of trust appear on their
face to be regular.
d. The note is endorsed in blank and such endorsement bears an
original signature of an Authorized Officer of the
Companies, based on the current list of such officers
supplied by the Companies or, if by a sub-borrower, such
endorsement bears an original signature of a person
purporting to be an officer of such sub-borrower.
37
<PAGE>
e. In the event that the loan was purchased or acquired by the
Companies or a sub-borrower, each intervening endorsement
from the original holder thereof through and into the
Companies or a sub-borrower bears an original signature or
signatures which appear to be those of the person or persons
endorsing such note, and all intervening endorsements
necessary to establish chain of endorsements in Companies or
a sub-borrower exist.
f. The original assignment of the mortgage/deed of trust bears
an original signature of an Authorized Officer of the
Companies, based on the current list of such officers
supplied by the Companies or, if applicable, an original
signature of a person purporting to be an officer of the
sub-borrower, with the name of the assignee left blank in
form and substance acceptable for recording.
g. In the event that the loan was purchased or acquired by the
Companies or a sub-borrower, each intervening assignment
from the original holder thereof through and into the
Companies or a sub-borrower bears an original signature or
signatures which appear to be those of the person or persons
assigning such mortgage or deed of trust, or, in the case of
a copy of such assignment certified by an Authorized Officer
of the Companies or a person purporting to be an officer of
an applicable sub-borrower, such copy bears what appears to
be a reproduction of such signature or signatures and all
intervening assignments necessary to establish a complete
chain into the Companies or sub-borrower.
h. For Construction Loans, evidence of each advance made by the
Companies which shall consist of a disbursement report
certified as true and correct by an Authorized Officer of
the Companies.
B. Tranche E and F Loans:
a. The original note, the copy of the credit and security
agreement and (for Tranche E Loans only) a copy of UCC-1
financing statements from the sub-borrower to the applicable
Company (each such copy to be certified by an Authorized
Officer of the applicable Company as true and complete) and
the DEF Schedule are consistent as to sub-borrower's name,
loan face amount and the Companies' loan number.
38
<PAGE>
b. The original note bears an original signature or signatures
which appear to be those of officers of the sub-borrower
named as the maker and the copy of the credit and security
agreement bears what appears to be a reproduction of such
signature or signatures.
c. Except for the endorsement in blank by the Companies of the
note, the original note, the copy of the credit and security
agreement appear, on their face, to be regular.
d. The description of collateral contained in the copy of the
credit and security agreement and the copy of the UCC-1
financing statement are identical in all material respects.
(Tranche E only)
e. The UCC-3 assignment correctly lists the applicable Company
as assignor and the Administrative Agent as assignee, bears
an original signature of an Authorized Officer of the
Company as assignee and correctly refers to the UCC-1
financing statement being assigned. Upon completion of this
review, the UCC-3 will be sent to the Administrative Agent.
(Tranche E only)
39
<PAGE>
EXHIBIT 1B
----------
TO SECURITY
-----------
AGREEMENT
---------
Required Review Steps (Other Collateral)
-----------------------------------------
BY THE ADMINISTRATIVE AGENT, WITH RESPECT TO ALL TRANCHE C LOANS AND REQUIRED
DOCUMENTS DELIVERED:
f. The copies of each Servicing Contract and Master Servicing
Contract have been certified as being true and complete by an
Authorized Officer of the applicable Company, and bears what appears
to be a reproduction of signatures of Authorized Officers of the
applicable Company and signatures of persons purporting to be officers
of all other parties thereto.
g. The original consent or acknowledgement bears the original
signature of persons purporting to be officers of each party to the
Servicing Contact or Master Servicing Contract which, according to the
terms of the Servicing Contract or Master Servicing Contract are
required to consent or acknowledge the assignment.
h. The original UCC-1 financing statement (or the original UCC-3
financing statement amendment) bears an original signature of an
Authorized Officer of the applicable Company as Debtor, is properly
completed and the description of collateral accurately describes the
servicing rights being pledged.
40
<PAGE>
EXHIBIT 2
---------
TO SECURITY
-----------
AGREEMENT
---------
Schedule of Required Documents
------------------------------
A. FOR A TRANCHE A LOAN OR A TRANCHE B LOAN (A/B COLLATERAL), THE FOLLOWING
DOCUMENTS FOR EACH MORTGAGE LOAN BEING FUNDED THEREWITH:
Those documents constituting (i) the "Required Loan Documents" as defined
and more fully described in Section 3.2(a) of the Custodial Agreement, and (ii)
the "Intervening Assignments" as defined and more fully described in Section
3.2(b) of the Custodial Agreement (such delivery to be subject to the exceptions
and time limits set forth therein).
Provided, however, that with respect to any Mortgage Loan which is being funded
-------- -------
with a Tranche B Loan and which has been included in the Collateral Value of the
Tranche B Borrowing Base in excess of 120 days, the Required Documents for such
Mortgage Loan shall also include (i) the "Intervening Assignments" as defined
and more fully described in Section 3.2(b) of the Custodial Agreement, and (ii),
if request therefor has been made by the Collateral Agent, the "Supplemental
Loan Documents" as defined and more fully described in Sections 3.2(c) and
3.2(d) of the Custodial Agreement, in each case subject to the exceptions
contained in such Sections.
B. FOR A TRANCHE C LOAN (OTHER COLLATERAL), THE FOLLOWING DOCUMENTS IN
CONNECTION THEREWITH:
6. A copy of each Servicing Contract and Master Servicing Contract
pursuant to which the Companies have acquired and continue to exercise the
Assigned Servicing Rights being financed in connection therewith; and
7. The original consent executed by the investor under each such
Servicing Contract or the MBS Fiduciary under each such Master Servicing
Contract acknowledging and consenting to the assignment by the Companies of the
Assigned Servicing Rights under each such Servicing Contract or Master Servicing
Contract to the Administrative Agent for the benefit of the Lenders (or, if such
acknowledgement and consent forms are not available with respect to any
Servicing Contracts, other evidence reasonably satisfactory to the
41
<PAGE>
Administrative Agent that the Companies' interest in such Servicing Contract can
be pledged to the Administrative Agent for the benefit of the Lenders) (for
purposes of the foregoing, a consent may consist of one or more separate
documents which, taken as a whole, evidence the consent of the applicable
investor or MBS Fiduciary to the assignment of the Companies' interest, an
agreement to appoint an entity acceptable to the Administrative Agent as a
successor servicer or master servicer, and a suitable Resignation Letter); and
3. Such UCC-3 Financing Statement amendments, listing the Companies as
debtors and the Administrative Agent on behalf of the Lenders as secured party,
and assigning the right, title and interest of the Companies in such Servicing
Contracts, Master Servicing Contracts and rights therein and thereunder, as the
Administrative Agent may deem necessary.
C. FOR A TRANCHE D LOAN (DEF COLLATERAL), THE FOLLOWING DOCUMENTS FOR EACH
CONSTRUCTION LOAN BEING FUNDED THEREWITH:
9. The original executed promissory note relating to the Construction
Loan, which promissory note shall be duly endorsed in blank and assigned in
blank without recourse by the Companies;
10. A copy of the original executed mortgage or deed of trust relating to
the Construction Loan, certified by the Companies, or the title company or
closing attorney which closed the Construction Loan, to be a true copy of such
original mortgage or deed of trust;
11. An original executed and recordable but unrecorded assignment of the
mortgage or deed of trust relating to the Construction Loan (unless the
Administrative Agent determines that under applicable State law the assignment
should be recorded in order to adequately protect its interest, in which case
the assignment shall be recorded by the Companies in the name of the
Administrative Agent and a certified true copy thereof shall be provided to the
Collateral Agent);
12. A certificate of the Companies with regard to such Construction Loan
certifying that no single-family tract home to be constructed with the proceeds
thereof has a sales price or construction cost in excess of $850,000 (unless
such requirement is specifically waived with respect to any single-family tract
home by the Administrative Agent).
42
<PAGE>
13. A Daily Trial Balance Report showing the current principal balance
outstanding under the note.
D. FOR A TRANCHE E LOAN (DEF COLLATERAL), THE FOLLOWING DOCUMENTS FOR EACH
SERVICING LOAN BEING FUNDED THEREWITH:
14. The original executed promissory note relating to the Servicing
Loan, made by the applicable sub-borrower as obligor and payable to the order of
the Companies, which promissory note shall be duly endorsed in blank and
assigned in blank without recourse by the Companies;
15. A copy of the credit and security agreement between the Companies
and the applicable sub-borrower relating to such Servicing Loan;
16. UCC-3 financing statements listing the Companies as debtors and the
Administrative Agent on behalf of the Lenders as secured party, and assigning
the right, title and interest of the Companies in the servicing contracts and
rights therein and thereunder which have been pledged by the applicable sub-
borrower to the Companies as security for such Servicing Loan; and
4. A copy, certified by an Authorized Officers of the Companies, of all
UCC-1 financing statements listing the applicable sub-borrower as debtor and the
Companies as secured party, signed by the sub-borrower and covering the
servicing contracts and rights therein described in the credit and security
agreement.
E. FOR A TRANCHE F LOAN (DEF COLLATERAL), THE FOLLOWING DOCUMENTS FOR EACH
FORECLOSURE/REPURCHASE LOAN BEING FINANCED THEREWITH:
17. The original executed promissory note relating to the
Foreclosure/Repurchase Loan, made by the applicable sub-borrower as obligor and
payable to the order of the Companies, which promissory note shall be duly
endorsed in blank and assigned in blank without recourse by the Companies;
18. A copy of the credit and security agreement between the Companies
and the applicable sub-borrower relating to such Foreclosure/Repurchase Loan;
and
19. With respect to each Mortgage Loan being purchased with the proceeds
of such Foreclosure/Repurchase Loan:
A. An original fully completed Delivery Certificate (as defined in
the Security Agreement);
43
<PAGE>
B. The original executed promissory note relating to the Mortgage
Loan (properly endorsed or assigned through all intervening holders thereof
to the Companies), which promissory note shall be duly endorsed in blank
and assigned in blank without recourse by the Companies or by the
applicable sub-borrower; and
C. An original and recordable but unrecorded assignment of the
mortgage or deed of trust relating to the Mortgage Loan (unless the
Administrative Agent determines that under applicable State law the
assignment should be recorded in order to adequately protect its interest,
in which case the assignment shall be recorded by the Companies in the name
of the Administrative Agent and a certified true copy thereof shall be
provided to the Collateral Agent), together with the original or a duly
certified copy of a proper assignment or assignments of the mortgage or
deed of trust from the original holder through any subsequent transferees
to the Companies, duly recorded if local requirements in the jurisdiction
in which the Property is located required the recordation of such
assignment or assignments.
44
<PAGE>
EXHIBIT 3A
----------
TO SECURITY
-----------
AGREEMENT
---------
Form of Mortgage Loan Schedule (A/B Collateral)
-----------------------------------------------
The delivery schedule for each Mortgage Loan and the monthly report to be
provided under the Security Agreement will contain the following information:
DELIVERY INFORMATION
--------------------
1. Loan Number
2. Identify that this Loan is being pledged to First Union National Bank
of North Carolina, as Agent
3. The scheduled principal balance
4. Name of Mortgagor
5. Paid to Date
6. Current Coupon
7. Remaining Term
8. Date on Promissory Note
9. Whether Loan is a Construction-to-Permanent Loan
MONTHLY INFORMATION
-------------------
1. Loan Number
2. Scheduled principal balance
3. Remaining Term
4. Paid to Date
5. Current Coupon
Each Mortgage Loan Schedule will be accompanied by the following transmittal
certification from the Companies.:
Pursuant to the terms of the Facility I or Facility II Credit Agreement dated as
of May 30, 1995, as amended or modified from time to time ("Agreement"), the
following documents (the "Required Documents") are being sent to you with
respect to each Mortgage Loan covered hereby:
( ) Executed Original Note, endorsed in blank (and including all intervening
endorsements necessary to establish chain of title in the applicable
Company)
45
<PAGE>
( ) Executed assignment of mortgage or deed of trust in blank (and any
intervening assignments - if original intervening assignments are
unavailable, then provide copies certified by the Companies)
( ) If the Mortgage Loan is a Construction-to-Permanent Loan, a Daily Trial
Balance Report certified as true and correct by an Authorized Officer
( ) An original or copy of the Consolidation and Modification Agreement, if
applicable
ACKNOWLEDGMENT:
All Representations and Warranties set forth in the Agreement are true and
correct. No default or event of default exists on the date hereof.
CERTIFICATE:
The Companies have in their possession appropriate copies or originals, as the
case may be, of all other documents relating to this Mortgage Loan and hold same
in trust for the benefit of the Administrative Agent and the Lenders as set
forth in the Agreement or in the Security Agreement referred to therein.
[NAME OF COMPANY]
By:_____________________
Name:___________________
Title:__________________
Date:___________________
46
<PAGE>
EXHIBIT 3B
----------
TO SECURITY
-----------
AGREEMENT
---------
Form of DEF Schedule (DEF Collateral)
-------------------------------------
The delivery certificate for each Construction Loan, Servicing Loan or
Foreclosure/Repurchase Loan and the monthly report to be provided under the
Custodial Agreement will contain the following information:
DELIVERY INFORMATION
--------------------
1. Loan Number
2. The scheduled principal balance
3. Name of Obligor
4. Paid to Date
5. Note Amount
MONTHLY INFORMATION
-------------------
1. Loan Number
2. Scheduled principal balance
3. Paid to Date
Each DEF Schedule will be accompanied by the following transmittal certification
from the Companies.:
Pursuant to the terms of the Facility II Credit Agreement dated as of May 30,
1995, as amended or modified from time to time ("Agreement"), the following
documents (the "Required Documents") are being sent to you with respect to each
Construction Loan, Servicing Loan or Foreclosure/Repurchase Loan covered hereby:
Tranche D
---------
( ) Executed original note, endorsed in blank (and including all intervening
endorsements necessary to establish chain into the applicable Company)
( ) Copy of executed original mortgage or deed of trust
( ) Executed assignment of mortgage or deed of trust (and any intervening
assignments - if original intervening assignments are unavailable, then
provide copies certified by the Companies)
47
<PAGE>
( ) Companies' certification that no home being constructed with proceeds of
such Construction Loan has a sales price or construction cost in excess of
$850,000 unless waived in writing by Administrative Agent (and, if
applicable, a copy of such waiver)
( ) A Daily Trial Balance Report certified as true and correct by an Authorized
Officer
Tranche E
---------
( ) Executed original note, endorsed in blank (and including all intervening
endorsements necessary to establish chain into the applicable Company)
( ) Copy of credit and security agreement between the applicable Company and
the applicable sub-borrower
( ) Copy of UCC-1 financing statements from sub-borrower to the applicable
Company
( ) UCC-3 Assignment duly executed by the applicable Company assigning to
Administrative Agent the applicable Company's security interest in the
servicing contracts and rights pledged by the sub-borrower to such Company
Tranche F
---------
( ) Executed original note, endorsed in blank (and including all intervening
endorsements necessary to establish chain into the applicable Company
( ) Copy of credit and security agreement between the applicable Company and
the applicable sub-borrower
( ) For each Mortgage Loan being acquired with the proceeds of a
Foreclosure/Repurchase Loan, a Mortgage Loan Schedule containing the
information and each document described on Exhibit 3A, except that the last
endorsement and assignment of mortgage (before the ones in blank) may be to
the sub-borrower rather than to the Companies.
ACKNOWLEDGMENT:
48
<PAGE>
All Representations and Warranties set forth in the Agreement are true and
correct. No default or event of default exists on the date hereof.
CERTIFICATE:
The Companies have in their possession appropriate copies or originals, as the
case may be, of all other documents relating to this Construction Loan,
Servicing Loan or Foreclosure/Repurchase Loan and hold same in trust for the
benefit of the Administrative Agent and the Lenders as set forth in the
Agreement or in the Security Agreement referred to therein.
[NAME OF COMPANY]
By:____________________
Name:__________________
Title:_________________
Date:__________________
49
<PAGE>
EXHIBIT 4
---------
TO SECURITY
-----------
AGREEMENT
---------
Form of Waiver
--------------
TO: Bankers Trust Company of California, N.A.,as Collateral
Agent
FROM First Union National Bank of North Carolina, as Administrative Agent
DATE: _____________________________
Pursuant to Paragraph 3(c) of the Security and Collateral Agency Agreement
dated as of May 30, 1995, as amended or modified from time to time (the
"Security Agreement"), the undersigned, acting in its capacity as Administrative
Agent under and pursuant to (i) that certain Facility II Credit Agreement dated
as of May 30, 1995, as amended or modified from time to time (the "Facility II
Agreement," all capitalized terms used and not defined herein having the
meanings given to such terms therein), and (ii) that certain Facility I Credit
Agreement dated as of May 30, 1995, as amended or modified from time to time
(the "Facility I Agreement" and, together with the Facility II Agreement, the
"Credit Agreements"), hereby informs you that:
(Check as applicable)
______ The undersigned Administrative Agent has waived the nonconformity of
the following Mortgage Loan(s) with respect to the eligibility
requirements for "Eligible A/B Mortgage Loans" contained in the Credit
Agreements:
Mortgage Loan No.: _____________________
Mortgagor's Name: ______________________
(Attach schedule containing additional Mortgage Loan(s), if any)
Upon the delivery to you of the Required Documents with respect to
such Mortgage Loan(s), and assuming that such Mortgage Loan(s)
complies with the requirements described in Paragraph 6(b) of the
Security Agreement,
50
<PAGE>
you are hereby authorized to include such Mortgage
Loan(s) in the computation of the Collateral Value of the Tranche A
Borrowing Base or the Tranche B Borrowing Base, as applicable.
______ The undersigned Administrative Agent has waived the nonconformity of
the following Construction Loan(s) with respect to the eligibility
requirements for "Construction Loans" contained in the Facility II
Agreement:
Obligor's Name: ______________________
(Attach schedule containing additional Construction Loan(s), if any)
Upon the delivery to you of the Required Documents with respect to
such Construction Loan(s), and assuming that such Construction Loan(s)
complies with the requirements described in Paragraph 6(c) of the
Security Agreement, you are hereby authorized to include such
Construction Loan(s) in the computation of the Collateral Value of the
Tranche D Borrowing Base.
______ The undersigned Administrative Agent has waived the nonconformity of
the following Servicing Loan(s) with respect to the eligibility
requirements for "Servicing Loans" contained in the Facility II
Agreement:
Obligor's Name: ______________________
(Attach schedule containing additional Servicing Loan(s), if any)
Upon the delivery to you of the Required Documents with respect to
such Servicing Loan(s), and assuming that such Servicing Loan(s)
complies with the requirements described in Paragraph 6(c) of the
Security Agreement, you are hereby authorized to include such
Servicing Loan(s) in the computation of the Collateral Value of the
Tranche E Borrowing Base.
51
<PAGE>
______ The undersigned Administrative Agent has waived the nonconformity of
the following Foreclosure/Repurchase Loan(s) with respect to the
eligibility requirements for "Foreclosure/Repurchase Loans" contained
in the Facility II Agreement:
Obligor's Name: ______________________
(Attach schedule containing additional Foreclosure/Repurchase
Loan(s), if any)
Upon the delivery to you of the Required Documents with respect to
such Foreclosure/Repurchase Loan(s), and assuming that such
Foreclosure/Repurchase Loan(s) complies with the requirements
described in Paragraph 6(c) of the Security Agreement, you are hereby
authorized to include such Foreclosure/Repurchase Loan(s) in the
computation of the Collateral Value of the Tranche F Borrowing Base.
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA,as Administrative Agent
By:__________________
Name:________________
Title:_______________
52
<PAGE>
SCHEDULE 1
----------
TO SECURITY
-----------
AGREEMENT
---------
List of Servicing Contracts and Master Servicing Contracts
----------------------------------------------------------
53
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 5,372
<SECURITIES> 0
<RECEIVABLES> 2,275,252
<ALLOWANCES> 1,775
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 293
<DEPRECIATION> 65
<TOTAL-ASSETS> 2,349,309
<CURRENT-LIABILITIES> 0
<BONDS> 188,826
<COMMON> 406
0
0
<OTHER-SE> 331,185
<TOTAL-LIABILITY-AND-EQUITY> 2,349,309
<SALES> 0
<TOTAL-REVENUES> 27,629 <F1>
<CGS> 0
<TOTAL-COSTS> 4,120
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,317
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 22,192
<INCOME-TAX> 0
<INCOME-CONTINUING> 22,192
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,192
<EPS-PRIMARY> 0.57
<EPS-DILUTED> 0.57
<FN>
<F1>Includes 60,213 of interest expense related to mortgage loan activities.
</FN>
</TABLE>
